judgement
stringlengths 593
808k
| dataset_name
stringclasses 3
values | summary
stringlengths 0
158k
|
|---|---|---|
The issue is whether the United Kingdom is precluded, by Council Regulation (EC) No 1408/71 on the application of social security schemes to employed persons, self employed persons and members of their families moving within the Community (the Regulation), from imposing a requirement of residence in Great Britain as a condition of entitlement to disability living allowance (DLA) and thus depriving a claimant who has gone to live in another Member State of that benefit.
DLA is a non contributory and non means tested benefit consisting of a care component and a mobility component.
It is not an income replacement benefit, as the recipient may or may not be working.
Its purpose is to cater for the extra costs of requiring certain types of care or being unable or virtually unable to walk.
The facts
The claimant, Mrs Tolley, a British national, was born on 17 April 1952.
She had paid national insurance contributions from 1967 to 1984 and been credited with some contributions thereafter, but none since the year 1993/94.
Depending on whether she fulfilled the contribution conditions when she reached state retirement age, therefore, she might have been entitled to a state retirement pension.
From 26 July 1993, she was awarded the care component of DLA on an indefinite basis, because she was unable to prepare a cooked meal for herself.
On 5 November 2002, she and her husband moved permanently to live in Spain.
She was not employed or self employed there.
In 2007, the Secretary of State for Work and Pensions decided that, as from 6 November 2002, she was not entitled to DLA.
She appealed to the First tier Tribunal, which held that she was entitled to continue to receive DLA by virtue of article 10 of the Regulation.
She died on 10 May 2011 and her husband was appointed to continue the proceedings in her place.
The Secretary of State appealed to the Upper Tribunal, which also held that Mrs Tolley was entitled to the benefit, but for a different reason: [2012] UKUT 282 (AAC).
Because she was insured against the risk of old age by virtue of her national insurance contributions, she was an employed person within the meaning of article 1(a) of the Regulation; that expression had the same meaning wherever it occurred in the Regulation; and the situation fell within article 22 of the Regulation.
The Secretary of State appealed to the Court of Appeal, which dismissed the appeal, holding that it was bound by that courts previous decision in Commissioners for Her Majestys Revenue and Customs v Ruas [2010] EWCA Civ 291, applying Martinez Sala (Case C 85/96) [1998] ECR I 2708, to hold that Mrs Tolley was an employed person for this purpose: [2013] EWCA Civ 1471.
The Secretary of State now appeals to the Supreme Court of the United Kingdom.
Relevant domestic law
Section 71(6) of the Social Security Contributions and Benefits Act 1992 (the 1992 Act) provides that A person shall not be entitled to a disability living allowance unless he satisfies prescribed conditions as to residence and presence in Great Britain.
The conditions prescribed for this purpose by regulation 2(1) of the Social Security (Disability Living Allowance) Regulations 1991 (SI 1991/2890) are that (a) on that day (iii) he has been present in Great Britain for a period of, or for periods amounting in the aggregate to, not less than 104 weeks in the 156 weeks immediately preceding that day.
It is, therefore, common ground that, under domestic law, Mrs Tolley was excluded from entitlement to DLA following her permanent move to Spain in November 2002.
The question is whether that domestic law is compatible with the Regulation.
European Union law
Article 2.1 of the Regulation No 1408/71 provides that This Regulation shall apply to employed or self employed persons and to students who are or have been subject to the legislation of one or more member states and who are nationals of one of the member states .
It is therefore common ground that Mrs Tolley falls within the personal scope of the Regulation.
It is also common ground that DLA is one of the benefits falling within the material scope of the Regulation, as defined in article 4.
Had it been categorised as an invalidity benefit within the meaning of article 4.1(b), it would have been covered by article 10.
This precludes the withdrawal of such benefits by reason of the fact that the recipient resides in the territory of a member state other than that in which the institution responsible for payment is situated, in other words, it provides for full portability within the Union.
However, in Commission v European Parliament (Case C 299/05) [2007] ECR I 08695, at para 68, following Molenaar (Case C 160/96) [1998] ECR I 843, para 25, and Jauch (Case C 215/99) [2001] ECR I 1901, para 25, the care component of DLA was categorised as a cash sickness benefit for the purpose of EU law.
Nevertheless, in Da Silva Martins (Case C 388/09) [2011] ECR I 5761, para 48, the Court observed that benefits relating to the risk of reliance on care, unlike sickness benefits, were not intended to be paid on a short term basis and might, in the detail of their application, display characteristics resembling invalidity and old age benefits.
This case is an example of the problems of applying provisions designed with short term benefits in mind to benefits which are capable of applying on a long term basis such as DLA.
Article 13.1 lays down the general rule that persons to whom the Regulation applies shall be subject to the legislation of a single member state.
Legislation is defined by article 1(j) in effect to mean all the legislation and other implementing measures of a member state relating to the branches and schemes of social security covered by article 4(1) and (2) or the special non contributory benefits covered by article 4(2a).
Article 13(2) defines the member state to whose legislation a person is subject, generally the lex loci laboris rather than where the person lives.
Article 13(2)(a) refers to a person employed rather than an employed person.
Article 13.2(f) provides that: a person to whom the legislation of a member state ceases to be applicable, without the legislation of another member state becoming applicable to him in accordance with one of the rules laid down in the aforegoing sub paragraphs or in accordance with one of the exceptions or special provisions laid down in articles 14 to 17 shall be subject to the legislation of the member state in whose territory he resides in accordance with the provisions of that legislation alone.
In Kuusijarvi (Case C 275/96) [1998] ECR I 3443, the court held that this did not preclude a member state from making the right to remain subject to its legislation of a person, who had ceased all occupational activity in its territory, dependent upon his continued residence there.
The court observed that a person who has ceased all occupational activity in the territory of a member state no longer satisfies the conditions laid down in article 13(2)(a) (para 32).
Article 89 provides that special procedures for implementing the legislations of certain member states are set out in annex VI.
Points 19 and 20 of the United Kingdoms entry in annex VI relate to article 13(2)(f).
Point 19 defines the date when UK legislation shall cease to apply for this purpose, so far as relevant, as the latest of (a) the day on which residence is transferred; (b) the day of cessation of employment or self employment, whether permanent or temporary, during which the person was subject to UK legislation; or (c) the last day of any period of receipt of UK sickness, maternity or unemployment benefit which began before the transfer of residence.
Point 20 provides, so far as relevant, that the fact that a person has become subject to the legislation of another member state in accordance with article 13(2)(f) shall not prevent (a) the application to him by the United Kingdom as the competent state of the provisions relating to employed or self employed persons of Title III, Chapter 1 if he remains an employed or self employed person for those purposes and was last so insured under the legislation of the United Kingdom.
Chapter 1 of Title III deals with the portability of sickness and maternity benefits.
Article 19.1 provides that An employed or self employed person residing in the territory of a member state other than the competent state, who satisfies the conditions of the legislation of the competent state for entitlement to benefits, , shall receive in the state in which he is resident: (a) benefits in kind ; (b) cash benefits provided by the competent institution in accordance with the legislation which it administers.
The Upper Tribunal held in this case that articles 19, 20, 21 and 22 contemplate different situations with no overlap between them.
Article 19 did not apply to Mrs Tolley, because on closer scrutiny it covers only the situation of a person who works in one member state and lives in a different member state (para 84).
Article 22.1 provides that An employed or self employed person who satisfies the conditions of the legislation of the competent state for entitlement to benefits, , and (b) who, having become entitled to benefits chargeable to the competent institution, is authorised by that institution to transfer his residence to the territory of another member state; shall be entitled (i) to benefits in kind (ii) to cash benefits provided by the competent institution in accordance with the provisions of the legislation which it administers.
The Upper Tribunal held that article 22 did apply to Mrs Tolley.
She was an employed person for the purposes of the Regulation; she had become entitled to cash sickness benefits under the legislation of the United Kingdom; and she had transferred her residence to another member state (para 86).
Her ability to rely on article 22 could not be defeated when, had authorisation been sought, the circumstances did not fall within those where, under article 22.2, refusal is permitted (para 89).
The definition of employed person is contained in article 1: For the purpose of this Regulation: (a) employed person and self employed person mean respectively: (i) any person who is insured, compulsorily or on an optional continued basis, for one or more of the contingencies covered by the branches of a social security scheme for employed or self employed persons ; (ii) any person who is compulsorily insured for one or more of the contingencies covered by the branches of social security dealt with in this Regulation under a social security scheme for all residents or for the whole working population, if such person: can be identified as an employed or self employed person by virtue of the manner in which such scheme is administered or financed, or failing such criteria, is insured for some other contingency specified in annex I under a scheme for employed or self employed persons either compulsorily or on an optional continued basis, or, where no such scheme exists in the Member State concerned, complies with the definition given in annex I;
The applicable definition is that in article 1(a)(ii), because DLA is a scheme for all residents, whether or not they are employed or self employed.
The United Kingdoms entry in annex I provides that Any person who is an employed earner or a self employed earner within the meaning of the legislation of Great Britain shall be regarded respectively as an employed person or a self employed person within the meaning of article 1(a)(ii) of the Regulation.
Section 2(1) of the 1992 Act defines employed earner as a person who is gainfully employed in Great Britain either under a contract of service, or in an office (including elective office) with general earnings.
This would not cover Mrs Tolley, who was not gainfully employed at the time.
the Grand Chamber held that In Dodl and Oberhollenzer (Case C 543/03) [2005] ECR I 5065, para 34, a person has the status of an employed person within the meaning of Regulation No 1408/71 where he is covered, even if only in respect of a single risk, on a compulsory or optional basis, by a general or special social security scheme mentioned in article 1(a) of that Regulation, irrespective of the existence of an employment relationship.
That case concerned Austrian women working in Austria but living in Germany with their German husbands who worked in Germany.
They were on unpaid maternity leave and the issue was whether Germany or Austria was responsible for paying family benefits.
The definition adopted by the Grand Chamber in Dodl was that in Martinez Sala (Case C 85/96) [1998] ECR I 2708, para 36, repeated in Kuusijarvi, para 21.
Martinez Sala concerned a Spanish national living lawfully in Germany, who had previously been working there but was no longer employed or self employed.
The issue was whether she was entitled to a German child raising allowance, a family benefit.
Since her situation was not covered by any of the provisions of Title III, Chapter 7, relating to family benefits, the restriction in the German entry in annex I, did not apply.
Hence her status as an employed person had to be judged solely on the basis of article 1(a)(ii), as defined above.
It was for the referring court to decide whether this was established on the facts (para 45).
If it was, then requiring her to produce a formal residence permit, which was not required of German nationals, was unequal treatment contrary to EU law (para 65).
The definition adopted in Martinez Sala was itself derived from Pierik II (Case 182/78) [1979] ECR 1977, paras 4 and 7, where it was held that the status of worker for the purpose of article 22 was not restricted to active as opposed to inactive workers.
The issue in that case was whether a person receiving an invalidity pension in the Netherlands was entitled to reclaim the cost of medical treatment in Germany.
Such pensioners came within the provisions of the Regulation concerning workers, including article 22, by virtue of their insurance under a social security scheme, unless they are subject to special provisions laid down regarding them (para 4).
The parties arguments
In very brief summary, the Government does not challenge the classification of DLA as a sickness benefit (although we comment that it would not have had the same problems had it been classified as an invalidity benefit and thus freely exportable under article 10).
Its concern is with the implications of collapsing the categories of employed and self employed persons, on the one hand, and unemployed persons, on the other hand, for the purpose, not only of sickness benefits generally, but also for maternity and family benefits (to which the same or similar rules apply).
The Government argues that Mrs Tolley cannot be an employed person for the purpose of Chapter 1 of Title III just because she is insured against the risk of old age under UK legislation and thus falls within the interpretation of article 1(a)(ii) in Dodl, Martinez Sala and other cases.
So to hold makes nonsense of the careful distinctions drawn in that Chapter between people who are employed or self employed and unemployed persons, covered by articles 19 to 22, whose rights to export sickness and maternity benefits are severely limited by article 25, read in combination with articles 69(1) and 71, dealing with the export of unemployment benefits.
Chapter 7, dealing with family benefits, also makes special provision for persons who have become unemployed.
The specific provisions in Title III are lex specialis overriding the general provisions in the Regulation.
Martinez Sala was not concerned with the provisions about exportability of particular benefits but with the general EU principle of equality.
The claimants in Dodl and in Borger were on maternity leave and Mrs Pierik was a pensioner.
The cases did not, therefore, have to grapple with the issue arising in this case.
Alternatively, a person such as Mrs Tolley falls within article 13(2)(f), because the legislation of the UK has ceased to be applicable to her, without the legislation of another member state becoming applicable under articles 13(2)(a) to (e), 14 to 17.
In the light of Kuusijarvi, the UK is entitled to make her right to remain subject to its legislation dependent upon her continued residence here.
Hence she is subject to the legislation of Spain, the member state in whose territory she now resides.
Point 19 of annex VI does not apply because she was not entitled to receive the benefit once she moved to live in Spain.
Point 20 does not apply because she is not an employed or self employed person for the purpose of Title III, Chapter 1.
On behalf of Mrs Tolley, it is argued that Commission v Parliament, following earlier case law, rejected the argument that the care component of DLA is a non contributory cash benefit within article 4(2a), and thus not exportable at all.
This shows that allowing persons such as Mrs Tolley to export their DLA is consistent with the policy of the Regulation.
More importantly, Mrs Tolley clearly fell within the definition of an employed person in Martinez Sala and confirmed by the Grand Chamber in Dodl, because she was covered in respect of the risk of old age by the UK social security system.
There cannot be different definitions for different purposes in the same Regulation.
Article 25 is concerned with job seekers, that is, persons who are currently unemployed but moving abroad to look for work.
It is designed to link the sickness benefit scheme with the unemployment benefit scheme.
It is not concerned with people like Mrs Tolley, who are wholly economically inactive owing to long term disability.
Article 13(2)(f) does not apply, because Mrs Tolley remains subject to the UK legislation by virtue of Points 19 and 20 of annex VI: either UK legislation has not ceased to apply within the meaning of Point 19, because she was still in receipt of a sickness benefit which began before she moved to Spain; or, if UK legislation had ceased to apply and therefore article 13(2)(f) did apply, by virtue of Point 20, the UK was not prevented from applying the provisions relating to employed or self employed persons in Title III, Chapter 1 to her.
For that purpose, according to the case law cited above, she clearly was an employed person.
Alternatively, reliance is placed on the opinion of Advocate General Jacobs in Kuusijarvi, at para 65: Article 22 of the Regulation, being designed to ensure that people retain their sickness benefit entitlement if they move their residence to another member state, would be entirely devoid of purpose if it could be defeated by a residence requirement in national law.
Hence he concluded that the right to continued payment of benefits conferred by article 22 could not be defeated by a residence requirement imposed by national legislation.
It follows that the national legislation had not ceased to apply for the purpose of article 13(2)(f).
The Court did not deal with the applicability of article 22 in the circumstances of that case, because it held that the benefit in question was a family, and not a sickness, benefit.
The Supreme Courts view
In this courts view, although the matter was not argued before us, the principled solution to a case such as this would be to treat the care component of DLA as an invalidity benefit for the purpose of the Regulation, and thus freely exportable under article 10, leaving the detailed provisions of Chapter 1 of Title III to deal with sickness benefits stricto sensu.
Then none of the current issues would have arisen: see Stewart (Case C 503/09) [2012] 1 CMLR 337.
The broad characteristic of the benefits listed in article 10 is that they are long term or one off payments in respect of permanent conditions, such as disability, old age or death, rather than short term benefits in respect of potentially temporary conditions, such as sickness, maternity or unemployment.
Income replacement cannot be an essential feature of an invalidity benefit, because they include those intended for the maintenance or improvement of earning capacity (article 4(1)(b)).
However, if DLA remains to be treated as a sickness benefit, the court agrees with the Government that none of the cases relied upon by Mrs Tolley and the English courts was concerned with whether, in the light of the specific provisions of Title III relating to unemployed persons, the broad definition in Dodl could apply to the provisions relating to employed persons.
It might be thought surprising if people who are wholly economically inactive were treated more favourably than people who are actively seeking work in a Regulation which is designed to facilitate the free movement of workers.
Logically, article 13(2)(f) comes before articles 19 to 22.
Mrs Tolley ceased to be subject to the legislation of the United Kingdom concerning DLA, because she was no longer resident here.
On the other hand, she remained subject to the legislation of the UK for the purposes of any potential entitlement to a state retirement pension.
So when article 13(2)(f) speaks of the legislation of a member state ceasing to be applicable, does it mean all that legislation, or (notwithstanding the definition in article 1(j)) only the legislation relating to the particular benefit in question? If the latter, how are Points 19 and 20 of annex VI to be interpreted? In particular, does Point 19(c) refer to actual receipt of or to entitlement to DLA? And does Point 20 merely permit, as opposed to require, the UK to continue paying DLA in accordance with Chapter 1 of Title III?
The questions referred
1. Is the care component of the United Kingdoms Disability Living Allowance properly classified as an invalidity rather than a cash sickness benefit for the purpose of Regulation No 1408/71? 2. (i) Does a person who ceases to be entitled to UK Disability Living Allowance as a matter of UK domestic law, because she has moved to live in another member state, and who has ceased all occupational activity before such move, but remains insured against old age under the UK social security system, cease to be subject to the legislation of the UK for the purpose of article 13(2)(f) of Regulation No 1408/71? (ii) Does such a person in any event remain subject to the legislation of the UK in the light of Point 19(c) of the United Kingdoms annex VI to the Regulation? (iii) If she has ceased to be subject to the legislation of the UK within the meaning of article 13(2)(f), is the UK obliged or merely permitted by virtue of Point 20 of annex VI to apply the provisions of Chapter 1 of Title III to the Regulation to her? (i) Does the broad definition of an employed person in Dodl apply for 3. the purposes of articles 19 to 22 of the Regulation, where the person has ceased all occupational activity before moving to another member state, notwithstanding the distinction drawn in Chapter 1 of Title III between, on the one hand, employed and self employed persons and, on the other hand, unemployed persons? (ii) If it does apply, is such a person entitled to export the benefit by virtue of either article 19 or article 22? Does article 22(1)(b) operate to prevent a claimants entitlement to the care component of DLA being defeated by a residence requirement imposed by national legislation on a transfer of residence to another member state? Hence we refer the following questions to the CJEU:
| UK-Abs | The issue in this appeal is whether as a matter of European Union law the United Kingdom may impose a requirement of residence in Great Britain as a condition of entitlement to disability living allowance (DLA).
Mrs Tolley, had worked in the UK, paying national insurance contributions, from 1967 to 1984, with some further contributions up to 1993/94.
From 1993 she was awarded the care component of DLA on an indefinite basis, because she was unable to prepare a cooked main meal for herself.
She moved permanently to Spain in November 2002.
The Secretary of State for Work and Pensions decided that she was no longer entitled to DLA by reason of s 71(6) Social Security Contributions and Benefits Act 1992 and the regulations thereunder, which required her to be resident in Great Britain.
Mrs Tolley appealed against this decision on the basis that UK domestic law was incompatible with the EU law laid down in Council Regulation (EC) No 1408/71 (the Regulation).
The Regulation provides that certain benefits (including those categorised as an invalidity benefit) are fully portable within the EU.
The care component of DLA has, however, been categorised in a number of EU cases as a cash sickness benefit.
Mrs Tolleys entitlement to receive it when she no longer resided in the UK depended on whether she was an employed person for the purposes of the Chapter 1 of Title III of the Regulation.
The meaning of employed person in article 1 of the Regulation has been broadly defined by the Court of Justice of the European Union (CJEU) in cases involving other benefits as extending to anyone who is insured under a social security scheme irrespective of the existence of an employment relationship.
Within Title III, the rights of unemployed persons to export sickness benefits are severely limited.
Mrs Tolley argued that she was an employed person as she was insured by reason of her national insurance contributions against the risk of old age under UK legislation.
Alternatively, she remained subject to the legislation of the UK for the purposes of article 13, which lays down the general rule that a person should only be subject to the legislation of a single member state.
The Secretary of State argued that Mrs Tolley could not be an employed person for the purpose of the specific provisions of Chapter 1 of Title III, or that she fell within article 13(2)(f) because the legislation of the UK had ceased to be applicable to her, and she had therefore become subject to the legislation of Spain.
Mrs Tolleys appeal was allowed by the First tier Tribunal.
She died shortly afterwards and her husband was appointed to continue the proceedings in her place.
The Secretary of State appealed against the First tier Tribunals decision but his appeal was rejected by the Upper Tribunal and by the Court of Appeal.
He now appeals to the Supreme Court.
The Supreme Court is obliged to refer questions of EU law to the CJEU if the application of the Regulation in the circumstances of this case is not clear.
The Supreme Court unanimously decides to refer three questions to the CJEU.
The terms of the reference are set out by Lady Hale.
In the view of the court, the principled solution to the case would be to treat the care component of DLA as an invalidity benefit for the purpose of the Regulation.
Unlike sickness benefits, DLA is not intended to be paid on a short term basis and is more akin to invalidity and old age benefits.
This would have avoided the issues which had arisen in this case [7, 24].
However, if DLA remains to be treated as a sickness benefit, none of the cases relied on by Mrs Tolley address the question of whether, in the light of the specific provisions of Title III relating to unemployed persons, the broad definition of employed persons under article 1 should apply [25].
It is also unclear how article 13 (and the special procedures for implementing the legislation of the UK in annex VI) apply when a person remains subject only to the legislation of a member state relating to a particular benefit, in this case potential entitlement to a state retirement pension.
The questions referred are therefore as follows [27]: 1. 2. 3.
Is the care component of the United Kingdoms Disability Living Allowance properly classified as an invalidity rather than a cash sickness benefit for the purpose of Regulation No 1408/71? (i) Does a person who ceases to be entitled to UK Disability Living Allowance as a matter of UK domestic law, because she has moved to live in another member state, and who has ceased all occupational activity before such move, but remains insured against old age under the UK social security system, cease to be subject to the legislation of the UK for the purpose of article 13(2)(f) of Regulation No 1408/71? (ii) Does such a person in any event remain subject to the legislation of the UK in the light of Point 19(c) of the United Kingdoms annex VI to the Regulation? (iii) If she has ceased to be subject to the legislation of the UK within the meaning of article 13(2)(f), is the UK obliged or merely permitted by virtue of Point 20 of annex VI to apply the provisions of Chapter 1 of Title III to the Regulation to her? (i) Does the broad definition of an employed person in Dodl and Oberhollenzer [2005] ECR I 5065 apply for the purposes of articles 19 to 22 of the Regulation, where the person has ceased all occupational activity before moving to another member state, notwithstanding the distinction drawn in Chapter 1 of Title III between, on the one hand, employed and self employed persons and, on the other hand, unemployed persons? (ii) If it does apply, is such a person entitled to export the benefit by virtue of either article 19 or article 22? Does article 22(1)(b) operate to prevent a claimants entitlement to the care component of DLA being defeated by a residence requirement imposed by national legislation on a transfer of residence to another member state?
|
The narrow question raised by this appeal is whether, during the period 1 October 2002 to 5 December 2005, the takings on a particular category of machines (the disputed machines) operated by the appellants (Rank) were subject to VAT.
The answer depends on whether the takings resulted from the provision of a gaming machine as defined in Note (3), more particularly whether for the purposes of that definition the element of chance in the game was provided by means of the machine.
If not, the takings were exempt.
The question comes to this court by a somewhat oblique route.
On 21 December 2005 Rank made a substantial claim for repayment of tax (a net figure of more than 25m) for that period.
That was on the basis of differences between the treatment between takings from the disputed machines, assuming they were exempt, and those from other similar machines which were taxable, thereby infringing the EU law principle of fiscal neutrality.
The long and complex procedural history by which that claim has been litigated in the domestic and European tribunals and courts was sufficiently summarised by Rimer LJ in the Court of Appeal (paras 5 8, 50 52), and need not be repeated.
The Court of Appeal answered the present question in favour of HMRC.
Rank appeals with permission of this court.
The disputed machines
The disputed machines were all slot machines used for gaming.
Traditionally such machines are coin operated, with three or more mechanical or video reels which spin when a button is pressed or, in the case of older machines, when a handle is pulled.
The machine typically pays out according to the patterns or symbols on the machine when it stops.
The basic form of the machines is sufficiently described in the agreed statement of facts, based on the findings of the VAT and Duties Tribunal: the hardware of a slot machine consists of a cabinet containing the electronic control board, power supply coin insert and pay out mechanisms, reels and/or video screens and cashboxes.
The electronic control board is an embedded microprocessor control system that generates the winning and losing games and displays the results to the player via the reels, lamp displays or video screens.
The machines software is a list of instructions that the processor executes in order to generate the winning or losing games.
Such software is controlled either by embedded software that is controlled or random or by a remote random number generator.
RNG (for random number generator) is used to describe the system for producing numbers for the machine's software, whether the system is embedded in that software or provided by means of another device.
As is apparent from that description, and was explained in evidence, modern machines are entirely computerised: In modern slot machines, the reels and lever are present for historical and entertainment reasons only.
The positions the reels will come to rest on are chosen by an embedded RNG contained within the machines software.
The RNG is constantly generating random numbers, at a rate of hundreds or maybe thousands per second.
As soon as the lever is pulled or the Play button is pressed, the most recent random number is used to determine the result.
This means that the result varies depending on exactly when the game is played.
A fraction of a second earlier or later, and the result would be different. (quoted by Rimer LJ, para 26)
Much evidence was given about the development from the 1960s of different forms of gaming equipment, including for example bingo machines and fixed odds betting terminals, and in particular the development of different forms of RNG.
This evidence was illustrated by photographs of different types of system from commercial brochures of the time.
The evidence was described at some length by Rimer LJ, and again it is unnecessary to repeat it.
For present purposes the significant points are the development, and (from the late 1970s) the commercial use, of RNGs in conjunction with different types of gaming equipment; and from about 2003 the development of multi machine products, with a single RNG serving a number of playing terminals.
As Rimer LJ noted (para 24) it has always been common ground that the definition of gaming machine in note (3) is satisfied by at least one form of slot machine: that is the type of machine in which the element of chance was provided by an electronic or mechanical component within, and forming an integral part of, the body of the machine.
The debate before the tribunal turned on the treatment of different forms of system using RNGs, either single terminal RNGs or multi terminal RNGs.
As Rimer LJ explained (paras 31 35) the tribunal made findings on certain forms of single terminal RNGs.
They included RNGs hanging by a wire from the terminal, or velcroed to the wall directly behind the machine or screwed to the wall (Rimer LJs category 1); or contained in a separate plinth on which the terminal stood, and linked to the terminal by a wire passing through a hole in the bottom of the terminal cabinet (category 2).
The tribunal concluded (paras 54 56; summary of conclusions para 2) that terminals constructed with dedicated RNGs were gaming machines within note (3) where the RNG was used with the machine whether or not the RNG had been detached, although they observed that the position might have been different if the cable could be unplugged, the RNG did have an independent power source and was ordered and supplied separately (para 55).
The machines in issue in the present appeal are all multi terminal systems.
As Rimer LJ explained (paras 36 39) the evidence referred to three different types of system (his categories 3(a) to (c)), but the differences are not material for present purposes.
It seems that in each case the RNG was connected by a wire to the playing terminals, but had its own power supply, and it might be housed in a separate box or hung on the wall.
Up to six terminals might be served by a single remote RNG.
Further, according to evidence summarised in the agreed statement of facts (para 20), each terminal was designed to be used with the RNG obtained from the manufacturer of the terminal, the terminals and RNGs were sold together, and each RNG was manufacturer specific so that a replacement if needed would have be obtained from the same manufacturer.
Though linked to a single RNG, each terminal could be operated independently and could offer the same or different games as the operator wished.
The legislation
The Finance Act 1972, which introduced VAT to the United Kingdom, provided in Schedule 5 for certain exemptions.
They included Group 4 Betting, Gaming and Lotteries, defined in these terms: Item no. 1.
The provision of any facilities for the placing of bets or the playing of any games of chance. 2.
The granting of a right to take part in a lottery.
The general effect of this provision, which remained unamended until 1 November 1975, was to exempt from VAT the takings of all machines used for gaming.
Note (1) to item 1 made three exclusions (a), (b) and (c) not relevant to the present dispute.
Note (2) provided that game of chance had the same meaning as in the Gaming Act 1968.
With effect from 1 November 1975 the notes to item 1 were amended by the Value Added Tax (Betting, Gaming and Lotteries) Order 1975 (the 1975 Order), subsequently consolidated into the Value Added Tax (Consolidation) Order 1976 (SI 1976/128).
By a new paragraph (d) to note (1), it was provided that item 1 would not apply to the provision of a gaming machine, that term being defined by note (4): (4) Gaming machine means a machine in respect of which the following conditions are satisfied, namely it is constructed or adapted for playing a game of chance (a) by means of it; and (b) a player pays to play the machine (except where he has an opportunity to play payment free as the result of having previously played successfully), either by inserting a coin or token into the machine or in some other way; and (c) of the machine. the element of chance in the game is provided by means It is common ground that the disputed machines fall within (a) and (b) of the definition, the area of disagreement being confined to (c).
Subject to minor amendments, including that what had previously been note (4) became note (3), the exemption and the exclusions remained unchanged until 6 December 2005.
With effect from that date, note (3) was amended by article 2 of the Value Added Tax (Betting, Gaming and Lotteries) Order 2005 (SI 2005/3328) in a way which left no doubt that takings from the disputed machines were thenceforth taxable.
Gaming Act comparisons
The concept of an element of chance provided by means of the machine can be traced back to Part III of the Gaming Act 1968, which applied to Gaming by Means of Machines.
For this purpose, section 52 defined machine as including any apparatus.
Section 26 provided, so far as material: 26 (1) This Part of this Act applies to any machine which (a) is constructed or adapted for playing a game of chance by means of the machine, and (b) has a slot or other aperture for the insertion of money or moneys worth in the form of cash or tokens. (2) In the preceding subsection the reference to playing a game of chance by means of a machine includes playing a game of chance partly by means of a machine and partly by other means if (but only if) the element of chance in the game is provided by means of the machine. (Emphasis added) The significance of the definition in that context was in identifying the different forms of regulatory control to be applied.
Part II of the 1968 Act applied to gaming on licensed premises, other than gaming by means of a machine to which Part III applied.
Section 21 provided for the regulation of machines not falling within the Part III definition; hence the expression section 21 machines, used in the evidence and the judgments below.
By contrast, the main regulatory provisions for Part III machines were in sections 31 to 34 of the Act.
The appellants place reliance in particular on section 31, which contained restrictions on the use of such Part III machines on premises licensed or registered for the purpose.
Section 31(2) and (3), as originally enacted, provided: (2) Not more than two machines to which this Part of this Act applies shall be made available for gaming on those premises. (3) The charge for play for playing a game once by means of any such machine on the premises shall be a coin or coins inserted in the machine of an amount not exceeding (or, if more than one, not in the aggregate exceeding) one shilling or such other sum as may be specified in an order made by the Secretary of State for the purposes of this subsection.
Reference has also been made to section 37(1) which gives the Secretary of State a general power to impose such restrictions as he may consider necessary or expedient on the sale, supply ,maintenance or use of machines to which Part III applies.
There was substantial evidence before the tribunal and the courts discussing the treatment (not always consistent) of various categories of machine by the regulatory authorities under the 1968 Act at different times.
There was evidence of guidance issued by HMRC which related the tax treatment of different forms of equipment to its treatment under the 1968 Act.
For example, guidance issued in January 2005 proceeded on the basis that section 21 gaming terminals were not gaming machines, as defined for either regulatory or tax purposes, because the element of chance is not provided by the terminals themselves but by a RNG which is outside the machine.
That stance is clearly inconsistent with the position taken by HMRC in the present appeal, but it is not suggested that this is in any way determinative.
Some help as to the meaning of the critical expression as understood in the mid 1970s, when the exclusion was drafted, can be taken from the well known description by Lord Denning MR of games of prize bingo in R v Herrod, Ex p Leeds City District Council [1976] 1 QB 540, p 558D H: I expect that everybody knows ordinary bingo.
It is played at bazaars, sales of work, and so forth, for small prizes and is perfectly lawful.
Now prize bingo is like ordinary bingo, but played with sophisticated apparatus.
Instead of cards with numbers on them, there are dials facing the players.
A player puts in a coin (5p for two cards).
Thereupon two dials light up showing numbers corresponding to two cards.
When the game starts, instead of someone drawing a number out of a hat, a machine throws a ball into the air.
A gaily dressed lady plucks one of them and calls out the number.
If it is one of the numbers on the dial, the player crosses it out by pulling a cover over it.
If he gets all his numbers crossed out correctly before the other players, he gets a prize.
This is obviously a lottery or a game of chance, but it is not a gaming machine because the element of chance is not provided by means of the machine but by means of the gay lady: see section 26(2) of the Gaming Act 1968. 15.
In some of these premises there are also some one armed bandits.
These are gaming machines.
The player puts in a coin.
This enables him to pull a handle to forecast a result.
Cylinders revolve and give an answer.
If he succeeds, he gets the winnings.
If he fails, he loses his money.
This is undoubtedly a gaming machine because the element of chance is provided by means of a machine: see section 26(1) of the Act of 1968 The contrast there drawn is between an element of chance provided by machinery within the device itself, and one provided by an outside agency of some kind.
That approach may have been readily applied to the relatively simple types of equipment then in use.
However, it is of little assistance in applying the statutory words to the more sophisticated forms of gaming device later developed.
The decisions below and the arguments on the appeal
It is not in dispute that in respect of all the potential comparators, whether multi terminal or single terminal, the element of chance was provided by the RNG.
In the case of slot machines it is clear that the machine to which Note (3)(b) refers was the terminal into which the coins or tokens were inserted.
If the conditions in (b) and (c) were both to be satisfied both the terminal and the RNG had to refer to the same machine.
The use of the definite article before the word machine in (b) and (c) makes this clear.
Indeed condition (a) had to be satisfied also.
Where the RNG was situated inside the terminal so as to be an integral part of it, we have no doubt that the RNG and the terminal formed part of a single machine 53.
Where the RNG was situated outside the terminal and served a number of terminals we conclude that the terminals were not gaming machines because the RNG was not part of any terminal and the element of chance was not provided by means of the machine containing the slot.
We do not consider that the language of Note (3) was apt to cover a series of terminals linked to one RNG.
The result is that by reason of Note (1)(d) to Group 4 the provision of gaming facilities by multi terminal products was exempt as a matter of law.
In the High Court Norris J agreed with their approach.
He said: The argument proceeded on the footing that the element of chance had to be provided by the machine and the problem lay in identifying the machine.
The element of chance is the determining event which governs the outcome of the game being played on the machine which has the slot in it and which the player is playing.
Where the determining event is a random number there is I think no difference in principle between a human being selecting a numbered ball, an electric ball shuffler (such as that used in the National Lottery) producing a numbered ball or a microprocessor emitting a stream of numbers.
It is a question of fact in each case whether that determining event is produced by the machine, and fine distinctions might have to be drawn.
In my judgment the principle by reference to which those judgments have to be made is whether the outcome of the game may sensibly be regarded as determined by an external event which the machine records or is produced by the machine itself.
Like the tribunal I would hold that the random generation of a number in a separate unit which serves various player terminals (which may themselves be running different games) is properly regarded as an external event and not one produced by the machine that the player is playing.
Like the tribunal I do not think it is possible to elaborate further. (para 67) 16.
He had earlier rejected the suggestion that the machine might include both terminals and the RNG as conflicting with the statutory restriction on numbers: The regulatory context helps me to decide that the argument that the machine is the system of terminals linked to a common RNG is wrong (because it would effectively mean that the restrictions on numbers of machines on any given premises for which Part III provides would be meaningless since the restriction would relate to the RNG in each system, to which vast numbers of playing terminals could be linked). (para 63) 17.
The Court of Appeal disagreed.
Rimer LJ attached weight to considerations related to the scope of Part III of the Gaming Act 1968.
It cannot, he thought, have been the purpose of Part III to confine its control to equipment comprised in a self contained single unit or terminal and to exclude from such control two separate, but linked, items of equipment that together perform an identical function (para 76).
He had earlier (para 67) noted without comment the argument that a broader construction would cause difficulties for the purpose of the limits on numbers of machines under section 31(2), and the response (given by Mr Peretz for HMRC) that the problem could be met by use of the Secretary of States general regulatory powers under section 37. 18.
He concluded that such a narrow, literal construction would lead to absurdity: 77.
That cannot be the correct construction of the word machine.
The word must, if the language of Part III is to be given a sensible and practical effect that will enable it to achieve its obvious purpose, be interpreted as including equipment ancillary, and connected, to the playing terminal that automatically provides the element of chance that determines the outcome of the game played on the terminal If this is right, it follows in my view, and for like reasons, that 79. a purpose built system comprising a terminal with a separate, but connected, RNG is also properly characterised as a machine.
The terminal cannot be used for gaming purposes except by being linked to the RNG; and the RNG is designed to be linked to the terminal in order to enable the game to be played.
Again, no doubt they constitute two separate items of equipment; but to treat the terminal as a separate machine in considering the impact or otherwise of Part III is unrealistic.
They are being used together for the purpose of playing a game on the terminal and the RNG forms an essential element of the system.
If right so far, I also do not understand why the multi terminal 80. systems should be treated any differently.
The fact that there is only one RNG serving several terminals cannot make a material difference.
In substance, the systems are exactly the same as in both previous configurations.
By like reasoning, I cannot see why each terminal and the single RNG do not together constitute a machine within section 26.
That is the substance of any such multi terminal system; and it is the substance of the matter that counts. 19.
Having reached that view in respect of the Gaming Act definition he saw no reason to take a different view in respect of note (3).
There again he rejected a narrow, literal reading which would reduce VAT on gaming machines to a voluntary tax, since tax could be avoided by a simple re design of the playing equipment, whilst leaving its essential function unchanged. (para 82) 20.
In this court the appellants have supported the reasoning of the tribunal, which as a multifactorial assessment based on a number of primary facts should have been respected by the appellate courts (Procter & Gamble UK v Revenue and Customs Comrs [2009] EWCA Civ 407, [2009] STC 1990 para 9ff).
The Court of Appeal were wrong to think that the narrow construction deprived the definition of sensible meaning, for regulatory or tax purposes, a position never previously taken by the Gaming Board or HMRC.
It is not possible to identify any specific regulatory purpose which would justify a departure from the ordinary meaning of the words.
Absent an abusive practice (as explained in Halifax plc v Customs & Excise Comrs (Case C 255/02) [2006] Ch 387, [2006] STC 919) the operators were entitled to design their machines in the most tax efficient way. 21.
The respondents in turn support the reasoning of the Court of Appeal, relying on a purposive construction, and like them taking account of the Gaming Act regime.
In particular they adopt the Court of Appeals conclusion that the word machine in the definition is apt to cover a configuration of separate, but connected, items that together enable the playing of a game of chance at a terminal .
For good measure, they seek to turn on its head the appellants reliance on the principle of neutrality.
So far as it applies, they argue, it favours an interpretation of note (3) which minimises any difference in treatment of similar items (Marks & Spencer plc v Customs and Excise Comrs (Case C 62/00) [2003] QB 866, [2002] ECR I 6325, para 24).
Discussion 22.
It is necessary first to dispose of a possible argument suggested by the court during the hearing but not adopted by either party rightly in my view.
This would treat the words by means of the machine as requiring no more than that the relevant information be communicated to the player by means of the machine on which he is playing, regardless of where or how that information is generated.
Thus when the player pulls a lever or presses a button on the terminal, which in turn triggers the operation of the RNG, whether or not connected to other terminals, the terminal on which he is playing becomes the means by which the element of chance is communicated, and so provided, to the player for the purposes of his game.
In my view, that is not the natural sense of the words used.
The question is how the element of chance is provided in the game.
The definition implies an active function in the game as it is played, rather than the mere passive transfer of information to the player. 23.
Secondly, with respect to the Court of Appeal, I do not consider that much help is to be gained from comparisons with the treatment of the various machines at different times under the Gaming Act.
Rimer LJ observed (para 74) that much of the argument before the Court of Appeal had been directed to the question whether the disputed machines had been Part III machines for the purpose of the 1968 Act, and thought it logical to start by considering that question.
I find that difficult to accept.
The sole issue in the appeal concerns the construction of the VAT legislation at the relevant time.
The draftsman has not simply applied the definition of gaming machine used in the Gaming Act, as he did when defining game of chance, but has merely adopted some of its elements.
It cannot be assumed that he intended precisely the same results.
Furthermore, even if one assumes that the policy thinking of the VAT draftsman was guided by that of the 1968 Act, that assumption is of little assistance unless perhaps a proposed interpretation conflicts materially with some aspect of the comparable provisions in the latter legislation, or if it reveals a clear basis for distinguishing in that context between the categories now in issue.
With one exception relied on by Norris J (see para 16 above), no such conflict has been identified.
On the other hand, it is of some relevance that no one has suggested any convincing policy reason for distinguishing, in either legislative context, between, on the one hand, embedded software or a single terminal RNG, and on the other a multi terminal RNG such as is in issue in this appeal.
Unless the language points clearly in a different direction, policy considerations favour treating them in the same way. 24.
Much of the argument in the tribunal and the lower courts turned on the meaning of the word machine.
The tribunal did not refer to any dictionary definition of the term.
However, they seem to have proceeded on the assumption that the word connoted a single item of equipment, which in the context of paragraph (b) of the definition, had to be that which was played by the player, and into which he inserted his coin or token.
Accordingly, for both (b) and (c) to be satisfied both the terminal and the RNG had to refer to the same machine, that being made clear by the use of the definite article before the word machine in both.
Where the RNG was situated outside the terminal and served a number of terminals, it was a separate item of equipment, so that the element of chance was not provided by means of the machine containing the slot.
Norris J took a similar view.
He also treated the relevant machine as that which has the slot in it and which the player is playing.
It was then a question of fact whether the outcome of the game is determined by an external event which the machine records or is produced by the machine itself.
The Court of Appeal interpreted the word machine in a broader sense, as extending to a configuration of separate, but connected, items of equipment that together enable the playing of a game of chance at the terminal.
Again they made no reference to any dictionary definition, relying instead on what they deemed the absurdity of a more narrow interpretation, which they thought would deprive the provisions of sensible and practical effect. 25.
I see some force in the appellants criticisms of the Court of Appeals reliance on arguments of absurdity, which seem difficult to reconcile with HMRCs own acceptance in the past of a narrow interpretation.
However, their approach can arguably be supported by reference to the natural meaning of the word machine in its context.
We have not been referred to any dictionary definitions of the word machine, but reference to the standard dictionaries does not indicate any linguistic reason to confine the word to a single item of equipment.
It is in some ways a chameleon like word, and the dictionaries contain a variety of meanings.
A typical and in my view accurate definition, taken from the Concise Oxford English Dictionary, is: an apparatus using or applying mechanical power, having several parts, each with a definite function and together performing certain kinds of work. 26.
This is of interest in the present context for two reasons.
First the use of the word apparatus as a synonym suggests that no particular significance is to be attached to the absence in the VAT legislation (as compared to the 1968 Act) of a specific reference to apparatus as part of the definition.
Secondly, the emphasis is not so much on the physical nature of the equipment or its parts, as on the functions they are performing together for the purpose of a particular type of work.
In the present context the overall purpose or task is the creation for a game of chance for the player, in which purpose both the terminal and the RNG play, and are designed to play, essential and connected functions.
It should not matter whether that task is being performed by a single item or a combination of linked items designed for the same task. 27.
If that is the correct analysis, the tribunals approach is open to the criticism that it limits its attention to the physical identity of the equipment as viewed by the player, but ignores the necessary components of the task which it is performing.
The terminal is useless for the task of playing the game without the RNG.
Where the RNG is linked to a single terminal, the tribunal apparently saw nothing unnatural in principle in viewing them as together constituting a single machine for playing the game.
On that view, it does not matter that the coin or token is paid into one part, and the element of chance is provided by another; nor that the player may be unaware that the machine which he is playing has more than one component. 28.
Similarly, even where the RNG is serving several terminals, it seems no less appropriate to treat the combined set of apparatus as a composite machine, at least where (as here) the combination has been designed and supplied for use together in the same premises, and the RNG functions for all material purposes in exactly the same way as embedded software in each terminal.
From the players point of view, it may be less natural to think of him playing, or inserting his coin into, the combined machine.
But viewed objectively that is what he is doing, since without the RNG his coin will not achieve its purpose, and the game will not be played. 29.
The principal objection to that interpretation is that relied on by Norris J by reference to the limits in section 31 of the Gaming Act 1968.
Read naturally and in context, the restriction of the numbers of machines on any premises seems directed at the terminals available to individual players.
It can hardly have been intended that it could be satisfied by two multi terminal machines serving an unlimited number of players.
As already noted, Mr Peretzs answer is that, even if the draftsman in 1968 may not have had in mind the possibility of multi terminal machines that cannot change the natural meaning of the words; section 37 was available to deal with changes in technology which might call for different or more sophisticated restrictions. 30.
In my view, it is not necessary to resolve this debate, since one can arrive at the same practical answer as the Court of Appeal, without departing from the view that the word machine, where it matters, can refer to an individual terminal.
The relevant phrase is the element of chance in the game is provided by means of the machine.
In the words of Norris J, it is the determining event which governs the outcome of the game being played on the machine which the player is playing.
Chance is the possibility of something happening, not in the abstract, but for a particular player in the context of a particular game; in other words, the possibility of that player getting the combination of numbers which wins a prize or conversely a combination which does not. 31.
Here what determines the outcome of the game is the pressing of a button (or pulling a lever) on the terminal.
The pressing of the lever is a more sophisticated equivalent of a player rolling a dice.
In that context, it can fairly be said, the winning number is produced by means of the players action in throwing the dice.
So here the RNG produces a pre programmed sequence of numbers which changes very rapidly.
The element of chance in any game is provided by means of the action of the particular player in pressing the button and so interrupting that ever changing sequence at a particular moment.
The terminal is not simply communicating information from the RNG, but is the active means by which the winning or losing combination is generated.
The RNG is a necessary part of that process, but its response (wherever situated) is entirely automatic.
In those circumstances, it is a fair use of language in my view, and consistent with the apparent policy of the legislation, to describe the element of chance as provided by means of the terminal. 32.
Accordingly, albeit for somewhat different reasons, I agree with the conclusion reached by the Court of Appeal and I would dismiss the appeal.
The tribunal concluded that the disputed machines were not gaming machines as defined by note (3).
They said:
| UK-Abs | The question in this appeal is whether, in the period 1 October 2002 to 5 December 2005, the takings from slot machines (the disputed machines) operated by the appellants (Rank) were subject to Value Added Taxation (VAT).
If the takings resulted from the provision of a gaming machine, as defined, then they were subject to VAT.
The disputed element of the definition of gaming machine was: the element of chance in the game is provided by means of the machine.
If this was not satisfied, then the takings from the disputed machines were exempt from VAT.
The disputed machines were computerised.
The machines typically pay out according to the symbols on the machine when it stops.
The positions the reels come to rest on are chosen by a Random Number Generator (RNG), which is the system for producing numbers for the machines software.
The RNG is constantly generating random numbers.
As soon as the lever is pulled or the button is pressed, the most recent random number is used to determine the result.
This means that the result varies depending on exactly when the game is played.
It was common ground that a slot machine is a gaming machine for VAT purposes when the element of chance is provided by a component that forms part of the body of the machine on which the game is played.
This appeal concerned multi terminal systems.
In each case the RNG might be housed in a separate box or hung on the wall, but was connected by a wire to the playing terminals.
Up to six playing terminals might be served by a single remote RNG.
Each terminal was designed to be used with the RNG obtained from the manufacturer of the terminal, the terminals and RNGs were sold together, and each RNG was manufacturer specific.
Though linked to a single RNG, each terminal could be operated independently and could offer the same or different games.
The VAT and Duties tribunal concluded, in favour of Rank, that the disputed machines were not gaming machines because the RNG was not part of any terminal and the element of chance was not provided by the machine containing the slot.
The High Court agreed.
The Court of Appeal overturned this decision; Rimer LJ considered that each terminal and the single RNG could together constitute a machine.
Rank appealed to the Supreme Court.
The Supreme Court unanimously dismisses the appeal.
Lord Carnwath gives the judgment of the Court with which Lord Neuberger, Lord Reed, Lord Toulson and Lord Hodge agree.
The question is how the element of chance is provided in the game; the definition implies an active function in the game as it is played, rather than the mere passive transfer of information to the player.
No one suggested any good policy reason for distinguishing between on the one hand, embedded software or a single terminal RNG, and on the other a multi terminal RNG. [22 23] The natural meaning of machine in context supports the Court of Appeals approach.
A typical and accurate definition from the Concise Oxford English Dictionary is an apparatus using or applying mechanical power, having several parts, each with a definite function and together performing certain kinds of work.
The overall purpose is the creation of a game of chance for the player, in which purpose both the terminal and the RNG play, and are designed to play, essential and connected functions.
The tribunals approach limits attention to the physical identity of the equipment as viewed by the player, but ignores the necessary components of the task which the equipment is performing.
The terminal is useless for playing the game without the RNG.
Where the RNG is linked to a single terminal, the tribunal saw nothing wrong in principle in viewing them as together being a single machine for playing the game.
Similarly, where the RNG serves several terminals, it is appropriate to treat the combined apparatus as a machine. [25 26] Rank argued that this approach is inconsistent with the limits on the numbers of machines on any premises (section 31 of the Gaming Act 1968).
That restriction seems directed at the terminals available to individual players.
It is not necessary to resolve the issue.
The practical answer is that the word machine, where it matters, can refer to an individual terminal.
But the relevant phrase is the element of chance in the game is provided by means of the machine.
Chance is the possibility of something happening, not in the abstract, but for a particular player in the context of a particular game; the possibility of that player getting the combination of numbers which wins a prize, or a combination which does not. [29 30] The outcome of the game is determined by pressing a button or pulling a lever on the terminal.
It is a more sophisticated equivalent of a player rolling a dice, where the winning number is produced by means of the players action in throwing the dice.
The RNG produces a pre programmed sequence of numbers which changes very rapidly.
The element of chance in any game is provided by means of the players action in pressing the button, so interrupting that ever changing sequence at a particular moment.
The terminal is not simply communicating information from the RNG, but is the active means by which the winning or losing combination is generated.
The RNG is a necessary part of the process, but its response (wherever it is situated) is entirely automatic.
In these circumstances, it is a fair use of language, and consistent with the apparent policy of the legislation, to describe the element of chance as provided by means of the terminal. [31] Accordingly, Ranks appeal is dismissed. [32]
|
Cigarettes attract smokers, smugglers and thieves.
In the two appeals now before the court, one container load was allegedly hi-jacked in Belgium en route between Switzerland and The Netherlands in September 2011, while another allegedly lost 756 of its original 1386 cartons while parked overnight contrary to express instructions near Copenhagen en route between Hungary and Vallensbaek, Denmark.
The consignors are claiming against English main contractors who undertook responsibility for the carriage and against sub-contractors in whose hands the cigarettes were when the alleged losses occurred.
The carriage was subject to the Convention on the Contract for the International Carriage of Goods by Road 1956 (CMR), given the force of law in the United Kingdom by the Carriage of Goods by Road Act 1965.
Although the Act only incorporates the English language version, CMR was agreed at an international level in English and French, each text being equally authentic.
Lord Wilberforce said this about the proper approach to its interpretation in James Buchanan & Co Ltd v Babco Forwarding & Shipping (UK) Ltd [1978] AC 141, 152D-F: I think that the correct approach is to interpret the English text, which after all is likely to be used by many others than British businessmen, in a normal manner, appropriate for the interpretation of an international convention, unconstrained by technical rules of English law, or by English legal precedent, but on broad principles of general acceptation: Stag Line Ltd v Foscolo, Mango and Co Ltd[1932] AC 328, per Lord Macmillan, at p 350.
Moreover, it is perfectly legitimate in my opinion to look for assistance, if assistance is needed, to the French text.
This is often put in the form that resort may be had to the foreign text if (and only if) the English text is ambiguous, but I think this states the rule too technically.
As Lord Diplock recently said in this House the inherent flexibility of the English (and, one may add, any) language may make it necessary for the interpreter to have recourse to a variety of aids: Carter v Bradbeer [1975] 1 WLR 1204, 1206.
There is no need to impose a preliminary test of ambiguity.
It appears that some 55 states have ratified, or acceded or succeeded to participation in CMR, of which half are states not members of the European Union, including states as wide-spread as Azerbaijan, Kazakhstan, Kyrgystan, Jordan, Mongolia, Moldova, Morocco, Syria, Tajikistan, the former Yugoslav Republic of Macedonia and Uzbekistan.
There is no international court to which national courts may refer issues of interpretation of CMR.
The present appeals each involve the issue whether the consignors can found jurisdiction in England not only against the main contractors but also against sub- contractors as successive carriers within the meaning of CMR, by relying on the presence here of, and the proceedings brought against, the main contractors and/or upon a provision in the main contract for English jurisdiction.
The goods had a high value, put in the case of the first container at 624,000 plus 2.9m duty and/or taxes demanded by Belgian Customs, and in the case of the cartons missing from the second container at 30,000 plus over 500,000m duty and/or taxes.
English law and English jurisdiction are said to offer the advantage that such duty and/or taxes are recoverable in a CMR claim against carriers, which is not the case in some other jurisdictions.
Joinder of all carriers in English proceedings is said to have the advantage that it will ensure that all parties concerned and their witnesses will be involved in the same proceedings, in which the consignors intend to seek to establish wilful misconduct, so preventing any carrier liable from availing itself of the limit of liability otherwise provided under Chapter IV of CMR (see articles 23 and 29).
In a clearly reasoned judgment, given on 23 March 2012 within a week of the hearing before him, the judge (Cooke J) held that the consignors could not succeed in doing this, and set aside the proceedings against the sub-contractors: [2010] EWHC 694 (Comm); [2013] 1 WLR 397.
The Court of Appeal (McFarlane LJ, Sir Bernard Rix and Sir Timothy Lloyd) heard argument over two days on 5-6 February 2013, and in a detailed judgment given by Sir Bernard Rix on 30 October 2013 reached the opposite conclusion: [2013] EWCA Civ 1319; [2014] 1 WLR 4526.
The matter now comes to this court with our permission.
The circumstances in greater detail
The two consignors were companies in the British American Tobacco group.
They are respondents on the appeal and have been referred to together as BAT.
The transport of the container loads took place under a framework agreement made by British American Tobacco (Supply Chain WE) Ltd (BAT SCWE) and a local agreement made by British American Tobacco (Holdings) Ltd (BAT Holdings) with the first defendants Exel Europe Ltd (Exel), who have played no part on these appeals.
The appellants are in the first appeal H Essers Security Logistics BV (Essers Security) and H Essers Transport Co Nederland BV (Essers Transport), referred to collectively as Essers, and in the second appeal Kazemier Transport BV (Kazemier).
All the appellants are ordinarily resident in and have their principal place of business in the Netherlands.
Essers Security was engaged by Exel to carry the first container, and maintains that it in turn engaged Essers Transport to do this.
Kazemier was engaged by Exel to carry the second container.
Two CMR consignment notes are before the court.
In relation to the first container, we have the consignors copy issued in Switzerland on 2 September 2011, showing the relevant BAT company as consignor and Maersk Shipping Lines as intended consignee and signed simply by Essers as carriers.
In relation to the second container, we have the carriers copy issued in Hungary on 15 September 2011 showing the relevant BAT company as consignor, an associated Danish company as consignee and Kazemier as carrier.
It is signed by a chauffeur, presumably Kazemiers driver, and, on receipt of the container at destination on 20 September 2011, by the Danish company with a notation regarding the missing cartons.
The common ground about the CMR position
There is much common ground between the parties.
First, the two BAT companies who are consignors have been treated as parties to the framework and/or local agreement, each of which provides that it is governed by English law, and that each party irrevocably submits to the exclusive jurisdiction of the English courts in relation to all matters arising out of or in connection with it.
I note in parenthesis that the sub-contracts made by Exel with respectively Essers Security and Kazemier also contained identical provisions, regarding choice of law and court.
Second, the arrangements between each BAT consignor and Exel constituted a contract for carriage by Exel within the meaning of CMR.
Third, under the provisions of Chapter VI of the Convention relating to carriage performed by successive carriers, Exel was the first carrier, while one or other of the Essers companies was the last carrier and the carrier performing the carriage at the time of the loss of the first container, and Kazemier was the last carrier and the carrier performing the carriage at the time of the loss of the second container.
Chapter VI of the Convention commences with article 34, providing: If carriage governed by a single contract is performed by successive road carriers, each of them shall be responsible for the performance of the whole operation, the second carrier and each succeeding carrier becoming a party to the contract of carriage, under the terms of the consignment note, by reason of his acceptance of the goods and the consignment note.
In the French version (equally authentic at an international level), that reads: Si un transport rgi par un contrat unique est execut par des transporteurs routiers successifs, chacun de ceux-ci assume la responsabilit de excution du transport total, le second transporteur et chacun des transporteurs suivants devenant, de par leur acceptation de la marchandise et de la lettre de voiture, parties au contrat, aux conditions de la lettre de voiture.
Article 35 gives a further indication as to how this system is envisaged as working.
It provides: 1.
A carrier accepting the goods from a previous carrier shall give the latter a dated and signed receipt.
He shall enter his name and address on the second copy of the consignment note.
Where applicable, he shall enter on the second copy of the consignment note and on the receipt reservations of the kind provided for in article 8, paragraph 2. 2.
The provisions of article 9 shall apply to the relations between successive carriers.
The common ground between the parties in the present case involves necessarily their acceptance that one or other of the Essers companies in the case of the first container and Kazemier in the case of the second was a successive carrier within article 34.
In this connection, the present parties are content to proceed on the basis, said in Professor Malcolm Clarkes work International Carriage of Goods by Road: CMR, 6th ed (2014), para 50a(i) to be disputed but accepted by both Donaldson J and the Court of Appeal in Ulster-Swift v Taunton Meat Haulage [1975] 2 Lloyds Rep 502, 507 and [1977] 1 Lloyds Rep 346, 358-361 and by other national courts, that, where (as here) a company contracts to carry goods, but sub- contracts the whole performance, the first company is for CMR purposes the first carrier, while the second becomes a successive carrier.
Further, although article 4 of CMR provides that The contract of carriage shall be confirmed by the making out of a consignment note, it continues by saying that The absence, irregularity or loss of the consignment note shall not affect the existence or the validity of the contract of carriage which shall remain subject to the provisions of this Convention.
However, article 34 provides that a second or succeeding carrier only becomes a successive carrier by becoming a party to the contract of carriage, under the terms of the consignment note, by reason of his acceptance of the goods and the consignment note.
At this point, therefore, it might seem that the existence of a CMR note was of importance, and Professor Loewe, in a Commentary on the Convention of 19 May 1956 on the Contract for the International Carriage of Goods by Road (CMR), prepared for the United Nations in 1975 and expressed at paragraph 16 to be based on the preparatory work, on personal notes and recollections of the negotiations, and on the logic and spirit of the Convention itself, indicates at paragraph 275 that the language of article 34 was directed to ensuring that successive carriers were made aware through the consignment note that the carriage which they were undertaking (perhaps only for one part, and possibly even within only one countrys territory) was international carriage subject to the provisions of CMR.
There appears in the present cases at least a real possibility that the two CMR consignment notes only came into existence at the time when the relevant Essers company and Kazemier collected the respective consignments and signed the relevant CMR consignment notes.
Whether article 34 can apply to such a case is a point which we can however leave open, since the parties are prepared without further examination to proceed on the basis that these appeals both concern successive carriage, by the relevant Essers company or companies and by Kazemier, within the terms of article 34.
Further provisions of CMR
The appeals raise a number of particular issues, to address which it is necessary to set out further provisions of CMR: CHAPTER II PERSONS FOR WHOM THE CARRIER IS RESPONSIBLE Article 3.
For the purposes of this Convention the carrier shall be responsible for the acts and omissions of his agents and servants and of any other persons of whose services he makes use for the performance of the carriage, when such agents, servants or other persons are acting within the scope of their employment, as if such acts or omissions were his own.
CHAPTER III CONCLUSION AND PERFORMANCE OF THE CONTRACT OF CARRIAGE Article 4.
[See above, para 12] Article 5.
The consignment note shall be made out in three original copies signed by the sender and the carrier.
Article 6.1.
The consignment note shall contain the following particulars: (a) the date of the consignment note and the place at which it is made out; the name and address of the sender; the name and address of the carrier; the place and the date of taking over of the goods and the place designated for delivery; the name and address of the consignee; the description in common use of the nature of the goods and the method of packing, and, in the case of dangerous goods, their generally recognised description; the number of packages and their special marks and numbers; the gross weight of the goods or their quantity otherwise expressed; (b) (c) (d) (e) (f) (g) (h) (i) (j) (k) charges relating to the carriage (carriage charges, supplementary charges, customs duties and other charges incurred from the making of the contract to the time of delivery); the requisite instructions for Customs and other formalities; a statement that the carriage is subject, notwithstanding any clause to the contrary, to the provisions of this Convention.
2
Where applicable, the consignment note shall also contain the following particulars: (a) (b) (c) (d) a statement that transhipment is not allowed; the charges which the sender undertakes to pay; the amount of cash on delivery charges; a declaration of the value of the goods and the amount representing special interest in delivery; the senders instructions to the carrier regarding insurance of the goods; the agreed time-limit within which the carriage is to be carried out; a list of the documents handed to the carrier.
(e) (f) (g) 3.
The parties may enter in the consignment note any other particulars which they may deem useful.
Article 8.1.
On taking over the goods, the carrier shall check: (a) (b) the accuracy of the statements in the consignment note as to the number of packages and their marks and numbers, and the apparent condition of the goods and their packaging.
2
Where the carrier has no reasonable means of checking the accuracy of the statements referred to in paragraph l(a) of this article, he shall enter his reservations in the consignment note together with the grounds on which they are based.
He shall likewise specify the grounds for any reservations which he makes with regard to the apparent condition of the goods and their packaging.
Such reservations shall not bind the sender unless he has expressly agreed to be bound by them in the consignment note.
Article 9.1.
The consignment note shall be prima facie evidence of the making of the contract of carriage, the conditions of the contract and the receipt of the goods by the carrier.
Article 13.1.
After arrival of the goods at the place designated for delivery, the consignee shall be entitled to require the carrier to deliver to him, against a receipt, the second copy of the consignment note and the goods.
If the loss of the goods is established or if the goods have not arrived after the expiry of the period provided for in article 19, the consignee shall be entitled to enforce in his own name against the carrier any rights arising from the contract of carriage.
CHAPTER V CLAIMS AND ACTIONS Article 30.1 [Deals with checking of the goods by the consignee] 30.2.
When the condition of the goods has been duly checked by the consignee and the carrier, evidence contradicting the result of this checking shall only be admissible in the case of loss or damage which is not apparent and provided that the consignee has duly sent reservations in writing to the carrier within seven days, Sundays and public holidays excepted, from the date of checking.
3
No compensation shall be payable for delay in delivery unless a reservation has been sent in writing to the carrier, within 21 days from the time that the goods were placed at the disposal of the consignee.
5
The carrier and the consignee shall give each other every reasonable facility for making the requisite investigations and checks.
Article 31.1 1.
In legal proceedings arising out of carriage under this Convention, the plaintiff may bring an action in any court or tribunal of a contracting country designated by agreement between the parties and in addition, in the courts or tribunals of a country within whose territory (a) the defendant is ordinarily resident, or has his principal place of business, or the branch or agency through which the contract of carriage was made, or the place where the goods were taken over by the carrier or the place designated for delivery is situated, (b) and in no other courts or tribunals.
2
Where in respect of a claim referred to in paragraph 1 of this article an action is pending before a court or tribunal competent under that paragraph, or where in respect of such a claim a judgment has been entered by such a court or tribunal no new action shall be started between the same parties on the same grounds unless the judgment of the court or tribunal before which the first action was brought is not enforceable in the country in which the fresh proceedings are brought.
Article 32: The period of limitation for an action arising out of carriage under this Convention shall be one year.
Nevertheless, in the case of wilful misconduct, or such default as in accordance with the law of the court or tribunal seised of the case, is considered as equivalent to wilful misconduct, the period of limitation shall be three years.
Article 33.
The contract of carriage may contain a clause conferring competence on an arbitration tribunal if the clause conferring competence on the tribunal provides that the tribunal shall apply this Convention.
CHAPTER VI PROVISIONS RELATING TO CARRIAGE PERFORMED BY SUCCESSIVE CARRIERS Articles 34 and 35 [See above, paras 10 and 11] Article 36.
Except in the case of a counter-claim or a set-off raised in an action concerning a claim based on the same contract of carriage, legal proceedings in respect of liability for loss, damage or delay may only be brought against the first carrier, the last carrier or the carrier who was performing that portion of the carriage during which the event causing the loss, damage or delay occurred; an action may be brought at the same time against several of these carriers.
Article 37.
A carrier who has paid compensation in compliance with the provisions of this Convention, shall be entitled to recover such compensation, together with interest thereon and all costs and expenses incurred by reason of the claim, from the other carriers who have taken part in the carriage, subject to the following provisions: the carrier responsible for the loss or damage shall be solely liable for the compensation whether paid by himself or by another carrier; (a) (b) when the loss or damage has been caused by the action of two or more carriers, each of them shall pay an amount proportionate to his share of liability; should it be impossible to apportion the liability, each carrier shall be liable in proportion to the share of the payment for the carriage which is due to him; if it cannot be ascertained to which carriers liability is attributable for the loss or damage, the amount of the compensation shall be apportioned between all the carriers as laid down in (b) above.
(c) Article 38.
If one of the carriers is insolvent, the share of the compensation due from him and unpaid by him shall be divided among the other carriers in proportion to the share of the payment for the carriage due to them.
Article 39.1.
No carrier against whom a claim is made under articles 37 and 38 shall be entitled to dispute the validity of the payment made by the carrier making the claim if the amount of the compensation was determined by judicial authority after the first mentioned carrier had been given due notice of the proceedings and afforded an opportunity of entering an appearance.
2
A carrier wishing to take proceedings to enforce his right of recovery may make his claim before the competent court or tribunal of the country in which one of the carriers concerned is ordinarily resident, or has his principal place of business or the branch or agency through which the contract of carriage was made.
All the carriers concerned may be made defendants in the same action.
The issues
The following particular issues arise: (i) First, can article 31 and 36 be read together, so that, once a claimant has established jurisdiction against one defendant under article 31.1(a), it can then bring into that jurisdiction any other successive carrier potentially liable under article 36? (ii) Second, is it under article 31 sufficient to enable the BAT companies to sue Essers and Kazemier as successive carriers in England that the English courts were designated by agreement in the carriage contracts made between such BAT companies and Exel? (iii) Third, can the BAT companies sue Essers and Kazemier in the English courts, on the basis that the branch or agency through which the contract of carriage was made was in England? (iv) Fourth, do the provisions or principles of the Brussels I Convention on Civil Jurisdiction and Judgments, Council Regulation (EC) No 44/2001 of 22 December 2000 (OJ 2001 L12, p 1) either enable jurisdiction to be established over Essers and Kazemier or inform or dictate the answer to any of the previous questions?
The answers to the first three questions all require a proper understanding of the significance of article 31, in a context where there are successive carriers.
Each side has also submitted that the fourth question may bear on jurisdiction generally or at least on the first two questions.
I will therefore start by outlining how they have submitted that this may be so.
Article 6(1) of the Brussels Regulation provides: A person domiciled in a member state may also be sued: where he is one of a number of defendants, in the courts for the place where any one of them is domiciled, provided the claims are so closely connected that it is expedient to hear and determine them together to avoid the risk of irreconcilable judgments resulting from separate proceedings;
A similar provision exists, of course, in a non-Union context in Practice Direction 6B para 3.1(3) governing the heads of English and Welsh jurisdiction.
BAT submit that this reflects a principle of general international acceptance that should inform the interpretation of articles 31 and 36 of CMR, and so the answer to the first question.
Alternatively, they submit that, if CMR has otherwise no like provision, there is a lacuna, which falls to be filled by article 6(1) of the Brussels Regulation.
In Frans Maas Logistics (UK) Ltd v CDR Trucking BV [1999] 1 All ER (Comm) 737; [1999] 2 Lloyds Rep 179, Colman J held article 31.2 of CMR to be limited to proceedings brought by same claimant against the same defendant, and that, on that basis, the lis pendens provisions of articles 21 and 22 of the Brussels Convention should be applied to preclude a mirror image claim in England raising the same issues, but with the parties positions as claimant and defendant reversed, to those raised in prior Dutch proceedings.
Colman Js decision limiting article 31.2 to claims by the same claimant against the same defendant was overruled by the Court of Appeal in Andrea Merzario Ltd v Internationale Spedition Leitner Gesellschaft GmbH [2001] 1 AER (Comm) 883; [2001] 1 Lloyds Rep 490, though this does not of itself necessarily mean that Colman J was wrong to identify as a possibility gap- filling, by reference to for example article 22 of the Brussels Regulation.
As to the second question, Essers and Kazemier rely on the principle, which I have no difficulty in accepting, that jurisdiction clauses generally derive their validity from agreement between the parties (or their privies).
This principle is clearly enshrined in article 25 of the recast Brussels Regulation ((EU) No 1215/2012 of 12 December 2012) (OJ 2012 L351, p 1): 1.
If the parties, regardless of their domicile, have agreed that a court or the courts of a member state are to have jurisdiction to settle any disputes which have arisen or which may arise in connection with a particular legal relationship, that court or those courts shall have jurisdiction, unless the agreement is null and void as to its substantive validity under the law of that member state.
Such jurisdiction shall be exclusive unless the parties have agreed otherwise.
The agreement conferring jurisdiction shall be either: (a) (b) in writing or evidenced in writing; in a form which accords with practices which the parties have established between themselves; or (c) in international trade or commerce, in a form which accords with a usage of which the parties are or ought to have been aware and which in such trade or commerce is widely known to, and regularly observed by, parties to contracts of the type involved in the particular trade or commerce concerned.
Accordingly, Essers and Kazemier submit that, in so far as the BAT companies seek to rely against them upon jurisdiction clauses which were contained in the contract between BAT and Exel and to which they did not agree, CMR cannot and should not be interpreted as binding them by such clauses.
The fact that, as it happened, the sub-contracts made by Exel with Essers Security and Kazemier were also subject to English choice of law and court clauses must, I accept, be legally irrelevant in this connection, however much it might be thought to diminish the attractiveness in non- legal terms of Essers and Kazemiers position.
In the further alternative, BAT submit that, if CMR positively precludes the recognition or application of article 6(1) or of a similar principle, then CMR would lead to results which are less favourable for achieving sound operation of the internal market than those resulting from the provisions of the Brussels Regulation, and in particular inconsistent with observance of the aim of minimising the risk of concurrent proceedings which is one of the objectives and principles which underlie judicial cooperation in civil and commercial matters in the European Union, and that its provisions must to that extent be over-ridden by the provisions of, or the principle behind, article 6(1).
The quotations are from the Court of Justices judgments in Nipponkoa Insurance Co (Europe) Ltd v Inter-Zuid Transport BV (DTC Surhuisterveen BV intervening) (Case C-452/12) EU:C:2013:858; [2014] 1 All ER (Comm) 288, paras 37 and 44; see also TNT Express Nederland BV v Axa Versicherung AG (Case C-533/08) EU:C:2010:243; [2011] RTR 136, paras 51 and 53.
Article 31.1 general
I turn to consider article 31.1.
A significant element of the Court of Appeals reasoning was that, looking at the overall structure of CMR, article 31 was primarily concerned only with, on the one side, cargo interests in the form of the sender or consignee, and, on the other side, the carrier and [p]rima facie, therefore, in its place, is not addressed to the position of a successive carrier, who only becomes a party to the single contract of carriage by accepting the goods and the consignment note (article 34) under what has been called a special statutory contract (para 61).
On that basis, the Court of Appeal approached article 31 as not addressing the possibility of multiple carrier defendants, successive carriers being only introduced in the later Chapter VI (para 62).
Article 31.1 thus balanced the interests of cargo interests and the original CMR carrier, by providing in paragraph (a) for jurisdictions looking to the interests of defendants and in paragraph (b) for jurisdictions looking to the interests of claimants (para 63).
The Court of Appeals approach in this regard led into its view that it was natural to treat the last sentence of article 36 as a further jurisdictional provision directed to the position of successive carriers who had only been introduced in article 34.
The difficulty I have with this approach is that, firstly, CMR must have been conceived as a whole and cannot be read as a series of sequential provisions, each unconscious of what was to follow.
Even the Court of Appeals use of words primarily and prima facie contain a limited recognition of that truth.
Secondly, the provisions of Chapter V, including article 31, must, on analysis, apply not only to disputes arising between cargo interests and the original CMR carrier, but also to situations where a successive carrier is involved.
That is clearly true of article 30, dealing with checking and time limits for making reservations.
It is also true of article 32 dealing with the one-year limitation period for actions.
It must also be true of the provisions regarding lis pendens, enforceability, and security for costs in paras 2-5 of article 31.
Article 31.1 must equally apply and have been envisaged as covering cases of successive carriage.
Mr Charles Priday in his submissions for BAT recognised this by his submission that what article 31 envisaged in such a case was that the claimant would establish jurisdiction against at least one of the relevant carriers identified in article 36 (ie the first or last carrier or the carrier performing the carriage at the time of the loss, damage of delay) whereupon the last sentence of article 36 would give jurisdiction over the other relevant carrier[s].
Mr John Passmore QCs response for Essers and Kazemier is that this analysis effectively undermines and opens up the careful scheme of article 31.
Article 31.1 jurisdiction designated by agreement
Rather than take the questions which the parties have identified in the order they have addressed them, I think that it is helpful to go through the various heads of jurisdiction contained in article 31 in the order in which they appear.
The opening provision of article 31.1 is that the plaintiff may bring an action in any court or tribunal of a contracting country designated by agreement between the parties.
It is unnecessary on these appeals to decide whether that means between the parties to the carriage contract or the parties to the litigation.
But I am of the view that it should be interpreted as meaning the latter.
Article 31.1 is a provision dealing with jurisdiction to bring legal proceedings.
Any agreement on jurisdiction between the parties to such proceedings is one for which one would naturally expect a Convention like CMR to cater.
When article 31.2 goes on to preclude any new action between the same parties, it is also referring to the parties to the litigation.
On this point, therefore, I would endorse Rix LJs view in Hatzl v XL Insurance Co Ltd [2009] EWCA Civ 223, [2010] 1 WLR 470, para 64.
Whatever the position in that respect, however, the opening provision of article 31.1 clearly applies as between BAT and Exel.
It provides one ground of jurisdiction for suing Exel in England (at least one other being, under paragraph (a), that Exels principal place of business is here).
The words and, in addition in article 31 qualify the operation of the jurisdiction clause agreed between BAT and Exel only to the extent that the clause is not under CMR exclusive.
So BAT could, if they had wished, have sued in one of the other jurisdictions provided by paragraphs (a) and (b) of article 31.1.
But it is common ground that they were as against Exel entitled to take advantage of the English jurisdiction clause.
Since it is also common ground on these appeals that Essers Security and/or Essers Transport in respect of the first container and Kazemier in respect of the second were successive carriers, it follows that they must, under article 34, have become party to the respective contract or contracts of carriage made between BAT and Exel.
If the matter stopped there, that would on the face of it mean party to those contracts whatever their terms.
But article 34 qualifies the position, by adding that a successive carrier becomes party to the contract of carriage under the terms of the consignment note, by reason of his acceptance of the goods and the consignment note, or in French becomes par leur acceptation de la marchandise et de la lettre de voiture, parties au contrat, aux conditions de la lettre de voiture.
These references to the terms or conditions of the consignment note are general.
They clearly refer to something different from any reservations which the first carrier may have entered regarding the number, marks, numbers, condition or packaging of the goods taken over under article 8.1, or which a successive carrier may have entered on his acceptance of the goods under article 35.1.
Such reservations are not terms or conditions by which anyone is bound.
Equally, since the consignment note is intended to confirm the contract of carriage (article 4) and is prima facie evidence of both its making and its conditions (article 9.1), it is difficult to understand the purpose of the reference to terms or conditions in article 34, unless it is intended to mean that a successive carrier is bound by the original contract in so far as its terms or conditions are set out in the consignment note.
CMR in a number of places refers to carriage, liability or conduct under the terms of or in accordance with a Convention, contract, article or law, and these also envisage that the former will be measured or controlled by reference to the latter.
Article 6 contains a full list of particulars which are required to appear in a consignment note and by their nature will disclose core terms of the main carriage contract.
But neither article 6 nor the present consignment notes make mention of any choice of law or court clause or agreement.
Particulars of any such clause or agreement might have been added as contemplated by article 6.3 of CMR in the boxes entitled Conventions particulires or Besondere Vereinbarungen on the consignment note.
But these boxes were in each case left empty.
There is of course nothing unusual about either a choice of law and court clause, or a clause providing for dispute resolution before an arbitration tribunal.
Both are common enough in international trade.
Article 31 contemplates that a contract of carriage may contain either, and the latter is for good measure also expressly permitted by article 33.
But that does not mean that CMR necessarily intended that a successive carrier should become party to such a clause, without having any notice of it or the express opportunity to decline to carry on its terms.
BAT rely on the fact that neither article 6.1 nor article 6.2 of CMR requires a CMR consignment note to state the existence of a choice of law or court clause.
But that to my mind tends to confirm that the transposition of application of such a clause to the relationship between the consignor or consignee and a successive carrier depends on agreement, and here in particular upon the use of the boxes provided pursuant to article 6.3.
Had it been contemplated that a successive carrier would automatically be bound by such a clause, one would have expected the existence of such a clause to have been among the particulars required by these paragraphs to appear in the consignment note for the very purpose of giving the successive carrier notice of them.
That is one obvious reason why, alongside basic details relating to the parties, the carriage and the goods (including in the case of dangerous goods their generally recognised description), the consignment note is required also to include for example, a statement that the carriage is subject to CMR, and further details such as any cash on delivery charges, any special interest in delivery, and instructions regarding insurance, and any agreed time-limit for the carriage.
These are all matters in relation to which a successive carrier would be expected to be bound and would accordingly need to know.
A choice of court clause is, on the contrary, a particular which the parties to a consignment note (particularly the consignors as the most likely claimant against a successive carrier) might consider it appropriate to identify in the relevant box, Conventions particulires, if they wished to bind a successive carrier by it.
It would fall within article 6.3.
But there is no reason why they should be bound to do this.
At a more fundamental level, I am now also persuaded that it would be contrary to general principle to hold a successive carrier bound by a choice of court clause, or any other contractual clause not evidenced by the consignment note, of which he had no express notice.
To do so would involve an unfamiliar and undesirable invasion of the general principle that contract depends on agreement.
It is true that CMR itself provides that a successive carrier becomes a party to the original carriage contract by acceptance of the goods and the consignment note.
But that is the published and, by now at least, familiar scheme of CMR, which any road carrier carrying on business within the CMR states may be taken to know, and of which the consignment note is also required to give express notice.
To hold a successive carrier liable by reference to terms or conditions not mentioned in the consignment note would be a quite different matter.
The consignor and a first carrier may have agreed all sorts of onerous obligations by which it would be most unfair to hold a successive carrier bound.
In the present case, it is alleged that Exel had been specifically instructed not to park the second container overnight.
No such instruction was recorded on the consignment note.
While we heard no argument on this specific point, it seems difficult to suggest that any such instruction could bind anyone contractually other than Exel.
To attempt to distinguish between specific instructions of a usual and an unusual nature would, in my view, be to make bricks without straw.
CMR neither contains nor hints at any such distinction.
Article 34 makes the straightforward point that successive carriers take over the goods and become parties to the original contract on the terms or conditions of the consignment note.
On that basis, I have ultimately reached the clear conclusion that there is no basis upon which Essers or Kazemier can have become bound by an English jurisdiction clause in the original contract or contracts to which they became party, but which was not identified in the terms or conditions of the CMR consignment note.
I note that Professor Loewe takes a different view in para 282 of the paper to which I have already referred, considering that a successive carrier who on his view becomes bound by a jurisdiction clause of which he had no notice in the consignment note could bring an action for damages against the first carrier.
This view is not based on any reference to negotiations preceding CMR, and is stated in simple conclusionary terms.
Why and how a successive carrier could or would have any claim for damages against a first carrier, who had no duty to identify the jurisdiction clause on the consignment note, is also unexplained.
Other commentators have not accepted Professor Loewes view on this point, though their reasoning varies.
In Hill and Messents CMR: Contracts for the International Carriage of Goods by Road 3rd ed (2000), paras 11.37 and 11.67 take the view which I have expressed.
At the same time, paras 10.27 and 10.28 suggest that a consignee may (like a privy or assignee) be bound by a jurisdiction clause, even though it is not mentioned in the consignment note.
But, if that is correct (on which I need express no concluded view), it does not undermine paras 11.37 and 11.67; rather it is because under article 13 a consignee stands, without more, in the same position as the consignor with regard to the enforcement of any rights arising from the contract of carriage, and, unlike the position under article 34, there is no qualification that the consignee is only entitled or bound under the terms or conditions of the consignment note.
In contrast, Professor Malcolm Clarke in his work, cited above, para 46c suggests that the designation of a court or tribunal by agreement between sender and carrier will not bind the consignee or a successive carrier unless the latter [sic] has notice of the designation.
But he does so on a basis which makes no reference to the language of article 34 and relies on two French decisions: one by the Court of Appeal of Paris dated 14 November 1969, the other by the Court of Appeal of Colmar dated 26 November 2001.
In the former, a French consignee suing in France was held not bound by any German jurisdiction clause, firstly because none had been proved even between the German consignor and the carrier, and secondly because the only document of a contractual nature evidencing the carriage terms which the consignee ever saw and accepted was a receipt which (it appears) made no mention of any jurisdiction clause.
In the latter case, the French consignor (Amural) was claiming, firstly, against the German buyer/consignee (Neuendorf) of frozen duck fillets for withholding 15% of the invoice amount on account of the high temperature of the fillets on arrival and, secondly or alternatively, against the carriers (TAC Transports) and sub-carriers (Transport Michel) for having caused any damage.
There was clearly French jurisdiction against both carriers under article 31.1(a) and (b), but there was an internal issue as to whether the Regional Court of Mulhouse had been chosen by agreement between Amural and TAC Transports or whether, failing such choice and as the court held, the Commercial Court of Meaux was the court assigned by the New French Code of Civil Procedure.
Neuendorf as buyer/consignee accepted that CMR governed his relationship with Amural.
This seems very strange in respect of a claim by Amural which appears to have been, as against Neuendorf, for the balance of the unpaid price of goods.
But, on the basis that CMR applied, Neuendorf contended that he could only be sued in Bochum, Germany as the place where he resided and the place of delivery.
This suggestion was summarily rejected by the court on the ground that article 31 conferred jurisdiction on France.
As against Neuendorf, and on the apparently odd assumption that CMR regulated its sale of goods relationship with Amural, this was presumably on the basis that France was where the goods were taken over for carriage.
Neither of the French cases cited by Professor Clarke seems to me therefore to offer any real guidance as to the proper approach to the application of an agreed jurisdiction clause as against a successive carrier.
However, in the light of the other considerations which I have set out, and contrary to my initial reaction, I have come the clear conclusion that the qualifying phrase in article 34 has the effect that a successive carrier will not be bound by a jurisdiction clause agreed between the consignor and the first carrier unless it is identified in the consignment note (or unless of course the successive carrier binds himself to it by agreement in some other way).
Article 31.1 further provisions
I move accordingly to the further provisions of article 31.1.
It is common ground, and in any event clearly correct, that paragraph (b) refers to the places of taking over by the carrier and designated for delivery under the CMR contract made between the consignor and the first carrier.
The only caveat that may be appropriate is that, as regards a successive carrier, the position could (again in the light of article 34) be different if the CMR consignment note failed correctly to reflect the place of taking over or the place designated for delivery actually agreed between the consignor and first carrier.
That, hopefully rare, case does not require further consideration here.
The effect of paragraph (b) is that any carrier against whom proceedings can be brought under article 36 can be sued in either the place where the goods were taken over or the place designated for their delivery.
Paragraph (a) of article 31.1 is on the other hand concerned with the position of the particular defendant under consideration, whether or not there are other co- defendants.
In so far as it refers to the country where that defendant is ordinarily resident, or has his principal place of business, it is capable of applying in relation to any successive carrier, or, indeed, in the case of an action by a carrier in relation to any consignor or consignee sued by such a carrier.
But the reference to the branch or agency through which the contract of carriage was made is much less obviously apt to apply as against anyone other than one of the original parties to the carriage contract, that is basically the consignor (and perhaps the consignee, if the consignor was acting as his agent) and the first carrier.
Mr Priday submits that that is wrong, and that, as successive carriers, Essers and Kazemier can be regarded as having contracted through the branch or agency of Exel because Exel made the framework and local agreement with BAT, to which Essers and Kazemier became parties under article 34.
That I regard as distorting the plain purpose and effect of the relevant provisions of CMR.
Essers and Kazemier are as successive carriers party to the original carriage contract under the terms of the consignment note not because anyone made a contract with them through any branch or agency, but simply because CMR makes them a party by statute in consequence of their accepting the goods and the consignment note.
It follows that article 31.1 contains a variety of provisions: (i) a provision enabling the enforcement of any jurisdiction clause in favour of the court or tribunal of a contracting state which was (a) agreed between the parties to the original carriage contract, or (b) to be taken, in the light of article 34, to be agreed as between the original goods interests and any successive carrier becoming party to that original contract on terms in the consignment note incorporating the jurisdiction clause, or (d) agreed in some other way between the parties to the litigation.
(ii) provisions in paragraph (a) regarding ordinary residence and a principal place of business which can be relied upon as against any carrier or successive carrier liable to suit under article 36, as well as by a carrier bringing proceedings arising out of carriage under CMR against a consignor or consignee, (iii) a further provision in paragraph (a) which can only sensibly apply in (iv) proceedings between original parties to the carriage contract, further provisions in paragraph (b) which open up jurisdiction in any claim arising out of CMR carriage to cover the courts or tribunals of the place of taking over or designated for delivery of the goods.
The important corollary of these provisions is that, under the final words of article 31.1, a claimant may not bring an action arising out of carriage under CMR in any other courts or tribunals.
The relationship of articles 31.1, 36 and 39
BATs case is that, once jurisdiction is established over one carrier under article 31.1 in any of the jurisdictions provided by that article, then the last sentence of article 36 opens up the further possibility of joining in the same proceedings any other carrier or carriers potentially liable under article 36, even though proceedings against them, viewed by themselves, cannot be brought within article 31.1.
The alternative view of the last sentence of article 36, advocated by Essers and Kazemier, is that it is there to make clear that the liability of the first, last carrier and performing carriers under article 36 is joint and several, and not alternative as might otherwise have been capable of being suggested in view of article 36s reference to proceedings being brought against the first carrier, the last carrier or the [performing] carrier.
The provision that an action may be brought against several of these carriers at the same time, or in the French la fois, is on this alternative view merely confirming or emphasising that there is no need to pursue them sequentially.
On BATs case, a jurisdiction clause agreed between the consignor and first carrier, but not mentioned in the CMR consignment note accepted by a successive carrier, would nonetheless enable the successive carrier to be added to the proceedings commenced against the first carrier in the court or tribunal of the place assigned by the jurisdiction clause.
Likewise, the ability to rely on any of the heads of jurisdiction provided by paragraph (a) of article 31.1 as against any relevant carrier (first, last or performing) would open up the same jurisdiction against any other of such carriers in relation to whom article 31.1 would not otherwise provide any ground of jurisdiction.
As BAT contend on the present appeals, the principal place of business of any carrier (even though it was outside any contracting state) would suffice to ground jurisdiction against all relevant carriers, even though it has no connection with the physical carriage.
On the face of it, such extensions of the carefully delineated jurisdiction provided by article 31.1 seem unlikely to have been intended.
The interests of claimants are, as the Court of Appeal observed at para 63, served by paragraph (b).
That paragraph enables all carriers potentially liable under article 36 to be joined in one forum.
The opening up of the heads of jurisdiction specified in article 31.1 which on BATs case follows from the last sentence of article 36 sits uneasily with the final words of article 31.1 and in no other courts or tribunals.
BAT submit that the interpretation of the last sentence of article 36 which they advance brings symmetry and order to CMRs treatment of claims involving multiple defendants.
In a cargo claim, jurisdiction can be achieved against all by establishing it against one.
That they submit is also what article 39.2 provides.
The problem with this submission is that article 39.2 states this explicitly, by providing that a carrier who has paid compensation may seek recourse by making his claim before the competent court or tribunal of the country in which one of the carriers concerned is ordinarily resident, or has his principal place of business or the branch or agency through which the contract of carriage was made and that all the carriers concerned may be made defendants in the same action.
In contrast, article 31.1(a) in terms only confers jurisdiction against the individual defendant whose ordinary residence, principal place of business or branch or agency is relied upon.
As to BATs submission that the last sentence of article 39.2 deals, as between carriers, with jurisdiction, and must have been seen as paralleling, also in relation to jurisdiction but here as between cargo interests and carriers, the last sentence of article 36, I do not consider that either sentence necessarily or clearly refers to jurisdiction.
Both are well capable of being read as emphasising or confirming no more than that all or several carriers liable may be sued at the same time.
BATs submission regarding symmetry also faces the objection that the claims covered by article 39.2 differ significantly in content and structure from those covered by article 31.1: (i) Article 31.1 does not only offer a claimant the jurisdiction of any individual defendants ordinary residence, principal place of business or branch or agency.
It offers the additional advantage of jurisdiction against all carriers potentially liable under article 36 (the first, the last and the performing carriers) in the place either of taking over or designated for delivery of the goods.
No such jurisdiction is available under article 39.2 to a carrier seeking recourse from another carrier.
(ii) Article 39.2 concerns recourse claims which fall under articles 37 and 38 to be divided pro rata, potentially between all carriers and not just the first, last or performing carrier.
This is so, having regard to the specific provisions covering cases where more than one carrier was responsible for the loss or damage, or where it cannot be ascertained who was responsible or where a carrier otherwise liable to contribute is insolvent.
There is an obvious imperative under article 39.2 to enable a claimant to bring all such claims in one jurisdiction.
The same imperative does not exist under article 31.1, since cargo interests are under article 36 entitled to look to any one of the relevant carriers (first, last or performing) to meet their full claim, each being liable 100%.
Further, in so far as cargo interests do wish to pursue all such relevant carriers together, they are able to do so in the place either of taking over or designated for delivery as stated in point (i).
BAT rely on dicta in two Court of Appeal cases: Cummins Engine Co Ltd v Davis Freight Forwarding (Hull) Ltd [1981] 1 WLR 1363 and ITT Schaub-Lorenz Vertriebsgesellschaft mbH v Birkart Johann lnternationale Spedition GmbH & Co KG [1988] 1 Lloyds Rep 487.
Both cases concerned recourse claims between carriers.
In Cummins, Cummins as consignor had contracted with Davis, another English company, for the carriage of engines from England to Amsterdam.
Davis instructed Charterway to undertake the leg from Rotterdam to Amsterdam, and Charterway in turn asked Graaf, who asked Boers to do this.
Charterway, Graaf and Boers were all Dutch firms and all successive carriers under CMR.
Cummins issued a writ in England against all four, but served only Davis.
Davis issued third party proceedings to join and seek recourse from Charterway, Graaf and Boers, who applied, successfully, to have the third party proceedings set aside on the basis that under article 39.2 any recourse proceedings against them could only be in Holland.
But at p 1371 Brandon LJ made the following general statement regarding jurisdiction in the main proceedings: It is clear from the provisions of CMR contained in Chapters V and VI that it contemplates two kinds of legal proceedings arising out of a contract of carriage.
The first kind of legal proceedings which it contemplates are actions brought by a sender or consignee of goods against one or more carriers.
Where successive carriers are involved, the effect of article 31, paragraph 1, combined with article 34, is that the plaintiff can bring a single action against one, more than one, or all the carriers concerned.
Article 31, paragraph 1, further requires him to bring his action in certain courts only.
These courts are, first, any court of a contracting state which has been agreed between the parties; secondly, the courts of the country where any of the carriers sued is ordinarily resident, or has his principal place of business, or the branch or agency through which the contract of carriage was made; and, thirdly, the courts of the place where the goods were taken over for the carriage or the place where they were to be delivered.
It is on the basis of these provisions that, in the present case, Cummins issued a writ against four parties, Davis, Charterway, Graaf and Boers, although they have only served such writ on Davis.
Brandon LJ went on specifically to address the recourse claims.
In ITT Schaub-Lorenz, at p 494, Bingham LJ quoted the above passage and its continuation, and said that, although it could not be regarded as having more than persuasive authority, I think (with respect) that it is plainly right.
Neither Cummins nor ITT Schaub-Lorenz required any precise examination of the accuracy of Brandon LJs statement that article 31.1 combined with article 34 allows a plaintiff to bring a single action against one, more than one, or all the carriers concerned in the courts of the country where any of the carriers concerned is ordinarily resident or has his principal place of business or the branch or agency through which the carriage contract was made.
Further, it is unclear by what reasoning Brandon LJ derived his summary from articles 31 and 34, the only articles which he cited.
Article 31.1(a) does not on any view confer jurisdiction over one carrier concerned, simply because any of the other carriers concerned is ordinarily resident or has his principal place of business or relevant branch or agency in the country where proceedings are brought.
It confers jurisdiction against a carrier who has such residence, place or branch or agency.
It is only the last sentence of article 36 - which Brandon LJ did not mention at all - that arguably extends this jurisdiction to enable other carriers to be added to the proceedings against the carrier defendant who satisfies article 31.1(a).
Further, in Cummins at pp 1374-1375 OConnor LJ also described the scheme of CMR in terms which were, I think, both more specific on the present issue and significantly different in effect from those used by Brandon LJ.
He said: It will be seen that the scheme of the Convention, starting in article 31, is that normally, unless the parties otherwise agree, any legal proceedings are to be originated in the jurisdiction of the defendant (article 31, paragraph 1(a)), and I am content, under the ordinary rules of interpretation, to read defendant for defendants.
The only alternative there given is the place where the goods were taken over or the place designated for delivery.
The place where the goods were taken over by the carrier, in my judgment, refers to the place where the contract of carriage commenced (see article 1 of the Convention) and cannot be repeated down the line where successive carriers have participated in the carriage at various stages.
That in the present case was Scotland and the place of delivery was Holland.
Therefore, Cummins were limited to bringing the action, as far as the jurisdiction of the defendant was concerned, either in England (Davis) or in Holland the other three.
It is clear from this passage that OConnor LJ did not accept that Cummins could under CMR properly bring English proceedings against any defendant other than Davis, which alone fell within article 31.1(a).
That corresponds with the case advanced by Essers and Kazemier on these appeals.
Academic commentary also supports Essers and Kazemiers position on this point: see Professor Loewes paper, para 281, Hill & Messent, para 11.67 and KF Haak in The Liability of the Carrier under the CMR (Stichting Vervoeradres The Hague 1986), p 114, para 2, where the requirement to bring each successive carrier held liable under article 36 within the scope of article 31.1 is explained as a practical restriction on the severity of the joint and several liability imposed by the last sentence of article 36 on, in particular, the last carrier.
The desirability of joining all possible defendants
This brings me to a fundamental element of BATs case, the desirability of, and suggested imperative to arrive at, an interpretation or solution enabling all claims by goods interests against all carriers to be resolved in one place and one set of proceedings.
That this can be a relevant approach is certainly borne out by article 6(1) of the Brussels Regulation, as well as, domestically, by Practice Direction 6B para 3.1(3): see para 16 above.
But it is not an invariable approach, and it is not the approach taken in the Warsaw Convention 1929 (for the Unification of Certain Rules Relating to International Carriage by Air, signed at Warsaw on 12 October 1929), the language of which the relevant provisions of CMR to a large degree reflect.
The Warsaw Convention provided: Article 28.1.
An action for damages must be brought, at the option of the plaintiff, in the territory of one of the High Contracting Parties, either before the court having jurisdiction where the carrier is ordinarily resident, or has his principal place of business, or has an establishment by which the contract has been made or before the court having jurisdiction at the place of destination.
Article 30.1.
In the case of carriage to be performed by various successive carriers and falling within the definition set out in the third paragraph of article 1, each carrier who accepts passengers, luggage or goods is subjected to the rules set out in this Convention, and is deemed to be one of the contracting parties to the contract of carriage in so far as the contract deals with that part of the carriage which is performed under his supervision.
3
As regards luggage or goods, the passenger or consignor will have a right of action against the first carrier, and the passenger or consignee who is entitled to delivery will have a right of action against the last carrier, and further, each may take action against the carrier who performed the carriage during which the destruction, loss, damage or delay took place.
These carriers will be jointly and severally liable to the passenger or to the consignor or consignee.
Under the Warsaw Convention, it is clear that article 28 defines jurisdiction, while the last sentence of article 30.3 deals, like the rest of that article, with liability by emphasising that all potentially liable carriers are jointly and severally liable for loss, damage or delay in respect of goods and luggage.
CMR rephrases the last sentence of article 36, but not in a way which suggests that it is now intended to have the fundamentally different purpose of addressing not liability (like the rest of article 36), but jurisdiction.
Viewing the position more generally, article 31.1 of CMR affords clearly defined heads of jurisdiction additional to those provided by the Warsaw Convention in particular jurisdiction based on any agreement between the parties to a court or tribunal in a contracting state, and jurisdiction at the place of taking over of the goods (and not merely at the place designated for their delivery).
As to the Brussels Regulation, there are, unsurprisingly, parallels between some of its provisions and those of CMR.
A defendants domicile in a member state is the general head of jurisdiction under article 2.1 of the Brussels Regulation, while article 5.5 provides a special head as regards disputes arising out of the operations of a branch or agency.
These heads broadly parallel the heads found in article 31.1(a) of CMR.
In other respects, there are however differences in both directions in the jurisdictions available under CMR and the Brussels Regulation.
Article 5.1 of the Brussels Regulation offers as special heads the place of performance of the obligation in question in a contract claim or the place where the harmful event occurred in a tort claim.
Article 31.1(b) of CMR offers in contrast the place designated for delivery, which may correspond with the place for performance of the obligation in question, if the relevant law enables suit against a carrier on the basis of a failure to deliver or to deliver in good condition at destination.
Finally, the Brussels Regulation does not offer any general head of jurisdiction paralleling the right to sue at the place of taking over the goods conferred by article 31.1(b).
On the other hand, coming to the nub of BATs case on this point, the Brussels Regulation contains the further special head that: A person domiciled in a member state may also be sued, where he is one of a number of defendants, in the courts for the place where any one of them is domiciled .
On Essers and Kazemiers case, CMR contains no such provision.
On BATs case, the last sentence of article 36 of CMR has an effect which is similar - similar, but necessarily wider since it would expose any successive carrier potentially liable under article 36 to being sued by cargo interests in any jurisdiction anywhere in the world which happened to be that of the principal place of business of any other such successive carrier, or which happened to be that of the branch or agency through which the first carrier happened to make the carriage contract.
A lesser point, not without all practical relevance, is that BATs reading of the last sentence of article 36 would also provide an automatic ground of jurisdiction against any such carrier without the qualifying condition inserted into article 6.1 of the Brussels Regulation, that the claims should be so closely connected that it is expedient to hear and determine them together to avoid the risk of irreconcilable judgments resulting from separate proceedings.
The absence of such a qualification could be significant if, for example, a claim was brought against a first carrier based on a special term included in the original carriage contract, but not binding on a successive carrier because it was not included in the consignment note.
In these circumstances, I do not consider that the desirability in some contexts of a provision such as article 6.1 of the Brussels Regulation or Practice Direction 6B para 3.1(1) can affect or impact on the interpretation of articles 31, 34 and 36 of CMR in any significant way.
Equally, I do not see how it can be said that there is any gap that article 6.1 should be called upon to fill, even assuming that gap-filling by reference to the Brussels Regulation is admissible and required, in a European Union context, as Colman J thought in Frans Maas Logistics.
The scheme of CMR appears to me to be deliberate and comprehensive.
For better or for worse, and starting with the model of the Warsaw Convention, it elected for a generous range of heads of jurisdiction.
There is no gap in it, as a matter of construction, merely a considered decision that the heads provided would reflect an appropriate balance between the interests of all concerned, potential claimants and potential defendants.
Does article 6.1 of the Brussels Regulation prevail over article 31.1 of CMR?
That leaves BATs last and perhaps most far-reaching submission, that, if all else fails, European Union law, in particular article 6.1 of the Brussels Regulation or the principle behind it, must prevail over the scheme of CMR to enable the joinder of all carriers potentially liable under article 36 in any court or tribunal in which jurisdiction can be established under article 31.1(a) on the basis of any one of such carriers principal place of business or branch or agency.
I have already outlined statements of principle made by the Court of Justice on which BAT rely (para 18 above).
The starting point, however, must be the European Treaties.
CMR was concluded before 1 January 1958 between states half of which are, even today, not member states of the European Union.
Article 351 TFEU provides: The rights and obligations arising from agreements concluded before 1 January 1958 or, for acceding states, before the date of their accession, between one or more member states on the one hand, and one or more third countries on the other, shall not be affected by the provisions of the Treaties.
To the extent that such agreements are not compatible with the Treaties, the member state or states concerned shall take all appropriate steps to eliminate the incompatibilities established.
Member states shall, where necessary, assist each other to this end and shall, where appropriate, adopt a common attitude.
In applying the agreements referred to in the first paragraph, member states shall take into account the fact that the advantages accorded under the Treaties by each member state form an integral part of the establishment of the Union and are thereby inseparably linked with the creation of common institutions, the conferring of powers upon them and the granting of the same advantages by all the other member states.
Reflecting article 351 TFEU, article 71 of the Brussels Regulation provides: 1.
This Regulation shall not affect any conventions to which the member states are parties and which in relation to particular matters, govern jurisdiction or the recognition or enforcement of judgments.
2
With a view to its uniform interpretation, paragraph 1 shall be applied in the following manner: (a) this Regulation shall not prevent a court of a member state, which is a party to a convention on a particular matter, from assuming jurisdiction in accordance with that convention, even where the defendant is domiciled in another member state which is not a party to that convention.
The court hearing the action shall, in any event, apply article 26 of this Regulation; (b) judgments given in a member state by a court in the exercise of jurisdiction provided for in a convention on a particular matter shall be recognised and enforced in the other member states in accordance with this Regulation.
Where a convention on a particular matter to which both the member state of origin and the member state addressed are parties lays down conditions for the recognition or enforcement of judgments, those conditions shall apply.
In any event, the provisions of this Regulation which concern the procedure for recognition and enforcement of judgments may be applied.
On the face of it, article 351 establishes a clear position.
The Court of Justice has, however, interpreted article 315.
In its famous decision in Kadi v Council of the European Union (Joined Cases C-402/05P and C-415/05P) [2009] AC 1225, the court in considering the relationship between a European sanctions measure and the obligations imposed on member states under the United Nations Charter and general international law to give effect to UN Security Council asset freezing orders under Chapter VII of the UN Charter, said this: 300.
What is more, such immunity from jurisdiction for a Community measure like the contested regulation, as a corollary of the principle of the primacy at the level of international law of obligations under the Charter of the United Nations, especially those relating to the implementation of resolutions of the Security Council adopted under Chapter VII of the Charter, cannot find a basis in the EC Treaty.
301
Admittedly, the court has previously recognised that article 234 of the EC Treaty (now, after amendment, article 307EC) could, if the conditions for application have been satisfied, allow derogations even from primary law, for example from article 113 of the EC Treaty on the common commercial policy: see, to that effect, the Centro-Com case [1997] QB 683, paras 56-61).
302
It is true also that article 297EC implicitly permits obstacles to the operation of the common market when they are caused by measures taken by a member state to carry out the international obligations it has accepted for the purpose of maintaining international peace and security.
303
Those provisions cannot, however, be understood to authorise any derogation from the principles of liberty, democracy and respect for human rights and fundamental freedoms enshrined in article 6(1) EU as a foundation of the Union.
304
Article 307EC may in no circumstances permit any challenge to the principles that form part of the very foundations of the Community legal order, one of which is the protection of fundamental rights, including the review by the Community judicature of the lawfulness of Community measures as regards their consistency with those fundamental rights.
Article 351 TFEU is the successor to article 307EC.
Kadi was a decision at a high level of importance for individual freedoms.
It is, in one sense, a surprise to find its thinking extended to the tarmacadam of the worlds roads.
But in TNT Express para 51, and Nipponkoa, para 37, referred to in para 18 above, the court stated that: Article 71 of Regulation 44/2001 cannot have a purport that conflicts with the principles underlying the legislation of which it is part.
Accordingly, that article cannot be interpreted as meaning that, in a field covered by the Regulation, such as the carriage of goods by road, a specialised convention, such as the CMR, may lead to results which are less favourable for achieving sound operation of the internal market than the results to which the Regulations provisions lead.
The court did not refer to article 307EC or article 351 TFEU, and the courts reasoning is essentially circular.
It is the purpose of article 307EC, now 351 TFEU, to derogate from not only Regulations such as (EC) 44/2001, but also from the Treaties themselves.
As Judge Allan Rosas, not a member of the court in TNT or Nipponkoa, explained extra-judicially in The Status in EU Law of International Agreements Concluded by EU member states (Fordham International Law Journal vol 34, Issue 5 (2011) article 7), at p 1321: Article 351(1) TFEU allows a derogation from the principle of primacy of EU law but only in relation to agreements concluded prior to EU membership and, in principle, only to treaty relations between member states and third states (category 1 above).
According to settled case law, the purpose of the provision is to establish that the application of EU law does not affect the duty of the member state concerned to respect the rights of non-member countries under a prior agreement and to perform its obligations thereunder.
The court has also recognized that article 351(1) TFEU may allow derogations from not only Unions secondary law but also its primary law, such as provisions of the TEU and the TFEU.
The court has added that the provision would not achieve its purpose if it did not imply a duty on the part of the Union institutions not to impede the performance of the obligations of member states that stem from a prior agreement.
These propositions are borne out by the prior authorities which Judge Rosas cited in their support, particularly Attorney General v Burgoa (Case C-812/79) [1980] ECR 2787, para 8 et seq.
At a high level, preservation of the internal market is of course fundamental to the Union.
But the court in both TNT para 49 and Nipponkoa para 36 endorsed the more detailed statements that, although article 71 of Regulation 44/2001 provides, in relation to matters governed by specialised conventions such as CMR, for the application of those conventions: the fact remains that their application cannot compromise the principles which underlie judicial cooperation in civil and commercial matters in the European Union, such as the principles, recalled in recitals 6, 11, 12 and 15 to 17 in the preamble to Regulation 44/2001, of free movement of judgments in civil and commercial matters, predictability as to the courts having jurisdiction and therefore legal certainty for litigants, sound administration of justice, minimisation of the risk of concurrent proceedings, and mutual trust in the administration of justice in the European Union.
In TNT the court added: 50.
Observance of each of those principles is necessary for the sound operation of the internal market, which, as is apparent from recital 1 in the preamble, constitutes the raison dtre of Regulation 44/2001.
The context in which these statements were made and applied is however important.
Both cases concerned competing proceedings between the same parties in different member states.
Both concerned the free movement of judgments and mutual trust in the administration of justice.
In TNT, AXA as cargo-insurer was seeking to enforce in the Netherlands a German judgment obtained against TNT, the CMR carriers, who were seeking in the Netherlands to contest the German courts jurisdiction to give the German judgment on the basis that there existed prior Netherlands proceedings in which TNT were seeking a declaration of non-liability.
The Hoge Raad referred the matter to the Court of Justice, which, after citing its familiar case law on mutual trust (including West Tankers Inc v Allianz SpA (formerly RAS Riunione Adriatica di Sicurt SpA) (Case C-185/07) EU:C:2009:69; [2009] AC 1138, para 24) held:
Having regard to the principle of mutual trust referred to above, the court has stated that the court of the state addressed is never in a better position than the court of the state of origin to determine whether the latter has jurisdiction.
Accordingly, Regulation 44/2001, apart from a few limited exceptions, does not authorise the jurisdiction of a court of a member state to be reviewed by a court in another member state (Allianz SpA, at para 29 and the case law cited).
Therefore, article 31(3) of the CMR can be applied in the European Union only if it enables the objectives of the free movement of judgments in civil and commercial matters and of mutual trust in the administration of justice in the European Union to be achieved under conditions at least as favourable as those resulting from the application of Regulation 44/2001. 55.
Nipponkoa also concerned competing sets of proceedings.
These were Dutch proceedings in which the carriers had successfully limited their liability to the CMR limit and German proceedings in which cargo insurers were seeking to establish wilful misconduct.
On a reference by the Landgericht Krefeld, the Court of Justice held that article 71 of the Brussels Regulation precluded an interpretation of article 31(2) of CMR whereby an action for a declaration of non- or limited liability did not involve the same cause of action as a positive claim for damages in respect of the same alleged loss.
This slightly surprising way of putting the matter (in terms of the proper interpretation of CMR) contrasts with the courts confirmation in TNT, paras 58-63, that it has no jurisdiction under article 267 TFEU to interpret international agreements concluded between member states and non-member countries or, specifically, to interpret article 31 of CMR.
It is however possible to understand the decision in Nipponkoa on the basis that what the court was really doing was treating Union law in the relevant area, particularly that covered by article 29.1 of the Brussels Regulation and Owners of cargo lately laden on board the ship Tatry v Owners of the ship Maciej Rataj (Case C-406/92) (Note) EU:C:1994:400; [1999] QB 515; [1995] 1 Lloyds Rep 302, as over-riding any different regime contained in CMR.
How close such reasoning and decisions may be to the thinking of the European legislators when they agreed article 351 TFEU and article 71 of the Brussels Regulation is a different matter.
The present case does not concern or present any risk of competing judgments involving the same parties.
BAT is under CMR unquestionably entitled to look to Exel for the whole of any loss which BAT can prove.
At highest, BAT may have to pursue Essers and Kazemier in different jurisdictions, if they continue to wish to expand their target beyond Exel.
In so far as BATs wish to do this is based on a belief that their evidential position, in seeking to show wilful misconduct, may be improved if they can join Essers and Kazemier, I cannot associate an evidential aim of this nature with any fundamental principle of Union law in the field of jurisdiction or justice.
I add that, in so far as BAT suggest that it may not be possible to sue Essers and Kazemier elsewhere on the same basis as here, since the courts in the Netherlands would decline to recognise Exel as first carrier (since it did not actually carry the goods anywhere), the point cuts both ways, as well as leaving open both a possibility that Essers and Kazemier should then themselves be regarded as first carriers and that if, on its face surprisingly, the Dutch courts would not regard the carriage as subject to CMR at all, Essers and Kazemier would be liable under the general law.
More fundamentally, as discussed in paras 44-47 above, CMR represents a balanced jurisdictional rgime adopted across a wide-range of some 55 states, only half of which are Union member states.
I cannot regard its tailored balance as impinging on any of the principles of Union law which have been explained by the Court of Justice in the authorities discussed above, and which it is for us to apply.
I conclude that nothing in Union law prevents effect being given to article 31.1 of CMR, under which it is clear that neither Essers nor Kazemier can be sued here.
I add, though it is unnecessary for my decision, that I cannot believe that it is wholly inadmissible under Union law to bear in mind the interests of those third party states in a rgime which operates with some certain degree of consistency across all member states.
Restrictions under Union law on the ordinary application of an international convention like CMR potentially undermine the uniformity and predictability that are the aim of such conventions.
This tends to suggest that any over-riding interests of Union law should be relatively narrowly confined.
Conclusion
Js order setting aside the service of the claim forms on Essers and Kazemier.
It follows from the above that I would allow this appeal, and restore Cooke
LORD SUMPTION: (with whom Lord Neuberger, Lord Clarke and Lord Reed agree)
Article 34 of the CMR provides that where a single contract of carriage is performed by successive carriers, each of them is to be responsible for the performance of the whole operation.
Under article 36, cargo interests are entitled to claim under the contract against the first and last carriers and the carrier in possession of the goods when the loss, damage or delay occurred.
The commercial logic of these provisions points towards recognising a jurisdiction to receive claims against all three in one set of proceedings.
Sir Bernard Rix makes a strong case for this outcome in the present case in his judgment in the Court of Appeal.
Nevertheless, in agreement with Lord Mance, I think that the language of the CMR points clearly in the other direction.
In the light of the Lord Mances very full analysis of the Convention, I can state my reasons quite shortly.
Chapter V deals with Claims and Actions.
Article 31.1 provides for legal proceedings arising out of carriage under this Convention to be brought in: any court or tribunal of a contracting country designated by agreement between the parties and in addition in the courts or tribunals of a country within whose territory, (a) the defendant is ordinarily resident, or has his principal place of business.
or the branch or agency through which the contract of carriage was made, or (b) the place where the goods were taken over by the carrier or the place designated for delivery is situated, and in no other courts or tribunals.
This provision cannot be limited to claims against the first or primary carrier.
It is in terms directed to claims arising out of carriage under this Convention.
It must therefore apply to any carrier whom the Convention makes potentially liable.
I find it impossible to attach any importance to the fact that it appears earlier in the text than the provisions regulating the liability of second or subsequent carriers.
As applied to actions arising out of carriage under the Convention, article 31.1 is in terms a complete code.
It confers jurisdiction on the courts or tribunals of the jurisdiction (i) which has been designated by agreement between the parties, or (ii) where the defendant is present in one or other of the ways envisaged by sub- paragraph (a), or (iii) where the place of consignment or the contractual place of delivery are situated (see sub-paragraph (b)), and in no other courts and tribunals.
The courts and tribunals of the place of consignment or the contractual place of delivery (case (iii) in my categorisation) have jurisdiction over all carriers who are potentially liable.
This is because these are jurisdictions identified by reference to the transportation operation and not some circumstance specific to the proposed defendant.
They are also identifiable from the consignment note.
The Convention envisages that in these jurisdictions all such carriers may be sued together.
So far, therefore, as there is a commercial imperative to have a jurisdiction in which all carriers potentially liable may be sued, that imperative is satisfied by the existence of jurisdiction at the place of consignment or the contractual place of delivery.
Cases (i) and (ii) are different.
In these cases, jurisdiction depends on something specific to the particular defendant, ie he has entered into a jurisdiction agreement with the claimant or is present within the relevant jurisdiction.
Jurisdiction may be established under one of these two heads only against defendants who fulfil the stated criteria.
There is no provision for jurisdiction to be exercisable against necessary or proper parties who do not fulfil them.
Since in this case, England was neither the place of consignment nor the contractual place of delivery, BAT must rely on one or other of the heads of jurisdiction specific to defendants satisfying particular criteria, ie cases (i) or (ii).
The only way in which they could claim to have agreed with Essers or Kazemier upon English jurisdiction is by showing that those companies acceded to the contracts between BAT and Exel which contained the relevant jurisdiction clause.
The agreements between BAT and Exel are framework agreements containing the terms of the relevant contract of carriage.
The consignment note is not itself the contract of carriage.
It is only prima facie evidence of its existence and terms: see article 9.
But under article 34, a succeeding carrier becomes a party to the contract of carriage only under the terms of the consignment note, by reason of his acceptance of the goods and the consignment note.
It follows that the only terms to which a successive carrier accedes by accepting the goods with the consignment note are those recorded in the consignment note.
These are terms of the Convention itself and any additional terms specified in Box 20 (Conditions Particulires Besondere Vereinbarungen).
This is a wholly rational result.
Those are the only terms of which the successive carrier was necessarily aware or to which he can be said to have consented.
That leaves only the argument that when Essers and Kazemier acceded to the contract of carriage by accepting the goods and the consignment note from Exel, they did so through a branch or agency, namely Exel, which was located in England.
This is, to my mind, an impossible argument.
As the context shows, the branch or agency referred to in sub-paragraph (a) of article 31.1 is relevant as one of a number of indicia of the defendants presence in the jurisdiction in which the claimant wishes to sue.
It means a branch or agency of the relevant defendant (Essers or Kazemier).
The conditions are, first, that it should be located in the jurisdiction (England) where the claimant wishes to sue and, secondly, that the contract of carriage should have been made through it.
It is not suggested that Essers or Kazemier has a branch or agency in England.
Even if they did, they did not accede to the contract of carriage through that branch or agency but by accepting the goods and the consignment note in Switzerland and Hungary respectively.
The fact that the place at which a successive carrier accedes to the contract under article 34 will necessarily be the place of consignment, which is already a relevant jurisdiction by virtue of sub-paragraph (b), indicates that paragraph (a) is in fact referring to the branch or agency through which the contract of carriage was originally made between the consignor and the first or primary carrier as principals.
It is not referring to the branch or agency (if any) through which a successive carrier acceded to it.
The final words of article 36 ( an action may be brought at the same time against several of these carriers) authorise proceedings at the same time against any or all carriers who are liable under the Convention.
The effect of these words is simply that there is no prescribed order in which cargo interests must have recourse to the various parties made concurrently liable.
The draftsman has no doubt assumed that proceedings will be brought in a court which has jurisdiction, but the article is not concerned with jurisdiction.
It certainly does not confer jurisdiction if it does not otherwise exist.
This analysis is supported by articles 37-39, which deal with claims for indemnity by a carrier who has paid compensation to cargo interests, against the carrier or carriers actually responsible (or deemed to be responsible).
Claims for an indemnity may be brought by the carrier who has paid against the carriers concerned (ie the carriers responsible or deemed to be responsible for the loss) in a jurisdiction where any one of them is present: see article 39.2.
Two points may be made about this.
First, it applies only to actions among carriers.
There is no equivalent provision available to found jurisdiction for claims brought by cargo interests under cases (i) or (ii).
Secondly, the technique used by the Convention for avoiding inconsistent findings in actions by cargo interests and subsequent actions by carriers among themselves is not to provide for them to be litigated in the same proceedings.
It is to provide for the validity of the payment of damages previously made to cargo interests to be incapable of challenge in subsequent proceedings for an indemnity, provided that the amount was determined by judicial authority after the [carrier against whom indemnity is claimed] had been given due notice of the proceedings and afforded an opportunity of entering an appearance: see article 39.1.
At the conclusion of the argument in this appeal I was persuaded that this appeal should be dismissed for the reasons given by Sir Bernard Rix in the Court of Appeal.
I remained of that view until I received a copy of the draft judgment of Lord Mance.
I am now entirely persuaded by his reasoning that Cooke J was correct at first instance and that this appeal should be allowed and his order restored.
Since then I have read in draft the judgment of Lord Sumption giving his reasons for agreeing with Lord Mance.
In all the circumstances, for the reasons which they give I would allow the appeal.
I do so with some misgivings because I agree with Lord Sumption that the commercial logic of articles 34 and 36 points towards the recognition of a jurisdiction to receive claims against all three carriers in one set of proceedings.
However, I agree with him that Lord Mances analysis has shown that the language of the CMR points clearly in the other direction.
At the conclusion of the argument in this appeal I was persuaded that this appeal should be dismissed for the reasons given by Sir Bernard Rix in the Court of Appeal.
I remained of that view until I received a copy of the draft judgment of Lord Mance.
I am now entirely persuaded by his reasoning that Cooke J was correct at first instance and that this appeal should be allowed and his order restored.
Since then I have read in draft the judgment of Lord Sumption giving his reasons for agreeing with Lord Mance.
In all the circumstances, for the reasons which they give I would allow the appeal.
I do so with some misgivings because I agree with Lord Sumption that the commercial logic of articles 34 and 36 points towards the recognition of a jurisdiction to receive claims against all three carriers in one set of proceedings.
However, I agree with him that Lord Mances analysis has shown that the language of the CMR points clearly in the other direction.
| UK-Abs | This case concerns jurisdiction over claims relating to thefts from two cargo containers.
The first container was allegedly hi jacked in Belgium in September 2011. 756 of an original 1,386 cigarette cartons disappeared from the second container while it was parked overnight near Copenhagen.
The consignors of these containers, and respondents in both appeals, are two companies in the British American Tobacco Group.
The consignors are claiming against the English main contractors, Exel Europe Ltd (Exel), who undertook responsibility for the carriage and also against the sub contractors, the appellants, in whose hands the containers were when the alleged losses occurred.
Exel has played no part in the appeals.
In the appeal concerning the first container the appellants are H Essers Security Logistics BV and H Essers Transport Company Nederland BV (collectively, Essers) and in the appeal concerning the second container the appellant is Kazemier Transport BV (Kazemier).
In both cases the carriage of containers was subject to the Convention on the Contract for the International Carriage of Goods by Road 1956 (CMR), which is given the force of law in the United Kingdom by the Carriage of Goods by Road Act 1965.
Article 31 CMR sets out certain bases on which courts and tribunals can have jurisdiction over disputes arising from contracts of carriage.
Article 34 CMR provides that where a contract of carriage is performed by successive carriers, each is responsible for the performance of the whole operation.
Under article 36 CMR, claims under the contract may be brought against the first and last carriers and the carrier in possession of the goods when the loss, damage or delay occurred.
The issue in the appeals is whether the consignors can found jurisdiction in England against Essers and Kazemeir as successive carriers within the meaning of CMR by relying on the presence in England of, and the proceedings brought against, Exel and/or upon a provision in the main contract for English jurisdiction.
The High Court set aside the service of claim forms on Essers and Kazemeir.
The Court of Appeal reached the opposite conclusion.
Essers and Kazemeir appealed to the Supreme Court.
The Supreme Court allows the appeals by Essers and Kazemeir and restores the High Courts order setting aside the service of claim forms.
Lord Mance writes the lead judgment, with which Lord Neuberger and Lord Reed agree.
Lord Sumption and Lord Clarke write concurring judgments.
Does Article 31 apply to successive carriers? Article 31 CMR applies to disputes where a successive carrier is involved [19 20, 61].
Article 31 CMR confers jurisdiction only on the courts or tribunals of the jurisdiction (i) as agreed by the parties, (ii) where the defendant is ordinarily resident, or has his principal place of business, or the branch through which the contract was made, or (iii) the place of consignment or delivery [33, 62].
In order to found jurisdiction in England, the respondents must bring their claim under one of these heads.
It is common ground that England was not the place of consignment or delivery for either container [31, 64].
Did Essers and Kazemeir agree to English jurisdiction? The appellants became party to the respective contracts made between the respondents and Exel but article 34 CMR qualifies this position by adding that a successive carrier becomes party to the contract of carriage under the terms of the consignment note [23].
It would be contrary to the general principle that contract depends on agreement to hold a successive carrier bound by a choice of court clause, or any other clause not evidenced by the consignment note and of which he had no express notice.
On that basis neither Essers nor Kazemeir were bound by an English jurisdiction clause in the original contracts [26].
Can a claimant bring subsequent carriers into the jurisdiction where it is already suing one carrier? The first, last and performing carriers under article 36 CMR hold joint and several liability, rather than alternative liability [34 42].
CMR reflects a considered decision as to the balance of interests between all potential claimants and defendants and ought not to be interpreted to include an additional head of jurisdiction allowing for a defendant domiciled in one member state to be sued in the courts of the place where a co defendant was domiciled, unlike the article 6.1 of the Regulation on Civil Jurisdiction and Judgments, Council Regulation (EC) No 44/2001 of 22 December 2000 (the Brussels Regulation) [46 47].
Was England the location of the branch or agency through which the relevant contract of carriage was made? Article 31 CMR refers to the original contract between the consignor and the primary carrier, rather than that through which any successive carrier acceded.
Therefore England is not the relevant location of such branch or agency [32, 66].
Does the Brussels Regulation provide any other basis for jurisdiction or aid the interpretation of the CMR? The Brussels Regulation does not provide any other basis for jurisdiction over Essers or Kazemeir or otherwise act as an aid to the interpretation of the CMR.
The CMR represents a balanced regime adopted across 55 states, only half of which are in the EU.
It does not impinge on any of the principles of EU law which the Court of Justice has, in other cases, held to prevail over such international agreements [48 57].
Lord Clarke and Lord Sumption both consider that the commercial logic of articles 34 and 36 points towards the recognition of a jurisdiction to receive claims against all three carriers in one set of proceedings but agree with Lord Mance that the language of the CMR clearly provides otherwise [60, 69].
|
Percy McDonald was diagnosed as suffering from mesothelioma in July 2012.
Sadly, at the beginning of February 2014, just before the appeal in his case was due to be heard by this court, Mr McDonald died.
His widow, Edna McDonald, has been substituted as respondent in the appeal.
The period between diagnosis and death in Mr McDonalds case is entirely consistent with experience of this insidious disease.
Survival for no more than a period of months after diagnosis is the almost invariable outcome.
Mesothelioma is a form of cancer that develops from cells of the mesothelium, the protective lining that covers many of the internal organs of the body.
It usually affects the pleura, the outer lining of the lungs and the internal chest wall.
It is most commonly caused by exposure to asbestos.
Symptoms or signs of mesothelioma may not appear until 50 years (or more) after exposure.
Mr McDonald was employed by a firm known as Building Research Establishment, operated by the government.
Between 1954 and March 1959 he attended Battersea power station in the course of his employment.
This was for the purpose of collecting pulverised fuel ash.
Between 1954 and January 1957 he was at the power station approximately twice a month.
Between January 1957 and March 1959 he was there about twice every three months.
The plant where the ash was collected did not contain asbestos.
But Mr McDonald, while visiting the power station, went into other areas where asbestos dust was generated by lagging work.
This happened particularly in the boiler house.
It is suggested by the appellant that his visits to these areas took place because of curiosity on his part or because he was on friendly terms with workers employed there.
At the times he was exposed to asbestos, Mr McDonald was, the appellants counsel, Mr Nolan QC, suggested, a sightseer or an interested visitor.
The lagging work involved mixing asbestos powder with water in large drums in order to make a paste.
It also included the sawing of preformed asbestos sections and the stripping off of old asbestos lagging.
On occasions Mr McDonald walked through dried asbestos paste.
The trial judge found that his exposure to asbestos was of a modest level on a limited number of occasions over a relatively short period of time [and] was not greater 7. than those levels thought of in the 1950s and 1960s as being unlikely to pose any real risk to health.
The appellant is the successor body to the occupiers of the power station and, at trial, Mr McDonald alleged that those occupiers were negligent and in breach of their statutory obligations under regulation 2(a) of the Asbestos Industry Regulations 1931 and section 47 of the Factories Act 1937.
He also claimed against his employers that they had been guilty of negligence.
The trial judge, His Honour Judge Denyer QC, dismissed all the claims against both defendants.
On appeal, the Court of Appeal allowed Mr McDonalds appeal under the 1931 Regulations but dismissed his appeal under the 1937 Act and in negligence.
The appellant appeals to this court against the judgment under the 1931 Regulations and Mrs McDonald cross appeals against the dismissal of her husbands claim under section 47 of the 1937 Act.
Negligence is no longer in issue.
The Asbestos Industry Regulations 1931
These Regulations were made pursuant to the provisions of the Factory and Workshop Act 1901, section 79 of which provided: Where the Secretary of State is satisfied that any manufacture, machinery, plant, process or description of manual labour, used in factories or workshops, is dangerous or injurious to health or dangerous to life or limb, either generally or in the case of women, children or any other class of persons, he may certify that manufacture, machinery, plant, process or description of manual labour to be dangerous; and thereupon the Secretary of State may, subject to the provisions of this Act, make such regulations as appear to him to be reasonably practicable and to meet the necessity of the case.
In a letter of 15 September 1931 the Secretary of State indicated that he would use his powers under this section and he enclosed a draft of the Regulations that he proposed to make for the protection of the workers employed in certain processes involving exposure to asbestos dust.
He gave notice in the letter that he had formally certified as dangerous the manipulation of asbestos and the manufacture or repair of articles composed wholly or partly of asbestos and processes incidental thereto The letter further intimated that the Secretary of State had decided to give effect to recommendations contained in two reports, Effects of Asbestos Dust on the Lungs and Dust Suppression in the Asbestos Industry by Merewether and Price published in March 1930 and the Report of Conferences between Employers and Inspectors concerning Methods for Suppressing Dust in Asbestos Textile Factories, which had been published shortly before the Secretary of States letter was sent.
That letter continued: The draft Regulations follow generally the provisions recommended in the two Reports already mentioned, with certain additions and modifications which have been made after taking into consideration observations submitted by the General Council of the Trades Union Congress. 8.
Section 82(1) of the 1901 Act provided: The regulations made under the foregoing provisions of this Act may apply to all the factories and workshops in which the manufacture, machinery, plant, process or description of manual labour, certified to be dangerous, is used (whether existing at the time when the regulations are made or afterwards established) or to any specified class of such factories or workshops.
They may provide for the exemption of any specified class of factories or workshops either absolutely or subject to conditions. 9.
The breadth of the anticipated application of the Regulations should be noted.
This subsection foreshadowed their application to a wide range of processes.
It also presaged that processes etc which did not exist at the time the Regulations were made could come within their embrace when later established.
The potentially wide scope of the Regulations was also reflected in section 83 of the Act which provided: .
Regulations made under the foregoing provisions of this Act may, among other things . (b) prohibit, limit or control the use of any material or process; 10.
This broadly based theme was continued in the text of the Regulations themselves.
In the preamble it was directed that they were to apply to all factories and workshops or parts thereof in which the following processes or any of them are carried on: (i) breaking, crushing, disintegrating, opening and grinding of asbestos, and the mixing or sieving of asbestos, and all processes involving manipulation of asbestos incidental thereto; (ii) all processes in the manufacture of asbestos textiles, including preparatory and finishing processes; (iii) the making of insulation slabs or sections, composed wholly or partly of asbestos, and processes incidental thereto; (iv) the making or repairing of insulating mattresses, composed wholly or partly of asbestos, and processes incidental thereto; (v) sawing, grinding, turning, abrading and polishing, in the dry state, of articles composed wholly or partly of asbestos in the manufacture of such articles; (vi) the cleaning of any chambers, fixtures and appliances for the collection of asbestos dust produced in any of the foregoing processes. 11.
The extent of the potential application of the Regulations was mitigated by a proviso to the preamble which was in the following terms: Provided that nothing in these Regulations shall apply to any factory or workshop or part thereof in which the process of mixing of asbestos or repair of insulating mattresses or any process specified in (v) or any cleaning of machinery or other plant used in connection with any process, is carried on, so long as (a) such process or work is carried on occasionally only and no person is employed therein for more than eight hours in any week; and (b) no other process specified in the foregoing paragraphs is carried on. 12.
Although this proviso cut down the scope of the Regulations, it gives some insight into the width of their intended ambit.
It carried the clear implication that the Regulations applied even if the main business of the factory or workshop was not the manufacture of asbestos goods.
Moreover, the processes identified in the preamble, other than those listed in the proviso, were to come within the Regulations even if the work involved in them took place only occasionally or for limited periods.
Also, in relation to those processes listed in the proviso, including mixing, the Regulations were to apply unless the work was carried out occasionally and no person undertook it for more than 8 hours a week.
A further proviso, not directly relevant for present purposes, permitted the chief inspector of factories to suspend or relax the Regulations, if satisfied that, by reason of the restricted use of asbestos or the methods of working, they could be suspended or relaxed without danger to those employed.
I say that this is not directly relevant but it is pertinent to note that one of the circumstances in which the suspension or relaxation might be authorised was that the use of asbestos was restricted.
If, as the appellant claims, the Regulations applied only to the industry engaged in the manufacture of asbestos, it is difficult to see how circumstances could arise in which asbestos use within such an industry would be restricted. 13.
The preamble stipulated that it was the duty of the occupier of factory or workshop premises to observe Part I of the Regulations.
Regulation 2 (which was in Part I) provided: 2. (a) Mixing or blending by hand of asbestos shall not be carried on except with an exhaust draught effected by mechanical means so designed and maintained as to ensure as far as practicable the suppression of dust during the processes. (b) If premises which are constructed or re constructed after the date of these Regulations the mixing or blending by hand of asbestos shall not be done except in a special room or place in which no other work is ordinarily carried on. 14.
Asbestos was defined in the Regulations as meaning any fibrous silicate mineral, and any admixture containing any such mineral, whether crude, crushed or opened.
Crude asbestos was the raw mineral as shipped in containers after it had been mined.
Crushed or opened material referred to its condition after it had undergone processes preparatory to its use.
The Regulations defined preparing as meaning crushing, disintegrating, and any other process in or incidental to the opening of asbestos.
The background to the1931 Regulations 15.
The parties are agreed that the Merewether and Price Report forms part of the background against which the 1931 Regulations were made and is therefore indispensable to any examination of their ambit.
The respondent claims that further material considerations include (i) the relevant provisions of the 1901 Act; (ii) the Secretary of States certification pursuant to section 79; (iii) the processes listed in the preamble; and (iv) the definition of asbestos in the Regulations.
The appellant contends that the Report on Conferences and the discussions which led to it also played a significant part in the shaping of the terms of the 1931 Regulations and that these must also be considered.
It has not been suggested by the respondent that this report should not be taken into account. 16.
The appellant points to two other sources which, it claims, provide material germane to a consideration of the intended scope of the Regulations.
The first of these is a report entitled Problems arising from the use of Asbestos Ministry of Labour HM Factory Inspectorate November 1967 (36 316).
This suggested that the 1931 Regulations [did] not apply to lagging and insulation operations using asbestos.
The respondent objects to any reference to this document on the ground that it did not feature in the case until the hearing before this court.
The second source identified by the appellant consists of material relating to the Parliamentary history of the Regulations.
This material demonstrates, the appellant argues, that Parliaments perspective was that the 1931 Regulations applied only to the asbestos industry.
The respondent contends that it is not permissible to refer to this material because the conditions prescribed by Pepper v Hart [1993] AC 593 as to the admissibility of statements made in Parliament are not satisfied.
It is also submitted that the references in Hansard do not, in any event, assist in determining the scope of the Regulations.
Section 47(1) of the Factories Act 1937 17.
Section 47(1) of the 1937 Act provided: In every factory in which, in connection with any process carried on, there is given off any dust or fume or other impurity of such a character and to such extent as to be likely to be injurious or offensive to the persons employed, or any substantial quantity of dust of any kind, all practicable measures shall be taken to protect the persons employed against inhalation of the dust or fume or other impurity and to prevent its accumulation in any workroom, and in particular, where the nature of the process makes it practicable, exhaust appliances shall be provided and maintained, as near as possible to the point of origin of the dust or fume or other impurity, so as to prevent it entering the air of any workroom. 18.
A number of elements is required to establish liability under the subsection.
Firstly, there must be a process which generates dust or fume or other impurity.
Secondly, the dust or fume etc must be of a character or extent as to be likely to be injurious or offensive.
Thirdly, the dust, fume or other impurity must be injurious or offensive to those employed.
But by way of alternative to the requirement that it be injurious or offensive, if the dust given off is substantial this will be sufficient to ground liability.
Finally, the measures to be taken in order to protect against inhalation of the dust, fume or other impurity must be practicable. 19.
Mr McDonald had relied on the second limb of the subsection, ie that the amount of asbestos dust that was given off in the areas of the power station where he had been exposed to it was substantial.
The first issue between the parties on this aspect of the case was whether it was sufficient that the volume of the dust at the time that it was initially generated was substantial, irrespective of its concentration at the time that Mr McDonald inhaled it or whether it had to be shown that at the time he was exposed to and inhaled it, there was a substantial quantity of dust.
The appellant argued that the concentration of dust had to be substantial at the moment of exposure and inhalation.
The respondent submitted that, if the quantity of dust that was initially liberated was substantial, it was not required under section 47(1) to show that, at the time Mr McDonald was exposed to it, the amount of the dust was substantial; it was enough that, at the point of its being given off, it could be so described. 20.
The appellant also argued that no duty was owed to Mr McDonald because he was not a person employed for the purposes of the subsection.
On this issue the respondent claimed that, during the time that he was exposed to the dust, Mr McDonald was a person employed.
It was submitted that to interpret section 47(1) so as to limit its application to workers actually engaged in the process of producing the dust or fume would greatly restrict the scope of the provision and would exclude from protection many who would be affected by the process.
Moreover, it would have been a simple matter to confine the application specifically to those actually engaged in the production of the dust or fume by an express provision to that effect.
An example of such an explicit provision was to be found in section 49 of the 1937 Act dealing with protection for eyes.
The application of the 1931 Regulations 21.
The principal argument of the appellant was that the 1931 Regulations, in their original conception and subsequent application, were focused on the asbestos industry and those working in it.
The purport of the appellants submission on this point was that section 79 of the 1901 Act envisaged the designation of a dangerous industry rather than proscription of the use in industry generally of dangerous material.
Only when a trade or industry was formally nominated as dangerous was it to be subject to the Regulations.
That submission, it was claimed, derived support from the terms of section 82 which focused on factories and workshops where the dangerous industry was carried on.
It was also sustained, Mr Nolan argued, by the title of the Regulations, The Asbestos Industry Regulations and the definition of asbestos.
That definition referred to asbestos in its unprocessed ie its raw, mineral condition.
It did not comprehend processed asbestos products such as asbestos insulation.
It was claimed that the exclusive focus of the Regulations on the asbestos industry was also indicated by subparagraph (v) of the preamble relating to sawing, grinding, turning, abrading and polishing in the dry state, of articles composed wholly or partly of asbestos in the manufacture of such articles.
The express inclusion of the qualification that these processes were confined to the manufacture of asbestos products made clear, it was said, that the subject of the 1931 Regulations was the asbestos industry and the production of materials within that industry, rather than the use of asbestos products in the work of other industries. 22. 23.
For the respondent it was argued that the terms of section 79 and the certification by the Secretary of State indicated that the Regulations were to apply whenever and wherever a defined process was carried on in a factory or workshop.
This was in keeping with the mischief which Merewether and Price had identified and the remedy they had proposed.
There was no reason to adopt a narrow definition of asbestos industry and on that basis restrict the application of the Regulations.
The term asbestos industry in the title was used in the wide sense of any industry where one or more processes referred to in the preamble was carried on. 24.
The breadth of the terms of the preamble was considered by the Court of Appeal in Cherry Tree Machine Co Ltd v Dawson sub nom Jeromson v Shell Tankers (UK) Ltd [2001] EWCA Civ 101, [2001] ICR 1223.
Hale LJ, delivering the only substantive judgment with which Mantell LJ and Cresswell J agreed, pointed out in para 7 that the preamble had made it clear that the Regulations applied to all factories and workshops in which the listed processes took place.
She also adverted to the import of the proviso in the preamble.
She held (at para 12) that the trial judge was plainly right to conclude that, for the exemption in the proviso to apply, it was required both that the work was carried on only occasionally and that no person was employed at that work for eight hours or more in any week.
That conclusion made it distinctly difficult for the application of the Regulations to be confined to factories and workshops where asbestos was manufactured.
Sporadic or occasional work involving the manufacture of asbestos was inherently unlikely to be a feature of factories where that activity was the sole or primary undertaking.
On this account Hale LJ declined to follow the decision in the Scottish case of Watt v Fairfield Shipbuilding & Engineering Co Ltd 1999 SLT 1084.
In that case, Lord Gill had felt that it was possible to give the proviso a satisfactory meaning, notwithstanding his conclusion that the 1931 Regulations applied only to the asbestos industry.
Hale LJ was not persuaded that this was possible, saying at para 21: It is however very difficult to imagine a factory or workshop whose main business was producing asbestos or asbestos products to which the exemption could possibly apply, given that only certain processes, infrequently carried on, are exempted and only then if none of the other defined processes is carried on in the same factory. 25.
The argument that the Regulations only applied to the asbestos industry and to the manufacture of asbestos had also been accepted in the earlier case of Banks v Woodhall Duckham Ltd, an unreported decision of the Court of Appeal which had been delivered on 30 November 1995.
The Court of Appeal in Cherry Tree distinguished that case, Hale LJ commenting (at para 25) that the observations of the court in Banks were not essential to the determination of the case because the trial judge had been unable to make findings of fact as to the extent to which any of the defendants had exposed the claimant to asbestos and what if any damage flowed from any such exposure. 26.
The appellant challenged the correctness of the decision in Cherry Tree.
It was submitted that too great an emphasis had been placed on the preambles description of the processes and insufficient regard had been had to the underlying theme of the 1901 Act and the 1931 Regulations.
This was that an industry was to be regulated rather than processes involving the use of asbestos.
In particular, the preventive measures suggested in the Merewether and Price Report were directed specifically towards the suppression and control of the dust involved in manufacturing processes, and steps to be taken in relation to those employed in the industry (p 17 of the Report). 27.
The central thesis of the appellants case rests on the notion that there was, at the time the 1931 Regulations were made, a clearly identifiable asbestos industry; that this industry was engaged solely in the manufacture of asbestos; and that it was the intention of the Secretary of State, in making the Regulations to confine their application to that closely defined industry.
Several reasons can be given for rejecting that argument, the first and most prosaic being that, if that had indeed been the Secretary of States aim, it could have been easily achieved by an unequivocal statement to the effect that the Regulations only applied to the asbestos manufacturing industry.
So far from stating that, the Regulations made it prominently clear that all factories and workshops in which certain specified processes are carried out are covered by the Regulations.
The emphasis immediately falls on the processes rather than the nature of the industry.
And this is entirely logical.
If processes other than those involved in the manufacture of asbestos were known to give rise to the risk of developing fibrosis (as they were at the time the Regulations were made) why should they be excluded from their ambit? 28.
Secondly, the Merewether and Price Report, on which the appellant places such weight, did not focus exclusively, in my view, on the asbestos manufacturing industry.
The first (and more important) part of the Report is devoted to an investigation of whether workers exposed to asbestos were at risk of developing pulmonary fibrosis.
That investigation had been commissioned by the Home Office following the discovery, in February1928, of a case of non tubercular fibrosis of the lungs in an asbestos worker, of sufficient severity to necessitate treatment in hospital (Seilers case).
As the covering letter enclosing the Report to the Home Secretary makes clear, the investigation established that the inhalation of asbestos dust over a period of years results in the development of a serious type of fibrosis of the lungs.
It was not suggested (nor could it have been) that inhalation of asbestos dust sufficient to cause fibrosis could only occur in the course of asbestos manufacture. 29.
The first part of the Report was not focused on the asbestos industry as such, therefore, but on the propensity of exposure to asbestos to cause fibrosis.
As it happens, workers in the textile branch of the asbestos industry were chosen for study because their exposure was to pure, or nearly pure, asbestos.
Workers in other parts of industry had exposure to a mixture of dusts, of which asbestos was one.
It was considered necessary to choose those whose exposure was to asbestos alone in order to evaluate the effect of asbestos dust.
At p 7 of the Report, however, the authors highlighted the considerable number of workers exposed to the influence of mixed dusts of which asbestos was but one.
As Judge LJ said, speaking of the Merewether and Price Report in Maguire v Harland & Wolff plc [2005] EWCA Civ 1, the research was confined to asbestos textile workers, but [the Report] explained that workers in other industries, exposed to asbestos dust, were also at risk (para 23). 30.
The choice of workers in the asbestos textile industry for investigation does not betoken a view on the part of the authors of the Report that protection for that category of workers was alone required.
They were chosen because they were known to be exposed to asbestos dust and, since the purpose of the investigation was to examine whether there was a connection between asbestos dust and fibrosis, it was logical to focus on them.
But the critical finding was that exposure to asbestos dust gave rise to the serious risk of grave illness.
Confronted by that finding and by the statement that workers in other areas of industry were exposed to asbestos, there is no obvious reason that the Secretary of State should decide to confine the application of the Regulations to the manufacturing arm of the asbestos industry and to leave unprotected the considerable number of other workers exposed to a mixture of dusts including asbestos. 31.
While the second part of the Report dealt with the suppression of dust in the asbestos industry, it did not suggest that precautionary measures need only be taken in relation to the manufacture of asbestos.
It would be illogical if it had done so in light of the central finding of the first part that prolonged exposure to asbestos, in whatever circumstances that occurred, carried a grave risk of serious illness.
Moreover, the second section of the Report looked separately at textile and non textile processes involving use of asbestos materials.
The latter included electrodes with an asbestos covering and miscellaneous goods containing a proportion of asbestos.
These processes were recognised by the authors of the Report to create significant exposure to asbestos and thereby a risk to health.
At p 19 the authors stated: Apart from manufacture, certain work is carried on in premises subject to the Factory and Workshops Acts, as well as in other premises, which involves use or manipulation of asbestos or products containing it.
The insulating of boilers, pipes, engines and parts of ships is the most important.
Much of this work is done on board ship by contractors who employ a considerable outdoor staff.
It is therefore unwise to dwell too heavily on some of the wording of the Regulations themselves in order to try to construct an exclusive emphasis on the manufacture of asbestos.
It is quite clear that the risks of ill health through exposure to asbestos other than in the course of its manufacture had been recognised.
Moreover, it is unsurprising that the Regulations should refer to many aspects of manufacture because the Merewether and Price Report had 32. dealt with asbestos textile workers.
But that circumstance alone does not justify the view that it was intended that the Regulations should apply only to the manufacture of asbestos and that the risks arising from other forms of exposure should be ignored. 33.
The Report on Conferences between Employers and Inspectors concerning Methods for Suppressing Dust in Asbestos Textile Factories obviously was concerned with that area of the industry.
While the Secretary of State had regard to that report, there is no reason to suppose that, simply because it dealt only with that side of the industry, the risks arising from exposure in other circumstances would be overlooked. 34.
A third reason for rejecting the appellants claim that the Regulations were designed to apply to the manufacturing processes of the asbestos industry is that it is at least questionable whether a selfcontained asbestos industry concerned exclusively with manufacturing could be said to exist in isolation from the use of asbestos in other factory settings.
As Merewether and Price themselves observed (at p 18 of their Report), the asbestos industry had developed greatly in the years before the report was issued and it continued to expand rapidly mainly because of the demands of the motor, electrical, engineering and building industries and of the increasing attention now paid to the insulation of steam plant to promote fuel economy. 35.
Unlike many other manufactured products, asbestos frequently required to be worked, manipulated, mixed and transformed after the supply of the raw material to the customer.
Merewether and Price referred to this at p 19 in the passage quoted at para 31 above.
It appears to me highly doubtful that the Secretary of State would have concluded that insulation companies which were not engaged in the manufacture of asbestos but whose workers were daily exposed to asbestos while manipulating it for application in various premises should not be regarded as part of the asbestos industry.
And, indeed, in his certification letter, the Secretary of State expressly stated that he had formally certified as dangerous the manipulation of asbestos as well as the manufacture or repair of articles composed wholly or partly of asbestos and processes incidental thereto.
In this context, it is appropriate to consider the Parliamentary material relied on by Mr Nolan as indicating the governments intention that the 1931 Regulations should apply only to the asbestos manufacturing industry.
The first of these was a reply given on behalf of the Ministry of Labour on 13 March 1930 to a question concerning the number of men and women employed in the asbestos industry and insured for unemployment.
The reply given was as follows: 36.
Separate statistics of the number of insured persons in the asbestos industry are not available, as that industry is included with others in the group Textile industries not separately specified.
At the population Census of 1921, the number of occupied persons classified as belonging to the asbestos industry in Great Britain included 2,550 males and 1,327 females, aged 12 and over. (Hansard (HC Debs) Col 1520 W) 37.
On 15 November 1934, in answer to a question about the number of deaths from asbestosis, the Home Secretary said: About 60 deaths have been brought to the notice of the Department and after investigation are all attributed by the Senior Medical Inspector of Factories to exposure incurred previous to the Asbestos Industry Regulations of 1931 which required elaborate precautions.
Special inquiry in 1932 as to other risks in warehouses and certain other processes revealed no need for any extension of the regulations, but their effectiveness will continue to be closely watched. (Hansard (HC Debs) Col 2122) 38.
Finally, Mr Nolan drew our attention to a statement made on 5 December 1966 by the Minister for Labour to the effect that he was revising the Asbestos Industry Regulations 1931, and intended to extend their application to all industries and processes in which asbestos is used. (Hansard (HC Debs) Col 197 W).
In the well known passage of his speech in Pepper v Hart [1993] AC 593, 634 Lord Browne Wilkinson set out the circumstances in which Parliamentary material could be used as an aid to construction of legislation in the following terms: 39. reference to Parliamentary material should be permitted as an aid to the construction of legislation which is ambiguous or obscure or the literal meaning of which leads to an absurdity.
Even in such cases references in court to Parliamentary material should only be permitted where such material clearly discloses the mischief aimed at or the legislative intention lying behind the ambiguous or obscure words.
In the case of statements made in Parliament, as at present advised I cannot foresee that any statement other than the statement of the Minister or other promoter of the Bill is likely to meet these criteria. 40.
Leaving aside the question of whether the Regulations are ambiguous, it is quite clear that none of the statements to which the appellant referred partakes of the quality required.
Quite apart from the fact that none bore directly on the issue of the application of the Regulations to an asbestos manufacturing industry only, none could be said to disclose the mischief aimed at or the legislative intention underlying them.
And, of course, two of the statements post dated the making of the Regulations and are, therefore, at most, an expression of view as to how they should be construed rather than a true guide to legislative intent.
The respondent is undoubtedly correct, therefore, in the claim that the conditions for the admissibility of the Parliamentary material are not present in this instance and is also correct in the assertion that, in any event, the statements do not assist in giving any real insight into the legislative intention in making the Regulations. 41.
For essentially the same reasons the 1967 report (referred to in para 16 above) cannot be regarded as an authoritative guide to the proper construction of the Regulations.
This represents, at best, one possible view as to the extent of their application.
The statement that the Regulations do not apply to lagging and insulation operations using asbestos is not elaborated upon nor is any reasoned support for it provided.
It also contrasts with the memorandum dated 6 September 1949 from the chief safety officer of the appellants predecessors to regional safety officers, in relation to the lagging of steam pipes in generating stations.
In it the view of the Deputy Chief Inspector of Factories is recorded as being that the 1931 Regulations applied to the mixing of asbestos in power stations but did not apply to the removal of old lagging or the application of insulation. 42.
The next reason for rejecting the appellants principal argument is that given by Hale LJ in the Cherry Tree case, namely, that the first proviso in the preamble is not only otiose but impossible to explain if the application of the Regulations is confined to the manufacture of asbestos.
An industry devoted exclusively to making this product simply could not avail of the proviso.
It could have no relevance if the appellants contended for interpretation of the Regulations is correct.
The fact that it was included points unmistakably to the conclusion that it was envisaged that the Regulations would apply to processes other than the manufacture of asbestos.
Allowing an exemption for work with asbestos which was occasional and carried on for no more than 8 hours per week simply does not make sense if the Regulations were only to apply to the asbestos industry as the appellant has defined it.
This proviso flatly contradicts the appellants claims as to the scope of application of the Regulations. 43. 44.
It is, of course, true that, if the Regulations are held to apply to all factories at which any of the processes is carried on, regulation 2(b) may appear somewhat anomalous.
To require mixing or blending by hand of asbestos to be carried on in a special room or place in which no other work is ordinarily carried on might appear to cast a considerable burden on employers engaged in lagging operations.
The respondent confronts this seeming incongruity head on by saying that since mixing work, in its wide sense, gave rise to dust to which workers were exposed other than those carrying out the work, it was a sensible and practical measure to stipulate that mixing should be undertaken in a separate room or place and, pursuant to regulation 2(a), provided with a suitable exhaust draught.
I am not convinced that this provides a complete answer to the claim that regulation 2(b), if applied to lagging operations and those working in their vicinity, imposes a duty that would in practical terms be very difficult to fulfil.
Be that as it may, I am of the firm view that regulation 2(b), if applied to all processes listed in the preamble, is more readily explicable than would be the exemption in the proviso if the regulation is confined to asbestos manufacture only.
While, therefore, I acknowledge that the terms of regulation 2(b) lend some support to the notion that the Regulations were designed to be more restrictive in their application, I do not consider that this is of sufficient moment to displace the plain meaning to be given to the preamble in applying the Regulations to all of the processes listed or to counteract the more obvious anomaly of the existence of an exemption for the asbestos manufacturing industry which plainly had no relevance to it.
Mixing 45.
Active dispute arose as to whether the term mixing in the Regulations should be given a specialised, technical, or its ordinary, meaning.
In support of its argument that it should be given a restricted, technical meaning, the appellant conducted a close textual analysis of the Merewether and Price Report, citing instances of where the term had been used in conjunction with other processes of manufacture.
Reliance was also placed on the Report on Conferences where it was clear, the appellant claimed, that the expression mixing was used in the technical sense of mixing raw asbestos as a preparatory step to its use in the manufacture of asbestos products.
In the Merewether and Price Report at p 11, mixing is first in a list of processes which includes crushing, opening and disintegrating.
And at p 21 the process of mixing is identified in the same context as the breaking, crushing, disintegrating, opening and grinding of asbestos and before reference to the sieving of asbestos.
This, the appellant claims, is a reference 46. to the preparatory steps for use of asbestos mineral in product manufacture, rather than mixing asbestos to create a paste.
This claim is fortified, the appellant says, by the reference on p 31 of the Report to the dusty process of hand mixing incidental to opening (ie manufacturing) processes. 47.
The appellant argues that the recommendations contained in the Merewether and Price Report correlate directly to the classification of processes in the preamble to the 1931 Regulations.
Thus the first recommendation (relating to exhaust ventilation at dust producing points) was the foundation for regulation 1.
The reference in this recommendation to the fact that such measures have not been applied to hand work and that special difficulties remain to be overcome in some cases eg . mixing . clearly referred back to mixing identified on pp 21 and 31 of the Report.
The recommendation that, unless the problem was surmounted, there should be general ventilation of a high standard applied so as to draw the dust laden air away from the worker became regulation 2(a), the appellant claimed, and therefore applied specifically to mixing or blending by hand with this clear technical meaning. 48.
These arguments are founded on the premise that the Merewether and Price Report and the Report on Conferences were translated directly to the provisions in the Regulations.
This is a false premise for two reasons.
First, the letter of 15 September 1931 indicated that, while the Regulations would follow generally the recommendations made in the two reports, certain additions and modifications had also been made.
Secondly and more importantly, the Merewether and Price Report and the Report on Conferences were based on the investigation of the specific conditions which had been addressed by both reports.
As earlier explained, Merewether and Price had isolated a particular group of asbestos workers for the precise reason that they wished to evaluate the effect of exposure to asbestos dust alone rather than the effect of exposure to mixed dusts including asbestos.
The Report on Conferences was concerned with methods for suppressing dust in asbestos textile factories.
But the consideration of the Secretary of State could not be constrained by the restricted basis on which the reports were prepared.
He should not have and must be presumed not to have ignored the risk to those who worked with asbestos, other than in the manufacturing process, that the Merewether and Price Report had clearly identified. 49.
Although Merewether and Price had, for understandable reasons, chosen workers whose activities were confined to the manufacture of asbestos, the significance of their findings went well beyond the impact on that restricted category of employees.
In particular, it was well known, at the time that the Regulations were made, that mixing of asbestos to create a paste was a regular feature of lagging.
And Merewether and Prices findings, properly understood, pointed clearly to the risk that chronic exposure to asbestos would entail, whatever the circumstances in which it occurred.
If it had been intended to exclude from the ambit of the Regulations mixing for the purpose of creating a paste for lagging, this would have been, in light of contemporaneous knowledge, a surprising outcome.
In any event, it would have had to be made explicitly clear and it was not.
I am satisfied, therefore, that the term mixing in the Regulations should not be given the restricted, technical meaning for which the appellant contends and that it should be taken to cover mixing asbestos powder with water such as occurred in this case.
The appellants secondary argument 50.
The appellant argued alternatively that, even if the Regulations covered mixing of asbestos to prepare a paste for lagging, they did not apply to someone such as Mr McDonald because he was not employed in the dangerous trade which had been certified by the Secretary of State under section 79 of the 1901 Act.
The appellant submitted that the Regulations could not have application wider than the statutory power under which they had been made and that a side note to section 79 stated that the power was to make regulations for the safety of persons employed in dangerous trades. 51.
Mr Nolan acknowledged, however, that the House of Lords had held in Canadian Pacific Steamships Ltd v Bryers [1958] AC 485 that the section 79 power was a wide one and entitled the Secretary of State to make regulations which could create a statutory duty to protect persons not employed in the process regulated (in that case a regular crew member of a ship undergoing repair in dry dock).
The nature and extent of any duty under regulations made pursuant to the section 79 power therefore depended on the terms of the particular regulations. 52.
Although there was no express provision in the Regulations which restricted their application to persons employed in the process of mixing asbestos for lagging, the appellant argued that it was implicit that the duty was so limited, firstly because that was in accord with the structure of the Regulations, which was to prescribe precautions to be taken in relation to each of the processes stipulated and, secondly because the mixing process was one of those referred to in the first proviso of the preamble.
Alternatively, if the protection extended beyond those who were actually involved in the processes, it did not cover someone who, like Mr McDonald, was not actually employed in the areas where the processes were taking place but was merely a casual visitor to those areas. 53.
I do not accept either of these arguments.
The fact that precautions are prescribed in relation to each of the processes involved says nothing to the question of whether someone has to be involved in the actual process or may be incidentally exposed to the dust or fume which the process generates.
It would be remarkable if the group to be protected was confined to those who were carrying out the process but those who were at risk from exposure because of their proximity to it should remain unprotected.
Given that the Canadian Pacific case had established that section 79 empowered the Secretary of State to make regulations which afforded protection to workers not involved in the process, the essential question is whether the 1931 Regulations, as made, had availed of that opportunity.
Where the risk of injury arises from inhalation of dust or fumes (and, of their nature, processes which generate these do not discriminate as to who inhales them), there does not appear to me to be any logical reason to exclude those employees who are liable to be affected by exposure solely because they do not actively work on the processes. 54.
Merewether and Price had adverted directly to this issue at p 20 et seq of their Report, stating that within the same workroom there could be several different processes carried on, each producing dust containing asbestos.
The Report recognised that a worker might be exposed to harmful dust created by a process he was not engaged in: In many works several processes are carried on in the same room.
In the absence of effective means of preventing escape of dust into the air, many workers are subjected to a risk from which they would otherwise be immune, or to a greater risk than that arising from their own work. 55.
As Mr Allan QC for the respondent pointed out in his submissions on section 47 of the 1937 Act, many processes within a factory are fully automated.
It could not have been Parliament's intention, he argued, that, where a fully automated process was producing dust or fume, no workers exposed to that dust or fume were protected by the section.
For reasons that I will give in the next section of the judgment, I accept that submission.
Using the same basis of reasoning I consider that the Secretary of State should be taken to have been principally concerned with protecting workers who were liable to be exposed to asbestos, rather than with confining protection to those whose job it was to carry out the processes which generated the risk of exposure. 56.
The fact that the mixing process was referred to in the first proviso of the preamble does not sound directly on whether the Regulations should extend to employed persons who are not actively involved in that process.
The 57. exemption available is perfectly understandable and workable if the Regulations apply to workers involved in that process and others who, by reason of their proximity to it, are liable to inhale the dust or fume that it generates.
I shall deal with the appellants argument in relation to the claim that Mr McDonald was not a person employed but merely a casual visitor or sightseer in the part of the judgment dealing with section 47 of the 1937 Act, to which I now turn.
The possible application of section 47 58.
The respondent has accepted that, in order to establish that there has been a breach of statutory duty based on the second limb of section 47(1), it must be shown that: (1) the dust was given off in connection with a process carried on in the power station; (2) Mr McDonald was a person employed within the meaning of the section; (3) the quantity of dust when given off was substantial; and (4) Mr McDonald inhaled dust given off by the relevant process.
The appellant agrees with this formulation except in relation to the third condition.
Mr Nolan contends that it must be shown that not only was the quantity of dust substantial at the point that it was generated by the process, it must be substantial at the point of inhalation.
I shall consider each of these in turn.
Was the dust given off in connection with a process? 59.
The appellant submitted that lagging operations were not part of the process carried on at Battersea power station.
That process was, the appellant claimed, the generation of electricity.
Mr Nolan relied on the judgment of Stuart Smith LJ in Banks where he accepted an argument that the lagging of pipes that may have given rise to dust was not a process being carried on in the factory, which was the manufacture of steel.
In Nurse v Morganite Crucible Ltd [1989] AC 692 the House of Lords considered the meaning of process in section 76(1) of the Factories Act 1961 and the Asbestos Regulations 1969.
Lord Griffiths stated at 704: The Divisional Court in giving leave to appeal to your Lordships House certified the following point of law of general public importance: 60.
Whether for the purposes of the Factories Act 1961 and Regulations thereunder process carried on in a factory means a manufacturing process or other continuous and regular activity carried on as a normal part of the operation of the factory.
My Lords, I am not prepared to answer the question in this form because the word process is scattered throughout many sections of the 1961 Act, and it appears in many regulations made thereunder.
Your Lordships have not had the opportunity to consider the meaning to be attached to process wherever it appears and it is possible that it has different meanings in different contexts.
I would confine my opinion to the meaning of the word process where it is used in the 1969 Regulations and I would answer the certified question by saying that where the word process is used in the Regulations it means any operation or series of operations being an activity of more than a minimal duration. 61.
Although Lord Griffiths specifically confined his opinion as to the meaning of process to its use in the 1969 Regulations, it is clear that he rejected (at least implicitly) any notion that, to be a process in a factory, an activity had to be integral to the principal output of the enterprise.
In the Nurse case the business of the factory was the manufacture of crucibles.
Asbestos was not used for any purpose directly associated with that product.
If an argument akin to that presented by the appellant in the present case had been accepted in Nurse that would have disposed of the appeal.
It did not.
And it did not because it was not necessary that, in order to be an activity in connection with a process, it had to be shown that it was directly involved with the manufacture of the end product of the factory.
In Brophy v J C Bradfield & Co Ltd [1955] 1 WLR 1148 the plaintiffs husband had been overcome by fumes from a boiler used to heat the factory.
It was claimed that the lack of ventilation in the boiler room constituted a breach of sections 4 and 47 of the Factories Act 1937.
The Court of Appeal held that this was not a process within the meaning of those sections.
At p 1153, Singleton LJ dealt with the point pithily when he said: 62. upon the facts it does not appear to me that the boiler room was a workroom within the meaning of section 4 (1) of the Act or that the fumes were generated in the course of any process or work carried on in the factory.
This was a boiler used for 63. heating the factory and I do not think that that section applies to the facts of the present case.
In Owen v IMI Yorkshire Copper Tube, an unreported decision of Buxton J delivered on 15 June 1995, the judge felt that the decision in Brophy could be explained on the basis that when the fumes came from the factory heating supply and not from any part of the manufacturing process it was not a part of the process carried on in the factory.
For my part, I would not distinguish Brophy on that basis.
I consider that it was, on this point, wrongly decided.
A process in a factory should not be confused with the product that is manufactured.
In factories all manner of processes are carried on which contribute to the ultimate manufactured product in varying degrees of closeness.
Thus, for instance, the heating system in Brophy was not required, in the sense of making a direct contribution to the manufacture of tents and canvas goods (which was the business of the factory).
But a heating system was doubtless required in order that the manufacture of those goods could take place. 64.
The words in section 47(1), a process carried on in any factory should be given their plain and natural meaning.
To suggest that they import some intimate connection with the manufacture of a product introduces an unnecessary and unwarranted gloss on the subsection.
If it is a process that is a normal feature of the factorys activity, it is a process for the purposes of the legislation.
I would therefore hold that the lagging work which Mr McDonald encountered in the power station constituted a process for the purposes of section 47 and that the first condition necessary to show breach of subsection (1) of that section has been met.
Was Mr McDonald a person employed? 65.
On the question of whether Mr McDonald was a person employed, the Court of Appeal decided that he was not, either in the sense of being employed at the factory or in the process of handling asbestos McCombe LJ at para 59 and the Lord Dyson MR at para 107. 66.
As Mr Allan pointed out, an interpretation of the section which restricts its application to workers engaged in the process producing the dust or fume would greatly curb the scope of the provision and would exclude from protection many workers affected by exposure to the substances.
And, as he also submitted, where the purpose of a provision is to protect the health of workers, a restrictive interpretation should not be adopted unless the wording compels it Harrison v National Coal Board [1951] AC 639 per Lord Porter at 650.
The wording of the section does not compel a restrictive application.
For the reasons given in paras 27 and 53 55 above, I consider that, in approaching the interpretation of this subsection, the emphasis should be on the need for protection rather than on involvement in the process.
One could perhaps understand a more restricted approach where the danger was inherent to the process or where there was a special risk to those actively involved in the process but that is not the case here. 68. 67.
Section 49 of the 1937 Act provides an example of such a special risk.
That section empowered the Secretary of State to make regulations in relation to a process which involved a special risk of injury to the eyes from particles or fragments thrown off in the course of the process, and to require that suitable goggles or effective screens should be provided to protect the eyes of the persons employed in the process.
The rider that the regulations should be targeted at those employed in the process in that instance is logical, given that the risk can be expected to arise only for those who are actually involved in the process but the same cannot be said for dust or fumes which are liable to be inhaled by any who encounter them.
The absence from section 47 of a similar rider to that found in section 49 is significant.
It reflects the recognition that the risk of exposure extends beyond those who are involved in the process of generating the dust or fume which can cause injury.
In Morrison v CEGB, an unreported decision of 16 March 1986, Rose J held that section 63(1) of the Factories Act 1961 (the equivalent of section 47(1) of the 1937 Act) only extended protection to those engaged in the process.
He held that if it had been intended to extend the protection to those working in the factory generally, then the section could have been so worded.
It does not appear that Rose J was referred to section 65 of the 1961 Act (the equivalent of section 49 of the 1937 Act).
In the later case of Owen v IMI Yorkshire Copper Tube Buxton J considered both sections and reached the opposite conclusion to that of Rose J. He gave five reasons for arriving at that conclusion, four of which I agree with and find compelling.
They are these: (i) the phrase in connection with any process carried on refers to the dust and fume produced, not to the person operating that process; (ii) the effect of section 63 was to prohibit accumulation of dust or fume in any workroom at all, and not merely in the workroom where the process producing them was carried out; (iii) comparison with section 4 of the 1961 Act showed that section 63 provided the same ambit of protection as section 4 which, in material part, provided that adequate ventilation of each workroom, and the rendering harmless, so far as practicable, of all fumes, dust etc generated in the course of any process or work carried on in the factory as may be injurious to health; (iv) since the duty imposed by section 63 was to prevent accumulation of dust or fume, the protection which it was designed to achieve 69. must extend to all employed in the workroom, not just those engaged in the process.
In the Court of Appeal, the decision of Buxton J in Owen is referred to only en passant at para 49 and in a footnote to para 56 of McCombe LJs judgment.
The learned Lord Justice and the Master of the Rolls preferred to follow the decision in Banks on this question.
Stuart Smith LJ in Banks had adopted the line of reasoning of Rose J in Morrison.
Although he was aware that Buxton J had disagreed with Morrison in his judgment in Owen, Stuart Smith LJ indicated that he had not seen the judgment in the latter case.
He concluded that the words persons employed in section 47 of the 1937 Act related back to the earlier words, in connection with any process.
This he found to be the natural reading of the words.
I do not agree.
There is no reason to import, in effect, the earlier words as a qualification to the plain and simple expression, the persons employed.
As Buxton J pointed out, this would have the effect of creating a significant gap in the cover of protection for workers who might, in the course of their employment, inhale dangerous substances and be at risk of grave illness in consequence.
Quite why the creation of such a significant gap should represent the intention of the legislature was not addressed or explained by Stuart Smith LJ nor, with respect, by the Court of Appeal in the present case. 70.
Nor did Stuart Smith LJ explain, although he adverted to it, why the contrast between sections 47 and 49 of the 1937 Act did not point clearly to the former section being interpreted more widely.
For the reasons given in para 67 above, I consider that this divergence is significant and clearly betokened an intention that the application of section 47 should extend to those employed persons liable to be affected by the dust or fume, not merely to those employees who were responsible for producing those substances. 71.
But if the section applied to persons employed generally, did it apply to Mr McDonald who was not employed by the occupiers of the power station and who did not require to go to the areas where he was exposed to asbestos in order to fulfil the requirements of his own employment? In Massey Harris Ferguson (Manufacturing) Ltd v Piper [1956] 2 QB 396 the Divisional Court held that persons employed where that expression was used in section 60 of the 1937 Act included not only servants of the occupier, but any other person who might be called on to do work in the factory, including a painter employed by an independent contractor.
At p 401, Lord Goddard CJ said, The test is whether a person is employed in the factory, not whether he is employed by the occupier.
This approach was approved by the House of Lords in the Canadian Pacific case see Viscount Kilmuir at 504.
On this basis, it was unnecessary for Mr McDonald to show that he was employed by the occupiers of the factory.
The fact that he was employed by a different organisation is irrelevant to the application of the subsection to his case.
Casual visitor 72.
What of the circumstance that Mr McDonald was not required to go to that part of the factory where he inhaled the dust which led to the development of mesothelioma? The answer is supplied, I believe, by the decision of the Court of Appeal in Uddin v Associated Portland Cement Manufacturers Ltd [1965] 2 QB 582.
In that case it was held that section 14 of the 1937 Act applied where a workman in the factory went to a part of the premises where he had no authority to go and his arm was caught in a revolving shaft.
At 593E Lord Pearce said, there is nothing to justify the gloss that an employed person is to be protected only so long as he is acting within the scope of his employment.
The suggestion that Mr McDonald was acting within the scope of his employment while in the areas where pulverised fuel ash was collected and stepped outside that scope as soon as he crossed the threshold of another room in the factory is fanciful.
I consider that the second condition to establish breach of section 47(1) has also been met.
Substantial quantity at time of giving off or inhalation? 73.
The third condition of the subsection that arises in the present case is that a substantial quantity of dust be present, on the appellants case at the time of inhalation, and, on the respondents, at the time that it was given off.
Resolution of the conflict between these two positions must begin with a close examination of how the requirement is framed in the subsection itself.
The duty to take all practicable measures is triggered when there is given off any injurious or offensive dust or fume or any substantial quantity of dust of any kind.
The subsection does not stipulate that the quantity of dust must be substantial at the point of inhalation.
The text of the provision therefore favours the respondents claim as to its proper interpretation.
It is to be presumed that the greater the quantity of dust given off, the greater the chance that it will be inhaled before it is dissipated.
It is therefore not at all surprising that practicable measures should be required to be taken at the point at which the dusts or fumes are given off.
On that account also, the respondents position is to be preferred.
That interpretation as to the effect of the subsection also appears to have been accepted by Widgery J in Nash v Parkinson Cowan Ltd (1961) 105 S J 323 although the judge in that case does not appear to have been asked to consider the two possible interpretations advanced on the present appeal. 74. 75.
Mr Nolan argued that his interpretation was supported by certain statements made by Singleton LJ in Gregson v Hick Hargreaves & Co Ltd [1955] 1 WLR 1252 where at 1263 he said, No one could successfully contend that if there was given off a considerable quantity of dust at one end of this 100 yards long shop, everyone down to the other end of the shop should be provided with a mask.
It appears to me, however, these remarks were made in the context of an examination whether it was practicable to supply masks rather than on the question of whether the obligation to take practicable measures arose if the amount of dust was considerable at the time that it was given off.
In a later passage Singleton LJ said: On the latter part of section 47(1) on which [counsel for the plaintiff] relies, he is entitled to say there was given off a substantial quantity of dust, and thus the employers were under a duty to take all practicable measures to protect the plaintiff and others employed against inhalation of the dust. 76.
I consider therefore that the duty to take practicable measures arises whenever a considerable quantity of dust is given off and that the activation of the duty is not dependent on its being shown that the quantity of dust was considerable at the moment of inhalation.
In my view, therefore, the third condition would be satisfied in Mr McDonalds case if the evidence established that, at the time the asbestos dust was given off, it was of substantial quantity.
The evidence about the amount of dust at the time that it was given off 77.
The Court of Appeal in the present case held that the trial judge had failed to make a finding on whether the amount of dust given off was substantial.
At para 62 McCombe LJ said that the judge made no finding on this point because although he had begun to address the question at the beginning of para13 of his judgment, by the end of the paragraph he had strayed off into the question of whether Mr McDonald had been exposed to dust likely to be injurious or offensive.
At para 109 Lord Dyson MR said, It is unfortunate that the judge did not make any finding on this issue of fact and it is difficult for this court to make good this omission. 78.
McCombe LJ analysed the evidence in relation to the giving off of a quantity of dust in paras 63 and 64 and the Lord Dyson MR expressed agreement with that analysis.
For reasons that will appear, it is necessary to set out both paras: 63.
Mr Allans submission in this area is that the evidence showed that there were substantial quantities of asbestos dust discharged in the activities at the power station and that it matters not that such dust may not have been substantial at the point of inhalation.
He submitted that it was common ground between the experts that the processes at the power station would have produced a substantial quantity of dust.
He referred to the reports of Mr Raper for Mr McDonald and Mr Glenn for the first respondent The first of those references includes a table of Mr Rapers compilation referring to the concentrations of asbestos dust to which Mr McDonald was likely to have been exposed.
Each is based upon Mr McDonald's proximity to the location of various operations.
The table is introduced by the following: 4.31 On the basis of the claimant's account and in view of the foregoing [in which Mr Raper had stated his own understanding of substantial quantities of dust], I would estimate the concentrations of asbestos dust to which the claimant is likely to have been exposed as shown in the following table.
The second passage, from the report of Mr Glenn, was in these terms: If there was work with asbestos insulation in the power station then there was the potential for anyone close to that work to be exposed to a high concentration of asbestos dust, but the dust would disperse as it moved away from the work area and those in neighbouring areas would have been subjected to a lower concentration of dust than those directly involved in the work. 64.
In my judgment, these passages are slender evidence of the giving off of a substantial quantity of dust.
The first is based upon Mr McDonalds account which, as the judge found, had its deficiencies.
The second only alludes to a potential for exposure to high quantities of dust based upon proximity of the person in question to the operation in question.
I consider that that material is not adequate to demonstrate that there was the giving off of any substantial quantity of dust relevant to the injury said to have been caused to Mr McDonald at these premises.
There simply was not the necessary evidence to establish in this case what quantities of dust were discharged by work at this power station and in what circumstances so as to constitute a substantial quantity for the purposes of the section. (Emphasis added). 80.
He pointed out that the consultant engineers, Mr Raper and Mr Glenn, in their joint statement agreed that asbestos would have been present in the lagging materials within the power station at the material time.
Mr McDonald in his witness statements had described asbestos powder being mixed in oil drums, the cutting of pre formed sections and the removal of old lagging.
Mr Raper had stated that these activities would have given rise to high concentrations of asbestos dust.
This opinion did not rest solely on Mr Rapers assessment of Mr McDonalds evidence.
He referred to published work by PG Harries who had measured dust levels in naval dockyards and supported his opinion by references to the relevant literature. 81.
When Mr Raper gave oral evidence these sections of his report were not challenged, Mr Allan claimed.
What was put in issue was the extent of Mr McDonalds exposure.
It was not surprising, said Mr Allan, that Mr Rapers oral evidence about high concentrations of dust was not challenged since what he had said on the subject was entirely uncontroversial.
Moreover, Mr Glenn, in his report, acknowledged that some types of work with asbestos insulation can release large amounts of asbestos dust unless appropriate precautions are taken and he gave a similar opinion in his report to that of Mr Raper regarding the fact that mixing of asbestos would give rise to high concentrations of asbestos dust. 82.
At the trial, according to Mr Allan, neither the appellant nor the first defendant disputed that within the power station work was carried out involving asbestos insulation and this work would cause substantial amounts of dust to be given off.
What was in dispute was the extent and frequency of Mr McDonalds exposure.
Finally, Mr Allan pointed out that in the Cherry Tree case it was not controversial that the type of lagging activities described by Mr McDonald gave rise to high concentrations of visible dust (Hale LJ para 39). 83.
For the appellant, Mr Nolan argued that the requirement that there be a substantial quantity of dust introduced either a qualitative or a quantitative dimension and suggested that in Anderson v RWE NPower plc (unreported 22 March 2010) Irwin J had inclined to the view that the substantial element of the requirement involved a qualitative component.
At para 43 of his judgment in that case Irwin J had said, the phrase substantial dust itself may add little, since in context it almost certainly meant so substantial as to be likely to be injurious.
On this approach some foreseeable risk of injury was imported into the test and its application would have to take account of prevailing knowledge (or lack of knowledge) of the risk.
If this was the correct approach, Mr Nolan submitted that the test could not have been satisfied since an unequivocal finding had been made by the trial judge that the level of Mr McDonalds exposure was not greater than that thought of at the material time as being unlikely to pose any real risk to health see para 4 above.
If the substantial element connoted merely a quantitative element, Mr Nolan claimed that this must mean more than a significant quantity.
He referred to the case of Richards v Highway Ironfounders (West Bromwich) Ltd [1955] 1 WLR 1049 when the plaintiff was found to have had to work in clouds of silica dust. (It is to be noted, however, that there was no examination by Sir Raymond Evershed MR of the extent of dust that had to be present for the requirement of substantial to be met, presumably because it was beyond dispute that the quantity was indeed substantial.
It should also be noted that, in contrast with the approach of Irwin J in Anderson, the Master of the Rolls considered that the question of foreseeability of injury was relevant only to the issue of practicable measures). 84. 85.
Mr Nolan submitted that any evidence of the quantity of dust which depended on Mr McDonalds account of the working conditions which he encountered was of limited value since his evidence about his exposure had been rejected by Judge Denyer QC as unreal and this finding had not been disturbed by the Court of Appeal.
It is important to note precisely what the judge said about this.
At para 11 he said: I reject the notion that he was constantly standing in clouds of asbestos dust when he was there this is an unreal scenario.
I accept the defendant's analysis that as you move away from the centre of activity, levels of harmful dust decline.
I accept that his likely exposure when exposed was not greater than those levels thought of in the 50s and 60s as being unlikely to pose any real risk to health.
Two points need to be made about this passage.
First the rejection of Mr McDonalds account related to his claim that he was standing in clouds of asbestos dust when, of course, Mr McDonalds case on section 47 was being advanced on the basis of the giving off of substantial quantity of dust of any kind.
As the Court of Appeal held, the judge failed to address that question.
The second and related point is that the judge appears to have made his judgment on the question of the levels of dust on the basis of whether they gave rise to known risks.
He did not address what has been described, for instance by Sir Raymond Evershed MR in Richards, as the dichotomy in section 47.
What does substantial mean? 86.
The relevant phrase in section 47 is any substantial dust of any kind.
I should start my discussion on this part by saying what this does not mean.
It does not mean a substantial quantity of injurious dust.
The so called dichotomy in section 47 points clearly away from such an approach.
Whether the second limb of the subsection is triggered calls for a purely quantitative assessment.
It may well be, as suggested in cases such as Richards and Gregson, that the possibly injurious propensity of the dust has a part to play in deciding what are practicable measures.
But that has nothing to say on the question whether, in the first instance, there is any substantial quantity of dust of any kind. 87.
The question whether the dust is asbestos or other injurious dust should therefore not obtrude into the initial assessment of whether the second limb of section 47(1) is engaged.
To do this conflates consideration of the second limb with considerations that are relevant to the first limb.
Proper application of the subsection requires a staged approach: (i) is the dust, fume or other impurity which is given off of such a character and given off to such an extent as to be likely to be injurious or offensive to the persons employed? (ii) if not, has any substantial quantity of dust of any kind been given off in the workroom where the claimant was a person employed? (iii) if the answer to (i) or (ii) is yes are there practicable measures which can be taken to protect the persons employed against inhalation of the dust or fume or other impurity and to prevent its accumulation in any workroom? And (iv) if the answer to (iii) is yes have they been taken? 88.
This staged approach was not followed by the trial judge nor, I am afraid, by the Court of Appeal, although, in fairness, it does not seem to have been presented to either in quite the stark way that I have expressed it.
Indeed, by the time that the matter came before the Court of Appeal, it may not have been feasible for counsel to present it in quite that way, given the flow of the evidence before Judge Denyer QC.
Be that as it may, it is clear that the sharp distinction that should have been drawn between matters required to establish liability under the first limb and those required to sustain a case under the second was not maintained.
The opening words of para 63 of McCombe LJs judgment and his observation that there was no evidence that any substantial quantity of dust relevant to Mr McDonalds injury had been given off disclose that that clear division between the two limbs was not preserved.
Of course, the question of whether any substantial quantity of any dust caused or contributed to Mr McDonalds condition would always be relevant but not at the stage where what was being decided was if there was a substantial quantity of dust of any kind. 89.
Mr Allan submits that the failure of the trial judge and the Court of Appeal to approach the application of the second limb properly is not fatal to the respondents case on the cross appeal.
In particular, he points to the fact that, at the time of Mr McDonalds exposure, no reliable scientific means existed for measuring the concentrations of dust in the atmosphere.
In these circumstances, he suggests, the assessment of dust levels had to be by reference to a visible dust cloud, even though the hazardous proportion of the dust would be invisible to the naked eye.
There was enough evidence, he claimed, to allow this court to conclude that such a visible dust cloud was present and that, therefore, the proposition that there was a substantial quantity of dust was made out. 90.
The problem with this submission is that there was no examination before the trial judge or the Court of Appeal of the issue whether the only means of assessing whether dust levels amounted to substantial was by visible assessment.
Or, at least, if there was, it does not feature in the judgment of either court.
Nor was evidence given of how dense the cloud would have to appear to be.
These, and doubtless many other issues, would have been canvassed before Judge Denyer QC if there had been a clear confrontation of the question whether, merely on its appearance, the quantity of dust which was generated at the time Mr McDonald was in the workroom satisfied the statutory requirement of being substantial.
It is not possible for this court to conduct retrospectively the type of investigation that would be required to provide a confident outcome to that debate.
I have concluded, therefore, that the third condition has not been, and cannot now be, satisfied.
The fourth condition has it been shown that Mr McDonald inhaled asbestos dust which caused his mesothelioma? 91.
The undisputed evidence was that anyone who was present in the workroom where lagging operations were carried out would be exposed to asbestos dust.
It was not disputed that Mr McDonald was so present.
While the extent of his exposure was a matter of controversy, the fact that he was exposed to some extent was not.
Therefore, as Lord Dyson MR pointed out in para 119 of his judgment, in the absence of any suggestion that he was exposed to asbestos in any other employment or in the general atmosphere, causation will have been established in the conventional way.
I consider that causation has been established and that Mr McDonalds estate is entitled to recover appropriate compensation.
Disposal 92.
I would dismiss the appeal and the cross appeal.
LADY HALE: 93.
A just and sensible judge is always prepared to admit that she has been wrong.
But it would not have been comfortable to be the swing vote between two Justices who thought that Cherry Tree Machine Company Ltd v Dawson (sub nom Jeromson v Shell Tankers (UK) Ltd) [2001] EWCA Civ 101, [2001] ICR 1223 was rightly decided and two who thought that it was wrong.
I am therefore mightily relieved that the unanimous view is that it was rightly decided.
The claimants husband in Cherry Tree was employed as an apprentice fitter in a factory which manufactured dry cleaners presses.
For two years, it was part of his job to mix asbestos flock with water in a bucket and then apply it to the plattens of a press in order to seal them to stop the steam escaping.
He was therefore mixing the asbestos as part of the process of manufacturing a product containing asbestos.
That sort of mixing, as Lord Reed explains, was covered by the Asbestos Industry Regulations 1931.
He was also engaged in the manufacture of such products and thus undoubtedly within the class of persons whom the Regulations were designed to protect. 94.
The first question in this case is whether the mixing of asbestos with water in order to form a paste with which to lag pipes and boilers in a power station was also covered by the Regulations.
The second question is whether the Regulations were designed to protect a person such as Mr McDonald, who was not employed by the power station but was there in the course of his employment with another employer.
Neither question is without difficulty, as the difference of opinion in this court demonstrates.
But it is common ground that if Mr McDonalds exposure to asbestos was in breach of a statutory duty owed to him, the power station will be liable on the basis of having materially increased the risk of his suffering injury from that exposure. 95.
The Regulations in question were made under section 79 of the Factory and Workshop Act 1901 (see para 6 above).
This gave the Secretary of State power to do two things: first, to certify that any manufacture, machinery, plant, process or description of manual labour, used in factories or workshops was dangerous, if he was satisfied that it was dangerous or injurious to health or dangerous to life or limb, either generally or in the case of women, children or any other class of persons; and second, having so certified, to make such regulations as appeared to him reasonably practicable and to meet the necessity of the case.
Section 82 made it clear that the regulations could cover any factory or workshop where the certified manufacture or process took place. 96.
The Secretary of State certified as dangerous the manipulation of asbestos and the manufacture or repair of articles composed wholly or partly of asbestos and processes incidental thereto.
The focus was upon the processes of manipulation and manufacture and not on any particular setting where this might happen.
This focus is carried through into the Preamble to the Regulations, which directs that they shall apply to all factories and workshops or parts thereof in which the following processes or any of them are carried on.
The only indication in the Regulations that they might not apply to all such factories or workshops is in the title The Asbestos Industry Regulations coupled with what that might have been understood to mean at the time. 97.
But that understanding is not crystal clear from the Merewether and Price Report on whose findings and recommendations the Regulations were based.
We can all read that Report, and the Report on Conferences between Employers and Inspectors concerning Methods for Suppressing Dust in Asbestos Textile Factories which followed it, and find some words which appear to support the view which we have taken of the Regulations and some which point the other way.
Part I of the Merewether and Price Report is devoted to establishing that there is a dose related risk to health from exposure to asbestos dust.
Part II is devoted to an explanation of the processes in which asbestos dust might be generated and the methods of suppressing that dust.
The introduction to Part II lists seven main groups of asbestos products, including at (c) insulation materials.
But it also points out that apart from manufacture, certain work is carried on in premises subject to the Factory and Workshops Acts, as well as in other premises, which involves use or manipulation of asbestos or products containing it (p 19).
It cannot therefore be assumed that the authors were only concerned with the factories and workshops in which the particular seven products listed as (a) to (g) were produced.
The concluding summary and recommendations include the comment that Dust is produced at many kinds of machines, in hand process work, and in simple incidental operations, particularly in emptying settling chambers, and in all handling of fiberized asbestos (p 31).
The overall message is clear: asbestos dust is potentially harmful; it is produced when handling asbestos and in various other manufacturing processes; and steps should be taken to suppress it.
In my view, the title to the Regulations, and the preceding Report, are by no means clear and unequivocal enough to dispel the plain meaning of the words of the Preamble to the Regulations, which direct that they shall apply to all factories and workshops in which the listed processes are carried out.
This is reinforced by the exclusion of places where only some of those processes are carried on and then only occasionally.
The Regulations do only apply to factories and workshops, and not, therefore, to places such as ships where processes producing asbestos dust were also known to be carried on.
But the power station with which we are concerned was a factory or workshop to which the Factories Acts applied. 98. 99.
The next question, therefore, is whether mixing asbestos containing insulation material in large drums to create insulating paste was a process covered by the Regulations.
Mr Nolan QC, for the defendant, mounted a vigorous argument that mixing in paragraph (i) of the list of processes in the Preamble had a narrow technical meaning which could not include mixing such as this.
He pointed to the uses of the term mixing, in both the Merewether and Price Report and the Report on Conferences, in the context of the work of preparing raw asbestos for use.
He also pointed to the context, at the beginning of the list of processes in the Regulations, before the references to the processes involved in the manufacture of various products. 100.
Mr Nolans meaning would not have included the mixing of asbestos flock with water in order to make the paste used to seal the plattens in Cherry Tree, a process which is also described in the Merewether and Price Report.
His meaning is difficult to reconcile with the Regulations definition of asbestos as any fibrous silicate mineral, and any admixture containing any such mineral, whether crude, crushed or opened.
As Lord Reed points out (para 155(v)), mixing of asbestos can take place at three stages within the asbestos industry: mixing the contents of sacks before crushing; mixing the crushed material before it is opened; and mixing the opened or fiberized asbestos with other materials in order to produce asbestos products.
But once the meaning is taken beyond the narrow technical meaning for which Mr Nolan argued, it is difficult to see why mixing asbestos (as defined in the Regulations) with water to make a paste to seal the plattens in a dry cleaning press is covered but mixing the same asbestos with water to make lagging paste is not, provided that both processes are carried on in a place covered by the Factories Acts.
The question comes back, therefore, to whether the Regulations are confined to the industry of making asbestos products, on which I respectfully differ from Lord Reed for the reasons given earlier. 101.
The next question, therefore, is whether Mr McDonald was a person for whose protection the Regulations were made.
The 1901 Act itself made no mention of civil liability towards anyone.
Under section 85(1), breach of the Regulations was a criminal offence punishable only with a fine.
But it was long ago established that, if statutory duties were created for the protection of a particular class of persons, who might be injured if those duties were not observed, then Parliament might not have intended that criminal liability were the only remedy: see, for example, the classic statement in Groves v Lord Wimborne [1898] 2 QB 402.
Civil liability therefore depends upon whether the claimant belongs to such a class.
But logic suggests that there must be some limit: the class may be very wide but it is less likely that legislation creating a criminal offence also intended to impose what is often a strict civil liability, independent of negligence or the foreseeability of harm, towards anyone at all who might suffer injury as a result of a breach. 102.
Sometimes the statute itself suggests the limit, as with the provisions of sections 47 and 49 of the Factories Act 1937, which protect respectively persons employed and persons employed in the process (see paras 17 and 67 above).
Sections 79 and 82 of the 1901 Act do not contain even those limits.
There is the complication, as pointed out in Canadian Pacific Steamships Ltd v Bryers [1958] AC 485, that the 1901 Act was repealed by the 1937 Act and Regulations made under it were deemed to have been made under the corresponding provisions of the 1937 Act; section 60 of the 1937 Act was originally limited to the protection of persons employed in the regulated processes; but this was amended in 1948 to cover all persons employed.
However, as Viscount Kilmuir pointed out, while Regulations which were ultra vires when made could not be rendered intra vires if the scope of the later Act were wider, it did not follow that Regulations which were intra vires when made could become ultra vires if the scope of the later Act were narrower. 103. Is there anything, therefore, to suggest that the duties imposed in the 1931 Regulations are owed only to persons employed by the factory or workshop in question, as opposed to persons employed elsewhere who come to the factory in the course of their employment and may be exposed to asbestos dust as a result? Part II of the Regulations imposes certain duties (breach of which is also punishable by a fine) upon persons employed, but some refer simply to persons employed, others to persons employed at [specified] work, and one provides that no person shall misuse or wrongfully interfere with appliances provided in pursuance of the Regulations.
This certainly suggests a link with employment, but not with any particular employment. 104.
Although liability under the Factories Acts is often considered a type of employers liability, it is in fact a species of occupiers liability, the duties being placed upon the occupiers of the factories and workshops to which they applied.
The object of those duties was to protect people from the harm which they might suffer as a result of the processes being carried on there.
As was pointed out by both Lord Goddard LC and Streatfeild J in Massey Harris Ferguson (Manufacturing) Ltd v Piper [1956] 2 QB 396, it is often the people who are not regularly employed in the factory in question who are most in need of the protection offered by duties of this sort.
The test which they adopted was whether a person was employed in the factory, not whether he was employed by the occupier.
This test was approved by the House of Lords in the Canadian Pacific Steamships case. 105.
The court in both those cases clearly regarded the decision in Hartley v Mayoh & Co [1954] 1 QB 383 as something of an exception to the general principle.
There it was held that there was no liability under the Electricity Supply Regulations towards a fireman attending a factory fire who was electrocuted because of faulty wiring.
It is noteworthy that, first, the occupier was only held responsible for 10% of the damages, the remainder being the responsibility of the electricity company; second, that the occupier was held liable in common law negligence anyway; and third, that no authorities, other than the general principle in Groves v Lord Wimborne, are cited for the proposition in any of the judgments in the Court of Appeal. 106.
Mr Allan QC, for the respondent claimant, suggested that the test of a person employed is a person who attends the factory in the course of his employment, with the possible proviso that he does so in connection with the processes carried on there, rather than solely in connection with his employers business.
Mr McDonald met that test.
He was there on a regular, although not frequent, basis in order to collect the pulverised fuel ash generated by the power stations processes.
I accept, of course, that at the time the Regulations were made, it was not known that a fatal disease might be caused by exposure to a single fibre of asbestos.
The Merewether and Price Report was concerned with what was then seen as a dose related risk of developing asbestosis.
But the Report also acknowledged that the appropriate methods for suppression of dust may only be fully determined when the harmful effects of comparatively low concentrations of asbestos dust are duly appreciated (p 31).
The message was clear: asbestos dust is harmful and the then known methods must be employed to protect workers from it.
I see no difficulty in regarding Mr McDonald as a person employed in the power station, albeit not by the power station, who was entitled to such protection as the Regulations then required. 107.
It follows that I agree with Lord Kerr and Lord Clarke that the appeal should be dismissed. 108.
In those circumstances, it is not strictly necessary to express a view on the cross appeal, but in my view it should be allowed.
As I am in a minority of one on this issue, I will explain my reasons very briefly.
All the conditions required by the substantial quantity limb of section 47 of the Factories Act 1937 (see para 109) are made out.
I agree, for the reasons given by Lord Kerr, that the lagging operations were a process carried on at the power station.
I also agree with him that Brophy v JC Bradfield & Co Ltd [1955] 1 WLR 1148 was wrong to hold that a factorys heating system was not a process carried on in the factory for this purpose.
I agree with both Lord Kerr and Lord Reed that the persons protected are not limited to those employed on the process in question.
For the reasons given earlier, I agree with Lord Kerr that the claimant was a person employed and thus protected by section 47.
And I agree with both Lord Kerr and Lord Reed that the quantity of dust must be substantial at the time when it is given off and not necessarily at the time when it is inhaled.
I remind myself that causation is not in issue in this case. 109.
Where I respectfully disagree is in their conclusion that there was no evidence that the quantity of dust given off at the relevant time was substantial.
I agree with Lord Kerr that this limb of section 47 requires only a quantitative assessment of the amount of dust of any kind being given off at the relevant time.
The relevant time is not when Mr McDonald was exposed to the dust or in the room where the lagging work was being done.
It is when the dust was given off.
This issue was not addressed by the trial judge, who was side tracked into issues of foreseeability and whether the dust was likely to be injurious, which are relevant to negligence and to the first limb of section 47, but not to the second.
Nor, with respect, was it addressed by the Court of Appeal in the passages quoted by Lord Kerr (at para 78).
They were concentrating on the evidence of Mr McDonalds exposure and not on the evidence of the quantity of dust given off when it was given off.
The evidence of both experts as to the amount of dust likely to have been given off by the various lagging activities carried on at the power station (summarised by Lord Kerr at paras 79 to 81) was entirely uncontroversial.
In my view it shows that the amount of dust given off was substantial.
The question then is whether practicable measures could have been taken to protect persons employed from inhaling the dust.
But that issue has not been raised by the appellant defendant, who has throughout argued that the section does not apply, rather than that there was nothing the appellant defendant could reasonably have done about it.
The burden was upon the appellant defendant to make such a case and the appellant defendant has not. 110.
Hence I would have allowed the claimant/respondents cross appeal in addition to dismissing the defendant/appellants appeal.
LORD CLARKE: 111.
Lord Kerr and Lord Reed have reached different conclusions on the question whether the appellant was in breach of regulation 2(a) of the Asbestos Industry Regulations 1931 (the Regulations).
Lord Kerr concludes that it was, whereas Lord Reed concludes that it was not.
I prefer the reasoning and conclusion of Lord Kerr on this question, which is the critical question in this appeal. 112.
Lord Kerr concludes that the Regulations should be given a broad construction.
He refers in paras 6 to 14 to the statutory basis for and to the provenance of the Regulations.
He refers to sections 79 and 82 of the Factory and Workshop Act 1901 and to a letter from the relevant Secretary of State dated 15 September 1931 enclosing a draft of the Regulations.
He notes the breadth of the anticipated application of the Regulations and the express provision in section 82(1) that processes which did not exist at the time could come within the Regulations in the future.
Thus section 83 provided that regulations made under the Act might, among other things, (b) prohibit, limit or control the use of any material or process.
At para 10 Lord Kerr quotes from the preamble to the Regulations, of which para (i) is of particular relevance here.
It provided that the Regulations were to apply to all factories and workshops or parts thereof in which the following processes or any of them are carried on: (i) breaking, crushing, disintegrating, opening and grinding of asbestos, and the mixing or sieving of asbestos, and all processes involving manipulation of asbestos incidental thereto; The remaining sub paragraphs are set out by Lord Kerr in para 10 above. 113.
Then in paras 11 and 12 Lord Kerr refers to one of the provisos to those provisions: Provided that nothing in these Regulations shall apply to any factory or workshop or part thereof in which the process of mixing of asbestos or repair of insulating mattresses or any process specified in (v) or any cleaning of machinery or other plant used in connection with any such process, is carried on, so long as (a) such process or work is carried on occasionally only and no person is employed therein, for more than eight hours in any week, and (b) no other process specified in the foregoing paragraphs is carried on.
I agree with Lord Kerr that, although the proviso cut down the scope of the Regulations, it also gave some insight into their intended ambit.
In particular, it carried the clear implication that the processes identified in the preamble, other than those listed in the proviso, were to come within the Regulations even if the work involved in them took place only occasionally or for limited periods.
Also, as Lord Kerr observes, in relation to the processes listed in the proviso, including mixing, the Regulations were to apply unless the work was carried out occasionally and no person undertook it for more than eight hours a week. 114.
The preamble provided that it was the duty of the occupier of relevant premises to observe Part I of the Regulations, which included regulation 2.
Regulation 2(a) and (b) provided: 2. (a) Mixing or blending by hand of asbestos shall not be carried on except with an exhaust draught effected by mechanical means so designed and maintained as to ensure as far as practicable the suppression of dust during the processes. (b) In premises which are constructed or reconstructed after the date of these Regulations the mixing or blending by hand of asbestos shall not be done except in a special room or place in which no other work is ordinarily carried on. 115.
The essential issue between the parties is whether the regulation 2(a) covered only the asbestos industry and was concerned with asbestos in its raw unprocessed condition, as submitted on behalf of the appellant, or whether it extended to processed asbestos products, as contended on behalf of the respondent.
In powerful judgments, Lord Reed espouses the former view, whereas Lord Kerr espouses the latter. 116.
Both Lord Kerr and Lord Reed refer extensively to the Merewether and Price Report and other relevant pointers.
I entirely accept that a critical part of the Regulations was concerned with processes in the manufacture and repair of items containing asbestos.
This is plain from paras (i) to (vi) of the preamble quoted by Lord Kerr at para 10 and, indeed, can be seen from the title to the Regulations, namely the Asbestos Industry Regulations.
However, the question is whether that expression should be given a wider or narrower meaning.
It seems to me that the better view is that it should be given a wider meaning. 117.
The purpose of the Regulations was surely to protect workers from the consequences of asbestos dust.
I do not myself see why that protection should be limited to those affected by asbestos dust in the process of manufacture and repair and not those affected whenever a defined process was carried on in a factory or workshop. 118.
All depends upon whether the process carried on in the present case was within para (i) of the preamble to the Regulations quoted above.
In short, was it within the expression mixing or sieving of asbestos, and all processes involving manipulation of asbestos incidental thereto? Asbestos was defined as meaning any fibrous silicate mineral, and any admixture containing any such mineral, whether crude, crushed or opened.
As I read his judgment, Lord Kerr accepted these submissions made on behalf of the respondent (summarised at his para 23). (1) Consistently with the mischief identified by Merewether and Price and the remedy they proposed, the terms of section 79 and the certification of the Secretary of State indicated that the Regulations were to apply whenever and wherever a defined process was carried on in a factory or workshop. (2) There was no need to adopt a narrow definition of asbestos industry and on that basis restrict the application of the Regulations.
The title was used in the wide sense of any industry where one or more of the processes referred to in the preamble was carried on. 119.
I agree.
As I see it, the specific question which must be answered is that identified by Lord Reed in paras 151 and 152.
As he says in para 151, the expert evidence given at the trial indicated that insulation material containing opened or fiberized asbestos were widely used until the 1960s for lagging boilers and pipework.
Such material commonly contained fiberized asbestos, mixed with other substances such as calcium silicate or cement.
The insulation material could either be pre formed or mixed with water and applied in the form of a paste.
Pre formed sections were sawed by hand in order to profile them for fitting.
The mixing of the paste involved bags of powdered insulation material being emptied into open topped containers for mixing with water.
Lord Reed concludes in para 152 that, having regard to that evidence, it appears likely, on the balance of probabilities, that the insulating material used by the laggers was an admixture containing fiberized asbestos and was therefore asbestos as defined in the Regulations.
The question posed by Lord Reed is whether the activities of the laggers fell within the Regulations. 120.
I agree with Lord Reed that that is indeed the question.
It appears to me, at any rate on the face of it and if the language is given its ordinary and natural meaning, that the conclusion that the material was an admixture amounts to a conclusion that there had been a mixing of asbestos within the meaning of para (i) of the preamble.
Equally, as I see it, there was a process of mixing of asbestos within the meaning of the proviso quoted above, although the proviso would not apply on the facts because the conditions were not both satisfied.
For my part, I do not think that the principle noscitur a sociis leads to the conclusion that the word mixing should be given other than its ordinary and natural meaning. 121.
I turn briefly to the authorities.
I agree with Lord Reed that in Watt v Fairfield Shipbuilding & Engineering Co Ltd 1999 SLT 1084 Lord Gill confined the scope of the Regulations too narrowly.
I also agree with him that the first case in which a detailed consideration of the background to the Regulations was Cherry Tree Machine Co Ltd v Dawson (sub nom, Jeromson v Shell Tankers (UK) Ltd) [2001] EWCA Civ 101; [2001] ICR 1223, which has been discussed in some detail by both Lord Kerr and Lord Reed and in which Hale LJ gave the only reasoned judgment, with which Mantell LJ and Cresswell J agreed.
Both Lord Kerr and Lord Reed accept that it was correctly decided, although Lord Reed expresses disagreement with some of the dicta in Hale LJs judgment. 122.
As I read that judgment, Hale LJ approached the construction of the Regulations in the way that I have sought to do.
I refer to only two aspects of her judgment in addition to those referred to by Lord Kerr.
First, she said at para 24 on p 1232 that none of the arguments in Banks v Woodhall Duckham Ltd (which was an unreported decision of the Court of Appeal dated 30 November 1995) or Watt was sufficiently persuasive to combat the natural and ordinary meaning of the words used.
Hale LJ approached the issue of construction by reference to the natural and ordinary meaning of the words used and was not persuaded that the title to the Regulations, namely the Asbestos Industry Regulations, led to any different conclusion.
At para 20 she described the most powerful of the submissions to the contrary as being the title to the Regulations but said that there were two even more powerful points in reply.
The first was that the Regulations were expressed to apply to any factory or workshop where the defined processes took place and the second was a point on the proviso much as referred to above.
Secondly, at para 25, Hale LJ expressed some doubt as to whether the Regulations applied to the work of knocking off old lagging but that they were more likely to have applied to the laggers work in mixing asbestos to form new insulation.
I respectfully share those views of Hale LJ (for the reasons she gives) and the views of Lord Kerr on mixing at paras 45 to 49 and prefer them to the different views of Lord Reed. 123.
I would only add that I also share the views of Lord Kerr expressed at paras 27 to 35 of his judgment.
In particular, if the Secretary of State had intended to limit the Regulations to a narrow view of the asbestos industry, he could easily have done so, whereas, as Hale LJ observed, the Regulations made it clear that all factories and workshops in which certain specified processes were carried out were covered.
If the purpose of the Regulations was to protect workers from asbestosis dust, why exclude these workers? I adopt Lord Kerrs approach to the Merewether and Price Report at his paras 28 to 35 without repeating it here.
I would only underline the statement of Judge LJ quoted by Lord Kerr at his para 29, that the research was confined to asbestos textile workers, but [the report] explained that workers in other industries, exposed to asbestos dust, were also at risk.
The critical finding was that exposure to asbestos dust gave rise to grave illness. 124.
For these reasons, like Lord Kerr, I would hold that the Regulations applied to the work being done by the laggers.
I agree with Lord Kerr and Lord Reed that it is not necessary for a person in the position of Mr McDonald to show that he was employed by the occupier or in the process in connection with which the dust or fume is given off.
The question remains, however, whether he was employed at the factory.
As Lord Kerr explains at paras 72 and 73, it is not necessary that the employee should be acting in the course of his employment: Uddin v Associated Portland Cement Manufacturers Ltd [1965] QB 582, per Lord Pearce at 593E. 125.
Lord Kerr notes at para 71 that, at any rate for the purposes of section 60 of the 1937 Act, persons employed included any person who might be called on to do work at the factory, including a painter employed by an independent contractor: see for example Massey Harris Ferguson (Manufacturing) Ltd v Piper [1956] 2 QB 396.
On the other hand, after referring to those cases, Lord Reed observes at para 217 that the expression does not extend to a fireman who enters a factory in order to put a fire out (Hartley v Mayoh & Co [1954] 1 QB 383), or to a police constable who enters a factory in pursuit of a felon (Wigley v British Vinegars Ltd [1964] AC 307, 324 per Viscount Kilmuir), although he is a person and he is employed.
Lord Reed adds that in Canadian Pacific Steamships Ltd v Bryers [1958] AC 485, 504 Viscount Kilmuir considered that the phrase applied to any person who is employed in the factory whether the direct servant of the occupier or a servant of an independent contractor so long as he is employed upon work in that factory.
He adds that in the later case of Wigley v British Vinegars Ltd, concerned with a window cleaner employed by an independent contractor, Viscount Kilmuir said, at p 324: In my view, the true distinction is between those who are to work for the purposes of the factory and those who are not.
Clearly, maintenance of the factory is work for the purpose of the factory, while the arrest of a felon or the putting out of a fire is not, though it may benefit the factory indirectly.
Window cleaning is part of the maintenance of the factory and in my view the deceased was within the protection afforded. 126.
Lord Reed recognises that these principles tend to give rise to the drawing of fine distinctions without any compelling rationale.
The present case might be regarded as an example.
As he puts it at para 218, it could perhaps be argued that Mr McDonald was employed for the purposes of the power station, either on the basis that one of those purposes was the sale of the ash, and he was employed collecting ash which had been sold, or on the basis that the ash was a by product which the power station had to dispose of, and he was employed removing it.
However, Lord Reed prefers the contrary view as being more persuasive on this basis.
Mr McDonald was not in reality working for the purposes of the power station.
He was working solely for the purposes of his employer, the Building Research Establishment.
It was the purchaser of the ash which was a by product of the power station, and it employed Mr McDonald to collect the ash in his lorry.
A customer of a factory can hardly be regarded as working for the purposes of the factory. 127.
I am bound to say that I prefer the former view.
It appears to me that a lorry driver who goes to a factory to collect its produce is in a real sense working for the purposes of the factory, albeit as the employee of someone else.
The collection of goods is essential to the operations of the factory.
The driver is much closer to the painter or the window cleaner than the fireman or the policeman.
I therefore prefer the view of Lord Kerr.
I would hold that, in the relevant sense and at the material time, Mr McDonald was employed in the factory. 128.
For these reasons I would hold that the appellant was in breach of the duty contained in regulation 2(a) and that, provided that the relevant causal link was established, the respondents estate is entitled to recover appropriate compensation.
As to causation, the position is summarised by Lord Dyson MR in para 119 of his judgment as follows: As I understand it, the only evidence of Mr McDonalds exposure to asbestos dust is of exposure from the activities at the National Grids factory.
There is no suggestion that he was exposed to asbestos dust in the course of any other employment during his working life.
It follows that, unless he was exposed to asbestos dust in the general atmosphere, the mesothelioma must have been caused by the dust to which he was exposed at the National Grids factory.
If he was not exposed to asbestos dust in the general atmosphere, causation will have been established in the conventional way.
If he was exposed to asbestos dust in the atmosphere, then he will succeed on the basis that the National Grid materially increased the risk of Mr McDonald contracting mesothelioma: see Sienkiewicz v Greif (UK) Ltd [2011] UKSC 10, [2011]2 AC 229. 129.
For these reasons I would dismiss the appeal.
I do not wish to say anything about the cross appeal.
LORD REED (with whom Lord Neuberger agrees) Introduction 130.
Mr McDonald was diagnosed with mesothelioma in 2012, and died from the disease in 2014.
His only known exposure to asbestos occurred when he was employed by the Building Research Establishment between 1954 and 1959 as a driver and, in the course of that employment, drove a lorry to Battersea Power Station from time to time in order to collect pulverised fuel ash for use in the experimental production of building materials.
In order to collect the ash, Mr McDonald had to drive his lorry beneath a chute outside the power station from which the ash was released.
He was not exposed to asbestos during that process. 131.
The evidence that he was exposed to asbestos during his visits to the power station comes from two written statements made by him, on which he was not well enough to be cross examined.
In his first statement, he said that there was generally a queue of vehicles waiting for deliveries, and that it was his habit to park his lorry and go into the power station for about an hour.
He had to deal with paperwork and talk to the manager about his delivery.
He got to know the workers in the power station, and they would show him around.
He would also have lunch in the power station.
He generally waited in the power station until it was time for him to collect the ash and leave. 132.
In his second statement, he said that once inside the power station it took him five minutes to walk to the managers office.
There were usually other people waiting to speak to the manager.
Once his paperwork was completed he would speak to the workers who were dealing with his delivery about any delays.
He also used the lavatories in the power station. 133.
In both statements, he described being present when thermal lagging was applied to boilers and pipework, and seeing the laggers mixing asbestos powder with water in order to make the lagging paste which they then applied to the boilers or pipes being insulated.
He also saw laggers cutting pre formed sections of asbestos to fit to pipes and boilers, and removing old asbestos insulation from pipework.
He claimed to have been in close proximity to such work, with visible clouds of asbestos in the air. 134.
Aspects of this account were challenged by the appellants, who are the successors of the former occupiers of the power station, and their co defendant at the trial, the Department for Communities and Local Government, which is the successor of Mr McDonalds employer.
It was common ground that the ash plant was separate from the power station, and did not have any lagged pipes or boilers.
If Mr McDonald had to enter the power station at all, it would only be to go to the offices.
The offices, lavatories and canteen would not be dusty environments.
There was no need for Mr McDonald to go inside the boiler house or the turbine house, where there would be lagging of boilers and pipes.
If he did so, he went there as a casual visitor.
It was very unlikely that Mr McDonald would have been standing in close proximity to clouds of asbestos. 135.
The trial judge, HH Judge Denyer QC, accepted the defendants analysis of the real extent and duration of Mr McDonalds visits to the power station.
He concluded that any exposure was at a modest level on a limited number of occasions over a relatively short period of time, and that his likely exposure when exposed was not greater than those levels thought of in the 50s and 60s as being unlikely to pose any real risk to health. 136.
The question which arises on this appeal is whether the appellants are liable in damages for breaches by their predecessors of regulation 2(a) of the Asbestos Industry Regulations 1931 (the 1931 Regulations) and section 47(1) of the Factories Act 1937 (the 1937 Act).
The judge rejected Mr McDonalds claims under both heads, and also a claim in negligence.
The Court of Appeal allowed the appeal in so far as the claim was advanced under the 1931 Regulations.
The appellants appeal against that decision.
There is a cross appeal against the dismissal of Mr McDonalds claim under the 1937 Act.
The claim in negligence is no longer pursued. 137.
I approach the questions raised in the following three parts, before concluding that the appeal should be allowed and the cross appeal dismissed: 1.
The historical background to the making of the 1931 Regulations and the enactment of the 1937 Act. 2.
An analysis of the Regulations against the backdrop of certain earlier documents and the relevant authorities, as well as subsequent legislation made on the basis of the understanding of the Regulations which I favour.
I conclude this part by considering whether Mr McDonald was within the scope of the Regulations in any event. 3.
An analysis of section 47(1) of the 1937 Act and its application to Mr McDonalds case. 138.
Although the legislation in question was repealed long ago, the questions raised as to its interpretation are of continuing practical significance.
As the facts of this case demonstrate, the consequences of exposure to asbestos may not become apparent for many years.
When they emerge, the resultant claims are often of substantial value and of considerable importance to the individuals affected, to the insurance industry and to the Government (which has succeeded to potential liabilities, particularly as a result of the nationalisation of industries in which asbestos was used).
The ambit of the legislation is therefore a matter of general public importance.
Part I: the Historical Background 139.
It is important to understand at the outset that the connection between asbestos and mesothelioma was unknown when the 1931 Regulations and the 1937 Act were conceived and introduced (and, for that matter, during the period when Mr McDonald visited the power station).
The legislation was not designed to protect against the risk of mesothelioma: a risk consequent upon exposure to any quantity of asbestos dust, however infrequent the exposure may be, and however insubstantial the quantity of dust to which the person is exposed.
The legislation has to be interpreted in the same way as any other legislation, and not distorted in order to provide compensation to those who were not intended to fall within its protection.
It should also be interpreted without any preconception that it must have been intended to maximise the protection afforded to workers: then as now, legislation concerned with health and safety reflected a compromise between competing interests and objectives.
The Factory and Workshop Act 1901 140.
The 1931 Regulations were made under section 79 of the Factory and Workshop Act 1901 (the 1901 Act).
Part IV of the 1901 Act was headed Dangerous and Unhealthy Industries.
It contained two groups of provisions.
The group relevant for present purposes was headed Regulations for Dangerous Trades.
It included section 79, which provided that where the Secretary of State was satisfied that any manufacture, machinery, plant, process or description of manual labour used in factories or workshops is dangerous or injurious to health or dangerous to life and limb, he might certify that manufacture, machinery, plant, process or description of manual labour to be dangerous.
On such certification, the Secretary of State might make such regulations as appeared to him to be reasonably practicable and to meet the necessity of the case.
The certification 141.
In accordance with section 80 of the 1901 Act, notice was given of a proposal to make the 1931 Regulations in a letter issued by the Home Office dated 15 September 1931.
The letter narrated that, as required by section 79, the Secretary of State had formally certified as dangerous: the manipulation of asbestos and the manufacture or repair of articles composed wholly or partly of asbestos and processes incidental thereto. 142.
It will be necessary at a later point to return to that letter.
For the present, it is to be noted that the certification, which was critical to the scope of the power to make regulations, concerned the manipulation of asbestos a term which, as I shall explain, is descriptive of fibrous silicate minerals and the manufacture or repair of articles composed wholly or partly of those minerals.
Part 2: the 1931 Regulations 143.
The 1931 Regulations, which were subsequently revoked and replaced by the Asbestos Regulations 1969 (SI 1969/690, the 1969 Regulations), are entitled The Asbestos Industry Regulations.
That title suggests that the Regulations are concerned with something identifiable as the asbestos industry, rather than with the use of the products of that industry in the work of other industries.
That is as one might expect from the terms of the certification, which as I have explained concerned the manipulation of asbestos, and the manufacture and repair of articles composed wholly or partly of asbestos, rather than the use of asbestos products. 144.
The Regulations begin with a preamble in which the Secretary of State directs that they are to apply to all factories and workshops or parts thereof in which the following processes or any of them are carried on: (i) breaking, crushing, disintegrating, opening and grinding of asbestos, and the mixing or sieving of asbestos, and all processes involving manipulation of asbestos incidental thereto; (ii) all processes in the manufacture of asbestos textiles, including preparatory and finishing processes; (iii) the making of insulation slabs or sections, composed wholly or partly of asbestos, and processes incidental thereto; (iv) the making or repairing of insulating mattresses, composed wholly or partly of asbestos, and processes incidental thereto; (v) sawing, grinding, turning, abrading and polishing, in the dry state, of articles composed wholly or partly of asbestos in the manufacture of such articles; (vi) the cleaning of any chambers, fixtures and appliances for the collection of asbestos dust produced in any of the foregoing processes. 145.
A proviso to the preamble excludes the application of the 1931 Regulations to: any factory or workshop or part thereof in which the process of mixing of asbestos or repair of insulating mattresses or any process specified in (v) or any cleaning of machinery or other plant used in connection with any such process, is carried on, so long as (a) such process or work is carried on occasionally only and no person is employed therein for more than eight hours in any week, and (b) no other process specified in the foregoing paragraphs is carried on.
As the proviso indicates, occasional exposure to asbestos dust was not thought at that time, unlike the present, to involve a significant risk to health.
A further proviso permits the Chief Inspector of Factories to suspend or relax the Regulations, if satisfied that, by reason of the restricted use of asbestos or the methods of working, they could be suspended or relaxed without danger to those employed. 146.
A number of terms used in the Regulations are defined.
In particular, asbestos is defined as meaning: any fibrous silicate mineral, and any admixture containing any such mineral, whether crude, crushed or opened. 147.
In relation to the obligations imposed by the 1931 Regulations, it is necessary in particular to note regulations 1(a) and 2. 148.
Regulation 1(a) requires an exhaust draught, preventing the escape of asbestos dust into the air, to be provided for manufacturing and conveying machinery, namely: (i) preparing, grinding or dry mixing machines; (ii) carding, card waste end, ring spinning machines, and looms; (iii) machines or other plant fed with asbestos ; (iv) machines used for the sawing, grinding, turning, abrading or polishing, in the dry state, of articles composed wholly or partly of asbestos. "Preparing is defined as meaning: crushing, disintegrating, and any other process in or incidental to the opening of asbestos.
A proviso states that regulation 1 does not apply inter alia to mixing or blending by hand of asbestos. 149.
Regulation 2 provides: (a) Mixing or blending by hand of asbestos shall not be carried on except with an exhaust draught effected by mechanical means so designed and maintained as to ensure as far as practicable the suppression of dust during the processes. (b) In premises which are constructed or reconstructed after the date of these Regulations the mixing or blending by hand of asbestos shall not be done except in a special room or place in which no other work is ordinarily carried on.
The interpretation and application of the 1931 Regulations 150.
Questions are raised in this appeal as to the scope of the 1931 Regulations: in particular, whether they applied to the power station by virtue of the activities carried on there by the laggers, and whether they imposed a duty which was owed to Mr McDonald. 151.
In order to decide whether the Regulations applied to the power station, it is necessary in the first place to consider whether asbestos, as defined, was used by the laggers working there.
There is no direct evidence (other than that of Mr McDonald) as to the composition of the material that they used.
It appears however from expert evidence given at the trial that insulation materials containing opened or fiberized asbestos were widely used until the 1960s for lagging boilers and pipework.
Such materials commonly contained 15% fiberized asbestos, mixed with other substances such as calcium silicate or cement.
The insulation material could be either pre formed, or mixed with water and applied in the form of a paste.
Pre formed sections were sawed by hand in order to profile them for fitting.
The mixing of the paste involved bags of powdered insulation material being emptied into open topped containers for mixing with water. 152.
Having regard to that evidence, it appears likely, on a balance of probabilities, that the insulating material used by the laggers was an admixture containing fiberized asbestos, and was therefore asbestos as defined by the Regulations.
The question then arises whether the activities of the laggers fell within the ambit of the Regulations. 153.
Considering the preamble defining the scope of the Regulations, paragraphs (ii), (iii), (iv) and (v) do not apply: each of them is concerned with the manufacture or repair of products composed wholly or partly of asbestos.
Paragraph (vi) is also inapplicable: it is concerned with the cleaning of appliances used for the collection of dust produced in the processes described in paragraphs (i) to (v).
The only remaining possibility is paragraph (i), and in particular the mixing of asbestos.
Do those words include the mixing in a power station of insulation material, containing fiberized asbestos, with water? 154.
As noted earlier, paragraph (i) of the preamble concerns breaking, crushing, disintegrating, opening and grinding of asbestos, and the mixing or sieving of asbestos, and all processes involving manipulation of asbestos incidental thereto.
That provision uses a number of ordinary English words, such as opening and mixing, but it is apparent that some of them, at least, are being used in a technical sense embedded in the industrial practice of that period.
Opening asbestos, for example, is evidently different from opening a window, or opening an account.
Some guidance as to the meaning of paragraph (i) can be obtained from the Regulations themselves, and other assistance from the reports which preceded their introduction. 155.
I shall discuss the reports at a later point, but it may be helpful to anticipate that discussion to the extent of summarising what is said in the reports about some of the terms found in the Regulations.
In summary: i) Opening asbestos means splitting the raw mineral into fibres. ii) The first stage in the opening or fiberizing of asbestos is for the mineral to be crushed.
This flattens out and breaks up the mineral. iii) After crushing, the mineral is sieved, for the purpose of grading it, prior to its being opened. iv) Waste asbestos products are fiberized by being disintegrated or broken up. v) Mixing can take place at three stages within the asbestos industry (an expression which I shall define in the next paragraph).
Before crushing, the contents of several sacks of the raw mineral may be mixed on the floor beside the crushing machine.
This is described as rough mixing.
After crushing, the crushed material may be mixed prior to being opened.
This is referred to as mixing or blending.
After opening, the fiberized asbestos may be mixed with other materials in order to produce a variety of asbestos products, including insulation materials.
At all these stages, the mixing may be done by hand or mechanically, although in 1931 mixing or blending in the asbestos textile industry was normally carried out by hand. vi) Grinding can refer to a method of cleaning machinery used for the carding of opened asbestos, or to a process used to trim and smooth asbestos products which have been cut or sawn. 156.
It appears from this summary that the terms used in paragraph (i) are related, in that they all describe processes employed in the early stages of producing products composed wholly or partly of asbestos.
I shall refer to factories and workshops where such products are made as the asbestos industry, reflecting the title of the 1931 Regulations.
It is important to bear in mind, first, that that description encompassed in 1931 the production of a very wide range of products of which asbestos formed a component, as I shall later explain in greater detail, and secondly, that factories where such products were made were not necessarily devoted wholly or mainly to their manufacture. 157.
The Regulations themselves also suggest a relationship between the processes grouped together in paragraph (i) of the preamble.
That is consistent with regulation 1(a)(i), which groups together preparing (defined as meaning crushing, disintegrating, and any other process in or incidental to the opening of asbestos), grinding and dry mixing.
In each of these contexts, the principle of interpretation, noscitur a sociis, suggests that mixing was a process related to other processes carried on by the asbestos industry, in the wide sense in which I have used that expression, rather than a process carried on in any premises where use was made of insulation materials containing asbestos that required to be mixed with water. 158.
In my view, seven other considerations support this interpretation of the term mixing as used in paragraph (i) of the preamble and regulations 1 and 2: i) Extending the noscitur a sociis principle beyond paragraph (i), all the other processes contemplated by paragraphs (ii) to (vi) are undoubtedly processes carried on in the course of manufacturing or repairing asbestos products of different kinds.
It follows that if paragraph (i) applied to any factory or workshop, of any kind, where insulating materials containing asbestos were mixed with water to form lagging paste, it would have a far wider scope than the other paragraphs.
Indeed, given the expert evidence that insulating materials containing asbestos were in common use when the first part of the power station was built, between 1929 and 1935, paragraph (i) of the preamble would on that basis extend the scope of the Regulations to a substantial proportion, if not the majority, of the factories and workshops in the United Kingdom. ii) If paragraph (i) of the preamble was intended to encompass the mixing of insulation materials containing asbestos with water in any factory or workshop, so that the 1931 Regulations would not be confined to the asbestos industry as I have described it, it would defy logic that paragraph (v) should apply only when the specified processes are carried out in the manufacture of asbestos articles.
Since the processes listed in that paragraph would give rise to asbestos dust whether they were carried out in the manufacture of such articles or not, it would be nonsensical to restrict the scope of paragraph (v) unless paragraph (i) were similarly restricted.
To give a concrete example, Mr McDonald described being in the proximity of asbestos dust generated by the sawing of pre formed sections of insulation containing asbestos.
That activity does not fall within the scope of the 1931 Regulations, because the articles are not being sawed in the manufacture of such articles, and paragraph (v) therefore does not apply.
That being so, what logic would there be in the mixing of the lagging paste falling within paragraph (i)? iii) The interpretation of paragraph (i) of the preamble which I have suggested is consistent with the title of the Regulations: the Asbestos Industry Regulations.
That title makes sense if the Regulations apply to factories and workshops producing products composed wholly or partly of asbestos.
If on the other hand paragraph (i) were construed as applying to any factory or workshop where asbestos based lagging materials were used, that title would be inappropriate and misleading. iv) When regulation 1(a)(i) refers to mixing machines, it is clear that it is concerned with mixing in the context of manufacturing: regulation 1(a) expressly applies to manufacturing and conveying machinery.
That is also consistent with the other types of machinery described in regulation 1(a), which are all employed in the asbestos industry as I have described it.
If regulation 2 is understood as being concerned with mixing or blending by hand in the asbestos industry, paragraph (b), which requires the provision of a dedicated room for mixing or blending by hand of asbestos, can be seen to be related to a number of other regulations which make similar provision in relation to particular processes, or particular plant, employed in that industry: for example, the making or repairing of insulating mattresses composed wholly or partly of asbestos (regulation 3(i)), storage chambers or bins for loose asbestos (regulation 4(a)), and chambers or apparatus for dust settling and filtering (regulation 4(b)). v) vi) To give regulation 2(b) a wider interpretation would have consequences for industry generally which would be so inconvenient that it is difficult to imagine that they were intended.
In particular, if the mixing of insulation materials containing asbestos with water, in order to form the paste widely used to insulate pipework and boilers, constituted mixing or blending of asbestos, it follows that any factory or workshop where lagging of that kind was used, constructed after 1931, would have to have a room dedicated to the exclusive use of laggers.
It seems unlikely that the Secretary of State can have intended to impose that burden upon industry, and there is no indication that anyone ever supposed that the Regulations had that effect. vii) Finally, it is important to bear in mind that non compliance with the Regulations was a criminal offence, by virtue of section 85 of the 1901 Act.
In dubio, penal legislation should normally be construed narrowly rather than widely. 159.
If the mixing of lagging paste is not mixing within the meaning of paragraph (i) of the preamble, is it nevertheless one of the processes involving manipulation of asbestos incidental to the processes mentioned in that paragraph? Clearly not.
Although the mixing of lagging paste might involve the manipulation of asbestos, that manipulation would not be incidental to one of the processes mentioned in paragraph (i). 160.
As against the analysis set out above, it has been argued that the first proviso to the preamble to the Regulations implies that their application cannot be restricted to the asbestos industry.
It is said to be very difficult to imagine a factory or workshop whose main business was producing products composed wholly or partly of asbestos to which the exemption could possibly apply, given that only certain processes, occasionally carried on, are exempted, and only then if none of the other defined processes is carried on in the same factory.
I shall consider this argument at a later point.
The letter dated 15 September 1931 161.
Further assistance in the interpretation of the 1931 Regulations can be obtained from two reports which preceded them.
The relationship between the Regulations and the reports was explained in the Home Office letter dated 15 September 1931, to which I referred earlier. 162.
The letter explained that the proposed regulations followed upon an inquiry conducted by the Factory Department of the Home Office, whose report, Effects of Asbestos Dust on the Lungs and Dust Suppression in the Asbestos Industry was published in 1930 (34 206, HMSO).
That report has been referred to in these proceedings as the Merewether and Price Report.
The letter stated that Part II of the Report had recommended a number of precautionary measures for the prevention of inhalation of asbestos dust by workmen employed in the industry, the most important of which was the use of exhaust ventilation in both the textile and non textile sections of the industry. 163.
The letter went on to state that it was evident from the Report that further inquiry would be necessary before a decision could be reached as to the best methods to be applied to the various machines in use.
A conference was therefore arranged with representatives of the asbestos textile industry and, as a result, a committee consisting of representatives of the manufacturers and of the Factory Inspectorate was set up to consider the best methods for the suppression of dust in this section of the industry.
That committee made a series of recommendations in its report, Report on Conferences between Employers and Inspectors concerning Methods for Suppressing Dust in Asbestos Textile Factories, published in 1931 (35 214, HMSO).
I shall refer to that report as the Conferences Report. 164.
The letter explained that the Secretary of State had decided to give effect to the recommendations contained in these two reports, and that the draft regulations generally followed the provisions recommended, with some additions and modifications.
The Merewether and Price Report 165.
The Merewether and Price Report is of great assistance in understanding the processes to which the Regulations referred, the terminology used in the Regulations, and the mischief which the Regulations were intended to address.
For these reasons, I shall consider the Report, and the subsequent Conferences Report, in greater detail than would otherwise be appropriate. 166.
As its title indicates, the Merewether and Price Report was concerned with the asbestos industry.
It reported the results of an investigation which was instituted, following the discovery in 1928 of fibrosis of the lungs in an asbestos worker named Seiler, in order to determine whether the supervention of this disease in an asbestos worker was an exceptional occurrence, or evidence of a grave health risk in the industry. (p 5). 167.
While the object of the investigation concerned the asbestos industry generally, the nature of the investigation necessitated a focus upon workers as nearly as possible exposed to pure asbestos dust: that is to say, those employed in the textile branch of the industry, those employed in the branch manufacturing insulating materials from practically pure asbestos, and those employed in some preliminary processes in other branches.
The results were analysed on a number of bases, including the processes in which the workers were employed.
For that purpose, a number of different processes within the asbestos industry were identified, and similar processes were grouped together.
The first group of similar processes was crushing, opening, disintegrating and mixing (p 11).
The implication is that mixing was a process within the asbestos industry, related in a relevant way to crushing, opening and disintegrating.
That is consistent, as I have explained, with the grouping of these processes together in paragraph (i) of the 1931 Regulations and in regulation 1(a). 168.
Processes were also grouped together for the purpose of determining the levels of dust which they generated.
For that purpose, one group was opening and handling fibre, without local exhaust ventilation.
This group was described as including opening, sieving, shovelling or otherwise handling asbestos fibre, and sack filling by hand in a settling chamber (p 12).
Opening and sieving both fall within the ambit of paragraph (i) of the Regulations, as I have explained, and shovelling or otherwise handling asbestos fibre, and sack filling by hand, would also appear to fall within paragraph (i) as processes involving manipulation of asbestos incidental thereto.
Manipulation of asbestos by hand and the filling or emptying of sacks also fall within the ambit of regulation 1(d) and (e) respectively. 169.
Analysing the statistics in this way, it was concluded: i) ii) that there was a correlation between the dustiness of processes, and the length of time during which workers were employed in those processes, and the incidence of fibrosis; and that it seems necessary for the production of generalised fibrosis of the lungs that a definite minimal quantity of dust must be inhaled, with the important implication that the reduction of the concentration of dust in the air in the neighbourhood of dusty asbestos processes will cause the almost total disappearance of the disease (p 15).
The outcome of the investigation was thus to establish the existence of a definite occupational risk in the asbestos industry (p 16).
The risk took the form of a distinct type of fibrosis of the lungs (p 16).
It was found that the incidence rate is highest in the most dusty processes and amongst those longest employed (p 17). 170.
Part II of the report contained the recommendations to which the letter of 15 September 1931 referred.
It began by noting the recent development and rapid expansion of the asbestos industry, mainly because of the demands of other industries, and the increasing attention paid to the insulation of steam plant to promote fuel economy (p 18).
Asbestos products were divided for convenience into seven main groups: Textiles (a) Yarn and cloth.
Non Textiles (b) Millboard, paper, asbestos cement sheets, tiles, and other building materials, sheet material of rubber or bituminous mixtures containing asbestos. (c) Insulation materials and articles. (d) Brake and clutch linings. (e) Packing and jointings. (f) Asbestos covered electric conductors electrodes, cables and wiring, coils for electric machinery. (g) Miscellaneous, including moulded electrical and other goods, etc. (p 18) 171.
In relation to group (a), the Report noted that some asbestos textile products were produced for use in the manufacture of other products, including products in groups (c), (d), (e), (f) and (g) (p 19).
In relation to group (c), the Report stated: Insulation materials include fiberized asbestos; magnesia, so called containing about 15% of fiberized asbestos and 85% of magnesia, and other finely divided mixtures composed partly of fiberized asbestos, used as insulating cements or plasters; fiberized asbestos stiffened into thick sheets, like mats, for lining bulkheads of ships; shaped sections and slabs, moulded from fiberized asbestos or mixtures containing it, or built up of corrugated asbestos paper so as to enclose air cells; mattresses, made of asbestos cloth and filled with fiberized asbestos, magnesia, or other filling. (p 19) 172.
The Report noted that work involving the use of asbestos products was carried on in other premises besides factories, the most important being insulation work, much of which was carried on by contractors (p 19).
The Report did not discuss any risks which might be associated with such work, which could only have been fully addressed by legislation of wider scope than regulations made under the Factories Acts. 173.
Some conclusions can be drawn from this discussion about the sense in which the Report referred to the asbestos industry.
As the groups of products indicate, it comprised factories and workshops which manufactured products (or repaired insulating mattresses) composed wholly or partly of asbestos.
The manufacturing process employed at the factory did not however necessarily involve the use of the raw mineral.
It might, as at factories producing articles in group (a), or it might not, as at factories producing articles in group (e).
Nor did the manufacturing process necessarily involve the use of fiberized asbestos: as the Report stated, fiberized asbestos was used in large quantities in the manufacture of groups (a) to (c), but to a much smaller extent in some of the other factories and workshops (p 19).
As I shall explain, the factory might therefore be one where substantial quantities of asbestos dust were produced, or it might not. 174.
In relation to the processes and preventive measures required, the Report focused on the dust producing processes.
In relation to group (a), the Report stated: Asbestos, suitable for yarn, has usually to be crushed, and in all cases opened (fiberized) before it is ready for carding.
These preparatory processes are effected by machinery, but entail much handwork.
Separating (to remove iron) and grading or sieving follow crushing, but precede opening.
Material for yarn is not usually treated in disintegrators, but in most factories these machines are used for fiberizing waste asbestos yarn, etc.
Crushing flattens out and breaks up the mineral without damaging the fibres.
It is accomplished either in a large edge runner, or in a small pan mill of the mortar mixing type.
The material is emptied upon the floor close to the machine, the contents of several sacks sometimes being spread on the floor to obtain a rough mixing. (pp 20 21) This description of the preparatory processes encompasses crushing, disintegrating, opening, sieving and rough mixing. 175.
Mixing or blending of the crushed asbestos was a further process, preparatory to carding: Crighton openers, enclosed centrifugal machines, are used for opening crushed asbestos, preparatory to carding.
Careful mixing or blending of crushed material is effected by spreading it evenly in layers on the floor over a considerable area cotton may be added at this stage if required and when feeding, taking a vertical cut through the mass Mixing is a great hindrance to elimination of hand work; it is asserted that poor yarn results if it is not done and that machine mixing has been tried and gave less satisfactory results.
If retained, it should be done at a higher level than the opener, under a large exhausted canopy and the mixture fed at a series of chutes. (p 21).
One sees here the alternatives addressed in the Regulations mixing machines, dealt with in regulation 1(a), and mixing or blending by hand, dealt with in regulation 2 and the background to the requirement that they should each be carried on with an exhaust draught. 176.
In relation to the non textile sector, the Report noted that fiberized asbestos was not used in some of the factories, and that exposure to dust might be slight or even negligible (p 26).
Fiberizing was almost exclusively confined to works in groups (b) and (c), ie works manufacturing millboard and similar products, and works manufacturing insulation materials.
Dust was evolved in factories or departments where fiberized asbestos was prepared for subsequent use or for sale, and also in departments where fiberized material, or dry mixtures containing it, were manipulated in preliminary manufacturing processes.
Finishing processes involving abrading or cutting could also be a source of dust, but such dust might contain only a small percentage of asbestos. 177.
In relation to group (c), the Report explained that fiberized asbestos was a component of many insulating materials which might also contain other materials.
It stated: In many small works the materials are mixed dry, by hand, in an open manner, involving sack emptying and filling, shovelling and weighing.
Enclosed rotary mixers could apparently be used for such work with exhaust applied at feeding points and the material discharged and bagged under enclosed conditions.
If hand work is retained, exhaust should be applied. (p 27) 178.
The mixing of fiberized asbestos with other materials was also an aspect of the manufacture of some products in groups (f) and (g).
In particular, the production of moulded goods could involve the mixing of asbestos paste using dry materials.
The mixing of asbestos putty also involved the handling of dry materials (p 30). 179.
Relating this discussion to the preamble to the Regulations, it will be recalled that the first proviso excludes the application of the Regulations to any factory or workshop, or it is important to note any part of a factory or workshop, where any of the following processes is carried on: (1) the process of mixing asbestos; (2) the repair of insulating mattresses; (3) sawing, grinding, turning, abrading and polishing, in the dry state, of articles composed wholly or partly of asbestos in the manufacture of such articles; and (4) any cleaning of machinery or other plant used in connection with any such process.
The exclusion is subject to two conditions.
First, the process or work must be carried on occasionally only, and no person must be employed in it for more than eight hours a week.
Secondly, no other process specified in the preamble to the Regulations must be carried on in the place in question. 180.
It is difficult to envisage circumstances in which the proviso would apply to factories or workshops producing goods in groups (a), (b) or (c), since, even if there were parts of such factories where only the activities mentioned in the proviso were carried on, it seems unlikely that those activities would be carried on only occasionally.
In some factories producing goods in groups (e), (f) and (g), on the other hand, the position might be different.
Given the variety of products which such factories might produce, and the variety of processes involved, it is possible to envisage situations where the first or second proviso might apply.
Such factories might for example produce a range of goods, most of which did not include asbestos, but which required the occasional mixing of asbestos, or some other process, such as grinding, or the repair of insulating mattresses, which was mentioned in the proviso.
The report contains little discussion of factories of that kind, since for obvious reasons it focused upon factories where the risk to health from asbestos dust was greatest.
The point is however illustrated by the discussion of factories producing cable and wiring, of which the report stated: Asbestos covered cable and wiring constitutes a small percentage of the output of the cable factories The amount of dust evolved is small, and special precautionary measures are apparently not required. (p 30) 181.
Returning to the Report, the section headed Summary and Recommendations began by noting that asbestos factories and workshops cover a great variety of processes (p 31).
It observed that the asbestos manufacturers were confronted with the necessity of attaining conditions in their industry which would ensure much less dust in the atmosphere than could be tolerated in many comparable trades not using asbestos (p 31).
As in the remainder of the Report, the focus of the recommendations was entirely on the asbestos industry, using that expression in the sense that I have explained. 182.
The specific recommendations foreshadow the provisions of the Regulations.
In particular, regulation 1(a) reflected recommendation 1(a), which was that exhaust ventilation should be provided for: Dust producing machines, eg (i) Crushing, disintegrating, teasing and other opening machines; sieving machines; fibre grinding machines; dry mixing machines; rolls fed with dry mixings.
Regulation 2(a) was one of a number of regulations that reflected recommendation 1(e), which was that exhaust ventilation should be provided for: Various hand operations, eg sack emptying and filling, weighing, mixing Regulation 2(b) was one of a number of regulations that reflected recommendation 7, which was that new factories should be laid out so as to avoid exposing workers to risk from processes upon which they were not engaged.
The Conferences Report 183.
The Conferences Report was prefaced by a letter from the Chief Inspector of Factories to the Home Secretary dated 10 April 1931, which explained that the recommendations reflected an important assumption, namely the existence of a critical limit of dust concentration below which workers may be employed without injury to health.
As I have explained, that assumption is contradicted by more recent knowledge. 184.
In the introductory section of the Report, it was noted that successful experiments had been carried out involving the application of exhaust to various processes, including mixing and blending (in opening processes) (p 6).
It was also noted that the safe concentration of dust in workrooms had been taken, on the basis of the Merewether and Price Report, to be the conditions arising from flyer spinning of asbestos fibres.
That criterion was said to be simple to apply to processes such as mixing, blending which are obviously more dusty than flyer spinning (p 6).
The recommendations focused upon the application of exhaust ventilation at dust producing points, so as to meet that criterion. 185.
The body of the Report set out the agreements arrived at.
They were listed under headings, mostly descriptive of particular processes.
The first heading was Crushing, including preliminary Sack Emptying, Rough Mixing on Floor near Crushers, Feeding and Discharging.
Rough mixing of raw asbestos prior to crushing was therefore included within crushing.
It was agreed that a mechanical exhaust draught should be applied.
This is reflected in regulation 1(a), which requires mechanical exhaust ventilation which prevents the escape of asbestos dust to be applied to preparing, defined as meaning crushing, disintegrating and any other process in or incidental to the opening of asbestos. 186.
The second heading was Mixing and Blending of Crushed Asbestos.
It was agreed that this process, which was at the time carried on by hand in the textile industry, should also be subject to mechanical exhaust ventilation.
Such ventilation had recently been applied by using an exhaust pipe above the mixing area.
Although much dust was removed, it was unclear whether this arrangement would fully meet the case.
That is reflected in regulation 2(a), which requires mixing or blending by hand of asbestos not to be carried on except with an exhaust draught so designed and maintained as to ensure as far as practicable the suppression of dust.
Although it is not discussed in the Report, one might infer that it was because of the limited efficacy of exhaust ventilation of mixing or blending by hand that regulation 2(b) requires the provision of a dedicated room for that activity in premises constructed after the date of the 1931 Regulations.
It was also noted in the Report that enclosed mixing machines might be developed in the future.
That possibility was addressed by regulation 1(a), in so far as it applies to dry mixing machines.
Further agreements dealt with other specific processes used in the asbestos textile industry.
In each case, a relationship can be seen between the agreement and a corresponding provision of the Regulations. 187.
The Report did not deal with the mixing of opened asbestos with other materials: as I have explained (and as was noted in the Report, in its discussion of mattress making), mixtures of asbestos and other materials were not normally used in the textile branch of the asbestos industry.
The mixing process involved would however fall within the ambit of either regulation 1(a) or regulation 2, depending on whether the mixing was carried out mechanically or by hand.
Did the 1931 Regulations in general, and regulation 2(a) in particular, apply? 188.
In summary therefore, it could hardly be clearer, when regard is had to (1) the Reports which preceded the certification under section 79 of the 1901 Act, (2) the terms of that certification, (3) the recommendations which the 1931 Regulations were intended to implement, and (4) the terms of the Regulations themselves, that the Regulations in general did not apply to the power station by virtue of the work being carried on there by the laggers, and that regulation 2(a) in particular did not apply to that work.
In the first place, the Regulations applied only to factories and workshops in which one or more of the processes listed in the preamble was carried on: the term mixing, as employed in paragraph (i) of the preamble, had a technical meaning, and described particular processes carried on in the asbestos industry.
Those processes were, first, mixing or blending of crushed asbestos preparatory to its being opened, and secondly, mixing of opened asbestos with other materials as part of the process of manufacturing asbestos products such as the insulation material used by laggers.
Those processes were not carried on at the power station.
The Regulations therefore did not apply to it: it was not a place where mixing, within the meaning of paragraph (i), was carried on.
Secondly, for the same reason, regulation 2(a) did not apply to the work carried on by the laggers, as it did not involve mixing or blending by hand of asbestos within the meaning of the Regulations.
The authorities 189.
That conclusion is consistent with the authorities in which the scope of the 1931 Regulations has been considered.
It appears to have been only in relatively recent years that any suggestion was made that the Regulations might apply in circumstances such as those of the present case.
The point was however argued in the case of Banks v Woodhall Duckham Ltd, Court of Appeal (unreported), 30 November 1995, which concerned a pipe fitter who suffered injury after being exposed to asbestos dust while working in various premises.
They included a steel works where he was exposed to dust created by laggers using insulation materials containing asbestos, which they mixed with water to create a paste.
A claim under the 1931 Regulations failed, in the first place, because the claimants evidence was rejected.
The court also accepted submissions to the effect that the Regulations were concerned with processes carried on in the asbestos industry, understood as meaning processes in the manufacture of asbestos products, and processes preliminary to such manufacture, and did not apply to the lagging of pipes in the steel industry. 190.
The same conclusion was reached by Lord Gill in the Outer House of the Court of Session in Watt v Fairfield Shipbuilding & Engineering Co Ltd 1999 SLT 1084, in which the pursuer had been exposed to asbestos dust while working on board ships under construction in shipyards.
As in the present case, the source of the dust was insulation material.
Lord Gill considered that the Regulations related to those processes by which the raw material was treated in the course of its being manufactured into asbestos products of various kinds.
That was also the interpretation for which the appellants argued in the present appeal.
Although I agree with Lord Gills decision on the facts of the case, I would not define the scope of the Regulations as narrowly as that: as I have explained, the asbestos industry is not confined, for these purposes, to factories or workshops where the raw mineral is treated, but includes, for example, those which manufacture products classified in the Merewether and Price Report as falling into groups (d), (e) and (f). 191.
The first case in which a detailed consideration of the background to the Regulations was undertaken was Cherry Tree Machine Co Ltd v Dawson (sub nom, Jeromson v Shell Tankers (UK) Ltd) [2001] EWCA Civ 101; [2001] ICR 1223.
So far as relevant, the case concerned a claim under the 1931 Regulations arising from a persons employment in a factory which manufactured dry cleaners presses.
The manufacturing process involved the use of fiberized asbestos, mixed with water, to form a seal around the platens of the presses: the asbestos sealant was designed to prevent steam from escaping when the presses were used.
An appeal by the employer against a finding of liability under regulation 2 was dismissed. 192.
That conclusion is consistent with my interpretation of the Regulations.
The presses were, in the language of the Regulations, articles composed partly of asbestos.
The mixing of asbestos in the factory formed part of the process of manufacturing the presses.
As Hale LJ observed at para 11, the process was similar to the asbestos putty mixing which had been mentioned in the Merewether and Price Report. 193.
Hale LJ also observed at para 20 that the scope of the Regulations is not confined to factories and workshops whose only or main business is the processing of raw asbestos or the manufacture of products made out of raw asbestos, as Lord Gill had considered in the case of Watt.
She accordingly rejected a submission that the Regulations applied only to the asbestos industry, understood in the sense which Lord Gill had favoured.
As she observed at para 20, nowhere in the Regulations was it said that they applied only to factories and workshops whose only or main business was the processing of raw asbestos or the manufacture of products made out of raw asbestos.
Furthermore, as she observed at para 22, the Merewether and Price Report clearly contemplated the mixing of asbestos in the manufacture of a wide variety of products, not just asbestos products in the narrow sense that had been argued for. 194.
I respectfully agree with that interpretation of the Regulations.
As I have explained, the construction favoured by Lord Gill would be inconsistent with the intention to implement the recommendations of the Merewether and Price Report, since it would effectively confine the scope of the Regulations to groups (a) to (c) of the factories and workshops mentioned in the Report, and leave groups (d) to (g) out of account.
The broader understanding of the asbestos industry which I have explained is also important in understanding the provisos to the preamble to the Regulations: since the Regulations applied to all factories or workshops any part of whose business was the making of asbestos products (or the repair of insulating mattresses), the enactment of a proviso exempting factories or workshops, or parts of them, which carried out certain types of work only occasionally is not difficult to understand. 195.
Hale LJ was also critical of the observations made in Banks, and followed in Watt, to the effect that the Regulations did not apply to the mixing of lagging paste by laggers.
As I have indicated, her criticisms of the reasoning in those cases were well made, and were necessary to her decision: in particular, her rejection of the argument that the Regulations were confined to processes involving the use of raw asbestos.
In so far as her observations went beyond what was necessary for the decision of the appeal, and suggested that it was more likely (para 25) that the Regulations applied to the mixing of lagging paste by laggers, they were obiter, and I would respectfully take a different view, for the reasons I have explained. 196.
In the present case, it was argued before the Court of Appeal, as before this court, that mixing, within the meaning of the 1931 Regulations, meant mixing prior to opening (ie what I have described as rough mixing and mixing or blending), but did not include the mixing of fiberized asbestos with other substances.
On that basis, it was argued that the case of Cherry Tree had been wrongly decided.
McCombe LJ, with whose reasoning on this matter the other members of the court agreed, saw force in the submission, but considered that the court was bound by the decision in Cherry Tree. 197.
As I have explained, I construe the term mixing, in the light of the Merewether and Price Report and its recommendations, as including mixing prior to opening, but also as including the mixing of fiberized asbestos with other substances, provided it is carried out by the asbestos industry: that is to say, provided it forms part of the process of producing a product composed wholly or partly of asbestos.
On that basis, the case of Cherry Tree appears to me to have been correctly decided, as I have explained.
The decision (as distinct from some observations which were strictly obiter) does not however entail that the work of laggers falls within the scope of the Regulations.
Consistently with the decisions (as distinct from some of the reasoning) in Banks and Watt, I consider that such work is beyond the scope of the Regulations.
Subsequent legislation 198.
It is noteworthy that subsequent legislation was made on the basis of the understanding of the 1931 Regulations which I have explained.
In 1967 the Ministry of Labour and HM Factory Inspectorate published a memorandum, Problems arising from the use of Asbestos (36 316), which noted that the Regulations applied to around 300 factories.
In the majority of those factories, only a very small proportion of employees were employed on asbestos processes.
The principal forms of employment subject to the Regulations were said to be the production of asbestos cement products, asbestos textiles and brake linings for motor vehicles (para 10). 199.
A table listed factories and warehouses handling asbestos where the Regulations did not apply.
These included electricity generating, where the relevant activity was identified as lagging and de lagging (Table 4).
The same table also listed generating stations amongst the places where contractors carrying out work involving the use of asbestos could be found.
The memorandum stated in terms that the Asbestos Industry Regulations do not apply to lagging and insulation operations using asbestos (para 13).
It noted that other employees working in the neighbourhood of lagging and insulation operations must also undergo considerable exposure to asbestos (para 13).
The memorandum referred to evidence of an increasing incidence of asbestosis, particularly amongst laggers, who tended to be excluded from the scope of the Regulations (para 18).
It also referred to evidence linking exposure to asbestos to various types of cancer, including mesothelioma. 200.
The Government responded by informing Parliament that it intended to introduce regulations to cover all the industries and processes in which asbestos is used, including occupations such as lagging and de lagging, thermal and sound insulation (Hansard, 10 July 1967, col 88).
The 1969 Regulations were subsequently made.
They applied specifically to electrical stations (regulation 3(1)) as well as to a wide range of other premises.
They applied to every process involving asbestos or any article composed wholly or partly of asbestos, except a process in connection with which asbestos dust cannot be given off (regulation 3(2)), and imposed obligations on employers as well as occupiers (regulation 5(1)). 201.
This material cannot be used as an aid to the interpretation of the 1931 Regulations.
It is nevertheless a matter of legitimate comment that the interpretation of the Regulations which is favoured by Lord Kerr is inconsistent with the basis on which the 1969 Regulations were made.
Was Mr McDonald within the scope of the 1931 Regulations in any event? 202.
The parties addressed the question whether, even assuming that the 1931 Regulations applied to the activities of the laggers at the power station, any duty was owed to Mr McDonald, since he was not employed in the process which generated asbestos dust. 203.
The Regulations were made under section 79 of the 1901 Act, the terms of which have been quoted.
That Act was repealed by the 1937 Act, which however contained a saving proviso in section 159(1), the effect of which was that the 1931 Regulations were deemed to have been made under section 60(1) of the 1937 Act.
The 1937 Act was in turn repealed by the Factories Act 1961 (the 1961 Act), which contained a similar proviso in paragraph 1 of Schedule 6.
The result was to deem the 1931 Regulations to have been made under section 76(1) of the 1961 Act, which provides: Where the Minister is satisfied that any manufacture, machinery, plant, equipment, appliance, process or description of manual labour is of such a nature as to cause risk of bodily injury to the persons employed or any class of those persons, he may, subject to the provisions of this Act, make such special regulations as appear to him to be reasonably practicable and to meet the necessity of the case. 204.
In Canadian Pacific Steamships Ltd v Bryers [1958] AC 485, the House of Lords took as its starting point, in deciding whether the plaintiff fell within the scope of regulations made in 1931 under section 79 of the 1901 Act, the terms of section 79 itself, on the basis that the 1937 and 1948 Acts could not give a wider meaning to the regulations than they had borne when they were made (it was assumed that the power conferred by section 60(1) of the 1937 Act as amended was no narrower than the power conferred by section 79 of the 1901 Act).
Section 79 of the 1901 Act was construed as empowering the Secretary of State to make regulations which enured for the benefit of persons employed in the factory, even if they were not employed in the process which caused the danger or injury to health or the danger to life and limb and thus brought about the certificate.
As Viscount Kilmuir LC observed at p 501, it was obvious that such a process, unless regulated, might be dangerous to others whose ordinary work in the factory brought them into regular proximity to the danger. 205.
Bearing in mind that the Regulations are now deemed to have been made under section 76(1) of the 1961 Act, the position is equally clear: that section refers generally to the persons employed, a form of words which was considered in the Canadian Pacific Steamships case to enable regulations to be made which protected persons who were employed in the factory but not in the relevant processes.
There is nothing in the Regulations themselves that indicates an intention to restrict the scope of the duty to those directly engaged in the specified processes.
Such an intention appears unlikely, since the Merewether and Price Report had made it clear that the risk to health caused by asbestos dust was not confined to those directly employed in the relevant process, but also affected other workers in the same workroom. 206.
It was also argued in the present appeal that no duty was owed to Mr McDonald in any event, since he was not a person employed in the power station.
It will be necessary to return to that question in the context of the duty imposed by section 47(1) of the 1937 Act.
Part 3: Section 47(1) of the 1937 Act 207.
It is necessary next to consider the cross appeal, which concerns the effect of section 47(1) of the 1937 Act.
It provides: In every factory in which, in connection with any process carried on, there is given off any dust or fume or other impurity of such a character and to such extent as to be likely to be injurious or offensive to the persons employed, or any substantial quantity of dust of any kind, all practicable measures shall be taken to protect the persons employed against inhalation of the dust or fume or other impurity and to prevent its accumulating in any workroom, and in particular, where the nature of the process makes it practicable, exhaust appliances shall be provided and maintained, as near as possible to the point of origin of the dust or fume or other impurity, so as to prevent it entering the air of any workroom. 208.
Section 47(1) applies in two situations.
The first is where there is given off any dust or fume or other impurity of such a character and to such extent as to be likely to be injurious or offensive to the persons employed.
Mr McDonald did not pursue any case based upon that branch of the provision.
The second situation is where there is given off any substantial quantity of dust of any kind.
Mr McDonald relied upon that branch of the provision.
Was there any substantial quantity of dust? 209.
The first issue which arises is whether, on the evidence, it has been established that there was any substantial quantity of dust given off in the power station at any relevant time.
In that regard, a difficulty arises for Mr McDonald from the absence of reliable evidence as to the quantity of dust given off during his visits to the power station.
The trial judge made no finding on the point.
The Court of Appeal concluded that, on the evidence, Mr McDonald had failed to establish that a substantial quantity of dust had been given off.
This court does not in my view have a proper basis for reaching a different conclusion.
It follows that the claim under section 47(1) must be rejected.
Was Mr McDonald a person employed? 210.
A further question which was argued was whether in any event any duty was owed under section 47(1) to Mr McDonald.
Was he one of the persons employed, within the meaning of the section? It was argued on behalf of the appellants that he was not.
Reliance was placed on the decisions of Rose J in Morrison v Central Electricity Generating Board (unreported), 15 March 1986, and of the Court of Appeal in Banks v Woodhall Duckham Ltd (unreported), 30 November 1995, where the view was taken, as a matter of grammatical analysis, that the words the persons employed, in section 47(1), referred back to the phrase in connection with any process carried on.
That decision was followed by the Court of Appeal in the present case. 211.
I am unable to agree with that construction.
The verb which governs the preposition in, in the phrase in connection with any process carried on, is not employed but given off (in connection with any process there is given off).
It is therefore the dust that must be connected to the process, rather than the persons employed.
An alternative possibility, that the words the persons employed might refer back to the phrase in the factory, must also be rejected: the verb which governs the preposition in, in the phrase in every factory, is not employed but taken (in every factory all practicable measures shall be taken). 212.
Greater assistance can be obtained from considering section 47(1) in the context of the 1937 Act as a whole.
In the Morrison case, Rose J contrasted section 63 of the 1961 Act (the successor provision of section 47 of the 1937 Act) with section 14(1) (the obligation to fence dangerous machinery), which imposed a duty with regard to every person employed or working on the premises.
The same contrast could also be drawn between sections 14(1) and 47(1) of the 1937 Act.
On the other hand, as Buxton J observed in Owen v IMI Yorkshire Copper Tube (unreported), 15 June 1995, the difference between those provisions is less striking than the difference between section 47(1) of the 1937 Act and section 49.
The latter provision, which is concerned with the protection of the eyes, imposes a duty in respect of the persons employed in the process.
Given that sections 47 and 49 appear in the same group of sections, the use of that limiting phrase in one section but not in the other is a strong reason for believing that the scope of section 47(1) was not intended to be limited, by implication, in the same way as section 49 was limited by express provision. 213.
Apart from these textual pointers, it is also necessary to consider what Parliament is likely to have intended.
The phrase the persons employed identifies the persons to whom the statutory duty is owed.
The duty is to take specified precautions in every factory in which, in connection with any process carried on, there is given off any dust or fume (or other impurity) of a particular description: either the dust or fume must be of such a character and extent as to be likely to be injurious or offensive to the persons employed, or the quantity of dust must be substantial.
In such circumstances, there is a duty to take all practicable measures to protect the persons employed against inhalation of the dust or fume, and to prevent its accumulating in any workroom. 214.
Considering first the situation where injurious or offensive dust or fumes are given off, it would not make sense for the duty to be confined by law to the persons employed in the process in question.
Although those persons would be most directly exposed to the dust or fumes, and would therefore be at the greatest risk of harm, it is perfectly possible that other persons might also be liable to inhale the dust or fumes and would also be at risk.
There might, for example, be other persons working in the workroom where the dust or fumes were generated a problem which had been highlighted by the Merewether and Price Report or persons who passed through the workroom in the course of their employment.
If they inhaled the dust or fumes and suffered injury, why should they not fall within the scope of the statutory duty? To confine the duty in such a way as to exclude a priori a category of persons who were liable to suffer the injury sought to be guarded against would be inconsistent with the apparent intention to protect those at risk. 215.
In the light of that consideration, and also the contrast between sections 47(1) and 49, the phrase the persons employed should not therefore be construed as being restricted to the persons employed in the process in connection with which the dust or fume is given off.
The only feasible alternative is that the phrase is intended to refer to the persons employed in the factory. 216.
If that is the correct construction of the phrase in its application to the first situation addressed by section 47(1), it seems to me that it must also be the correct construction in relation to the second situation, where a substantial quantity of dust is given off.
There is nothing in the section to suggest that the phrase has two different meanings, depending upon which of the alternative situations exists. 217.
The question then arises whether Mr McDonald was one of the persons employed in the power station.
There are numerous authorities on the meaning of the phrase the persons employed, where used in the Factories Acts.
It is clear that the phrase is not confined to the employees of the occupier of the factory: see, for example, Massey Harris Ferguson (Manufacturing) Ltd v Piper [1956] 2 QB 396, where it was held to extend to a painter, employed by an independent contractor, carrying out painting work in a factory.
It does not however extend to a fireman who enters a factory in order to put a fire out (Hartley v Mayoh & Co [1954] 1 QB 383), or to a police constable who enters a factory in pursuit of a felon (Wigley v British Vinegars Ltd [1964] AC 307, 324 per Viscount Kilmuir), although he is a person and he is employed.
In Canadian Pacific Steamships Ltd v Bryers [1958] AC 485, 504 Viscount Kilmuir considered that the phrase applied to any person who is employed in the factory whether the direct servant of the occupier or a servant of an independent contractor so long as he is employed upon work in that factory.
Those words are however themselves little clearer than the statutory phrase.
In the later case of Wigley v British Vinegars Ltd, concerned with a window cleaner employed by an independent contractor, Viscount Kilmuir said at p 324: In my view, the true distinction is between those who are to work for the purposes of the factory and those who are not.
Clearly, maintenance of the factory is work for the purpose of the factory, while the arrest of a felon or the putting out of a fire is not, though it may benefit the factory indirectly.
Window cleaning is part of the maintenance of the factory and in my view the deceased was within the protection afforded.
The other members of the House agreed. 218.
It can fairly be said that the test laid down in Wigley, like the differently expressed test laid down in the Canadian Pacific Steamships case, can result in the drawing of fine distinctions without any compelling rationale beyond the need to draw a line somewhere.
The present case might be regarded as an example.
It could be argued that Mr McDonald was employed for the purposes of the power station, either on the basis that one of those purposes was the sale of the ash, and he was employed collecting ash which had been sold, or on the basis that the ash was a by product which the power station had to dispose of, and he was employed removing it.
The contrary view appears to me however to be more persuasive.
Mr McDonald was not in reality working for the purposes of the power station.
He was working solely for the purposes of his employer, the Building Research Establishment.
It was the purchaser of the ash which was a by product of the power station, and it employed Mr McDonald to collect the ash in his lorry.
A customer of a factory can hardly be regarded as working for the purposes of the factory, even if he goes there in person to collect the article purchased; and a person whom he employs to collect the article from the factory can hardly be in a different position.
Although the sale of such articles would no doubt be one of the purposes of the factory, and the sales staff would therefore fall within the scope of the legislation, the collection of the articles by or on behalf of purchasers is not in the same position. 219.
On that ground, as well as on the basis that it had not been proved that any substantial quantity of dust was given off, the Court of Appeal was correct to reject the claim under the 1937 Act.
It also follows that the claim under the 1931 Regulations would have to be rejected for the same reason, even if, contrary to my conclusion, the Regulations had applied to the work being carried on by the laggers.
Does a claim lie only if a substantial quantity of dust was inhaled? 220.
A further issue which was argued is whether, as was maintained on behalf of Mr McDonald, a claim lies under section 47(1) whenever (a) a substantial quantity of dust is given off in connection with a process carried on in a factory, (b) there has been a failure to take all practicable measures to protect the persons employed against inhalation of the dust, and (c) a person employed has suffered injury caused by inhalation of dust given off by the relevant process.
It was argued on behalf of the appellants that it was not enough that the injury should have been caused by the inhalation of any of the dust: in order to have a claim under the section, the dust must have been substantial in quantity at the point when it was inhaled by the claimant. 221.
It was argued on behalf of the appellants that, as a matter of textual analysis, when section 47(1) imposed a duty to take all practicable measures to protect the persons employed against inhalation of the dust, those words could only mean the substantial quantity of dust said to give rise to the duty, with the implication that the duty was only to protect against inhalation of a substantial quantity of dust. 222.
That argument appears to me to be fallacious.
It is plainly correct that the words the dust refer to the substantial quantity of dust given off.
There is therefore a duty to protect the persons employed against the inhalation of that dust.
It does not however follow that the duty applies in respect of a particular person only if that person is individually liable to inhale a substantial quantity of the dust.
One might as well argue that, if a manufacturer sold a substantial quantity of ginger beer which was contaminated with snails, and was under a duty to take precautions to prevent customers from consuming the ginger beer, it followed that the duty was only to protect against the consumption of a substantial quantity of the ginger beer. 223.
It might alternatively be argued that the duty imposed by section 47(1) in respect of any substantial quantity of dust is in reality unlikely to have been intended to confer a right of action upon an employee who suffered injury as a result of inhaling an insubstantial quantity of dust.
In support of that view, it might be said that Part IV of the 1937 Act, and section 47(1) in particular, are intended to protect the health of employees.
Section 47(1) begins by addressing the situation where dust is given off of such a character and to such an extent as to be likely to be injurious to health.
The part of section 47(1) concerned with any substantial quantity of dust cannot therefore be concerned with dust which is known to be inherently harmful to health, since that danger has already been addressed.
Its concern must be the risk to health which exists where any dust is given off in substantial quantity.
That risk derives from the high concentration of dust in the air which is inhaled.
Once the dust has become dispersed in the atmosphere, that risk disappears. 224.
This argument can be analysed: (1) as restricting the category of person to whom a duty is owed under the relevant limb of section 47(1) to persons employed who inhale dust which is substantial in quantity, or (2) as restricting the type of injury for which a claim can be brought under the relevant limb of section 47(1) to injury which is caused by the inhalation of dust which is substantial in quantity.
The first is an argument about the scope of the statutory duty.
The second is an argument about remoteness of damage.
Each is in my opinion fallacious. 225.
Considering first the scope of the duty, this has already been discussed.
It depends on the meaning of the persons employed.
For the reasons explained earlier, those words must refer to all the persons employed in the factory. 226.
So far as remoteness is concerned, when Parliament enacted section 47(1) it imposed on employers a duty to take all practicable measures to protect the persons employed against inhalation of the dust, whenever any substantial quantity of dust was given off in connection with any process carried on in a factory, and imposed civil liability for a breach of the duty which caused injury.
It did not impose liability only if the breach caused injury in a particular way.
As Lord Reid said in Grant v National Coal Board [1956] AC 649, 661: I cannot see why it should matter just how the accident was caused provided that it was in fact caused by a breach of the section.
I see no ground for imputing to Parliament an intention to make the mineowner liable for some of the consequences of breach but to relieve him of liability for others. 227.
If therefore there was a breach of the duty imposed by section 47(1), in that a substantial quantity of asbestos dust was given off in connection with a process carried on in the power station and all practicable measures were not taken to protect the persons employed against inhalation of the dust, and if a person employed suffered physical injury caused by the inhalation of the dust, it cannot matter that the precise illness, or the way in which it was caused by the inhalation of the dust, was not foreseeable at the time when the statute was enacted: Hughes v Lord Advocate [1963] AC 837. 228.
The point is illustrated by the case of Gregson v Hick Hargreaves & Co Ltd [1955] 1 WLR 1252, where the plaintiff had suffered illness as a result of inhaling noxious particles of silica which formed part of a substantial quantity of dust given off by a process.
The presence of the silica, and its harmfulness, had not been known at the time.
The defendants argument that they should not be held liable was rejected.
Jenkins LJ observed at p 1266 that the duty of employers was to take all practicable measures to protect their workpeople from the inhalation of dust, and their duty to do that did not depend on the question whether the dust was known or believed to be noxious or not. 229.
Finally, in relation to this branch of the appeal, I should record that no issue was raised as to whether the dust generated by the work carried out by the laggers in the power station was given off in connection with any process carried on there, within the meaning of section 47(1).
Conclusion 230.
For the reasons I have explained, I would allow the appeal and dismiss the cross appeal. 79.
Mr Allan criticises these passages on a number of grounds.
He submits that there was in fact clear and undisputed evidence that: (1) the insulation at this power station would have contained asbestos; (2) insulation work was undertaken at the power station which included mixing asbestos powder in oil drums, sawing pre formed sections and removing old lagging by ripping it off pipework; and (3) the activities of mixing asbestos powder, sawing asbestos sections and removing old lagging would generate high concentrations of asbestos dust which, on any view, would amount to substantial quantities of dust.
| UK-Abs | Between 1954 and March 1959 Percy McDonald attended Battersea power station in the course of his employment as a lorry driver for a firm known as Building Research Station to collect pulverised fuel ash.
Between 1954 and January 1957 he was at the power station approximately twice a month but this fell to about twice every three months from January 1957.
While at the power station as a casual visitor Mr McDonald went into areas where asbestos dust was generated by lagging work.
The lagging work involved mixing asbestos powder with water in order to make a paste, as well as sawing preformed asbestos sections and stripping off old asbestos lagging.
Mr McDonald was diagnosed as suffering from mesothelioma in July 2012 and sadly died at the beginning of February 2014.
His widow, Edna McDonald, took his place as respondent in the appeal.
The National Grid Electricity Transmission Plc (National Grid) is the successor body to the occupiers of the power station.
At trial, Mr McDonald alleged that those occupiers had been in breach of their statutory obligations under regulation 2(a) of the Asbestos Industry Regulations 1931 (the 1931 Regulations) and section 47 of the Factories Act 1937 (the 1937 Act).
He also brought claims in negligence against the successors to his former employers and National Grid, but these claims were dropped before the matter came to the Supreme Court.
The trial judge dismissed all Mr McDonalds claims.
On appeal, the Court of Appeal allowed Mr McDonalds appeal under the 1931 Regulations but dismissed his appeal under the 1937 Act.
National Grid appeals to the Supreme Court in the first appeal and Mr McDonalds representative cross appeals in the second appeal.
The Supreme Court dismisses National Grids appeal and dismisses the cross appeal.
On the appeal, the decision was by a majority of three (Lord Kerr gives the lead judgment and Lady Hale and Lord Clarke give concurring judgments) to two (Lord Reed, with whom Lord Neuberger agreed).
On the cross appeal, the decision was by a majority of four to one, with Lady Hale in the minority.
On the first appeal, the majority conclude that the 1931 Regulations apply to all factories and workshops processing asbestos, not just those dealing with asbestos in its raw, unprocessed condition.
The clear wording of the Regulations indicated this, focusing as they did on the processes in question rather than the nature of the industry. [27, 98, 116] The Secretary of State made these Regulations to
counteract the harm that could be done by the manipulation of asbestos rather than focusing on any particular setting where this might happen [96, 117].
The mixing of asbestos during lagging work at the power station fell within the meaning of paragraph (i) of the Preamble to the 1931 Regulations.
The Secretary of State was alive to the risk posed by mixing asbestos in settings other than a narrowly defined manufacturing context [49, 124].
Lady Hale points out that this interpretation of mixing was compatible with Cherry Tree Machine Co Ltd v Dawson sub nom Jeromson v Shell Tankers (UK) Ltd [2001] EWCA Civ 101, which the Supreme Court unanimously approves in this case [100].
Lord Kerr holds that a worker in a factory or workshop where processing of asbestos took place was within the scope of the 1931 Regulations, even if not mixing asbestos himself or directly employed by the occupiers of the premises where asbestos was being mixed.
The Secretary of State made these Regulations under section 79 of the Factory and Workshop Act 1901 (the 1901 Act), which empowered him to afford protection to workers not involved in the asbestos processing.
The risk of injury which these Regulations sought to protect against arose from inhalation of dust or fumes.
There was therefore no logical reason to exclude those who were liable to exposure despite not working directly with asbestos [53].
Lady Hale concludes that liability under the 1901 Act is imposed on occupiers (rather than employers) to protect people in the premises they occupied, therefore the question was whether a person was employed in the power station, not whether he was employed by the occupier [103 104].
Lord Clarke deems that Mr McDonald was in a real sense working for the purposes of the power station and agrees with Lord Kerr [127].
Lord Reed, with whom Lord Neuberger agrees, undertakes an extensive review of the background to the 1931 Regulations.
They would dismiss the appeal on the grounds that the 1931 Regulations are not engaged as they are intended to apply solely to asbestos processing within the asbestos industry.
They hold that the Regulations were penal legislation which should be construed narrowly [158].
Lord Neuberger, Lord Kerr, Lord Clarke and Lord Reed would dismiss the cross appeal.
They agree that, while the rest of the statutory criteria are met, there is no sufficient evidence to rebut the Court of Appeals conclusion that Mr McDonald had failed to establish that a substantial quantity of dust had been given off by the mixing process, as required by section 47(1) of the 1937 Act [90, 209].
Lady Hale would allow the cross appeal on the grounds that there is evidence upon which it could be determined that a substantial quantity of dust had been given off [108 109].
|
Where a tenancy of land is held by more than one person, those persons hold the tenancy jointly.
In Hammersmith and Fulham LBC vs Monk [1992] AC 478 (Monk), the House of Lords unanimously held that, where such a tenancy is a periodic tenancy, which can be brought to an end by a notice to quit, the common law rule is that, in the absence of a contractual term to the contrary, the tenancy will be validly determined by service on the landlord of a notice to quit by only one of the joint tenants. (This was not a revolutionary decision: it had long been assumed to be the law: see eg Doe d Aslin v Summersett (1830) 1 B & Ad135, 140 per Lord Tenterden CJ).
Thus, in common law, one of a number of joint periodic tenants can bring the tenancy to an end against the wishes, even without the knowledge, of his or her co tenant or co tenants, by serving a notice to quit on the landlord.
The present case concerns a secure weekly tenancy of a house granted to a husband and wife, Mr and Mrs Sims.
Some years after the tenancy was granted, the couple separated, and Mrs Sims served a notice to quit on the landlord, Dacorum Borough Council.
The tenancy was a secure tenancy under the Housing Act 1985.
Under sections 82 84 of that Act, a secure periodic tenancy can only be brought to an end by a landlord if it obtains and executes a court order for possession, and such an order can only be granted if (i) the landlord has served a notice relying on one or more of the grounds specified in Schedule 2, and (ii) depending on the ground, it is reasonable to order possession and/or alternative accommodation is available for the tenant.
Accordingly, the effect of the 1985 Act is to deprive a landlord of its common law right to determine a secure tenancy by serving a notice to quit on the tenant.
By contrast, there is no restriction in the 1985 Act on the exercise by a tenant of his or her common law right to determine a secure tenancy by serving a notice to quit on the landlord.
Accordingly, following the reasoning in Monk, Dacorum contends that the secure tenancy granted to Mr and Mrs Sims has come to an end, and Mr Sims must vacate the house.
Monk was decided before the Human Rights Act 1998 was enacted, and, now that it has come into force, Mr Sims contends that his rights (a) to respect for his home under article 8 of the European Convention on Human Rights and/or (b) peacefully to enjoy his possessions under article 1 of the first protocol to the Convention (A1P1) would be wrongly infringed if Dacorums claim succeeds.
Accordingly, he contends that the decision, or the effect of the decision, in Monk should now be reconsidered.
The factual background
On 15 March 2002, Dacorum granted Michael and Sharon Sims a written tenancy of a three bedroom house at 5 Dunny Lane, Chipperfield, Kings Langley, Hertfordshire.
The tenancy agreement, which was expressed as if it was written to Mr and Mrs Sims by Dacorum, provided that: 92.You must notify us in writing at least four clear rent weeks ahead of your intention to terminate the tenancy which should end at midnight on a Sunday.
The agreement also stated that as regards Ending joint tenancies: 100.
Where either joint tenant wishes to terminate their interest in a tenancy they must terminate the full tenancy as in (92) above. 101.
We will then decide whether any of the other joint tenants can remain in the property or be offered more suitable accommodation.
The tenancy was initially an introductory tenancy under Part V of the Housing Act 1996, and, after Mr and Mrs Sims had resided in the house for a year, the tenancy became a joint secure weekly tenancy by virtue of the provisions of that Act.
Until March 2010, Mr and Mrs Sims lived together in the house as their only home together with their four children.
Unfortunately, the marriage broke down in about September 2009.
Following an alleged act of violence by Mr Sims on one of his sons in November 2009, Mrs Sims told Dacorum that he had been guilty of previous acts of domestic violence, and that she wished to move out.
Mrs Sims left the house in March 2010 with their two youngest children, and moved into a womens refuge from which she applied to Wycombe District Council for accommodation.
Wycombe told her that her application could not be granted so long as she had a tenancy of a residential property.
Accordingly, she wrote to Dacorum to say that she wanted to give up her tenancy, and Dacorum replied suggesting that she could achieve this by serving a notice to quit.
On 25 June 2010 Mrs Sims served a notice to quit on Dacorum purporting to terminate the tenancy on 26 July 2010.
Mr Sims, who suffers from learning difficulties, remained living in the house with the older two children (although by the time of the trial those two children were no longer living there).
Before the notice to quit had been served, Mr Sims asked Dacorum if he could remain in the house and have the tenancy transferred into his sole name.
By a letter dated 19 July 2010, Dacorum refused this request, and informed Mr Sims that he had no legal right to stay in the house.
Despite a letter from Mrs Sims, supporting Mr Simss application to remain in the house and expressing concerns about his mental health, Dacorum confirmed this decision following internal reviews in December 2010 and June 2011. 11.
Mr Sims now appeals to the Supreme Court.
The basis upon which the appeal was brought (as is reflected in Mr Simss petition for permission to appeal) was the same as that which was pursued before the Court of Appeal.
However, in the statement of facts and issues as agreed between the parties and his written case and oral submissions, Mr Arden retreated from his submissions in the Court of Appeal and argued only that we should revisit the decision in Monk, on the basis that the effect of that decision in the present case infringed Mr Simss rights under article 8 and under A1P1.
Discussion: A1P1 14.
A1P1 provides, inter alia, that everyone is entitled to peaceful enjoyment of his possessions, and that nobody should be deprived of his possessions except in the public interest and subject to conditions provided for by law. 15.
The property which Mr Sims owned and of which he complains to have been wrongly deprived, whether one characterises it as the tenancy or an interest in the tenancy, was acquired by him on terms that (i) it would be lost if a notice to quit was served by Mrs Sims (clause 100), and (ii) if that occurred, Dacorum could decide to permit him to stay in the house or find other accommodation for him (clause 101).
The property was lost as a result of Mrs Sims serving a notice to quit, and Dacorum did consider whether to let Mr Sims remain, as he requested, and decided not to let him do so.
Given that Mr Sims was deprived of his property in circumstances, and in a way, which was specifically provided for in the agreement which created it, his A1P1 claim is plainly very hard to sustain.
The point was well put in the written case of Mr Chamberlain QC on behalf of the Secretary of State: the loss of [Mr Simss] property right is the result of a bargain that he himself made.
I believe that that conclusion is reinforced by the admissibility decision in Di Palma v United Kingdom (1986) 10 EHRR 149, which concerned the implementation of a forfeiture proviso in a lease against a tenant in rather harsh circumstances. 16.
The only two arguments which I think Mr Sims could even conceivably raise in those circumstances would be (i) that clause 100 is irrational or at least so unreasonable as to offend the right to enjoy the property concerned, or (ii) that Dacorum unfairly or irrationally operated clause 101.
Assuming (without deciding) that those arguments are open to him in principle in relation to his A1P1 claim, it is nonetheless plain that they fail on the facts. 17.
Clause 100 is consistent with a common law principle which is not now attacked, and its effect is anyway mitigated by clause 101.
Further, it is not an unreasonable provision, in that someones interest has to suffer when one of two joint periodic tenants serves a notice to quit.
If the result is not as decided in Monk, either the tenant who served the notice is forced to remain a tenant against her will, or the landlord is landed with one tenant instead of two, which means less security and, in a case such as the present, a family property occupied by a single person.
Just as a joint tenant in Mr Simss position can claim that the outcome determined as correct in Monk is harsh, so could a joint tenant in Mrs Simss position or a landlord in Dacorums position contend that either of the alternative outcomes is harsh. 18.
As to Dacorums operation of clause 101, the Deputy District Judge dealt with this when considering whether Dacorums decision to seek possession of the house was reasonable and proportionate, on the basis that the two issues were different sides of the same coin; no complaint is made of that, and rightly so.
The Deputy District Judge took into account the facts that Mr Sims had lived in the property for ten years, that Mrs Sims had voluntarily served a notice to quit, that she had not been unaware of the effect of serving the notice, that Dacorum had not induced her to serve the notice, that Mr Sims had been responsible for her vacating the property by his violence, that there were no relevant medical circumstances or particular vulnerability pertaining to Mr Sims which would impede his search for other accommodation, that Dacorum had a clear right to re allocate the property, that [s]ocial housing is a scarce resource, and that procedurally, Mr Sims had been accorded an ample opportunity to present his case, and Dacorum had carefully considered the position and had fully reviewed its own decision.
Accordingly, as already mentioned, she made the order for possession sought by Dacorum.
In my view, the Deputy District Judges conclusion was, to put it at its very lowest, one to which she was entitled to come for the reasons that she gave.
Indeed, I would go further, and say that, in light of her conclusions of primary fact, she reached the only appropriate conclusion she could have reached.
In these circumstances, I would reject Mr Simss case based on A1P1. 19.
Discussion: article 8 20.
Article 8.1 provides, inter alia, that everyone is entitled to respect for his private life [and] his home, and article 8.2 states that there should be no interference by a public authority with the exercise of this right save if it is in accordance with the law. necessary in a democratic society, and in the interests of the economic well being of the country or for the protection of the rights or freedoms of others. 22. 21.
So far as Mr Simss case on article 8 is concerned, there is no doubt but that he was entitled to raise the question of the proportionality of Dacorums pursuit of the claim for possession of the house in the light of Pinnock v Manchester City Council [2010] UKSC 45, [2011] 2 AC 104 and Hounslow LBC v Powell [2011] UKSC 8, [2011] 2 AC 186, as explained by Lord Hodge in R (CN) v Lewisham LBC [2014] UKSC 62, paras 58 60 and 63.
However, in this case, that point gets Mr Sims nowhere.
As I have already indicated in paras 18 and 19 of this judgment, the Deputy District Judge carefully considered that question, and, in relation to Mr Simss case on article 8, she came to the conclusion that Dacorums careful decision making process amply accorded with article 8.1 [and] that the decision that the Council made was one to which it could reasonably have come.
She then said that [h]aving reviewed all the relevant factors myself, in my judgment it is lawful and proportionate to make an order for possession in this case.
Again, I consider that this was plainly correct.
In these circumstances, Mr Arden argued that the service of the notice to quit by Mrs Sims was itself a violation of Mr Simss article 8 rights because it put in jeopardy his right to remain in his home.
The fact that the service of the notice to quit put Mr Simss right to stay in his home at risk does not mean that it therefore operated as an infringement of his right to respect for his home.
No judgment of the Strasbourg court begins to justify such a proposition.
Mrs Sims had the right to serve the notice, and, as already observed, the service of such a notice and its consequences were specifically covered by the agreement which gave Mr Sims the right to occupy the house as his home in the first place (see clauses 100 and 101).
I accept that the effect of the service of the notice to quit was to put at risk Mr Simss enjoyment of his home.
I also accept that different considerations may very well apply for article 8 purposes to Mr Sims, who is at risk of losing what has been his family home for many years, from those considerations that apply to temporarily housed homeless people who are at risk of losing their temporary accommodation as in R (CN) v Lewisham.
However, I do not consider that that undermines the point that full respect for Mr Simss article 23. 8 rights was accorded by the facts that (i) his tenancy was determined in accordance with its contractual terms to which he had agreed in clause 100 of the tenancy agreement, (ii) he was entitled to the benefit of clause 101 of his tenancy agreement, (iii) under the Protection from Eviction Act 1977, he could not be evicted without a court order, and (iv) the court would have to be satisfied that Dacorum was entitled to evict him as a matter of domestic law, and (v) the court could not make such an order without permitting him to raise a claim that it would be disproportionate to evict him, in accordance with the reasoning in Pinnock and Powell. 24.
Mr Arden suggested that this conclusion was inconsistent with the judgment of the Strasbourg court in Buckland v United Kingdom (2013) 56 EHRR 16, but I agree with the written submission of Mr Bhose QC for Dacorum that the judgment simply supports the proposition that, where the court is considering making an order for possession against a public sector residential tenant, she must have the opportunity of raising the argument that, in the light of article 8, no order for possession should be made.
I do not therefore think that it assists Mr Sims in this case.
In these circumstances, I consider that Mr Simss case based on article 8 also fails.
Conclusion 26.
It follows from this analysis that I would dismiss this appeal. 25.
On 28 October 2010, Dacorum issued proceedings in the County Court against Mr Sims seeking possession of the house, and, in his Defence dated 5 January 2011 Mr Sims raised a number of arguments, including challenges to the effectiveness of the notice to quit and challenges to Dacorums decision to seek possession against him.
The proceedings were delayed while Dacorums internal reviews proceeded, but the trial eventually took place before Deputy District Judge Wood on 2 December 2011.
Two weeks later, she gave an admirably clear and thorough judgment in which she examined all the evidence and arguments which had been put before her, and decided that she should make an order for possession against Mr Sims.
In summary, the Deputy District Judge held that (1) Mr Sims had committed acts of domestic violence, which was the reason why Mrs Sims had left the house; (2) Mrs Sims had understood that a possible outcome of her serving the notice to quit was that Dacorum would seek to evict Mr Sims, (3) no pressure to serve the notice to quit was put on Mrs Sims by Dacorum, (4) Mr Sims did not suffer from learning difficulties to any extent relevant either to Dacorums decision making process or to considerations of proportionality, (5) she was quite satisfied that the Council's careful decision making process amply accorded with article 8.1 and that the decision that the Council made was one to which it could reasonably have come, (6) she was bound by authority to hold that, as a matter of law, where, as here, a notice to quit has been served by one of two joint tenants of his own accord, that notice is effective to determine the joint tenancy, (7) it was lawful and proportionate to make a possession order, and (8) she should make an outright order for possession of the house. 12.
Mr Sims appealed to the Court of Appeal, and the only ground which he pursued on that occasion was that the decision in Monk was incompatible with his article 8 rights, and that the court should change the common law so that it was compatible.
Mr Arden QC, who appeared on Mr Simss behalf, as he did on the appeal to the Court of Appeal, accepted that Mr Simss appeal should be dismissed by the Court of Appeal, which duly happened, for reasons trenchantly given by Mummery LJ (with whom Etherton LJ and Sir Scott Baker agreed) [2013] EWCA Civ 12.
| UK-Abs | This case concerns a secure weekly tenancy of a house granted to a husband and wife, Mr and Mrs Sims, as joint tenants, by Dacorum Borough Council.
A secure periodic tenancy can only be brought to an end by a landlord by obtaining and executing a court order for possession.
By contrast, there is no such restriction on the ability of a tenant to exercise a common law right to bring a periodic secure tenancy to an end by serving a notice to quit on the landlord.
Following the decision of the House of Lords in Hammersmith and Fulham LBC v Monk [1992] Ac 478 (Monk), a periodic tenancy held by joint tenants may be validly brought to an end by only one of the joint tenants serving a notice to quit on the landlord.
Under the terms of the tenancy agreement in this case it was specifically provided in clause 100 that, if either of the joint tenants wished to terminate their interest in the tenancy, they were required to terminate the full tenancy.
Clause 101 provided that Dacorum would then decide whether the other joint tenant could remain in the property or be offered more suitable accommodation.
Mr and Mrs Sims separated, and Mrs Sims served a notice to quit on Dacorum.
Dacorum therefore contends that the secure tenancy has come to an end, and Mr Sims must vacate the house.
Monk was decided before the Human Rights Act 1998 was enacted.
Mr Sims contends that his right to a private and family life under Article 8 of the European Convention on Human Rights and his right peacefully to enjoy his possessions under Article 1 of the first protocol to the Convention would be wrongfully infringed if Dacorums claim were to succeed.
The issue in this appeal is therefore whether the eviction of Mr Sims would be a wrongful infringement of his rights either:
The Supreme Court unanimously dismisses the appeal.
Lord Neuberger (with whom the other Justices agree) gives the only judgment.
In his written case and oral submissions, counsel for Mr Sims retreated from the suggestion that the Supreme Court should revisit the decision in Monk, but maintained that the effect of that decision in the present case infringed Mr Sims rights under Article 8, or under A1P1 Article 1 of the first protocol to the European Convention of Human Rights [14 19]
(1) under Article 1 of the first protocol to the Convention (A1P1); or (2) under Article 8 of the Convention.
Under A1P1, everyone is entitled to peaceful enjoyment of his possessions and nobody should be deprived of his possessions except in the public interest and subject to conditions provided for by law [14].
Clause 100 provided that the tenancy could be determined by one only of the tenants and Clause 101 provided that if that occurred, Dacorum could decide to permit him to stay in the house.
In this case, Mrs Sims determined the tenancy in accordance with clause 100 and Dacorum did consider whether to let Mr Sims remain in accordance with clause 101 and decided not to let him do so.
The way in which Mr Sims was deprived of his property was thus specifically provided for in the agreement which created the property, that is, his interest in the tenancy.
He lost this property right as a result of the bargain that he himself made. [15 16].
In these circumstances, the only arguments Mr Sims could raise would be either (1) that clause 100 is irrational or so unreasonable as to offend the right to enjoy the property concerned or (2) that Dacorum unfairly or irrationally operated clause 101.
However, clause 100 is consistent with the common law principle in Monk, and the effect of clause 100 is mitigated by clause 101.
The effect of Monk for a joint tenant in Mr Sims position is harsh.
However, when one of two joint periodic tenants serves a notice to quit, someones interest has to suffer; if the position were otherwise than it is under Monk, there would be a harsh result for the other joint tenant or for the landlord [17].
The Deputy District Judge considered Dacorums operation of clause 101, and concluded that procedurally Mr Sims had been accorded ample opportunity to present his case and that Dacorum had carefully considered the position and had fully reviewed its own decision.
In light of the Deputy District Judges conclusions of primary fact, she reached the only appropriate conclusion she could have reached, namely that Dacorums operation of clause 101 was reasonable.
In these circumstances, Mr Sims case based on A1P1 fails. [18 19].
Article 8 of the European Convention of Human rights [20 25] Under Article 8.1 of the Convention, everyone is entitled to respect for his private life [and] his home and Article 8.2 provides that there should be no interference by a public authority with the exercise of this right save if is in accordance with the law, necessary in a democratic society, and in the interests of the economic well being of the countryor for the protection of the rights or freedoms of others [20].
Mr Sims was entitled to raise the question of the proportionality of Dacorums pursuit of the claim for possession of the house in light of previous decisions of the House of Lords and Supreme Court.
However, proportionality does not assist Mr Sims.
The Deputy District Judge carefully assessed Dacorums decision making process and she was plainly correct that it was lawful and proportionate to make an order for possession in this case [21].
Service of the notice to quit put at risk Mr Sims enjoyment of his house which had been his family home for many years.
However, Mr Sims Article 8 rights were accorded full respect, given that (1) his tenancy was determined in accordance with agreed contractual terms, (2) he received the benefit of clause 101, (3) under the Protection from Eviction Act 1977 he could not be evicted with a court order, (4) the court would have to be satisfied that Dacorum was entitled to evict him, and (5) the court could not make such an order without permitting him to raise a claim that it would be disproportionate to evict him[22 23].
Accordingly, Mr Sims case cased on Article 8 fails [24 25].
|
Percy McDonald was diagnosed as suffering from mesothelioma in July 2012.
Sadly, at the beginning of February 2014, just before the appeal in his case was due to be heard by this court, Mr McDonald died.
His widow, Edna McDonald, has been substituted as respondent in the appeal.
The period between diagnosis and death in Mr McDonalds case is entirely consistent with experience of this insidious disease.
Survival for no more than a period of months after diagnosis is the almost invariable outcome.
Mesothelioma is a form of cancer that develops from cells of the mesothelium, the protective lining that covers many of the internal organs of the body.
It usually affects the pleura, the outer lining of the lungs and the internal chest wall.
It is most commonly caused by exposure to asbestos.
Symptoms or signs of mesothelioma may not appear until 50 years (or more) after exposure.
Mr McDonald was employed by a firm known as Building Research Establishment, operated by the government.
Between 1954 and March 1959 he attended Battersea power station in the course of his employment.
This was for the purpose of collecting pulverised fuel ash.
Between 1954 and January 1957 he was at the power station approximately twice a month.
Between January 1957 and March 1959 he was there about twice every three months.
The plant where the ash was collected did not contain asbestos.
But Mr McDonald, while visiting the power station, went into other areas where asbestos dust was generated by lagging work.
This happened particularly in the boiler house.
It is suggested by the appellant that his visits to these areas took place because of curiosity on his part or because he was on friendly terms with workers employed there.
At the times he was exposed to asbestos, Mr McDonald was, the appellants counsel, Mr Nolan QC, suggested, a sightseer or an interested visitor.
The lagging work involved mixing asbestos powder with water in large drums in order to make a paste.
It also included the sawing of preformed asbestos sections and the stripping off of old asbestos lagging.
On occasions Mr McDonald walked through dried asbestos paste.
The trial judge found that his exposure to asbestos was of a modest level on a limited number of occasions over a relatively short period of time [and] was not greater 7. than those levels thought of in the 1950s and 1960s as being unlikely to pose any real risk to health.
The appellant is the successor body to the occupiers of the power station and, at trial, Mr McDonald alleged that those occupiers were negligent and in breach of their statutory obligations under regulation 2(a) of the Asbestos Industry Regulations 1931 and section 47 of the Factories Act 1937.
He also claimed against his employers that they had been guilty of negligence.
The trial judge, His Honour Judge Denyer QC, dismissed all the claims against both defendants.
On appeal, the Court of Appeal allowed Mr McDonalds appeal under the 1931 Regulations but dismissed his appeal under the 1937 Act and in negligence.
The appellant appeals to this court against the judgment under the 1931 Regulations and Mrs McDonald cross appeals against the dismissal of her husbands claim under section 47 of the 1937 Act.
Negligence is no longer in issue.
The Asbestos Industry Regulations 1931
These Regulations were made pursuant to the provisions of the Factory and Workshop Act 1901, section 79 of which provided: Where the Secretary of State is satisfied that any manufacture, machinery, plant, process or description of manual labour, used in factories or workshops, is dangerous or injurious to health or dangerous to life or limb, either generally or in the case of women, children or any other class of persons, he may certify that manufacture, machinery, plant, process or description of manual labour to be dangerous; and thereupon the Secretary of State may, subject to the provisions of this Act, make such regulations as appear to him to be reasonably practicable and to meet the necessity of the case.
In a letter of 15 September 1931 the Secretary of State indicated that he would use his powers under this section and he enclosed a draft of the Regulations that he proposed to make for the protection of the workers employed in certain processes involving exposure to asbestos dust.
He gave notice in the letter that he had formally certified as dangerous the manipulation of asbestos and the manufacture or repair of articles composed wholly or partly of asbestos and processes incidental thereto The letter further intimated that the Secretary of State had decided to give effect to recommendations contained in two reports, Effects of Asbestos Dust on the Lungs and Dust Suppression in the Asbestos Industry by Merewether and Price published in March 1930 and the Report of Conferences between Employers and Inspectors concerning Methods for Suppressing Dust in Asbestos Textile Factories, which had been published shortly before the Secretary of States letter was sent.
That letter continued: The draft Regulations follow generally the provisions recommended in the two Reports already mentioned, with certain additions and modifications which have been made after taking into consideration observations submitted by the General Council of the Trades Union Congress. 8.
Section 82(1) of the 1901 Act provided: The regulations made under the foregoing provisions of this Act may apply to all the factories and workshops in which the manufacture, machinery, plant, process or description of manual labour, certified to be dangerous, is used (whether existing at the time when the regulations are made or afterwards established) or to any specified class of such factories or workshops.
They may provide for the exemption of any specified class of factories or workshops either absolutely or subject to conditions. 9.
The breadth of the anticipated application of the Regulations should be noted.
This subsection foreshadowed their application to a wide range of processes.
It also presaged that processes etc which did not exist at the time the Regulations were made could come within their embrace when later established.
The potentially wide scope of the Regulations was also reflected in section 83 of the Act which provided: .
Regulations made under the foregoing provisions of this Act may, among other things . (b) prohibit, limit or control the use of any material or process; 10.
This broadly based theme was continued in the text of the Regulations themselves.
In the preamble it was directed that they were to apply to all factories and workshops or parts thereof in which the following processes or any of them are carried on: (i) breaking, crushing, disintegrating, opening and grinding of asbestos, and the mixing or sieving of asbestos, and all processes involving manipulation of asbestos incidental thereto; (ii) all processes in the manufacture of asbestos textiles, including preparatory and finishing processes; (iii) the making of insulation slabs or sections, composed wholly or partly of asbestos, and processes incidental thereto; (iv) the making or repairing of insulating mattresses, composed wholly or partly of asbestos, and processes incidental thereto; (v) sawing, grinding, turning, abrading and polishing, in the dry state, of articles composed wholly or partly of asbestos in the manufacture of such articles; (vi) the cleaning of any chambers, fixtures and appliances for the collection of asbestos dust produced in any of the foregoing processes. 11.
The extent of the potential application of the Regulations was mitigated by a proviso to the preamble which was in the following terms: Provided that nothing in these Regulations shall apply to any factory or workshop or part thereof in which the process of mixing of asbestos or repair of insulating mattresses or any process specified in (v) or any cleaning of machinery or other plant used in connection with any process, is carried on, so long as (a) such process or work is carried on occasionally only and no person is employed therein for more than eight hours in any week; and (b) no other process specified in the foregoing paragraphs is carried on. 12.
Although this proviso cut down the scope of the Regulations, it gives some insight into the width of their intended ambit.
It carried the clear implication that the Regulations applied even if the main business of the factory or workshop was not the manufacture of asbestos goods.
Moreover, the processes identified in the preamble, other than those listed in the proviso, were to come within the Regulations even if the work involved in them took place only occasionally or for limited periods.
Also, in relation to those processes listed in the proviso, including mixing, the Regulations were to apply unless the work was carried out occasionally and no person undertook it for more than 8 hours a week.
A further proviso, not directly relevant for present purposes, permitted the chief inspector of factories to suspend or relax the Regulations, if satisfied that, by reason of the restricted use of asbestos or the methods of working, they could be suspended or relaxed without danger to those employed.
I say that this is not directly relevant but it is pertinent to note that one of the circumstances in which the suspension or relaxation might be authorised was that the use of asbestos was restricted.
If, as the appellant claims, the Regulations applied only to the industry engaged in the manufacture of asbestos, it is difficult to see how circumstances could arise in which asbestos use within such an industry would be restricted. 13.
The preamble stipulated that it was the duty of the occupier of factory or workshop premises to observe Part I of the Regulations.
Regulation 2 (which was in Part I) provided: 2. (a) Mixing or blending by hand of asbestos shall not be carried on except with an exhaust draught effected by mechanical means so designed and maintained as to ensure as far as practicable the suppression of dust during the processes. (b) If premises which are constructed or re constructed after the date of these Regulations the mixing or blending by hand of asbestos shall not be done except in a special room or place in which no other work is ordinarily carried on. 14.
Asbestos was defined in the Regulations as meaning any fibrous silicate mineral, and any admixture containing any such mineral, whether crude, crushed or opened.
Crude asbestos was the raw mineral as shipped in containers after it had been mined.
Crushed or opened material referred to its condition after it had undergone processes preparatory to its use.
The Regulations defined preparing as meaning crushing, disintegrating, and any other process in or incidental to the opening of asbestos.
The background to the1931 Regulations 15.
The parties are agreed that the Merewether and Price Report forms part of the background against which the 1931 Regulations were made and is therefore indispensable to any examination of their ambit.
The respondent claims that further material considerations include (i) the relevant provisions of the 1901 Act; (ii) the Secretary of States certification pursuant to section 79; (iii) the processes listed in the preamble; and (iv) the definition of asbestos in the Regulations.
The appellant contends that the Report on Conferences and the discussions which led to it also played a significant part in the shaping of the terms of the 1931 Regulations and that these must also be considered.
It has not been suggested by the respondent that this report should not be taken into account. 16.
The appellant points to two other sources which, it claims, provide material germane to a consideration of the intended scope of the Regulations.
The first of these is a report entitled Problems arising from the use of Asbestos Ministry of Labour HM Factory Inspectorate November 1967 (36 316).
This suggested that the 1931 Regulations [did] not apply to lagging and insulation operations using asbestos.
The respondent objects to any reference to this document on the ground that it did not feature in the case until the hearing before this court.
The second source identified by the appellant consists of material relating to the Parliamentary history of the Regulations.
This material demonstrates, the appellant argues, that Parliaments perspective was that the 1931 Regulations applied only to the asbestos industry.
The respondent contends that it is not permissible to refer to this material because the conditions prescribed by Pepper v Hart [1993] AC 593 as to the admissibility of statements made in Parliament are not satisfied.
It is also submitted that the references in Hansard do not, in any event, assist in determining the scope of the Regulations.
Section 47(1) of the Factories Act 1937 17.
Section 47(1) of the 1937 Act provided: In every factory in which, in connection with any process carried on, there is given off any dust or fume or other impurity of such a character and to such extent as to be likely to be injurious or offensive to the persons employed, or any substantial quantity of dust of any kind, all practicable measures shall be taken to protect the persons employed against inhalation of the dust or fume or other impurity and to prevent its accumulation in any workroom, and in particular, where the nature of the process makes it practicable, exhaust appliances shall be provided and maintained, as near as possible to the point of origin of the dust or fume or other impurity, so as to prevent it entering the air of any workroom. 18.
A number of elements is required to establish liability under the subsection.
Firstly, there must be a process which generates dust or fume or other impurity.
Secondly, the dust or fume etc must be of a character or extent as to be likely to be injurious or offensive.
Thirdly, the dust, fume or other impurity must be injurious or offensive to those employed.
But by way of alternative to the requirement that it be injurious or offensive, if the dust given off is substantial this will be sufficient to ground liability.
Finally, the measures to be taken in order to protect against inhalation of the dust, fume or other impurity must be practicable. 19.
Mr McDonald had relied on the second limb of the subsection, ie that the amount of asbestos dust that was given off in the areas of the power station where he had been exposed to it was substantial.
The first issue between the parties on this aspect of the case was whether it was sufficient that the volume of the dust at the time that it was initially generated was substantial, irrespective of its concentration at the time that Mr McDonald inhaled it or whether it had to be shown that at the time he was exposed to and inhaled it, there was a substantial quantity of dust.
The appellant argued that the concentration of dust had to be substantial at the moment of exposure and inhalation.
The respondent submitted that, if the quantity of dust that was initially liberated was substantial, it was not required under section 47(1) to show that, at the time Mr McDonald was exposed to it, the amount of the dust was substantial; it was enough that, at the point of its being given off, it could be so described. 20.
The appellant also argued that no duty was owed to Mr McDonald because he was not a person employed for the purposes of the subsection.
On this issue the respondent claimed that, during the time that he was exposed to the dust, Mr McDonald was a person employed.
It was submitted that to interpret section 47(1) so as to limit its application to workers actually engaged in the process of producing the dust or fume would greatly restrict the scope of the provision and would exclude from protection many who would be affected by the process.
Moreover, it would have been a simple matter to confine the application specifically to those actually engaged in the production of the dust or fume by an express provision to that effect.
An example of such an explicit provision was to be found in section 49 of the 1937 Act dealing with protection for eyes.
The application of the 1931 Regulations 21.
The principal argument of the appellant was that the 1931 Regulations, in their original conception and subsequent application, were focused on the asbestos industry and those working in it.
The purport of the appellants submission on this point was that section 79 of the 1901 Act envisaged the designation of a dangerous industry rather than proscription of the use in industry generally of dangerous material.
Only when a trade or industry was formally nominated as dangerous was it to be subject to the Regulations.
That submission, it was claimed, derived support from the terms of section 82 which focused on factories and workshops where the dangerous industry was carried on.
It was also sustained, Mr Nolan argued, by the title of the Regulations, The Asbestos Industry Regulations and the definition of asbestos.
That definition referred to asbestos in its unprocessed ie its raw, mineral condition.
It did not comprehend processed asbestos products such as asbestos insulation.
It was claimed that the exclusive focus of the Regulations on the asbestos industry was also indicated by subparagraph (v) of the preamble relating to sawing, grinding, turning, abrading and polishing in the dry state, of articles composed wholly or partly of asbestos in the manufacture of such articles.
The express inclusion of the qualification that these processes were confined to the manufacture of asbestos products made clear, it was said, that the subject of the 1931 Regulations was the asbestos industry and the production of materials within that industry, rather than the use of asbestos products in the work of other industries. 22. 23.
For the respondent it was argued that the terms of section 79 and the certification by the Secretary of State indicated that the Regulations were to apply whenever and wherever a defined process was carried on in a factory or workshop.
This was in keeping with the mischief which Merewether and Price had identified and the remedy they had proposed.
There was no reason to adopt a narrow definition of asbestos industry and on that basis restrict the application of the Regulations.
The term asbestos industry in the title was used in the wide sense of any industry where one or more processes referred to in the preamble was carried on. 24.
The breadth of the terms of the preamble was considered by the Court of Appeal in Cherry Tree Machine Co Ltd v Dawson sub nom Jeromson v Shell Tankers (UK) Ltd [2001] EWCA Civ 101, [2001] ICR 1223.
Hale LJ, delivering the only substantive judgment with which Mantell LJ and Cresswell J agreed, pointed out in para 7 that the preamble had made it clear that the Regulations applied to all factories and workshops in which the listed processes took place.
She also adverted to the import of the proviso in the preamble.
She held (at para 12) that the trial judge was plainly right to conclude that, for the exemption in the proviso to apply, it was required both that the work was carried on only occasionally and that no person was employed at that work for eight hours or more in any week.
That conclusion made it distinctly difficult for the application of the Regulations to be confined to factories and workshops where asbestos was manufactured.
Sporadic or occasional work involving the manufacture of asbestos was inherently unlikely to be a feature of factories where that activity was the sole or primary undertaking.
On this account Hale LJ declined to follow the decision in the Scottish case of Watt v Fairfield Shipbuilding & Engineering Co Ltd 1999 SLT 1084.
In that case, Lord Gill had felt that it was possible to give the proviso a satisfactory meaning, notwithstanding his conclusion that the 1931 Regulations applied only to the asbestos industry.
Hale LJ was not persuaded that this was possible, saying at para 21: It is however very difficult to imagine a factory or workshop whose main business was producing asbestos or asbestos products to which the exemption could possibly apply, given that only certain processes, infrequently carried on, are exempted and only then if none of the other defined processes is carried on in the same factory. 25.
The argument that the Regulations only applied to the asbestos industry and to the manufacture of asbestos had also been accepted in the earlier case of Banks v Woodhall Duckham Ltd, an unreported decision of the Court of Appeal which had been delivered on 30 November 1995.
The Court of Appeal in Cherry Tree distinguished that case, Hale LJ commenting (at para 25) that the observations of the court in Banks were not essential to the determination of the case because the trial judge had been unable to make findings of fact as to the extent to which any of the defendants had exposed the claimant to asbestos and what if any damage flowed from any such exposure. 26.
The appellant challenged the correctness of the decision in Cherry Tree.
It was submitted that too great an emphasis had been placed on the preambles description of the processes and insufficient regard had been had to the underlying theme of the 1901 Act and the 1931 Regulations.
This was that an industry was to be regulated rather than processes involving the use of asbestos.
In particular, the preventive measures suggested in the Merewether and Price Report were directed specifically towards the suppression and control of the dust involved in manufacturing processes, and steps to be taken in relation to those employed in the industry (p 17 of the Report). 27.
The central thesis of the appellants case rests on the notion that there was, at the time the 1931 Regulations were made, a clearly identifiable asbestos industry; that this industry was engaged solely in the manufacture of asbestos; and that it was the intention of the Secretary of State, in making the Regulations to confine their application to that closely defined industry.
Several reasons can be given for rejecting that argument, the first and most prosaic being that, if that had indeed been the Secretary of States aim, it could have been easily achieved by an unequivocal statement to the effect that the Regulations only applied to the asbestos manufacturing industry.
So far from stating that, the Regulations made it prominently clear that all factories and workshops in which certain specified processes are carried out are covered by the Regulations.
The emphasis immediately falls on the processes rather than the nature of the industry.
And this is entirely logical.
If processes other than those involved in the manufacture of asbestos were known to give rise to the risk of developing fibrosis (as they were at the time the Regulations were made) why should they be excluded from their ambit? 28.
Secondly, the Merewether and Price Report, on which the appellant places such weight, did not focus exclusively, in my view, on the asbestos manufacturing industry.
The first (and more important) part of the Report is devoted to an investigation of whether workers exposed to asbestos were at risk of developing pulmonary fibrosis.
That investigation had been commissioned by the Home Office following the discovery, in February1928, of a case of non tubercular fibrosis of the lungs in an asbestos worker, of sufficient severity to necessitate treatment in hospital (Seilers case).
As the covering letter enclosing the Report to the Home Secretary makes clear, the investigation established that the inhalation of asbestos dust over a period of years results in the development of a serious type of fibrosis of the lungs.
It was not suggested (nor could it have been) that inhalation of asbestos dust sufficient to cause fibrosis could only occur in the course of asbestos manufacture. 29.
The first part of the Report was not focused on the asbestos industry as such, therefore, but on the propensity of exposure to asbestos to cause fibrosis.
As it happens, workers in the textile branch of the asbestos industry were chosen for study because their exposure was to pure, or nearly pure, asbestos.
Workers in other parts of industry had exposure to a mixture of dusts, of which asbestos was one.
It was considered necessary to choose those whose exposure was to asbestos alone in order to evaluate the effect of asbestos dust.
At p 7 of the Report, however, the authors highlighted the considerable number of workers exposed to the influence of mixed dusts of which asbestos was but one.
As Judge LJ said, speaking of the Merewether and Price Report in Maguire v Harland & Wolff plc [2005] EWCA Civ 1, the research was confined to asbestos textile workers, but [the Report] explained that workers in other industries, exposed to asbestos dust, were also at risk (para 23). 30.
The choice of workers in the asbestos textile industry for investigation does not betoken a view on the part of the authors of the Report that protection for that category of workers was alone required.
They were chosen because they were known to be exposed to asbestos dust and, since the purpose of the investigation was to examine whether there was a connection between asbestos dust and fibrosis, it was logical to focus on them.
But the critical finding was that exposure to asbestos dust gave rise to the serious risk of grave illness.
Confronted by that finding and by the statement that workers in other areas of industry were exposed to asbestos, there is no obvious reason that the Secretary of State should decide to confine the application of the Regulations to the manufacturing arm of the asbestos industry and to leave unprotected the considerable number of other workers exposed to a mixture of dusts including asbestos. 31.
While the second part of the Report dealt with the suppression of dust in the asbestos industry, it did not suggest that precautionary measures need only be taken in relation to the manufacture of asbestos.
It would be illogical if it had done so in light of the central finding of the first part that prolonged exposure to asbestos, in whatever circumstances that occurred, carried a grave risk of serious illness.
Moreover, the second section of the Report looked separately at textile and non textile processes involving use of asbestos materials.
The latter included electrodes with an asbestos covering and miscellaneous goods containing a proportion of asbestos.
These processes were recognised by the authors of the Report to create significant exposure to asbestos and thereby a risk to health.
At p 19 the authors stated: Apart from manufacture, certain work is carried on in premises subject to the Factory and Workshops Acts, as well as in other premises, which involves use or manipulation of asbestos or products containing it.
The insulating of boilers, pipes, engines and parts of ships is the most important.
Much of this work is done on board ship by contractors who employ a considerable outdoor staff.
It is therefore unwise to dwell too heavily on some of the wording of the Regulations themselves in order to try to construct an exclusive emphasis on the manufacture of asbestos.
It is quite clear that the risks of ill health through exposure to asbestos other than in the course of its manufacture had been recognised.
Moreover, it is unsurprising that the Regulations should refer to many aspects of manufacture because the Merewether and Price Report had 32. dealt with asbestos textile workers.
But that circumstance alone does not justify the view that it was intended that the Regulations should apply only to the manufacture of asbestos and that the risks arising from other forms of exposure should be ignored. 33.
The Report on Conferences between Employers and Inspectors concerning Methods for Suppressing Dust in Asbestos Textile Factories obviously was concerned with that area of the industry.
While the Secretary of State had regard to that report, there is no reason to suppose that, simply because it dealt only with that side of the industry, the risks arising from exposure in other circumstances would be overlooked. 34.
A third reason for rejecting the appellants claim that the Regulations were designed to apply to the manufacturing processes of the asbestos industry is that it is at least questionable whether a selfcontained asbestos industry concerned exclusively with manufacturing could be said to exist in isolation from the use of asbestos in other factory settings.
As Merewether and Price themselves observed (at p 18 of their Report), the asbestos industry had developed greatly in the years before the report was issued and it continued to expand rapidly mainly because of the demands of the motor, electrical, engineering and building industries and of the increasing attention now paid to the insulation of steam plant to promote fuel economy. 35.
Unlike many other manufactured products, asbestos frequently required to be worked, manipulated, mixed and transformed after the supply of the raw material to the customer.
Merewether and Price referred to this at p 19 in the passage quoted at para 31 above.
It appears to me highly doubtful that the Secretary of State would have concluded that insulation companies which were not engaged in the manufacture of asbestos but whose workers were daily exposed to asbestos while manipulating it for application in various premises should not be regarded as part of the asbestos industry.
And, indeed, in his certification letter, the Secretary of State expressly stated that he had formally certified as dangerous the manipulation of asbestos as well as the manufacture or repair of articles composed wholly or partly of asbestos and processes incidental thereto.
In this context, it is appropriate to consider the Parliamentary material relied on by Mr Nolan as indicating the governments intention that the 1931 Regulations should apply only to the asbestos manufacturing industry.
The first of these was a reply given on behalf of the Ministry of Labour on 13 March 1930 to a question concerning the number of men and women employed in the asbestos industry and insured for unemployment.
The reply given was as follows: 36.
Separate statistics of the number of insured persons in the asbestos industry are not available, as that industry is included with others in the group Textile industries not separately specified.
At the population Census of 1921, the number of occupied persons classified as belonging to the asbestos industry in Great Britain included 2,550 males and 1,327 females, aged 12 and over. (Hansard (HC Debs) Col 1520 W) 37.
On 15 November 1934, in answer to a question about the number of deaths from asbestosis, the Home Secretary said: About 60 deaths have been brought to the notice of the Department and after investigation are all attributed by the Senior Medical Inspector of Factories to exposure incurred previous to the Asbestos Industry Regulations of 1931 which required elaborate precautions.
Special inquiry in 1932 as to other risks in warehouses and certain other processes revealed no need for any extension of the regulations, but their effectiveness will continue to be closely watched. (Hansard (HC Debs) Col 2122) 38.
Finally, Mr Nolan drew our attention to a statement made on 5 December 1966 by the Minister for Labour to the effect that he was revising the Asbestos Industry Regulations 1931, and intended to extend their application to all industries and processes in which asbestos is used. (Hansard (HC Debs) Col 197 W).
In the well known passage of his speech in Pepper v Hart [1993] AC 593, 634 Lord Browne Wilkinson set out the circumstances in which Parliamentary material could be used as an aid to construction of legislation in the following terms: 39. reference to Parliamentary material should be permitted as an aid to the construction of legislation which is ambiguous or obscure or the literal meaning of which leads to an absurdity.
Even in such cases references in court to Parliamentary material should only be permitted where such material clearly discloses the mischief aimed at or the legislative intention lying behind the ambiguous or obscure words.
In the case of statements made in Parliament, as at present advised I cannot foresee that any statement other than the statement of the Minister or other promoter of the Bill is likely to meet these criteria. 40.
Leaving aside the question of whether the Regulations are ambiguous, it is quite clear that none of the statements to which the appellant referred partakes of the quality required.
Quite apart from the fact that none bore directly on the issue of the application of the Regulations to an asbestos manufacturing industry only, none could be said to disclose the mischief aimed at or the legislative intention underlying them.
And, of course, two of the statements post dated the making of the Regulations and are, therefore, at most, an expression of view as to how they should be construed rather than a true guide to legislative intent.
The respondent is undoubtedly correct, therefore, in the claim that the conditions for the admissibility of the Parliamentary material are not present in this instance and is also correct in the assertion that, in any event, the statements do not assist in giving any real insight into the legislative intention in making the Regulations. 41.
For essentially the same reasons the 1967 report (referred to in para 16 above) cannot be regarded as an authoritative guide to the proper construction of the Regulations.
This represents, at best, one possible view as to the extent of their application.
The statement that the Regulations do not apply to lagging and insulation operations using asbestos is not elaborated upon nor is any reasoned support for it provided.
It also contrasts with the memorandum dated 6 September 1949 from the chief safety officer of the appellants predecessors to regional safety officers, in relation to the lagging of steam pipes in generating stations.
In it the view of the Deputy Chief Inspector of Factories is recorded as being that the 1931 Regulations applied to the mixing of asbestos in power stations but did not apply to the removal of old lagging or the application of insulation. 42.
The next reason for rejecting the appellants principal argument is that given by Hale LJ in the Cherry Tree case, namely, that the first proviso in the preamble is not only otiose but impossible to explain if the application of the Regulations is confined to the manufacture of asbestos.
An industry devoted exclusively to making this product simply could not avail of the proviso.
It could have no relevance if the appellants contended for interpretation of the Regulations is correct.
The fact that it was included points unmistakably to the conclusion that it was envisaged that the Regulations would apply to processes other than the manufacture of asbestos.
Allowing an exemption for work with asbestos which was occasional and carried on for no more than 8 hours per week simply does not make sense if the Regulations were only to apply to the asbestos industry as the appellant has defined it.
This proviso flatly contradicts the appellants claims as to the scope of application of the Regulations. 43. 44.
It is, of course, true that, if the Regulations are held to apply to all factories at which any of the processes is carried on, regulation 2(b) may appear somewhat anomalous.
To require mixing or blending by hand of asbestos to be carried on in a special room or place in which no other work is ordinarily carried on might appear to cast a considerable burden on employers engaged in lagging operations.
The respondent confronts this seeming incongruity head on by saying that since mixing work, in its wide sense, gave rise to dust to which workers were exposed other than those carrying out the work, it was a sensible and practical measure to stipulate that mixing should be undertaken in a separate room or place and, pursuant to regulation 2(a), provided with a suitable exhaust draught.
I am not convinced that this provides a complete answer to the claim that regulation 2(b), if applied to lagging operations and those working in their vicinity, imposes a duty that would in practical terms be very difficult to fulfil.
Be that as it may, I am of the firm view that regulation 2(b), if applied to all processes listed in the preamble, is more readily explicable than would be the exemption in the proviso if the regulation is confined to asbestos manufacture only.
While, therefore, I acknowledge that the terms of regulation 2(b) lend some support to the notion that the Regulations were designed to be more restrictive in their application, I do not consider that this is of sufficient moment to displace the plain meaning to be given to the preamble in applying the Regulations to all of the processes listed or to counteract the more obvious anomaly of the existence of an exemption for the asbestos manufacturing industry which plainly had no relevance to it.
Mixing 45.
Active dispute arose as to whether the term mixing in the Regulations should be given a specialised, technical, or its ordinary, meaning.
In support of its argument that it should be given a restricted, technical meaning, the appellant conducted a close textual analysis of the Merewether and Price Report, citing instances of where the term had been used in conjunction with other processes of manufacture.
Reliance was also placed on the Report on Conferences where it was clear, the appellant claimed, that the expression mixing was used in the technical sense of mixing raw asbestos as a preparatory step to its use in the manufacture of asbestos products.
In the Merewether and Price Report at p 11, mixing is first in a list of processes which includes crushing, opening and disintegrating.
And at p 21 the process of mixing is identified in the same context as the breaking, crushing, disintegrating, opening and grinding of asbestos and before reference to the sieving of asbestos.
This, the appellant claims, is a reference 46. to the preparatory steps for use of asbestos mineral in product manufacture, rather than mixing asbestos to create a paste.
This claim is fortified, the appellant says, by the reference on p 31 of the Report to the dusty process of hand mixing incidental to opening (ie manufacturing) processes. 47.
The appellant argues that the recommendations contained in the Merewether and Price Report correlate directly to the classification of processes in the preamble to the 1931 Regulations.
Thus the first recommendation (relating to exhaust ventilation at dust producing points) was the foundation for regulation 1.
The reference in this recommendation to the fact that such measures have not been applied to hand work and that special difficulties remain to be overcome in some cases eg . mixing . clearly referred back to mixing identified on pp 21 and 31 of the Report.
The recommendation that, unless the problem was surmounted, there should be general ventilation of a high standard applied so as to draw the dust laden air away from the worker became regulation 2(a), the appellant claimed, and therefore applied specifically to mixing or blending by hand with this clear technical meaning. 48.
These arguments are founded on the premise that the Merewether and Price Report and the Report on Conferences were translated directly to the provisions in the Regulations.
This is a false premise for two reasons.
First, the letter of 15 September 1931 indicated that, while the Regulations would follow generally the recommendations made in the two reports, certain additions and modifications had also been made.
Secondly and more importantly, the Merewether and Price Report and the Report on Conferences were based on the investigation of the specific conditions which had been addressed by both reports.
As earlier explained, Merewether and Price had isolated a particular group of asbestos workers for the precise reason that they wished to evaluate the effect of exposure to asbestos dust alone rather than the effect of exposure to mixed dusts including asbestos.
The Report on Conferences was concerned with methods for suppressing dust in asbestos textile factories.
But the consideration of the Secretary of State could not be constrained by the restricted basis on which the reports were prepared.
He should not have and must be presumed not to have ignored the risk to those who worked with asbestos, other than in the manufacturing process, that the Merewether and Price Report had clearly identified. 49.
Although Merewether and Price had, for understandable reasons, chosen workers whose activities were confined to the manufacture of asbestos, the significance of their findings went well beyond the impact on that restricted category of employees.
In particular, it was well known, at the time that the Regulations were made, that mixing of asbestos to create a paste was a regular feature of lagging.
And Merewether and Prices findings, properly understood, pointed clearly to the risk that chronic exposure to asbestos would entail, whatever the circumstances in which it occurred.
If it had been intended to exclude from the ambit of the Regulations mixing for the purpose of creating a paste for lagging, this would have been, in light of contemporaneous knowledge, a surprising outcome.
In any event, it would have had to be made explicitly clear and it was not.
I am satisfied, therefore, that the term mixing in the Regulations should not be given the restricted, technical meaning for which the appellant contends and that it should be taken to cover mixing asbestos powder with water such as occurred in this case.
The appellants secondary argument 50.
The appellant argued alternatively that, even if the Regulations covered mixing of asbestos to prepare a paste for lagging, they did not apply to someone such as Mr McDonald because he was not employed in the dangerous trade which had been certified by the Secretary of State under section 79 of the 1901 Act.
The appellant submitted that the Regulations could not have application wider than the statutory power under which they had been made and that a side note to section 79 stated that the power was to make regulations for the safety of persons employed in dangerous trades. 51.
Mr Nolan acknowledged, however, that the House of Lords had held in Canadian Pacific Steamships Ltd v Bryers [1958] AC 485 that the section 79 power was a wide one and entitled the Secretary of State to make regulations which could create a statutory duty to protect persons not employed in the process regulated (in that case a regular crew member of a ship undergoing repair in dry dock).
The nature and extent of any duty under regulations made pursuant to the section 79 power therefore depended on the terms of the particular regulations. 52.
Although there was no express provision in the Regulations which restricted their application to persons employed in the process of mixing asbestos for lagging, the appellant argued that it was implicit that the duty was so limited, firstly because that was in accord with the structure of the Regulations, which was to prescribe precautions to be taken in relation to each of the processes stipulated and, secondly because the mixing process was one of those referred to in the first proviso of the preamble.
Alternatively, if the protection extended beyond those who were actually involved in the processes, it did not cover someone who, like Mr McDonald, was not actually employed in the areas where the processes were taking place but was merely a casual visitor to those areas. 53.
I do not accept either of these arguments.
The fact that precautions are prescribed in relation to each of the processes involved says nothing to the question of whether someone has to be involved in the actual process or may be incidentally exposed to the dust or fume which the process generates.
It would be remarkable if the group to be protected was confined to those who were carrying out the process but those who were at risk from exposure because of their proximity to it should remain unprotected.
Given that the Canadian Pacific case had established that section 79 empowered the Secretary of State to make regulations which afforded protection to workers not involved in the process, the essential question is whether the 1931 Regulations, as made, had availed of that opportunity.
Where the risk of injury arises from inhalation of dust or fumes (and, of their nature, processes which generate these do not discriminate as to who inhales them), there does not appear to me to be any logical reason to exclude those employees who are liable to be affected by exposure solely because they do not actively work on the processes. 54.
Merewether and Price had adverted directly to this issue at p 20 et seq of their Report, stating that within the same workroom there could be several different processes carried on, each producing dust containing asbestos.
The Report recognised that a worker might be exposed to harmful dust created by a process he was not engaged in: In many works several processes are carried on in the same room.
In the absence of effective means of preventing escape of dust into the air, many workers are subjected to a risk from which they would otherwise be immune, or to a greater risk than that arising from their own work. 55.
As Mr Allan QC for the respondent pointed out in his submissions on section 47 of the 1937 Act, many processes within a factory are fully automated.
It could not have been Parliament's intention, he argued, that, where a fully automated process was producing dust or fume, no workers exposed to that dust or fume were protected by the section.
For reasons that I will give in the next section of the judgment, I accept that submission.
Using the same basis of reasoning I consider that the Secretary of State should be taken to have been principally concerned with protecting workers who were liable to be exposed to asbestos, rather than with confining protection to those whose job it was to carry out the processes which generated the risk of exposure. 56.
The fact that the mixing process was referred to in the first proviso of the preamble does not sound directly on whether the Regulations should extend to employed persons who are not actively involved in that process.
The 57. exemption available is perfectly understandable and workable if the Regulations apply to workers involved in that process and others who, by reason of their proximity to it, are liable to inhale the dust or fume that it generates.
I shall deal with the appellants argument in relation to the claim that Mr McDonald was not a person employed but merely a casual visitor or sightseer in the part of the judgment dealing with section 47 of the 1937 Act, to which I now turn.
The possible application of section 47 58.
The respondent has accepted that, in order to establish that there has been a breach of statutory duty based on the second limb of section 47(1), it must be shown that: (1) the dust was given off in connection with a process carried on in the power station; (2) Mr McDonald was a person employed within the meaning of the section; (3) the quantity of dust when given off was substantial; and (4) Mr McDonald inhaled dust given off by the relevant process.
The appellant agrees with this formulation except in relation to the third condition.
Mr Nolan contends that it must be shown that not only was the quantity of dust substantial at the point that it was generated by the process, it must be substantial at the point of inhalation.
I shall consider each of these in turn.
Was the dust given off in connection with a process? 59.
The appellant submitted that lagging operations were not part of the process carried on at Battersea power station.
That process was, the appellant claimed, the generation of electricity.
Mr Nolan relied on the judgment of Stuart Smith LJ in Banks where he accepted an argument that the lagging of pipes that may have given rise to dust was not a process being carried on in the factory, which was the manufacture of steel.
In Nurse v Morganite Crucible Ltd [1989] AC 692 the House of Lords considered the meaning of process in section 76(1) of the Factories Act 1961 and the Asbestos Regulations 1969.
Lord Griffiths stated at 704: The Divisional Court in giving leave to appeal to your Lordships House certified the following point of law of general public importance: 60.
Whether for the purposes of the Factories Act 1961 and Regulations thereunder process carried on in a factory means a manufacturing process or other continuous and regular activity carried on as a normal part of the operation of the factory.
My Lords, I am not prepared to answer the question in this form because the word process is scattered throughout many sections of the 1961 Act, and it appears in many regulations made thereunder.
Your Lordships have not had the opportunity to consider the meaning to be attached to process wherever it appears and it is possible that it has different meanings in different contexts.
I would confine my opinion to the meaning of the word process where it is used in the 1969 Regulations and I would answer the certified question by saying that where the word process is used in the Regulations it means any operation or series of operations being an activity of more than a minimal duration. 61.
Although Lord Griffiths specifically confined his opinion as to the meaning of process to its use in the 1969 Regulations, it is clear that he rejected (at least implicitly) any notion that, to be a process in a factory, an activity had to be integral to the principal output of the enterprise.
In the Nurse case the business of the factory was the manufacture of crucibles.
Asbestos was not used for any purpose directly associated with that product.
If an argument akin to that presented by the appellant in the present case had been accepted in Nurse that would have disposed of the appeal.
It did not.
And it did not because it was not necessary that, in order to be an activity in connection with a process, it had to be shown that it was directly involved with the manufacture of the end product of the factory.
In Brophy v J C Bradfield & Co Ltd [1955] 1 WLR 1148 the plaintiffs husband had been overcome by fumes from a boiler used to heat the factory.
It was claimed that the lack of ventilation in the boiler room constituted a breach of sections 4 and 47 of the Factories Act 1937.
The Court of Appeal held that this was not a process within the meaning of those sections.
At p 1153, Singleton LJ dealt with the point pithily when he said: 62. upon the facts it does not appear to me that the boiler room was a workroom within the meaning of section 4 (1) of the Act or that the fumes were generated in the course of any process or work carried on in the factory.
This was a boiler used for 63. heating the factory and I do not think that that section applies to the facts of the present case.
In Owen v IMI Yorkshire Copper Tube, an unreported decision of Buxton J delivered on 15 June 1995, the judge felt that the decision in Brophy could be explained on the basis that when the fumes came from the factory heating supply and not from any part of the manufacturing process it was not a part of the process carried on in the factory.
For my part, I would not distinguish Brophy on that basis.
I consider that it was, on this point, wrongly decided.
A process in a factory should not be confused with the product that is manufactured.
In factories all manner of processes are carried on which contribute to the ultimate manufactured product in varying degrees of closeness.
Thus, for instance, the heating system in Brophy was not required, in the sense of making a direct contribution to the manufacture of tents and canvas goods (which was the business of the factory).
But a heating system was doubtless required in order that the manufacture of those goods could take place. 64.
The words in section 47(1), a process carried on in any factory should be given their plain and natural meaning.
To suggest that they import some intimate connection with the manufacture of a product introduces an unnecessary and unwarranted gloss on the subsection.
If it is a process that is a normal feature of the factorys activity, it is a process for the purposes of the legislation.
I would therefore hold that the lagging work which Mr McDonald encountered in the power station constituted a process for the purposes of section 47 and that the first condition necessary to show breach of subsection (1) of that section has been met.
Was Mr McDonald a person employed? 65.
On the question of whether Mr McDonald was a person employed, the Court of Appeal decided that he was not, either in the sense of being employed at the factory or in the process of handling asbestos McCombe LJ at para 59 and the Lord Dyson MR at para 107. 66.
As Mr Allan pointed out, an interpretation of the section which restricts its application to workers engaged in the process producing the dust or fume would greatly curb the scope of the provision and would exclude from protection many workers affected by exposure to the substances.
And, as he also submitted, where the purpose of a provision is to protect the health of workers, a restrictive interpretation should not be adopted unless the wording compels it Harrison v National Coal Board [1951] AC 639 per Lord Porter at 650.
The wording of the section does not compel a restrictive application.
For the reasons given in paras 27 and 53 55 above, I consider that, in approaching the interpretation of this subsection, the emphasis should be on the need for protection rather than on involvement in the process.
One could perhaps understand a more restricted approach where the danger was inherent to the process or where there was a special risk to those actively involved in the process but that is not the case here. 68. 67.
Section 49 of the 1937 Act provides an example of such a special risk.
That section empowered the Secretary of State to make regulations in relation to a process which involved a special risk of injury to the eyes from particles or fragments thrown off in the course of the process, and to require that suitable goggles or effective screens should be provided to protect the eyes of the persons employed in the process.
The rider that the regulations should be targeted at those employed in the process in that instance is logical, given that the risk can be expected to arise only for those who are actually involved in the process but the same cannot be said for dust or fumes which are liable to be inhaled by any who encounter them.
The absence from section 47 of a similar rider to that found in section 49 is significant.
It reflects the recognition that the risk of exposure extends beyond those who are involved in the process of generating the dust or fume which can cause injury.
In Morrison v CEGB, an unreported decision of 16 March 1986, Rose J held that section 63(1) of the Factories Act 1961 (the equivalent of section 47(1) of the 1937 Act) only extended protection to those engaged in the process.
He held that if it had been intended to extend the protection to those working in the factory generally, then the section could have been so worded.
It does not appear that Rose J was referred to section 65 of the 1961 Act (the equivalent of section 49 of the 1937 Act).
In the later case of Owen v IMI Yorkshire Copper Tube Buxton J considered both sections and reached the opposite conclusion to that of Rose J. He gave five reasons for arriving at that conclusion, four of which I agree with and find compelling.
They are these: (i) the phrase in connection with any process carried on refers to the dust and fume produced, not to the person operating that process; (ii) the effect of section 63 was to prohibit accumulation of dust or fume in any workroom at all, and not merely in the workroom where the process producing them was carried out; (iii) comparison with section 4 of the 1961 Act showed that section 63 provided the same ambit of protection as section 4 which, in material part, provided that adequate ventilation of each workroom, and the rendering harmless, so far as practicable, of all fumes, dust etc generated in the course of any process or work carried on in the factory as may be injurious to health; (iv) since the duty imposed by section 63 was to prevent accumulation of dust or fume, the protection which it was designed to achieve 69. must extend to all employed in the workroom, not just those engaged in the process.
In the Court of Appeal, the decision of Buxton J in Owen is referred to only en passant at para 49 and in a footnote to para 56 of McCombe LJs judgment.
The learned Lord Justice and the Master of the Rolls preferred to follow the decision in Banks on this question.
Stuart Smith LJ in Banks had adopted the line of reasoning of Rose J in Morrison.
Although he was aware that Buxton J had disagreed with Morrison in his judgment in Owen, Stuart Smith LJ indicated that he had not seen the judgment in the latter case.
He concluded that the words persons employed in section 47 of the 1937 Act related back to the earlier words, in connection with any process.
This he found to be the natural reading of the words.
I do not agree.
There is no reason to import, in effect, the earlier words as a qualification to the plain and simple expression, the persons employed.
As Buxton J pointed out, this would have the effect of creating a significant gap in the cover of protection for workers who might, in the course of their employment, inhale dangerous substances and be at risk of grave illness in consequence.
Quite why the creation of such a significant gap should represent the intention of the legislature was not addressed or explained by Stuart Smith LJ nor, with respect, by the Court of Appeal in the present case. 70.
Nor did Stuart Smith LJ explain, although he adverted to it, why the contrast between sections 47 and 49 of the 1937 Act did not point clearly to the former section being interpreted more widely.
For the reasons given in para 67 above, I consider that this divergence is significant and clearly betokened an intention that the application of section 47 should extend to those employed persons liable to be affected by the dust or fume, not merely to those employees who were responsible for producing those substances. 71.
But if the section applied to persons employed generally, did it apply to Mr McDonald who was not employed by the occupiers of the power station and who did not require to go to the areas where he was exposed to asbestos in order to fulfil the requirements of his own employment? In Massey Harris Ferguson (Manufacturing) Ltd v Piper [1956] 2 QB 396 the Divisional Court held that persons employed where that expression was used in section 60 of the 1937 Act included not only servants of the occupier, but any other person who might be called on to do work in the factory, including a painter employed by an independent contractor.
At p 401, Lord Goddard CJ said, The test is whether a person is employed in the factory, not whether he is employed by the occupier.
This approach was approved by the House of Lords in the Canadian Pacific case see Viscount Kilmuir at 504.
On this basis, it was unnecessary for Mr McDonald to show that he was employed by the occupiers of the factory.
The fact that he was employed by a different organisation is irrelevant to the application of the subsection to his case.
Casual visitor 72.
What of the circumstance that Mr McDonald was not required to go to that part of the factory where he inhaled the dust which led to the development of mesothelioma? The answer is supplied, I believe, by the decision of the Court of Appeal in Uddin v Associated Portland Cement Manufacturers Ltd [1965] 2 QB 582.
In that case it was held that section 14 of the 1937 Act applied where a workman in the factory went to a part of the premises where he had no authority to go and his arm was caught in a revolving shaft.
At 593E Lord Pearce said, there is nothing to justify the gloss that an employed person is to be protected only so long as he is acting within the scope of his employment.
The suggestion that Mr McDonald was acting within the scope of his employment while in the areas where pulverised fuel ash was collected and stepped outside that scope as soon as he crossed the threshold of another room in the factory is fanciful.
I consider that the second condition to establish breach of section 47(1) has also been met.
Substantial quantity at time of giving off or inhalation? 73.
The third condition of the subsection that arises in the present case is that a substantial quantity of dust be present, on the appellants case at the time of inhalation, and, on the respondents, at the time that it was given off.
Resolution of the conflict between these two positions must begin with a close examination of how the requirement is framed in the subsection itself.
The duty to take all practicable measures is triggered when there is given off any injurious or offensive dust or fume or any substantial quantity of dust of any kind.
The subsection does not stipulate that the quantity of dust must be substantial at the point of inhalation.
The text of the provision therefore favours the respondents claim as to its proper interpretation.
It is to be presumed that the greater the quantity of dust given off, the greater the chance that it will be inhaled before it is dissipated.
It is therefore not at all surprising that practicable measures should be required to be taken at the point at which the dusts or fumes are given off.
On that account also, the respondents position is to be preferred.
That interpretation as to the effect of the subsection also appears to have been accepted by Widgery J in Nash v Parkinson Cowan Ltd (1961) 105 S J 323 although the judge in that case does not appear to have been asked to consider the two possible interpretations advanced on the present appeal. 74. 75.
Mr Nolan argued that his interpretation was supported by certain statements made by Singleton LJ in Gregson v Hick Hargreaves & Co Ltd [1955] 1 WLR 1252 where at 1263 he said, No one could successfully contend that if there was given off a considerable quantity of dust at one end of this 100 yards long shop, everyone down to the other end of the shop should be provided with a mask.
It appears to me, however, these remarks were made in the context of an examination whether it was practicable to supply masks rather than on the question of whether the obligation to take practicable measures arose if the amount of dust was considerable at the time that it was given off.
In a later passage Singleton LJ said: On the latter part of section 47(1) on which [counsel for the plaintiff] relies, he is entitled to say there was given off a substantial quantity of dust, and thus the employers were under a duty to take all practicable measures to protect the plaintiff and others employed against inhalation of the dust. 76.
I consider therefore that the duty to take practicable measures arises whenever a considerable quantity of dust is given off and that the activation of the duty is not dependent on its being shown that the quantity of dust was considerable at the moment of inhalation.
In my view, therefore, the third condition would be satisfied in Mr McDonalds case if the evidence established that, at the time the asbestos dust was given off, it was of substantial quantity.
The evidence about the amount of dust at the time that it was given off 77.
The Court of Appeal in the present case held that the trial judge had failed to make a finding on whether the amount of dust given off was substantial.
At para 62 McCombe LJ said that the judge made no finding on this point because although he had begun to address the question at the beginning of para13 of his judgment, by the end of the paragraph he had strayed off into the question of whether Mr McDonald had been exposed to dust likely to be injurious or offensive.
At para 109 Lord Dyson MR said, It is unfortunate that the judge did not make any finding on this issue of fact and it is difficult for this court to make good this omission. 78.
McCombe LJ analysed the evidence in relation to the giving off of a quantity of dust in paras 63 and 64 and the Lord Dyson MR expressed agreement with that analysis.
For reasons that will appear, it is necessary to set out both paras: 63.
Mr Allans submission in this area is that the evidence showed that there were substantial quantities of asbestos dust discharged in the activities at the power station and that it matters not that such dust may not have been substantial at the point of inhalation.
He submitted that it was common ground between the experts that the processes at the power station would have produced a substantial quantity of dust.
He referred to the reports of Mr Raper for Mr McDonald and Mr Glenn for the first respondent The first of those references includes a table of Mr Rapers compilation referring to the concentrations of asbestos dust to which Mr McDonald was likely to have been exposed.
Each is based upon Mr McDonald's proximity to the location of various operations.
The table is introduced by the following: 4.31 On the basis of the claimant's account and in view of the foregoing [in which Mr Raper had stated his own understanding of substantial quantities of dust], I would estimate the concentrations of asbestos dust to which the claimant is likely to have been exposed as shown in the following table.
The second passage, from the report of Mr Glenn, was in these terms: If there was work with asbestos insulation in the power station then there was the potential for anyone close to that work to be exposed to a high concentration of asbestos dust, but the dust would disperse as it moved away from the work area and those in neighbouring areas would have been subjected to a lower concentration of dust than those directly involved in the work. 64.
In my judgment, these passages are slender evidence of the giving off of a substantial quantity of dust.
The first is based upon Mr McDonalds account which, as the judge found, had its deficiencies.
The second only alludes to a potential for exposure to high quantities of dust based upon proximity of the person in question to the operation in question.
I consider that that material is not adequate to demonstrate that there was the giving off of any substantial quantity of dust relevant to the injury said to have been caused to Mr McDonald at these premises.
There simply was not the necessary evidence to establish in this case what quantities of dust were discharged by work at this power station and in what circumstances so as to constitute a substantial quantity for the purposes of the section. (Emphasis added). 80.
He pointed out that the consultant engineers, Mr Raper and Mr Glenn, in their joint statement agreed that asbestos would have been present in the lagging materials within the power station at the material time.
Mr McDonald in his witness statements had described asbestos powder being mixed in oil drums, the cutting of pre formed sections and the removal of old lagging.
Mr Raper had stated that these activities would have given rise to high concentrations of asbestos dust.
This opinion did not rest solely on Mr Rapers assessment of Mr McDonalds evidence.
He referred to published work by PG Harries who had measured dust levels in naval dockyards and supported his opinion by references to the relevant literature. 81.
When Mr Raper gave oral evidence these sections of his report were not challenged, Mr Allan claimed.
What was put in issue was the extent of Mr McDonalds exposure.
It was not surprising, said Mr Allan, that Mr Rapers oral evidence about high concentrations of dust was not challenged since what he had said on the subject was entirely uncontroversial.
Moreover, Mr Glenn, in his report, acknowledged that some types of work with asbestos insulation can release large amounts of asbestos dust unless appropriate precautions are taken and he gave a similar opinion in his report to that of Mr Raper regarding the fact that mixing of asbestos would give rise to high concentrations of asbestos dust. 82.
At the trial, according to Mr Allan, neither the appellant nor the first defendant disputed that within the power station work was carried out involving asbestos insulation and this work would cause substantial amounts of dust to be given off.
What was in dispute was the extent and frequency of Mr McDonalds exposure.
Finally, Mr Allan pointed out that in the Cherry Tree case it was not controversial that the type of lagging activities described by Mr McDonald gave rise to high concentrations of visible dust (Hale LJ para 39). 83.
For the appellant, Mr Nolan argued that the requirement that there be a substantial quantity of dust introduced either a qualitative or a quantitative dimension and suggested that in Anderson v RWE NPower plc (unreported 22 March 2010) Irwin J had inclined to the view that the substantial element of the requirement involved a qualitative component.
At para 43 of his judgment in that case Irwin J had said, the phrase substantial dust itself may add little, since in context it almost certainly meant so substantial as to be likely to be injurious.
On this approach some foreseeable risk of injury was imported into the test and its application would have to take account of prevailing knowledge (or lack of knowledge) of the risk.
If this was the correct approach, Mr Nolan submitted that the test could not have been satisfied since an unequivocal finding had been made by the trial judge that the level of Mr McDonalds exposure was not greater than that thought of at the material time as being unlikely to pose any real risk to health see para 4 above.
If the substantial element connoted merely a quantitative element, Mr Nolan claimed that this must mean more than a significant quantity.
He referred to the case of Richards v Highway Ironfounders (West Bromwich) Ltd [1955] 1 WLR 1049 when the plaintiff was found to have had to work in clouds of silica dust. (It is to be noted, however, that there was no examination by Sir Raymond Evershed MR of the extent of dust that had to be present for the requirement of substantial to be met, presumably because it was beyond dispute that the quantity was indeed substantial.
It should also be noted that, in contrast with the approach of Irwin J in Anderson, the Master of the Rolls considered that the question of foreseeability of injury was relevant only to the issue of practicable measures). 84. 85.
Mr Nolan submitted that any evidence of the quantity of dust which depended on Mr McDonalds account of the working conditions which he encountered was of limited value since his evidence about his exposure had been rejected by Judge Denyer QC as unreal and this finding had not been disturbed by the Court of Appeal.
It is important to note precisely what the judge said about this.
At para 11 he said: I reject the notion that he was constantly standing in clouds of asbestos dust when he was there this is an unreal scenario.
I accept the defendant's analysis that as you move away from the centre of activity, levels of harmful dust decline.
I accept that his likely exposure when exposed was not greater than those levels thought of in the 50s and 60s as being unlikely to pose any real risk to health.
Two points need to be made about this passage.
First the rejection of Mr McDonalds account related to his claim that he was standing in clouds of asbestos dust when, of course, Mr McDonalds case on section 47 was being advanced on the basis of the giving off of substantial quantity of dust of any kind.
As the Court of Appeal held, the judge failed to address that question.
The second and related point is that the judge appears to have made his judgment on the question of the levels of dust on the basis of whether they gave rise to known risks.
He did not address what has been described, for instance by Sir Raymond Evershed MR in Richards, as the dichotomy in section 47.
What does substantial mean? 86.
The relevant phrase in section 47 is any substantial dust of any kind.
I should start my discussion on this part by saying what this does not mean.
It does not mean a substantial quantity of injurious dust.
The so called dichotomy in section 47 points clearly away from such an approach.
Whether the second limb of the subsection is triggered calls for a purely quantitative assessment.
It may well be, as suggested in cases such as Richards and Gregson, that the possibly injurious propensity of the dust has a part to play in deciding what are practicable measures.
But that has nothing to say on the question whether, in the first instance, there is any substantial quantity of dust of any kind. 87.
The question whether the dust is asbestos or other injurious dust should therefore not obtrude into the initial assessment of whether the second limb of section 47(1) is engaged.
To do this conflates consideration of the second limb with considerations that are relevant to the first limb.
Proper application of the subsection requires a staged approach: (i) is the dust, fume or other impurity which is given off of such a character and given off to such an extent as to be likely to be injurious or offensive to the persons employed? (ii) if not, has any substantial quantity of dust of any kind been given off in the workroom where the claimant was a person employed? (iii) if the answer to (i) or (ii) is yes are there practicable measures which can be taken to protect the persons employed against inhalation of the dust or fume or other impurity and to prevent its accumulation in any workroom? And (iv) if the answer to (iii) is yes have they been taken? 88.
This staged approach was not followed by the trial judge nor, I am afraid, by the Court of Appeal, although, in fairness, it does not seem to have been presented to either in quite the stark way that I have expressed it.
Indeed, by the time that the matter came before the Court of Appeal, it may not have been feasible for counsel to present it in quite that way, given the flow of the evidence before Judge Denyer QC.
Be that as it may, it is clear that the sharp distinction that should have been drawn between matters required to establish liability under the first limb and those required to sustain a case under the second was not maintained.
The opening words of para 63 of McCombe LJs judgment and his observation that there was no evidence that any substantial quantity of dust relevant to Mr McDonalds injury had been given off disclose that that clear division between the two limbs was not preserved.
Of course, the question of whether any substantial quantity of any dust caused or contributed to Mr McDonalds condition would always be relevant but not at the stage where what was being decided was if there was a substantial quantity of dust of any kind. 89.
Mr Allan submits that the failure of the trial judge and the Court of Appeal to approach the application of the second limb properly is not fatal to the respondents case on the cross appeal.
In particular, he points to the fact that, at the time of Mr McDonalds exposure, no reliable scientific means existed for measuring the concentrations of dust in the atmosphere.
In these circumstances, he suggests, the assessment of dust levels had to be by reference to a visible dust cloud, even though the hazardous proportion of the dust would be invisible to the naked eye.
There was enough evidence, he claimed, to allow this court to conclude that such a visible dust cloud was present and that, therefore, the proposition that there was a substantial quantity of dust was made out. 90.
The problem with this submission is that there was no examination before the trial judge or the Court of Appeal of the issue whether the only means of assessing whether dust levels amounted to substantial was by visible assessment.
Or, at least, if there was, it does not feature in the judgment of either court.
Nor was evidence given of how dense the cloud would have to appear to be.
These, and doubtless many other issues, would have been canvassed before Judge Denyer QC if there had been a clear confrontation of the question whether, merely on its appearance, the quantity of dust which was generated at the time Mr McDonald was in the workroom satisfied the statutory requirement of being substantial.
It is not possible for this court to conduct retrospectively the type of investigation that would be required to provide a confident outcome to that debate.
I have concluded, therefore, that the third condition has not been, and cannot now be, satisfied.
The fourth condition has it been shown that Mr McDonald inhaled asbestos dust which caused his mesothelioma? 91.
The undisputed evidence was that anyone who was present in the workroom where lagging operations were carried out would be exposed to asbestos dust.
It was not disputed that Mr McDonald was so present.
While the extent of his exposure was a matter of controversy, the fact that he was exposed to some extent was not.
Therefore, as Lord Dyson MR pointed out in para 119 of his judgment, in the absence of any suggestion that he was exposed to asbestos in any other employment or in the general atmosphere, causation will have been established in the conventional way.
I consider that causation has been established and that Mr McDonalds estate is entitled to recover appropriate compensation.
Disposal 92.
I would dismiss the appeal and the cross appeal.
LADY HALE: 93.
A just and sensible judge is always prepared to admit that she has been wrong.
But it would not have been comfortable to be the swing vote between two Justices who thought that Cherry Tree Machine Company Ltd v Dawson (sub nom Jeromson v Shell Tankers (UK) Ltd) [2001] EWCA Civ 101, [2001] ICR 1223 was rightly decided and two who thought that it was wrong.
I am therefore mightily relieved that the unanimous view is that it was rightly decided.
The claimants husband in Cherry Tree was employed as an apprentice fitter in a factory which manufactured dry cleaners presses.
For two years, it was part of his job to mix asbestos flock with water in a bucket and then apply it to the plattens of a press in order to seal them to stop the steam escaping.
He was therefore mixing the asbestos as part of the process of manufacturing a product containing asbestos.
That sort of mixing, as Lord Reed explains, was covered by the Asbestos Industry Regulations 1931.
He was also engaged in the manufacture of such products and thus undoubtedly within the class of persons whom the Regulations were designed to protect. 94.
The first question in this case is whether the mixing of asbestos with water in order to form a paste with which to lag pipes and boilers in a power station was also covered by the Regulations.
The second question is whether the Regulations were designed to protect a person such as Mr McDonald, who was not employed by the power station but was there in the course of his employment with another employer.
Neither question is without difficulty, as the difference of opinion in this court demonstrates.
But it is common ground that if Mr McDonalds exposure to asbestos was in breach of a statutory duty owed to him, the power station will be liable on the basis of having materially increased the risk of his suffering injury from that exposure. 95.
The Regulations in question were made under section 79 of the Factory and Workshop Act 1901 (see para 6 above).
This gave the Secretary of State power to do two things: first, to certify that any manufacture, machinery, plant, process or description of manual labour, used in factories or workshops was dangerous, if he was satisfied that it was dangerous or injurious to health or dangerous to life or limb, either generally or in the case of women, children or any other class of persons; and second, having so certified, to make such regulations as appeared to him reasonably practicable and to meet the necessity of the case.
Section 82 made it clear that the regulations could cover any factory or workshop where the certified manufacture or process took place. 96.
The Secretary of State certified as dangerous the manipulation of asbestos and the manufacture or repair of articles composed wholly or partly of asbestos and processes incidental thereto.
The focus was upon the processes of manipulation and manufacture and not on any particular setting where this might happen.
This focus is carried through into the Preamble to the Regulations, which directs that they shall apply to all factories and workshops or parts thereof in which the following processes or any of them are carried on.
The only indication in the Regulations that they might not apply to all such factories or workshops is in the title The Asbestos Industry Regulations coupled with what that might have been understood to mean at the time. 97.
But that understanding is not crystal clear from the Merewether and Price Report on whose findings and recommendations the Regulations were based.
We can all read that Report, and the Report on Conferences between Employers and Inspectors concerning Methods for Suppressing Dust in Asbestos Textile Factories which followed it, and find some words which appear to support the view which we have taken of the Regulations and some which point the other way.
Part I of the Merewether and Price Report is devoted to establishing that there is a dose related risk to health from exposure to asbestos dust.
Part II is devoted to an explanation of the processes in which asbestos dust might be generated and the methods of suppressing that dust.
The introduction to Part II lists seven main groups of asbestos products, including at (c) insulation materials.
But it also points out that apart from manufacture, certain work is carried on in premises subject to the Factory and Workshops Acts, as well as in other premises, which involves use or manipulation of asbestos or products containing it (p 19).
It cannot therefore be assumed that the authors were only concerned with the factories and workshops in which the particular seven products listed as (a) to (g) were produced.
The concluding summary and recommendations include the comment that Dust is produced at many kinds of machines, in hand process work, and in simple incidental operations, particularly in emptying settling chambers, and in all handling of fiberized asbestos (p 31).
The overall message is clear: asbestos dust is potentially harmful; it is produced when handling asbestos and in various other manufacturing processes; and steps should be taken to suppress it.
In my view, the title to the Regulations, and the preceding Report, are by no means clear and unequivocal enough to dispel the plain meaning of the words of the Preamble to the Regulations, which direct that they shall apply to all factories and workshops in which the listed processes are carried out.
This is reinforced by the exclusion of places where only some of those processes are carried on and then only occasionally.
The Regulations do only apply to factories and workshops, and not, therefore, to places such as ships where processes producing asbestos dust were also known to be carried on.
But the power station with which we are concerned was a factory or workshop to which the Factories Acts applied. 98. 99.
The next question, therefore, is whether mixing asbestos containing insulation material in large drums to create insulating paste was a process covered by the Regulations.
Mr Nolan QC, for the defendant, mounted a vigorous argument that mixing in paragraph (i) of the list of processes in the Preamble had a narrow technical meaning which could not include mixing such as this.
He pointed to the uses of the term mixing, in both the Merewether and Price Report and the Report on Conferences, in the context of the work of preparing raw asbestos for use.
He also pointed to the context, at the beginning of the list of processes in the Regulations, before the references to the processes involved in the manufacture of various products. 100.
Mr Nolans meaning would not have included the mixing of asbestos flock with water in order to make the paste used to seal the plattens in Cherry Tree, a process which is also described in the Merewether and Price Report.
His meaning is difficult to reconcile with the Regulations definition of asbestos as any fibrous silicate mineral, and any admixture containing any such mineral, whether crude, crushed or opened.
As Lord Reed points out (para 155(v)), mixing of asbestos can take place at three stages within the asbestos industry: mixing the contents of sacks before crushing; mixing the crushed material before it is opened; and mixing the opened or fiberized asbestos with other materials in order to produce asbestos products.
But once the meaning is taken beyond the narrow technical meaning for which Mr Nolan argued, it is difficult to see why mixing asbestos (as defined in the Regulations) with water to make a paste to seal the plattens in a dry cleaning press is covered but mixing the same asbestos with water to make lagging paste is not, provided that both processes are carried on in a place covered by the Factories Acts.
The question comes back, therefore, to whether the Regulations are confined to the industry of making asbestos products, on which I respectfully differ from Lord Reed for the reasons given earlier. 101.
The next question, therefore, is whether Mr McDonald was a person for whose protection the Regulations were made.
The 1901 Act itself made no mention of civil liability towards anyone.
Under section 85(1), breach of the Regulations was a criminal offence punishable only with a fine.
But it was long ago established that, if statutory duties were created for the protection of a particular class of persons, who might be injured if those duties were not observed, then Parliament might not have intended that criminal liability were the only remedy: see, for example, the classic statement in Groves v Lord Wimborne [1898] 2 QB 402.
Civil liability therefore depends upon whether the claimant belongs to such a class.
But logic suggests that there must be some limit: the class may be very wide but it is less likely that legislation creating a criminal offence also intended to impose what is often a strict civil liability, independent of negligence or the foreseeability of harm, towards anyone at all who might suffer injury as a result of a breach. 102.
Sometimes the statute itself suggests the limit, as with the provisions of sections 47 and 49 of the Factories Act 1937, which protect respectively persons employed and persons employed in the process (see paras 17 and 67 above).
Sections 79 and 82 of the 1901 Act do not contain even those limits.
There is the complication, as pointed out in Canadian Pacific Steamships Ltd v Bryers [1958] AC 485, that the 1901 Act was repealed by the 1937 Act and Regulations made under it were deemed to have been made under the corresponding provisions of the 1937 Act; section 60 of the 1937 Act was originally limited to the protection of persons employed in the regulated processes; but this was amended in 1948 to cover all persons employed.
However, as Viscount Kilmuir pointed out, while Regulations which were ultra vires when made could not be rendered intra vires if the scope of the later Act were wider, it did not follow that Regulations which were intra vires when made could become ultra vires if the scope of the later Act were narrower. 103. Is there anything, therefore, to suggest that the duties imposed in the 1931 Regulations are owed only to persons employed by the factory or workshop in question, as opposed to persons employed elsewhere who come to the factory in the course of their employment and may be exposed to asbestos dust as a result? Part II of the Regulations imposes certain duties (breach of which is also punishable by a fine) upon persons employed, but some refer simply to persons employed, others to persons employed at [specified] work, and one provides that no person shall misuse or wrongfully interfere with appliances provided in pursuance of the Regulations.
This certainly suggests a link with employment, but not with any particular employment. 104.
Although liability under the Factories Acts is often considered a type of employers liability, it is in fact a species of occupiers liability, the duties being placed upon the occupiers of the factories and workshops to which they applied.
The object of those duties was to protect people from the harm which they might suffer as a result of the processes being carried on there.
As was pointed out by both Lord Goddard LC and Streatfeild J in Massey Harris Ferguson (Manufacturing) Ltd v Piper [1956] 2 QB 396, it is often the people who are not regularly employed in the factory in question who are most in need of the protection offered by duties of this sort.
The test which they adopted was whether a person was employed in the factory, not whether he was employed by the occupier.
This test was approved by the House of Lords in the Canadian Pacific Steamships case. 105.
The court in both those cases clearly regarded the decision in Hartley v Mayoh & Co [1954] 1 QB 383 as something of an exception to the general principle.
There it was held that there was no liability under the Electricity Supply Regulations towards a fireman attending a factory fire who was electrocuted because of faulty wiring.
It is noteworthy that, first, the occupier was only held responsible for 10% of the damages, the remainder being the responsibility of the electricity company; second, that the occupier was held liable in common law negligence anyway; and third, that no authorities, other than the general principle in Groves v Lord Wimborne, are cited for the proposition in any of the judgments in the Court of Appeal. 106.
Mr Allan QC, for the respondent claimant, suggested that the test of a person employed is a person who attends the factory in the course of his employment, with the possible proviso that he does so in connection with the processes carried on there, rather than solely in connection with his employers business.
Mr McDonald met that test.
He was there on a regular, although not frequent, basis in order to collect the pulverised fuel ash generated by the power stations processes.
I accept, of course, that at the time the Regulations were made, it was not known that a fatal disease might be caused by exposure to a single fibre of asbestos.
The Merewether and Price Report was concerned with what was then seen as a dose related risk of developing asbestosis.
But the Report also acknowledged that the appropriate methods for suppression of dust may only be fully determined when the harmful effects of comparatively low concentrations of asbestos dust are duly appreciated (p 31).
The message was clear: asbestos dust is harmful and the then known methods must be employed to protect workers from it.
I see no difficulty in regarding Mr McDonald as a person employed in the power station, albeit not by the power station, who was entitled to such protection as the Regulations then required. 107.
It follows that I agree with Lord Kerr and Lord Clarke that the appeal should be dismissed. 108.
In those circumstances, it is not strictly necessary to express a view on the cross appeal, but in my view it should be allowed.
As I am in a minority of one on this issue, I will explain my reasons very briefly.
All the conditions required by the substantial quantity limb of section 47 of the Factories Act 1937 (see para 109) are made out.
I agree, for the reasons given by Lord Kerr, that the lagging operations were a process carried on at the power station.
I also agree with him that Brophy v JC Bradfield & Co Ltd [1955] 1 WLR 1148 was wrong to hold that a factorys heating system was not a process carried on in the factory for this purpose.
I agree with both Lord Kerr and Lord Reed that the persons protected are not limited to those employed on the process in question.
For the reasons given earlier, I agree with Lord Kerr that the claimant was a person employed and thus protected by section 47.
And I agree with both Lord Kerr and Lord Reed that the quantity of dust must be substantial at the time when it is given off and not necessarily at the time when it is inhaled.
I remind myself that causation is not in issue in this case. 109.
Where I respectfully disagree is in their conclusion that there was no evidence that the quantity of dust given off at the relevant time was substantial.
I agree with Lord Kerr that this limb of section 47 requires only a quantitative assessment of the amount of dust of any kind being given off at the relevant time.
The relevant time is not when Mr McDonald was exposed to the dust or in the room where the lagging work was being done.
It is when the dust was given off.
This issue was not addressed by the trial judge, who was side tracked into issues of foreseeability and whether the dust was likely to be injurious, which are relevant to negligence and to the first limb of section 47, but not to the second.
Nor, with respect, was it addressed by the Court of Appeal in the passages quoted by Lord Kerr (at para 78).
They were concentrating on the evidence of Mr McDonalds exposure and not on the evidence of the quantity of dust given off when it was given off.
The evidence of both experts as to the amount of dust likely to have been given off by the various lagging activities carried on at the power station (summarised by Lord Kerr at paras 79 to 81) was entirely uncontroversial.
In my view it shows that the amount of dust given off was substantial.
The question then is whether practicable measures could have been taken to protect persons employed from inhaling the dust.
But that issue has not been raised by the appellant defendant, who has throughout argued that the section does not apply, rather than that there was nothing the appellant defendant could reasonably have done about it.
The burden was upon the appellant defendant to make such a case and the appellant defendant has not. 110.
Hence I would have allowed the claimant/respondents cross appeal in addition to dismissing the defendant/appellants appeal.
LORD CLARKE: 111.
Lord Kerr and Lord Reed have reached different conclusions on the question whether the appellant was in breach of regulation 2(a) of the Asbestos Industry Regulations 1931 (the Regulations).
Lord Kerr concludes that it was, whereas Lord Reed concludes that it was not.
I prefer the reasoning and conclusion of Lord Kerr on this question, which is the critical question in this appeal. 112.
Lord Kerr concludes that the Regulations should be given a broad construction.
He refers in paras 6 to 14 to the statutory basis for and to the provenance of the Regulations.
He refers to sections 79 and 82 of the Factory and Workshop Act 1901 and to a letter from the relevant Secretary of State dated 15 September 1931 enclosing a draft of the Regulations.
He notes the breadth of the anticipated application of the Regulations and the express provision in section 82(1) that processes which did not exist at the time could come within the Regulations in the future.
Thus section 83 provided that regulations made under the Act might, among other things, (b) prohibit, limit or control the use of any material or process.
At para 10 Lord Kerr quotes from the preamble to the Regulations, of which para (i) is of particular relevance here.
It provided that the Regulations were to apply to all factories and workshops or parts thereof in which the following processes or any of them are carried on: (i) breaking, crushing, disintegrating, opening and grinding of asbestos, and the mixing or sieving of asbestos, and all processes involving manipulation of asbestos incidental thereto; The remaining sub paragraphs are set out by Lord Kerr in para 10 above. 113.
Then in paras 11 and 12 Lord Kerr refers to one of the provisos to those provisions: Provided that nothing in these Regulations shall apply to any factory or workshop or part thereof in which the process of mixing of asbestos or repair of insulating mattresses or any process specified in (v) or any cleaning of machinery or other plant used in connection with any such process, is carried on, so long as (a) such process or work is carried on occasionally only and no person is employed therein, for more than eight hours in any week, and (b) no other process specified in the foregoing paragraphs is carried on.
I agree with Lord Kerr that, although the proviso cut down the scope of the Regulations, it also gave some insight into their intended ambit.
In particular, it carried the clear implication that the processes identified in the preamble, other than those listed in the proviso, were to come within the Regulations even if the work involved in them took place only occasionally or for limited periods.
Also, as Lord Kerr observes, in relation to the processes listed in the proviso, including mixing, the Regulations were to apply unless the work was carried out occasionally and no person undertook it for more than eight hours a week. 114.
The preamble provided that it was the duty of the occupier of relevant premises to observe Part I of the Regulations, which included regulation 2.
Regulation 2(a) and (b) provided: 2. (a) Mixing or blending by hand of asbestos shall not be carried on except with an exhaust draught effected by mechanical means so designed and maintained as to ensure as far as practicable the suppression of dust during the processes. (b) In premises which are constructed or reconstructed after the date of these Regulations the mixing or blending by hand of asbestos shall not be done except in a special room or place in which no other work is ordinarily carried on. 115.
The essential issue between the parties is whether the regulation 2(a) covered only the asbestos industry and was concerned with asbestos in its raw unprocessed condition, as submitted on behalf of the appellant, or whether it extended to processed asbestos products, as contended on behalf of the respondent.
In powerful judgments, Lord Reed espouses the former view, whereas Lord Kerr espouses the latter. 116.
Both Lord Kerr and Lord Reed refer extensively to the Merewether and Price Report and other relevant pointers.
I entirely accept that a critical part of the Regulations was concerned with processes in the manufacture and repair of items containing asbestos.
This is plain from paras (i) to (vi) of the preamble quoted by Lord Kerr at para 10 and, indeed, can be seen from the title to the Regulations, namely the Asbestos Industry Regulations.
However, the question is whether that expression should be given a wider or narrower meaning.
It seems to me that the better view is that it should be given a wider meaning. 117.
The purpose of the Regulations was surely to protect workers from the consequences of asbestos dust.
I do not myself see why that protection should be limited to those affected by asbestos dust in the process of manufacture and repair and not those affected whenever a defined process was carried on in a factory or workshop. 118.
All depends upon whether the process carried on in the present case was within para (i) of the preamble to the Regulations quoted above.
In short, was it within the expression mixing or sieving of asbestos, and all processes involving manipulation of asbestos incidental thereto? Asbestos was defined as meaning any fibrous silicate mineral, and any admixture containing any such mineral, whether crude, crushed or opened.
As I read his judgment, Lord Kerr accepted these submissions made on behalf of the respondent (summarised at his para 23). (1) Consistently with the mischief identified by Merewether and Price and the remedy they proposed, the terms of section 79 and the certification of the Secretary of State indicated that the Regulations were to apply whenever and wherever a defined process was carried on in a factory or workshop. (2) There was no need to adopt a narrow definition of asbestos industry and on that basis restrict the application of the Regulations.
The title was used in the wide sense of any industry where one or more of the processes referred to in the preamble was carried on. 119.
I agree.
As I see it, the specific question which must be answered is that identified by Lord Reed in paras 151 and 152.
As he says in para 151, the expert evidence given at the trial indicated that insulation material containing opened or fiberized asbestos were widely used until the 1960s for lagging boilers and pipework.
Such material commonly contained fiberized asbestos, mixed with other substances such as calcium silicate or cement.
The insulation material could either be pre formed or mixed with water and applied in the form of a paste.
Pre formed sections were sawed by hand in order to profile them for fitting.
The mixing of the paste involved bags of powdered insulation material being emptied into open topped containers for mixing with water.
Lord Reed concludes in para 152 that, having regard to that evidence, it appears likely, on the balance of probabilities, that the insulating material used by the laggers was an admixture containing fiberized asbestos and was therefore asbestos as defined in the Regulations.
The question posed by Lord Reed is whether the activities of the laggers fell within the Regulations. 120.
I agree with Lord Reed that that is indeed the question.
It appears to me, at any rate on the face of it and if the language is given its ordinary and natural meaning, that the conclusion that the material was an admixture amounts to a conclusion that there had been a mixing of asbestos within the meaning of para (i) of the preamble.
Equally, as I see it, there was a process of mixing of asbestos within the meaning of the proviso quoted above, although the proviso would not apply on the facts because the conditions were not both satisfied.
For my part, I do not think that the principle noscitur a sociis leads to the conclusion that the word mixing should be given other than its ordinary and natural meaning. 121.
I turn briefly to the authorities.
I agree with Lord Reed that in Watt v Fairfield Shipbuilding & Engineering Co Ltd 1999 SLT 1084 Lord Gill confined the scope of the Regulations too narrowly.
I also agree with him that the first case in which a detailed consideration of the background to the Regulations was Cherry Tree Machine Co Ltd v Dawson (sub nom, Jeromson v Shell Tankers (UK) Ltd) [2001] EWCA Civ 101; [2001] ICR 1223, which has been discussed in some detail by both Lord Kerr and Lord Reed and in which Hale LJ gave the only reasoned judgment, with which Mantell LJ and Cresswell J agreed.
Both Lord Kerr and Lord Reed accept that it was correctly decided, although Lord Reed expresses disagreement with some of the dicta in Hale LJs judgment. 122.
As I read that judgment, Hale LJ approached the construction of the Regulations in the way that I have sought to do.
I refer to only two aspects of her judgment in addition to those referred to by Lord Kerr.
First, she said at para 24 on p 1232 that none of the arguments in Banks v Woodhall Duckham Ltd (which was an unreported decision of the Court of Appeal dated 30 November 1995) or Watt was sufficiently persuasive to combat the natural and ordinary meaning of the words used.
Hale LJ approached the issue of construction by reference to the natural and ordinary meaning of the words used and was not persuaded that the title to the Regulations, namely the Asbestos Industry Regulations, led to any different conclusion.
At para 20 she described the most powerful of the submissions to the contrary as being the title to the Regulations but said that there were two even more powerful points in reply.
The first was that the Regulations were expressed to apply to any factory or workshop where the defined processes took place and the second was a point on the proviso much as referred to above.
Secondly, at para 25, Hale LJ expressed some doubt as to whether the Regulations applied to the work of knocking off old lagging but that they were more likely to have applied to the laggers work in mixing asbestos to form new insulation.
I respectfully share those views of Hale LJ (for the reasons she gives) and the views of Lord Kerr on mixing at paras 45 to 49 and prefer them to the different views of Lord Reed. 123.
I would only add that I also share the views of Lord Kerr expressed at paras 27 to 35 of his judgment.
In particular, if the Secretary of State had intended to limit the Regulations to a narrow view of the asbestos industry, he could easily have done so, whereas, as Hale LJ observed, the Regulations made it clear that all factories and workshops in which certain specified processes were carried out were covered.
If the purpose of the Regulations was to protect workers from asbestosis dust, why exclude these workers? I adopt Lord Kerrs approach to the Merewether and Price Report at his paras 28 to 35 without repeating it here.
I would only underline the statement of Judge LJ quoted by Lord Kerr at his para 29, that the research was confined to asbestos textile workers, but [the report] explained that workers in other industries, exposed to asbestos dust, were also at risk.
The critical finding was that exposure to asbestos dust gave rise to grave illness. 124.
For these reasons, like Lord Kerr, I would hold that the Regulations applied to the work being done by the laggers.
I agree with Lord Kerr and Lord Reed that it is not necessary for a person in the position of Mr McDonald to show that he was employed by the occupier or in the process in connection with which the dust or fume is given off.
The question remains, however, whether he was employed at the factory.
As Lord Kerr explains at paras 72 and 73, it is not necessary that the employee should be acting in the course of his employment: Uddin v Associated Portland Cement Manufacturers Ltd [1965] QB 582, per Lord Pearce at 593E. 125.
Lord Kerr notes at para 71 that, at any rate for the purposes of section 60 of the 1937 Act, persons employed included any person who might be called on to do work at the factory, including a painter employed by an independent contractor: see for example Massey Harris Ferguson (Manufacturing) Ltd v Piper [1956] 2 QB 396.
On the other hand, after referring to those cases, Lord Reed observes at para 217 that the expression does not extend to a fireman who enters a factory in order to put a fire out (Hartley v Mayoh & Co [1954] 1 QB 383), or to a police constable who enters a factory in pursuit of a felon (Wigley v British Vinegars Ltd [1964] AC 307, 324 per Viscount Kilmuir), although he is a person and he is employed.
Lord Reed adds that in Canadian Pacific Steamships Ltd v Bryers [1958] AC 485, 504 Viscount Kilmuir considered that the phrase applied to any person who is employed in the factory whether the direct servant of the occupier or a servant of an independent contractor so long as he is employed upon work in that factory.
He adds that in the later case of Wigley v British Vinegars Ltd, concerned with a window cleaner employed by an independent contractor, Viscount Kilmuir said, at p 324: In my view, the true distinction is between those who are to work for the purposes of the factory and those who are not.
Clearly, maintenance of the factory is work for the purpose of the factory, while the arrest of a felon or the putting out of a fire is not, though it may benefit the factory indirectly.
Window cleaning is part of the maintenance of the factory and in my view the deceased was within the protection afforded. 126.
Lord Reed recognises that these principles tend to give rise to the drawing of fine distinctions without any compelling rationale.
The present case might be regarded as an example.
As he puts it at para 218, it could perhaps be argued that Mr McDonald was employed for the purposes of the power station, either on the basis that one of those purposes was the sale of the ash, and he was employed collecting ash which had been sold, or on the basis that the ash was a by product which the power station had to dispose of, and he was employed removing it.
However, Lord Reed prefers the contrary view as being more persuasive on this basis.
Mr McDonald was not in reality working for the purposes of the power station.
He was working solely for the purposes of his employer, the Building Research Establishment.
It was the purchaser of the ash which was a by product of the power station, and it employed Mr McDonald to collect the ash in his lorry.
A customer of a factory can hardly be regarded as working for the purposes of the factory. 127.
I am bound to say that I prefer the former view.
It appears to me that a lorry driver who goes to a factory to collect its produce is in a real sense working for the purposes of the factory, albeit as the employee of someone else.
The collection of goods is essential to the operations of the factory.
The driver is much closer to the painter or the window cleaner than the fireman or the policeman.
I therefore prefer the view of Lord Kerr.
I would hold that, in the relevant sense and at the material time, Mr McDonald was employed in the factory. 128.
For these reasons I would hold that the appellant was in breach of the duty contained in regulation 2(a) and that, provided that the relevant causal link was established, the respondents estate is entitled to recover appropriate compensation.
As to causation, the position is summarised by Lord Dyson MR in para 119 of his judgment as follows: As I understand it, the only evidence of Mr McDonalds exposure to asbestos dust is of exposure from the activities at the National Grids factory.
There is no suggestion that he was exposed to asbestos dust in the course of any other employment during his working life.
It follows that, unless he was exposed to asbestos dust in the general atmosphere, the mesothelioma must have been caused by the dust to which he was exposed at the National Grids factory.
If he was not exposed to asbestos dust in the general atmosphere, causation will have been established in the conventional way.
If he was exposed to asbestos dust in the atmosphere, then he will succeed on the basis that the National Grid materially increased the risk of Mr McDonald contracting mesothelioma: see Sienkiewicz v Greif (UK) Ltd [2011] UKSC 10, [2011]2 AC 229. 129.
For these reasons I would dismiss the appeal.
I do not wish to say anything about the cross appeal.
LORD REED (with whom Lord Neuberger agrees) Introduction 130.
Mr McDonald was diagnosed with mesothelioma in 2012, and died from the disease in 2014.
His only known exposure to asbestos occurred when he was employed by the Building Research Establishment between 1954 and 1959 as a driver and, in the course of that employment, drove a lorry to Battersea Power Station from time to time in order to collect pulverised fuel ash for use in the experimental production of building materials.
In order to collect the ash, Mr McDonald had to drive his lorry beneath a chute outside the power station from which the ash was released.
He was not exposed to asbestos during that process. 131.
The evidence that he was exposed to asbestos during his visits to the power station comes from two written statements made by him, on which he was not well enough to be cross examined.
In his first statement, he said that there was generally a queue of vehicles waiting for deliveries, and that it was his habit to park his lorry and go into the power station for about an hour.
He had to deal with paperwork and talk to the manager about his delivery.
He got to know the workers in the power station, and they would show him around.
He would also have lunch in the power station.
He generally waited in the power station until it was time for him to collect the ash and leave. 132.
In his second statement, he said that once inside the power station it took him five minutes to walk to the managers office.
There were usually other people waiting to speak to the manager.
Once his paperwork was completed he would speak to the workers who were dealing with his delivery about any delays.
He also used the lavatories in the power station. 133.
In both statements, he described being present when thermal lagging was applied to boilers and pipework, and seeing the laggers mixing asbestos powder with water in order to make the lagging paste which they then applied to the boilers or pipes being insulated.
He also saw laggers cutting pre formed sections of asbestos to fit to pipes and boilers, and removing old asbestos insulation from pipework.
He claimed to have been in close proximity to such work, with visible clouds of asbestos in the air. 134.
Aspects of this account were challenged by the appellants, who are the successors of the former occupiers of the power station, and their co defendant at the trial, the Department for Communities and Local Government, which is the successor of Mr McDonalds employer.
It was common ground that the ash plant was separate from the power station, and did not have any lagged pipes or boilers.
If Mr McDonald had to enter the power station at all, it would only be to go to the offices.
The offices, lavatories and canteen would not be dusty environments.
There was no need for Mr McDonald to go inside the boiler house or the turbine house, where there would be lagging of boilers and pipes.
If he did so, he went there as a casual visitor.
It was very unlikely that Mr McDonald would have been standing in close proximity to clouds of asbestos. 135.
The trial judge, HH Judge Denyer QC, accepted the defendants analysis of the real extent and duration of Mr McDonalds visits to the power station.
He concluded that any exposure was at a modest level on a limited number of occasions over a relatively short period of time, and that his likely exposure when exposed was not greater than those levels thought of in the 50s and 60s as being unlikely to pose any real risk to health. 136.
The question which arises on this appeal is whether the appellants are liable in damages for breaches by their predecessors of regulation 2(a) of the Asbestos Industry Regulations 1931 (the 1931 Regulations) and section 47(1) of the Factories Act 1937 (the 1937 Act).
The judge rejected Mr McDonalds claims under both heads, and also a claim in negligence.
The Court of Appeal allowed the appeal in so far as the claim was advanced under the 1931 Regulations.
The appellants appeal against that decision.
There is a cross appeal against the dismissal of Mr McDonalds claim under the 1937 Act.
The claim in negligence is no longer pursued. 137.
I approach the questions raised in the following three parts, before concluding that the appeal should be allowed and the cross appeal dismissed: 1.
The historical background to the making of the 1931 Regulations and the enactment of the 1937 Act. 2.
An analysis of the Regulations against the backdrop of certain earlier documents and the relevant authorities, as well as subsequent legislation made on the basis of the understanding of the Regulations which I favour.
I conclude this part by considering whether Mr McDonald was within the scope of the Regulations in any event. 3.
An analysis of section 47(1) of the 1937 Act and its application to Mr McDonalds case. 138.
Although the legislation in question was repealed long ago, the questions raised as to its interpretation are of continuing practical significance.
As the facts of this case demonstrate, the consequences of exposure to asbestos may not become apparent for many years.
When they emerge, the resultant claims are often of substantial value and of considerable importance to the individuals affected, to the insurance industry and to the Government (which has succeeded to potential liabilities, particularly as a result of the nationalisation of industries in which asbestos was used).
The ambit of the legislation is therefore a matter of general public importance.
Part I: the Historical Background 139.
It is important to understand at the outset that the connection between asbestos and mesothelioma was unknown when the 1931 Regulations and the 1937 Act were conceived and introduced (and, for that matter, during the period when Mr McDonald visited the power station).
The legislation was not designed to protect against the risk of mesothelioma: a risk consequent upon exposure to any quantity of asbestos dust, however infrequent the exposure may be, and however insubstantial the quantity of dust to which the person is exposed.
The legislation has to be interpreted in the same way as any other legislation, and not distorted in order to provide compensation to those who were not intended to fall within its protection.
It should also be interpreted without any preconception that it must have been intended to maximise the protection afforded to workers: then as now, legislation concerned with health and safety reflected a compromise between competing interests and objectives.
The Factory and Workshop Act 1901 140.
The 1931 Regulations were made under section 79 of the Factory and Workshop Act 1901 (the 1901 Act).
Part IV of the 1901 Act was headed Dangerous and Unhealthy Industries.
It contained two groups of provisions.
The group relevant for present purposes was headed Regulations for Dangerous Trades.
It included section 79, which provided that where the Secretary of State was satisfied that any manufacture, machinery, plant, process or description of manual labour used in factories or workshops is dangerous or injurious to health or dangerous to life and limb, he might certify that manufacture, machinery, plant, process or description of manual labour to be dangerous.
On such certification, the Secretary of State might make such regulations as appeared to him to be reasonably practicable and to meet the necessity of the case.
The certification 141.
In accordance with section 80 of the 1901 Act, notice was given of a proposal to make the 1931 Regulations in a letter issued by the Home Office dated 15 September 1931.
The letter narrated that, as required by section 79, the Secretary of State had formally certified as dangerous: the manipulation of asbestos and the manufacture or repair of articles composed wholly or partly of asbestos and processes incidental thereto. 142.
It will be necessary at a later point to return to that letter.
For the present, it is to be noted that the certification, which was critical to the scope of the power to make regulations, concerned the manipulation of asbestos a term which, as I shall explain, is descriptive of fibrous silicate minerals and the manufacture or repair of articles composed wholly or partly of those minerals.
Part 2: the 1931 Regulations 143.
The 1931 Regulations, which were subsequently revoked and replaced by the Asbestos Regulations 1969 (SI 1969/690, the 1969 Regulations), are entitled The Asbestos Industry Regulations.
That title suggests that the Regulations are concerned with something identifiable as the asbestos industry, rather than with the use of the products of that industry in the work of other industries.
That is as one might expect from the terms of the certification, which as I have explained concerned the manipulation of asbestos, and the manufacture and repair of articles composed wholly or partly of asbestos, rather than the use of asbestos products. 144.
The Regulations begin with a preamble in which the Secretary of State directs that they are to apply to all factories and workshops or parts thereof in which the following processes or any of them are carried on: (i) breaking, crushing, disintegrating, opening and grinding of asbestos, and the mixing or sieving of asbestos, and all processes involving manipulation of asbestos incidental thereto; (ii) all processes in the manufacture of asbestos textiles, including preparatory and finishing processes; (iii) the making of insulation slabs or sections, composed wholly or partly of asbestos, and processes incidental thereto; (iv) the making or repairing of insulating mattresses, composed wholly or partly of asbestos, and processes incidental thereto; (v) sawing, grinding, turning, abrading and polishing, in the dry state, of articles composed wholly or partly of asbestos in the manufacture of such articles; (vi) the cleaning of any chambers, fixtures and appliances for the collection of asbestos dust produced in any of the foregoing processes. 145.
A proviso to the preamble excludes the application of the 1931 Regulations to: any factory or workshop or part thereof in which the process of mixing of asbestos or repair of insulating mattresses or any process specified in (v) or any cleaning of machinery or other plant used in connection with any such process, is carried on, so long as (a) such process or work is carried on occasionally only and no person is employed therein for more than eight hours in any week, and (b) no other process specified in the foregoing paragraphs is carried on.
As the proviso indicates, occasional exposure to asbestos dust was not thought at that time, unlike the present, to involve a significant risk to health.
A further proviso permits the Chief Inspector of Factories to suspend or relax the Regulations, if satisfied that, by reason of the restricted use of asbestos or the methods of working, they could be suspended or relaxed without danger to those employed. 146.
A number of terms used in the Regulations are defined.
In particular, asbestos is defined as meaning: any fibrous silicate mineral, and any admixture containing any such mineral, whether crude, crushed or opened. 147.
In relation to the obligations imposed by the 1931 Regulations, it is necessary in particular to note regulations 1(a) and 2. 148.
Regulation 1(a) requires an exhaust draught, preventing the escape of asbestos dust into the air, to be provided for manufacturing and conveying machinery, namely: (i) preparing, grinding or dry mixing machines; (ii) carding, card waste end, ring spinning machines, and looms; (iii) machines or other plant fed with asbestos ; (iv) machines used for the sawing, grinding, turning, abrading or polishing, in the dry state, of articles composed wholly or partly of asbestos. "Preparing is defined as meaning: crushing, disintegrating, and any other process in or incidental to the opening of asbestos.
A proviso states that regulation 1 does not apply inter alia to mixing or blending by hand of asbestos. 149.
Regulation 2 provides: (a) Mixing or blending by hand of asbestos shall not be carried on except with an exhaust draught effected by mechanical means so designed and maintained as to ensure as far as practicable the suppression of dust during the processes. (b) In premises which are constructed or reconstructed after the date of these Regulations the mixing or blending by hand of asbestos shall not be done except in a special room or place in which no other work is ordinarily carried on.
The interpretation and application of the 1931 Regulations 150.
Questions are raised in this appeal as to the scope of the 1931 Regulations: in particular, whether they applied to the power station by virtue of the activities carried on there by the laggers, and whether they imposed a duty which was owed to Mr McDonald. 151.
In order to decide whether the Regulations applied to the power station, it is necessary in the first place to consider whether asbestos, as defined, was used by the laggers working there.
There is no direct evidence (other than that of Mr McDonald) as to the composition of the material that they used.
It appears however from expert evidence given at the trial that insulation materials containing opened or fiberized asbestos were widely used until the 1960s for lagging boilers and pipework.
Such materials commonly contained 15% fiberized asbestos, mixed with other substances such as calcium silicate or cement.
The insulation material could be either pre formed, or mixed with water and applied in the form of a paste.
Pre formed sections were sawed by hand in order to profile them for fitting.
The mixing of the paste involved bags of powdered insulation material being emptied into open topped containers for mixing with water. 152.
Having regard to that evidence, it appears likely, on a balance of probabilities, that the insulating material used by the laggers was an admixture containing fiberized asbestos, and was therefore asbestos as defined by the Regulations.
The question then arises whether the activities of the laggers fell within the ambit of the Regulations. 153.
Considering the preamble defining the scope of the Regulations, paragraphs (ii), (iii), (iv) and (v) do not apply: each of them is concerned with the manufacture or repair of products composed wholly or partly of asbestos.
Paragraph (vi) is also inapplicable: it is concerned with the cleaning of appliances used for the collection of dust produced in the processes described in paragraphs (i) to (v).
The only remaining possibility is paragraph (i), and in particular the mixing of asbestos.
Do those words include the mixing in a power station of insulation material, containing fiberized asbestos, with water? 154.
As noted earlier, paragraph (i) of the preamble concerns breaking, crushing, disintegrating, opening and grinding of asbestos, and the mixing or sieving of asbestos, and all processes involving manipulation of asbestos incidental thereto.
That provision uses a number of ordinary English words, such as opening and mixing, but it is apparent that some of them, at least, are being used in a technical sense embedded in the industrial practice of that period.
Opening asbestos, for example, is evidently different from opening a window, or opening an account.
Some guidance as to the meaning of paragraph (i) can be obtained from the Regulations themselves, and other assistance from the reports which preceded their introduction. 155.
I shall discuss the reports at a later point, but it may be helpful to anticipate that discussion to the extent of summarising what is said in the reports about some of the terms found in the Regulations.
In summary: i) Opening asbestos means splitting the raw mineral into fibres. ii) The first stage in the opening or fiberizing of asbestos is for the mineral to be crushed.
This flattens out and breaks up the mineral. iii) After crushing, the mineral is sieved, for the purpose of grading it, prior to its being opened. iv) Waste asbestos products are fiberized by being disintegrated or broken up. v) Mixing can take place at three stages within the asbestos industry (an expression which I shall define in the next paragraph).
Before crushing, the contents of several sacks of the raw mineral may be mixed on the floor beside the crushing machine.
This is described as rough mixing.
After crushing, the crushed material may be mixed prior to being opened.
This is referred to as mixing or blending.
After opening, the fiberized asbestos may be mixed with other materials in order to produce a variety of asbestos products, including insulation materials.
At all these stages, the mixing may be done by hand or mechanically, although in 1931 mixing or blending in the asbestos textile industry was normally carried out by hand. vi) Grinding can refer to a method of cleaning machinery used for the carding of opened asbestos, or to a process used to trim and smooth asbestos products which have been cut or sawn. 156.
It appears from this summary that the terms used in paragraph (i) are related, in that they all describe processes employed in the early stages of producing products composed wholly or partly of asbestos.
I shall refer to factories and workshops where such products are made as the asbestos industry, reflecting the title of the 1931 Regulations.
It is important to bear in mind, first, that that description encompassed in 1931 the production of a very wide range of products of which asbestos formed a component, as I shall later explain in greater detail, and secondly, that factories where such products were made were not necessarily devoted wholly or mainly to their manufacture. 157.
The Regulations themselves also suggest a relationship between the processes grouped together in paragraph (i) of the preamble.
That is consistent with regulation 1(a)(i), which groups together preparing (defined as meaning crushing, disintegrating, and any other process in or incidental to the opening of asbestos), grinding and dry mixing.
In each of these contexts, the principle of interpretation, noscitur a sociis, suggests that mixing was a process related to other processes carried on by the asbestos industry, in the wide sense in which I have used that expression, rather than a process carried on in any premises where use was made of insulation materials containing asbestos that required to be mixed with water. 158.
In my view, seven other considerations support this interpretation of the term mixing as used in paragraph (i) of the preamble and regulations 1 and 2: i) Extending the noscitur a sociis principle beyond paragraph (i), all the other processes contemplated by paragraphs (ii) to (vi) are undoubtedly processes carried on in the course of manufacturing or repairing asbestos products of different kinds.
It follows that if paragraph (i) applied to any factory or workshop, of any kind, where insulating materials containing asbestos were mixed with water to form lagging paste, it would have a far wider scope than the other paragraphs.
Indeed, given the expert evidence that insulating materials containing asbestos were in common use when the first part of the power station was built, between 1929 and 1935, paragraph (i) of the preamble would on that basis extend the scope of the Regulations to a substantial proportion, if not the majority, of the factories and workshops in the United Kingdom. ii) If paragraph (i) of the preamble was intended to encompass the mixing of insulation materials containing asbestos with water in any factory or workshop, so that the 1931 Regulations would not be confined to the asbestos industry as I have described it, it would defy logic that paragraph (v) should apply only when the specified processes are carried out in the manufacture of asbestos articles.
Since the processes listed in that paragraph would give rise to asbestos dust whether they were carried out in the manufacture of such articles or not, it would be nonsensical to restrict the scope of paragraph (v) unless paragraph (i) were similarly restricted.
To give a concrete example, Mr McDonald described being in the proximity of asbestos dust generated by the sawing of pre formed sections of insulation containing asbestos.
That activity does not fall within the scope of the 1931 Regulations, because the articles are not being sawed in the manufacture of such articles, and paragraph (v) therefore does not apply.
That being so, what logic would there be in the mixing of the lagging paste falling within paragraph (i)? iii) The interpretation of paragraph (i) of the preamble which I have suggested is consistent with the title of the Regulations: the Asbestos Industry Regulations.
That title makes sense if the Regulations apply to factories and workshops producing products composed wholly or partly of asbestos.
If on the other hand paragraph (i) were construed as applying to any factory or workshop where asbestos based lagging materials were used, that title would be inappropriate and misleading. iv) When regulation 1(a)(i) refers to mixing machines, it is clear that it is concerned with mixing in the context of manufacturing: regulation 1(a) expressly applies to manufacturing and conveying machinery.
That is also consistent with the other types of machinery described in regulation 1(a), which are all employed in the asbestos industry as I have described it.
If regulation 2 is understood as being concerned with mixing or blending by hand in the asbestos industry, paragraph (b), which requires the provision of a dedicated room for mixing or blending by hand of asbestos, can be seen to be related to a number of other regulations which make similar provision in relation to particular processes, or particular plant, employed in that industry: for example, the making or repairing of insulating mattresses composed wholly or partly of asbestos (regulation 3(i)), storage chambers or bins for loose asbestos (regulation 4(a)), and chambers or apparatus for dust settling and filtering (regulation 4(b)). v) vi) To give regulation 2(b) a wider interpretation would have consequences for industry generally which would be so inconvenient that it is difficult to imagine that they were intended.
In particular, if the mixing of insulation materials containing asbestos with water, in order to form the paste widely used to insulate pipework and boilers, constituted mixing or blending of asbestos, it follows that any factory or workshop where lagging of that kind was used, constructed after 1931, would have to have a room dedicated to the exclusive use of laggers.
It seems unlikely that the Secretary of State can have intended to impose that burden upon industry, and there is no indication that anyone ever supposed that the Regulations had that effect. vii) Finally, it is important to bear in mind that non compliance with the Regulations was a criminal offence, by virtue of section 85 of the 1901 Act.
In dubio, penal legislation should normally be construed narrowly rather than widely. 159.
If the mixing of lagging paste is not mixing within the meaning of paragraph (i) of the preamble, is it nevertheless one of the processes involving manipulation of asbestos incidental to the processes mentioned in that paragraph? Clearly not.
Although the mixing of lagging paste might involve the manipulation of asbestos, that manipulation would not be incidental to one of the processes mentioned in paragraph (i). 160.
As against the analysis set out above, it has been argued that the first proviso to the preamble to the Regulations implies that their application cannot be restricted to the asbestos industry.
It is said to be very difficult to imagine a factory or workshop whose main business was producing products composed wholly or partly of asbestos to which the exemption could possibly apply, given that only certain processes, occasionally carried on, are exempted, and only then if none of the other defined processes is carried on in the same factory.
I shall consider this argument at a later point.
The letter dated 15 September 1931 161.
Further assistance in the interpretation of the 1931 Regulations can be obtained from two reports which preceded them.
The relationship between the Regulations and the reports was explained in the Home Office letter dated 15 September 1931, to which I referred earlier. 162.
The letter explained that the proposed regulations followed upon an inquiry conducted by the Factory Department of the Home Office, whose report, Effects of Asbestos Dust on the Lungs and Dust Suppression in the Asbestos Industry was published in 1930 (34 206, HMSO).
That report has been referred to in these proceedings as the Merewether and Price Report.
The letter stated that Part II of the Report had recommended a number of precautionary measures for the prevention of inhalation of asbestos dust by workmen employed in the industry, the most important of which was the use of exhaust ventilation in both the textile and non textile sections of the industry. 163.
The letter went on to state that it was evident from the Report that further inquiry would be necessary before a decision could be reached as to the best methods to be applied to the various machines in use.
A conference was therefore arranged with representatives of the asbestos textile industry and, as a result, a committee consisting of representatives of the manufacturers and of the Factory Inspectorate was set up to consider the best methods for the suppression of dust in this section of the industry.
That committee made a series of recommendations in its report, Report on Conferences between Employers and Inspectors concerning Methods for Suppressing Dust in Asbestos Textile Factories, published in 1931 (35 214, HMSO).
I shall refer to that report as the Conferences Report. 164.
The letter explained that the Secretary of State had decided to give effect to the recommendations contained in these two reports, and that the draft regulations generally followed the provisions recommended, with some additions and modifications.
The Merewether and Price Report 165.
The Merewether and Price Report is of great assistance in understanding the processes to which the Regulations referred, the terminology used in the Regulations, and the mischief which the Regulations were intended to address.
For these reasons, I shall consider the Report, and the subsequent Conferences Report, in greater detail than would otherwise be appropriate. 166.
As its title indicates, the Merewether and Price Report was concerned with the asbestos industry.
It reported the results of an investigation which was instituted, following the discovery in 1928 of fibrosis of the lungs in an asbestos worker named Seiler, in order to determine whether the supervention of this disease in an asbestos worker was an exceptional occurrence, or evidence of a grave health risk in the industry. (p 5). 167.
While the object of the investigation concerned the asbestos industry generally, the nature of the investigation necessitated a focus upon workers as nearly as possible exposed to pure asbestos dust: that is to say, those employed in the textile branch of the industry, those employed in the branch manufacturing insulating materials from practically pure asbestos, and those employed in some preliminary processes in other branches.
The results were analysed on a number of bases, including the processes in which the workers were employed.
For that purpose, a number of different processes within the asbestos industry were identified, and similar processes were grouped together.
The first group of similar processes was crushing, opening, disintegrating and mixing (p 11).
The implication is that mixing was a process within the asbestos industry, related in a relevant way to crushing, opening and disintegrating.
That is consistent, as I have explained, with the grouping of these processes together in paragraph (i) of the 1931 Regulations and in regulation 1(a). 168.
Processes were also grouped together for the purpose of determining the levels of dust which they generated.
For that purpose, one group was opening and handling fibre, without local exhaust ventilation.
This group was described as including opening, sieving, shovelling or otherwise handling asbestos fibre, and sack filling by hand in a settling chamber (p 12).
Opening and sieving both fall within the ambit of paragraph (i) of the Regulations, as I have explained, and shovelling or otherwise handling asbestos fibre, and sack filling by hand, would also appear to fall within paragraph (i) as processes involving manipulation of asbestos incidental thereto.
Manipulation of asbestos by hand and the filling or emptying of sacks also fall within the ambit of regulation 1(d) and (e) respectively. 169.
Analysing the statistics in this way, it was concluded: i) ii) that there was a correlation between the dustiness of processes, and the length of time during which workers were employed in those processes, and the incidence of fibrosis; and that it seems necessary for the production of generalised fibrosis of the lungs that a definite minimal quantity of dust must be inhaled, with the important implication that the reduction of the concentration of dust in the air in the neighbourhood of dusty asbestos processes will cause the almost total disappearance of the disease (p 15).
The outcome of the investigation was thus to establish the existence of a definite occupational risk in the asbestos industry (p 16).
The risk took the form of a distinct type of fibrosis of the lungs (p 16).
It was found that the incidence rate is highest in the most dusty processes and amongst those longest employed (p 17). 170.
Part II of the report contained the recommendations to which the letter of 15 September 1931 referred.
It began by noting the recent development and rapid expansion of the asbestos industry, mainly because of the demands of other industries, and the increasing attention paid to the insulation of steam plant to promote fuel economy (p 18).
Asbestos products were divided for convenience into seven main groups: Textiles (a) Yarn and cloth.
Non Textiles (b) Millboard, paper, asbestos cement sheets, tiles, and other building materials, sheet material of rubber or bituminous mixtures containing asbestos. (c) Insulation materials and articles. (d) Brake and clutch linings. (e) Packing and jointings. (f) Asbestos covered electric conductors electrodes, cables and wiring, coils for electric machinery. (g) Miscellaneous, including moulded electrical and other goods, etc. (p 18) 171.
In relation to group (a), the Report noted that some asbestos textile products were produced for use in the manufacture of other products, including products in groups (c), (d), (e), (f) and (g) (p 19).
In relation to group (c), the Report stated: Insulation materials include fiberized asbestos; magnesia, so called containing about 15% of fiberized asbestos and 85% of magnesia, and other finely divided mixtures composed partly of fiberized asbestos, used as insulating cements or plasters; fiberized asbestos stiffened into thick sheets, like mats, for lining bulkheads of ships; shaped sections and slabs, moulded from fiberized asbestos or mixtures containing it, or built up of corrugated asbestos paper so as to enclose air cells; mattresses, made of asbestos cloth and filled with fiberized asbestos, magnesia, or other filling. (p 19) 172.
The Report noted that work involving the use of asbestos products was carried on in other premises besides factories, the most important being insulation work, much of which was carried on by contractors (p 19).
The Report did not discuss any risks which might be associated with such work, which could only have been fully addressed by legislation of wider scope than regulations made under the Factories Acts. 173.
Some conclusions can be drawn from this discussion about the sense in which the Report referred to the asbestos industry.
As the groups of products indicate, it comprised factories and workshops which manufactured products (or repaired insulating mattresses) composed wholly or partly of asbestos.
The manufacturing process employed at the factory did not however necessarily involve the use of the raw mineral.
It might, as at factories producing articles in group (a), or it might not, as at factories producing articles in group (e).
Nor did the manufacturing process necessarily involve the use of fiberized asbestos: as the Report stated, fiberized asbestos was used in large quantities in the manufacture of groups (a) to (c), but to a much smaller extent in some of the other factories and workshops (p 19).
As I shall explain, the factory might therefore be one where substantial quantities of asbestos dust were produced, or it might not. 174.
In relation to the processes and preventive measures required, the Report focused on the dust producing processes.
In relation to group (a), the Report stated: Asbestos, suitable for yarn, has usually to be crushed, and in all cases opened (fiberized) before it is ready for carding.
These preparatory processes are effected by machinery, but entail much handwork.
Separating (to remove iron) and grading or sieving follow crushing, but precede opening.
Material for yarn is not usually treated in disintegrators, but in most factories these machines are used for fiberizing waste asbestos yarn, etc.
Crushing flattens out and breaks up the mineral without damaging the fibres.
It is accomplished either in a large edge runner, or in a small pan mill of the mortar mixing type.
The material is emptied upon the floor close to the machine, the contents of several sacks sometimes being spread on the floor to obtain a rough mixing. (pp 20 21) This description of the preparatory processes encompasses crushing, disintegrating, opening, sieving and rough mixing. 175.
Mixing or blending of the crushed asbestos was a further process, preparatory to carding: Crighton openers, enclosed centrifugal machines, are used for opening crushed asbestos, preparatory to carding.
Careful mixing or blending of crushed material is effected by spreading it evenly in layers on the floor over a considerable area cotton may be added at this stage if required and when feeding, taking a vertical cut through the mass Mixing is a great hindrance to elimination of hand work; it is asserted that poor yarn results if it is not done and that machine mixing has been tried and gave less satisfactory results.
If retained, it should be done at a higher level than the opener, under a large exhausted canopy and the mixture fed at a series of chutes. (p 21).
One sees here the alternatives addressed in the Regulations mixing machines, dealt with in regulation 1(a), and mixing or blending by hand, dealt with in regulation 2 and the background to the requirement that they should each be carried on with an exhaust draught. 176.
In relation to the non textile sector, the Report noted that fiberized asbestos was not used in some of the factories, and that exposure to dust might be slight or even negligible (p 26).
Fiberizing was almost exclusively confined to works in groups (b) and (c), ie works manufacturing millboard and similar products, and works manufacturing insulation materials.
Dust was evolved in factories or departments where fiberized asbestos was prepared for subsequent use or for sale, and also in departments where fiberized material, or dry mixtures containing it, were manipulated in preliminary manufacturing processes.
Finishing processes involving abrading or cutting could also be a source of dust, but such dust might contain only a small percentage of asbestos. 177.
In relation to group (c), the Report explained that fiberized asbestos was a component of many insulating materials which might also contain other materials.
It stated: In many small works the materials are mixed dry, by hand, in an open manner, involving sack emptying and filling, shovelling and weighing.
Enclosed rotary mixers could apparently be used for such work with exhaust applied at feeding points and the material discharged and bagged under enclosed conditions.
If hand work is retained, exhaust should be applied. (p 27) 178.
The mixing of fiberized asbestos with other materials was also an aspect of the manufacture of some products in groups (f) and (g).
In particular, the production of moulded goods could involve the mixing of asbestos paste using dry materials.
The mixing of asbestos putty also involved the handling of dry materials (p 30). 179.
Relating this discussion to the preamble to the Regulations, it will be recalled that the first proviso excludes the application of the Regulations to any factory or workshop, or it is important to note any part of a factory or workshop, where any of the following processes is carried on: (1) the process of mixing asbestos; (2) the repair of insulating mattresses; (3) sawing, grinding, turning, abrading and polishing, in the dry state, of articles composed wholly or partly of asbestos in the manufacture of such articles; and (4) any cleaning of machinery or other plant used in connection with any such process.
The exclusion is subject to two conditions.
First, the process or work must be carried on occasionally only, and no person must be employed in it for more than eight hours a week.
Secondly, no other process specified in the preamble to the Regulations must be carried on in the place in question. 180.
It is difficult to envisage circumstances in which the proviso would apply to factories or workshops producing goods in groups (a), (b) or (c), since, even if there were parts of such factories where only the activities mentioned in the proviso were carried on, it seems unlikely that those activities would be carried on only occasionally.
In some factories producing goods in groups (e), (f) and (g), on the other hand, the position might be different.
Given the variety of products which such factories might produce, and the variety of processes involved, it is possible to envisage situations where the first or second proviso might apply.
Such factories might for example produce a range of goods, most of which did not include asbestos, but which required the occasional mixing of asbestos, or some other process, such as grinding, or the repair of insulating mattresses, which was mentioned in the proviso.
The report contains little discussion of factories of that kind, since for obvious reasons it focused upon factories where the risk to health from asbestos dust was greatest.
The point is however illustrated by the discussion of factories producing cable and wiring, of which the report stated: Asbestos covered cable and wiring constitutes a small percentage of the output of the cable factories The amount of dust evolved is small, and special precautionary measures are apparently not required. (p 30) 181.
Returning to the Report, the section headed Summary and Recommendations began by noting that asbestos factories and workshops cover a great variety of processes (p 31).
It observed that the asbestos manufacturers were confronted with the necessity of attaining conditions in their industry which would ensure much less dust in the atmosphere than could be tolerated in many comparable trades not using asbestos (p 31).
As in the remainder of the Report, the focus of the recommendations was entirely on the asbestos industry, using that expression in the sense that I have explained. 182.
The specific recommendations foreshadow the provisions of the Regulations.
In particular, regulation 1(a) reflected recommendation 1(a), which was that exhaust ventilation should be provided for: Dust producing machines, eg (i) Crushing, disintegrating, teasing and other opening machines; sieving machines; fibre grinding machines; dry mixing machines; rolls fed with dry mixings.
Regulation 2(a) was one of a number of regulations that reflected recommendation 1(e), which was that exhaust ventilation should be provided for: Various hand operations, eg sack emptying and filling, weighing, mixing Regulation 2(b) was one of a number of regulations that reflected recommendation 7, which was that new factories should be laid out so as to avoid exposing workers to risk from processes upon which they were not engaged.
The Conferences Report 183.
The Conferences Report was prefaced by a letter from the Chief Inspector of Factories to the Home Secretary dated 10 April 1931, which explained that the recommendations reflected an important assumption, namely the existence of a critical limit of dust concentration below which workers may be employed without injury to health.
As I have explained, that assumption is contradicted by more recent knowledge. 184.
In the introductory section of the Report, it was noted that successful experiments had been carried out involving the application of exhaust to various processes, including mixing and blending (in opening processes) (p 6).
It was also noted that the safe concentration of dust in workrooms had been taken, on the basis of the Merewether and Price Report, to be the conditions arising from flyer spinning of asbestos fibres.
That criterion was said to be simple to apply to processes such as mixing, blending which are obviously more dusty than flyer spinning (p 6).
The recommendations focused upon the application of exhaust ventilation at dust producing points, so as to meet that criterion. 185.
The body of the Report set out the agreements arrived at.
They were listed under headings, mostly descriptive of particular processes.
The first heading was Crushing, including preliminary Sack Emptying, Rough Mixing on Floor near Crushers, Feeding and Discharging.
Rough mixing of raw asbestos prior to crushing was therefore included within crushing.
It was agreed that a mechanical exhaust draught should be applied.
This is reflected in regulation 1(a), which requires mechanical exhaust ventilation which prevents the escape of asbestos dust to be applied to preparing, defined as meaning crushing, disintegrating and any other process in or incidental to the opening of asbestos. 186.
The second heading was Mixing and Blending of Crushed Asbestos.
It was agreed that this process, which was at the time carried on by hand in the textile industry, should also be subject to mechanical exhaust ventilation.
Such ventilation had recently been applied by using an exhaust pipe above the mixing area.
Although much dust was removed, it was unclear whether this arrangement would fully meet the case.
That is reflected in regulation 2(a), which requires mixing or blending by hand of asbestos not to be carried on except with an exhaust draught so designed and maintained as to ensure as far as practicable the suppression of dust.
Although it is not discussed in the Report, one might infer that it was because of the limited efficacy of exhaust ventilation of mixing or blending by hand that regulation 2(b) requires the provision of a dedicated room for that activity in premises constructed after the date of the 1931 Regulations.
It was also noted in the Report that enclosed mixing machines might be developed in the future.
That possibility was addressed by regulation 1(a), in so far as it applies to dry mixing machines.
Further agreements dealt with other specific processes used in the asbestos textile industry.
In each case, a relationship can be seen between the agreement and a corresponding provision of the Regulations. 187.
The Report did not deal with the mixing of opened asbestos with other materials: as I have explained (and as was noted in the Report, in its discussion of mattress making), mixtures of asbestos and other materials were not normally used in the textile branch of the asbestos industry.
The mixing process involved would however fall within the ambit of either regulation 1(a) or regulation 2, depending on whether the mixing was carried out mechanically or by hand.
Did the 1931 Regulations in general, and regulation 2(a) in particular, apply? 188.
In summary therefore, it could hardly be clearer, when regard is had to (1) the Reports which preceded the certification under section 79 of the 1901 Act, (2) the terms of that certification, (3) the recommendations which the 1931 Regulations were intended to implement, and (4) the terms of the Regulations themselves, that the Regulations in general did not apply to the power station by virtue of the work being carried on there by the laggers, and that regulation 2(a) in particular did not apply to that work.
In the first place, the Regulations applied only to factories and workshops in which one or more of the processes listed in the preamble was carried on: the term mixing, as employed in paragraph (i) of the preamble, had a technical meaning, and described particular processes carried on in the asbestos industry.
Those processes were, first, mixing or blending of crushed asbestos preparatory to its being opened, and secondly, mixing of opened asbestos with other materials as part of the process of manufacturing asbestos products such as the insulation material used by laggers.
Those processes were not carried on at the power station.
The Regulations therefore did not apply to it: it was not a place where mixing, within the meaning of paragraph (i), was carried on.
Secondly, for the same reason, regulation 2(a) did not apply to the work carried on by the laggers, as it did not involve mixing or blending by hand of asbestos within the meaning of the Regulations.
The authorities 189.
That conclusion is consistent with the authorities in which the scope of the 1931 Regulations has been considered.
It appears to have been only in relatively recent years that any suggestion was made that the Regulations might apply in circumstances such as those of the present case.
The point was however argued in the case of Banks v Woodhall Duckham Ltd, Court of Appeal (unreported), 30 November 1995, which concerned a pipe fitter who suffered injury after being exposed to asbestos dust while working in various premises.
They included a steel works where he was exposed to dust created by laggers using insulation materials containing asbestos, which they mixed with water to create a paste.
A claim under the 1931 Regulations failed, in the first place, because the claimants evidence was rejected.
The court also accepted submissions to the effect that the Regulations were concerned with processes carried on in the asbestos industry, understood as meaning processes in the manufacture of asbestos products, and processes preliminary to such manufacture, and did not apply to the lagging of pipes in the steel industry. 190.
The same conclusion was reached by Lord Gill in the Outer House of the Court of Session in Watt v Fairfield Shipbuilding & Engineering Co Ltd 1999 SLT 1084, in which the pursuer had been exposed to asbestos dust while working on board ships under construction in shipyards.
As in the present case, the source of the dust was insulation material.
Lord Gill considered that the Regulations related to those processes by which the raw material was treated in the course of its being manufactured into asbestos products of various kinds.
That was also the interpretation for which the appellants argued in the present appeal.
Although I agree with Lord Gills decision on the facts of the case, I would not define the scope of the Regulations as narrowly as that: as I have explained, the asbestos industry is not confined, for these purposes, to factories or workshops where the raw mineral is treated, but includes, for example, those which manufacture products classified in the Merewether and Price Report as falling into groups (d), (e) and (f). 191.
The first case in which a detailed consideration of the background to the Regulations was undertaken was Cherry Tree Machine Co Ltd v Dawson (sub nom, Jeromson v Shell Tankers (UK) Ltd) [2001] EWCA Civ 101; [2001] ICR 1223.
So far as relevant, the case concerned a claim under the 1931 Regulations arising from a persons employment in a factory which manufactured dry cleaners presses.
The manufacturing process involved the use of fiberized asbestos, mixed with water, to form a seal around the platens of the presses: the asbestos sealant was designed to prevent steam from escaping when the presses were used.
An appeal by the employer against a finding of liability under regulation 2 was dismissed. 192.
That conclusion is consistent with my interpretation of the Regulations.
The presses were, in the language of the Regulations, articles composed partly of asbestos.
The mixing of asbestos in the factory formed part of the process of manufacturing the presses.
As Hale LJ observed at para 11, the process was similar to the asbestos putty mixing which had been mentioned in the Merewether and Price Report. 193.
Hale LJ also observed at para 20 that the scope of the Regulations is not confined to factories and workshops whose only or main business is the processing of raw asbestos or the manufacture of products made out of raw asbestos, as Lord Gill had considered in the case of Watt.
She accordingly rejected a submission that the Regulations applied only to the asbestos industry, understood in the sense which Lord Gill had favoured.
As she observed at para 20, nowhere in the Regulations was it said that they applied only to factories and workshops whose only or main business was the processing of raw asbestos or the manufacture of products made out of raw asbestos.
Furthermore, as she observed at para 22, the Merewether and Price Report clearly contemplated the mixing of asbestos in the manufacture of a wide variety of products, not just asbestos products in the narrow sense that had been argued for. 194.
I respectfully agree with that interpretation of the Regulations.
As I have explained, the construction favoured by Lord Gill would be inconsistent with the intention to implement the recommendations of the Merewether and Price Report, since it would effectively confine the scope of the Regulations to groups (a) to (c) of the factories and workshops mentioned in the Report, and leave groups (d) to (g) out of account.
The broader understanding of the asbestos industry which I have explained is also important in understanding the provisos to the preamble to the Regulations: since the Regulations applied to all factories or workshops any part of whose business was the making of asbestos products (or the repair of insulating mattresses), the enactment of a proviso exempting factories or workshops, or parts of them, which carried out certain types of work only occasionally is not difficult to understand. 195.
Hale LJ was also critical of the observations made in Banks, and followed in Watt, to the effect that the Regulations did not apply to the mixing of lagging paste by laggers.
As I have indicated, her criticisms of the reasoning in those cases were well made, and were necessary to her decision: in particular, her rejection of the argument that the Regulations were confined to processes involving the use of raw asbestos.
In so far as her observations went beyond what was necessary for the decision of the appeal, and suggested that it was more likely (para 25) that the Regulations applied to the mixing of lagging paste by laggers, they were obiter, and I would respectfully take a different view, for the reasons I have explained. 196.
In the present case, it was argued before the Court of Appeal, as before this court, that mixing, within the meaning of the 1931 Regulations, meant mixing prior to opening (ie what I have described as rough mixing and mixing or blending), but did not include the mixing of fiberized asbestos with other substances.
On that basis, it was argued that the case of Cherry Tree had been wrongly decided.
McCombe LJ, with whose reasoning on this matter the other members of the court agreed, saw force in the submission, but considered that the court was bound by the decision in Cherry Tree. 197.
As I have explained, I construe the term mixing, in the light of the Merewether and Price Report and its recommendations, as including mixing prior to opening, but also as including the mixing of fiberized asbestos with other substances, provided it is carried out by the asbestos industry: that is to say, provided it forms part of the process of producing a product composed wholly or partly of asbestos.
On that basis, the case of Cherry Tree appears to me to have been correctly decided, as I have explained.
The decision (as distinct from some observations which were strictly obiter) does not however entail that the work of laggers falls within the scope of the Regulations.
Consistently with the decisions (as distinct from some of the reasoning) in Banks and Watt, I consider that such work is beyond the scope of the Regulations.
Subsequent legislation 198.
It is noteworthy that subsequent legislation was made on the basis of the understanding of the 1931 Regulations which I have explained.
In 1967 the Ministry of Labour and HM Factory Inspectorate published a memorandum, Problems arising from the use of Asbestos (36 316), which noted that the Regulations applied to around 300 factories.
In the majority of those factories, only a very small proportion of employees were employed on asbestos processes.
The principal forms of employment subject to the Regulations were said to be the production of asbestos cement products, asbestos textiles and brake linings for motor vehicles (para 10). 199.
A table listed factories and warehouses handling asbestos where the Regulations did not apply.
These included electricity generating, where the relevant activity was identified as lagging and de lagging (Table 4).
The same table also listed generating stations amongst the places where contractors carrying out work involving the use of asbestos could be found.
The memorandum stated in terms that the Asbestos Industry Regulations do not apply to lagging and insulation operations using asbestos (para 13).
It noted that other employees working in the neighbourhood of lagging and insulation operations must also undergo considerable exposure to asbestos (para 13).
The memorandum referred to evidence of an increasing incidence of asbestosis, particularly amongst laggers, who tended to be excluded from the scope of the Regulations (para 18).
It also referred to evidence linking exposure to asbestos to various types of cancer, including mesothelioma. 200.
The Government responded by informing Parliament that it intended to introduce regulations to cover all the industries and processes in which asbestos is used, including occupations such as lagging and de lagging, thermal and sound insulation (Hansard, 10 July 1967, col 88).
The 1969 Regulations were subsequently made.
They applied specifically to electrical stations (regulation 3(1)) as well as to a wide range of other premises.
They applied to every process involving asbestos or any article composed wholly or partly of asbestos, except a process in connection with which asbestos dust cannot be given off (regulation 3(2)), and imposed obligations on employers as well as occupiers (regulation 5(1)). 201.
This material cannot be used as an aid to the interpretation of the 1931 Regulations.
It is nevertheless a matter of legitimate comment that the interpretation of the Regulations which is favoured by Lord Kerr is inconsistent with the basis on which the 1969 Regulations were made.
Was Mr McDonald within the scope of the 1931 Regulations in any event? 202.
The parties addressed the question whether, even assuming that the 1931 Regulations applied to the activities of the laggers at the power station, any duty was owed to Mr McDonald, since he was not employed in the process which generated asbestos dust. 203.
The Regulations were made under section 79 of the 1901 Act, the terms of which have been quoted.
That Act was repealed by the 1937 Act, which however contained a saving proviso in section 159(1), the effect of which was that the 1931 Regulations were deemed to have been made under section 60(1) of the 1937 Act.
The 1937 Act was in turn repealed by the Factories Act 1961 (the 1961 Act), which contained a similar proviso in paragraph 1 of Schedule 6.
The result was to deem the 1931 Regulations to have been made under section 76(1) of the 1961 Act, which provides: Where the Minister is satisfied that any manufacture, machinery, plant, equipment, appliance, process or description of manual labour is of such a nature as to cause risk of bodily injury to the persons employed or any class of those persons, he may, subject to the provisions of this Act, make such special regulations as appear to him to be reasonably practicable and to meet the necessity of the case. 204.
In Canadian Pacific Steamships Ltd v Bryers [1958] AC 485, the House of Lords took as its starting point, in deciding whether the plaintiff fell within the scope of regulations made in 1931 under section 79 of the 1901 Act, the terms of section 79 itself, on the basis that the 1937 and 1948 Acts could not give a wider meaning to the regulations than they had borne when they were made (it was assumed that the power conferred by section 60(1) of the 1937 Act as amended was no narrower than the power conferred by section 79 of the 1901 Act).
Section 79 of the 1901 Act was construed as empowering the Secretary of State to make regulations which enured for the benefit of persons employed in the factory, even if they were not employed in the process which caused the danger or injury to health or the danger to life and limb and thus brought about the certificate.
As Viscount Kilmuir LC observed at p 501, it was obvious that such a process, unless regulated, might be dangerous to others whose ordinary work in the factory brought them into regular proximity to the danger. 205.
Bearing in mind that the Regulations are now deemed to have been made under section 76(1) of the 1961 Act, the position is equally clear: that section refers generally to the persons employed, a form of words which was considered in the Canadian Pacific Steamships case to enable regulations to be made which protected persons who were employed in the factory but not in the relevant processes.
There is nothing in the Regulations themselves that indicates an intention to restrict the scope of the duty to those directly engaged in the specified processes.
Such an intention appears unlikely, since the Merewether and Price Report had made it clear that the risk to health caused by asbestos dust was not confined to those directly employed in the relevant process, but also affected other workers in the same workroom. 206.
It was also argued in the present appeal that no duty was owed to Mr McDonald in any event, since he was not a person employed in the power station.
It will be necessary to return to that question in the context of the duty imposed by section 47(1) of the 1937 Act.
Part 3: Section 47(1) of the 1937 Act 207.
It is necessary next to consider the cross appeal, which concerns the effect of section 47(1) of the 1937 Act.
It provides: In every factory in which, in connection with any process carried on, there is given off any dust or fume or other impurity of such a character and to such extent as to be likely to be injurious or offensive to the persons employed, or any substantial quantity of dust of any kind, all practicable measures shall be taken to protect the persons employed against inhalation of the dust or fume or other impurity and to prevent its accumulating in any workroom, and in particular, where the nature of the process makes it practicable, exhaust appliances shall be provided and maintained, as near as possible to the point of origin of the dust or fume or other impurity, so as to prevent it entering the air of any workroom. 208.
Section 47(1) applies in two situations.
The first is where there is given off any dust or fume or other impurity of such a character and to such extent as to be likely to be injurious or offensive to the persons employed.
Mr McDonald did not pursue any case based upon that branch of the provision.
The second situation is where there is given off any substantial quantity of dust of any kind.
Mr McDonald relied upon that branch of the provision.
Was there any substantial quantity of dust? 209.
The first issue which arises is whether, on the evidence, it has been established that there was any substantial quantity of dust given off in the power station at any relevant time.
In that regard, a difficulty arises for Mr McDonald from the absence of reliable evidence as to the quantity of dust given off during his visits to the power station.
The trial judge made no finding on the point.
The Court of Appeal concluded that, on the evidence, Mr McDonald had failed to establish that a substantial quantity of dust had been given off.
This court does not in my view have a proper basis for reaching a different conclusion.
It follows that the claim under section 47(1) must be rejected.
Was Mr McDonald a person employed? 210.
A further question which was argued was whether in any event any duty was owed under section 47(1) to Mr McDonald.
Was he one of the persons employed, within the meaning of the section? It was argued on behalf of the appellants that he was not.
Reliance was placed on the decisions of Rose J in Morrison v Central Electricity Generating Board (unreported), 15 March 1986, and of the Court of Appeal in Banks v Woodhall Duckham Ltd (unreported), 30 November 1995, where the view was taken, as a matter of grammatical analysis, that the words the persons employed, in section 47(1), referred back to the phrase in connection with any process carried on.
That decision was followed by the Court of Appeal in the present case. 211.
I am unable to agree with that construction.
The verb which governs the preposition in, in the phrase in connection with any process carried on, is not employed but given off (in connection with any process there is given off).
It is therefore the dust that must be connected to the process, rather than the persons employed.
An alternative possibility, that the words the persons employed might refer back to the phrase in the factory, must also be rejected: the verb which governs the preposition in, in the phrase in every factory, is not employed but taken (in every factory all practicable measures shall be taken). 212.
Greater assistance can be obtained from considering section 47(1) in the context of the 1937 Act as a whole.
In the Morrison case, Rose J contrasted section 63 of the 1961 Act (the successor provision of section 47 of the 1937 Act) with section 14(1) (the obligation to fence dangerous machinery), which imposed a duty with regard to every person employed or working on the premises.
The same contrast could also be drawn between sections 14(1) and 47(1) of the 1937 Act.
On the other hand, as Buxton J observed in Owen v IMI Yorkshire Copper Tube (unreported), 15 June 1995, the difference between those provisions is less striking than the difference between section 47(1) of the 1937 Act and section 49.
The latter provision, which is concerned with the protection of the eyes, imposes a duty in respect of the persons employed in the process.
Given that sections 47 and 49 appear in the same group of sections, the use of that limiting phrase in one section but not in the other is a strong reason for believing that the scope of section 47(1) was not intended to be limited, by implication, in the same way as section 49 was limited by express provision. 213.
Apart from these textual pointers, it is also necessary to consider what Parliament is likely to have intended.
The phrase the persons employed identifies the persons to whom the statutory duty is owed.
The duty is to take specified precautions in every factory in which, in connection with any process carried on, there is given off any dust or fume (or other impurity) of a particular description: either the dust or fume must be of such a character and extent as to be likely to be injurious or offensive to the persons employed, or the quantity of dust must be substantial.
In such circumstances, there is a duty to take all practicable measures to protect the persons employed against inhalation of the dust or fume, and to prevent its accumulating in any workroom. 214.
Considering first the situation where injurious or offensive dust or fumes are given off, it would not make sense for the duty to be confined by law to the persons employed in the process in question.
Although those persons would be most directly exposed to the dust or fumes, and would therefore be at the greatest risk of harm, it is perfectly possible that other persons might also be liable to inhale the dust or fumes and would also be at risk.
There might, for example, be other persons working in the workroom where the dust or fumes were generated a problem which had been highlighted by the Merewether and Price Report or persons who passed through the workroom in the course of their employment.
If they inhaled the dust or fumes and suffered injury, why should they not fall within the scope of the statutory duty? To confine the duty in such a way as to exclude a priori a category of persons who were liable to suffer the injury sought to be guarded against would be inconsistent with the apparent intention to protect those at risk. 215.
In the light of that consideration, and also the contrast between sections 47(1) and 49, the phrase the persons employed should not therefore be construed as being restricted to the persons employed in the process in connection with which the dust or fume is given off.
The only feasible alternative is that the phrase is intended to refer to the persons employed in the factory. 216.
If that is the correct construction of the phrase in its application to the first situation addressed by section 47(1), it seems to me that it must also be the correct construction in relation to the second situation, where a substantial quantity of dust is given off.
There is nothing in the section to suggest that the phrase has two different meanings, depending upon which of the alternative situations exists. 217.
The question then arises whether Mr McDonald was one of the persons employed in the power station.
There are numerous authorities on the meaning of the phrase the persons employed, where used in the Factories Acts.
It is clear that the phrase is not confined to the employees of the occupier of the factory: see, for example, Massey Harris Ferguson (Manufacturing) Ltd v Piper [1956] 2 QB 396, where it was held to extend to a painter, employed by an independent contractor, carrying out painting work in a factory.
It does not however extend to a fireman who enters a factory in order to put a fire out (Hartley v Mayoh & Co [1954] 1 QB 383), or to a police constable who enters a factory in pursuit of a felon (Wigley v British Vinegars Ltd [1964] AC 307, 324 per Viscount Kilmuir), although he is a person and he is employed.
In Canadian Pacific Steamships Ltd v Bryers [1958] AC 485, 504 Viscount Kilmuir considered that the phrase applied to any person who is employed in the factory whether the direct servant of the occupier or a servant of an independent contractor so long as he is employed upon work in that factory.
Those words are however themselves little clearer than the statutory phrase.
In the later case of Wigley v British Vinegars Ltd, concerned with a window cleaner employed by an independent contractor, Viscount Kilmuir said at p 324: In my view, the true distinction is between those who are to work for the purposes of the factory and those who are not.
Clearly, maintenance of the factory is work for the purpose of the factory, while the arrest of a felon or the putting out of a fire is not, though it may benefit the factory indirectly.
Window cleaning is part of the maintenance of the factory and in my view the deceased was within the protection afforded.
The other members of the House agreed. 218.
It can fairly be said that the test laid down in Wigley, like the differently expressed test laid down in the Canadian Pacific Steamships case, can result in the drawing of fine distinctions without any compelling rationale beyond the need to draw a line somewhere.
The present case might be regarded as an example.
It could be argued that Mr McDonald was employed for the purposes of the power station, either on the basis that one of those purposes was the sale of the ash, and he was employed collecting ash which had been sold, or on the basis that the ash was a by product which the power station had to dispose of, and he was employed removing it.
The contrary view appears to me however to be more persuasive.
Mr McDonald was not in reality working for the purposes of the power station.
He was working solely for the purposes of his employer, the Building Research Establishment.
It was the purchaser of the ash which was a by product of the power station, and it employed Mr McDonald to collect the ash in his lorry.
A customer of a factory can hardly be regarded as working for the purposes of the factory, even if he goes there in person to collect the article purchased; and a person whom he employs to collect the article from the factory can hardly be in a different position.
Although the sale of such articles would no doubt be one of the purposes of the factory, and the sales staff would therefore fall within the scope of the legislation, the collection of the articles by or on behalf of purchasers is not in the same position. 219.
On that ground, as well as on the basis that it had not been proved that any substantial quantity of dust was given off, the Court of Appeal was correct to reject the claim under the 1937 Act.
It also follows that the claim under the 1931 Regulations would have to be rejected for the same reason, even if, contrary to my conclusion, the Regulations had applied to the work being carried on by the laggers.
Does a claim lie only if a substantial quantity of dust was inhaled? 220.
A further issue which was argued is whether, as was maintained on behalf of Mr McDonald, a claim lies under section 47(1) whenever (a) a substantial quantity of dust is given off in connection with a process carried on in a factory, (b) there has been a failure to take all practicable measures to protect the persons employed against inhalation of the dust, and (c) a person employed has suffered injury caused by inhalation of dust given off by the relevant process.
It was argued on behalf of the appellants that it was not enough that the injury should have been caused by the inhalation of any of the dust: in order to have a claim under the section, the dust must have been substantial in quantity at the point when it was inhaled by the claimant. 221.
It was argued on behalf of the appellants that, as a matter of textual analysis, when section 47(1) imposed a duty to take all practicable measures to protect the persons employed against inhalation of the dust, those words could only mean the substantial quantity of dust said to give rise to the duty, with the implication that the duty was only to protect against inhalation of a substantial quantity of dust. 222.
That argument appears to me to be fallacious.
It is plainly correct that the words the dust refer to the substantial quantity of dust given off.
There is therefore a duty to protect the persons employed against the inhalation of that dust.
It does not however follow that the duty applies in respect of a particular person only if that person is individually liable to inhale a substantial quantity of the dust.
One might as well argue that, if a manufacturer sold a substantial quantity of ginger beer which was contaminated with snails, and was under a duty to take precautions to prevent customers from consuming the ginger beer, it followed that the duty was only to protect against the consumption of a substantial quantity of the ginger beer. 223.
It might alternatively be argued that the duty imposed by section 47(1) in respect of any substantial quantity of dust is in reality unlikely to have been intended to confer a right of action upon an employee who suffered injury as a result of inhaling an insubstantial quantity of dust.
In support of that view, it might be said that Part IV of the 1937 Act, and section 47(1) in particular, are intended to protect the health of employees.
Section 47(1) begins by addressing the situation where dust is given off of such a character and to such an extent as to be likely to be injurious to health.
The part of section 47(1) concerned with any substantial quantity of dust cannot therefore be concerned with dust which is known to be inherently harmful to health, since that danger has already been addressed.
Its concern must be the risk to health which exists where any dust is given off in substantial quantity.
That risk derives from the high concentration of dust in the air which is inhaled.
Once the dust has become dispersed in the atmosphere, that risk disappears. 224.
This argument can be analysed: (1) as restricting the category of person to whom a duty is owed under the relevant limb of section 47(1) to persons employed who inhale dust which is substantial in quantity, or (2) as restricting the type of injury for which a claim can be brought under the relevant limb of section 47(1) to injury which is caused by the inhalation of dust which is substantial in quantity.
The first is an argument about the scope of the statutory duty.
The second is an argument about remoteness of damage.
Each is in my opinion fallacious. 225.
Considering first the scope of the duty, this has already been discussed.
It depends on the meaning of the persons employed.
For the reasons explained earlier, those words must refer to all the persons employed in the factory. 226.
So far as remoteness is concerned, when Parliament enacted section 47(1) it imposed on employers a duty to take all practicable measures to protect the persons employed against inhalation of the dust, whenever any substantial quantity of dust was given off in connection with any process carried on in a factory, and imposed civil liability for a breach of the duty which caused injury.
It did not impose liability only if the breach caused injury in a particular way.
As Lord Reid said in Grant v National Coal Board [1956] AC 649, 661: I cannot see why it should matter just how the accident was caused provided that it was in fact caused by a breach of the section.
I see no ground for imputing to Parliament an intention to make the mineowner liable for some of the consequences of breach but to relieve him of liability for others. 227.
If therefore there was a breach of the duty imposed by section 47(1), in that a substantial quantity of asbestos dust was given off in connection with a process carried on in the power station and all practicable measures were not taken to protect the persons employed against inhalation of the dust, and if a person employed suffered physical injury caused by the inhalation of the dust, it cannot matter that the precise illness, or the way in which it was caused by the inhalation of the dust, was not foreseeable at the time when the statute was enacted: Hughes v Lord Advocate [1963] AC 837. 228.
The point is illustrated by the case of Gregson v Hick Hargreaves & Co Ltd [1955] 1 WLR 1252, where the plaintiff had suffered illness as a result of inhaling noxious particles of silica which formed part of a substantial quantity of dust given off by a process.
The presence of the silica, and its harmfulness, had not been known at the time.
The defendants argument that they should not be held liable was rejected.
Jenkins LJ observed at p 1266 that the duty of employers was to take all practicable measures to protect their workpeople from the inhalation of dust, and their duty to do that did not depend on the question whether the dust was known or believed to be noxious or not. 229.
Finally, in relation to this branch of the appeal, I should record that no issue was raised as to whether the dust generated by the work carried out by the laggers in the power station was given off in connection with any process carried on there, within the meaning of section 47(1).
Conclusion 230.
For the reasons I have explained, I would allow the appeal and dismiss the cross appeal. 79.
Mr Allan criticises these passages on a number of grounds.
He submits that there was in fact clear and undisputed evidence that: (1) the insulation at this power station would have contained asbestos; (2) insulation work was undertaken at the power station which included mixing asbestos powder in oil drums, sawing pre formed sections and removing old lagging by ripping it off pipework; and (3) the activities of mixing asbestos powder, sawing asbestos sections and removing old lagging would generate high concentrations of asbestos dust which, on any view, would amount to substantial quantities of dust.
| UK-Abs | Between 1954 and March 1959 Percy McDonald attended Battersea power station in the course of his employment as a lorry driver for a firm known as Building Research Station to collect pulverised fuel ash.
Between 1954 and January 1957 he was at the power station approximately twice a month but this fell to about twice every three months from January 1957.
While at the power station as a casual visitor Mr McDonald went into areas where asbestos dust was generated by lagging work.
The lagging work involved mixing asbestos powder with water in order to make a paste, as well as sawing preformed asbestos sections and stripping off old asbestos lagging.
Mr McDonald was diagnosed as suffering from mesothelioma in July 2012 and sadly died at the beginning of February 2014.
His widow, Edna McDonald, took his place as respondent in the appeal.
The National Grid Electricity Transmission Plc (National Grid) is the successor body to the occupiers of the power station.
At trial, Mr McDonald alleged that those occupiers had been in breach of their statutory obligations under regulation 2(a) of the Asbestos Industry Regulations 1931 (the 1931 Regulations) and section 47 of the Factories Act 1937 (the 1937 Act).
He also brought claims in negligence against the successors to his former employers and National Grid, but these claims were dropped before the matter came to the Supreme Court.
The trial judge dismissed all Mr McDonalds claims.
On appeal, the Court of Appeal allowed Mr McDonalds appeal under the 1931 Regulations but dismissed his appeal under the 1937 Act.
National Grid appeals to the Supreme Court in the first appeal and Mr McDonalds representative cross appeals in the second appeal.
The Supreme Court dismisses National Grids appeal and dismisses the cross appeal.
On the appeal, the decision was by a majority of three (Lord Kerr gives the lead judgment and Lady Hale and Lord Clarke give concurring judgments) to two (Lord Reed, with whom Lord Neuberger agreed).
On the cross appeal, the decision was by a majority of four to one, with Lady Hale in the minority.
On the first appeal, the majority conclude that the 1931 Regulations apply to all factories and workshops processing asbestos, not just those dealing with asbestos in its raw, unprocessed condition.
The clear wording of the Regulations indicated this, focusing as they did on the processes in question rather than the nature of the industry. [27, 98, 116] The Secretary of State made these Regulations to
counteract the harm that could be done by the manipulation of asbestos rather than focusing on any particular setting where this might happen [96, 117].
The mixing of asbestos during lagging work at the power station fell within the meaning of paragraph (i) of the Preamble to the 1931 Regulations.
The Secretary of State was alive to the risk posed by mixing asbestos in settings other than a narrowly defined manufacturing context [49, 124].
Lady Hale points out that this interpretation of mixing was compatible with Cherry Tree Machine Co Ltd v Dawson sub nom Jeromson v Shell Tankers (UK) Ltd [2001] EWCA Civ 101, which the Supreme Court unanimously approves in this case [100].
Lord Kerr holds that a worker in a factory or workshop where processing of asbestos took place was within the scope of the 1931 Regulations, even if not mixing asbestos himself or directly employed by the occupiers of the premises where asbestos was being mixed.
The Secretary of State made these Regulations under section 79 of the Factory and Workshop Act 1901 (the 1901 Act), which empowered him to afford protection to workers not involved in the asbestos processing.
The risk of injury which these Regulations sought to protect against arose from inhalation of dust or fumes.
There was therefore no logical reason to exclude those who were liable to exposure despite not working directly with asbestos [53].
Lady Hale concludes that liability under the 1901 Act is imposed on occupiers (rather than employers) to protect people in the premises they occupied, therefore the question was whether a person was employed in the power station, not whether he was employed by the occupier [103 104].
Lord Clarke deems that Mr McDonald was in a real sense working for the purposes of the power station and agrees with Lord Kerr [127].
Lord Reed, with whom Lord Neuberger agrees, undertakes an extensive review of the background to the 1931 Regulations.
They would dismiss the appeal on the grounds that the 1931 Regulations are not engaged as they are intended to apply solely to asbestos processing within the asbestos industry.
They hold that the Regulations were penal legislation which should be construed narrowly [158].
Lord Neuberger, Lord Kerr, Lord Clarke and Lord Reed would dismiss the cross appeal.
They agree that, while the rest of the statutory criteria are met, there is no sufficient evidence to rebut the Court of Appeals conclusion that Mr McDonald had failed to establish that a substantial quantity of dust had been given off by the mixing process, as required by section 47(1) of the 1937 Act [90, 209].
Lady Hale would allow the cross appeal on the grounds that there is evidence upon which it could be determined that a substantial quantity of dust had been given off [108 109].
|
This appeal raises the issue whether, as the appellants contend, a claimant who is seeking to maintain an action in passing off need only establish a reputation among a significant section of the public within the jurisdiction, or whether, as the courts below held, such a claimant must also establish a business with customers within the jurisdiction.
It is an issue on which there is conflicting jurisprudence in the common law world, and it is of particularly acute significance in the age of global electronic communication.
The factual background
The claim in these proceedings relates to internet protocol television (IPTV), which is a way of delivering TV or video content over the internet.
There are two main types of IPTV, closed circuit and over the top.
Closed circuit IPTV uses dedicated bandwidth on the providers network.
It requires the subscriber to have a set top box to receive the service, the signal for which is encrypted.
In many respects, closed circuit IPTV services are akin to traditional cable broadcasts.
However, in addition to linear television broadcasts, IPTV services typically include catch up facilities and other forms of video on demand.
Over the top (OTT) IPTV involves the signal being delivered via a standard broadband connection.
OTT IPTV can be viewed (with appropriate software applications) on any device with a broadband connection.
The appellant claimants, Starbucks (HK) Ltd and PCCW Media Ltd, are members of a substantial group based in Hong Kong headed by PCCW Ltd, and I will refer to group members compendiously as PCCM.
Since 2003, PCCM has provided a closed circuit IPTV service in Hong Kong.
The service was launched under the name NOW BROADBAND TV, but in March 2006 the name was changed to NOW TV, under which it has operated ever since.
By 2012, after PCCM had spent substantial sums on marketing, NOW TV had become the largest pay TV operator in Hong Kong, with around 1.2m subscribers, covering over half the households in Hong Kong.
Having started with 23 channels it now has around 200, and many of the programmes are PCCMs, quite a few of them under brand names using the word NOW.
Although the name of the channel has always been English, all PCCMs programmes are in Mandarin or Cantonese, but the channel also carries some English language programmes (including Sky News and Manchester Uniteds channel, MUTV).
Ninety per cent of PCCMs pay TV revenue comes from subscriptions, the balance coming from advertising.
People in the United Kingdom cannot receive PCCM's closed circuit service.
No set top boxes for it have been supplied in the UK, no subscription has been registered to a subscriber with a UK billing address, and there is no evidence of any subscriptions having been paid for with credit or debit cards with billing addresses in the UK.
Consistently with this, PCCM has never held an Ofcom licence for broadcasting in the UK.
However, a number of Chinese speakers permanently or temporarily resident in the UK in 2012 were aware of the NOW TV service through exposure to it when residing in or visiting Hong Kong.
On the findings made by the trial judge, UK residents could also become acquainted with the NOW TV service in three other ways by 2012.
First, since July 2007, the Chinese language content had been accessible free of charge via PCCMs own websites.
Secondly, programmes and trailers from the NOW TV service had been available free of charge on PCCMs channel on the YouTube website.
Thirdly, a few of PCCMs programmes from its NOW TV service had been available as videos on demand on various international airlines, three of which flew into the UK, but none of whose in flight magazines made reference to NOW TV.
PCCM had been giving consideration to expanding its NOW TV subscription service internationally, including into the UK, since some time in 2009, when it began discussions with a potential UK partner, and those discussions had been continuing during 2012.
In June 2012, PCCM had launched a NOW player app in the UK, both on its website and via the Apple App Store, in order to warm up the market for the launch of PCCMs NOW TV on the platform of its proposed UK partner.
The app and the channels were to be targeted at the Chinese speaking population in the UK.
By October 2012, just over 2,200 people in the UK had downloaded the app.
Meanwhile, on 21 March 2012, the three respondent defendants, British Sky Broadcasting Group PLC, British Sky Broadcasting Ltd and Sky IP International Ltd, who are all part of the British Sky Broadcasting Group, and have been referred to throughout these proceedings as Sky, announced that they intended to launch a new IPTV service under the name NOW TV, as an OTT service.
They subsequently effected that launch in beta form in mid July 2012.
The development of Skys NOW TV service had begun with a presentation to their operating executives in late March 2011, and, after consulting an external branding organisation, Sky chose the name Sky Movies NOW in September 2011.
However, further consideration suggested that it would be unwise to include the word Sky in the name of the new service, and a consumer research agency was instructed to address the naming issue.
The agency recommended simply using the word Now, and Sky decided to follow that advice, while including the phrase Powered by Sky in the branding.
The instant proceedings
On 19 April 2012, PCCM began these proceedings, seeking to prevent Sky from using the name NOW TV in connection with its OTT IPTV service in the UK, on the grounds that the use of that name amounted to passing off. (There was also a claim that it infringed a trade mark registered in the name of PCCM.
That claim was dismissed by the courts below and is not pursued in this appeal.)
The claim came before Arnold J, and in the course of his judgment, he found that a substantial number of Chinese speakers permanently or temporarily resident in the UK were acquainted with PCCMs NOW TV service through exposure to it when residing in or visiting Hong Kong.
He also found that PCCMs NOW TV service had acquired a reputation amongst members of the Chinese speaking community in the UK, based on their exposure to it via PCCMs NOW TV channel on the YouTube website and PCCMs NOW TV websites (together the websites) as well as the showing of PCCMs programmes on international flights.
Arnold J held that this reputation was modest but more than de minimis.
However, Arnold J dismissed PCCMs claim.
He rejected the argument that it was sufficient for PCCM to identify a body of people in the UK who associated the mark NOW TV with its IPTV service in Hong Kong: they were not customers in the UK, and therefore did not represent goodwill in the jurisdiction.
He also considered that the mere accessibility of PCCMs material in the UK via the websites did not give rise to a protectable goodwill, stating that the key question is whether the viewers of PCCMs programmes in the [UK] were customers for its service so as to give rise to a protectable goodwill in the UK [2012] EWHC 3074 Ch, [2013] FSR 29, para 147.
Two paragraphs later, he said that the contention that viewers in the UK of PCCMs programmes on the websites represented goodwill would, as he put it, stretch the concept of customer to breaking point.
As he explained, if it were otherwise, hundreds of television channels worldwide would have customers, and hence protectable goodwill, in the UK, as a result of the YouTube website.
In para 150 of his judgment, he concluded that the reality was that PCCM's primary purpose in making programme content available via YouTube, its own websites and international airlines was to promote its Hong Kong business by encouraging people to subscribe in Hong Kong.
Therefore, he held that PCCMs customers were its viewers in Hong Kong, but not viewers in the UK, and so its business had goodwill in Hong Kong but not in the UK, so that the passing off claim failed.
Arnold J nonetheless added in para 158 that, if he had found PCCM to have a protectable goodwill in the UK, he would have accepted that there was a likelihood that a substantial number of UK viewers who were previously familiar with PCCMs NOW TV would wrongly believe that Skys NOW TV emanated from the same or a connected source.
Arnold J gave PCCM permission to appeal against his decision on the passing off claim.
PCCMs appeal to the Court of Appeal was dismissed for reasons given by Sir John Mummery, with whom Patten and Pitchford LJJ agreed [2013] EWCA Civ 1465, [2014] FSR 20.
The Court of Appeal essentially agreed with Arnold Js analysis as briefly summarised in para 11 above.
In the circumstances, they did not need to deal with the issues raised in Skys respondents notice, in which it was contended that Arnold J had erred in finding that (i) the reputation of PCCM's NOW service in the UK was more than de minimis, and (ii) internet users visiting PCCMs website could access any video content from the UK at any relevant time.
With the permission of this Court, PCCM now appeals against the decision of the Court of Appeal, upholding Arnold Js dismissal of its passing off claim.
The issue on this appeal
As Lord Oliver of Aylmerton explained in Reckitt & Colman Products Ltd v Borden Inc [1990] 1 WLR 491, [t]he law of passing off can be summarised in one short general proposition no man may pass off his goods as those of another.
As he immediately went on to say, a claimant, or a plaintiff as it was then, has to establish three elements in order to succeed in a passing off action: First, he must establish a goodwill or reputation attached to the goods or services which he supplies in the mind of the purchasing public by association with the identifying get up (whether it consists simply of a brand name or a trade description, or the individual features of labelling or packaging) under which his particular goods or services are offered to the public, such that the get up is recognised by the public as distinctive specifically of the plaintiffs goods or services.
Secondly, he must demonstrate a misrepresentation by the defendant to the public (whether or not intentional) leading or likely to lead the public to believe that goods or services offered by him are the goods or services of the plaintiff.
Whether the public is aware of the plaintiffs identity as the manufacturer or supplier of the goods or services is immaterial, as long as they are identified with a particular source which is in fact the plaintiff.
Thirdly, he must demonstrate that he suffers or that he is likely to suffer, damage by reason of the erroneous belief engendered by the defendants misrepresentation that the source of the defendants goods or services is the same as the source of those offered by the plaintiff.
It is common ground that, in order to succeed, a claimant in a passing off action has to establish its claim as at the inception of the use complained of.
Although there is no decision of the House of Lords specifically to that effect, it is supported by a number of Court of Appeal decisions, perhaps most clearly from Anheuser Busch Inc v Budejovicky Budvar NP [1984] FSR 413, 462, and it appears to me that it must be right.
Accordingly, as the Judge accepted, PCCM had to establish the three elements (or, on one view of PCCMs case on the first element, an updated version of the three elements) identified by Lord Oliver, in relation to the NOW TV mark for IPTV services as at 21 March 2012, the date when Sky went public about its imminent intention to launch its IPTV service in the UK under the name NOW TV.
Subject to the issues raised by Sky in their respondents notice, and based on the conclusions reached by the Judge, PCCM established the second and third of the three elements identified by Lord Oliver.
The argument on this appeal has therefore focussed on the first element, namely the requirement that PCCM must establish what Lord Oliver referred to as a goodwill or reputation attached to the goods or services which he supplies in the mind of the purchasing public by association with the relevant get up, viz. the mark NOW TV with PCCMs IPTV service.
The Judge and the Court of Appeal thought that it was not enough for PCCM to establish that it had a reputation among a significant number of people in this country, if it had no goodwill in this country.
Thus, they considered that the fact that there were people in this country who associated NOW TV with PCCMs product would not satisfy the first element, if those people were not or had not been customers for PCCMs product in this country.
They also considered that the fact that people in this country had been exposed to PCCMs NOW TV products via the websites and the showing of PCCMs programmes on international flights did not make them customers for the purpose of establishing goodwill in this country.
On behalf of Sky, Mr Hobbs QC, who appeared with Mr Purvis QC and Mr Hollingworth, supported these conclusions.
Mr Silverleaf QC, who appeared with Ms Pickard for PCCM, argued that the courts below were wrong, and in particular that (i) it was sufficient for PCCM to succeed in its passing off claim that it had established a reputation for the NOW TV name in connection with its IPTV service among a significant number of people in this country, even if they were not customers of PCCMs IPTV services in this country, but in Hong Kong, and (ii) in any event, PCCM had customers in this country, because a significant number of people were PCCMs customers in this country by virtue of having been exposed to PCCMs programmes on the websites and on international flights.
The House of Lords and Privy Council authorities and Anheuser Busch
In the course of their excellent arguments, each counsel referred to a number of judgments to support their respective cases.
A degree of caution is appropriate when considering these earlier cases, for two reasons.
First, in many (but not all) of the cases, the precise issue which this appeal raises was not being considered, and therefore the judges may not have had that issue in the forefront of their minds or have received full argument in connection with it.
Secondly, (despite certifying in its notice of appeal that PCCM would not be inviting this Court to depart from any decision of the House of Lords) Mr Silverleaf argued that we should, if necessary, develop the law so that it accords with their case: thus, it would not automatically be enough to conclude that the reasoning in a previous decision of the House of Lords effectively disposes of this appeal.
Nonetheless, it does appear that the courts in the United Kingdom have consistently held that it is necessary for a claimant to have goodwill, in the sense of a customer base, in this jurisdiction, before it can satisfy the first element identified by Lord Oliver.
That this has been the consistent theme in the cases can be well established by reference to a series of House of Lords decisions, and a decision of the Judicial Committee of the Privy Council, over the past century.
In AG Spalding & Bros v AW Gamage Ltd (1915) 32 RPC 273, 284, Lord Parker of Waddington said that the nature of the right the invasion of which is the subject of [a] passing off action was a right of property in the business or goodwill likely to be injured by the misrepresentation, and, at least unless the concept of goodwill is given a significantly wider meaning than that which it naturally has, it would not extend to a mere reputation.
Thus, in Inland Revenue Commissioners v Muller & Cos Margarine Ltd [1901] AC 217, 235, Lord Lindley explained that goodwill is inseparable from the business to which it adds value, and, in my opinion, exists where the business is carried on.
As he went on to explain, goodwill can have a distinct locality even within a particular jurisdiction.
Observations of Lord Macnaghten, Lord James of Hereford and Lord Brampton at pp 224, 228 and 231 233 respectively were to much the same effect.
Although the observations were made in the context of a revenue case, they purported to be general statements about the meaning of goodwill.
In T Oertli AG v EJ Bowman (London) Ltd [1959] RPC 1, the House of Lords unanimously upheld a decision of the Court of Appeal, where Jenkins LJ had said that it was of course essential to the success of any claim in respect of passing off based on the use of a given mark or get up that the plaintiff should be able to show that the disputed mark or get up has become by user in this country distinctive of the plaintiffs goods see at [1957] RPC 388, 397.
In another passing off case, Star Industrial Co Ltd v Yap Kwee Kor [1976] FSR 256, 269, Lord Diplock, giving the advice of the Privy Council, referred to and relied on the observations of Lord Parker in Spalding.
Lord Diplock explained that [g]oodwill, as the subject of proprietary rights, is incapable of subsisting by itself, having no independent existence apart from the business to which it is attached.
He went on to explain that it is local in character and divisible, so that if the business is carried on in several countries a separate goodwill attaches to it in each.
In Erven Warnink BV v J Townend & Sons (Hull) Ltd [1979] AC 731, 752, Lord Fraser of Tullybelton quoted Lord Diplocks observations in Star Industrial with approval.
At pp 755 756, he went on to identify five facts which it was essential for a plaintiff to establish in a passing off action, of which the first was that his business consists of, or includes, selling in England a class of goods to which a particular trade name applies.
In the same case, Lord Diplock at p 742, citing Spalding, identified five characteristics which must be present in order to create a valid cause of action for passing off, which included caus[ing] actual damage to a business or goodwill of the [plaintiff].
Viscount Dilhorne, Lord Salmon and Lord Scarman agreed with both speeches.
In the passage in his speech in Reckitt & Colman, quoted in para 15 above, Lord Oliver referred to a goodwill or reputation in the mind of the purchasing public, and at p 510, Lord Jauncey of Tullichettle referred to a requirement that the plaintiffs goods have acquired a reputation in the market and are known by some distinguishing feature.
Lord Bridge of Harwich (with undisguised reluctance, albeit not in connection with the point at issue), Lord Brandon of Oakbrook and Lord Goff of Chieveley agreed with both speeches.
The ratio of the decision of the Court of Appeal in Anheuser Busch was indisputably that, in order to support a passing off claim, the claimant must establish goodwill in the form of customers for its goods or services within the jurisdiction.
In that case the importation from the United States of bottled beer under the plaintiffs BUDWEISER mark for use and sale in US military and diplomatic establishments within the UK and other European countries did not entitle the plaintiff to establish what Lord Oliver later stated was the first element of a passing off claim in relation to the UK, at any rate outside those establishments.
Oliver LJ (later of course Lord Oliver) said at p 470 that the sales of 5,000,000 cases of bottles over 12 years in US diplomatic and military establishments in European countries were sales for a very special market having no connection with the market in the countries in which the consumption actually took place; having said that, he accepted that there could well be a localised goodwill within the diplomatic and military establishments.
He also emphasised that the fact that the BUDWEISER mark may have had a reputation among a significant number of people in the UK did not assist the plaintiff as it involved confus[ing] goodwill, which cannot exist in a vacuum, with mere reputation, adding that reputation which may, no doubt, and frequently does, exist without any supporting local business, does not by itself constitute a property which the law protects.
OConnor and Dillon LJJ expressed similar views at pp 471 472 and 476 respectively.
PCCMs case
PCCM contends that, particularly in an age of global electronic communication and relatively quick and cheap travel, it is inconsistent with commercial reality and unrealistic in terms of practicality to treat the reputation or goodwill associated with a mark for a particular product or service as limited to jurisdictions in which there is a business with customers for the product or service, and incapable of extending to jurisdictions in which the mark is simply associated with the particular product or service as a matter of reputation.
More specifically, PCCM argues that, in any event, on the facts found by Arnold J, it had a sufficient goodwill or reputation in the mind of the purchasing public [in the United Kingdom] by association with the identifying get up of NOW TV attached to its products and services, namely its IPTV service, to satisfy the first element, as identified by Lord Oliver, of its passing off claim.
On behalf of PCCM, Mr Silverleaf contended that the notion that goodwill should be limited to jurisdictions where the claimant had business is wrong in principle: the question of where the claimant had goodwill was a matter of fact and evidence, not a matter of law.
Further, in the present age of international travel and the presence of the internet, he argued that it would be anachronistic and unjust if there was no right to bring passing off proceedings, particularly in relation to an electronically communicated service, in a jurisdiction where, as a matter of fact, the plaintiffs mark had acquired a reputation.
He suggested that the mere fact that the customers are in Hong Kong when they enjoy the service should not undermine PCCMs case that they have such a reputation here which deserves to be protected.
He also submitted that the law would be arbitrary if PCCM had no right to bring passing off proceedings despite having a reputation in this country simply because users did not pay when they viewed PCCMs programmes free on the websites.
Mr Silverleaf contrasted what he suggested was the slight difference between the present case and cases such as Sheraton Corporation of America v Sheraton Motels Ltd [1964] RPC 202.
In that case, Buckley J held that a United States hotel company had a sufficiently arguable case for saying that it had goodwill in the UK to justify an interlocutory injunction against use of its mark; the goodwill was based on the fact that customers living in the United Kingdom booked rooms in the plaintiffs hotels through the plaintiffs London office or through UK based travel agents.
So far as authorities are concerned, Mr Silverleaf suggested that there was no decision of the House of Lords which was inconsistent with this analysis, and, if we concluded that there was, we should depart from it.
He accepted that some of the reasoning of the Privy Council in Star Industrial and the decision and reasoning of the Court of Appeal in Anheuser Busch were inconsistent with PCCMs argument, but rightly said that we were not bound by them.
He also relied on some decisions of the English courts to which I have not so far referred, some decisions of courts in other common law jurisdictions, and the economic and practical realities of the early 21st century.
Lord Diplocks suggestion in Star Industrial that, if business is carried on in more than one country there is a separate goodwill in each country, has been questioned in more than one domestic case.
Thus, in two first instance decisions, Graham J suggested that the geographical boundaries of any goodwill should be a question of fact in each case, rather than one of law see Baskin Robbins Ice Cream Co v Gutman [1976] FSR 545, 547 548 and Maxims Ltd v Dye [1977] 1 WLR 1155, 1159, 1162.
Megarry V C in Metric Resources Corporation v Leasemetrix Ltd [1979] FSR 571, 579 also expressed some doubt about Lord Diplocks view on this point.
And Lord Diplocks analysis was described as not being an exactly accurate rendering of what was said in Inland Revenue Commissioners v Muller's Margarine by Lloyd LJ (with whom Jacob and Stanley Burnton LJJ agreed) in Hotel Cipriani Srl v Cipriani (Grosvenor Street) Ltd [2010] EWCA Civ 110, [2010] RPC 485, para 99, although Lloyd LJ clearly considered that the actual decision in Star Industrial was correct.
As he concluded, however, in para 106, Anheuser Busch was binding authority for the proposition that an undertaking which seeks to establish goodwill in relation to a mark for goods cannot do so, however great may be the reputation of his mark in the UK, unless it has customers among the general public in the UK for those products.
So far as Anheuser Busch is concerned, as I have already indicated, the fact that the decision proceeded on the basis that a plaintiff in a passing off action must have goodwill, in the form of customers, in the jurisdiction did not represent any departure from an approach already approved by the House of Lords.
As Oliver LJ pointed out at p 464, Lord Diplock in Erven Warnink at p 744 stated that a plaintiff must have used the descriptive term long enough on the market in connection with his own goods and have traded successfully enough to have built up a goodwill for his business, and, as Oliver LJ then observed, this emphasises the point that goodwill (as opposed to mere reputation) does not exist here apart from a business carried on here.
As Oliver LJ went on to say, the same feature emerges with even greater clarity from the decision of the Privy Council in Star Industrial.
And Dillon LJ in Anheuser Busch at pp 475 476 cited Spalding, Star Industrial and Inland Revenue Commissioners v Muller to make the same point.
A number of first instance, mostly interlocutory, cases were cited by Mr Silverleaf to support his argument that there is or should be no requirement that a claimant in a passing off action should be able to establish goodwill, as opposed to mere reputation, in the jurisdiction concerned.
I do not think that any of the decisions in question assists PCCM.
In La Socit Anonyme des Anciens tablissements Panhard et Levassor v Panhard Levassor Motor Company Ltd [1901] 2 Ch 513, it is true that the French motor car manufacturer plaintiffs, as Farwell J put it at p 516, did not sell directly in England.
However, as he went on to explain, their cars were brought and imported into England, so that England was one of their markets.
As Dillon LJ put it in Anheuser Busch at pp 477 478, the French plaintiffs there had a market for their cars with the general public in this country through the importers who had obtained licences from the third parties who had relevant patent rights and the reputation, when the cars were imported into this country, enured to the French plaintiffs.
Nor does Sheraton help PCCM.
As explained in para 29 above, the US hotel company had a booking office and agents in London, so it had customers in England.
In Suhner & Co AG v Suhner Ltd [1967] RPC 336, Plowman J made no conclusive finding that the plaintiff had goodwill in the UK, but it is clear that its goods had been sold here see at pp 337 338.
In Globelegance BV v Sarkissian [1974] RPC 603, Templeman J reviewed many of the authorities at pp 609 613, and clearly accepted that it was necessary to have custom in this country, concluding that [p]ure advertisement is clearly insufficient [but taking] bookings [is] sufficient [as is] carrying out orders in this country.
He then decided that the activities of the plaintiff in that case, selling patterns to a department store, who then used the patterns to make up dresses which were sold under the plaintiffs mark, was enough.
In a significant number of other cases at first instance, it is clear that, well before the Court of Appeal decision in Anheuser Busch, Chancery Judges considered that a plaintiff had to establish at least an arguable case that it had business in the UK before it could obtain an interlocutory injunction against passing off.
Before turning to them, it is instructive to refer to Maxwell v Hogg (1867) LR 2 Ch 307, which appears to have been the first case in which an English court specifically decided that mere reputation, without customers, was not enough to found a passing off claim.
The Court of Appeal held that the plaintiffs advertising campaign in respect of a proposed new newspaper called Belgravia with a view to imminent publication did not give him any right to enjoin the defendant from publishing a newspaper with the same name.
Turner LJ, after mentioning the inconvenience of a plaintiff who had not even used the mark being able to restrain someone else from doing so, said at p 312 that the plaintiff had neither given, nor come under any obligation to give, anything to the world; so that there is a total want of consideration for the right which he claims.
Cairns LJ at pp 313 314, explained that the plaintiff had no right of property for which he could claim protection, as there has been no sale, or offering for sale, of the articles to which the name is to be attached.
More recent cases which support Skys case include the decisions of Pennycuick J in Alain Bernardin et Cie v Pavilion Properties Ltd [1967] RPC 581, Brightman J in Amway Corporation v Eurway International Ltd [1974] RPC 82, and Walton J in Athletes Foot Marketing Associates Inc v Cobra Sports Ltd [1980] RPC 343.
In Alain Bernardin, Pennycuick J held that the plaintiffs could not obtain an injunction against the use of the mark CRAZY HORSE in the UK, even though they could establish a reputation here for its cabaret in Paris under that name.
The plaintiffs problem was that they could not identify any business done in the UK, either directly or indirectly (to use Farwell Js expression in Panhard), in connection with their Crazy Horse Saloon in Paris, and the mere distribution of advertisements was not enough (hence Templeman Js observation in Globelegance [1974] RPC 603).
In other words, there does not seem to have been any evidence of any customers in England of the plaintiffs Paris establishment as opposed to people in England who visited that establishment when they were in Paris (see at p 582).
Mr Silverleaf pointed out that the reasoning of Pennycuick J caused Sir Nicolas Browne Wilkinson V C some concern in Pete Waterman Ltd v CBS United Kingdom Ltd [1993] EMLR 27, 53 55.
At pp 53 54, Sir Nicolas said that Pennycuick Js reasoning was based on the proposition that even if the foreign trader has customers here he cannot protect his reputation unless he has conducted some business here, whereas the Vice Chancellor thought that the law was or should be that [i]f there is a use by the foreign trader in this country of his name for the purposes of his trade, the piracy of that name is an actionable wrong.
But, as Mr Hobbs pointed out, the decision in Alain Bernardin would have been the same if the test identified by the Vice Chancellor had been applied.
Turning now to the cases in other jurisdictions, PCCM contends that decisions of the courts of Ireland, Canada, New Zealand, Australia, South Africa, Hong Kong and Singapore are consistent with its argument that a claimant does not have to establish goodwill, in the sense of actual customers, within the jurisdiction, in order to establish a claim for passing off.
In C&A Modes v C&A (Waterford) Ltd [1978] FSR 126, the Supreme Court of Ireland held that the plaintiffs C&A department store in Belfast was entitled to mount a claim in passing off in the Irish Republic.
At p 139, Henchy J was clearly unhappy about the decision in Alain Bernardin, and said that there were in the Irish Republic sufficient customers of [the] plaintiffs business [in Belfast] to justify his claim.
At pp 140 141, Kenny J rejected the argument that a passing off claim should be limited to cases where the plaintiff had acquired some of its goodwill in the Republic by user or trading in this country, and pointed out that the plaintiff in that case had customers in the Republic, where it had carried out extensive advertising on television and radio and in the newspapers.
He also said that the decision in Alain Bernardin was wrong.
OHiggins CJ agreed with Henchy J.
I do not find this decision of much assistance in this case.
As Walton J said in Athletes Foot at p 356, these judgments (at least arguably in the same way as the judgment in Pete Waterman) show a misapprehension of the reasoning in Alain Bernardin: if there had been customers of the Crazy Horse business in England, in the sense in which there were customers of the Sheraton Hotels business in England, the decision in [Alain Bernardin] surely must have been the other way.
The Canadian case relied on by PCCM, Orkin Exterminating Co Inc v Pestco Co of Canada Ltd (1985) 19 DLR (4th) 90, is of no assistance.
Although the plaintiffs business was conducted in the USA, it enjoyed thousands of Canadian clients who used its pest control services for their properties in Canada.
At p 101 of his judgment in the Court of Appeal in Ontario, Morden JA specifically relied on the fact that the plaintiff had goodwill including having customers in Canada, although he did express disquiet about Lord Diplocks notion in Star Industrial that goodwill had to be divided up nationally.
The New Zealand decision referred to by PCCM, Dominion Rent A Car Ltd v Budget Rent A Car Systems (1970) Ltd [1987] 2 TCLR 91, does not take matters much further.
The ultimate decision was that both parties were entitled to use the name BUDGET in connection with their respective car hire businesses in New Zealand, and that turned on the facts.
At p 101, Cooke P said that he did not think that Lord Diplock in Star Industrial should be understood as saying that goodwill should be automatically divisible between jurisdictions, describing it as unnecessarily myopic to restrict this process to national boundaries.
The furthest Cooke P went in the direction PCCM argues for was at pp 101 102, where he said that he thought that an Australian companys reputation and goodwill can extend to New Zealand (and vice versa), but, importantly, he added and, at least if there is a sufficient business connection with this country, will be entitled to protection here.
At pp 106 107, he said that the rental vehicle business in Australasia cannot be divided into two mutually exclusive groups of customers, those who hire vehicles for driving in Australia and those who hire vehicles for driving in New Zealand.
Obviously the same persons may do both, thereby rejecting the contention that the defendant only had customers in New Zealand and the plaintiff in Australia.
In his judgment, Somers J said at p 116 that a plaintiff in a passing off action must show an invasion of that intangible right of property compendiously described as goodwill which can only exist in New Zealand when attached to a business having some connection with this country.
At p 120, Casey J quoted with apparent approval the view of Lord Fraser in Erven Warnink.
Richardson J was in general agreement with Cooke P and Somers J, and McMullin J was in general agreement with Cooke P.
Support for PCCMs case may however be found in the decision of the Federal Court of Australia in ConAgra Inc v McCain Foods (Aust) Pty Ltd (1992) 106 ALR 465, given by Lockhart J, with whom Gummow and French JJ agreed (and gave judgments of their own).
After a very full review of the common law authorities (including those I have discussed above) on pp 473 501, Lockhart J said at p 504 that it was no longer valid, if it ever was, to speak of a business having goodwill or reputation only where the business is carried on, relying on [m]odern mass advertising [which] reaches people in many countries of the world, [t]he international mobility of the world population and the fact that [t]his is an age of enormous commercial enterprises.
He also said at p 505 that, in his view, the hard line cases in England conflict with the needs of contemporary business and international commerce.
He concluded on the next page that it is not necessary that a plaintiff, in order to maintain a passing off action, must have a place of business or a business presence in Australia; nor is it necessary that his goods are sold here, saying that it would be sufficient if his goods have a reputation in this country among persons here, whether residents or otherwise.
Two points should be noted about this decision.
First, the passing off claim nonetheless failed because the plaintiff was held to have an insufficient reputation in Australia.
Secondly, the High Court of Australia has not considered this issue.
The approach of the Supreme Court of South Africa in Caterham Car Sales & Coachworks Ltd v Birkin Cars (Pty) Ltd [1998] 3 All SA 175 (A) is to similar effect see at para 16.
Indeed, at para 19, ConAgra was cited with approval.
However, once again, the claim failed on the ground of insufficiency of reputation.
As to Hong Kong, PCCM points out that, in Ten Ichi Co Ltd v Jancar Ltd [1989] 2 HKC 330, Sears J in the High Court on an application for an interlocutory injunction seems to have held that mere reputation was enough to found a passing off claim following an earlier Hong Kong High Court decision.
However, more recently, the Court of Final Appeal in In re Ping An Securities Ltd (2009) 12 HKCFAR 808, para 17, cited Lord Oliver in Reckitt & Colman to support the (admittedly undisputed) proposition that a plaintiff must establish a goodwill (in the country or region) in a business in the supply of goods or services under the relevant get up in order to maintain a claim in passing off.
Finally, Singapore.
In Jet Aviation (Singapore) Pte Ltd v Jet Maintenance Pte Ltd [1998] 3 SLR(R) 713, para 45, PCCM contends that Warren LH Khoo J in the High Court appears to have followed ConAgra.
I am not at all sure that he did: see at para 42.
However, it is unnecessary to decide that question, because more recently, the Court of Appeal considered the issue in an impressively wide ranging judgment in Staywell Hospitality Group Pty Ltd v Starwood Hotels & Resorts Worldwide Inc [2013] SGCA 65, [2014] 1 SLR 911.
After briefly considering most of the authorities to which I have referred (including the decision of Arnold J in this case), Sundaresh Menon CJ, giving the judgment of the court, explained at para 135 that the Singapore courts had largely followed Star Industrial, holding that a foreign trader which does not conduct any business activity in Singapore cannot maintain an action in passing off here, and that this draws a clear distinction between goodwill and reputation.
However, as he explained in the next paragraph, this hard line approach has been softened in one respect in Singapore (citing CDL Hotels International Ltd v Pontiac Marina Pte Ltd [1998] 1 SLR(R) 975, para 58) namely where the plaintiff has started pre business activities, such as embark[ing] on massive advertising campaigns before the commencement of trading to familiarise the public with the service or product.
Sundaresh Menon CJ explained at para 138 that this was consistent with two English decisions, WH Allen & Co v Brown Watson Ltd [1965] RPC 191 and British Broadcasting Corporation v Talbot Motor Co Ltd [1981] FSR 228, a view which derives some support from the judgment of Dillon LJ in Marcus Publishing plc v Hutton Wild Communications Ltd [1990] RPC 576, 584.
Discussion
Although I acknowledge that PCCMs case is not without force (as is well demonstrated by the reasoning in the judgments in ConAgra), I have reached the conclusion that this appeal should be dismissed on the same ground on which it was decided in the courts below.
In other words, I consider that we should reaffirm that the law is that a claimant in a passing off claim must establish that it has actual goodwill in this jurisdiction, and that such goodwill involves the presence of clients or customers in the jurisdiction for the products or services in question.
And, where the claimants business is abroad, people who are in the jurisdiction, but who are not customers of the claimant in the jurisdiction, will not do, even if they are customers of the claimant when they go abroad.
It seems to have been the consistent view of the House of Lords and Privy Council from 1915 to 1990 that a plaintiff who seeks passing off relief in an English court must show that he has goodwill, in the form of customers, in the jurisdiction of the court.
While it can be said that, in none of the cases discussed in paras 21 25 above was that point the main focus of attention, it nonetheless seems clear that that is what a succession of respected judges, many of whom had substantial experience in this area, considered to be the law.
That conclusion is underlined by the reasoning and conclusion in the judgments in Anheuser Busch, and indeed the first instance judgments discussed in paras 32 36 above.
It is of course open to this court to develop or even to change the law in relation to a common law principle, when it has become archaic or unsuited to current practices or beliefs.
Indeed it is one of the great virtues of the common law that it can adapt itself to practical and commercial realities, which is particularly important in a world which is fast changing in terms of electronic processes, travel and societal values.
Nonetheless, we should bear in mind that changing the common law sometimes risks undermining legal certainty, both because a change in itself can sometimes generate uncertainty and because change can sometimes lead to other actual or suggested consequential changes.
In addition to domestic cases, it is both important and helpful to consider how the law has developed in other common law jurisdictions important because it is desirable that the common law jurisdictions have a consistent approach, and helpful because every national common law judiciary can benefit from the experiences and thoughts of other common law judges.
In the present instance, the Singapore courts follow the approach of the UK courts, whereas the courts of Australia (subject to the High Court holding otherwise) and South Africa seem to favour the approach supported by PCCM.
The position is less clear in other Commonwealth jurisdictions.
In the United States of America, the approach appears to be consistent with that of the courts below in this case.
Thus in Grupo Gigante SA De CV v Dallo & Co Inc (2004) 391 F 3d 1088 the Court of Appeals for the 9th circuit said at p 1093 that priority of trademark rights in the United States depends solely upon priority of use in the United States, not on priority of use anywhere in the world.
Earlier use in another country usually just does not count.
Accordingly it does not appear to me that there is anything like a clear trend in the common law courts outside the UK away from the hard line approach manifested in the UK cases discussed in paras 21 26 and 32 36 above.
Particularly in the light of what has been said in some of the cases discussed above, it appears that there are two connected issues which justify further discussion, namely (i) clarification as to what constitutes sufficient business to give rise to goodwill as a matter of principle, and (ii) resolution of the judicial disagreement as to the jurisdictional division of goodwill described by Lord Diplock in Star Industrial.
As to what amounts to a sufficient business to amount to goodwill, it seems clear that mere reputation is not enough, as the cases cited in paras 21 26 and 32 36 above establish.
The claimant must show that it has a significant goodwill, in the form of customers, in the jurisdiction, but it is not necessary that the claimant actually has an establishment or office in this country.
In order to establish goodwill, the claimant must have customers within the jurisdiction, as opposed to people in the jurisdiction who happen to be customers elsewhere.
Thus, where the claimants business is carried on abroad, it is not enough for a claimant to show that there are people in this jurisdiction who happen to be its customers when they are abroad.
However, it could be enough if the claimant could show that there were people in this jurisdiction who, by booking with, or purchasing from, an entity in this country, obtained the right to receive the claimants service abroad.
And, in such a case, the entity need not be a part or branch of the claimant: it can be someone acting for or on behalf of the claimant.
That is why, as explained in Athletes Foot, the decision in Panhard et Levassor and the observations in Pete Waterman are compatible with the decision in Alain Bernardin.
As to Lord Diplocks statement in Star Industrial that, for the purpose of determining whether a claimant in a passing off action can establish the first of Lord Olivers three elements, an English court has to consider whether the claimant can establish goodwill in England, I consider that it was correct.
In other words, when considering whether to give protection to a claimant seeking relief for passing off, the court must be satisfied that the claimants business has goodwill within its jurisdiction.
It would be wrong to suggest that there is a rule of law that, whatever the point at issue, goodwill has to be divided between jurisdictions, not least because (unsurprisingly) we have not had an exhaustive analysis of all the circumstances in which goodwill may have to be considered by the court.
However, it seems to me that, when it comes to a domestic, common law issue such as passing off, an English court has to consider the factual position in the UK.
That is well illustrated by the fact that, even if PCCMs argument was accepted and it was enough for a claimant merely to establish a reputation, that reputation would still have to be within the jurisdiction.
The notion that goodwill in the context of passing off is territorial in nature is also supported by refusal of judges to accept that a court of one jurisdiction has power to make orders in relation to the goodwill in another jurisdiction.
I have in mind the decisions of the House of Lords in Lecouturier v Rey [1910] AC 262, 265 per Lord Macnaghten, with whom Lord Atkinson and Lord Collins agreed, and at pp 269 272 per Lord Shaw of Dunfermline, and the Privy Council in Ingenohl v Wing On & Co (Shanghai) Ltd (1927) 44 RPC 343, 359 360, per Viscount Haldane giving the advice of the Board.
The territorial approach to goodwill is also apparent in the context of trade marks in RJ Reuter Co Ltd v Mulhens [1954] Ch 50, 89 and 95 96 (per Lord Evershed MR and Romer LJ respectively) and Adrema Werke Maschinenbau GmbH v Custodian of Enemy Property [1957] RPC 49, 54 55 and 59 (per Lord Evershed MR and Jenkins LJ).
It is also worth mentioning that article 6 of the Paris Convention for the Protection of Industrial Property 1883 (last revised 1967 and last amended 1979) states, in para (1) that registration of trademarks shall be determined in each country by its domestic legislation, and in para (3) that a duly registered mark is to be regarded as independent of marks registered in other countries of the Union.
My view on the two issues discussed in paras 49 53 above is supported by a brief extract from Lord Frasers speech in Erven Warnink at p 755, where he said that the meaning of the name in countries other than England is immaterial because what the court is concerned to do is to protect the plaintiffs' property in the goodwill attaching to the name in England and it has nothing to do with the reputation or meaning of the name elsewhere.
Indirect support for this approach is also to be found in decisions of the Court of Justice of the European Union, which has emphasised in a number of decisions the need for genuine use of a mark, namely to guarantee the identity of the origin of the goods or services for which it is registered, in order to create or preserve an outlet for those goods or services, and that this means real commercial exploitation of the mark in the course of trade, particularly the usages regarded as warranted in the economic sector concerned as a means of maintaining or creating market share for the goods or services protected by the mark to quote from Leno Merken BV v Hagelkruis Beheer BV (Case C 149/11) EU:C:2012:816, para 29.
Further, it is relevant to note that the CJEU has also held that the mere fact that a website [advertising or selling the product or service concerned] is accessible from the territory covered by the trade mark is not a sufficient basis for concluding that the offers for sale displayed there are targeted at consumers in that territory L'Oreal SA v eBay International AG (Case C 324/09) EU:C:2011:474 [2011] ECR I 6011, para 64.
It is also of interest that, even in the context of the single market, the CJEU has accepted that because of linguistic, cultural, social and economic differences between the Member States, a sign which is devoid of distinctive character or descriptive of the goods or services concerned in one Member State is not so in another Member State see Junited Autoglas Deutschland GmBH & Co KG v Office for Harmonisation in the Internal Market (Trade Marks and Designs) (Case T 297/13) EU:T:2014:893, para 31, citing Matratzen Concord AG v Hukla Germany SA (Case C 421/04) EU:C:2006:164 [2006] ECR I 2303, para 25.
Professor Wadlow has, in my judgment, correctly summarised the position in The Law of Passing off Unfair Competition by Misrepresentation 4th ed, 2011, para 3 131: The reason why goodwill is territorial is that it is a legal proprietary right, existing or not in any jurisdiction according to whether the laws of that jurisdiction protect its putative owner.
Goodwill in the legal sense is therefore something more than bare reputation .
The distinction between goodwill in the legal sense and reputation in the everyday sense is like that between copyright and the underlying literary work.
It may be surprising, and even inconvenient, that at the moment a literary work is reduced to writing tens or hundreds of legally distinct copyrights may simultaneously come into existence all over the world, but the nature of copyright as a legal right of property arising in any given jurisdiction from national legislation, common law or self executing treaty means that it must be wrong to speak as if there were a single international copyright.
This analysis can be said with some justification to involve some fine distinctions, and on some occasions to lead to some difficult questions of fact and to result in some decisions which could appear rather harsh.
However, any decision as to what a claimant must show in order to establish the first element of Lord Olivers trilogy of elements or requirements will involve fine distinctions, and will sometimes involve difficult or harsh cases.
I am unconvinced that if we accept the conclusion of the courts below, supported by Sky, it would be likely to lead to more arguable unfairnesses or difficulties than if we adopted PCCMs case.
It is also necessary to bear in mind the balancing exercise underlying the law of passing off, which Somers J described in Dominion Rent A Car at p 116 as a compromise between two conflicting objectives, on the one hand the public interest in free competition, on the other the protection of a trader against unfair competition by others.
More broadly, there is always a temptation to conclude that, whenever a defendant has copied the claimants mark or get up, and therefore will have benefitted from the claimants inventiveness, expenditure or hard work, the claimant ought to have a cause of action against the defendant.
Apart from the rather narrower point that passing off must involve detriment to the claimant, it is not enough for a claimant to establish copying to succeed.
All developments, whether in the commercial, artistic, professional or scientific fields, are made on the back of other peoples ideas: copying may often be an essential step to progress.
Hence, there has to be some balance achieved between the public interest in not unduly hindering competition and encouraging development, on the one hand, and on the other, the public interest in encouraging, by rewarding through a monopoly, originality, effort and expenditure the argument which is reflected in Turner LJs observation at p 312 in Maxwell v Hogg to the effect that a plaintiff who has merely advertised, but not marketed, his product, has given no consideration to the public in return for his claimed monopoly.
In the instant case, the assessment of the appropriate balance between competition and protection, which arises in relation to any intellectual property right, must be made by the court, given that passing off is a common law concept.
If it was enough for a claimant merely to establish reputation within the jurisdiction to maintain a passing off action, it appears to me that it would tip the balance too much in favour of protection.
It would mean that, without having any business or any consumers for its product or service in this jurisdiction, a claimant could prevent another person using a mark, such as an ordinary English word, now, for a potentially indefinite period in relation to a similar product or service.
In my view, a claimant who has simply obtained a reputation for its mark in this jurisdiction in respect of his products or services outside this jurisdiction has not done enough to justify granting him an effective monopoly in respect of that mark within the jurisdiction.
I am unpersuaded that PCCMs case is strengthened by the fact that we are now in the age of easy worldwide travel and global electronic communication.
While I accept that there is force in the point that the internet can be said to render the notion of a single international goodwill more attractive, it does not answer the points made in paras 51 59 above.
Further, given that it may now be so easy to penetrate into the minds of people almost anywhere in the world so as to be able to lay claim to some reputation within virtually every jurisdiction, it seems to me that the imbalance between protection and competition which PCCMs case already involves (as described in paras 60 62 above) would be exacerbated.
The same point can be made in relation to increased travel: it renders it much more likely that consumers of a claimants product or service abroad will happen to be within this jurisdiction and thus to recognise a mark as the claimants.
If PCCMs case were correct, it would mean that a claimant could shut off the use of a mark in this jurisdiction even though it had no customers or business here, and had not spent any time or money in developing a market here and did not even intend to do so.
A rather different factor which militates against PCCMs case is section 56 of the Trade Marks Act 1994 which gives effect to article 6(bis) of the Paris Convention) and is concerned with well known marks.
By virtue of subsection (1), section 56 applies to a mark which is owned by a person who is domiciled or has a business in a Convention country and which is well known in the United Kingdom.
Section 56(2) entitles such a person to restrain by injunction the use in the United Kingdom of a trade mark which, or the essential part of which, is identical or similar to his mark, in relation to identical or similar goods or services, where the use is likely to cause confusion.
This provision is significant in the present context because it substantially reduces the likelihood of the sort of harsh results referred to at the start of para 60 above.
It means that, where a mark which is used abroad and has a reputation in this country, it still can be protected if it satisfies section 56(1), even if the proprietor of the mark cannot establish any customers or sufficient goodwill in this jurisdiction.
A more radical argument was advanced by Sky based on section 56 of the 1994 Act, namely that, by that section, the legislature decided on the circumstances in which mere reputation in this country should be enough to justify protection being accorded to a mark used in another country, and that the courts should not extend the common law further than Parliament has thought it right to go.
As Mr Hobbs put it, if Parliament has decided that domestic reputation is enough in the case of a well known mark, it is not for the courts to extend the principle to marks which are not well known.
Another, perhaps starker, way of putting the point is that, if PCCMs case is correct, it is hard to see what purpose section 56 of the 1994 Act would have.
I see considerable force in that argument, but it is unnecessary to rule on it, and I prefer not to do so.
Finally, a point which I would leave open is that discussed in the judgment of Sundaresh Menon CJ in Staywell (see para 46 above), namely whether a passing off claim can be brought by a claimant who has not yet attracted goodwill in the UK, but has launched a substantial advertising campaign within the UK making it clear that it will imminently be marketing its goods or services in the UK under the mark in question.
It may be that such a conclusion would not so much be an exception, as an extension, to the hard line, in that public advertising with an actual and publicised imminent intention to market, coupled with a reputation thereby established may be sufficient to generate a protectable goodwill.
On any view, the conclusion would involve overruling Maxwell v Hogg, and, if it would be an exception rather than an extension to the hard line, it would have to be justified by commercial fairness rather than principle.
However, it is unnecessary to rule on the point, which, as explained in para 46, has some limited support in this jurisdiction and clear support in Singapore.
Modern developments might seem to argue against such an exception (see para 63 above), but it may be said that it would be cheap and easy, particularly for a large competitor, to spike a pre marketing advertising campaign in the age of the internet.
It would, I think, be better to decide the point in a case where it arises.
Assuming that such an exception exists, I do not consider that the existence of such a limited, pragmatic exception to the hard line could begin to justify the major and fundamental departure from the clear, well established and realistic principles which PCCMs case would involve.
In this case, PCCMs plans for extending its service into the UK under the NOW TV mark were apparently pretty well advanced when Sky launched their NOW TV service, but the plans were still not in the public domain, and therefore, even if the exception to the hard line is accepted, it would not assist PCCM.
Conclusion
For these reasons, I conclude that PCCMs appeal should be dismissed.
Its business is based in Hong Kong, and it has no customers, and therefore no goodwill, in the UK.
It is true that, according to the Judge, there are a significant number of people who are, temporarily or in the longer term, members of the Chinese community in the UK, with whom the mark NOW TV is associated with PCCMs IPTV service.
In so far as they are customers of PCCM, they are customers in Hong Kong, and not in the UK, because it is only in Hong Kong that they can enjoy the service in question, and the service is not marketed, sold or offered in the UK.
The people in the UK who get access to PCCMs NOW TV programmes via the websites, or on various international airlines, are not PCCM customers at any rate in the UK, because there is no payment involved (either directly by the people concerned or indirectly through third party advertising), and the availability of PCCMs product in these outlets simply was intended to, and did, promote PCCMs Hong Kong business.
Basically, it simply amounted to advertising in the UK, and, as explained above, a reputation acquired through advertising is not enough to found a claim in passing off.
Given that we are dismissing the appeal, it is unnecessary to consider Skys other arguments to support this conclusion which were the same as those which it would have raised before the Court of Appeal in its respondents notice (see para 13 above).
If we had allowed PCCMs appeal, because the Court of Appeal understandably did not address those issues we would have remitted the case to the Court of Appeal to consider them.
| UK-Abs | Internet protocol television (IPTV) is a way of delivering TV or video content over the internet.
IPTV can be closed circuit or over the top.
The appellants (PCCM) are a substantial group of companies based in Hong Kong which has provided a closed circuit IPTV service in Hong Kong since 2003.
Since 2006 the service has been marketed and delivered under the name NOW TV.
By 2012, NOW TV had become the largest pay TV operator in Hong Kong, with around 1.2 million subscribers, covering over half the households in Hong Kong.
People in the UK cannot receive this closed circuit service, and no subscribers for its Hong Kong IPTV service have been recruited in the UK.
However, a number of Chinese speakers permanently or temporarily resident in the UK in 2012 were aware of the NOW TV service through exposure to it when residing in or visiting Hong Kong, or from viewing NOW TV programmes on YouTube and other websites in the UK.
The appellants have been considering expanding its NOW TV subscription service internationally since 2009.
In June 2012 it launched a NOW player app in the UK on its website and via the Apple Store, targeted at the Chinese speaking population in the UK.
Meanwhile, in March 2012, the respondents (Sky) announced that they intended to launch a new over the top IPTV service under the name NOW TV.
The service was launched in beta form in mid July 2012.
In April 2012, PCCM began proceedings seeking to prevent Sky from using the name NOW TV in connection with Skys IPTV service in the UK on the grounds that the use of the name amounted to passing off.
The law of passing off prevents one trader from passing off its goods or services as the goods and services of another.
At first instance, the judge found that a substantial number of Chinese speakers permanently or temporarily resident in the UK were acquainted with PCCMs NOW TV service.
He also found that PCCMs NOW TV service had acquired a reputation amongst members of the Chinese speaking community in the UK and that this reputation was modest but more than de minimis.
However he held that the key question was whether the viewers of PCCMs programmes in the UK were customers for its service and that, for the purposes of passing off, it was not enough for PCCM to establish that it had a reputation among a significant number of people in this country if it had no goodwill in this country.
This led him to dismiss PCCMs claim.
PCCMs appeal to the Court of Appeal was dismissed and PCCM now appeals to the Supreme Court.
The Supreme Court unanimously dismisses the appeal.
Lord Neuberger (with whom all the other Justices agree) delivers the judgment of the Court.
Courts in the UK have consistently held that it is necessary for a claimant to have actual goodwill, in the sense of a customer base, in this jurisdiction before it can satisfy this requirement for the law of passing off [20 25].
Where the claimants business is abroad, people who are in the jurisdiction, but who are not customers of the claimant in the jurisdiction, will not do, even if they are customers of the
claimant when they go abroad [47 48].
An examination of the approach in other Common Law jurisdictions suggests that the Singapore courts follow the approach of the UK courts, whereas the Courts of Australia and South Africa seem to favour the approach supported by PCCM; there does not appear to be a clear trend in the common law courts outside the UK away from the approach taken in the UK cases [50].
Goodwill in the context of passing off is territorial in nature and an English court has to consider the factual position in the UK.
It is clear that mere reputation is not enough; the claimant must have significant goodwill in the form of customers in the jurisdiction.
However, it is not necessary to have an establishment or office in this country [52 55].
The law of passing off involves striking a balance between the public interest in free competition and the protection of the trader against unfair competition; if it were enough for a claimant merely to establish reputation in the jurisdiction, without a significant number of people who are customers within the jurisdiction to maintain a passing off action, this would tip the balance too much in favour of protection [61 62], particularly in this modern era of global electronic communication [63].
It follows that PCCMs appeal should be dismissed.
Its business is based in Hong Kong, and it has no customers, and therefore no goodwill, in the United Kingdom.
The people in the UK who get access to PCCMs NOW TV programmes via the websites are not PCCM customers in the UK, because there is no payment involved and the availability of PCCMs product was intended to promote PCCMs Hong Kong business; as such it amounted to advertising in the UK which is insufficient to maintain a claim in passing off [67].
|
These two appeals raise an issue which has not been considered by the Supreme Court or by the House of Lords for a century, namely the principles underlying the law relating to contractual penalty clauses, or, as we will call it, the penalty rule.
The first appeal, Cavendish Square Holding BV v Talal El Makdessi, raises the issue in relation to two clauses in a substantial commercial contract.
The second appeal, ParkingEye Ltd v Beavis, raises the issue at a consumer level, and it also raises a separate issue under the Unfair Terms in Consumer Contracts Regulations 1999 (SI 1999/2083) (the 1999 Regulations).
We shall start by addressing the law on the penalty rule generally, and will then discuss the two appeals in turn.
The law in relation to penalties
The penalty rule in England is an ancient, haphazardly constructed edifice which has not weathered well, and which in the opinion of some should simply be demolished, and in the opinion of others should be reconstructed and extended.
For many years, the courts have struggled to apply standard tests formulated more than a century ago for relatively simple transactions to altogether more complex situations.
The application of the rule is often adventitious.
The test for distinguishing penal from other principles is unclear.
As early as 1801, in Astley v Weldon (1801) 2 Bos & Pul 346, 350 Lord Eldon confessed himself, not for the first time, much embarrassed in ascertaining the principle on which [the rule was] founded.
Eighty years later, in Wallis v Smith (1882) 21 Ch D 243, 256, Sir George Jessel MR, not a judge noted for confessing ignorance, observed that The ground of that doctrine I do not know.
In 1966 Diplock LJ, not a judge given to recognising defeat, declared that he could make no attempt, where so many others have failed, to rationalise this common law rule: Robophone Facilities Ltd v Blank [1966] 1 WLR 1428, 1446.
The task is no easier today.
But unless the rule is to be abolished or substantially extended, its application to any but the clearest cases requires some underlying principle to be identified.
Equitable origins
The penalty rule originated in the equitable jurisdiction to relieve from defeasible bonds.
These were promises under seal to pay a specified sum of money, subject to a proviso that they should cease to have effect on the satisfaction of a condition, usually performance of some other (primary) obligation.
By the beginning of the 16th century, the practice had grown up of taking defeasible bonds to secure the performance obligations sounding in damages.
This enabled the holder of the bond to bring his action in debt, which made it unnecessary for him to prove his loss and made it possible to stipulate for substantially more than his loss.
The common law enforced the bonds according to their letter.
But equity regarded the real intention of the parties as being that the bond should stand as security only, and restrained its enforcement at common law on terms that the debtor paid damages, interest and costs.
The classic statement of this approach is that of Lord Thurlow LC in Sloman v Walter (1783) 1 Bro CC 418, 419: where a penalty is inserted merely to secure the enjoyment of a collateral object, the enjoyment of the object is considered as the principal intent of the deed, and the penalty only as accessional, and, therefore, only to secure the damage really incurred .
The essential conditions for the exercise of the jurisdiction were (i) that the penal provision was intended as a security for the recovery of the true amount of a debt or damages, and (ii) that that objective could be achieved by restraining proceedings on the bond in the courts of common law, on terms that the defendant paid damages.
As Lord Macclesfield observed in Peachy v Duke of Somerset (1720) 1 Strange 447, 453: The true ground of relief against penalties is from the original intent of the case, where the penalty is designed only to secure money, and the court gives him all that he expected or desired: but it is quite otherwise in the present case.
These penalties or forfeitures were never intended by way of compensation, for there can be none.
This last reservation remained an important feature of the equitable jurisdiction to relieve.
As Baggallay LJ put it in Protector Endowment Loan and Annuity Company v Grice (1880) 5 QBD 592, 595, where the intent is not simply to secure a sum of money, or the enjoyment of a collateral object, equity does not relieve.
The common law rule
The process by which the equitable rule was adopted by the common law is traced by Professor Simpson in his article The penal bond with conditional defeasance (1966) 82 LQR 392, 418 419.
Towards the end of the 17th century, the courts of common law tentatively began to stay proceedings on a penal bond to secure a debt, unless the plaintiff was willing to accept a tender of the money, together with interest and costs.
The rule was regularised and extended by two statutes of 1696 and 1705.
Section 8 of the Administration of Justice Act 1696 (8 & 9 Will 3 c 11) is a prolix provision whose effect was that the plaintiff suing in the common law courts on a defeasible bond to secure the performance of covenants (not just debts) was permitted to plead the breaches and have his actual damages assessed.
Judgment was entered on the bond, but execution was stayed upon payment of the assessed damages.
The Administration of Justice Act 1705 (4 & 5 Anne c 16) allowed the defendant in an action on the bond to pay the amount of the actual loss, together with interest and costs, into court, and rely on the payment as a defence.
These statutes were originally framed as facilities for plaintiffs suing on bonds.
But by the end of the 18th century the common law courts had begun to treat the statutory procedures as mandatory, requiring damages to be pleaded and proved and staying all further proceedings on the bond: see Roles v Rosewell (1794) 5 TR 538, Hardy v Bern (1794) 5 TR 636.
The effect of this legislation was thus to make it unnecessary to proceed separately in chancery for relief from the penalty and in the courts of common law for the true loss.
As a result, the equitable jurisdiction was rarely invoked, and the further development of the penalty rule was entirely the work of the courts of common law.
It developed, however, on wholly different lines.
The equitable jurisdiction to relieve from penalties had been closely associated with the jurisdiction to relieve from forfeitures which developed at the same time.
Both were directed to contractual provisions which on their face created primary obligations, but which during the 17th and 18th centuries the courts of equity treated as secondary obligations on the ground that the real intention was that they should stand as a mere security for performance.
The court then intervened to grant relief from the rigours of the secondary obligation in order to secure performance in another, less penal or (in modern language) more proportionate, way.
In contrast, the penalty rule as it was developed by the common law courts in the course of the 19th and 20th centuries proceeded on the basis that although penalties were secondary obligations, the parties meant what they said.
They intended the provision to be applied according to the letter with a view to penalising breach.
The law relieved the contract breaker of the consequences not because the objective could be secured in another way but because the objective was contrary to public policy and should not therefore be given effect at all.
The difference in approach to penalties of the courts of equity and the common law courts is in many ways a classic example of the contrast between the flexible if sometimes unpredictable approach of equity and the clear if relatively strict approach of the common law.
With the gradual decline of the use of penal defeasible bonds, the common law on penalties was developed almost entirely in the context of damages clauses ie clauses which provided for payment of a specified sum in place of common law damages.
Because they were a contractual substitute for common law damages, they could not in any meaningful sense be regarded as a mere security for their payment.
If the agreed sum was a penalty, it was treated as unenforceable.
Starting with the decisions in Astley in 1801 and Kemble v Farren (1829) 6 Bing 141, the common law courts introduced the now familiar distinction between a provision for the payment of a sum representing a genuine pre estimate of damages and a penalty clause in which the sum was out of all proportion to any damages liable to be suffered.
By the middle of the 19th century, this rule was well established.
In Betts v Burch (1859) 4 H & N 506, 509, Martin B regretted that he was bound by the cases and prevented from holding that parties are at liberty to enter into any bargain they please so that if they have made an improvident bargain they must take the consequences.
But Bramwell B (at p 511) appeared to have no such reservations.
The distinction between a clause providing for a genuine pre estimate of damages and a penalty clause has remained fundamental to the modern law, as it is currently understood.
The question whether a damages clause is a penalty falls to be decided as a matter of construction, therefore as at the time that it is agreed: Public Works Comr v Hills [1906] AC 368, 376; Webster v Bosanquet [1912] AC 394; Dunlop Pneumatic Tyre Co Ltd v New Garage and Motor Co Ltd [1915] AC 79, at pp 86 87 (Lord Dunedin); and Cooden Engineering Co Ltd v Stanford [1953] 1 QB 86, 94 (Somervell LJ).
This is because it depends on the character of the provision, not on the circumstances in which it falls to be enforced.
It is a species of agreement which the common law considers to be by its nature contrary to the policy of the law.
One consequence of this is that relief from the effects of a penalty is, as Hoffmann LJ put it in Else (1982) Ltd v Parkland Holdings Ltd [1994] 1 BCLC 130, 144, mechanical in effect and involves no exercise of discretion at all.
Another is that the penalty clause is wholly unenforceable: Clydebank Engineering & Shipbuilding Co Ltd v Don Jose Ramos Yzquierdo y Castaneda [1905] AC 6, 9, 10 (Lord Halsbury LC); Gilbert Ash (Northern) Ltd v Modern Engineering (Bristol) Ltd [1974] AC 689, 698 (Lord Reid), 703 (Lord Morris of Borth y Gest) and 723 724 (Lord Salmon); Scandinavian Trading Tanker Co AB v Flota Petrolera Ecuatoriana (The Scaptrade) [1983] 2 AC 694, 702 (Lord Diplock); AMEV UDC Finance Ltd v Austin (1986) 162 CLR 170, 191 193 (Mason and Wilson JJ).
Deprived of the benefit of the provision, the innocent party is left to his remedy in damages under the general law.
As Lord Diplock put it in The Scaptrade at p 702: The classic form of penalty clause is one which provides that upon breach of a primary obligation under the contract a secondary obligation shall arise on the part of the party in breach to pay to the other party a sum of money which does not represent a genuine pre estimate of any loss likely to be sustained by him as the result of the breach of primary obligation but is substantially in excess of that sum.
The classic form of relief against such a penalty clause has been to refuse to give effect to it, but to award the common law measure of damages for the breach of primary obligation instead.
Equity, on the other hand, relieves against forfeitures where the primary object of the bargain is to secure a stated result which can effectively be attained when the matter comes before the court, and where the forfeiture provision is added by way of security for the production of that result: Shiloh Spinners Ltd v Harding [1973] AC 691, 723 (Lord Wilberforce).
As Lord Wilberforce said at p 722, the paradigm cases are the jurisdiction to relieve from a right of re entry in a lease of land and the mortgagors equity of redemption (and the associated equitable right to redeem) in relation to mortgages.
Save in relation to non payment of rent, the power to grant relief from forfeiture to lessees is now contained in section 146 of the Law of Property Act 1925, and probably exclusively so (see Official Custodian for Charities v Parway Estates Departments Ltd [1985] Ch 151).
Relief for mortgagors through the equitable right to redeem is (save in relation to most residential properties) largely still based on judge made law.
However, neither by statute nor on general principles of equity is a lessors right of re entry or a mortgagees right of sale or foreclosure treated as being by its nature contrary to the policy of the law.
What equity (and, where it applies, statute) typically considers to be contrary to the policy of the law is the enforcement of such rights in circumstances where their purpose, namely the performance of the obligations in the lease or the mortgage, can be achieved in other ways normally by late substantive compliance and payment of appropriate compensation.
The forfeiture or foreclosure/power of sale is therefore enforceable, equity intervening only to impose terms.
These will generally require the lessee or mortgagor to rectify the breach and make good any loss suffered by the lessor or mortgagee.
If the lessee or mortgagee cannot or will not do so, the forfeiture will be unconditionally enforced although perhaps not invariably (see per Lord Templeman in Associated British Ports v CH Bailey plc [1990] 2 AC 703, 707 708 in the context of section 146, and, more generally, the judgments in Cukurova Finance International Ltd v Alfa Telecom Turkey Ltd (No 3) [2013] UKPC 20, [2015] 2 WLR 875).
The penalty rule as it has been developed by the judges gives rise to two questions, both of which have a considerable bearing on the questions which arise on these appeals.
In what circumstances is the rule engaged at all? And what makes a contractual provision penal? In what circumstances is the penalty rule engaged?
In England, it has always been considered that a provision could not be a penalty unless it provided an exorbitant alternative to common law damages.
This meant that it had to be a provision operating upon a breach of contract.
In Moss Empires Ltd v Olympia (Liverpool) Ltd [1939] AC 544, this was taken for granted by Lord Atkin (p 551) and Lord Porter (p 558).
As a matter of authority the question is settled in England by the decision of the House of Lords in Export Credits Guarantee Department v Universal Oil Products Co [1983] 1 WLR 399 (ECGD).
Lord Roskill, with whom the rest of the committee agreed, said at p 403: [P]erhaps the main purpose, of the law relating to penalty clauses is to prevent a plaintiff recovering a sum of money in respect of a breach of contract committed by a defendant which bears little or no relationship to the loss actually suffered by the plaintiff as a result of the breach by the defendant.
But it is not and never has been for the courts to relieve a party from the consequences of what may in the event prove to be an onerous or possibly even a commercially imprudent bargain.
As Lord Hodge points out in his judgment, the Scottish authorities are to the same effect.
This principle is worth restating at the outset of any analysis of the penalty rule, because it explains much about the way in which it has developed.
There is a fundamental difference between a jurisdiction to review the fairness of a contractual obligation and a jurisdiction to regulate the remedy for its breach.
Leaving aside challenges going to the reality of consent, such as those based on fraud, duress or undue influence, the courts do not review the fairness of mens bargains either at law or in equity.
The penalty rule regulates only the remedies available for breach of a partys primary obligations, not the primary obligations themselves.
This was not a new concept in 1983, when ECGD was decided.
It had been the foundation of the equitable jurisdiction, which depended on the treatment of penal defeasible bonds as secondary obligations or, as Lord Thurlow LC put it in 1783 in Sloman as collateral or accessional to the primary obligation.
And it provided the whole basis of the classic distinction made at law between a penalty and a genuine pre estimate of loss, the former being essentially a way of punishing the contract breaker rather than compensating the innocent party for his breach.
We shall return to that distinction below.
This means that in some cases the application of the penalty rule may depend on how the relevant obligation is framed in the instrument, ie whether as a conditional primary obligation or a secondary obligation providing a contractual alternative to damages at law.
Thus, where a contract contains an obligation on one party to perform an act, and also provides that, if he does not perform it, he will pay the other party a specified sum of money, the obligation to pay the specified sum is a secondary obligation which is capable of being a penalty; but if the contract does not impose (expressly or impliedly) an obligation to perform the act, but simply provides that, if one party does not perform, he will pay the other party a specified sum, the obligation to pay the specified sum is a conditional primary obligation and cannot be a penalty.
However, the capricious consequences of this state of affairs are mitigated by the fact that, as the equitable jurisdiction shows, the classification of terms for the purpose of the penalty rule depends on the substance of the term and not on its form or on the label which the parties have chosen to attach to it.
As Lord Radcliffe said in Campbell Discount Co Ltd v Bridge [1962] AC 600, 622, [t]he intention of the parties themselves, by which he clearly meant the intention as expressed in the agreement, is never conclusive and may be overruled or ignored if the court considers that even its clear expression does not represent the real nature of the transaction or what in truth it is taken to be (and cf per Lord Templeman in Street v Mountford [1985] AC 809, 819).
This aspect of the equitable jurisdiction was inherited by the courts of common law, and has been firmly established since the earliest common law cases.
Payment of a sum of money is the classic obligation under a penalty clause and, in almost every reported case involving a damages clause, the provision stipulates for the payment of money.
However, it seems to us that there is no reason why an obligation to transfer assets (either for nothing or at an undervalue) should not be capable of constituting a penalty.
While the penalty rule may be somewhat artificial, it would heighten its artificiality to no evident purpose if it were otherwise.
Similarly, the fact that a sum is paid over by one party to the other party as a deposit, in the sense of some sort of surety for the first partys contractual performance, does not prevent the sum being a penalty, if the second party in due course forfeits the deposit in accordance with the contractual terms, following the first partys breach of contract see the Privy Council decisions in Public Works Comr v Hills [1906] AC 368, 375 376, and Workers Trust & Merchant Bank Ltd v Dojap Investments Ltd [1993] AC 573.
By contrast, in Else (1982) at p 146, Hoffmann LJ, citing Stockloser v Johnson [1954] 1 QB 476 in support, said that, unlike a case where money has been deposited as security for due performance of [a] partys obligation, retention of instalments which have been paid under contract so as to become the absolute property of the vendor does not fall within the penalty rule, although, he added that it was subject to the jurisdiction for relief against forfeiture.
The relationship between penalty clauses and forfeiture clauses is not entirely easy.
Given that they had the same origin in equity, but that the law on penalties was then developed through common law while the law on forfeitures was not, this is unsurprising.
Some things appear to be clear.
Where a proprietary interest or a proprietary or possessory right (such as a patent or a lease) is granted or transferred subject to revocation or determination on breach, the clause providing for determination or revocation is a forfeiture and cannot be a penalty, and, while it is enforceable, relief from forfeiture may be granted: see BICC plc v Burndy Corpn [1985] Ch 232, 246 247 and 252 (Dillon LJ) and The Scaptrade, pp 701 703, (Lord Diplock).
But this does not mean that relief from forfeiture is unavailable in cases not involving land see Cukurova Finance International Ltd v Alfa Telecom Turkey Ltd (No 2) [2013] UKPC 2, [2015] 2 WLR 875, especially at paras 92 97, and the cases cited there.
What is less clear is whether a provision is capable of being both a penalty clause and a forfeiture clause.
It is inappropriate to consider that issue in any detail in this judgment, as we have heard very little argument on forfeitures unsurprisingly because in neither appeal has it been alleged that any provision in issue is a forfeiture from which relief could be granted.
But it is right to mention the possibility that, in some circumstances, a provision could, at least potentially, be a penalty clause as well as a forfeiture clause.
We see the force of the arguments to that effect advanced by Lord Mance and Lord Hodge in their judgments.
What makes a contractual provision penal?
As we have already observed, until relatively recently this question was answered almost entirely by reference to straightforward liquidated damages clauses.
It was in that context that the House of Lords sought to restate the law in two seminal decisions at the beginning of the 20th century, Clydebank in 1904 and Dunlop in 1915.
Clydebank was a Scottish appeal about a shipbuilding contract with a provision (described as a penalty) for the payment of 500 per week for delayed delivery.
The provision was held to be a valid liquidated damages clause, not a penalty.
Lord Halsbury (p 10) said that the distinction between the two depended on whether it is, what I think gave the jurisdiction to the courts in both countries to interfere at all in an agreement between the parties, unconscionable and extravagant, and one which no court ought to allow to be enforced.
Lord Halsbury declined to lay down any abstract rule for determining what was unconscionable or extravagant, saying only that it must depend on the nature of the transaction the thing to be done, the loss likely to accrue to the person who is endeavouring to enforce the performance of the contract, and so forth.
Lord Halsburys formulation has proved influential, and the two other members of the Appellate Committee both delivered concurring judgments agreeing with it.
It is, however, worth drawing attention to an observation of Lord Robertson (pp 19 20) which points to the principle underlying the contrasting expressions liquidated damages and penalty: Now, all such agreements, whether the thing be called penalty or be called liquidate damage, are in intention and effect what Professor Bell calls instruments of restraint, and in that sense penal.
But the clear presence of this does not in the least degree invalidate the stipulation.
The question remains, had the respondents no interest to protect by that clause, or was that interest palpably incommensurate with the sums agreed on? It seems to me that to put this question, in the present instance, is to answer it.
Dunlop arose out of a contract for the supply of tyres, covers and tubes by a manufacturer to a garage.
The contract contained a number of terms designed to protect the manufacturers brand, including prohibitions on tampering with the marks, restrictions on the unauthorised export or exhibition of the goods, and on resales to unapproved persons.
There was also a resale price maintenance clause, which would now be unlawful but was a legitimate restriction of competition according to the notions prevailing in 1914.
It was this clause which the purchaser had broken.
The contract provided for the payment of 5 for every tyre, cover or tube sold in breach of any provision of the agreement.
Once again, the provision was held to be a valid liquidated damages clause.
In his speech, Lord Dunedin formulated four tests which, if applicable to the case under consideration, may prove helpful, or even conclusive (p 87).
They were (a) that the provision would be penal if the sum stipulated for is extravagant and unconscionable in amount in comparison with the greatest loss that could conceivably be proved to have followed from the breach; (b) that the provision would be penal if the breach consisted only in the non payment of money and it provided for the payment of a larger sum; (c) that there was a presumption (but no more) that it would be penal if it was payable in a number of events of varying gravity; and (d) that it would not be treated as penal by reason only of the impossibility of precisely pre estimating the true loss.
Lord Dunedins speech in Dunlop achieved the status of a quasi statutory code in the subsequent case law.
Some of the many decisions on the validity of damages clauses are little more than a detailed exegesis or application of his four tests with a view to discovering whether the clause in issue can be brought within one or more of them.
In our view, this is unfortunate.
In the first place, Lord Dunedin proposed his four tests not as rules but only as considerations which might prove helpful or even conclusive if applicable to the case under consideration.
He did not suggest that they were applicable to every case in which the law of penalties was engaged.
Second, as Lord Dunedin himself acknowledged, the essential question was whether the clause impugned was unconscionable or extravagant.
The four tests are a useful tool for deciding whether these expressions can properly be applied to simple damages clauses in standard contracts.
But they are not easily applied to more complex cases.
To deal with those, it is necessary to consider the rationale of the penalty rule at a more fundamental level.
What is it that makes a provision for the consequences of breach unconscionable? And by comparison with what is a penalty clause said to be extravagant? Third, none of the other three Law Lords expressly agreed with Lord Dunedins reasoning, and the four tests do not all feature in any of their speeches.
Indeed, it appears that, in his analysis at pp 101 102, Lord Parmoor may have taken a more restrictive view of what constituted a penalty than did Lord Dunedin.
More generally, the other members of the Appellate Committee gave their own reasons for concurring in the result, and they also repay consideration.
For present purposes, the most instructive is that of Lord Atkinson, who approached the matter on an altogether broader basis.
Lord Atkinson pointed (pp 90 91) to the critical importance to Dunlop of the protection of their brand, reputation and goodwill, and their authorised distribution network.
Against this background, he observed (pp 91 92): It has been urged that as the sum of 5 becomes payable on the sale of even one tube at a shilling less than the listed price, and as it was impossible that the appellant company should lose that sum on such a transaction, the sum fixed must be a penalty.
In the sense of direct and immediate loss the appellants lose nothing by such a sale.
It is the agent or dealer who loses by selling at a price less than that at which he buys, but the appellants have to look at their trade in globo, and to prevent the setting up, in reference to all their goods anywhere and everywhere, a system of injurious undercutting.
The object of the appellants in making this agreement, if the substance and reality of the thing and the real nature of the transaction be looked at, would appear to be a single one, namely, to prevent the disorganization of their trading system and the consequent injury to their trade in many directions.
The means of effecting this is by keeping up their price to the public to the level of their price list, this last being secured by contracting that a sum of 5 shall be paid for every one of the three classes of articles named sold or offered for sale at prices below those named on the list.
The very fact that this sum is to be paid if a tyre cover or tube be merely offered for sale, though not sold, shows that it was the consequential injury to their trade due to undercutting that they had in view.
They had an obvious interest to prevent this undercutting, and on the evidence it would appear to me impossible to say that that interest was incommensurate with the sum agreed to be paid.
Lord Atkinson went on to draw an analogy, which has particular resonance in the Cavendish appeal, with a clause dealing with damages for breach of a restrictive covenant on the canvassing of business by a former employee.
In this context, he said (pp 92 93): It is, I think, quite misleading to concentrate ones attention upon the particular act or acts by which, in such cases as this, the rivalry in trade is set up, and the repute acquired by the former employee that he works cheaper and charges less than his old master, and to lose sight of the risk to the latter that old customers, once tempted to leave him, may never return to deal with him, or that business that might otherwise have come to him may be captured by his rival.
The consequential injuries to the traders business arising from each breach by the employee of his covenant cannot be measured by the direct loss in a monetary point of view on the particular transaction constituting the breach.
Lord Atkinson was making substantially the same point as Lord Robertson had made in Clydebank.
The question was: what was the nature and extent of the innocent partys interest in the performance of the relevant obligation.
That interest was not necessarily limited to the mere recovery of compensation for the breach.
Lord Atkinson considered that the underlying purpose of the resale price maintenance clause gave Dunlop a wider interest in enforcing the damages clause than pecuniary compensation. 5 per item was not incommensurate with that interest even if it was incommensurate with the loss occasioned by the wrongful sale of a single item.
Although the other members of the Appellate Committee did not express themselves in the same terms as Lord Atkinson, their approach was entirely consistent with his.
Lord Parker at p 97 said that whether the sum agreed to be paid on the breach is really a penalty must depend on the circumstances of each particular case, and at p 99, echoing Lord Atkinsons fuller treatment of the point, as just set out, he described the damage which would result from any breach as consist[ing] in the disturbance or derangement of the system of distribution by means of which [Dunlops] goods reach the ultimate consumer.
In their speeches, Lord Dunedin (p 87), Lord Parker (p 98) and Lord Parmoor (p 103) ultimately were content to rest their decision that the 5 was not a penalty on the ground that an exact pre estimate of loss was impossible, whereas, in the passages quoted above, Lord Atkinson analysed why that was so.
It seems clear that the actual result of the case was strongly influenced by Lord Atkinsons reasoning.
The clause was upheld although, on the face of it, it failed all but the last of Lord Dunedins tests.
The 5 per item applied to breaches of very variable significance and it was impossible to relate the loss attributable to the sale of that item.
It was justifiable only by reference to the wider interests identified by Lord Atkinson.
The great majority of cases decided in England since Dunlop have concerned more or less standard damages clauses in consumer contracts, and Lord Dunedins four tests have proved perfectly adequate for dealing with those.
More recently, however, the courts have returned to the possibility of a broader test in less straightforward cases, in the context of the supposed commercial justification for clauses which might otherwise be regarded as penal.
An early example is the decision of the House of Lords in The Scaptrade, where at p 702, Lord Diplock, with whom the rest of the Appellate Committee agreed, observed that a right to withdraw a time chartered vessel for non payment of advance hire was not a penalty because its commercial purpose was to create a fund from which the cost of providing the chartered service could be funded.
In Lordsvale Finance plc v Bank of Zambia [1996] QB 752, Colman J was concerned with a common form provision in a syndicated loan agreement for interest to be payable at a higher rate during any period when the borrower was in default.
There was authority that such provisions were penal: Lady Holles v Wyse (1693) 2 Vern 289; Strode v Parker (1694) 2 Vern 316, Wallingford v Mutual Society (1880) 5 App Cas 685, 702 (Lord Hatherley).
But Colman J held that the clause was valid because its predominant purpose was not to deter default but to reflect the greater credit risk associated with a borrower in default.
At pp 763 764, he observed that a provision for the payment of money upon breach could not be categorised as a penalty simply because it was not a genuine pre estimate of damages, saying that there would seem to be: no reason in principle why a contractual provision the effect of which was to increase the consideration payable under an executory contract upon the happening of a default should be struck down as a penalty if the increase could in the circumstances be explained as commercially justifiable, provided always that its dominant purpose was not to deter the other party from breach.
Colman Js approach was approved by Mance LJ, delivering the leading judgment in the Court of Appeal in Cine Bes Filmcilik ve Yapimcilik v United International Pictures [2004] 1 CLC 401, para 13.
A similar view was taken by Arden LJ in Murray v Leisureplay plc [2005] IRLR 946, para 54, where she posed the question Has the party who seeks to establish that the clause is a penalty shown that the amount payable under the clause was imposed in terrorem, or that it does not constitute a genuine pre estimate of loss for the purposes of the Dunlop case, and, if he has shown the latter, is there some other reason which justifies the discrepancy between [the amount payable under the clause and the amount payable by way of damages in common law]? (emphasis added).
She considered that the clause in question had advantages for both sides, and pointed out that no evidence had been adduced to show that the clause lacked commercial justification: see paras 70 76.
But Buxton LJ put the matter on a wider basis for which Clarke LJ (para 105) expressed a preference.
He referred to the speech of Lord Atkinson in Dunlop and suggested that the ratio of the actual decision in that case had been that an explanation of the clause in commercial rather than deterrent terms was available.
All three members of the court endorsed the approach of Colman J in Lordsvale and Mance LJ in Cine Bes.
Colman J in Lordsvale and Arden LJ in Murray were inclined to rationalise the introduction of commercial justification as part of the test, by treating it as evidence that the impugned clause was not intended to deter.
Later decisions in which a commercial rationale has been held inconsistent with the application of the penalty rule, have tended to follow that approach: see, for example, Euro London Appointments Ltd v Claessens International Ltd [2006] 2 Lloyds Rep 436, General Trading Company (Holdings) Ltd v Richmond Corpn Ltd [2008] 2 Lloyds Rep 475.
It had the advantage of enabling them to reconcile the concept of commercial justification with Lord Dunedins four tests.
But we have some misgivings about it.
The assumption that a provision cannot have a deterrent purpose if there is a commercial justification, seems to us to be questionable.
By the same token, we agree with Lord Radcliffes observations in Campbell Discount at p 622, where he said: I do not myself think that it helps to identify a penalty, to describe it as in the nature of a threat to be enforced in terrorem (to use Lord Halsburys phrase in Elphinstone v Monkland Iron & Coal Co Ltd (1886) 11 App Cas 332, 348).
I do not find that that description adds anything of substance to the idea conveyed by the word penalty itself, and it obscures the fact that penalties may quite readily be undertaken by parties who are not in the least terrorised by the prospect of having to pay them and yet are, as I understand it, entitled to claim the protection of the court when they are called upon to make good their promises.
Moreover, the penal character of a clause depends on its purpose, which is ordinarily an inference from its effect.
As we have already explained, this is a question of construction, to which evidence of the commercial background is of course relevant in the ordinary way.
But, for the same reason, the answer cannot depend on evidence of actual intention: see Chartbrook Ltd v Persimmon Homes Ltd [2009] AC 1101, paras 28 47 (Lord Hoffmann).
However, while we have misgivings about some aspects of their reasoning, these aspects are peripheral to the essential point which Colman J and Buxton LJ were making, and we consider that their emphasis on justification provides a valuable insight into the real basis of the penalty rule.
It is the same insight as that of Lord Robertson in Clydebank and Lord Atkinson in Dunlop.
A damages clause may properly be justified by some other consideration than the desire to recover compensation for a breach.
This must depend on whether the innocent party has a legitimate interest in performance extending beyond the prospect of pecuniary compensation flowing directly from the breach in question.
The availability of remedies for a breach of duty is not simply a question of providing a financial substitute for performance.
It engages broader social and economic considerations, one of which is that the law will not generally make a remedy available to a party, the adverse impact of which on the defaulter significantly exceeds any legitimate interest of the innocent party.
In the famous case of White & Carter (Councils) Ltd v McGregor [1962] AC 413, Lord Reid observed, at p 431: It may well be that, if it can be shown that a person has no legitimate interest, financial or otherwise, in performing the contract rather than claiming damages, he ought not to be allowed to saddle the other party with an additional burden with no benefit to himself.
If a party has no interest to enforce a stipulation, he cannot in general enforce it: so it might be said that, if a party has no interest to insist on a particular remedy, he ought not to be allowed to insist on it.
And, just as a party is not allowed to enforce a penalty, so he ought not to be allowed to penalise the other party by taking one course when another is equally advantageous to him.
Here the respondent did not set out to prove that the appellants had no legitimate interest in completing the contract and claiming the contract price rather than claiming damages.
Parliament has on many occasions relieved parties from certain kinds of improvident or oppressive contracts, but the common law can only do that in very limited circumstances.
In White & Carter the innocent party was entitled to ignore the repudiation of the contract breaker and proceed to perform, claiming his remuneration in debt rather than limiting himself to damages, notwithstanding that this course might be a great deal more expensive for the contract breaker.
This, according to Lord Reid (p 431), was because the contract breaker did not set out to prove that the appellants had no legitimate interest in completing the contract and claiming the contract price rather than claiming damages.
More generally, the attitude of the courts, reflecting that of the Court of Chancery, is that specific performance of contractual obligations should ordinarily be refused where damages would be an adequate remedy.
This is because the minimum condition for an order of specific performance is that the innocent party should have a legitimate interest extending beyond pecuniary compensation for the breach.
The paradigm case is the purchase of land or certain chattels such as ships, which the law recognises as unique.
Because of their uniqueness the purchasers interest extends beyond the mere award of damages as a substitute for performance.
As Lord Hoffmann put it in addressing a very similar issue the purpose of the law of contract is not to punish wrongdoing but to satisfy the expectations of the party entitled to performance: Co operative Insurance Society Ltd v Argyll Stores (Holdings) Ltd [1998] AC 1, 15.
In our opinion, the law relating to penalties has become the prisoner of artificial categorisation, itself the result of unsatisfactory distinctions: between a penalty and genuine pre estimate of loss, and between a genuine pre estimate of loss and a deterrent.
These distinctions originate in an over literal reading of Lord Dunedins four tests and a tendency to treat them as almost immutable rules of general application which exhaust the field.
In Legione v Hateley (1983) 152 CLR 406, 445, Mason and Deane JJ defined a penalty as follows: A penalty, as its name suggests, is in the nature of a punishment for non observance of a contractual stipulation; it consists of the imposition of an additional or different liability upon breach of the contractual stipulation .
All definition is treacherous as applied to such a protean concept.
This one can fairly be said to be too wide in the sense that it appears to be apt to cover many provisions which would not be penalties (for example most, if not all, forfeiture clauses).
However, in so far as it refers to punishment and an additional or different liability as opposed to in terrorem and genuine pre estimate of loss, this definition seems to us to get closer to the concept of a penalty than any other definition we have seen.
The real question when a contractual provision is challenged as a penalty is whether it is penal, not whether it is a pre estimate of loss.
These are not natural opposites or mutually exclusive categories.
A damages clause may be neither or both.
The fact that the clause is not a pre estimate of loss does not therefore, at any rate without more, mean that it is penal.
To describe it as a deterrent (or, to use the Latin equivalent, in terrorem) does not add anything.
A deterrent provision in a contract is simply one species of provision designed to influence the conduct of the party potentially affected.
It is no different in this respect from a contractual inducement.
Neither is it inherently penal or contrary to the policy of the law.
The question whether it is enforceable should depend on whether the means by which the contracting partys conduct is to be influenced are unconscionable or (which will usually amount to the same thing) extravagant by reference to some norm.
The true test is whether the impugned provision is a secondary obligation which imposes a detriment on the contract breaker out of all proportion to any legitimate interest of the innocent party in the enforcement of the primary obligation.
The innocent party can have no proper interest in simply punishing the defaulter.
His interest is in performance or in some appropriate alternative to performance.
In the case of a straightforward damages clause, that interest will rarely extend beyond compensation for the breach, and we therefore expect that Lord Dunedins four tests would usually be perfectly adequate to determine its validity.
But compensation is not necessarily the only legitimate interest that the innocent party may have in the performance of the defaulters primary obligations.
This was recognised in the early days of the penalty rule, when it was still the creature of equity, and is reflected in Lord Macclesfields observation in Peachy (quoted in para 5 above) about the application of the penalty rule to provisions which were never intended by way of compensation, for which equity would not relieve.
It was reflected in the result in Dunlop.
And it is recognised in the more recent decisions about commercial justification.
And, as Lord Hodge shows, it is the principle underlying the Scottish authorities.
The penalty rule is an interference with freedom of contract.
It undermines the certainty which parties are entitled to expect of the law.
Diplock LJ was neither the first nor the last to observe that The court should not be astute to descry a penalty clause: Robophone at p 1447.
As Lord Woolf said, speaking for the Privy Council in Philips Hong Kong Ltd v Attorney General of Hong Kong (1993) 61 BLR 41, 59, the court has to be careful not to set too stringent a standard and bear in mind that what the parties have agreed should normally be upheld, not least because [a]ny other approach will lead to undesirable uncertainty especially in commercial contracts.
Although the penalty rule originates in the concern of the courts to prevent exploitation in an age when credit was scarce and borrowers were particularly vulnerable, the modern rule is substantive, not procedural.
It does not normally depend for its operation on a finding that advantage was taken of one party.
As Lord Wright MR observed in Imperial Tobacco Company (of Great Britain) and Ireland v Parslay [1936] 2 All ER 515, 523: A millionaire may enter into a contract in which he is to pay liquidated damages, or a poor man may enter into a similar contract with a millionaire, but in each case the question is exactly the same, namely, whether the sum stipulated as damages for the breach was exorbitant or extravagant .
But for all that, the circumstances in which the contract was made are not entirely irrelevant.
In a negotiated contract between properly advised parties of comparable bargaining power, the strong initial presumption must be that the parties themselves are the best judges of what is legitimate in a provision dealing with the consequences of breach.
In that connection, it is worth noting that in Philips Hong Kong at pp 57 59, Lord Woolf specifically referred to the possibility of taking into account the fact that one of the parties to the contract is able to dominate the other as to the choice of the terms of a contract when deciding whether a damages clause was a penalty.
In doing so, he reflected the view expressed by Mason and Wilson JJ in AMEV UDC at p 194 that the courts were thereby able to strike a balance between the competing interests of freedom of contract and protection of weak contracting parties (citing Atiyah, The Rise and Fall of Freedom of Contract (1979), Chapter 22).
However, Lord Woolf was rightly at pains to point out that this did not mean that the courts could thereby adopt some broader discretionary approach.
The notion that the bargaining position of the parties may be relevant is also supported by Lord Browne Wilkinson giving the judgment of the Privy Council in Workers Bank.
At p 580, he rejected the notion that the test of reasonableness [could] depend upon the practice of one class of vendor, which exercises considerable financial muscle as it would allow such people to evade the law against penalties by adopting practices of their own.
In his judgment, he decided that, in contracts for sale of land, a clause providing for a forfeitable deposit of 10% of the purchase price was valid, although it was an anomalous exception to the penalty rule.
However, he held that the clause providing for a forfeitable 25% deposit in that case was invalid because in Jamaica, the customary deposit has been 10% and [a] vendor who seeks to obtain a larger amount by way of forfeitable deposit must show special circumstances which justify such a deposit, which the appellant vendor in that case failed to do.
Should the penalty rule be abrogated?
The primary case of Miss Smith QC, who appeared for Cavendish in the first appeal, was that the penalty rule should now be regarded as antiquated, anomalous and unnecessary, especially in the light of the growing importance of statutory regulation in this field.
It is the creation of the judges, and, she argued, the judges should now take the opportunity to abolish it.
There is a case to be made for taking this course.
It was expounded with considerable forensic skill by Miss Smith, and has some powerful academic support: see Sarah Worthington, Common Law Values: the Role of Party Autonomy in Private Law, in The Common Law of Obligations: Divergence and Unity (ed A Robertson and M Tilbury (2015)), pp 18 26.
We rather doubt that the courts would have invented the rule today if their predecessors had not done so three centuries ago.
But this is not the way in which English law develops, and we do not consider that judicial abolition would be a proper course for this court to take.
The first point to be made is that the penalty rule is not only a long standing principle of English law, but is common to almost all major systems of law, at any rate in the western world.
It has existed in England since the 16th century and can be traced back to the same period in Scotland: McBryde, The Law of Contract in Scotland, 3rd ed (2007), paras 22 148.
The researches of counsel have shown that it has been adopted with some variants in all common law jurisdictions, including those of the United States.
A corresponding rule was derived from Roman law by Pothier, Trait des Obligations, No 346, which is to be found in the Civil Codes of France (article 1152), Germany (for non commercial contracts only) (sections 343, 348), Switzerland (article 163.3), Belgium (article 1231) and Italy (article 1384).
It is included in influential attempts to codify the law of contracts internationally, including the Unidroit Principles of International Commercial Contracts (2010) (article 7.4.13), and the UNCITRAL Uniform Rules on Contract Clauses for an Agreed Sum Due upon Failure of Performance (article 6).
In January 1978 the Committee of Ministers of the Council of Europe recommended a number of common principles relating to penal clauses, including (article 7) that a stipulated sum payable on breach may be reduced by the court when it is manifestly excessive.
It is true that statutory regulation, which hardly existed at the time that the penalty rule was developed, is now a significant feature of the law of contract.
In England, the landmark legislation was the Unfair Contract Terms Act 1977.
For most purposes, the Act was superseded by the Unfair Terms in Consumer Contracts Regulations 1994 (SI 1994/3159), which was in turn replaced by the 1999 Regulations, both of which give effect to European Directives.
The 1999 Regulations contain an indicative and non exhaustive list of the terms which may be regarded as unfair, including terms which have the object or effect of requiring any consumer who fails to fulfil his obligation to pay a disproportionately high sum in compensation.
Nonetheless, statutory regulation is very far from covering the whole field.
Penalty clauses are controlled by the 1999 Regulations, but the Regulations apply only to consumer contracts and the control of unfair terms under regulations 3 and 5 is limited to those which have not been individually negotiated.
There are major areas, notably non consumer contracts, which are not regulated by statute.
Some of those who enter into such contracts, for example professionals and small businesses, may share many of the characteristics of consumers which are thought to make the latter worthy of legal protection.
The English Law Commission considered penalty clauses in 1975 (Working Paper No 61, Penalty Clauses and Forfeiture of Monies Paid, April 1975), at a time when there was no relevant statutory regulation, and the Scottish Law Commission reported on them in May 1999 (Report No 171).
Neither of these Reports recommended abolition of the rule.
On the contrary, both recommended legislation which would have expanded its scope.
Further, although there are justified criticisms that can be made of the penalty rule, it is consistent with other well established principles which have been developed by judges (albeit mostly in the Chancery courts) and which involve the court in declining to give full force to contractual provisions, such as relief from forfeiture, the equity of redemption, and refusal to grant specific performance, as discussed in paras 10 11 and 29 30 above.
Finally, the case for abolishing the rule depends heavily on anomalies in the operation of the law as it has traditionally been understood.
Many, though not all of these are better addressed (i) by a realistic appraisal of the substance of contractual provisions operating upon breach, and (ii) by taking a more principled approach to the interests that may properly be protected by the terms of the parties agreement.
Should the penalty rule be extended?
In the course of his cogent submissions, Mr Bloch QC, who appeared for Mr Makdessi on the first appeal, suggested that, as an alternative to confirming or abrogating the penalty rule, this court could extend it, so that it applied more generally.
As he pointed out, this was the course taken by the High Court of Australia, and it would have the advantage of rendering the penalty rule less formalistic in its application, and, which may be putting the point in a different way, less capable of avoidance by ingenious drafting.
This step has recently been taken in Australia.
Until recently, the law in Australia was the same as it is in England: see IAC Leasing Ltd v Humphrey (1972) 126 CLR 131, 143 (Walsh J); ODea v Allstates Leasing System (WA) Pty Ltd (1983) 152 CLR 359, 390 (Brennan J); AMEV UDC at p 184 (Mason and Wilson JJ, citing ECGD among other authorities), 211 (Dawson J); Ringrow Pty Ltd v BP Australia Pty Ltd (2005) 224 CLR 656, 662.
However, a radical departure from the previous understanding of the law occurred with the decision of the High Court of Australia in Andrews v Australia and New Zealand Banking Group Ltd (2012) 247 CLR 205.
The background to this case was very similar to that in Office of Fair Trading v Abbey National plc [2010] 1 AC 696.
It concerned the application of the penalty rule to contractual bank charges payable when the bank bounced a cheque or allowed the customer to draw in excess of his available funds or agreed overdraft limit.
These might in a loose sense be regarded as banking irregularities, but they did not involve any breach of contract on the part of the customer.
On that ground Andrew Smith J had held in the Abbey National case that the charges were incapable of being penalties: [2008] 2 All ER (Comm) 625, paras 295 299 (the point was not appealed).
In Andrews, the High Court of Australia disagreed.
They engaged in a detailed historical examination of the equitable origin of the rule and concluded that there subsisted, independently of the common law rule, an equitable jurisdiction to relieve against any sufficiently onerous provision which was conditional upon a failure to observe some other provision, whether or not that failure was a breach of contract.
At para 10, they defined a penalty as follows: In general terms, a stipulation prima facie imposes a penalty on a party (the first party) if, as a matter of substance, it is collateral (or accessory) to a primary stipulation in favour of a second party and this collateral stipulation, upon the failure of the primary stipulation, imposes upon the first party an additional detriment, the penalty, to the benefit of the second party.
In that sense, the collateral or accessory stipulation is described as being in the nature of a security for and in terrorem of the satisfaction of the primary stipulation.
If compensation can be made to the second party for the prejudice suffered by failure of the primary stipulation, the collateral stipulation and the penalty are enforced only to the extent of that compensation.
The first party is relieved to that degree from liability to satisfy the collateral stipulation.
Any decision of the High Court of Australia has strong persuasive force in this court.
But we cannot accept that English law should take the same path, quite apart from its inconsistency with established and unchallenged House of Lords authority.
In the first place, although the reasoning in Andrews was entirely historical, it is not in fact consistent with the equitable rule as it developed historically.
The equitable jurisdiction to relieve from penalties arose wholly in the context of bonds defeasible in the event of the performance of a contractual obligation.
It necessarily posited a breach of that obligation.
Secondly, if there is a distinct and still subsisting equitable jurisdiction to relieve against penalties which is wider than the common law jurisdiction, with three possible exceptions it appears to have left no trace in the authorities since the fusion of law and equity in 1873.
The first arguable exception is in In re Dagenham (Thames) Dock Co; Ex p Hulse (1873) LR 8 Ch App 1022 (followed by the Privy Council in Kilmer v British Columbia Orchard Lands Ltd [1913] AC 319), where the Court of Appeal granted a purchaser, who had been in possession for five years and carried out improvements, further time to pay the second and final instalment of a purchase price on the ground that the clause requiring him to vacate and to forfeit the first instalment for not having paid the second instalment on time, was a penalty.
However, James and Mellish LJJ may have been treating the clause as a forfeiture (as they both also used that expression in their brief judgments), and in any event they treated the purchaser in the same way as a mortgagor in possession asking for more time to pay.
Further, as Romer LJ pointed out in Stockloser at pp 497 498, the decision could be justified by the fact that time had already been extended twice by agreement, and in any event there was no question of the vendor being required to repay the first instalment.
The second arguable exception is no more than an unsupported throw away line in the judgment of Diplock LJ in Robophone at p 1446, where he said it was by no means clear whether penalty clauses are simply void, but, on analysis, he was dealing with a rather different point (namely that discussed by Lord Atkin in the passage that follows).
The third exception is the unsatisfactory decision in Jobson v Johnson [1989] 1 WLR 1026, to which we shall return in paras 84 87 below.
It is relevant to add in this connection that the law of penalties has been held to be the same in England and Scotland: Stair Memorial Encyclopaedia of the Laws of Scotland, vol 15, paras 783 801, and see Clydebank.
Yet equity, although influential, has never been a distinct branch of Scots law.
In the modern law of both countries, the penalty rule is an aspect of the law of contract.
Thirdly, the High Courts redefinition of a penalty is, with respect, difficult to apply to the case to which it is supposedly directed, namely where there is no breach of contract.
It treats as a potential penalty any clause which is in the nature of a security for and in terrorem of the satisfaction of the primary stipulation.
By a security it means a provision to secure compensation for the prejudice suffered by the failure of the primary stipulation.
This analysis assumes that the primary stipulation is some kind of promise, in which case its failure is necessarily a breach of that promise.
If, for example, there is no duty not to draw cheques against insufficient funds, it is difficult to see where compensation comes into it, or how bank charges for bouncing a cheque or allowing the customer to overdraw can be regarded as securing a right of compensation.
Finally, the High Courts decision does not address the major legal and commercial implications of transforming a rule for controlling remedies for breach of contract into a jurisdiction to review the content of the substantive obligations which the parties have agreed.
Modern contracts contain a very great variety of contingent obligations.
Many of them are contingent on the way that the parties choose to perform the contract.
There are provisions for termination upon insolvency, contractual payments due on the exercise of an option to terminate, break fees chargeable on the early repayment of a loan or the closing out of futures contracts in the financial or commodity markets, provisions for variable payments dependent on the standard or speed of performance and take or pay provisions in long term oil and gas purchase contracts, to take only some of the more familiar types of clause.
The potential assimilation of all of these to clauses imposing penal remedies for breach of contract would represent the expansion of the courts supervisory jurisdiction into a new territory of uncertain boundaries, which has hitherto been treated as wholly governed by mutual agreement.
We would accept that the application of the penalty rule can still turn on questions of drafting, even where a realistic approach is taken to the substance of the transaction and not just its form.
But we agree with what Hoffmann LJ said in Else (1982) at p 145, namely that, while it is true that the question whether the penalty rule applies may sometimes turn on somewhat formal distinction[s], this can be justified by the fact that the rule being an inroad upon freedom of contract which is inflexible ought not to be extended, at least by judicial, as opposed to legislative, decision making.
The first appeal: Cavendish v El Makdessi
The factual and procedural history
Mr Makdessi founded a group of companies (the Group) which by 2008 had become the largest advertising and marketing communications group in the Middle East, and operated through a network of around 20 companies with more than 30 offices in over 15 countries.
At that time, Mr Makdessi was one of the most influential Lebanese business leaders, his name was closely identified with the business of the Group, and he had very strong relationships with its clients and senior employees.
In 2008, the holding company of the Group was Team Y & R Holdings Hong Kong Ltd (the Company).
The Company had 1,000 issued shares, which were owned by Mr Makdessi and Mr Joseph Ghossoub, with the exception of 126 shares which were held by Young & Rubicam International Group BV (Y & RIG), a company in the WPP group of companies (WPP), the worlds largest market communications services group.
By an agreement of 28 February 2008 (the Agreement) Mr Makdessi and Mr Ghossoub (described as the Sellers) agreed to sell to Y & RIG (described as the Purchaser) 474 shares (described as the Sale Shares) in the Company.
Y & RIG then transferred those shares to Cavendish Square Holdings BV (Cavendish), another WPP company, and by a novation agreement of 29 February 2008, Cavendish was substituted for Y & RIG as a party to the Agreement.
Thus Cavendish came to hold 60% of the Company while the Sellers retained 40%.
For present purposes, Y & RIG can be ignored and the Purchaser can be treated as Cavendish.
The Agreement had been the subject of extensive negotiations over six months, and both sides were represented by highly experienced and respected commercial lawyers: Allen & Overy acting for Cavendish, and Lewis Silkin for the Sellers, Mr Makdessi and Mr Ghossoub.
By clause 3.1, the price payable by Cavendish [i]n consideration of the sale of the Sale Shares and the obligations of the Sellers herein (and which was to be apportioned 53.88% to Mr Makdessi and 46.12% to Mr Ghossoub) was to be paid by Cavendish in the following way: i) A Completion Payment of US$34m to be paid on completion of the Agreement; ii) A Second Payment of US$31.5m to be paid into escrow on completion, and to be released in four instalments, as restructuring of the Group companies took effect; iii) An Interim Payment, to be paid 30 days after agreement of the group operating profits (OPAT) for 2007 2009, and to be the amount by which the product of eight, 0.474 and the average annual OPAT 2007 2009 exceeded US$63m (being the sum of the earlier payments less US$ 2.5m representing interest); iv) A Final Payment, to be paid 30 days after agreement of the OPAT for 2007 2011, and to be the amount by which the product of a figure between seven and ten (depending on the level of profit), 0.474 and the annual average annual OPAT for 2009 2011 exceeded the aggregate of US$63m and the Interim Payment.
Clause 6 contained provisions relating to the calculation of OPAT and payment of the consideration.
Clause 3.2 of the Agreement provided that, if the Interim Payment and/or the Final Payment turned out to be a negative figure, it or they should be treated as zero, but there was to be no claw back of the earlier payments.
Clause 3.3 of the Agreement provided that the maximum of all payments would be US$147.5m.
By clause 9.1 of, and paragraph 2.15(c) of Schedule 7 to, the Agreement, the Sellers warranted that the Net Asset Value (NAV) of the Company at 31 December 2007 was just over US$69.74m.
Clause 15 contained a put option which entitled each of the Sellers to require Cavendish, by a Notice served at any time between 1 January and 31 March in 2011 or any subsequent year (in the case of Mr Makdessi) and any time between 1 January and 31 March in 2017 or in any subsequent year (in the case of Mr Ghossoub), to buy all their remaining shares in the Company.
The price payable on the exercise of this option was (subject to a cap of US$75m in the case of each Seller) to be the relevant sellers proportion of a sum eight times the average OPAT for a reference period of seven years (the year in which the notice was served, the previous year and the two subsequent years).
It was to be payable by instalments.
Clause 11 was concerned with the protection of goodwill.
Clause 11.1 provided as follows: 11.1.
Each Seller recognises the importance of the goodwill of the Group to [Cavendish] and the WPP Group which is reflected in the price to be paid by the Purchaser for the Sale Shares.
Accordingly, each Seller commits as set out in this clause 11 to ensure that the interest of each of [Cavendish] and the WPP Group in that goodwill is properly protected.
Clause 11.2 provided that, in Mr Makdessis case, until two years after he ceased to hold any shares in the Company or the date of the final instalment of any payment under clause 15, and in Mr Ghossoubs case, until two years after he ceased employment with the Company, the Sellers would not (a) carry on, or be engaged or interested in Restricted Activities (ie the provision of goods or services which competed with the Group companies) in Prohibited Areas (ie in countries in which any of the Group companies carried on business); (b) solicit or accept orders, enquiries or business in respect of Restricted Activities in the Prohibited Areas; (c) divert orders, enquiries or business from any Group company; or (d) employ or solicit any senior employee or consultant of any Group company.
Clause 11.7 started by recording that Cavendish recognises the importance of the goodwill of the Group to the Sellers and to the value of the Interim Payment and the Final Payment.
It then contained a covenant by Cavendish that neither it nor any other WPP company would without the Sellers prior written consent other than within the Group companies, trade in any of the [23 identified] countries using [specified] names [including Adrenalin].
Under clause 7.5, Messrs El Makdessi and Ghossoub agreed that, within four months of completion, they would dispose of any shares in Carat Middle East Sarl (Carat), and procure the termination of a joint venture agreement which another Carat company had entered into with a member of the Aegis group of companies.
Carat describes itself on its website as the worlds leading independent media planning and buying specialist [o]wned by global media group Aegis Group plc [with] more than 5,000 people in 70 countries worldwide.
It is a competitor of WPP, including Cavendish and the Company.
The two provisions of central relevance for present purposes were included in clause 5, which was headed Default.
Clauses 5.1 and 5.6 provided: 5.1 If a Seller becomes a Defaulting Shareholder [which is defined as including a Seller who is in breach of clause 11.2] he shall not be entitled to receive the Interim Payment and/or the Final Payment which would other than for his having become a Defaulting Shareholder have been paid to him and [Cavendish]s obligations to make such payment shall cease. 5.6.
Each Seller hereby grants an option to [Cavendish] pursuant to which, in the event that such Seller becomes a Defaulting Shareholder, [Cavendish] may require such Seller to sell to [Cavendish] all of the Shares held by that Seller (the Defaulting Shareholder Shares). [Cavendish] shall buy and such Seller shall sell the Defaulting Shareholder Shares within 30 days of receipt by such Seller of a notice from [Cavendish] exercising such option in consideration for the payment by [Cavendish] to such Seller of the Defaulting Shareholder Option Price [defined as an amount equal to the [NAV] on the date that the relevant Seller becomes a Defaulting Shareholder multiplied by [the percentage which represents the proportion of the total shares the relevant Seller holds].
Mr Ghossoub signed an agreement by which he agreed to remain an employee and director of the Company.
During the negotiations, Mr Makdessi had made it clear that he did not wish to remain an employee.
However, he signed an agreement, by which he became a non executive director of the Company (as well as other companies in the Group) and non executive chairman, for an initial term of 18 months which was renewable.
Under this he agreed to certain specific obligations by way of ongoing support of the Company.
Mr Makdessi resigned as non executive chairman of the Company in April 2009.
On 1 July 2009, at the Companys request, he resigned as non executive director of all companies in the Group, save the Company itself.
He was removed from the board of the Company on 27 April 2011, after the commencement of these proceedings.
Mr Makdessi has been paid his share of the first two payments stipulated by clause 3.1, namely the Completion Payment and the Second Payment, together with some additional interest.
However, he has not yet been paid the remaining payments under clause 3.1, namely the Interim Payment or the Final Payment, or any part thereof.
His remaining shares represent just over 21.5% of the whole issued share capital of the Company.
By December 2010, Cavendish and the Company concluded that Mr Makdessi had acted in breach of his duties to the Company as a director and in breach of his obligations to Cavendish under clause 11.2 of the Agreement.
On 13 December 2010 Cavendish gave notice of the exercise of its Call Option under clause 5.6.
In December 2010, these proceedings were commenced against Mr Makdessi, with Cavendish suing for breach of the Agreement, and the Company suing for breach of fiduciary duty.
Their re amended particulars allege that in breach of his fiduciary duties and the restrictive covenants Mr Makdessi had throughout 2008 and 2009 in Lebanon and Saudi Arabia (both of which were within the Prohibited Area), in breach of clause 11.2, engaged in Restricted Activities, solicited clients and employees away from Group companies and accepted orders in respect of Restricted Activities.
The essence of the complaints was that Mr Makdessi had (i) continued to provide services to Carat, including assisting it to generate business, diverting business to it and soliciting clients and diverting their business to it; and (ii) set up rival advertising agencies in Lebanon and Saudi Arabia with Adrenalin in their name and that those agencies had poached or tried to poach a number of the Companys customers and employees.
Mr Makdessi subsequently admitted that from February 2008 he had had an ongoing, unpaid involvement in the affairs of Carat pending the appointment of a replacement CEO and that such involvement placed him in breach of fiduciary duty to the Company with effect from 1 July 2008, and that, if the covenants in clause 11.2 were valid and enforceable (as they have been held to be) his involvement in the affairs of Carat rendered him a Defaulting Shareholder within the meaning of the Agreement.
The Companys claim for breach of fiduciary duty was settled by its acceptance of a payment into court made by Mr Makdessi in the sum of US$500,000.
Cavendish claimed to have suffered loss and damage in the form of a loss of value of its shareholding in the Company, but it subsequently accepted that such loss was irrecoverable as it was merely reflective of the loss which could be claimed, indeed had been claimed, by the Company.
More importantly for present purposes, Cavendish claimed that Mr Makdessis admissions of breach of fiduciary duty demonstrated that he was in breach of clause 11.2 in relation to (at least) his continued involvement in Carat.
Cavendish accordingly sought a declaration that he was a Defaulting Shareholder, was not entitled to the Interim Payment or the Final Payment as a result of clause 5.1, and was obliged, as of the date 30 days after the service of its notice exercising the Call Option, namely 14 January 2011, to sell to Cavendish all his shares in the Company at the Defaulting Shareholder Option Price, and it sought specific performance of the latter obligation.
The case was tried by Burton J and the appeal was heard in the Court of Appeal by Patten, Tomlinson and Christopher Clarke LJJ.
The issue at both stages was the same, namely whether clauses 5.1 and 5.6 were valid and enforceable as Cavendish contended, or whether as Mr Makdessi argued they both were void and unenforceable because they constituted penalties.
The courts below were naturally constrained by the perceived need to fit any analysis into the framework set by Lord Dunedins four principles.
Burton J felt able to escape those constraints, and concluded that the two provisions were valid and enforceable.
However, Christopher Clarke LJ, giving the leading judgment in the Court of Appeal, held that the two provisions were unenforceable penalties under the penalty rule as traditionally understood.
No short summary can do justice to Christopher Clarke LJs thoughtful and careful analysis, but essentially he felt unable to uphold Burton Js decision because he felt bound by the traditional explanation of the rule as being directed against deterrent clauses as such: see [2012] EWHC 3582 (Comm) and [2013] EWCA Civ 1539 respectively.
Cavendish now appeals to this court.
The implications of the Agreement
Clause 5 deals with the obligations of a Defaulting Shareholder.
So far as Mr Makdessi was concerned, that meant a Seller in breach of the restrictive covenants at clause 11.2.
In the case of Mr Ghossoub, who remained an employee of the Company, it meant a Seller who was either in breach of the restrictive covenants or else had been summarily dismissed on any of a number of specified grounds, all of them serious and potentially discreditable to the Company.
The background to clause 5 is of some importance.
Burton J found that the Agreement was negotiated in detail over a considerable period by parties dealing on equal terms with professional assistance of a high order.
Cavendish was acquiring 47.4% of the Company so as to bring its holding up to 60%.
It is common ground that a large proportion of the purchase price represented goodwill.
The NAV (without goodwill) of the Company was warranted by the Sellers at over US$69.7m as at 31 December 2007, whereas the maximum consideration for 47.4% of the Company, including the profit related element, was US$147.5m, implying a maximum value of more than US$300m for the whole Group.
Clause 11.1 recorded the Sellers recognition that the restrictive covenants reflected the importance of the goodwill, and Burton J found that its value was heavily dependent on the continuing loyalty of Mr Makdessi and Mr Ghossoub.
Subject to various options, they retained a 40% shareholding between them and were expected to maintain their connection with the business for a minimum period, Mr Ghossoub as an employee and director, and Mr Makdessi as a non executive director and chairman.
The following summary in the agreed Statement of Facts and Issues is based on the unchallenged evidence given at the trial: The structure of the Agreement was typical of acquisition agreements in the marketing sector.
As in this case, the vendor is typically the founder or operator of the business, and has important relationships with clients and key staff.
If they decide to turn against the business, its success can be significantly affected, and provisions are therefore included to protect the value of the investment, and in particular the value of the goodwill represented by the vendors existing personal relationships.
The respondent fell into that category; the importance of personal relationships with clients is even stronger in the Middle East than the UK, and he had very strong relationships with clients and senior employees, and he was such a well known figure that if he acted against the Group, it would inevitably cause it to lose value.
Clause 3.1 provided that the first two instalments of the purchase price amounted to US$65.5m, which would be received by the Sellers in any event.
The effect of clause 5.1 was that in the event that a Seller acted in breach of the restrictive covenants, he would not be entitled to receive the last two instalments of the purchase price, the Interim Payment and the Final Payment, both of which were calculated by reference to the audited consolidated profit of the Company for years after completion of the Agreement (2007 2009 for the Interim Payment, and 2007 2011 for the Final Payment).
The result of Cavendishs exercise of its rights under clause 5.1 according to its terms was to reduce the consideration for the Defaulting Shareholders shares from his proportion of the maximum of US$147.5m to his proportion of US$65.5m.
In Mr Makdessis case, he would receive up to US$44,181,600 less.
Under clause 15, the Sellers had a put option to require Cavendish to buy their remaining shareholdings, which in Mr Makdessis case was first exercisable during the first three months of 2011.
The provisions determining the option price have been summarised in para 50 above.
It was a multiple of average audited consolidated profit over a reference period, a formula which would reflect the value of goodwill.
The effect of clause 5.6 was that if before the exercise of the clause 15 put option a Seller was in breach of the restrictive covenants, Cavendish acquired an option to acquire his retained shareholding at a lower price, namely the relevant proportion of the net asset value at the time of the default.
The result of Cavendishs implementation of clause 5.6, according to its terms, was that insofar as, at the date of default, Mr Makdessis shareholding had a value attributable to goodwill, he would not receive it and would not be able to exercise the clause 15 put option in 2011.
Was clause 5.1 contrary to the penalty rule?
Clause 5.1 disentitles a Defaulting Shareholder from receiving money which would otherwise have been due to him as his proportion of the price of the transferred shares.
If this constitutes a forfeiture, it would appear that, at least on the current state of the authorities, there would be no jurisdiction to relieve against it, because a contractual right to be paid money is not a proprietary or possessory interest in property: The Scaptrade and BICC (see para 17 above).
But there is some, albeit rather unsatisfactory, authority that such a clause may be a penalty.
Gilbert Ash (Northern) Ltd v Modern Engineering (Bristol) Ltd [1974] AC 689 concerned a provision in a building subcontract entitling the contractor to suspend or withhold the payment of money due to the subcontractor upon any breach of contract.
Four members of the Appellate Committee accepted, obiter, a concession by counsel that this was a penalty: see p 698 (Lord Reid), pp 703 704 (Lord Morris of Borth y Gest), p 711 (Viscount Dilhorne), pp 723 724 (Lord Salmon).
This was because it allowed the contractor to withhold all sums due, and not just the estimated damages flowing from the sub contractors breach.
The result was to put intolerable pressures on the latters cash flow which was calculated to force him into submission.
The only other English decision directly in point is Socony Mobil Oil Co Inc v West of England Ship Owners Mutual Insurance Association Ltd (The Padre Island) [1987] 2 Lloyds Rep 529 (Saville J), [1989] 1 Lloyds Rep 239 (CA); [1991] 2 AC 1, a case notable for the multiplicity of arguments and the diversity of judicial opinions.
It was a claim under the Third Parties (Rights Against Insurers) Act 1930 by cargo claimants who had obtained judgment for damages against an insolvent ship owner entered with the defendant P & I Club.
Saville J dismissed the claim on the ground that under the standard pay to be paid clause in the rules recovery from the club was conditional on the ship owner having first paid the judgment creditor.
Since this had not happened there was no claim to be transferred under the 1930 Act.
The Court of Appeal allowed the appeal on this point.
They were wrong to do so, as the House of Lords subsequently held.
But on the footing that the pay to be paid clause did not bar the claim, the Court of Appeal went on to consider an alternative argument on behalf of the club, based on a provision in its rules that cover should retrospectively cease upon the insureds failure to pay a call.
The judgment creditors answer to this argument was that the provision was unenforceable as a penalty.
Saville J had held (i) that this last question did not arise because on the facts the retrospective cesser clause would not have applied anyway, but (ii) that the penalty rule was not engaged because it applied only to provisions which required the contract breaker to pay money.
The Court of Appeal upheld him on (i), as a result of which (ii) did not arise.
But Stuart Smith LJ considered point (ii), obiter.
He thought, on the basis of Gilbert Ash, that the penalty rule could apply to a provision disentitling the contract breaker from receiving a sum of money.
He could see no distinction between withholding or disentitling a person to a sum of money which is due to him and requiring him to pay a sum of money (p 262).
OConnor LJ said (p 265) that if the point had arisen he would have been of the same view as Stuart Smith LJ.
Bingham LJ disagreed, and would have held that the penalty rule was not engaged.
These two cases thus provide some support for the contention that clause 5.1 is capable of engaging the penalty rule.
On the other hand, it has been held that a clause which renders instalments irrecoverable by a defaulting purchaser is a forfeiture but not a penalty: see Else (1982) and Stockloser, cited in para 16 above.
If that is so, then there is a powerful argument for saying that a clause which renders instalments of payment irrecoverable by a defaulting vendor should, by the same token, not be a penalty, but at best a forfeiture.
We are, however, prepared to assume, without deciding, that a contractual provision may in some circumstances be a penalty if it disentitles the contract breaker from receiving a sum of money which would otherwise have been due to him.
But even on that assumption, it will not always be a penalty.
That must depend on the nature of the right of which the contract breaker is being deprived and the basis on which he is being deprived of it.
The provision thought to be penal in Gilbert Ash was a good example of a secondary provision operating upon a breach of the subcontractors primary obligations.
It authorised the contractor to withhold all remuneration due to the subcontractor if the latter had committed any breach of contract until the contractors claim had been resolved.
It was a security, albeit an exorbitant one, for the contractors claim.
The retrospective cesser clause in the West of England Clubs rules in The Padre Island was very different.
It forfeited an accrued right to indemnity permanently.
Clauses of this kind are potentially harsher than those which operate simply as a security.
But they may define the primary obligations of the parties, in which case the penalty rule will not apply to them.
It is not a proper function of the penalty rule to empower the courts to review the fairness of the parties primary obligations, such as the consideration promised for a given standard of performance.
For example, the consideration due to one party may be variable according to one or more contingencies, including the contingency of his breach of the contract.
There is no reason in principle why a contract should not provide for a party to earn his remuneration, or part of it, by performing his obligations.
If as a result his remuneration is reduced upon his non performance, there is no reason to regard that outcome as penal.
Suppose that a contract of insurance provided that it should be cancelled ab initio if the insured failed to pay the premium within three months of inception.
The effect would be to forfeit any claim upon a casualty occurring in the first three months but it would be difficult to regard the provision as penal on that account.
One reason why Bingham LJ disagreed with Stuart Smith LJ was that he considered the retrospective cesser clause to be no different.
I do not myself think it unreasonable, he said (p 254), that a member should lose his cover in respect of a period for which he fails to pay his premium.
He may well have been right to analyse the clause in that way, but it is a fair criticism of Stuart Smith LJs approach that he did not consider this aspect of the matter at all.
Where, against this background, does clause 5.1 stand? It is plainly not a liquidated damages clause.
It is not concerned with regulating the measure of compensation for breach of the restrictive covenants.
It is not a contractual alternative to damages at law.
Indeed in principle a claim for common law damages remains open in addition, if any could be proved.
The clause is in reality a price adjustment clause.
Although the occasion for its operation is a breach of contract, it is in no sense a secondary provision.
The consideration fixed by clause 3.1 is said to be payable [i]n consideration of the sale of the Sale Shares and the obligations of the Sellers herein.
Those obligations of the Sellers herein include the restrictive covenants.
Clause 5.1 belongs with clauses 3 and 6, among the provisions which determine Cavendishs primary obligations, ie those which fix the price, the manner in which the price is calculated and the conditions on which different parts of the price are payable.
Its effect is that the Sellers earn the consideration for their shares not only by transferring them to Cavendish, but by observing the restrictive covenants.
As Burton J said at para 59 of his judgment, [t]he juxtaposition on the one hand of substantial delayed payment for goodwill and on the other hand a series of covenants which is intended to safeguard and protect that goodwill is of particular significance.
Although clause 5.1 has no relationship, even approximate, with the measure of loss attributable to the breach, Cavendish had a legitimate interest in the observance of the restrictive covenants which extended beyond the recovery of that loss.
It had an interest in measuring the price of the business to its value.
The goodwill of this business was critical to its value to Cavendish, and the loyalty of Mr Makdessi and Mr Ghossoub was critical to the goodwill.
The fact that some breaches of the restrictive covenants would cause very little in the way of recoverable loss to Cavendish is therefore beside the point.
As Burton J graphically observed in para 43 of his judgment, once Cavendish could no longer trust the Sellers to observe the restrictive covenants, the wolf was in the fold.
Loyalty is indivisible.
Its absence in a business like this introduces a very significant business risk whose impact cannot be measured simply by reference to the known and provable consequences of particular breaches.
It is clear that this business was worth considerably less to Cavendish if that risk existed than if it did not.
How much less? There are no juridical standards by which to answer that question satisfactorily.
We cannot know what Cavendish would have paid without the assurance of the Sellers loyalty, even assuming that they would have bought the business at all.
We cannot know whether the basic price or the maximum price fixed by clause 3.1 would have been the same if they were not adjustable in the event of breach of the restrictive covenants.
We cannot know what other provisions of the agreement would have been different, or what additional provisions would have been included on that hypothesis.
These are matters for negotiation, not forensic assessment (save in the rare cases where the contract or the law requires it).
They were matters for the parties, who were, on both sides, sophisticated, successful and experienced commercial people bargaining on equal terms over a long period with expert legal advice and were the best judges of the degree to which each of them should recognise the proper commercial interests of the other.
We have already drawn attention to the fact that damages are in principle recoverable in addition to the price reduction achieved by clause 5.1.
In this case, the Company recovered US$500,000 from Mr Makdessi.
Cavendish has abandoned any claim of their own for damages, because any loss of theirs would simply reflect the Companys loss.
But it would not always be so.
There are hypotheses, for example that the restrictive covenants had been broken after he ceased to be a director, in which Cavendishs loss by his breach of the restrictive covenants would not have been reflective and might in principle have been recovered in addition to the reduction of the price under clause 5.1.
Does any of this matter? We do not think so.
Clause 5.1 is not concerned with the measure of compensation for the breach.
It cannot be regarded as penal simply because damages are recoverable in addition.
The real question is whether any damages have been suffered on account of the breach in circumstances where the price has been adjusted downwards on account of the same breach.
As between Mr Makdessi and the Company, the right of Cavendish to a price reduction cannot affect the measure or recoverability of the Companys loss.
It is res inter alios acta.
It is an open question whether the right to a price reduction would go to abate any loss recoverable by Cavendish themselves if they had suffered any.
We do not propose to resolve it on this appeal: the issue does not arise and was not argued.
It is enough to note that if Cavendishs loss is not abated, that would be because the law regards Cavendish as having suffered it notwithstanding its right to the reduction.
That can hardly make clause 5.1 a penalty.
We do not doubt that price adjustment clauses are open to abuse, and if clause 5.1 were a disguised punishment for the Sellers breach, it would make no difference that it was expressed as part of the formula for determining the consideration.
But before a court can reach that conclusion, it must have some reason to do so.
In this case, there is none.
On the contrary, all the considerations summarised above point the other way.
We conclude, in agreement with Burton J, that clause 5.1 was not a penalty.
Was clause 5.6 contrary to the penalty rule?
Clause 5.6 gives rise to more difficult questions, but the analysis is essentially the same.
The purpose of requiring a Defaulting Shareholder to sell his retained shares was to sever the connection between the Company and a major shareholder if he were to compete against it (and also, in the case of Mr Ghossoub, if he were to be dismissed for discreditable conduct).
The severance of the connection is completed by clause 14.2, which provides that upon ceasing to be a shareholder he will no longer be entitled to a seat on the board or to appoint a nominee in his place.
In itself, this is not said to be objectionable.
The objection is to the formula which excludes the value of goodwill from the calculation of the price.
It is not and could not be suggested that the exclusion of goodwill serves to compensate for the estimated loss attributable to the breach.
Any recoverable damages for the breach of the restrictive covenants will be recoverable on top of the forced sale of the Defaulting Shareholders retained shares.
Indeed, the effect of excluding the value of goodwill is to achieve what Mr Bloch called a reverse sliding scale.
The more trivial the effect of the breach on the value of the goodwill, the greater will be the Defaulting Shareholders loss in being deprived of any goodwill element in the price.
The logic of the price formula for the sale of the retained shares under clause 5.6 is similar to that of the price adjustment achieved by clause 5.1 for the sale of the transferred shares.
It reflects the reduced price which Cavendish was prepared to pay for the acquisition of the business in circumstances where it could not count on the loyalty of Mr Makdessi and/or Mr Ghossoub.
We have dealt with this point in the context of clause 5.1.
It also reflects the fact that with the severance of the connection between the Defaulting Shareholder and the Company, no goodwill will in future be attributable to his role in the business.
Indeed, the assumption must be that a Seller in breach of the restrictive covenants may be actively engaged in undermining the goodwill attributable to his former role in the business.
It is true that the severance of the connection between a Defaulting Shareholder and the Group will not necessarily destroy the whole of the goodwill of the business which was sold to Cavendish, especially if the other Seller remains loyal.
But so far as the Group is able to retain some or all of the goodwill built up by the Defaulting Shareholder in the past, that will presumably be due to the efforts of others.
In our view, the same legitimate interest which justifies clause 5.1 justifies clause 5.6 also.
It was an interest in matching the price of the retained shares to the value that the Sellers were contributing to the business.
There is a perfectly respectable commercial case for saying that Cavendish should not be required to pay the value of goodwill in circumstances where the Defaulting Shareholders efforts and connections are no longer available to the Company, and indeed are being deployed to the benefit of the Companys competitors, and where goodwill going forward would be attributable to the efforts and connections of others.
It seems likely that clause 5.6 was expected to influence the conduct of the Sellers after Cavendishs acquisition of control in a way that would benefit the Companys business and its proprietors during the period when they were yoked together.
To that extent it may be described as a deterrent.
But that is only objectionable if it is penal, ie if the object was to punish.
But the price formula in clause 5.6 had a legitimate function which had nothing to do with punishment and everything to do with achieving Cavendishs commercial objective in acquiring the business.
And, like clause 5.1, it was part of a carefully constructed contract which had been the subject of detailed negotiations over many months between two sophisticated commercial parties, dealing with each other on an equal basis with specialist, experienced and expert legal advice.
More fundamentally, a contractual provision conferring an option to acquire shares, not by way of compensation for a breach of contract but for distinct commercial reasons, belongs as it seems to us among the parties primary obligations, even if the occasion for its operation is a breach of contract.
This may be tested by asking how the penalty rule could be applied to it without making a new contract for the parties.
The Court of Appeal simply treated clause 5.6 as unenforceable, and declared that Mr Makdessi was not obliged to sell his shares whether at the specified price or at all.
That cannot be right, since the severance of the shareholding connection was in itself entirely legitimate, and indeed commercially sensible.
If the option to acquire the retained shares is to stand, the price formula cannot be excised without substituting something else.
Yet there is no juridical basis on which a different pricing formula can be imposed.
There is no fall back position at common law, as there is in the case of a damages clause.
Mr Bloch argued that this difficulty can be surmounted by granting Mr Makdessi a remedy corresponding to the one ordered by the Court of Appeal in Jobson v Johnson.
We do not accept this.
Jobson arose out of a contract for the sale of a substantial shareholding in a football club for a consideration payable by instalments.
The contract provided that in the event of default in the payment of any instalment, the purchaser would be obliged to transfer the shareholding back to the vendors at a price which was said to represent a substantial undervalue.
This was a forfeiture.
The purchaser would have been entitled to relief in equity if he had been in a position to pay, albeit late.
The purchaser had in fact counterclaimed for such relief, but the counterclaim had been struck out on account of his failure to comply with his disclosure obligations.
That left only a contention, advanced by way of defence, that the obligation to transfer back the shares was also a penalty.
As briefly discussed in para 17 above, that may or may not have been an argument which was open to him, and it is unnecessary to decide that issue on this appeal.
The Court of Appeal accepted the argument and held that the penalty rule could apply not only to an obligation to pay money upon a breach of contract, but also to an obligation to transfer assets in that event.
This gives rise to no difficulty at least in principle, in a case where the court could simply decline to enforce the penalty, leaving the innocent party to his ordinary remedies at law.
That was the position in Jobson, because the Court of Appeal construed the share transfer clause as a purely secondary obligation which was intended simply to secure the payment of the price: see pp 1031 1032, 1037 (Dillon LJ), pp 1043 1044, 1045 (Nicholls LJ).
On that basis, Mr Johnson could in theory have been left to obtain judgment for the amount of the outstanding instalments and if necessary levy execution against the shares.
However, we are bound to observe that this would appear to be a somewhat peculiar outcome.
If the purchaser had been able to argue that he was entitled to relief from forfeiture, the court would presumably have dealt with his case on that basis and would not have considered the penalty argument at all.
Accordingly, on the Court of Appeals reasoning, as a result of his default in giving disclosure, he was able to achieve a better result than he would have done if he had given disclosure and been able to seek relief from forfeiture.
In terms of achieving a fair commercial result, it is perhaps understandable that the Court of Appeal took the course that they did.
Rather than applying the well established principles relating to penalties, they invoked the authorities on relief from forfeiture, which Mr Johnson had been prevented from claiming, and applied them to the penalty rule.
They held that in equity a penalty was enforceable pro tanto, or on what Nicholls LJ called a scaled down basis, ie only to the extent of any actual loss suffered by the breach.
The court achieved this by offering the vendor the choice of (i) taking an order for specific performance of the retransfer, conditional upon its being ascertained that this would not overcompensate him for the non payment of the outstanding instalments, or (ii) taking an order for the sale of the shares by the court, the outstanding instalment and interest to be paid to him out of the proceeds and the balance to be paid to the defaulting purchaser.
A somewhat similar approach was later taken by the High Court of Australia in Andrews v Australia and New Zealand Banking Group Ltd (2012) 247 CLR 205, which also adopted the concept of partial enforcement.
The difficulty about this approach was pointed out by Mason and Wilson JJ in the High Court of Australia in AMEV UDC at pp 192 193: At least since the advent of the Judicature system a penalty provision has been regarded as unenforceable or, perhaps void, ab initio: Citicorp Australia Ltd v Hendry (1985) 4 NSWLR 1.
In all that time it has been thought that no action could be brought on such a clause, no doubt because the courts should not lend their aid to the enforcement in any way of a provision which is oppressive.
However, this is not the only reason why the courts would refuse to lend their aid.
In the majority of cases involving penalties, the courts, if called upon to assist in partial enforcement of the kind suggested by the appellant, would be required to undertake an unfamiliar role.
They would need to rewrite the clause so as to permit the plaintiff to recover the loss he has actually sustained.
Penalty clauses are not, generally speaking, so expressed as to entitle the plaintiff to recover his actual loss.
Instead they prescribe the payment of a sum which is exorbitant or a sum to be ascertained by reference to a formula which is not an acceptable pre estimate of damage.
In either case the court, if it were to enforce the clause, would be performing a function very different from that which it undertakes when it severs or reads down an unenforceable covenant, such as a covenant in restraint of trade.
In the ultimate analysis, in whatever form it be expressed, the appellants argument amounts to an invitation to the court to develop a new law of compensation, distinct from common law damages, which would govern the entitlement of plaintiffs who insist on the inclusion of penalty clauses in their contracts.
Even if the course taken by the Court of Appeal in Jobson had been right, it would not be available to Mr Makdessi because clause 5.6 cannot sensibly be analysed as a mere security for the performance of the restrictive covenants.
But in our opinion the analysis of Mason and Wilson JJ was correct, and so far as it related to the form of relief, Jobson was wrongly decided.
In the first place, the treatment of a penalty clause as partly enforceable, although supported by some turns of phrase in old cases concerned with other issues, is contrary to consistent modern authority.
So, with respect, is the treatment of its enforcement as discretionary according to the circumstances at the time of the breach.
If, as the authorities show, the penal consequences of a contractual provision fall to be determined as at the time of the agreement, and a provision found to be a penalty is unenforceable, it is impossible to see how it can be enforceable on terms.
Secondly, the Court of Appeal accepted that the court could not rewrite the parties contract by specifically enforcing the retransfer of the shares to the vendors at a higher price or enforcing the retransfer of some only of the shares: see p 1037 (Dillon LJ), p 1042 (Nicholls LJ).
Yet that is in reality what they did, by refusing to enforce the retransfer unless the vendor agreed to vary its effect.
Third, the Court of Appeal interpreted the provision for the retransfer of the shares as a security for the payment of the outstanding instalments.
They placed the word security in inverted commas because the obligation was purely personal.
But the Court of Appeals order treated it as if it was an equitable mortgage of the shares, which it manifestly was not.
It appears to us that the Court of Appeal were, as a matter of legal analysis, treating the clause in question as a forfeiture and not a penalty, and granting relief from forfeiture on appropriate terms, although in doing so they purported to be treating it as a penalty clause, because they were constrained to do so in the light of the pleadings.
So far as the relief granted in Jobson is concerned, the decision was entirely orthodox if it is treated as a forfeiture case, but it was wrong in principle if it is treated as a penalty case.
The Court of Appeal in this case thought clauses 5.1 and 5.6 should both be treated in the same way when it came to applying the penalty rule, and we take the same view, but, in agreement with Burton J at first instance, we consider that neither clause is avoided by the penalty rule.
The second appeal: ParkingEye v Beavis
The factual and procedural history
British Airways Pension Fund (the Fund) owns the Riverside Retail Park in Chelmsford.
The Fund leases sites on the Retail Park to various multiple retailers, but retains overall control of the site.
There is a car park located at the Retail Park, and, on 25 August 2011, the Fund entered into a contract with ParkingEye Ltd in respect of management services at that car park.
At all material times since then, ParkingEye has displayed about 20 signs at the entrance to the car park and at frequent intervals throughout it.
The signs are large, prominent and legible, so that any reasonable user of the car park would be aware of their existence and nature, and would have a fair opportunity to read them if he or she wished to do so.
The upper 80% or so of the signs are worded and laid out substantially as follows (mostly in black print on an orange background): ParkingEye car park management 2 hour max stay Customer only car park 4 hour maximum stay for Fitness Centre Members Failure to comply with the following will result in a Parking Charge of 85 Parking limited to 2 hours (no return within 1 hour) Park only within marked bays Blue badge holders only in marked bays.
Below this main part of the signs in small, but legible black print on the same orange background is the following information: ParkingEye Ltd is solely engaged to provide a traffic space maximisation scheme.
We are not responsible for the car park surface, other motor vehicles, damage or loss to or from motor vehicles or users safety.
The parking regulations for this car park apply 24 hours a day, all year round, irrespective of the site opening hours.
Parking is at the absolute discretion of the site.
By parking within the car park, motorists agree to comply with the car park regulations.
Should a motorist fail to comply with the car park regulations, the motorist accepts that they are liable to pay a Parking Charge and that their name and address will be requested from the DVLA.
Parking charge Information: A reduction of the Parking Charge is available for a period, as detailed in the Parking Charge Notice.
The reduced amount payable will not exceed 75, and the overall amount will not exceed 150 prior to any court action, after which additional costs will be incurred.
Below that information, in somewhat larger print are the words: This car park is private property.
At the very bottom of the signs on a black background is ParkingEyes name, telephone number and address in orange, and a drawing of a padlock, a drawing of a surveillance camera with the words car park monitored by ANPR systems in small letters underneath, and two logos recording that ParkingEye was a member of the British Parking Association (BPA) and that it was a BPA approved operator.
At 2.29 on the afternoon of 15 April 2013, Mr Beavis drove his motor car into the car park and parked it there.
He did not leave until two hours 56 minutes later, thereby overstaying the two hour limit by nearly an hour.
ParkingEye obtained Mr Beaviss name and address from the Driver and Vehicle Licensing Agency (DVLA), and sent him a standard First Parking Charge Notice which demanded that he pay the 85 charge within 28 days, but stated that, if he paid within 14 days, the charge would be reduced to 50.
The Notice also informed him of an appeals procedure.
Mr Beavis ignored this demand, as well as a subsequent standard form reminder notice and warning letter.
ParkingEye then began proceedings in the County Court to recover the 85 alleged to be due.
A claim of this size would normally have been dealt with by a District Judge under the small claims procedure, but it was recognised that the case raised some points of principle which were likely to affect many other similar claims, so it was heard by the Designated Civil Judge for East Anglia.
Before Judge Moloney QC and before the Court of Appeal, Mr Beavis raised two arguments as to why he should not have to pay the 85 charge, namely that it was (i) unenforceable at common law because it is a penalty, and/or (ii) unfair and therefore unenforceable by virtue of the 1999 Regulations.
The Court of Appeal (Moore Bick and Patten LJJ and Sir Timothy Lloyd) upheld Judge Moloney QCs decision rejecting each of his arguments see [2015] EWCA Civ 402.
Mr Beavis now appeals to this court, maintaining both his arguments.
Introductory
It was common ground before the Court of Appeal, and is common ground in this court, that on the facts which we have just summarised there was a contract between Mr Beavis and ParkingEye.
Mr Beavis had a contractual licence to park his car in the retail park on the terms of the notice posted at the entrance, which he accepted by entering the site.
Those terms were that he would stay for not more than two hours, that he would park only within the marked bays, that he would not park in bays reserved for blue badge holders, and that on breach of any of those terms he would pay 85.
Moore Bick LJ in the Court of Appeal was inclined to doubt this analysis, and at one stage so were we.
But, on reflection, we think that it is correct.
The 85 is described in the notice as a parking charge, but no one suggests that that label is conclusive.
In our view it was not, as a matter of contractual analysis, a charge for the right to park, nor was it a charge for the right to overstay the two hour limit.
Not only is the 85 payable upon certain breaches which may occur within the two hour free parking period, but there is no fixed period of time for which the motorist is permitted to stay after the two hours have expired, for which the 85 could be regarded as consideration.
The licence having been terminated under its terms after two hours, the presence of the car would have constituted a trespass from that point on.
In the circumstances, the 85 can only be regarded as a charge for contravening the terms of the contractual licence.
Schemes of this kind (including a significant discount on prompt payment after the first demand) are common in the United Kingdom.
Some are operated by private landowners, some by parking management companies like ParkingEye, and some by local authorities.
They are subject to a measure of indirect regulation.
Under section 54 of the Protection of Freedoms Act 2012, parked cars may not be immobilised or towed away by a private operator, but section 56 and Schedule 4 provide for the recovery of parking charges.
Where a motorist becomes liable by contract for a sum in the nature of a fee or charge or in tort for a sum in the nature of damages, there is a right under certain conditions to recover it: Schedule 4, paragraph 4.
One of those conditions is that the keepers details must have been supplied by the Secretary of State in response to an application for the information: ibid, para 11.
The Secretary of States functions in relation to the provision of this information are performed by the DVLA.
Under article 27(1)(e) of the Road Vehicles (Registration and Licensing) Regulations 2002 (SI 2002/2742), the Secretary of State is empowered to make available particulars in the vehicle register to anyone who has reasonable cause for wanting the particulars to be made available to him.
Since 2007, the policy of the Secretary of State has been to disclose the information for parking enforcement purposes only to members of an accredited trade association.
The criteria for accreditation were stated in Parliament to include the existence of a clear and enforced code of conduct (for example relating to conduct, parking charge signage, charge levels, appeals procedure, approval of ticket wording and appropriate pursuit of penalties (Hansard (HC Debates), 24 July 2006, col 95WS).
As at April 2013, there was only one relevant accredited trade association, the BPA, to which reference was made on the Notice, and to which ParkingEye still belongs.
The BPA Code of Practice is a detailed code of regulation governing signs, charges and enforcement procedures.
Clause 13 deals with grace periods.
Clause 13.4 provides: 13.4 You should allow the driver a reasonable period to leave the private car park after the parking contract has ended, before you take enforcement action.
Clause 19 provides: 19.5 If the parking charge that the driver is being asked to pay is for a breach of contract or act of trespass, this charge must be based on the genuine pre estimate of loss that you suffer.
We would not expect this amount to be more than 100.
If the charge is more than this, operators must be able to justify the amount in advance. 19.6 If your parking charge is based on a contractually agreed sum, that charge cannot be punitive or unreasonable.
If it is more than the recommended amount in 19.5 and is not justified in advance, it could lead to an investigation by the Office of Fair Trading.
The maximum of 100 recommended by the BPA may be compared with the penalties charged by local authorities, which are regulated by statute.
The Civil Enforcement of Parking Contraventions (Guidelines on Levels of Charges) (England) Order 2007 (SI 2007/3487) lays down guidelines for the level of penalties outside Greater London.
For higher level contraventions (essentially unauthorised on street parking), the recommended penalty is capped at 70 and for other contraventions at 50.
The corresponding figures for Greater London are 130 and 80.
Parking charges and the penalty rule
ParkingEye concedes that the 85 is payable upon a breach of contract, and that it is not a pre estimate of damages.
As it was not the owner of the car park, ParkingEye could not recover damages, unless it was in possession, in which case it may be able to recover a small amount of damages for trespass.
This is because it lost nothing by the unauthorised use resulting from Mr Beavis overstaying.
On the contrary, at least if the 85 is payable, it gains by the unauthorised use, since its revenues are wholly derived from the charges for breach of the terms.
The notice at the entrance describes ParkingEye as being engaged to provide a traffic space maximisation scheme, which is an exact description of its function.
In the agreed Statement of Facts and Issues, the parties state that the predominant purpose of the parking charge was to deter motorists from overstaying, and that the landowners objectives include the following: a.
The need to provide parking spaces for their commercial tenants prospective customers; b. The desirability of that parking being free so as to attract customers; c. The need to ensure a reasonable turnover of that parking so as to increase the potential number of such customers; d. The related need to prevent misuse of the parking for purposes unconnected with the tenants business, for example by commuters going to work or shoppers going to off park premises; and e. cost, or ideally some profit, to themselves.
The desirability of running that parking scheme at no
Against this background, it can be seen that the 85 charge had two main objects.
One was to manage the efficient use of parking space in the interests of the retail outlets, and of the users of those outlets who wish to find spaces in which to park their cars.
This was to be achieved by deterring commuters or other long stay motorists from occupying parking spaces for long periods or engaging in other inconsiderate parking practices, thereby reducing the space available to other members of the public, in particular the customers of the retail outlets.
The other purpose was to provide an income stream to enable ParkingEye to meet the costs of operating the scheme and make a profit from its services, without which those services would not be available.
These two objectives appear to us to be perfectly reasonable in themselves.
Subject to the penalty rule and the Regulations, the imposition of a charge to deter overstayers is a reasonable mode of achieving them.
Indeed, once it is resolved to allow up to two hours free parking, it is difficult to see how else those objectives could be achieved.
In our opinion, while the penalty rule is plainly engaged, the 85 charge is not a penalty.
The reason is that although ParkingEye was not liable to suffer loss as a result of overstaying motorists, it had a legitimate interest in charging them which extended beyond the recovery of any loss.
The scheme in operation here (and in many similar car parks) is that the landowner authorises ParkingEye to control access to the car park and to impose the agreed charges, with a view to managing the car park in the interests of the retail outlets, their customers and the public at large.
That is an interest of the landowners because (i) they receive a fee from ParkingEye for the right to operate the scheme, and (ii) they lease sites on the retail park to various retailers, for whom the availability of customer parking was a valuable facility.
It is an interest of ParkingEye, because it sells its services as the managers of such schemes and meets the costs of doing so from charges for breach of the terms (and if the scheme was run directly by the landowners, the analysis would be no different).
As we have pointed out, deterrence is not penal if there is a legitimate interest in influencing the conduct of the contracting party which is not satisfied by the mere right to recover damages for breach of contract.
Mr Butcher QC, who appeared for the Consumers Association (interveners), submitted that because ParkingEye was the contracting party its interest was the only one which could count.
For the reason which we have given, ParkingEye had a sufficient interest even if that submission be correct.
But in our opinion it is not correct.
The penal character of this scheme cannot depend on whether the landowner operates it himself or employs a contractor like ParkingEye to operate it.
The motorist would not know or care what if any interest the operator has in the land, or what relationship it has with the landowner if it has no interest.
This conclusion is reinforced when one bears in mind that the question whether a contractual provision is a penalty turns on the construction of the contract, which cannot normally turn on facts not recorded in the contract unless they are known, or could reasonably be known, to both parties.
None of this means that ParkingEye could charge overstayers whatever it liked.
It could not charge a sum which would be out of all proportion to its interest or that of the landowner for whom it is providing the service.
But there is no reason to suppose that 85 is out of all proportion to its interests.
The trial judge, Judge Moloney QC, found that the 85 charge was neither extravagant nor unconscionable having regard to the level of charges imposed by local authorities for overstaying in car parks on public land.
The Court of Appeal agreed and so do we.
It is higher than the penalty that a motorist would have had to pay for overstaying in an on street parking space or a local authority car park.
But a local authority would not necessarily allow two hours of free parking, and in any event the difference is not substantial.
The charge is less than the maximum above which members of the BPA must justify their charges under their code of practice.
The charge is prominently displayed in large letters at the entrance to the car park and at frequent intervals within it.
The mere fact that many motorists regularly use the car park knowing of the charge is some evidence of its reasonableness.
They are not constrained to use this car park as opposed to other parking facilities provided by local authorities, Network Rail, commercial car park contractors or other private landowners.
They must regard the risk of having to pay 85 for overstaying as an acceptable price for the convenience of parking there.
The observations of Lord Browne Wilkinson in Workers Bank at p 580 referred to in para 35 above are in point.
While not necessarily conclusive, the fact that ParkingEyes payment structure in its car parks (free for two hours and then a relatively substantial sum for overstaying) and the actual level of charge for overstaying (85) are common in the UK provides support for the proposition that the charge in question is not a penalty.
No other evidence was furnished by Mr Beavis to show that the charge was excessive.
We conclude, in agreement with the courts below, that the charge imposed on Mr Beavis was not a penalty.
Parking charges and the Unfair Terms in Consumer Contracts Regulations
The 1999 Regulations subject the terms of consumer contracts to a fairness test.
An unfair term is not binding on a consumer: regulation 8(1).
The fairness test is not applicable to all terms in consumer contracts.
It does not apply to certain core terms, namely those which define the main subject matter of the contract nor to the adequacy of the price or remuneration for the goods or services supplied: regulation 6(2).
But it follows from the fact that the 85 charge is a charge for acting in breach of the primary terms that it is not excluded from the fairness test under either of these heads.
The issue is therefore whether the test is satisfied.
Under regulation 5(1), a contractual term which has not been individually negotiated shall be regarded as unfair if, contrary to the requirement of good faith, it causes a significant imbalance in the parties rights and obligations arising under the contract, to the detriment of the consumer.
Regulation 6(1) provides that the unfairness of a contractual term shall be assessed, taking into account the nature of the goods or services for which the contract was concluded and by referring, at the time of conclusion of the contract, to all the circumstances attending the conclusion of the contract and to all the other terms of the contract or of another contract on which it is dependent.
An indicative and non exhaustive list of terms which may be regarded as unfair by this test is contained in Schedule 2.
This includes at paragraph 1(e) a term requiring any consumer who fails to fulfil his obligation to pay a disproportionately high sum in compensation.
In our opinion, the same considerations which show that the 85 charge is not a penalty, demonstrate that it is not unfair for the purpose of the Regulations.
The reason is that although it arguably falls within the illustrative description of potentially unfair terms at paragraph 1(e) of Schedule 2 to the Regulations, it is not within the basic test for unfairness in regulations 5(1) and 6(1).
The Regulations give effect to Council Directive 93/13/EEC on unfair terms in consumer contracts, and these rather opaque provisions are lifted word for word from articles 3 and 4 of the Directive.
The effect of the Regulations was considered by the House of Lords in Director General of Fair Trading v First National Bank plc [2001] 1 AC 481.
But it is sufficient now to refer to Aziz v Caixa dEstalvis de Catalunya, Tarragona i Manresa (Case C 415/11) [2013] 3 CMLR 89, which is the leading case on the topic in the Court of Justice of the European Union.
Aziz was a reference from a Spanish court seeking guidance on the criteria for determining the fairness of three provisions in a loan agreement.
They provided for (i) the acceleration of the repayment schedule in the event of the borrowers default, (ii) the charging of default interest, and (iii) the unilateral certification by the lender of the amount due for the purpose of legal proceedings.
The judgment of the Court of Justice is authority for the following propositions: 1) The test of significant imbalance and good faith in article 3 of the Directive (regulation 5(1) of the 1999 Regulations) merely defines in a general way the factors that render unfair a contractual term that has not been individually negotiated (para 67).
A significant element of judgment is left to the national court, to exercise in the light of the circumstances of each case. 2) The question whether there is a significant imbalance in the parties rights depends mainly on whether the consumer is being deprived of an advantage which he would enjoy under national law in the absence of the contractual provision (paras 68, 75).
In other words, this element of the test is concerned with provisions derogating from the legal position of the consumer under national law. 3) However, a provision derogating from the legal position of the consumer under national law will not necessarily be treated as unfair.
The imbalance must arise contrary to the requirements of good faith.
That will depend on whether the seller or supplier, dealing fairly and equitably with the consumer, could reasonably assume that the consumer would have agreed to such a term in individual contract negotiations (para 69). 4) The national court is required by article 4 of the Directive (regulation 6(1) of the 1999 Regulations) to take account of, among other things, the nature of the goods or services supplied under the contract.
This includes the significance, purpose and practical effect of the term in question, and whether it is appropriate for securing the attainment of the objectives pursued by it in the member state concerned and does not go beyond what is necessary to achieve them (paras 71 74).
In the case of a provision whose operation is conditional upon the consumers breach of another term of the contract, it is necessary to assess the importance of the latter term in the contractual relationship.
In its judgment, the Court of Justice drew heavily on the opinion of Advocate General Kokott, specifically endorsing her analysis at a number of points.
That analysis, which is in the nature of things more expansive than the courts, repays careful study.
In the Advocate Generals view, the requirement that the significant imbalance should be contrary to good faith was included in order to limit the Directives inroads into the principle of freedom of contract. [I]t is recognised, she said, that in many cases parties have a legitimate interest in organising their contractual relations in a manner which derogates from the [rules of national law] (para AG73).
In determining whether the seller could reasonably assume that the consumer would have agreed to the relevant term in a negotiation, it is important to consider a number of matters.
These include whether such contractual terms are common, that is to say they are used regularly in legal relations in similar contracts, or are surprising, whether there is an objective reason for the term and whether, despite the shift in the contractual balance in favour of the user of the term in relation to the substance of the term in question, the consumer is not left without protection (para AG75).
Advocate General Kokott returned to the question of legitimate interest when addressing default interest.
She observed that a provision requiring the payment upon default of a sum exceeding the damage caused, may be justified if it serves to encourage compliance with the borrowers obligations: If default interest is intended merely as flat rate compensation for damage caused by default, a default interest rate will be substantially excessive if it is much higher than the accepted actual damage caused by default.
It is clear, however, that a high default interest rate motivates the debtor not to default on his contractual obligations and to rectify quickly any default which has already occurred.
If default interest under national law is intended to encourage observance of the agreement and thus the maintenance of payment behaviour, it should be regarded as unfair only if it is much higher than is necessary to achieve that aim (para AG87).
Finally, the Advocate General observes that the impact of a term alleged to be unfair must be examined broadly and from both sides.
Provisions favouring the lender may indirectly serve the interest of the borrower also, for example by making loans more readily available (para AG94).
In our opinion the term imposing the 85 charge was not unfair.
The term does not exclude any right which the consumer may be said to enjoy under the general law or by statute.
But it may fairly be said that in the absence of agreement on the charge, Mr Beavis would not have been liable to ParkingEye.
He would have been liable to the landowner in tort for trespass, but that liability would have been limited to the occupation value of the parking space.
To that extent there was an imbalance in the parties rights.
But it did not arise contrary to the requirement of good faith, because ParkingEye and the landlord to whom ParkingEye was providing the service had a legitimate interest in imposing a liability on Mr Beavis in excess of the damages that would have been recoverable at common law.
ParkingEye had an interest in inducing him to observe the two hour limit in order to enable customers of the retail outlets and other members of the public to use the available parking space.
To echo the observations of the Advocate General at para AG94 of her opinion, charging overstayers 85 underpinned a business model which enabled members of the public to park free of charge for two hours.
This was fundamental to the contractual relationship created by Mr Beaviss acceptance of the terms of the notice, whose whole object was the efficient management of the car park.
It was an interest of exactly the kind envisaged by the Advocate General at para AG87 of her opinion and by the Court of Justice at para 74 of the judgment.
There is no reason to regard the amount of the charge as any higher than was necessary to achieve that objective.
Could ParkingEye, dealing fairly and equitably with the consumer, reasonably assume that the consumer would have agreed to such a term in individual contract negotiations? The concept of a negotiated agreement to enter a car park is somewhat artificial, but it is perfectly workable provided that one bears in mind that the test, as Advocate General Kokott pointed out in Aziz at para AG75, is objective.
The question is not whether Mr Beavis himself would in fact have agreed to the term imposing the 85 charge in a negotiation, but whether a reasonable motorist in his position would have done so.
In our view a reasonable motorist would have agreed.
In the first place, motorists generally and Mr Beavis in particular did accept it.
In the case of non negotiated standard terms that would not ordinarily be entitled to much weight.
But although the terms, like all standard contracts, were presented to motorists on a take it or leave it basis, they could not have been briefer, simpler or more prominently proclaimed.
If you park here and stay more than two hours, you will pay 85.
Motorists could hardly avoid reading the notice and were under no pressure to accept its terms.
Objectively, they had every reason to do so.
They were being allowed two hours of free parking.
In return they had to accept the risk of being charged 85 if they overstayed.
Overstaying penalties are, as we have mentioned, both a normal feature of parking contracts on public and on private land, and important for the efficient management of the space in the interests of the general body of users and the neighbouring outlets which they may frequent.
They are beneficial not just to ParkingEye, the landowner and the retail outlets, but to the motorists themselves, because they make parking space available to them which might otherwise be clogged up with commuters and other long stay users.
The amount of the charge was not exorbitant in comparison to the general level of penalties imposed for parking infractions.
Nor is there any reason to think that it was higher than necessary to ensure considerate use by motorists of the available space.
And, while we accept Mr Butchers submission that the fact that the 85 charge is broadly comparable to charges levied by local authorities for parking in public car parks is not enough to show that it was levied in good faith, it is nonetheless a factor which assists ParkingEye in that connection.
The risk of having to pay it was wholly under the motorists own control.
All that he needed was a watch.
In our opinion, a hypothetical reasonable motorist would have agreed to objectively reasonable terms, and these terms are objectively reasonable.
It is right to mention three further arguments which were raised by Mr de Waal QC on behalf of Mr Beavis to support his case that the 85 charge was unfair, and which we have not so far specifically addressed.
First, Mr de Waal relied on the fact that it was payable by a motorist who overstayed even by a minute.
The Consumers Association expanded on this point by observing that there are many reasons why a motorist may overstay, some of which may be due to unforeseen circumstances.
We cannot accept this.
ParkingEyes business model could have had a graduated charge for overstayers based on how long they overstayed, but the fact that it did not do so does not render it unfair.
Even if it had done, it would presumably have involved a specific sum for each hour or part of an hour, in which case the same complaint could be made.
More fundamentally, as we have explained, the 85 charge for overstayers was not a payment for being permitted to park after the two hours had expired: it was a sum imposed for staying for more than two hours.
The notion of a single sum between 50 and 100 for overstaying even by a minute, appears to be a very common practice, in that it is adopted by many, probably the majority of, public and private car park operators.
As for the suggestion that the overstay may have arisen from unforeseen circumstances, we find it hard to regard that as relevant.
The object of the 85 charge is simply to influence the behaviour of motorists by causing them to leave within two hours.
It is reasonable that the risk of exceeding it should rest with the motorist, who is in a position to organise his time as he sees fit.
There are many circumstances in life when the only way of being on time is to allow for contingency and arrive early.
This is accepted by every motorist who uses metered on street parking while shopping.
The legal basis on which he is made liable for overstaying penalties is of course different in that case.
It is statutory and not contractual.
But the underlying rationale and justification is precisely the same, namely to ration scarce parking space.
It is right to add that, as communicated to any overstayer from whom the charge is demanded, ParkingEye has an appeals procedure, and the BPA Code of Practice provides at paragraph 13.4 for a reasonable grace period after the expiry of the fixed parking period.
The appeals procedure provides a degree of protection for any overstayer, who would be able to cite any special circumstances as a reason for avoiding the charge.
And, while the Code of Practice is not a contractual document, it is in practice binding on the operator since its existence and observance is a condition of his ability to obtain details of the registered keeper from the DVLA.
In assessing the fairness of a term, it cannot be right to ignore the regulatory framework which determines how and in what circumstances it may be enforced.
The second argument which should be mentioned is that the 85 charge for overstayers takes advantage of the consumers requirement to park in that particular place to shop or visit a particular location.
If this car park is unusually attractively located for shoppers and others, the evidence shows that the 85 charge has not been fixed at a particularly high level to reflect that fact.
Further, as Mr Kirk QC pointed out on behalf of ParkingEye, it is equally true that the consumer gets the benefit of free parking in that unusually attractively located car park for two hours, and, save in unusual circumstances, it is entirely within his or her control whether the two hour limit is exceeded.
And if the consumer considers that the circumstances are unusual, he or she can invoke the appeals procedure.
Finally, Mr de Waal submitted that it was unfair to make the minority who contravene the parking rules bear the whole cost of running the car park.
In our view, if the 85 charge is itself such as a reasonable motorist would accept, the mere imbalance between the position of those who comply and those who do not cannot possibly make the charge unfair.
It arises only because both categories are allowed two hours of free parking, and because the great majority of users of the car park (more than 99.5%, we were told) observe the rules.
Accordingly, we agree with the courts below that the 85 charge in this case does not infringe the 1999 Regulations.
Conclusion on the two appeals
For these reasons, we would allow the appeal in Cavendish v El Makdessi and dismiss the appeal in ParkingEye v Beavis, and we would declare that none of the terms impugned on the two appeals contravenes the penalty rule, and that the charge in issue in ParkingEye v Beavis does not infringe the 1999 Regulations.
LORD MANCE:
Introduction
These two appeals raise wide ranging and difficult questions about the current law governing contractual penalties.
The cases lie at opposite ends of a financial spectrum.
In the first, the appellant, Cavendish Square Holding BV (Cavendish), is part of the worlds leading marketing communications group (WPP), while the respondent, Mr Talal El Makdessi, was co founder and co owner with Mr Joseph Ghossoub of the Middle Easts largest advertising and marketing communications group (the Group).
Prior to 2008 WPP held 12.6% of the shares of the Group.
In 2008 Mr El Makdessi and Mr Ghoussoub agreed to sell to Cavendish a further 47.4% of the Groups shares (in the form of an interest in Team Y & R Holdings Hong Kong Ltd (Team), a holding company set up to facilitate the transaction).
The transaction was effected by a sale and purchase agreement dated 28 February 2008, whereby Mr El Makdessi and Mr Ghoussoub agreed to make the 47.4% shareholding available in the ratio of 53.88% to 46.12%.
The price was payable in stages: US$65.5m (Mr El Makdessis share being 53.88%) was payable on completion of the sale and Group reorganisation.
Thereafter, there were to be Interim and Final Payments derived from a multiple of the Groups audited consolidated operating profit (OPAT) between respectively 2007 and 2009 and 2007 and 2011.
Clause 11.2 was a clause prohibiting Mr El Makdessi from various competitive or potentially competitive activity.
Clauses 5.1 and 5.6 provided that, if he breached clause 11.2, he would not be entitled to receive the Interim and/or Final Payments, and could be required to sell Cavendish the rest of his shares at a Defaulting Shareholder Option Price, based on asset value and so ignoring any goodwill value.
Mr El Makdessi also became non executive chair of Team with a service agreement binding him to remain in position for at least 18 months.
It is accepted by Mr El Makdessi that he did subsequently breach clause 11.2, and was thereby also in breach of fiduciary duty towards Team.
The present proceedings were initiated by both Cavendish and Team.
Teams claim was settled in October 2012 when it accepted a Part 36 payment of US$500,000 made by Mr El Makdessi.
Cavendishs claim is for declarations that Mr El Makdessis breach of clause 11.2 means that clauses 5.1 and 5.6 now have the effect stated in the previous paragraph.
Mr El Makdessi maintains that they are unenforceable penalty clauses.
In the second case, the appellant, Mr Beavis, was the owner and driver of a vehicle which he parked in a retail shopping car park adjacent to Chelmsford railway station.
The owner of the retail site and car park, British Airways Pension Fund (BAPF), had engaged ParkingEye Ltd, the respondent, to provide a traffic space maximisation scheme.
The scheme involved the erection at the entrance to and throughout the car part of prominent notices, including the injunctions 2 hour max stay and Parking limited to 2 hours, coupled with the further notice Failure to comply will result in a Parking Charge of 85.
Underneath, it also stated: By parking within the car park, motorists agree to comply with the car park regulations.
Mr Beavis left his car parked for 56 minutes over a permitted two hour period.
He maintains that the 85 charge demanded of him by ParkingEye (reducible to 50 if he had paid within 14 days) is an unenforceable penalty.
Further or alternatively, he maintains that it is unfair and invalid within the meaning of the Unfair Terms in Consumer Contracts Regulations 1999.
Cavendish succeeded before Burton J on 14 December 2012, although only on condition that it agreed to credit Mr El Makdessi with the US$500,000 recovered from him by Team.
The Court of Appeal (Patten, Tomlinson and Christopher Clarke LJJ), [2013] EWCA Civ 1539, over ruled Burton J, [2012] EWHC 3582 (Comm), on 26 November 2013, holding both clauses to be unenforceable penalties.
The court held however that the judge had had, on his view of the case, no basis to impose a condition that Cavendish agree to credit Mr El Makdessi with the US$500,000 (and the contrary has not been suggested before the Supreme Court).
Mr Beavis has so far failed at both instances, before Judge Moloney QC on 19 May 2014 and the Court of Appeal (Moore Bick and Patten LJJ and Sir Timothy Lloyd) on 23 April 2015, [2015] EWCA Civ 402.
The appellants in both cases now appeal with the permission of the Supreme Court in the case of Mr El Makdessi and of the Court of Appeal in the case of Mr Beavis.
Cavendish v Mr El Makdessi facts
I can summarise and take the relevant terms of the sale and purchase agreement to which Cavendish and Mr El Makdessi were parties from the agreed Statement of Facts and Issues (SFI): 10.
By clause 2.1 of the Agreement, Joe and the respondent (defined as the Sellers) agreed to sell 47.4% of the shareholding in the Company.
Clause 3 set out the consideration for that sale, which pursuant to Schedule 1 was to be shared between the respondent and Joe in shares of 53.88% and 46.12% respectively.
The consideration, payment of which was not expressed to be subject to any condition, was as follows: (1) A payment of US$34,000,000 on completion; (2) A second payment of US$31,500,000 to be paid into escrow on completion and released to Joe and the respondent in accordance with clauses 3.6 to 3.12 (which in short provided for the sum to become payable in stages as the various restructurings provided for in the Agreement took effect). (3) A further payment (the Interim Payment) was to become payable on its Due Date and was to be calculated as follows: 8 x Average 2007 2009 OPAT x 47.4% minus US$63,000,000 (4) A final payment (the Final Payment) was to become payable on its Due Date, and was to be calculated as follows: M x Average 2007 2011 OPAT x 47.4% minus US$63,000,000 and the Interim Payment. 11.
OPAT was defined in Schedule 12 as meaning the audited consolidated operating profit of the Group, and Due Date was defined as meaning 30 days after the relevant OPAT was agreed or determined.
The figure M in the definition of Final Payment was a figure varying between seven and ten depending on the growth of OPAT over the period 2007 to 2011. 12.
Thus the Interim and Final Payments in essence obliged the purchaser to make further payments to Joe and the respondent calculated by reference to the Groups profitability in the years 2007 to 2011. 13.
Clause 3.2 provided that if the calculation of the Interim Payment or the Final Payment resulted in a negative figure, it was to be treated as zero and Joe and the respondent would not be required to repay any sum already paid. 14.
Clause 3.3 capped the total amount of all payments at US$147,500,000. 15.
By clause 9.1, paragraph 2.15 of Schedule 7, and Schedule 11, Joe and the respondent warranted that the net assets of the entire Group, not just their share, as at 31 December 2007 were US$69,744,340. 16.
Under the Agreement, therefore, a substantial part of the purchase consideration comprised goodwill: a.
The Completion and Second Payments totalled $65.5m and were for 47.4% of the equity (47.4% of the warranted 2007 NAV being $33,058,817); b.
At its highest (assuming no decrease in NAV) some US$114.44m would be payable for goodwill ($147,500,000 $33,058,817), representing 77% of the aggregate purchase consideration. 17.
Clause 11 was entitled Protection of Goodwill, and provided that: 11 PROTECTION OF GOODWILL 11.1 Each Seller recognises the importance of the goodwill of the Group to the Purchaser and the WPP Group which is reflected in the price to be paid by the Purchaser for [the shares].
Accordingly, each Seller commits as set out in this clause 11 to ensure that the interest of each of the Purchaser and the WPP Group in that goodwill is properly protected. 18.
Clause 11.2 then set out various restrictive covenants (the Restrictive Covenants) entered into by Joe and the respondent: 11.2 Until the date 24 months after the Relevant Date, no Seller will directly or indirectly without the Purchasers prior consent: (a) carry on or be engaged, concerned, or interested, in competition with the Group, in the Restricted Activities within the Prohibited Area; (b) solicit or knowingly accept any orders, enquiries or business in respect of the Restricted Activities in the Prohibited Area from any Client; (c) divert away from any Group Company any orders, enquiries or business in respect of the Restricted Activities from any Client; or (d) employ, solicit or entice away from or endeavour to employ, solicit, or entice away from any Group Company any senior employee or consultant employed or engaged by that Group Company. 19.
By virtue of the definitions in Schedule 12 of the Agreement, Restricted Activities meant the provision of products and/or services of a competitive nature to those being provided by the Group, Prohibited Area meant any countries in which the Group carried on the business of marketing communications and ancillary services, and Client meant any client or potential client of the Group who had placed an order with the Group during the past 12 months or been in discussions with the Group during that period. 20.
As to the several covenants: (a) the effect of any breach of the covenant against employing or soliciting senior employees could be less than a breach of the covenants against competitive activity; the respondents position is that it was likely, in many circumstances, to be markedly less; and (b) Losses attributable to breaches of the covenant against solicitation could vary, the respondent says were likely to vary widely, according to the nature, extent, duration and success of the solicitation. 21.
By clause 7.5, the respondent agreed that within four months after completion he would dispose of any shares held by him in Carat Middle East Sarl (Carat) and procure that a joint venture agreement of 19 December 2003 to which Group Carat (Nederland) BV and Aegis International BV, on the one hand, and the respondent, on the other, were parties, would be terminated. 22.
By the time of trial, the respondent had conceded that (if the Restrictive Covenants were enforceable) he was in breach thereof by reason of his ongoing, unpaid involvement in the affairs of Carat (the Breach). 23.
It is the provisions providing for the consequences of breach which are in issue in this appeal.
By reason of the Breach, the respondent became a Defaulting Shareholder within the meaning of the definition in Schedule 12.
Clause 5.1 is headed DEFAULT and includes two relevant provisions. 24.
First, clause 5.1 provides that on becoming a Defaulting Shareholder, the respondent would not be entitled to receive the Interim Payment or the Final Payment: If a Seller becomes a Defaulting Shareholder he shall not be entitled to receive the Interim Payment and/or the Final Payment which would other than for his having become a Defaulting Shareholder have been paid to him and the Purchasers obligation to make such payments shall cease. 25.
In money terms, the effect of this provision is that in the event of a default by the respondent, he could receive up to $44,181,600 less than would have been the case had he not acted in breach.
If both Sellers were to default, they could lose up to US$82m ($147.5 $65.5) between them. 26.
Second, clause 5.6 grants an option over the respondents remaining shares in the Group whereby in the event that he became a Defaulting Shareholder, the appellant could require him to sell those remaining shares: Each Seller hereby grants an option to the Purchaser pursuant to which, in the event that such Seller becomes a Defaulting Shareholder, the Purchaser may require such Seller to sell to the Purchaser (or its nominee) all (and not some only) of the Shares held by that Seller (the Defaulting Shareholder Shares).
The Purchaser (or its nominee) shall buy and such Seller shall sell with full title guarantee the Defaulting Shareholder Shares . within 30 days of receipt by such Seller of a notice from the Purchaser exercising such option in consideration for the payment by the Purchaser to such Seller of the Defaulting Shareholder Option Price. 27.
The Defaulting Shareholder Option Price is defined in Schedule 12 as meaning the proportion of the Net Asset Value of the company equal to the proportion of shares sold by the Defaulting Shareholder, a formula which excludes the value of goodwill.
By clause 5.7, this could be satisfied either in cash or by issuing shares in WPP, at the absolute discretion of the appellant. 28.
Clause 15.1 granted the Sellers a put option by which they could require the appellant to purchase all their remaining shares in the Company: Each Seller is hereby granted an option by the Purchaser pursuant to which such Seller may, subject to clause 15.2, by service of an Option Notice in the form set out in Schedule 10 (the Option Notice) require the Purchaser (or its nominee) to purchase from him all (and not some only) of the Shares held by that Seller (the Option Shares).
The Purchaser (or its nominee) shall buy and the Seller shall sell with full title guarantee the Option Shares . within 30 days of receipt of the Option Notice in consideration for the payment when due of the price determined in accordance with clause 15.3 (the Option Price). 29.
In money terms, the effect of clause 5.6 is that insofar as the retained shares of a Defaulting Shareholder have, at the date when he becomes a Defaulting Shareholder, a value which is attributable to goodwill, he will not receive it.
He will not be able to exercise the put option otherwise available in 2011 and subsequent years, which would give him a price, not exceeding $75m, which reflected goodwill. 30.
As of the date of the Agreement, the respondent was, and was bound to remain, a director for at least 18 months and was entitled to remain thereafter as long as he was a shareholder unless Cavendish considered that his outside business interests were likely to result in a material ongoing conflict with his duties as a director.
For so long as he did remain a director, any breach of clause 11.2 would give rise to a cause of action for breach of fiduciary duty to the Company. 31.
The Agreement contained no provision which precluded the Company from bringing a claim for damages for conduct rendering the respondent a Defaulting Shareholder. 32.
As with the agreement as a whole, these provisions were subject to negotiation and amendment between the parties. 33.
The structure of the Agreement was typical of acquisition agreements in the marketing sector.
As in this case, the vendor is typically the founder or operator of the business, and has important relationships with clients and key staff.
If they decide to turn against the business, its success can be significantly affected, and provisions are therefore included to protect the value of the investment, and in particular the value of the goodwill represented by the vendors existing personal relationships.
The respondent fell into that category; the importance of personal relationships with clients is even stronger in the Middle East than the UK, and he had very strong relationships with clients and senior employees, and he was such a well known figure that if he acted against the Group, it would inevitably cause it to lose value.
Paragraphs 25 and 29 of this agreed summary outline the effect of clauses 5.1 and 5.6 of the sale and purchase agreement, on which Cavendish relies but which Mr El Makdessi submits to be penal and unenforceable.
Since clauses 5.1 and 5.6 operate because Mr El Makdessi became a Defaulting Shareholder by reason of breach of clause 11.2, both clauses need to be considered with reference to the nature, scope and duration of the restrictive covenants in favour of Cavendish which clause 11.2 contains.
As para 33 of the agreed summary records, the restrictive covenants represented very significant protections of the value of the goodwill which Cavendish was to acquire.
Clause 11.2 provides for such protection to continue until 24 months after the Relevant Date.
By Schedule 12: Relevant Date means in respect of a Seller the later of the date of termination of his employment by the Group, the date that he no longer holds any Shares or the date of payment of the final instalment of the Option Price pursuant to clause 15.5(b).
Clause 16.1 provided that: Save as otherwise expressly provided by this agreement no Seller shall transfer, sell, charge, Encumber or otherwise dispose of all or part of his interest in any Shares.
The put option referred to in para 28 of the agreed summary was only exercisable by Mr El Makdessi by option notice served at any time between 1 January and 31 March in 2011 or in any subsequent year (clause 15.2).
Upon its exercise, the Option Price was payable in two instalments, the second or final instalment being due within 30 days of the agreement or final determination of OPAT for N+2 (clause 15.5(b)).
OPAT means under Schedule 12 the audited consolidated operating profit in any 12 month accounting period ending 31 December.
N means the financial year in which the Option Notice is served (clause 15.3).
N+2 thus means the year 2013, and the earliest date of full payment of any Option Price under clause 15 would be some date in 2014, once the OPAT for N+2 was agreed or finally determined.
That would be the (earliest) Relevant Date, assuming that Mr El Makdessi had previously determined his employment by the Group which he was only committed to maintain for 18 months from the date of the agreement (para 30 of the agreed summary).
Under the terms of the sale and purchase agreement dated 28 February 2008, Mr El Makdessi was bound by the restrictive covenants for a further 24 months, ie until a date in 2016, some eight years after the sale and purchase agreement.
There has been no challenge in this court to the reasonableness of this lengthy restriction, and it underlines the importance of goodwill to the agreement and to the buyers, Cavendish, in particular.
ParkingEye Limited v Beavis facts
The signs exhibited at the entrance and throughout the car park are large, prominent and legible.
They are worded as follows (the words down to marked bays all being given especial prominence): 4 hour maximum stay for Fitness Centre Members Failure to comply with the following will result in a Parking Charge of: ParkingEye car park management 2 hour max stay Customer only car park 85 Parking limited to 2 hours (no return within 1 hour) Park only within marked bays Blue badge holders only in marked bays ParkingEye Ltd is solely engaged to provide a traffic space maximisation scheme.
We are not responsible for the car park surface, other motor vehicles, damage or loss to or from motor vehicles or users safety.
The parking regulations for this car park apply 24 hours a day, all year round, irrespective of the site opening hours.
Parking is at the absolute discretion of the site.
By parking within the car park, motorists agree to comply with the car park regulations.
Should a motorist fail to comply with the car park regulations, the motorist accepts that they are liable to pay a Parking Charge and that their name and address will be requested from the DVLA.
Parking charge Information: A reduction of the Parking Charge is available for a period, as detailed in the Parking Charge Notice.
The reduced amount payable will not exceed 75, and the overall amount will not exceed 150 prior to any court action, after which additional costs will be incurred.
This car park is private property.
ParkingEye operated the arrangements at the Chelmsford car park under a Supply Agreement for Car Park Management made with BAPF on 25 August 2011.
ParkingEye guarantees BAPF an undisclosed minimum weekly amount for the privilege, for which it appears, in practice, to have been paying BAPF about 1,000 per week.
Neither BAPF nor ParkingEye makes any charge for parking by motorists who comply with the two hour maximum stay and other regulations.
So ParkingEyes only income is from those required to pay the 85 (or reduced) charge.
ParkingEye operates a number of other car parks on a similar basis.
Its annual accounts for the year ended 31 August 2013 show an operating profit of over 1.6m, and a net profit after tax of about 1m, on a turnover of over 14m.
Parking at the site is monitored by ParkingEye by automatic number plate recognition cameras to monitor the entry into and departure of vehicles from the car park.
The cameras showed Mr Beaviss vehicle driving into the car park at 14.29 pm on 15 April 2013 and leaving at 17.26 pm, a stay of two hours and 56 minutes.
Mr Beavis admits having been the driver.
ParkingEye obtained the vehicles registered keepers details from the DVLA, and sent a First Parking Charge Notice which included statements to the effect that the parking charge of 85 was payable within 28 days of the date of the notice, but would be discounted to 50 if paid within 14 days, and that there was an appeals procedure (which did not however include any power to grant discretionary relief).
Mr Beavis did not pay or appeal, and the present proceedings were begun against him.
The issues
This section of the judgment concerns the doctrine of penalties.
I deal later with the issues arising under the Unfair Terms in Consumer Contracts Regulations 1999: see paras 200 213 below.
Miss Joanna Smith QC for Cavendish invites the Supreme Court to undertake a fundamental review of the law regarding penalties.
In her submission it is outdated, incoherent and unnecessary, and should be abolished.
Alternatively, it should have no place in relation to commercial contracts, by which I understand her to mean contracts at arms length between equally balanced parties, like Cavendish and Mr El Makdessi.
In the further alternative, she submits that it is or should be held to be inapplicable to any clauses other than those requiring payment of money on breach, and/or to clauses not aimed at compensating for the breach, but for which some other valid commercial reason exists.
Mr Bloch QC for Mr El Makdessi resists these submissions.
In his submission, the doctrine fulfils a tried and well established role, there is no impetus, let alone one based on any research or review, for its abolition or restriction and it is, on principle and authority, applicable to the types of clause in issue in this case.
He submits that the law governing penalties enables and requires account to be taken of the interests intended to be protected by the relevant clause a proposition that Miss Smith was in reply at first inclined to dispute, but after questioning and reflection later herself endorsed.
But protection of such interests is, in Mr Blochs submission, subject to the over riding control that it must not be extravagant, oppressive or manifestly excessive.
In his submission the present clauses are precisely that, since their effect is in the case of clause 5.1 to deprive Mr El Makdessi of part of the agreed consideration, and to do so in a way which bears no resemblance to any loss which his breach may have caused Cavendish or the Group.
On the contrary, the smaller the loss it has caused, the larger the penalty effect, and vice versa.
As to clause 5.6, its effect is to give Cavendish a right on any default by Mr El Makdessi to force him to part with his remaining shareholding, at a price likely to be well below its actual value, again in circumstances where the difference in value in no way reflects any loss which the default may have caused Cavendish or the Group, and where the smaller the loss caused to the Group, the larger the difference in value of which Mr El Makdessi is deprived.
Mr John de Waal QC for Mr Beavis, and Mr Christopher Butcher QC for the Consumers Association, interveners, submit that there is a dichotomy between a genuine pre estimate and a deterrent clause, that the focus must be on the particular contractual relationship in issue, and general commercial or other considerations cannot detract from that focus or justify what would otherwise amount to a penalty.
Mr Jonathan Kirk QC for ParkingEye does not challenge the existing law of penalties, but, like Miss Smith, submits that it is inapplicable to clauses not aimed at compensating for the breach, but for which some other valid (not necessarily commercial) reason exists.
That, he submits, is the present case.
The law of penalties in this jurisdiction currently applies to contractual clauses operating on a breach of contract by the other party to the contract: see the statements to that effect by Lord Roskill in Export Credits Guarantee Department v Universal Oil Products Co [1983] 1 WLR 399 at pp 402H and 404C (although the facts of that case were quite special).
This limitation has on occasion been seen as a weakness or even as an indication of inherent fragility in the doctrines underpinning.
The High Court of Australia has quite recently addressed this aspect head on, holding that breach is not an essential aspect of the doctrine; the essential question is whether the contract imposes a restriction from doing the particular act, reserving a payment if it is done, or whether it confers a right to do the act in return for payment of an equivalent: Andrews v Australia and New Zealand Banking Group Ltd [2012] HCA 30, 247 CLR 205, Paciocco v Australia and New Zealand Banking Group Ltd [2015] FCAFC 50, para 95.
The present appeals do not raise for consideration whether there should be any such extension of the doctrine, but rather whether it should be abolished or restricted, in English law.
For my part, if the doctrine survives in English law, I do not see the distinction between situations of breach and non breach as being without rational or logical underpinning.
It is true that clever drafting may create apparent incongruities in particular cases.
But in most cases parties know and reflect in their contracts a real distinction, legal and psychological, between what, on the one hand, a party can permissibly do and what, on the other hand, constitutes a breach and may attract a liability to damages for or even to an injunction to restrain the breach.
In Mr Beaviss appeal, Mr de Waal also suggested that ParkingEye could have economic reasons for formulating the liability to pay 85 (or a reduced 50) as a liability for breach, rather than as a consideration payable for parking for longer than two hours.
As a consideration, he suggested, it would have attracted VAT and ParkingEye could furthermore have incurred liability for rates as a person in beneficial occupation of the car park.
The concept of a penalty
The doctrine of penalties is commonly expressed as involving a dichotomy between compensatory and deterrent clauses.
In Robophone Facilities Ltd v Blank [1966] 1 WLR 1428, 1446H 1447A, Diplock LJ even expressed the doctrine in terms of a rule of public policy that did not permit a party to a contract to recover in an action a sum greater than the measure of damages to which he would be entitled at common law.
All three of the early 20th century decisions of highest jurisdictions which together constitute the origin of the modern doctrine contain dicta suggestive of a mutually exclusive dichotomy.
But all three show that there is no requirement that the measure of damages at common law should be ascertainable indeed that an inability to ascertain this can justify an agreement to pay a fixed sum on breach.
In this connection, they point to a broad understanding of the interests which can justify such an agreement.
All three decisions must also be read in context, which involved interests different from those relevant on the present appeals.
In the first decision, the Scottish appeal of Clydebank Engineering and Shipbuilding Co v Don Jose Ramos Yzquierdo y Castaneda [1905] AC 6, the House was concerned with an expressed penalty of 500 per week for late delivery of four torpedo boats to the Spanish Government.
The Earl of Halsbury LC distinguished at p 10 between an agreed sum for damages and a penalty to be held over the other party in terrorem and Lord Davey at p 15 between a clause providing for liquidate damages or for a punishment irrespective of the damage caused.
But the Earl of Halsbury went on to stress how extremely complex, difficult, and expensive any proof of damages would have been, how it would involve before ones mind the whole administration of the Spanish Navy and how absolutely idle and impossible [it would be] to enter into a question of that sort unless you had some kind of agreement between the parties as to what was the real measure of damages which ought to be applied (pp 11 12).
He also rejected out of hand submissions that a warship has no value at all, and that, had the torpedo boats been delivered on time, they would have been sunk, like much else of the Spanish fleet, in the Spanish American war (of 1898, after the United States intervened in support of Cuban independence).
Lord Davey and Lord Robertson indicated that they saw the ultimate question as being whether the shipbuilders had shown that the clause was exorbitant, extravagant or unconscionable to the point where it could not be regarded as commensurate with the interest protected: see pp 16 and 20.
Lord Robertson encapsulated his view of the issue as follows: The question remains, had the respondents no interest to protect by that clause, or was that interest palpably incommensurate with the sums agreed on? It seems to me that to put this question, in the present instance, is to answer it.
Unless injury to a state is as matter of law inexpressible in money, Spain was or might be deeply interested in the early delivery of these ships and deeply injured by delay.
To my thinking, Lord Moncreiff has, in two sentences, admirably stated the case: The subject matter of the contracts, and the purposes for which the torpedo boat destroyers were required, make it extremely improbable that the Spanish Government ever intended or would have agreed that there should be inquiry into, and detailed proof of, damage resulting from delay in delivery.
The loss sustained by a belligerent, or an intending belligerent, owing to a contractors failure to furnish timeously warships or munitions of war, does not admit of precise proof or calculation; and it would be preposterous to expect that conflicting evidence of naval or military experts should be taken as to the probable effect on the suppression of the rebellion in Cuba or on the war with America of the defenders delay in completing and delivering those torpedo boat destroyers.
At p 19, Lord Robertson also described a penalty as a sum merely stipulated in terrorem [which] could not possibly have formed a genuine pre estimate of the creditors probable or possible interest in the due performance of the principal obligation.
Lord Robertsons last words were quoted by the Judicial Committee of the Privy Council (which included the Lord Chancellor, Lord Davy and Lord Dunedin) in the second decision, Public Works Comr v Hills [1906] AC 368, 375 376.
The Boards advice was that the clause in that case was a penalty.
The clause, contained in one railway construction contract, provided for the forfeiture, on non completion of the railway within the stipulated time, of whatever retention moneys were held as a result of two separate railway construction contracts together with a further 10,000.
The determining factor was in the Boards advice that the sum was not a definite sum, but is liable to great fluctuation in amount dependent on events not connected with the fulfilment of this contract (p 376).
The third decision is the English appeal in Dunlop Pneumatic Tyre Co Ltd v New Garage and Motor Co Ltd [1915] AC 79.
Under Dunlops standard terms, distributors undertook not to sell or offer the goods to any private customers or to any co operative society at less than Dunlops current list prices, not to sell to persons whose supplies Dunlop had decided to suspend, and not to exhibit or export without Dunlops consent.
The terms stipulated for payment of 5 for every tyre, cover, or tube sold or offered in breach of such undertakings.
Dunlops unchallenged evidence was price cutting would indirectly damage their business as a whole (p 88).
On this basis the House held that the stipulation was not a penalty.
Lord Dunedin said: But though damage as a whole from such a practice would be certain, yet damage from any one sale would be impossible to forecast.
It is just, therefore, one of those cases where it seems quite reasonable for parties to contract that they should estimate that damage at a certain figure, and provided that figure is not extravagant there would seem no reason to suspect that it is not truly a bargain to assess damages, but rather a penalty to be held in terrorem.
Lord Atkinson spelled the point out at pp 91 93 (italics added): In the sense of direct and immediate loss the appellants lose nothing by such a sale.
It is the agent or dealer who loses by selling at a price less than that at which he buys, but the appellants have to look at their trade in globo, and to prevent the setting up, in reference to all their goods anywhere and everywhere, a system of injurious undercutting.
The object of the appellants in making this agreement, if the substance and reality of the thing and the real nature of the transaction be looked at, would appear to be a single one, namely, to prevent the disorganization of their trading system and the consequent injury to their trade in many directions.
The means of effecting this is by keeping up their price to the public to the level of their price list, this last being secured by contracting that a sum of 5l shall be paid for every one of the three classes of articles named sold or offered for sale at prices below those named on the list.
The very fact that this sum is to be paid if a tyre cover or tube be merely offered for sale, though not sold, shows that it was the consequential injury to their trade due to undercutting that they had in view.
They had an obvious interest to prevent this undercutting, and on the evidence it would appear to me impossible to say that that interest was incommensurate with the sum agreed to be paid.
Their object is akin in some respects to that which a trader has in binding a former employee not to set up, or carry on, a rival business within a certain area.
The traders object is to prevent competition, and especially to prevent his old customers whom the employee knows from being enticed away from him.
If one takes for example the case of a plumber, the carrying on of the trade of a plumber may mean anything from mending gas pipes for a few pence apiece up to doing all the plumbing work of a big hotel.
If the employee should mend one hundred of such pipes for twenty old customers at 6d apiece, for which the employer would charge 1s apiece, could it possibly be contended that the traders loss was only one hundred sixpences, 21 10s? It is, I think, quite misleading to concentrate ones attention upon the particular act or acts by which, in such cases as this, the rivalry in trade is set up, and the repute acquired by the former employee that he works cheaper and charges less than his old master, and to lose sight of the risk to the latter that old customers, once tempted to leave him, may never return to deal with him, or that business that might otherwise have come to him may be captured by his rival.
The consequential injuries to the traders business arising from each breach by the employee of his covenant cannot be measured by the direct loss in a monetary point of view on the particular transaction constituting the breach.
An old customer may be as effectively enticed away from him through the medium of a 10s job done at a cheap rate as by a 50l job done at a cheap rate, or a reputation for cheap workmanship may be acquired possibly as effectively in one case as in the other.
Lord Parker was to like effect.
After concluding that the damage likely to accrue from the breach of every stipulation to which the clause applied was the same in kind, he said (p 99): Such damage will in every case consist in the disturbance or derangement of the system of distribution by means of which the appellants goods reach the ultimate consumer.
Lord Dunedins is the first and most cited speech in Dunlop.
But Miss Smith is right to emphasise the importance of the other speeches.
The second of four main propositions which Lord Dunedin thought deducible from authoritative decisions was that: 2.
The essence of a penalty is a payment of money stipulated as in terrorem of the offending party; the essence of liquidated damages is a genuine covenanted pre estimate of damage (Clydebank Engineering and Shipbuilding Co v Don Jose Ramos Yzquierdo y Castaneda [1905] AC 6).
Later authority has found the phrase in terrorem to be unhelpful.
Lord Radcliffe commented in Campbell Discount Co Ltd v Bridge [1962] AC 600, 622: I do not find that that description adds anything of substance to the idea conveyed by the word penalty itself, and it obscures the fact that penalties may quite readily be undertaken by parties who are not in the least terrorised by the prospect of having to pay them .
Lord Radcliffes comment has been quoted with approval in the Court of Appeal in Cine Bes Filmcilik ve Yapimcilik v United International Pictures [2004] 1 CLC 401 and again in Murray v Leisureplay plc [2005] EWCA Civ 963, [2005] IRLR 946, paras 47 and 109, per Arden LJ and Buxton LJ.
In Cine Bes, para 13, I regarded as a more accessible paraphrase of the concept of penalty that adopted by Colman J in Lordsvale Finance plc v Bank of Zambia [1996] QB 752, 762G.
Colman J there said that the Dunlop Pneumatic Tyre case showed that: whether a provision is to be treated as a penalty is a matter of construction to be resolved by asking whether at the time the contract was entered into the predominant contractual function of the provision was to deter a party from breaking the contract or to compensate the innocent party for breach.
That the contractual function is deterrent rather than compensatory can be deduced by comparing the amount that would be payable on breach with the loss that might be sustained if breach occurred.
Lord Dunedins first and third propositions were that, while the language used may be a prima facie indication as to whether a sum stipulated is a penalty, it is not conclusive; the question is one of construction to be decided upon the terms and inherent circumstances of each particular contract, judged of as at the time of [its] making.
His fourth proposition had four sub heads, identifying various tests which have been suggested to assist this task of construction and which may prove helpful, or even conclusive.
Briefly summarised, the tests were: a. A sum is a penalty if extravagant and unconscionable in amount in comparison with the greatest loss that could conceivably be proved to have followed from the breach. b.
If the breach consists only in not paying a sum of money, a sum stipulated as payable on the breach greater than any that ought to have been paid will be a penalty.
There is a presumption (but no more) that it is penalty when a single c. lump sum is made payable by way of compensation, on the occurrence of one or more or all of several events, some of which may occasion serious and others but trifling damage. d.
On the other hand, it is no obstacle to the sum stipulated being a genuine pre estimate of damage, that the consequences of the breach are such as to make precise pre estimation almost an impossibility.
On the contrary, that is just the situation when it is probable that pre estimated damage was the true bargain between the parties (Clydebank Case, Lord Halsbury, at p 11).
It is clear from these three decisions that a concern can protect a system which it operates across its whole business by imposing an undertaking on all its counterparties to respect the system, coupled with a provision requiring payment of an agreed sum in the event of any breach of such undertaking.
The impossibility of measuring loss from any particular breach is a reason for upholding, not for striking down, such a provision.
The qualification and safeguard is that the agreed sum must not have been extravagant, unconscionable or incommensurate with any possible interest in the maintenance of the system, this being for the party in breach to show.
In 1986 the High Court of Australia thought, when examining recent English authority, that the underlying test of extravagance, exorbitance or unconscionability to be derived from the Clydebank Engineering and Dunlop cases had been eroded by decisions in which the focus had been more narrowly on a comparison between the agreed sum and any possible loss which could be awarded for the breach of contract in question: AMEV UDC Finance Ltd v Austin [1986] HCA 63, 162 CLR 170, 190.
It advocated a return to the original concept.
This was taken up by the Privy Council in Philips Hong Kong Ltd v Attorney General of Hong Kong (1993) 61 BLR 41, where Lord Woolf emphasised the interest that parties have in being able to know with a reasonable degree of certainty the extent of their liability and the risks that they run (p 54).
But both these cases accept a basic dichotomy between penal and compensatory provisions.
More recent authority suggests that this dichotomy may not be exclusive and that there may be clauses which operate on breach and which are commercially justifiable although they fall into neither category.
In short, commercial interests may justify the imposition upon a breach of contract of a financial burden which cannot either be related directly to loss caused by the breach or justified by reference to the impossibility of assessing such loss.
In Lordsvale Finance Colman J was concerned with a loan agreement providing that the rate of interest would increase prospectively from the time of default in payment.
He noted, at pp 763 764 (italics added): the borrower in default is not the same credit risk as the prospective borrower with whom the loan agreement was first negotiated.
Merely for the pre existing rate of interest to continue to accrue on the outstanding amount of the debt would not reflect the fact that the borrower no longer has a clean record.
Given that money is more expensive for a less good credit risk than for a good credit risk, there would in principle seem to be no reason to deduce that a small rateable increase in interest charged prospectively upon default would have the dominant purpose of deterring default.
That is not because there is in any real sense a genuine pre estimate of loss, but because there is a good commercial reason for deducing that deterrence of breach is not the dominant contractual purpose of the term.
It is perfectly true that for upwards of a century the courts have been at pains to define penalties by means of distinguishing them for liquidated damages clauses.
The question that has always had to be addressed is therefore whether the alleged penalty clause can pass muster as a genuine pre estimate of loss.
That is because the payment of liquidated damages is the most prevalent purpose for which an additional payment on breach might be required under a contract.
However, the jurisdiction in relation to penalty clauses is concerned not primarily with the enforcement of inoffensive liquidated damages clauses but rather with protection against the effect of penalty clauses.
There would therefore seem to be no reason in principle why a contractual provision the effect of which was to increase the consideration payable under an executory contract upon the happening of a default should be struck down as a penalty if the increase could in the circumstances be explained as commercially justifiable, provided always that its dominant purpose was not to deter the other party from breach.
In a whole series of cases across the world, courts have taken their cue from Lordsvale and held that provisions in loan agreements for uplifting the interest rate for the future after a default should not be regarded as penalties, save where the uplift is evidently extravagant: see eg Hong Leuong Finance Ltd v Tan Gin Huay [1999] 2 SLR 153, Beil v Mansell (No 2) (2006) 2 Qd R 499, PSAL Ltd v Kellas Sharpe [2012] QSC 31, Elberg v Fraval [2012] VSC 342, Place Concorde East Ltd Partnership v Shelter Corp of Canada Ltd (2003) 43 BLR (3d) 54 and In re Mandarin Container [2004] 3 HKLRD 554.
The rationale of these cases is that the default bears on the credit risk (and, as Beil v Mansell identifies, may also bear on the cost of administering the loan).
The uplift is conditioned on the breach, but the breach reflects directly upon the continuing appropriateness of the originally agreed interest terms.
In substance, the uplift amounts to a variation of the original terms.
If on the other hand, it is evident from the size of the uplift that it is in its nature a punishment for or deterrent to breach, rather than an ordinary commercial re rating to reflect a change in risk (or administration cost), then it will still be disallowed as a penalty as the actual decisions in Hong Leuong, Beil v Mansell and Elberg v Fraval illustrate.
In Cine Bes the Court of Appeal was concerned, inter alia, with an agreement settling litigation and granting a new licence on terms that, if the new licence was subsequently terminated for breach by the licensee, the licensor would be entitled, inter alia, to recover the costs incurred in the litigation.
The court held that this was not penal.
It was an understandable and reasonable commercial condition upon which [the licensor] was prepared to dispose of the prior litigation and to enter into the fresh licence (para 33).
If that licence had to be terminated for breach, there was, in short, no reason why the settlement terms should not be revisited.
In the course of my judgment, I said (para 15): I have also found valuable Colman Js further observation[s] in Lordsvale at pp 763g 764a, which indicate that a dichotomy between a genuine pre estimate of damages and a penalty does not necessarily cover all the possibilities.
There are clauses which may operate on breach, but which fall into neither category, and they may be commercially perfectly justifiable.
In Murray v Leisureplay plc [2005] EWCA Civ 963, [2005] IRLR 946, a later Court of Appeal (Arden, Clarke and Buxton LJJ) agreed with the approach taken in Lordsvale and Cine Bes, with Clarke and Buxton LJJ stressing the importance of the commercial context, even in cases where there would be no difficulty about assessing damages (at respectively paras 105 and 118).
The case concerned a clause in a chief executives employment contract entitling him to payment of a years gross salary in the event of wrongful termination of his employment without a years notice.
The dicta in para 15 in Cine Bes were considered recently by the Federal Court of Australia in Paciocco v Australia and New Zealand Banking Group Ltd [2015] FCAFC 50, at para 99.
The case concerned fees charged by banks for late payment, for honour and over limit payments and for non payments.
Allsop CJ thought that any difficulties about accepting a dichotomy could be avoided by a different analysis, which he expressed at para 103 as follows: The object and purpose of the doctrine of penalties is vindicated if one considers whether the agreed sum is commensurate with the interest protected by the bargain: Andrews (HC) at para 75; Dunlop at pp 91 93; Clydebank at pp 15 17, 19 and 20; Public Works Comr v Hills at pp 375 376.
This is not to say that the inquiry is unconnected with recoverable damages, but the question of extravagance and unconscionability by reference, as Lord Dunedin said in Dunlop, to the greatest loss that could conceivably be proved to have followed from the breach, is to be understood as reflecting the obligees interest in the due performance of the obligation: Public Works Comr v Hills at pp 375 376.
One only needs to reflect on the facts of Dunlop and the justification for the payment that was found to be legitimate to appreciate these matters.
In my opinion, the development of the law indicated by the authorities discussed in paras 145 to 151 above is a sound one.
It is most easily explained on the basis that the dichotomy between the compensatory and the penal is not exclusive.
There may be interests beyond the compensatory which justify the imposition on a party in breach of an additional financial burden.
The maintenance of a system of trade, which only functions if all trading partners adhere to it (Dunlop), may itself be viewed in this light; so can terms of settlement which provide on default for payment of costs which a party was prepared to forego if the settlement was honoured (Cine Bes); likewise, also the revision of financial terms to match circumstances disclosed or brought about by a breach (Lordsvale and other cases).
What is necessary in each case is to consider, first, whether any (and if so what) legitimate business interest is served and protected by the clause, and, second, whether, assuming such an interest to exist, the provision made for the interest is nevertheless in the circumstances extravagant, exorbitant or unconscionable.
In judging what is extravagant, exorbitant or unconscionable, I consider (despite contrary expressions of view) that the extent to which the parties were negotiating at arms length on the basis of legal advice and had every opportunity to appreciate what they were agreeing must at least be a relevant factor.
The Federal Court of Australia in Paciocco (para 151 above) preferred to maintain the dichotomy between the penal and compensatory, while at the same time focusing on the interest protected by the bargain or the interest in the due performance of the obligation and on whether the sum stipulated as payable on breach is commensurate with, or extravagant or unconscionable by reference to, that interest.
Provided that interest protected or in due performance is understood widely enough to cover an interest in renegotiating the original contractual bargain in the light of the situation after or revealed by the breach, that formulation would appear to lead to the same result as reached in the cases discussed in paras 145 to 151.
Can the penalty doctrine apply to clauses withholding payments?
In the cases so far discussed, the provision in issue required payment of money.
A number of authorities have considered whether and how far the doctrine extends beyond provisions for payment of money.
First, the penalty doctrine has been applied to provisions not requiring the payment of money by, but authorising the withholding of moneys otherwise due to, the party in breach.
Although the point was apparently conceded (p 693H), several members of the House accepted this in Gilbert Ash (Northern) Ltd v Modern Engineering (Bristol) Ltd [1974] AC 689.
The clause there provided that, in the event that a sub contractor failed to comply with any of the provisions of this sub contract, the contractor might suspend or withhold payment of any moneys due.
Lord Reid said (p 698C F) that, read literally, this would entitle the contractor to withhold sums far in excess of any fair estimate of the value of his claims and was an unenforceable penalty, and Lord Morris, Viscount Dilhorne and Lord Salmon spoke to similar effect (pp 703G, 711D and 723H).
Hunter J adopted and applied their statements in Hong Kong in the building contract case of Hsin Chong Construction Co Ltd v Hong Kong and Kowloon Wharf and Godown Co Ltd [1984] HKCFI 212, paras 22 23.
In Firma C Trade SA v Newcastle Protection and Indemnity Association (The Fanti and The Padre Island) (No 2) [1989] 1 Lloyds Rep 239, the majority (OConnor and Stuart Smith LJJ; Bingham LJ dissenting) would have held that, if (contrary to their holding) the mutual associations membership rules had provided for retrospective cesser of cover on non payment of a release call, they would have involved an unenforceable penalty.
Bingham LJs reasoning does not rest unequivocally on a view that a withholding clause cannot constitute a penalty.
He invoked considerations special to membership of a mutual insurer, namely that any loss of cover was for a period in respect of which the member was failing to pay the premium, so casting the burden of indemnity on other members (p 254).
While he also relied on Daff v Midland Colliery Owners Mutual Indemnity Co Ltd (1913) 109 LT 418, the question whether a similar clause could, if retroactive, be invalid as a penalty was not apparently addressed by anyone in that case, and it can in those circumstances hardly suggest that the deliberate statements in Gilbert Ash were per incuriam.
In Public Works Comr v Hills the Privy Council applied the penalty doctrine to a clause forfeiting, on a termination for non completion of works, sums lodged by a contractor with the Cape Agent General as security for its performance and for release back to it in three stages as it progressed the works.
Since the sums were only lodged by way of security and were to be returned if the works progressed, the contractor could be seen to have a continuing interest in them, which the clause forfeited.
More recently in Workers Trust & Merchant Bank Ltd v Dojap Investments Ltd [1993] AC 573, the Privy Council treated Public Works Comr v Hills as authority that the doctrine applies to the forfeiture of a deposit exceeding the sum of 10% of the contract price customarily paid in respect of the sale of land.
It left open the unresolved question discussed in Stockloser v Johnson [1954] 1 QB 476, whether the doctrine applies, or the court has any other equitable power, to address a situation where a party is given possession of property on terms that he will pay for property by instalments, in default of which he will forfeit any interest in the property and the instalments already paid.
However, still more recently, Eder J in Cadogan Petroleum Holdings Ltd v Global Process Systems LLC [2013] 2 Lloyds Rep 26 held the doctrine inapplicable to forfeiture of prepayments made towards the acquisition of property in the form of two gas plants.
The contract provided for a series of such pre payments, not all of which GPS completed making.
It never therefore acquired the gas plants, and Cadogan relied on a contractual clause forfeiting all pre payments which GPS had made.
It appears that there may be Scots authority to like effect: see Zemhunt (Holdings) Ltd v Control Securities [1991] Scot CS CSIH 6, 1992 SC 58, 1992 SCLR 151, although that case itself only concerned a 10% deposit.
Can the penalty doctrine apply to transfers of moneys worth?
Second, the doctrine has been applied to provisions requiring the transfer, upon a breach, of money or moneys worth in the form of property belonging to the party in breach.
In Watson v Noble (1885) 13 R 347, a ship owner sold seven shares in a trawler to its master for 100, and agreed to hold them on trust for him, but only for so long as he fulfil obligations as skipper which included being sober and attentive to his duties.
The master was later dismissed for alleged drunkenness, the owner refused to transfer the shares and the master sued to recover their price.
The master succeeded on the basis that the provision for forfeiture of the shares was an unenforceable penalty.
In Jobson v Johnson [1989] 1 WLR 1026 the English Court of Appeal reached the same conclusion, where shares in Southend United Football Club were transferred with part of the price payable by deferred instalments and the contract provided for their retransfer in the event of a failure to pay any instalment for a sum equivalent only to the first instalment, however many and whatever the value of the instalments in fact paid.
Evans LJ also accepted the application of the penalty doctrine to transfers of property in Else (1982) Ltd v Parkland Holdings Ltd [1994] 1 BCLC 130, 138e f.
There is substantial Australian authority in the same sense.
In Bysouth v Shire of Blackburn and Mitcham (No 2) [1928] VLR 562, Irvine CJ held at pp 574 575 with Mann and Lowe JJ agreeing at p 579 that a provision for forfeiture by the council of its contractors property in and upon the works in the event of breach was penal.
In Forestry Commission of New South Wales v Stefanetto (1976) 133 CLR 507, Mason and Jacobs JJ took the same view in the High Court.
In Wollondilly Shire Council v Picton Power Lines Pty Ltd (1994) 33 NSWLR 551, 555G, the doctrine was applied to a provision requiring the defaulting contractor to sell back property to the council at its original sale price, with Handley JA observing that, since equity looks to substance not form, the doctrine must apply to the transfer of moneys worth as well as money.
In Ringrow Pty Ltd v BP Australia Pty Ltd (2005) 224 CLR 656, the High Court of Australia cited Jobson v Johnson for the same proposition in relation to a clause requiring a petrol station to be sold back to BP at a price excluding goodwill.
The argument failed on the facts, because of expert evidence, which the trial judge accepted, that in the context of this particular station there was no monetary value attaching to any goodwill.
Finally, the High Court in Andrews again cited Jobson v Johnson for the proposition that the doctrine applied to the transfer of property.
In Else (para 157 above), the Court of Appeal was however concerned with a contract under which the seller retained the shares agreed to be sold in Sheffield United Football Club and the terms of which permitted the seller to retain half of any instalments already paid in the event that the contract was terminated for failure to pay any instalment.
The court, distinguishing Jobson v Johnson as a case where property in the shares had passed, refused to extend the penalty doctrine to cover the situation before it.
There would have been discretion to relieve against forfeiture in equity, but this too was refused on the ground that it was not unconscionable in the circumstances for the seller to insist on the strict terms: the purchaser had under the contract in fact already enjoyed two years as club chairman and the agreement was itself a compromise to avoid argument whether the terms of the agreement which it replaced constituted a penalty.
The relationship between the penalty doctrine and relief against forfeiture
Jobson v Johnson proceeds on the basis that a case may raise for consideration both the penalty doctrine and the power of the court to relieve against forfeiture.
In my opinion, that is both logical and correct in principle under the current law.
A penalty clause imposes a sanction for breach which is extravagant to the point where the court will in no circumstances enforce it according to its terms.
The power to relieve against forfeiture relates to clauses which do not have that character, but which nonetheless operate on breach to deprive a party of an interest in a manner which would not be penal.
That it would not be penal is evident from the fact that the court will only grant relief on the basis that the breach is rectified by performance. [I]n the ordinary course, as the Privy Council said in Cukurova Finance International Ltd v Alfa Telecom Turkey Ltd [2013] UKPC 20, [2015] 2 WLR 875, para 13, relief in equity will only be granted on the basis of conditions requiring performance, albeit late, of the contract in accordance with its terms as to principal, interest and costs: see eg per Lord Parker of Waddington in Kreglinger v New Patagonia Meat and Cold Storage Co Ltd [1914] AC 25, at pp 49 50 and per Lord Wilberforce in Shiloh Spinners Ltd v Harding [1973] AC 691, at pp 722C and 723H.
The two doctrines, both originating in equity, therefore operate at different points and with different effects.
Consideration whether a clause is penal occurs necessarily as a preliminary to considering whether it should be enforced, or whether relief should be granted against forfeiture.
This same inter relationship between the penalty doctrine and relief against forfeiture was also assumed in BICC plc v Burndy Corpn [1985] Ch 232, where Dillon LJ, with whom Ackner LJ agreed, considered first whether the clause was a penalty, before moving to the issue of relief against forfeiture.
The clause was a provision in an agreement dissolving a joint relationship, whereby certain joint patent rights would continue to be held by BICC, with Burndy paying its share of the costs of their maintenance and processing by BICC, and with a clause providing that, if either party failed to fulfil its obligations in that regard, the party not in default could require an assignment of the guilty partys interests in the joint rights.
Burndy failed to meet certain costs due, BICC claimed an assignment of Burndys share in the joint rights, to which Burndys first response was that the clause was in the nature of a penalty, since the value of Burndys share would be worth many times more than the sums unpaid or any actual loss to BICC (pp 236H 237C).
The submission failed on the basis that it was commercial sense or a sensible purpose that a party failing to pay its share of the costs of processing or keeping alive a patent may be required to give up its interest (pp 246G and 247C), and that the clause was no more a penalty clause than is the ordinary power of re entry in a lease or the ordinary provision in a patent licence to enable the patentee to determine the licence, however valuable, in the event of non payment of royalties (p 247C D).
The reasoning has some of the flavour of Bingham LJs observations in The Fanti about the mutuality existing between members of a mutual insurance association.
But how far the analogies on which Dillon LJ relied are reliable in a context of forced transfer of property is a question for another case.
The position regarding re entry under a lease has long been regulated by statute, and a contractual licence raises different considerations to a requirement to transfer a proprietary share in joint rights.
Be that as it may be, the case does not suggest that a forced transfer of property rights can never attract the operation of the penalty doctrine.
It turned on the existence of joint rights, in the maintenance and processing of which both parties agreed to play their part.
Should the penalty doctrine be abolished or restricted?
This being the current state of authority, I come to Cavendishs primary and secondary cases, that the penalty doctrine should be abolished, or, that failing, that it should be restricted to non commercial cases or to cases involving payment of money.
I am unable to accept either proposition.
As to abolition, there would have to be shown the strongest reasons for so radical a reversal of jurisprudence which goes back over a century in its current definition and much longer in its antecedents.
It has long been recognised that the situations in which the doctrine may and may not apply can involve making distinctions which can appear narrow and which follow lines which can be difficult to define.
But that has never hitherto been regarded as a reason for abandoning the whole doctrine, which in its core exists to restrain exorbitant or unconscionable consequences following from breach.
In 1966 Diplock LJ, after referring in Robophone to the public policy behind the rule in the passage which I have already quoted (para 131 above), said that in these days when so often one party cannot satisfy his contractual hunger la carte but only at the table dhte of a standard printed contract, it has certainly not outlived its usefulness.
In 1975 the Law Commission in its Working Paper No 61, Penalty Clauses and Forfeiture of Monies Paid, far from suggesting abolition proposed that the doctrine should be expanded, along lines now accepted in Australia by Andrews, to cover any situation where the object of the disputed contractual obligation is to secure the act or result which is the true result of the contract (pp 18 19).
In 1999, the Scottish Law Commission in its Report on Penalty Clauses (Scot Law Com No 171) recommended that there should continue to be judicial control over contractual penalties, whatever form they take whether payment of money or forfeiture of money or transfer or forfeiture of property.
It suggested as the criterion for such control whether the penalty was manifestly excessive in all the circumstances when the contract was entered into.
It further recommended a test of substance for determining whether a clause was a penalty and an extension along the same lines as the English Law Commission recommended in 1975.
Cavendishs submission that this court should abolish or rewrite radically the penalty doctrine is made without the benefit of the sort of research into the consequences and merits of such a step, which the Law Commission or Parliament would undertake before venturing upon it.
There is therefore an unpromising background to Cavendishs submission that the doctrine should be either abolished or restricted.
Further, the Scottish Law Commission pointed out (para 1.8) that there has been a general convergence of approaches in European civil codes and soft law proposals towards a recognition of the utility and desirability of judicial control of disproportionately, excessively, manifestly or grossly high or unreasonable penalties.
The Council of Europes Resolution 78(3) of 20 January 1978 on Penal Clauses in Civil Law (article 7), the Principles of European Contract Law (article 9:509), the Uncitral Texts on Liquidated Damages and Penalty Clauses (article 8) and the Unidroit Principles of International Commercial Contracts (article 7.4.13) all contain provisions for such control along such lines.
I note in parenthesis that many national European legal systems already appear to contain similar provisions, even if only introduced legislatively as appears to be the case in France by laws of 9 July 1975 and 11 October 1985 amending article 1152 of the Code civil (and reversing the effect of the Cour de cassation decision in Paris frres c Dame Juillard Civ 14 February 1866).
Germany in contrast takes a broad view of the interests which may be protected by a clause imposing a financial liability on breach (Vertragsstrafe), including among them not merely compensation, but also deterrence.
But in non business cases, the court has the power to reduce any penalty to an appropriate level under BGB (the Civil Code), section 343.
However, HGB (the Commercial Code) para 248 exempts contracts between businessmen from the scope of BGB section 343, although such contracts appear still to be susceptible to control if they are standard form contracts (not the case with that between Cavendish and Mr El Makdessi) or in terms so abusive as to infringe other principles applicable generally, although only in extreme cases, such as those governing Guten Sitten, Wucher or Treu und Glauben (BGB sections 138 and 242).
At the courts request, Cavendish also included as an appendix to its case a valuable examination of the law of, and relevant academic commentary from, other common law countries: Australia, Canada, New York and other United States states and sources, Scotland, New Zealand, Singapore and Hong Kong.
It is sufficient to say that all these countries retain a doctrine broadly on the same lines as the current English doctrine.
In both Australia and Canada, emphasis has been placed on the root principles of extravagance, exorbitance or unconscionability, to be found in the Clydebank Engineering and Dunlop cases: AMEV UDC Finance Ltd v Austin [1986] HCA 63, 162 CLR 170 and Elsley v J G Collins Insurance Agencies Ltd [1978] 2 SCR 916 and Waddams, The Law of Damages (Nov 2014), para 8 340.
In Australia, the doctrine has been extended, as I have noted, to cover situations falling short of breach: Andrews.
In both Singapore and Hong Kong, the approach in Philips Hong Kong has been followed.
In Australia, it is established that the penalty doctrine applies to clauses calling for the transfer of property (para 158 above) as well as to the withholding of sums due, and there is also Hong Kong authority for the latter (para 154 above).
Waddams, The Law of Contracts, 6th ed (2010), para 461 cites Jobson v Johnson for the proposition that it applies to clauses requiring transfer of property at an undervalue in Canada, and there is no suggestion of disagreement on either of these points in any other common law country.
It would be odd, to say the least, if the United Kingdom separated itself from so general a consensus.
It is true that, in a European Union context measures now exist which carry some of the burden which might previously have been borne by the penalty doctrine: the Unfair Terms in Consumer Contracts Regulations 1999, giving effect to Directive 93/13/EEC, and the Consumer Protection from Unfair Trading Regulations 2008, giving effect to Directive 2005/29/EC.
These are confined to consumer situations, and in the case of the former at present to contract terms which are not individually negotiated.
That limitation has disappeared, with the coming into force of the Consumer Rights Act 2015 on 1 October 2015 to replace the Unfair Terms in Consumer Contracts Regulations 1999, the Unfair Contract Terms Act 1977 (in relation to consumer contracts), most of the Sale of Goods Act 1979, and the Supply of Goods and Services Act 1982 (in relation to consumer contracts).
It would be unsafe to assume that any of these measures makes or will make the penalty doctrine redundant.
The fact that Parliament has not sought to abolish or amend the doctrine, despite their existence, is just as capable of being invoked in its favour.
In any event, the doctrine protects businesses, including small businesses, which may well have a need for it.
I would reject Miss Smiths submission that the doctrine should be limited so as not to apply to commercial cases for similar reasons.
There is no basis in authority or principle for such a limitation.
It would strike at an existing protection in an area where the doctrine has been frequently invoked, including in the cases on exorbitant uplifts of loan interest upon breach of loan agreements.
The concept of a commercial case is also undefined and obscure, in the absence of any applicable statutory definition.
Miss Smiths further submission that the doctrine should be limited by confining unconscionability to circumstances of procedural misconduct, involving duress, undue influence, misrepresentation, or something similar would appear effectively to deprive the doctrine of any role at all, and again has no basis in authority or principle.
I am equally unable to accept that the doctrine should be confined to cases of payment of money.
It would be absurd to draw a rigid distinction between a requirement to transfer money and property.
It would also be absurd to draw such a distinction between them and the withholding of moneys due.
Such uncertainties as may exist regarding the doctrines applicability to deposits or to clauses forfeiting pre payments must await decision in due course.
Application of the penalty doctrine Cavendish
The relevant trigger to the operation of both clauses 5.1 and 5.6 is the definition of Defaulting Shareholder, to include a Seller who is in breach of clause 11.2 hereof.
Clause 11.2 contains various restrictive covenants.
It is common ground (SFI para 20: para 121 above) that the breach of the covenant against employing or soliciting senior employees could be less than a breach of the covenants against competitive activity, and that losses from breaches of the covenant against solicitation could vary, according to the nature, extent, duration and success of the solicitation.
Mr El Makdessi would say markedly less and vary widely.
Two points may be made here.
First, the covenants must be seen as a package designed to protect against activities, all of them aimed at competitive activity and all of them likely to be conducted in a manner difficult to detect and to be, if detected, difficult to evaluate with regard to their extent or impact.
In this situation, Lord Atkinsons words in Dunlop appear to me to have resonance here: The object of the appellants in making this agreement, if the substance and reality of the thing and the real nature of the transaction be looked at, would appear to be a single one, namely, to prevent the disorganization of their trading system and the consequent injury to their trade in many directions.
It is, I think, quite misleading to concentrate ones attention upon the particular act or acts by which, in such cases as this, the rivalry in trade is set up, The consequential injuries to the traders business arising from each breach by the employee of his covenant cannot be measured by the direct loss in a monetary point of view on the particular transaction constituting the breach.
This was said in a context where Dunlop was protecting the whole of its business, involving many actual and potential transactions with many different purchasers, by imposing trading restrictions on every purchaser.
In the present case, Cavendish is protecting the whole of the business, of which it was to be majority shareholder, involving many actual and potential transactions with many different customers, by imposing a competitive restriction on the sellers from whom it was buying the majority control.
In each case, the focus should be on the overall picture, not on the individual breaches.
Second, so far as it is said, obviously correctly, that breach of clause 11.2(d) may have consequences different from those of clauses 11.2(a) to (c), the speeches in Dunlop may be seen as open to different interpretations.
On the one hand, the situation may be argued to fall within Lord Dunedins fourth proposition, para (c).
On the other hand, the whole of clause 11.2 may be regarded as doing (in Lord Atkinsons further words at p 93) little, if anything, more than impose a single obligation here refraining from any potentially competitive activity.
Lord Parker exposed the problems in this area to particularly detailed examination at p 98, when he described the position as more complicated when the stipulation, though still a single stipulation, is capable of being broken more than once, and in more ways than one, such as a stipulation not to solicit the customers of a firm.
A solicitation which is unsuccessful, can give rise to only nominal damages, and even if it be successful the actual damage may vary greatly according to the value of the custom which is thereby directly or indirectly lost to the firm.
Still, whatever damage there is must be the same in kind for every possible breach, and the fact that it may vary in amount for each particular breach has never been held to raise any presumption or inference that the sum agreed to be paid is a penalty, at any rate in cases where the parties have referred to it as agreed or liquidated damages.
The question becomes still more complicated where a single sum is agreed to be paid on the breach of a number of stipulations of varying importance.
It is said that in such a case there arises an inference or presumption against the sum in question being in the nature of agreed damages, even though the parties have referred to it as such.
My Lords, in this respect I think a distinction should be drawn between cases in which the damage likely to accrue from each stipulation is the same in kind and cases in which the damage likely to accrue varies in kind with each stipulation.
Cases of the former class seem to me to be completely analogous to those of a single stipulation, which can be broken in various ways and with varying damage; but probably it would be difficult for the court to hold that the parties had pre estimated the damage if they have referred to the sum payable as a penalty.
In cases, however, of the latter class, I am inclined to think that the prima facie presumption or inference is against the parties having pre estimated the damage, even though the sum payable is referred to as agreed or liquidated damages.
The damage likely to accrue from breaches of the various stipulations being in kind different, a separate pre estimate in the case of each stipulation would be necessary, and it would not be very likely that the same result would be arrived at in respect of each kind of damage.
Applying this passage, on the assumption that clause 11.2 should be regarded as containing, in Lord Parkers words, a number of stipulations of varying importance I would consider that the damage likely to accrue from each such stipulation was the same in kind being damage from competitive activity.
On that basis, Lord Parkers approach would lead to the conclusion that there was no penal presumption.
It is submitted, however, by Mr Bloch that clause 5.1 is penal for a different reason, because of the size and haphazard nature of its potential impact in forfeiting entitlement to receive the Interim and/or Final Payments, so far as not yet paid at the time of its breach.
Taking the size of impact, it is common ground that a substantial part of the purchase price comprised goodwill (SFI, para 16).
This is clear from the terms of the agreement alone (especially clauses 11.1 and 11.7), but is further confirmed by the evidence of Mr Scott for Cavendish and by the figures alone.
The net assets of the entire Group were, by the terms of the sale and purchase agreement, warranted by Mr El Makdessi to be US$69.7m as at 31 December 2007.
That indicates that in broad terms around US$33m of the US$65.5m paid to Mr El Makdessi and Mr Ghoussoub by way of Completion and Second Payments was seen as attributable to the Groups net asset value.
Their total entitlement was capped under clause 3.3 at US$147.5m.
Deducting the net asset value element of the Completion and Second Payments, the anticipated goodwill value must have been up to US$114.5m, of which US$32.5m (about 26%) was covered by the Completion and Second Payments, meaning that up to US$82m was anticipated to come by way of the Interim and Final Payments, of which Mr El Makdessis 53.88% share would be some US$44m.
On Cavendishs case, Mr El Makdessis breach of clause 11.2 deprives him of any claim to this or any other goodwill element of the value of his shares over and above that already covered by the Completion and Second Payments.
Mr Bloch submits that this arrangement self evidently lacks any rational connection between the severity of the breach or of its consequences and the impact of clause 5.1.
A partial response to this submission is that there may be a connection as a result of the timing of the Interim and/or Final Payments.
Clause 5.1 will only result in the loss of either Payment, if the breach occurs before the payment is due.
The Due Date for each such Payment is 30 days after determination of the relevant OPAT for all financial periods to which the Payment relates.
That would normally mean at some point in the first half of 2010 in the case of the Interim Period, and in the first half of 2012 in the case of the Final Payment.
The later the breach in time, the less its impact on the Group and the less likely that it would occur in time for clause 5.1 to bite.
That, however, amounts to a very crude link, at best.
And it means that clause 5.1 is only capable of operating as any form of protection for Cavendish against breaches occurring for something over four years from the date of agreement, while clause 11.2 is capable of continuing and being broken for a much longer period of years (24 months after the Relevant Date, itself potentially postponed until whenever Mr El Makdessi exercises the put option provided by clause 15).
Further, Mr Bloch can point to a respect in which the mechanism of clause 5.1 is likely to work in a quite opposite direction to any that would be expected: that is, in inverse ratio to any loss caused to the Group by the breach.
The earlier and greater the breach, the more likely that Mr El Makdessi would be profiting by it at the expense of the Group, in a way affecting the Groups OPAT and so reducing the Interim and Final Payments and the impact of their loss under clause 5.1.
In contrast, a small breach with small consequences for the Group at an early stage would leave the Groups OPAT unaffected, and would mean that clause 5.1 had the maximum possible impact on Mr El Makdessi.
Cavendishs response to such points is in essence that they focus too narrowly on the consequences of breach.
In line with Lord Atkinsons approach in Dunlop (paras 142 and 172 above), the focus should be not on any particular possible breach or its timing or consequences, but on the general interest being protected, and the question whether the protection which the parties agreed can be condemned as unconscionable or manifestly excessive.
In this connection, Miss Smith submits that what was in substance agreed was a price formula, which reverted, understandably, in the event of breach of clause 11.2 to a basis of valuation omitting any further goodwill element.
In this connection, Miss Smith drew attention to the provision in clause 3.1 stating that the agreed payments were all in consideration of the sale of the Sale Shares and the obligations of the Sellers herein.
However, I do not regard that as assisting the argument.
The same could be said of any obligation triggering a penalty clause, and one might add that neither the Interim nor the Final Payment is expressly tied to clause 11.2, although each is expressly made subject to the provisions of clause 6, dealing with Calculation of OPAT and payment of the consideration.
Cavendishs general response nonetheless appears to me to have substantial force.
The essence of what the parties were agreeing was that goodwill was crucial, and that there could be no further question of paying for any goodwill element of Mr El Makdessis shares if he committed a breach of his non competitive obligations under clause 11.2.
It is true that, in the circumstances existing for at least the first 18 months after the agreement, any such breach would be actionable in damages by Team, with the result that Cavendishs loss would in theory be made good and it could itself have had no contractual claim for damages because of the rule precluding recovery of reflective loss.
But after 18 months this would not necessarily be the case, and even during the 18 month period, it is understandable that Cavendish should no longer be prepared to pay any further goodwill element, once competitive activity by Mr El Makdessi had cast a doubt over the current and future value of the Groups goodwill.
As with a bank loan, so here, on a much larger scale, it can be said that any such breach could and would change in a fundamental respect the risk element involved in Cavendishs purchase of a large block of shares in the Group.
On this basis, the question still remains whether clause 5.1 can and should be condemned as penal, on the grounds that it is extravagant, exorbitant or unconscionable in its nature and impact.
Not without initial hesitation, and despite the powerful points made by Mr Bloch, I have come to the conclusion that, in this particular agreement made deliberately and advisedly between informed and sophisticated parties, the court should answer this question in the negative, and hold that clause 5.1 is enforceable.
Its effect was to revise the basic price calculation for the shares which had been agreed to be sold, and, so viewed in the context of a carefully negotiated agreement between informed and legally advised parties at arms length, I do not consider it can or should be regarded as extravagant, exorbitant or unconscionable.
I turn to clause 5.6.
This raises somewhat different considerations.
It is a provision requiring Mr El Makdessi as the party in breach to transfer property in his remaining shares against his will at a price based on net asset value alone.
It is explained in terms of a desire to sever all interest from someone who has breached his contract.
But it does so, first by imposing on the contract breaker a forced deprivation of property which was not otherwise agreed to be sold under the contract broken, and second by doing this at a price which (unlike clause 5.1 which leaves the contract breaker with a substantial element of goodwill value, under the Completion and Second Payments) deprives him of the whole of any goodwill value attaching to such property.
I accept that a forced transfer for no consideration or for a consideration which does not reflect the value of the asset transferred may constitute a penalty within the scope of the penalty doctrine.
But clause 5.6 must be viewed in nature and impact as a composite whole as well as in context.
It operates as an element in a mechanism provided by clauses 5 and 11.2 for bringing to an end the continuing relationship between WPP and a defaulting shareholder.
Although triggered by default, it amounts, like clause 5.1, to a reshaping of the parties primary relationship.
Had their relationship as common shareholders in the Group continued, Mr El Makdessi would have continued to be bound by the restrictions contained in clause 11.2, until 2016 (para 122 above), and would have had the benefit of the put option contained in clause 15.
The Relevant Option Price which Mr El Makdessi could receive upon his exercise of the Put Option provided by clause 15 would have been based again on eight times average OPAT over four years (starting with the year preceding the exercise of the Option) capped at US$75m.
As with the price of the shares which Mr El Makdessi agreed to sell, so with the Option Price, the parties clearly envisaged that a price calculated on such a basis would exceed by a multiple a net asset based price.
Clause 5.6 would not have made any real sense otherwise.
However, once Mr El Makdessi breached clause 11.2, the position changed radically.
It is accepted that, once such a breach occurred, it was in principle understandable that he should be required to sever any shareholding relationship completely by selling his remaining shares.
But that would at the same time release him from his restrictive covenants, in view of the definition of the Relevant Date, set out in para 122 above.
The Group without the protective benefit of the restrictive covenants would be vulnerable (potentially for many years during which it could legitimately have expected to be protected by the covenants) in a way which would clearly justify revisiting the basis on which any price for the purchase of Mr El Makdessis remaining shareholding was set.
What the fortunes of the Group would be, following premature severance of relations, in circumstances where it was now open to Mr El Makdessi to compete as much as he wished, would be difficult, if not impossible, to predict.
Again, Mr Bloch submits that the clause is likely to operate in a highly random manner.
A small breach committed at an early stage but of little consequence for the Groups OPAT will deprive the Defaulting Shareholder of a large goodwill value; a large breach committed at an early stage to the Defaulting Shareholders benefit will depress the goodwill value of the Option Shares, and cost the Defaulting Shareholder less.
But the ultimate question is in my view whether this carefully negotiated clause, attributing a nil value to goodwill on a forced severance of shareholding relationships triggered by a breach of basic restrictive covenants, can be regarded as exorbitant or unconscionable, having regard to the completely new scenario created by any breach of the restrictive covenants.
Once it is accepted, I think inevitably, that complete severance of relationships was a natural provision to include as a consequence of any such breach, I do not consider that an agreement that this should take place on a basis ignoring any goodwill which might subsist can or should be regarded as being either exorbitant or unconscionable.
That makes it unnecessary to consider Mr Blochs further submissions that, if clause 5.6 was a penalty but it was in principle understandable that the parties should have agreed on severance of their shareholding relationship, Cavendish could have invited, but has not invited, any offer of the type which Dillon and Nicholls LJJ in Jobson v Johnson considered that a contract breaker such as Mr El Makdessi could be required to make.
In the present case, that would (presumably) be an offer to sell the remaining shares at a fair or market price.
That would go further than anything that Dillon and Nicholls LJJ specifically endorsed in that case.
It is unnecessary to say more about this aspect of the decision in Jobson v Johnson, on which I would in an appropriate case have wished to hear further and fuller submissions.
It follows that I would allow the appeal in respect of both clauses 5.1 and 5.6.
Application of the penalty doctrine ParkingEye Limited v Beavis
There is common ground between all before the court that the relationship between ParkingEye and Mr Beavis was a contractual relationship, whereby Mr Beavis undertook not to park for more two hours and, upon any breach of that obligation, incurred a liability of 85, reducible, in this case, to 50 if he had paid within 14 days of ParkingEyes demand.
The Court of Appeal raised a question about this analysis, which the Supreme Court also took up.
But I am satisfied that it is correct in law.
The terms of the signs which Mr Beavis must be taken to have accepted by conduct in entering and parking in the car park are to that effect.
Mr Beavis thereby expressly agreed to stay for two hours maximum, and to comply with the other parking restrictions, such as parking within a marked bay and not using a blue badge holders bay, and to pay the stipulated sum if he failed so to comply.
It may be suggested that Mr Beavis thereby promised nothing which can in law constitute valuable consideration.
He was being given a licence, on conditions, and he would have been a trespasser if he overstayed or failed to comply with its other conditions.
But ParkingEye was not in possession of the car park, or capable of bringing proceedings in trespass.
It had a mere right to control parking at the site the right to permit or refuse others to park there on such conditions as it might stipulate.
By promising ParkingEye not to overstay and to comply with its other conditions, Mr Beavis gave ParkingEye a right, which it would not otherwise have had, to enforce such conditions against him in contract.
Even if no Parking Charge had been stipulated, enforcement would still have been possible in law, even if a claim for damages or for an injunction might not in practice have been likely.
With the stipulated Parking Charge, the nature of the intended contract is even clearer, although the question arises whether the Parking Charge is an unenforceable penalty.
The quid pro quo provided by ParkingEye in return for Mr Beaviss promise was the grant of permission to park for up to two hours in its discretion free of charge, on conditions.
Each party thus gave the other valuable consideration.
ParkingEye argued that Parliament has, by the Protection of Freedoms Act 2012, effectively recognised the legitimacy of a scheme such as theirs, in a way precluding or at least militating against any application of the penalty doctrine.
The judge and Court of Appeal (para 28) also found some support in this Act for the view that charges of this kind are not to be regarded as unenforceable.
In my view, that is a misreading of the Act.
The Act merely makes provision for the recovery of unpaid parking charges from the keeper or hirer of a vehicle (section 56), in circumstances where (a) the driver of a vehicle is required by virtue of a relevant obligation to pay parking charges in respect of the parking of the vehicle on relevant land; and (b) those charges have not been paid in full (Schedule 4, paragraph 1).
The reference to a relevant obligation does not exclude the penalty doctrine.
On the contrary, if a charge stipulated contractually is a penalty, there will be no obligation.
There is nothing in the detailed definitions to affect this straightforward conclusion.
Schedule 4, paragraph 2(1) provides that: parking charge (a) in the case of a relevant obligation arising under the terms of a relevant contract, means a sum in the nature of a fee or charge, and (b) in the case of a relevant obligation arising as a result of a trespass or other tort, means a sum in the nature of damages.
Relevant contract is defined in wide terms including a contract which arises only on parking and is made either with the owner or occupier of the land or with someone like ParkingEye authorised by the owner or occupier to enter into a contract requiring the payment of parking charges: Schedule 4, paragraph 2(1).
Relevant obligation means (a) an obligation arising under the terms of a relevant contract or, (b) where there is no relevant contract, as a result of a trespass or other tort committed by the parking: Schedule 4, paragraph 2(1).
The reference to a sum in the nature of damages is to a sum of which adequate notice was given to drivers of vehicles (when the vehicle was parked ): Schedule 4, paragraph 2(2).
The position in tort may one day merit closer examination, since it is not clear to me on what basis, other than contractual, the driver of a vehicle can incur any obligation to pay a sum in the nature of damages as a result of a trespass or other tort, however much notice was given to him or her when the vehicle was parked.
If there is such a basis, however, I have little doubt that the law would also extend the penalty doctrine to cover it.
The penalty doctrine is therefore potentially applicable to the present scheme.
It is necessary to identify the interests which it serves.
They are in my view clear.
Mr Beavis obtained an (admittedly revocable) permission to park and, importantly, agreement that if and so far as he took advantage of this it would be free of charge.
ParkingEye was able to fulfil its role of providing a traffic management maximisation scheme for BAPF.
The scheme met, so far as appears, BAPFs aim of providing its retail park lessees with spaces in which their customers could park.
All three conditions imposed were directed to this aim, and all were on their face reasonable. (The only comment that one might make, is that, although the signs made clear that it was a Customer only car park, the Parking Charge of 85 did not apply to this limitation, which might be important in central Chelmsford.
The explanation is, no doubt, that, unlike a barrier operated scheme where exit can be made conditional upon showing or using a ticket or bill obtained from a local shop, a camera operated scheme allows no such control.) The scheme gave BAPF through ParkingEyes weekly payments some income to cover the costs of providing and maintaining the car park.
Judging by ParkingEyes accounts, and unless the Chelmsford car park was out of the ordinary, the scheme also covered ParkingEyes costs of operation and gave their shareholders a healthy annual profit.
Mr de Waal for Mr Beavis and Mr Butcher for the Consumers Association submit that this is to look at matters too broadly and that the focus should be on the individual contract.
They also submit that it is imbalanced and unfair in its operation as regards Mr Beavis or any other individual user of the car park.
Mr de Waal goes so far as to suggest that the scheme contains a concealed pitfall, since it actually operates not by reference to length of time spent parking, but by length of time spent between entry into and exit from the car park.
That to my mind is an a contextual understanding of the signs.
Whether or not ParkingEyes cameras at the entry and exit are clearly visible, I do not believe that customers think that individual car parking spaces are monitored or a period spent driving around such a car park looking for a space is likely to fall outside the 2 hour max stay or period of Parking limited to 2 hours specified in the signs.
More significantly, Mr de Waal and Mr Butcher observe that the scheme only works by taking advantage of human fallibility or unforeseen circumstances.
Deliberate overstayers can leave their cars for days and only pay 85 (or the reduced sum if they pay promptly on demand).
That is evidently not a problem or the scheme would provide for some form of gradated payment.
Other shoppers believe that they will complete their shopping expedition within two hours and intend to do so.
The scheme therefore relies on human (over)optimism, that the relevant shopping expedition will be over within two hours, or that the shopper will not find him or herself detained in a queue at the last minute in the last shop.
Those who overstay do not incur the 85 or reduced liability in any real sense by agreement, but by misfortune.
Mr de Waal and Mr Butcher point out that the sum of 85 or 50 could well represent a large part of a car drivers or owners weekly income, eg in the case of a pensioner, and that, even adjacently to Chelmsford Station it is likely well to exceed any sum that would be payable for parking for say three hours in a car park charging according to time stayed.
They also submit that ParkingEyes level of charging compares unfavourably with that authorised under the Civil Enforcement of Parking Contraventions (England) General Regulations 2007 (SI 2007/3483) and the Civil Enforcement of Parking Contraventions (Guidelines on Levels of Charges) (England) Order (SI 2007/3487).
These authorise a penalty charge of 50, reducible, if paid within 21 days, in the case of a contravention detected by an approved device (such as CCTV) or 14 days in other cases, to 25 for parking in contravention of one of the statutory or regulatory provisions listed in Schedule 7, paragraph 4 of the Traffic Management Act 2004.
But a scheme relating to the enforcement of parking and parking charges by public authorities in public places is in no way analogous to that in issue on this appeal.
Further, merely because statute sets a lower level does not mean that a higher level would not have been reasonable.
In judging whether ParkingEyes parking charges fall foul of the penalty doctrine, the scheme it operates has to be seen as a whole, bearing in mind all the interests obviously involved.
This follows from what I have said in earlier parts of this judgment in relation to the penalty doctrine generally and in relation to its application to clause 5.1 of the agreement in the Cavendish appeal in particular.
A useful starting point is that BAPF might have decided to operate such a scheme itself.
In that case, its interest in providing for its retail lessees requirements for parking for their customers would be both clear and clearly relevant.
It does not cease to be relevant, because BAPF chose to contract out the operation of the scheme to ParkingEye.
The signs disclose that ParkingEye has been engaged as car park manager to provide a traffic space maximisation scheme.
The provision of free parking for up to two hours is an obvious benefit and attraction for customers and so also for retail lessees and for BAPF, which has a clear interest in the retail parks success.
The 85 charge for overstaying is certainly set at a level which no ordinary customer (as opposed to someone deliberately overstaying for days) would wish to incur.
It has to have, and is intended to have, a deterrent element, as Judge Moloney QC recognised in his careful judgment (para 7.14).
Otherwise, a significant number of customers could all too easily decide to overstay, limiting the shopping possibilities of other customers.
Turnover of customers is obviously important for a retail park.
A scheme which imposed a much smaller charge for short overstaying or operated with fine gradations according to the period of overstay would be likely to be unenforceable and ineffective.
It would also not be worth taking customers to court for a few pounds.
But the scheme is transparent, and the risk which the customer accepts is clear.
The fact that, human nature being what it is, some customers under estimate or over look the time required or taken for shopping, a break or whatever else they may do, does not make the scheme excessive or unconscionable.
The charge has to be and is set at a level which enables the managers to recover the costs of operating the scheme.
It is here also set at a level enabling ParkingEye to make a profit.
Unless BAPF was itself prepared to pay ParkingEye, which would have meant, in effect, that it was subsidising customers to park on its own site, this was inevitable.
If BAPF had attempted itself to operate such a scheme, one may speculate that the charge might even have had to be set at a higher level to cover its costs without profit, since ParkingEye is evidently a specialist in the area.
In these circumstances, the fact that no individual episode of overstaying, or of mis parking, could be said to involve ParkingEye or BAPF in any ascertainable damage is irrelevant.
What matters is that a charge of the order of 85 (reducible on prompt payment) is an understandable ingredient of a scheme serving legitimate interests.
Customers using the car park agree to the scheme by doing so.
The position was well summed up by Judge Moloney QC (para 7.16), when he said that: although there is a sense in which this contractual parking charge has the characteristics of a deterrent penalty, it is neither improper in its purpose nor manifestly excessive in its amount.
It is commercially justifiable, not only from the viewpoints of the landowner and ParkingEye, but also from that of the great majority of motorists who enjoy the benefit of free parking at the site, effectively paid for by the minority of defaulters, who have been given clear notice of the consequences of overstaying.
ParkingEye Limited v Beavis Unfair Terms in Consumer Contracts Regulations
The 1999 Regulations address the problem of unfair terms in contracts concluded between a seller or supplier and a consumer.
They implement Directive 93/13/EEC.
By virtue of regulation 3(1) (Interpretation), ParkingEye is a supplier and Mr Beavis a consumer.
Regulation 8(1) provides that An unfair term in a contract concluded with a consumer by a seller or supplier shall not be binding on the consumer.
Regulation 5(1) specifies what is to be understood by an unfair term.
It provides that: A contractual term which has not been individually negotiated shall be regarded as unfair if, contrary to the requirement of good faith, it causes a significant imbalance in the parties rights and obligations arising under the contract, to the detriment of the consumer.
This repeats, exactly, the terms of article 3(1) of the Directive.
The terms of the parking contract made between ParkingEye and Mr Beavis were not of course individually negotiated.
Regulation 6 provides: (l) Without prejudice to regulation 12, the unfairness of a contractual term shall be assessed, taking into account the nature of the goods or services for which the contract was concluded and by referring, at the time of conclusion of the contract, to all the circumstances attending the conclusion of the contract and to all the other terms of the contract or of another contract on which it is dependent. (2) In so far as it is in plain intelligible language, the assessment of fairness of a term shall not relate (a) to the definition of the main subject matter of the contract, or (b) to the adequacy of the price or remuneration, as against the goods or services supplied in exchange.
This, although subsection (2) is differently worded, gives effect to article 4 of the Directive.
It is not suggested in the present case that the term requiring payment of 85 (reducible) in the event of non compliance with ParkingEyes regulations falls within either limb of regulation 6(2).
Directive 93/13/EEC indicates in its 16th preamble that: the assessment, according to the general criteria chosen, of the unfair character of terms must be supplemented by a means of making an overall evaluation of the different interests involved; whereas this constitutes the requirement of good faith; whereas, in making an assessment of good faith, particular regard shall be had to the strength of the bargaining positions of the parties, whether the consumer had an inducement to agree to the term and whether the goods or services were sold or supplied to the special order of the consumer; whereas the requirement of good faith may be satisfied by the seller or supplier where he deals fairly and equitably with the other party whose legitimate interests he has to take into account.
The Court of Justice has in Mohamed Aziz v Caixa dEstalvis de Catalunya, Tarragona i Manresa (Catalunyacaixa) (Case C 415/11) given guidance as to article 3(1) of the Directive, holding that: Article 3(1) of Directive 93/13 must be interpreted as meaning that: the concept of significant imbalance to the detriment of the consumer must be assessed in the light of an analysis of the rules of national law applicable in the absence of any agreement between the parties, in order to determine whether, and if so to what extent, the contract places the consumer in a less favourable legal situation than that provided for by the national law in force.
To that end, an assessment of the legal situation of that consumer having regard to the means at his disposal, under national law, to prevent continued use of unfair terms, should also be carried out; in order to assess whether the imbalance arises contrary to the requirement of good faith, it must be determined whether the seller or supplier, dealing fairly and equitably with the consumer, could reasonably assume that the consumer would have agreed to the term concerned in individual contract negotiations.
Domestically, the position was considered by the House of Lords in Director General of Fair Trading v First National Bank plc [2002] 1 AC 481 where Lord Bingham said (para 17) that: The requirement of significant imbalance is met if a term is so weighted in favour of the supplier as to tilt the parties rights and obligations under the contract significantly in his favour.
This may be by the granting to the supplier of a beneficial option or discretion or power, or by the imposing on the consumer of a disadvantageous burden or risk or duty.
The illustrative terms set out in Schedule 3 to the Regulations provide very good examples of terms which may be regarded as unfair; whether a given term is or is not to be so regarded depends on whether it causes a significant imbalance in the parties rights and obligations under the contract.
This involves looking at the contract as a whole.
But the imbalance must be to the detriment of the consumer; The requirement of good faith in this context is one of fair and open dealing.
Openness requires that the terms should be expressed fully, clearly and legibly, containing no concealed pitfalls or traps.
Appropriate prominence should be given to terms which might operate disadvantageously to the customer.
Fair dealing requires that a supplier should not, whether deliberately or unconsciously, take advantage of the consumers necessity, indigence, lack of experience, unfamiliarity with the subject matter of the contract, weak bargaining position or any other factor listed in or analogous to those listed in Schedule 2 to the Regulations.
Good faith in this context is not an artificial or technical concept; nor, since Lord Mansfield was its champion, is it a concept wholly unfamiliar to British lawyers.
It looks to good standards of commercial morality and practice.
Regulation 4(1) lays down a composite test, covering both the making and the substance of the contract, and must be applied bearing clearly in mind the objective which the Regulations are designed to promote.
In the same case, Lord Millett said of regulation 5(1) (para 54): There can be no one single test of this.
It is obviously useful to assess the impact of an impugned term on the parties rights and obligations by comparing the effect of the contract with the term and the effect it would have without it.
But the inquiry cannot stop there.
It may also be necessary to consider the effect of the inclusion of the term on the substance or core of the transaction; whether if it were drawn to his attention the consumer would be likely to be surprised by it; whether the term is a standard term, not merely in similar non negotiable consumer contracts, but in commercial contracts freely negotiated between parties acting on level terms and at arms length; and whether, in such cases, the party adversely affected by the inclusion of the term or his lawyer might reasonably be expected to object to its inclusion and press for its deletion.
The list is not necessarily exhaustive; other approaches may sometimes be more appropriate.
Many of the submissions under the 1999 Regulations overlap as a matter of fact with submissions already considered in the context of the penalty doctrine.
The legal test is of course different.
It is however relevant and necessary in the present context as in relation to the penalty doctrine to consider the different interests involved (16th recital to the Directive), which brings in all the factors discussed in paras 193 199 above.
Again, reliance is placed on the fact that the charge of 85 (reducible) is incurred by overstaying for the shortest of periods, and does not vary according to the length of overstay.
But that, for reasons already indicated, is an integral element of the scheme.
Reliance is also placed on the Court of Justices emphasis in Aziz on the need to consider, first, what the position would have been under national law apart from the challenged term and, second, on whether the supplier could reasonably assume that the consumer would have agreed such a term in individual contract negotiations.
Bearing in mind the need under the Directive and Regulations to consider all the circumstances, the Court of Justice cannot be taken to have been identifying considerations that would by themselves be conclusive, rather than relevant.
That also reflects what Lord Millett said in the passage just quoted.
It is clear that, but for the agreement made when parking, Mr Beavis would not have had any right to park at all, and would have been liable to damages in trespass, for which it would, almost certainly, not have been worth BAPFs while to pursue him.
That would not have achieved any of BAPFs aims, and cannot here be an appropriate comparator when assessing the legitimacy or fairness of the scheme put in place by BAPF and ParkingEye.
In reality, BAPF would have had to make some entirely different arrangement, involving perhaps barriers with either machines to take payments or a car park attendant to cater for overstayers.
But that would not mean that BAPF or ParkingEye could or would have lowered the charge for overstaying, which, as stated, had to be set at a deterrent level if their aim of encouraging a regular turnover of customers was to be achieved.
The submission that ParkingEye could not reasonably assume that customers in Mr Beaviss position would have agreed to the scheme in individual contract negotiations is less easy to address.
A customer in Mr Beaviss position, if asked about the terms on which he would wish to park, would no doubt have been very satisfied with a proposal of two hours free parking, but would very probably have asked for some form of gradated payment in the event of overstaying.
Confronted with the other interests involved and the considerations making that unacceptable from BAPFs and ParkingEyes viewpoint, I am not at all confident that he or she would have refused to accept the risk of having to pay 85 (reducible on prompt payment) in the event of overstaying.
Mr de Waal and Mr Butcher submit that this would only have been because the customer would have under estimated the risk, and, at this point, again suggest that the scheme trades off the weakness of well meaning customers.
They point to Office of Fair Trading v Ashbourne Management Services Ltd [2011] EWHC 1237 (Ch), [2011] CTLC 237, where Kitchin J held that the minimum membership term provisions in a number of standard form gym membership contracts were unfair and invalid, because: The defendants business model was designed and calculated to take advantage of the naivety and inexperience of the average consumer using gym and health clubs at the lower end of the market.
The defendants knew that the average consumer overestimates the use he will make of the gym and health clubs and exploited this fact.
The problem in this respect was that the defendants, who operated gym membership schemes, themselves accepted that it was a notorious fact that many people join such gym clubs having resolved to exercise regularly but fail to attend at all after two or three months.
A reading of Kitchin Js judgment indicates how fact sensitive his conclusions were, differing according to his analysis of the particular terms of different contracts before him.
In particular, because contracts 11 to 13 before him allowed early termination in a wider range of circumstances (eg medical, change of employment or a move of more than 15 miles: para 50), he was prepared to accept a minimum term not exceeding 12 months this, even though the identified problem related to members joining enthusiastically without thinking that they might well be leaving after only two or three months; and he added that he might well have been prepared to accept up to 24 or 36 months, had the contracts given an option to terminate after 12 months, coupled with a requirement to reimburse the differential between the agreed subscription and a shorter term subscription in respect of the period up to termination (para 174).
There was therefore a balancing of all the interests involved at each stage.
Although the submissions that the scheme was unfair within the meaning of the 1999 Regulations were forcefully presented, I cannot ultimately accept them.
Judge Moloney QC summarised his conclusions as follows (para 7.18): a.
It is difficult to categorise as not in good faith a simple and familiar provision of this sort of which very clear notice was given to the consumer in advance. b.
There is not a significant imbalance between the parties rights and obligations, when the motorist is given a valuable privilege (two hours free parking) in return for a promise to pay a specified sum in the event of overstaying, provided that sum is not disproportionately high. c.
The charge in question is not disproportionately high, and insofar as it exceeds compensation its amount is justifiable, and not in bad faith or detrimental to the consumer.
I agree with the way Judge Moloney QC put it, as did the Court of Appeal.
In the result, I would dismiss Mr Beaviss appeal.
Conclusion
It follows that in the Cavendish case, I would allow Cavendishs appeal in relation to both clause 5.1 and clause 5.6; and that I would also dismiss Mr Beaviss appeal in the second case brought by ParkingEye.
LORD HODGE:
I adopt with gratitude the summary of the facts and the procedural history of the two appeals in the joint judgment of Lord Neuberger and Lord Sumption (at paras 44 68 in relation to the Cavendish appeal and paras 89 96 in relation to Mr Beaviss appeal).
Like them, I would allow the Cavendish appeal and dismiss the appeal by Mr Beavis.
Cavendishs primary submission was that this court should abolish the rule that the courts do not enforce penalty clauses.
This issue affects Scots law as well as English law as the rule is essentially the same in each jurisdiction, although the Scottish courts have in certain circumstances a power to abate the penalty which the English courts do not.
Scots law has used English authorities in its development see Bells Principles of the Law of Scotland (10th ed) section 34 and has, through the case of Clydebank Engineering and Shipbuilding Co Ltd v Castaneda [1905] AC 6, (1905) 7 F (HL) 77, had a significant influence on the development of English law.
I therefore focus on authorities from both jurisdictions in this judgment but also refer to authorities from other common law jurisdictions.
The Cavendish appeal raises three principal issues: i) What is the scope of the rule against penalties? ii) Whether that rule should be abrogated or at least altered so as not to apply in commercial transactions where the contracting parties are of equal bargaining power and each acts on skilled legal advice? And if not, iii) Whether and, if so, how the rule should be applied in the circumstances of the appeal?
I have come to the conclusion that the rule, which in each jurisdiction is now a rule of the law of contract, should not be abrogated.
I have also concluded that its application in the circumstances of the Cavendish contract does not require the court to refuse to give effect to the parties agreement.
I set out my reasoning below before turning more briefly to Mr Beaviss appeal.
The scope of the rule against penalties
The modern law in relation to penalty clauses was laid down by the House of Lords and the Judicial Committee of the Privy Council in a quartet of cases over 100 years ago.
First, the House of Lords examined a liquidated damages clause in the Clydebank Engineering case in 1904.
Then the Privy Council applied the decision in Clydebank to a retention clause in Public Works Comr v Hills [1906] AC 368 and to a liquidated damages clause in Webster v Bosanquet [1912] AC 394.
Finally, in Dunlop Pneumatic Tyre Co Ltd v New Garage and Motor Co Ltd [1915] AC 79, which again concerned a liquidated damages clause, the House of Lords, in the speech of Lord Dunedin, set out an approach to the rule which has dominated judicial discussion ever since.
In that case at pp 86 88 Lord Dunedin drew various propositions of law from the earlier three cases of the quartet.
To assist later discussion I set out those propositions so far as necessary: 1.
Though the parties to a contract who use the words penalty or liquidated damages may prima facie be supposed to mean what they say, yet the expression used is not conclusive.
The court must find out whether the payment stipulated is in truth a penalty or liquidated damages.
This doctrine may be said to be found passim in nearly every case. 2.
The essence of a penalty is a payment of money stipulated as in terrorem of the offending party; the essence of liquidated damages is a genuine covenanted pre estimate of damage (Clydebank Engineering ). 3.
The question whether a sum stipulated is penalty or liquidated damages is a question of construction to be decided upon the terms and inherent circumstances of each particular contract, judged of as at the time of the making of the contract, not as at the time of the breach (Public Works Comr v Hills and Webster v Bosanquet). 4.
To assist this task of construction various tests have been suggested, which if applicable to the case under consideration may prove helpful, or even conclusive.
Such are: (a) It will be held to be penalty if the sum stipulated for is extravagant and unconscionable in amount in comparison with the greatest loss that could conceivably be proved to have followed from the breach. (Illustration given by Lord Halsbury in Clydebank case.) (b) It will be held to be a penalty if the breach consists only in not paying a sum of money, and the sum stipulated is a sum greater than the sum which ought to have been paid (Kemble v Farren 6 Bing 141).
This though one of the most ancient instances is truly a corollary to the last test. (c) There is a presumption (but no more) that it is a penalty when a single lump sum is made payable by way of compensation, on the occurrence of one or more or all of several events, some of which may occasion serious and others but trifling damage (Lord Watson in Elphinstone v Monkland Iron and Coal Co 11 App Cas 332).
On the other hand: (d) It is no obstacle to the sum stipulated being a genuine pre estimate of damage, that the consequences of the breach are such as to make precise pre estimation almost an impossibility.
On the contrary, that is just the situation when it is probable that pre estimated damage was the true bargain between the parties (Clydebank Case, Lord Halsbury at p 11; Webster v Bosanquet, Lord Mersey at p 398).
I observe that Lord Dunedin stated the first three propositions without qualification.
The first and the third have caused no difficulty: the court looks to the substance of the transaction and approaches the matter as a question of construing the particular contract at the time when it was made.
The second has caused difficulty when it has been treated as creating in all cases a dichotomy between a genuine pre estimate of damage on the one hand and a deterrent against breach on the other, if the former is understood to be a calculation of what common law damages would be.
Indeed, in the Dunlop case itself the clause was upheld not because an individual discounted sale would cause loss of the stipulated magnitude but because of the danger of repeated undercutting of the appellants prices for their products, which would disrupt their trading system see in particular Lord Atkinson at pp 92 93.
I will return to that proposition.
Lord Dunedin prefaced the tests in the fourth proposition with a recognition that they might be neither helpful nor conclusive in a particular case.
That is important, but, as I shall seek to explain, I take issue with that approach in relation to proposition 4(a), which in my view contains the essence of the test, where the contractual provisions seek to fix a sum payable as damages, and an adapted form of that test applies where the clause is protecting other interests of the innocent party.
(a) The clauses to which the rule against penalties applies
One of the reasons for the problem with the second proposition has been that the penalty doctrine applies not only to clauses which seek to set the damages to be paid on breach of contract but also to clauses which set out other consequences of a breach of contract.
Thus in Lordsvale Finance plc v Bank of Zambia [1996] QB 752 Colman J, in a celebrated judgment dealing with a contractual provision to increase the rate of interest on a loan during a period of default, did not ask himself whether the provision was a genuine pre estimate of damage.
He considered whether it was commercially justifiable to increase the consideration payable under an executory contract upon the happening of default.
He concluded that the 1% prospective increase in the interest rate was commercially justifiable so long as the dominant purpose was not to deter the borrower from breach.
In my view, that decision was clearly correct as a default affected the credit risk that the lender undertook.
The Court of Appeal in Cine Bes Filmcilik Ve Yapimcilik v United International Pictures [2004] 1 CLC 401 supported Colman Js approach.
Mance LJ, who produced the leading judgment, recognised (at para 15) that there were clauses which might operate on breach and which were commercially justifiable but which did not fall into either category of a dichotomy between a genuine pre estimate of damages and a penalty.
In that case UIP had granted a licence to Cine Bes to show films on its movie channel.
There were disputes over the licence agreement which resulted in litigation which the parties compromised in an agreement to grant a fresh licence.
UIP later terminated the fresh licence on the ground of Cine Bess breach of contract.
One of the provisions that Cine Bes challenged as a penalty was that it should pay to UIP not only its enforcement costs for the default on the fresh licence but also its litigation costs in the prior litigation.
The Court of Appeal rejected this challenge, Mance LJ stating (at para 33): The agreement regarding past litigation costs was understandable in the overall context of the settlement of the prior litigation.
It would be wrong to treat it as if it were there to deter [Cine Bes] from, or to penalise or punish [Cine Bes] for, any default.
It was an understandable and reasonable commercial condition upon which UIP was prepared to dispose of the prior litigation, and to enter into the fresh licence.
Mance LJ, drawing on Colman Js analysis, drew a distinction between a reasonable commercial condition on the one hand and a punishment on the other.
As I shall seek to show, there is support for this dichotomy in the older case law.
The Court of Appeal again considered the penalty doctrine in Murray v Leisureplay plc [2005] IRLR 946, which concerned a provision in the employment contract of a chief executive that entitled him to one years gross salary in the event of the termination of his employment without one years notice.
The company challenged this entitlement as a penalty because common law damages would have given the director a sum after deduction of tax and national insurance contributions and he would have been under an obligation to mitigate his loss.
The court rejected this challenge, accepting that the provision, which provided the director with generous reassurance against dismissal and could result in greater recovery than the amount of his actual loss which he could recover at common law, was commercially justified.
In my view, this broader approach of Colman J and the Court of Appeal involves a correct analysis of the law and escapes the straightjacket into which the law risked being placed by an over rigorous emphasis on a dichotomy between a genuine pre estimate of damages on the one hand and a penalty on the other.
To justify that view I will have to look briefly at the law before Dunlop.
Before doing so, it is necessary to look at other provisions relating to breach of contract to which the rule against penalties has been applied or may apply and in particular (i) clauses withholding payments which were otherwise due, (ii) clauses requiring the party in breach to transfer property to the innocent party and (iii) clauses providing for the payment of a non refundable deposit in a contract of sale.
Clauses withholding payments on breach: I see no principled reason why the law on penalties should be confined to clauses that require the contract breaker to pay money in the event of breach and not extend to clauses that in the same circumstance allow the innocent party to withhold moneys which are otherwise due.
Indeed, there is ample authority to support the view that clauses which allow the innocent party to withhold payments on breach may be unenforceable as penalties where the sums retained are, or may be, wholly disproportionate to the loss suffered by the withholding party.
One of the quartet of cases to which I referred in para 219 above Public Works Comr v Hills is an example of the application of the rule against penalties to a clause seeking in the event of a breach of contract to withhold money otherwise due to a contractor.
In English law the House of Lords in Gilbert Ash (Northern) Ltd v Modern Engineering (Bristol) Ltd [1974] AC 689 considered a clause in a construction sub contract that allowed the main contractor to suspend or withhold payment of any moneys due to the sub contractor if the sub contractor failed to comply with any of its conditions.
While the contractor conceded that this part of the contractual clause was a penalty, it is clear from the speeches of their Lordships that they agreed with the concession: see Lord Reid at p 698D F, Lord Morris of Borth y Gest at p 703G, Viscount Dilhorne at p 711D and Lord Salmon at p 723H.
The majority of the Court of Appeal (Stuart Smith and OConnor LJJ) followed that approach in The Fanti and the Padre Island (No 2) [1989] 1 Lloyds Rep 239.
Cavendish has argued that such clauses should be seen as forfeiture clauses to which the law of penalties should not apply.
Ms Smith urged that it would be a recipe for confusion if a single clause were to be classified in two different ways.
I disagree.
There is no reason in principle why a contractual provision, which involves forfeiture of sums otherwise due, should not be subjected to the rule against penalties, if the forfeiture is wholly disproportionate either to the loss suffered by the innocent party or to another justifiable commercial interest which that party has sought to protect by the clause.
If the forfeiture is not so exorbitant and therefore is enforceable under the rule against penalties, the court can then consider whether under English law it should grant equitable relief from forfeiture, looking at the position of the parties after the breach and the circumstances in which the contract was broken.
This was the approach which Dillon LJ adopted in BICC plc v Burndy Corpn [1985] Ch 232 and in which Ackner LJ concurred.
The court risks no confusion if it asks first whether, as a matter of construction, the clause is a penalty and, if it answers that question in the negative, considers whether relief in equity should be granted having regard to the position of the parties after the breach.
I therefore conclude that clauses that authorise the withholding of sums otherwise due to the contract breaker may fall within the scope of the rule against penalties.
Different considerations may arise when, on its rescission of a contract of sale, the vendor seeks to retain instalments of the price which the purchaser has made; in English law the equitable remedy against forfeiture may be available to preserve the purchasers claim for restitution of the instalments: Stockloser v Johnson [1954] 1 QB 476; Else (1982) Ltd v Parkland Holdings Ltd [1994] 1 BCLC 130.
But we are not concerned with such circumstances in this appeal.
Clauses requiring the transfer of property on breach: Again I see no reason in principle why the rule against penalties should not extend to clauses that require the contract breaker to transfer property to the innocent party on breach.
There is authority in both English law and Scots law supporting this approach.
In Jobson v Johnson [1989] 1 WLR 1026 the Court of Appeal considered a clause that required a purchaser of shares to re transfer shares to the vendor for a fixed consideration if he defaulted on payment of instalments of the price.
The clause was treated as a penalty because it fixed the re transfer price at a modest figure regardless of the number of the much larger instalments which the purchaser had paid before his default.
The case was an unusual one and the approach of the court to a remedy was influenced by the absence of a counterclaim for relief from forfeiture.
I do not accept the conclusion in that case that the court had power in English law to modify a penalty (see para 283 below).
But that does not, in my view, call into question the courts unanimous conclusion that the clause was caught by the rule against penalties.
See also Else (1982) Ltd (above) Evans LJ at pp 137h and 138e.
As I have said in para 227 above I see no confusion resulting from an assessment first, whether a clause is a penalty and, if it is not, considering whether to grant relief from forfeiture.
In the Scottish case of Watson v Noble (1885) 13 R 347 a ship owner sold seven shares in a trawler to the appellant and was paid 100 for them.
In a subsequent agreement the owner agreed to employ the appellant as captain of the vessel and to hold the shares in trust for him.
The ship owner imposed an obligation on the captain to remain sober and attentive to his duties on pain of dismissal and forfeiture of both his shares and the right to claim repayment of the 100 which he had paid for the shares.
In an application by the appellant for repayment of the 100 after his dismissal, the Second Division treated the forfeiture of the shares as a penalty which could not be enforced and, because the ship owner refused to transfer the shares, required him to repay the 100 which he had received for them.
There is also considerable support in Australian authority for the application of the rule against penalties to clauses requiring a party in breach to transfer property to the innocent party.
See, for example, Bysouth v Shire of Blackburn and Mitcham (No 2) [1928] VLR 562, Irvine CJ at pp 574 575; Forestry Commission of New South Wales v Stefanetto (1976) 133 CLR 507, Mason J at p 521; Wollondilly Shire Council v Picton Power Lines Pty Ltd (1994) 33 NSWLR 551, Handley JA at p 555F G; Ringrow Pty Ltd v BP Australia Pty Ltd (2005) 224 CLR 656 in which the point was conceded (p 665); and Interstar Wholesale Finance Pty Ltd v Integral Home Loans Pty Ltd [2008] NSWCA 310, Allsop P at paras 101 102.
The Court of Appeal in New Zealand has taken a similar view: Amaltal Corpn Ltd v Maruha (NZ) Corpn Ltd [2004] 2 NZLR 614, Blanchard J at para 61.
I am satisfied therefore that the rule against penalties can be applied to a contractual term that provides for the transfer on breach of contract of property from the contract breaker to the innocent party.
Clauses requiring the purchaser to pay an extravagant non refundable deposit: In English law a non refundable deposit is a guarantee by a purchaser that the contract will be performed: Howe v Smith (1884) 27 Ch D 89, Cotton LJ at p 95; Soper v Arnold (1889) 14 App Cas 429, 435 per Lord MacNaghten.
It provides the vendor with some assurance of performance while the property is taken off the market during the period from the date of the contract to the completion of performance.
If the contract is performed, the deposit forms part of the purchase price.
If the purchaser breaks the contract, the vendor keeps the deposit.
As Fry LJ stated in Howe v Smith (at p 101): It is not merely a part payment, but is then also an earnest to bind the bargain so entered into, and creates by the fear of its forfeiture a motive in the payer to perform the rest of the contract.
Where the deposit was fixed at a reasonable figure, its forfeiture on breach of contract does not bring into play the rule against penalties, its purpose not being related to any loss that the vendor may have suffered and that he may seek to recover in damages: Wallis v Smith (1882) 21 Ch D 243, Jessel MR at p 258.
But in Stockloser v Johnson [1954] 1 QB 476, Denning LJ suggested (at p 491) that a party could not call a stipulation for an initial payment of 50% of the purchase price a deposit and thereby achieve a forfeiture from which equity could give no relief.
He said (at p 492) that the equity of restitution was to be tested not at the time of the contract but by the conditions existing when it was invoked.
This suggests that he was considering relief from forfeiture rather than the rule against penalties.
More directly relevant is Lord Radcliffes statement in Campbell Discount Co Ltd v Bridge [1962] AC 600, when discussing deposits (at p 624): I do not see any sufficient reason why in the right setting a sum of money may not be treated as a penalty, even though it arises from an obligation that is essentially a guarantee.
The Judicial Committee of the Privy Council has developed the idea that an extravagant deposit should not be forfeited on breach of contract.
In Linggi Plantations Ltd v Jagatheesan [1972] 1 MLJ 89, Lord Hailsham (at p 94) suggested that where, on investigation, the real nature of an initial payment, which was termed a deposit, was shown to be the imposition of a penalty, it might be recovered by the purchaser, and that it was only a reasonable deposit that was irrecoverable.
More recently, in Workers Trust & Merchant Bank Ltd v Dojap Investments Ltd [1993] AC 573, the Board addressed the question whether a deposit of 25% of the purchase price in the contract for the purchase of land from a bank at auction in Jamaica (where 10% deposits were customary) could be forfeited.
Lord Browne Wilkinson, who gave the Boards advice, spoke (at p 579) of the risk that the special treatment which the law gives to deposits being abused if the contracting parties attach the label deposit to a penalty.
The Privy Council made the validity of a deposit conditional upon whether it was reasonable as earnest money.
Lord Browne Wilkinson stated (at p 580): In order to be reasonable a true deposit must be objectively operating as earnest money and not as a penalty.
To allow the test of reasonableness to depend upon the practice of one class of vendor, which exercises considerable financial muscle, would be to allow them to evade the law against penalties by adopting practices of their own.
The Board therefore took as a norm the long established practice both in Jamaica and the United Kingdom of a deposit of 10% and required a vendor who sought a larger percentage to show special circumstances to justify that deposit.
In effect, the Board applied a test of commercial justification akin to the test which Colman J later applied in Lordsvale Finance plc.
In Polyset Ltd v Panhandat Ltd (2002) 5 HKCFAR 234 the Hong Kong Court of Final Appeal carried out a thorough review of the law relating to deposits.
The court considered the cases which I have mentioned and concluded that the court would intervene to prevent forfeiture where parties abused the concept of deposit.
The forfeiture of a deposit would be enforced only if it were reasonable as earnest money.
Where the deposit exceeded the conventional amount, the court would permit forfeiture only if the party seeking to forfeit could show that exceptional circumstances justified the higher amount (Ribeiro PJ at para 90, Bokhary PJ at paras 10 18, Chan PJ at paras 40 42; Lord Millett NPJ at para 165).
Because Bokhary PJ and Ribeiro PJ considered that the test of genuine pre estimate of loss applied in the rule against penalties when considering whether a sum was liquidated damages, they did not view the reasonable as earnest money test as part of the law of penalties.
But if, as I think correct, the true test for penalties is wider than the genuine pre estimate of loss test (see paras 242 255 below), the Hong Kong courts conclusions were wholly consistent with Lord Browne Wilkinsons approach in Workers Trust.
Historically, Scots law has followed English law in treating deposits as outside the rule against penalties, citing English authorities in support of the view that a deposit was a guarantee of or security for performance: Commercial Bank of Scotland Ltd v Beal (1890) 18 R 80; Roberts & Cooper v Salvesen & Co 1918 SC 794; Zemhunt (Holdings) Ltd v Control Securities plc 1992 SC 58.
There has been no discussion whether that exclusion is confined to reasonable deposits.
But in none of those cases was there a question whether the deposit was extravagant.
In Roberts & Cooper, in which the First Division upheld the forfeiture of a 3,000 deposit on the purchase of a ship for 30,000 when the purchaser repudiated the contract, Lord Skerrington (at p 814) suggested that there was no reason why in a proper case a clause for the forfeiture of a purchasers deposit should not be construed as a penalty and be unenforceable.
I agree.
As Scots law has followed English law in relation to the law of deposits, I see no reason why it should not adopt the modern approach of excluding only reasonable deposits from the rule against penalties.
I conclude therefore that in both English law and Scots law (a) a deposit which is not reasonable as earnest money may be challenged as a penalty and (b) where the stipulated deposit exceeds the percentage set by long established practice the vendor must show special circumstances to justify that deposit if it is not to be treated as an unenforceable penalty.
Circumstances other than breach of contract: The rule against penalties applies only in the context of a breach of contract.
In English law the House of Lords has so held in Export Credits Guarantee Department v Universal Oil Products Co [1983] 1 WLR 399, 403 per Lord Roskill.
In Scots law the question has not reached the House of Lords or the Supreme Court.
But in Granor Finance Ltd v Liquidator of Eastore Ltd 1974 SLT 296, Lord Keith, when a Lord Ordinary, held (p 298) that the rule against penalties had no application in a case which was not a case of breach of contract, and more recently, in EFT Commercial Ltd v Security Change Ltd 1992 SC 414, the First Division has re asserted that position.
Mr Bloch, counsel for Mr Makdessi, suggested in the course of debate that the court could extend the rule against penalties.
He referred to the controversial decision of the High Court of Australia in Andrews v Australia and New Zealand Banking Group Ltd (2012) 247 CLR 205, in which the court held that bank charges, which were imposed on customers on the occurrence of events which were not breaches of contract, could be characterised as penalties and thus be unenforceable.
As this suggestion is peripheral to the main arguments in this appeal, I deal with it shortly.
I am satisfied that the rule against penalties in both English and Scots law has applied only in relation to secondary obligations penal remedies for breach of contract.
In Scotland, the courts administer an equitable as well as a common law jurisdiction without having two branches of jurisdiction.
There is no freestanding equitable jurisdiction to render unenforceable as penalties stipulations operative as a result of events which do not entail a breach of contract.
Such an innovation would, if desirable, require legislation.
(b) The true test for a penalty
In para 221 above I suggested (a) that there was a problem in the way in which the courts had read Lord Dunedins second proposition and (b) that his proposition 4(a) contained the essence of the test: that is, whether the secondary obligation was exorbitant and unconscionable.
The rule against penalties is a rule of contract law based on public policy.
It is a question of construction of the parties contract judged by reference to the circumstances at the time of contracting; the public policy is that the courts will not enforce a stipulation for punishment for breach of contract.
In the first of the quartet of cases, Clydebank Engineering, the House of Lords held that the courts would not enforce a measure that was extravagant and unconscionable: Earl of Halsbury LC at p 10, Lord Davey at p 16 and Lord Robertson at p 20.
Different expressions were used to describe the manifestly excessive nature of the measure in comparison with the interest which the challenged clause protected.
But at its heart was the idea of exorbitance or gross excessiveness.
The phrase in Lord Dunedins second proposition appears to have come from the opinion of Lord Kyllachy as Lord Ordinary in the Clydebank Engineering case ((1903) 5 F 1016 at p 1022) where he contrasted a measure which was reasonable and moderate and one which was exorbitant and unconscionable and said of the latter that: the amount stipulated might be such as to make it plain that it was merely stipulated in terrorem, and could not possibly have formed a genuine pre estimate of the creditors probable or possible interest in the due performance of the principal obligation.
While Lord Kyllachys emphasis on a genuine pre estimate suggests that he was considering clauses which are intended to fix the level of damages paid on breach of contract, the overriding test of exorbitance fits the wider range of circumstances in which the rule against penalties has been applied, including enhanced interest charges (Lordsvale Finance), the agreement to pay an employee sums in excess of common law damages (Murray), and deposits (Workers Trust & Merchant Bank Ltd).
Lord Robertsons focus in the Clydebank Engineering case on the innocent partys interest in the due performance of the principal obligation and his posing of the question had the respondents no interest to protect by that clause, or was that interest palpably incommensurate with the sums agreed on? provide the framework for the application of the exorbitance test to those wider circumstances.
Lord Dunedins propositions were his summary of existing authorities.
In his second proposition he drew on Lord Kyllachys phrase to state the paradigms of a penalty on the one hand and liquidated damages on the other.
Exorbitance featured in his proposition 4(a) and also in the speeches of Lord Atkinson (p 97: unreasonable, unconscionable or extravagant) and Lord Parmoor (p 101: extravagant or unconscionable; extravagant disproportion between the agreed sum and the amount of any damage capable of pre estimate).
The focus on the disproportion between the specified sum and damage capable of pre estimation makes sense in the context of a damages clause but is an artificial concept if applied to clauses which have another commercial justification.
Similarly, I doubt whether it is helpful to rely on the concept of deterrence.
Many contractual provisions are coercive in nature, encouraging a contracting party to perform his or her obligations; the prospect of liability in common law damages itself is a spur to performance.
Similarly, a deposit provides a motive for performance (para 234 above).
Instead, the broader test of exorbitance or manifest excess compared with the innocent partys commercial interests fits the various applications of the rule against penalties and is consistent with the repeated warnings by the courts against imposing too stringent a standard.
Thus in Robophone Facilities Ltd v Blank [1966] 1 WLR 1428 (CA) Diplock LJ warned (at p 1447E), The court should not be astute to descry a penalty clause.
In Philips Hong Kong Ltd v Attorney General of Hong Kong (1993) 61 BLR 41, Lord Woolf (at p 59) said: [T]he court has to be careful not to set too stringent a standard and bear in mind that what the parties have agreed should normally be upheld.
Any other approach will lead to undesirable uncertainty especially in commercial contracts.
In Murray (above) Arden LJ expressed a similar view when she said (at para 43), The parties are allowed a generous margin.
When the court makes a value judgment on whether a provision is exorbitant or unconscionable, it has regard to the legitimate interests, commercial or otherwise, which the innocent party has sought to protect.
Where the obligation which has been breached is to pay money on a certain date, the innocent partys interests are normally fully served by the payment of the stipulated sum together with interest and the costs of recovery.
More complex questions arise where there is an obligation to perform by a certain date, such as the construction of the torpedo boats in Clydebank Engineering, as the assessment of the loss suffered by the innocent party may often be difficult and parties may have an interest in fixing the level of compensation in advance to avoid the necessity of an expensive trial.
In Scots law a distinction has also been drawn between the breach of an obligation to perform some act and the wilful breach of a prohibition; in the latter circumstance the court is less inclined to treat a harsh contractual remedy as unconscionable.
Thus in Forrest & Barr v Henderson, Coulbourn & Co (1869) 8 M 187, Lord Neaves (at p 202) stated: There are great differences in the stipulations themselves that are so made, and, in particular, there is a great difference according as the breach of contract consists in faciendo and in non faciendo.
If a man wilfully goes against what he has promised not to do, that is an unfavourable case for restriction.
Lord Deas expressed a similar view at p 196.
As the rule against penalties is based on public policy and has developed over time, its current form is of more significance than its historical development.
Lord Neuberger and Lord Sumption have discussed the origins and development of the rule in English law in paras 4 11 of their judgment.
Professor David Ibbetson in A Historical Introduction to the Law of Obligations (1999) (pp 255 256) records how Scots law and South Africas Roman Dutch law came to influence the modern English rule in Dunlop.
It may therefore be helpful to say something about the development of the rule in Scots law.
In early Scots law penalties were associated with usury.
While there are examples of the Court of Session enforcing penalties in the early 16th century, in Home v Hepburn (1549) Mor 10033 the Court of Session prohibited the imposition of punishments for breach of contract.
In the abbreviated report of that case the court held: de practica regni, poenae conventionales non possunt exigi, nisi quatenus interest actores, quia sapiunt quendam usuram et inhonestum questum Balfours Practicks (1579) gives a vernacular account of the case in these terms (Stair Society vol I, p 151): Be the law of this realme, poena conventionales, sic as ane soume of money adjectit, with consent of parties, in ony contract or obligatioun, in name of pane, may not be askit be ony persoun bot in sa far as he is interestit, hurt or skaithit; because all sic painis are in ane maner usuraris, and dishonest, made for lucre or gane.
It is of note that the judgment referred to the innocent partys interest in performance (interesse to have an interest) as well his injury or damage (skaith), foreshadowing Lord Robertsons formulation in Clydebank Engineering.
Viscount Stair in his Institutions of the Law of Scotland regarded the power to modify exorbitant bonds and contracts as part of the nobile officium of the Court of Session, recognising that necessitous debtors yield to exorbitant penalties (Stair, IV.3.2).
A penalty clause was seen as a secondary obligation, an additional means of enforcement; tendering the penalty did not release the contract breaker from his primary obligation: University of Glasgow v Faculty of Physicians and Surgeons (1840) 1 Rob 397, 415.
The Court of Session, as the supreme court of law and equity, exercised an equitable power of mitigation (Bell, Commentaries on the Law of Scotland, 7th ed (1870) vol I, 700).
Many of the cases concerned the imposition of additional rent on an agricultural tenant who departed from the agreed cropping cycle of the land (as in Stration v Graham (1789) 3 Pat 119).
In relation to penalty clauses in bonds, the courts enforced the penalty only to the extent of recovering the principal sum due, interest and expenses.
The power to modify a penalty was placed on a statutory basis and the extant provision is section 5 of the Debts Securities (Scotland) Act 1856: [A]nd in all cases where penalties for non payment, over and above performance, are contained in bonds or other obligations for sums of money, and are made the subject of adjudication, or of demand in any other shape, it shall be in the power of the court to modify and restrict such penalties, so as not to exceed the real and necessary expenses incurred in making the debt effectual.
More recently, in Wirral Borough Council v Currys Group plc 1998 SLT 463, Lord Hamilton (at p 467) confirmed that the statutory power to modify extends to money obligations other than bonds.
Although the Scottish Parliament has enacted legislation to abolish the remedy of adjudication as a means of debt recovery (the Bankruptcy and Diligence etc (Scotland) Act 2007), the court retains a power to modify such penalties for failure to fulfil monetary obligations.
By the mid 19th century, case law on penalty clauses had moved to contracts for the supply of goods and services and construction contracts.
Three cases, in which Lord Inglis participated, provided the backdrop for the Clydebank Engineering decision, the first of the quartet of cases which set out the modern law.
In Johnston v Robertson (1861) 23 D 646, the Second Division held that a charge of 5 per week for the late completion of a poor house was liquidated damages and not a penalty; Lord Justice Clerk Inglis (at p 655) posed the question whether the stipulation was a reasonable and appropriate mode of enforcing the obligation to complete the work by the specified date and whether the sum was proportionate to the loss suffered by the innocent party.
In Craig v McBeath (1863) 1 M 1020, 1022, Lord Justice Clerk Inglis cited Home v Hepburn in support of the proposition that Parties cannot lawfully enter into an agreement that the one party shall be punished at the suit of the other.
Lord Young enunciated a similar principle in Robertson v Drivers Trs (1881) 8 R 555, 562, stating that the law will not let people punish each other.
In Forrest & Barr (above), which concerned the purchase and erection of a crane in a shipyard by a specified date and a penalty of 20 per day for delay, Lord President Inglis stated (at p 193) that equity would interfere to prevent a claim being maintained to an exorbitant and unconscionable amount.
Lord Deas, Lord Ardmillan and Lord Neaves used the same expressions (at pp 198, 199 and 203 respectively); Lord Kinloch (at p 201) spoke of a claim being so utterly extravagant and unreasonable that the court could infer that it was a penalty or punishment.
This approach to penalty clauses is consistent with the judgments of the House of Lords in Dunlop in which an extravagant disproportion between an agreed sum and the innocent partys interest in the due performance of the contract would amount to what Lord Parmoor described (p 100) as: a penal sum inserted as a punishment on the defaulter irrespective of the amount of any loss which could at the time have been in contemplation of the parties .
I therefore conclude that the correct test for a penalty is whether the sum or remedy stipulated as a consequence of a breach of contract is exorbitant or unconscionable when regard is had to the innocent partys interest in the performance of the contract.
Where the test is to be applied to a clause fixing the level of damages to be paid on breach, an extravagant disproportion between the stipulated sum and the highest level of damages that could possibly arise from the breach would amount to a penalty and thus be unenforceable.
In other circumstances the contractual provision that applies on breach is measured against the interest of the innocent party which is protected by the contract and the court asks whether the remedy is exorbitant or unconscionable. (ii) Whether the rule against penalties should be abrogated or altered?
I am not persuaded that there is any proper basis for abrogating the rule against penalties or restricting its application to commercial transactions where the parties are unequal in their bargaining power and there is a risk of oppression.
The rule against penalties is an exception to the general approach of the common law that parties are free to contract as they please and that the courts will enforce their agreements pacta sunt servanda.
The rule against penalties may have been motivated in part by a desire to prevent oppression of the weaker party by the more powerful party to a contractual negotiation.
As I have said, Viscount Stair spoke of this danger when he spoke of necessitous debtors having to yield to exorbitant penalties (IV.3.2).
Diplock LJ in Robophone (p 1447A) recognised the reality that many contracting parties could not contract la carte but had to accept the table dhte of the standard term contract.
In AMEVUDC Finance Ltd v Austin (1986) 162 CLR 170, Mason and Wilson JJ (at pp 193 194) suggested that the rule was aimed at preventing oppression and that the nature of the relationship between the contracting parties was a factor relevant to unconscionableness.
In Philips v Hong Kong (pp 58 59) Lord Woolf suggested that in some cases the fact that one of the contracting parties was able to dominate the other as to the choice of the contract terms was relevant to the application of the rule.
But the application of the rule does not depend on any disparity of power of the contracting parties: Imperial Tobacco Co (of Great Britain and Ireland) Ltd v Parslay [1936] 2 All ER 515 (CA), Lord Wright MR at p 523.
Because the rule is not so limited, Ms Joanna Smith QC argued that the rule interferes with freedom of contract in circumstances in which it is not needed.
The rule may also be criticised because it can be circumvented by careful drafting.
Indeed one of Cavendishs arguments was that clause 5.1 could have been removed from the scope of the rule if it had been worded so as to make the payment of the instalments conditional upon performance of the clause 11 obligations.
This is a consequence of the rule applying only in the context of breach of contract.
But where it is clear that the parties have so circumvented the rule and that the substance of the contractual arrangement is the imposition of punishment for breach of contract, the concept of a disguised penalty may enable a court to intervene: see Interfoto Picture Library Ltd v Stiletto Visual Programmes Ltd [1989] QB 433, Bingham LJ at pp 445 446 and, more directly, the American Law Institutes Restatement of the Law, Second, Contracts section 356 on liquidated damages and penalties, in which the commentary suggests that the courts focus on the substance of the contractual term would enable it in an appropriate case to identify disguised penalties.
It may also be said against the rule that it promotes uncertainty in commercial dealings as the contracting parties may not be able to foresee the judges value judgment on whether a particular provision is exorbitant or unconscionable.
There is beyond doubt real benefit in parties being able to agree the consequences of a breach of contract, particularly where there would be difficulty in ascertaining the sum in damages which was appropriate to compensate the innocent party for loss caused by the breach.
Parties save on transaction costs where they can avoid expensive litigation on the consequences of breach of contract.
It has also been said that judges should be modest in their assumptions that they know about business: Wallis v Smith (1882) 21 Ch D 243, Jessel MR at p 266.
Legislative measures have been introduced to control unfair terms in contracts.
In recent years, the Unfair Terms in Consumer Contracts Regulations 1999 and the Consumer Protection from Unfair Trading Regulations 2008 have given effect to European Directives and more recently the Consumer Rights Act 2015 has been brought into force.
But while this legislation may have reduced the need for the rule against penalties in consumer contracts, it has no bearing on commercial contracts.
There are therefore arguments that can be made against the rule against penalties, or at least against its scope.
But I am persuaded that the rule against penalties should remain part of our law, principally for three reasons.
First, there remain significant imbalances in negotiating power in the commercial world.
Small businesses often contract with large commercial entities and have little say as to the terms of their contracts.
Examples such as the relationship between a main contractor and a sub contractor in the construction industry and that between a large retail chain and a small supplier spring to mind.
Secondly, abolition of the rule against penalties would go against the flow of legal developments both nationally and internationally.
Both the Law Commission of England and Wales and the Scottish Law Commission have looked at the rule against penalties and neither has recommended its abolition.
The Law Commissions Working Paper No 61 on Penalty Clauses and Forfeiture of Monies Paid in 1975 proposed the extension of judicial control to embrace penalty clauses that come into operation without any breach of contract.
More recently, the Scottish Law Commissions Report on Penalty Clauses in 1999 recommended the retention of judicial control over penalties whether they took the form of a payment of money, a forfeiture of money, a transfer of property or a forfeiture of property.
It recommended a criterion of manifestly excessive and the abolition of any requirement that the clause be founded in a pre estimate of damages.
It also recommended that judicial control should not be confined to cases where the promisor is in breach of contract.
As counsels very helpful researches showed, other common law countries such as Australia, Canada, New Zealand, Singapore and Hong Kong have rules against penalties, as has the commercially important law of New York, the Uniform Commercial Code and, as I have mentioned, the American Law Institutes Restatement of the Law, Second, Contracts.
In the civil law tradition, which has had a profound influence on Scots law and which under Lord Mansfield influenced the development of English commercial law, the modern civil codes of Belgium (article 1231), France (article 1152), Germany (section 343), and Italy (article 1384) and the Swiss Code of Obligations (article 163) all provide for the modification of contractual penalties using tests such as manifestly excessive, disproportionately high, or excessive.
Further, in what Mr Bloch described as soft law, recent international instruments prepared by expert lawyers, such as the Council of Europes Resolution (78) 3 on Penal Clauses in Civil Law (1978) (article 7), the Principles of European Contract Law (1995) (article 9.509), the Unidroit Principles of International Commercial Contracts (1994) (article 7.4.13) and Uncitral texts on liquidated damages and penalty clauses (1983) (article 8) also provide for the restriction of grossly excessive or manifestly excessive or substantially disproportionate penalty clauses.
The Draft Common Frame of Reference (III 3:712) also provides for the reduction of stipulated payments for non performance if they are grossly excessive.
Thirdly, I am not persuaded that the rule against penalties prevents parties from reaching sensible arrangements to fix the consequences of a breach of contract and thus avoid expensive disputes.
The criterion of exorbitance or unconscionableness should prevent the enforcement of only egregious contractual provisions.
Ms Smiths alternative proposal, that the rule should not extend to commercial transactions in which the parties are of equal bargaining power and each acts on skilled legal advice, does not appeal to me.
Creating such a gateway to the application of the rule would risk adding to the expense of commercial disputes by requiring the court to rule on issues of fact about the bargaining power of the parties and the calibre of their respective legal advisers.
I therefore turn to the application of the rule against penalties in the two appeals.
The application of the rule against penalties:
(a) in the Cavendish appeal
Clause 5.1, which removes a sellers valuable rights to receive the interim payment and final payment if he is in breach of clause 11.2, was likely to deprive the defaulting shareholder of a substantial sum of money.
The parties have agreed that the enforcement of the clause would deprive Mr El Makdessi of up to $44,181,600.
Breach of clause 11.2 therefore comes at a high price.
There is clearly a strong argument, which Lord Neuberger and Lord Sumption favour, that in substance clause 5.1 is a primary obligation which made payment of the interim and final payments conditional upon the sellers performance of his clause 11.2 obligations.
But even if it were correct to analyse clause 5.1 as a secondary provision operating on breach of the sellers primary obligation, I am satisfied that it is not an unenforceable penalty clause for the following six reasons.
First, it is important to consider the nature of the obligations of the sellers which could trigger the withholding of the instalments under clause 5.1.
Clause 11.2 imposed restrictive covenants on the sellers, prohibiting them from competing with the company.
Having sold substantial blocks of shares in the company for a price which attributed a high value to its goodwill, the sellers were prohibited from derogating from what they had sold.
Secondly, the factual matrix in the uncontested evidence of Mr Andrew Scott, WPPs director of corporate development, and Mr Ghossoub and recorded in the agreed statement of facts and issues showed the importance of personal relationships in the marketing sector and particularly in the Middle East.
The statement of facts and issues recorded (at para 5) that the success of the Groups business depended on the personal relationships which Mr Ghossoub and Mr El Makdessi had built up with their key clients and in para 33, which Lord Neuberger and Lord Sumption quote at para 66 of their judgment, it explained that the agreement was structured to protect the goodwill of the Group.
The continued loyalty of the sellers was critically important to preserving the value of the Groups goodwill.
Thirdly, that evidence and the agreement itself showed that a large proportion of the agreed purchase price was attributable to that goodwill.
Extrapolating from the maximum consideration which the sellers could have received for the shares which they sold, the company had a maximum value of $300m which compares with its certified NAV (without goodwill) of $69.7m.
Cavendish therefore needed to be assured of the sellers loyalty.
It had a very substantial and legitimate interest in protecting the value of the companys goodwill.
It did so by giving the sellers a strong financial incentive to remain loyal to the company by complying with the restrictions set out in clause 11.2.
The sellers, who, like Cavendish, had access to expert legal advice and negotiated the contract over several months, agreed to peril their entitlement to the deferred consideration on their continued loyalty.
Fourthly, I am not persuaded by Mr Blochs argument that clause 5.1 was exorbitant because it could be triggered by a minor breach of clause 11.2, such as an unsuccessful solicitation of a senior employee.
That appears to me to be unrealistic.
Clause 5.1 was not addressing the loss which Cavendish might suffer from breach of the restrictive covenant, whether an isolated and minor breach or repeated and fundamental breaches.
It was addressing the disloyalty of a seller who was prepared in any way to attack the companys goodwill.
No question therefore arises of a presumption of a penalty where the same sum is payable on the occurrence of several events which may cause serious or trifling damages as in Lord Dunedins proposition 4(c) in Dunlop.
In any event, that presumption would not apply because the losses arising from any breach of clause 11.2 were generically the same see Lord Parker of Waddington in Dunlop at p 98.
As Lord Neuberger and Lord Sumption have said (para 75), loyalty is indivisible.
Fifthly, Mr Bloch submitted that clause 5.1 might operate perversely as far as Mr El Makdessi was concerned because a minor breach of clause 11.2, which did not harm the companys goodwill, would result in his losing more by the loss of the interim and final payments than a major breach which diminished the profits of the company and thus the deferred consideration.
Similarly, he submitted that a breach that was detected before the interim payment or the final payment would have more serious consequences for the seller than one detected later.
But again clause 5.1 is not addressing the loss which Cavendish may incur from a particular breach.
The relevant questions are broader, namely (i) whether Cavendish had a legitimate interest in the circumstances to protect its investment in the company and (ii) whether the making of its later instalments of price depend upon each sellers performance of his clause 11.2 obligations was a manifestly excessive means of protecting that interest.
Finally, I am not persuaded that the companys entitlement to seek a disgorgement of Mr El Makdessis profits arising from his breach of fiduciary duty and the possibility that Cavendish itself might have a claim in damages if Mr El Makdessi breached clause 11.2 after he ceased to be a director make the operation of clause 5.1 exorbitant or unconscionable.
The former is res inter alios acta as each of Cavendish and the company have separate legal personality.
Any award of damages to Cavendish would be designed to place it in the same position financially as if the contract had been performed.
If an award of damages together with the price reduction which clause 5.1 effects involved double counting, I would expect the price reduction to be credited against the claim for damages.
In summary, I am persuaded that in the circumstances of this share purchase, Cavendish had a very substantial legitimate interest to protect by making the deferred consideration depend upon the continued loyalty of the sellers through their compliance with the prohibitions in clause 11.2.
I do not construe clause 5.1 as a stipulation for punishment for breach; it is neither exorbitant nor unconscionable but is commensurate with Cavendishs legitimate interests.
It may therefore be enforced.
Clause 5.6, which provides for the compulsory transfer of the defaulting shareholders retained shareholding, is more difficult.
But I have come to the view that it also may be enforced.
Mr El Makdessi does not contest the obligation placed on the defaulting shareholder to transfer his shares on breach of contract.
But he challenges the price at which the compulsory transfer is to be effected, as the formula for the calculation of the price excludes the value of goodwill.
There is again a strong argument, which Lord Neuberger and Lord Sumption favour, that clause 5.6 is a primary obligation to which the rule against penalties does not apply.
But if all such clauses were treated as primary obligations, there would be considerable scope for abuse.
I construe the clause as a secondary obligation, which is designed to deter (a) the sellers from breaching their clause 11.2 obligations and (b) a seller who is an employee from misconduct which damages the interests of the Group and leads to summary dismissal (viz the Schedule 12 definition of defaulting shareholder).
Clause 5.6, like clause 5.1, is not a provision which fixes the damages payable for a breach of contract.
It seeks to regulate the terms on which a defaulting shareholder severs his connection with the company.
It falls to be construed in the context of the agreement as a whole, in which Cavendish agreed to pay a price for the shares which it purchased on the basis that the sellers remained involved in the company for transitional periods and complied with their clause 11.2 duties for at least two years after they had exercised their put options under clause 15 or had otherwise ceased to hold shares in the company.
I think that Mr El Makdessi was correct in accepting that, if a seller acted in breach of clause 11.2 by competing with the company in any of the ways listed in that clause, Cavendish would act reasonably in seeking to remove him from any involvement in the company, including by the compulsory transfer of his shareholding.
On the departure of the defaulting shareholder, the company would lose both his work on its behalf and also his valuable personal connections.
It was readily foreseeable at the time of contracting that the departure on default of either of the sellers would cause significant damage to the companys goodwill and thus materially reduce its value.
Against that background, the question for the court is whether the defaulting shareholder option price, which was the net asset value of the company excluding any goodwill value, was an exorbitant or unconscionable undervaluation when measured against Cavendishs legitimate interest in protecting its investment from the risk of either of the sellers acting against the companys interests.
In my view, the terms were harsh; but they were not exorbitant.
They were not a punishment but, in the particular context of the purchase of a marketing business in the Middle East, were a legitimate means of encouraging the sellers to comply with their clause 11.2 obligations which were critical to Cavendishs investment.
Nor were the terms unconscionable for any broader reason.
The contract was negotiated in detail by parties of relatively equal bargaining power and with skilled legal advice; a seller could readily comply with the obligations in clause 11.2, which were, in Lord Neavess words in Forrest & Barr (para 249 above), obligations in non faciendo, or prohibitions.
For completeness, I comment on Mr Blochs suggestion that the court has a power to modify the terms on which clause 5.6 would operate.
In English law a penalty clause cannot be enforced.
For the reasons given by Lord Neuberger and Lord Sumption in their judgment (at paras 84 87) I think that the decision of the Court of Appeal in Jobson v Johnston was incorrect in so far as it modified a penalty clause and should be overruled.
In Scots law the statutory power of the court to modify a penalty (para 252 above) does not extend to a penalty in support of a primary obligation other than for payment of a sum of money.
If there is in Scots law a residual common law power of modification of penalties in support of primary obligations such as to supply goods or services as in Craig v McBeath (above), I do not see how the power of abatement can extend to modifying the price of a compulsorily transferred asset.
(b) in Mr Beaviss appeal
I agree (a) that the relationship between ParkingEye and Mr Beavis was a contractual relationship in the form of a licence and (b) that the parking charge incurred on breach of the obligation to park for no more than two hours engages the rule against penalties.
If my analysis of the rule against penalties is correct, the only relevant questions are (i) did ParkingEye have a legitimate interest to protect by the imposition of the parking charge (ii) whether the level of the charge is exorbitant or unconscionable.
This is because, first, the charge was not and did not purport to be a claim for damages for any loss that ParkingEye would suffer as a result of a motorist exceeding the two hour maximum parking time.
ParkingEye suffered no loss.
Secondly, the fact that the charge encouraged the motorist to comply with the terms of the licence and deterred him or her from overstaying or parking irresponsibly outside the marked parking bays did not make it a penalty.
Deterrence in that sense is not the test for a penalty.
ParkingEye had a legitimate interest to protect.
It provided a service to its clients, the owners of the retail park which leased units to retailers.
It undertook to manage the car park in a way which benefitted the owners and the retailers and also the public seeking to visit units within the retail park by encouraging the public to remain in the car park for no longer than two hours.
ParkingEye imposed the parking charge in order to encourage the prompt turnover of car parking spaces and also to fund its own business activities and make a profit.
That legitimate interest would not justify the parking charge if it were out of all proportion to that interest, or, in other words, exorbitant.
In deciding whether the charge was exorbitant, I think that the court can look at the statutorily authorised practice of local authorities in England and Wales and also the recommendations of the accredited trade association, the BPA.
Neither is conclusive and the question is ultimately a value judgment by the court.
But local authority practice, the BPA guidance, and also the evidence that it is common practice in the United Kingdom to allow motorists to stay for two hours in such private car parks and then to impose a charge of 85, support the view that such a charge was not manifestly excessive.
There was no other evidence that suggested otherwise.
In so far as the criterion of unconscionableness allows the court to address considerations other than the size of the penalty in relation to the protected interest, the fact that motorists entering the car park were given ample warning of both the time limit of their licence and the amount of the charge also supports the view that the parking charge was not unconscionable.
I therefore conclude that the rule against penalties is no bar against the enforcement of the parking charge imposed on Mr Beavis.
Mr Beaviss other ground of appeal: the Unfair Terms in Consumer Contracts
Regulations 1999
I was initially in some doubt about the correct answer to this challenge.
But on further consideration I am persuaded for the reasons given by Lord Neuberger and Lord Sumption and also by Lord Mance that the 85 charge did not infringe the 1999 Regulations.
Conclusion
I would therefore allow the appeal in Cavendish v El Makdessi and dismiss the appeal in ParkingEye v Beavis and make the declarations that Lord Neuberger and Lord Sumption propose in para 115 of their joint judgment.
LORD CLARKE:
I agree that the appeal in Cavendish should be allowed, that that in Beavis should be dismissed and that we should make the declarations proposed by Lord Neuberger and Lord Sumption.
In reaching those conclusions I agree with the reasoning of Lord Neuberger and Lord Sumption, Lord Mance and Lord Hodge, save that on the question whether clauses 5.1 and 5.6 are capable of constituting penalties, I agree with Lord Hodge in having an open mind about clause 5.1, and in concluding that clause 5.6 is a secondary obligation see paras 270 and 280 respectively.
As to the relationship between penalties and forfeiture, my present inclination is to agree with Lord Hodge (in para 227) and with Lord Mance (in paras 160 and 161) that in an appropriate case the court should ask first whether, as a matter of construction, the clause is a penalty and, if it answers that question in the negative, it should ask (where relevant) whether relief against forfeiture should be granted in equity having regard to the position of each of the parties after the breach.
LORD TOULSON: (dissenting in part on ParkingEye Limited)
I agree with paras 116 to 187 of the judgment of Lord Mance and paras 216 to 283 of the judgment of Lord Hodge.
In short, I agree with them on all points of general principle about the doctrine of penalties, its interrelationship with forfeiture and the application of the principles in the Cavendish case.
On the essential nature of a penalty clause, I would highlight and endorse Lord Hodges succinct statement at para 255 that the correct test for a penalty is whether the sum or remedy stipulated as a consequence of a breach of contract is exorbitant or unconscionable when regard is had to the innocent partys interest in the performance of the contract.
Parties and courts should focus on that test, bearing in mind a) that it is impossible to lay down abstract rules about what may or may not be extravagant or unconscionable, because it depends on the particular facts and circumstances established in the individual case (as Lord Halsbury said in the Clydebank case, [1905] AC 6, 10, and Lord Parmoor said in the Dunlop case, [1915] AC 79, 101), and b) that exorbitant or unconscionable are strong words.
I agree with Lord Mance (para 152) that the word unconscionable in this context means much the same as extravagant.
On the inter relationship between the law relating to penalties and forfeiture clauses, I agree specifically with paras 160 161 of Lord Mances judgment and paras 227 230 of Lord Hodges judgment.
Ms Smith argued in her written case and orally that if relief were to be granted at all to Mr El Makedessi it should be pursuant to the relief against forfeiture, because clauses such as 5.1 were properly to be regarded as forfeiture clauses and the penalty doctrine was therefore not capable of being applied.
I would reject that argument for the reasons given by Lord Mance and Lord Hodge.
I agree with them that the proper approach is to consider first whether the clause was an exorbitant provision to have included in the contract at the time when it was made; and, if not, to consider next whether any relief should properly be granted under the equitable doctrine of relief against forfeiture in the circumstances at and after the time of the breach.
As Lord Mance and Lord Hodge have noted, this approach was followed by the Court of Appeal (Ackner, Kerr and Dillon LJJ) in BICC plc v Bundy Corpn [1985] Ch 232.
It is logical and just.
I disagree with the other members of the court in the parking case.
Since I am a lone voice of dissent and the judgments are already exceedingly long, I will state my reasons briefly.
Everyone agrees that there was a contract between Mr Beavis and ParkingEye, but I begin by looking at what was the consideration for, and essential content of, the contract.
The parties were content to argue the case, as they had in the Court of Appeal, on the basis that by using the car park Mr Beavis entered into a contract by which he agreed to leave it within two hours; and that his failure to do so was a breach of contract for which he agreed to pay 85 (subject to a discount for prompt payment).
Moore Bick LJ expressed doubt whether this was the correct analysis, and since this is a test case it is right to consider the matter.
Where parties intend to enter into legal relations, it does not require much to constitute consideration.
Some benefit must be conferred both ways; but the benefit provided by the promisor does not have to be for the promisee personally; it may be for some third party whom the promisee wishes to benefit. (This has nothing to do with the doctrine of privity.) Any act or promise in exchange for an act or promise can constitute consideration.
In this case we are concerned with a car park forming an integral part of a retail park occupied by a number of well known chains.
The use of the car park was not merely a benefit to the user.
It was of obvious benefit to the freeholder (and the lessees of the retail outlets) that members of the public should be attracted to the retail park by its availability, and that was no doubt why it was provided.
As Mr Christopher Butcher QC correctly submitted, the use of the car park by Mr Beavis was sufficient consideration for a contract governing the terms of its usage.
The form of notice stated that Parking is at the absolute discretion of the site, but once a motorist had parked he would obviously have to be given reasonable notice of a requirement to leave.
The most important term of the contract was that the user was permitted to stay for a maximum of two hours.
That requirement was displayed in bigger and bolder letters than anything else.
There were subsidiary requirements; that the user should not return within one hour after leaving; that parking should be within the bays marked; and that certain bays were restricted to use by blue badge holders (ie persons with mobility problems).
The contract further stated, although this was not legally necessary, that By parking within the car park, motorists agree to comply with the car park regulations, meaning the provisions stated in the notice (since there were no other regulations).
Overstaying would therefore be a breach of contract (as, for example, would be parking except within the lines of an appropriate marked bay).
In the case of a breach of any description, the user agree to pay the sum of 85.
This was therefore, as the parties rightly accepted, an agreement to pay a specified figure for a breach of contract.
It was not an agreement allowing a motorist to overstay in consideration of a payment of 85.
On overstaying (or for that matter on returning within one hour after leaving the car park) the user would be a trespasser.
We are not concerned in this case whether the agreement to pay 85 would leave the landowner free to sue the user for damages for trespass, although he would no doubt in theory be entitled to seek injunctive relief.
It is convenient to consider the effect of the Unfair Terms in Consumer Contracts Regulations 1999 (the Regulations) before considering the effect of the common law on penalty clauses.
Regulation 8(1) provides that an unfair term in a contract concluded with a consumer by a seller or supplier shall not be binding on the consumer.
An unfair term is defined in regulation 5(1): A contractual term which has not been individually negotiated shall be regarded as unfair if, contrary to the requirement of good faith, it causes a significant imbalance in the parties rights and obligations arising under the contract, to the detriment of the consumer.
Regulation 6(1) requires the question of unfairness to be assessed, taking into account the nature of the goods or services, and by referring to all the circumstances at the time of the conclusion of the contract and to all the other terms of the contract.
Regulation 6(2) excludes from the assessment of fairness terms (provided that they are in plain intelligible language) relating to the definition of the main subject matter of the contract or to the adequacy of the price or remuneration, as against the goods or services supplied in exchange.
The term which levies 85 on a user of the car park who overstays, or returns within an hour or parks badly, does not provide remuneration for the services of ParkingEye, nor does it relate to the definition of the subject matter of the contract.
It is simply a penalty for doing one of the things prohibited.
Its enforceability depends on whether it satisfies the requirement of fairness within the meaning of the Regulations.
Schedule 2 to the Regulations provides an indicative list of terms which may be considered unfair, including a term requiring a consumer who fails to fulfil his obligation to pay a disproportionately high sum in compensation.
The Regulations give effect to the European Council Directive 93/13/EEC of 5 April 1993 on unfair terms in consumer contracts (the Directive).
Article 3(1) of the Directive is the counterpart to regulation 5(1) and is identically worded.
In Director General of Fair Trading v First National Bank plc [2001] UKHL 52, [2002] 1 AC 481, para 17, Lord Bingham described this provision as laying down a composite test, covering both the making and the substance of the contract, which must be applied bearing in mind the object which the Regulations are designed to promote.
He said that fair dealing requires that the supplier should not, deliberately or unconsciously, take advantage of the consumers necessity, indigence, lack of experience, unfamiliarity with the subject matter of the contract, weak bargaining position or any factor listed in or analogous to those listed in the Schedule.
In the same case Lord Millett, at para 54, suggested as a matter for consideration whether, as between parties negotiating freely a contract on level terms, the party adversely affected by the term or his lawyer might reasonably be expected to object to it.
More recently in Aziz v Caixa dEstalvis de Catalunya, Tarragona i Manresa (Case C 415/11) [2013] 3 CMLR 89, the Court of Justice of the European Union has addressed the interpretation of article 3(1) of the Directive.
It observed (at para 44) that the system of protection introduced by the Directive is based on the idea that the consumer is in a weak position vis vis the seller or supplier.
In agreement with the opinion of Advocate General Kokott, the court held that the reference in article 3(1) to a significant imbalance in the parties rights and obligations under the contract must be interpreted as requiring the court to evaluate to what extent the term places the consumer in a worse position than would have been the situation under the relevant national law in the absence of that term.
Applying that test, it follows that the 85 penalty clause created a significant imbalance within the meaning of the regulation, because it far exceeded any amount which was otherwise likely to be recoverable as damages for breach of contract or trespass.
As to whether the imbalance was contrary to the requirement of good faith, the court, at para 76 in agreement with the Advocate General held that in order to assess whether the imbalance arises contrary to the requirement of good faith, it must be determined whether the seller or supplier, dealing fairly and equitably with the consumer, could reasonably assume that the consumer would have agreed to the term concerned in individual contract negotiations.
That test is significantly more favourable to the consumer than would be applied by a court in this country under the penalty doctrine.
Whereas the starting point at common law is that parties should be kept to their bargains, and it is for those objecting that a clause is penal to establish its exorbitant nature, the starting point of the Directive is that the consumer needs special protection, and it is for the supplier to show that a non core term which is significantly disadvantageous to the consumer, as compared with the ordinary operation of the law without that term, is one which the supplier can fairly assume that the consumer would have agreed in individual negotiations on level terms.
The burden is on the supplier to adduce the evidence necessary to justify that conclusion.
I do not consider that such an assumption could fairly be made in the present case.
The Consumers Association through Mr Butcher advanced a number of telling points.
By most peoples standards 85 is a substantial sum of money.
Mr Butcher reminded the court by way of comparison that the basic state pension is 115 per week.
There may be many reasons why the user of a car park in a retail park may unintentionally overstay by a short period.
There may be congestion in the shops or the user may be held up for any number of reasons.
There may be congestion trying to get out of the car park.
In short there may be numerous unforeseen circumstances.
No allowance is made for disabilities (other than the provision of bays for blue badge holders).
Similarly there may be good reasons for a person to return to the car park within two hours, for example because the shopper has left something behind (and the car park may incidentally be half empty).
There may be reasons why a user parks with his wheels outside the marked bay (for example because of the way the adjacent vehicle is parked or because he is a wheelchair user and none of the blue bays are available).
Examples could be multiplied.
The point is that the penalty clause makes no allowance for circumstances, allows no period of grace and provides no room for adjustment.
The court was referred to a code of practice published by the British Parking Association which addresses some of these matters, but the significant fact is that it is not a contractual document.
A competent lawyer representing a user in individual negotiation might be expected, among other things, to argue that the supplier should at least commit to following the code of practice.
More broadly the penalty clause places the whole cost of running the car park on the shoulders of those who overstay by possibly a very short time, although their contribution to the cost will have been very small.
The trial judge and the Court of Appeal were impressed by a comparison with the charges at local authority car parks.
The comparison is seductive but superficial.
Apart from the fact that local authorities operate under a different statutory scheme, a large amount of the cost is raised from all users by hourly charges, as distinct from placing the entire burden on the minority of overstayers; and there is not the same feature in the case of a municipal car park as there is in a supermarket car park, where the car park is ancillary to the use of the retail units some of whose customers are then required to underwrite the entire cost as a result of overstaying.
There is of course an artificiality in postulating a hypothetical negotiation between the supplier and an individual customer with the same access to legal advice, but because it is a consumer contract, and because the supplier is inserting a term which alters the legal effect under the core terms in the suppliers favour, the supplier requires as it were to put itself in the customers shoes and consider whether it can reasonably assume that the customer would have agreed to it.
I am not persuaded that it would be reasonable to make that assumption in this case and I would therefore have allowed the appeal.
It has been suggested that managing the effective use of parking space in the interests of the retailer and the users of those outlets who wished to find spaces to park could only work by deterring people from occupying space for a long time.
But that is a guess.
It may be so; it may not.
ParkingEye called no evidence on the point.
But it is common knowledge that many supermarket car parks make no such charge.
I return to the point that it was for ParkingEye to show the factual grounds on which it could reasonably assume that a customer using that car park would have agreed, in individual negotiations, to pay 85 if he overstayed for a minute, or parked with his wheels not entirely within a marked bay, or for whatever reason returned to the car park in less than one hour (perhaps because he had left something behind).
On the bare information which was placed before the court, I am not persuaded that ParkingEye has shown grounds for assuming that a party who was in a position to bargain individually, and who was advised by a competent lawyer, would have agreed to the penalty clause as it stood.
Lord Neuberger and Lord Sumption in para 107 have substituted their judgment of reasonableness of the clause for the question whether the supplier could reasonably have assumed that the customer would have agreed with the term, and on that approach there is not much, if any, difference in substance from the test whether it offended the penalty doctrine at common law.
That approach is consistent with their statement in para 104 that the considerations which show that it is not a penalty demonstrate also that it does not offend the Regulations.
I consider that the approach waters down the test adopted by the CJEU and at the very least that the point is not acte clair.
Mr Beaviss argument that the clause was a penalty at common law is more questionable, but in the circumstances nothing would be gained by discussing that matter further.
| UK-Abs | Cavendish v El Makdessi By an agreement, Mr Makdessi agreed to sell to Cavendish a controlling stake in the holding company of the largest advertising and marketing communications group in the Middle East.
The contract provided that if he was in breach of certain restrictive covenants against competing activities, Mr Makdessi would not be entitled to receive the final two instalments of the price paid by Cavendish (clause 5.1) and could be required to sell his remaining shares to Cavendish, at a price excluding the value of the goodwill of the business (clause 5.6).
Mr Makdessi subsequently breached these covenants.
Mr Makdessi argued that clauses 5.1 and 5.6 were unenforceable penalty clauses.
The Court of Appeal, overturning Burton J at first instance, held that the clauses were unenforceable penalties under the penalty rule as traditionally understood.
ParkingEye v Beavis ParkingEye Ltd agreed with the owners of the Riverside Retail Park to manage the car park at the site.
ParkingEye displayed numerous notices throughout the car park, saying that a failure to comply with a two hour time limit would result in a Parking Charge of 85.
On 15 April 2013, Mr Beavis parked in the car park, but overstayed the two hour limit by almost an hour.
ParkingEye demanded payment of the 85 charge.
Mr Beavis argued that the 85 charge was unenforceable at common law as a penalty, and/or that it was unfair and unenforceable by virtue of the Unfair Terms in Consumer Contracts Regulations 1999.
The Court of Appeal upheld the first instance decision rejecting those arguments.
The Supreme Court allows the appeal in Cavendish v El Makdessi and dismisses the appeal in ParkingEye v Beavis, thus upholding the validity of the disputed clauses in both cases.
Lord Neuberger and Lord Sumption give a joint judgment, with which Lord Clarke and Lord Carnwath agree.
Lord Mance and Lord Hodge write concurring judgments.
Lord Toulson agrees that the appeal in Cavendish v El Makdessi should be allowed but dissents in ParkingEye v Beavis.
The Legal Principles The penalty rule is an ancient, haphazardly constructed edifice which has not weathered well [3].
However, it is of long standing and a similar rule exists in all other developed systems of law.
It also covers types of contract which are not regulated in any other way.
It should not therefore be abolished, but neither should it be extended [36 40].
The fundamental principle is that the penalty rule regulates only the contractual remedy available for the breach of primary contractual obligations, and not the fairness of those primary obligations
themselves [13].
The relevant contractual remedy typically stipulates payment of money, but it equally applies to obligations to transfer assets, or clauses where one party forfeits a deposit following its own breach of contract [14 18].
What makes a contractual provision penal? Lord Dunedins tests in Dunlop Pneumatic Tyre Company Ltd. v New Garage and Motor Company Ltd. [1915] AC 79 have too often been treated as a code.
The speeches of the rest of the Appellate Committee, particularly Lord Atkinson, are at least as important.
The validity of a clause providing for the consequences of a breach of contract depends on whether the innocent party can be said to have a legitimate interest in the enforcement of the clause.
There is a legitimate interest in the recovery of a sum constituting a reasonable pre estimate of damages, but the innocent party may have a legitimate interest in performance which extends beyond the recovery of pecuniary compensation.
The law will not generally uphold a contractual remedy where the adverse impact of that remedy significantly exceeds the innocent partys legitimate interest [18 30].
The concepts of deterrence and genuine pre estimate of loss are unhelpful.
The true test is whether the impugned provision is a secondary obligation which imposes a detriment on the contract breaker out of all proportion to any legitimate interest of the innocent party in the enforcement of the primary obligation [32].
Lord Mance agrees with that test.
The first step is to consider whether any (and if so what) legitimate business interest is served and protected by the clause, and if so and secondly, whether the provision made for that interest is extravagant, exorbitant or unconscionable [152].
The penalty doctrine has been applied to clauses withholding payments, and transfers of moneys worth [154 159], and may be considered alongside relief against forfeiture [161].
It should not be abolished or restricted: its existence is justified by its longstanding invocation and endorsement in the United Kingdom, Europe and across common law jurisdictions [162 170].
Lord Hodge concurs, reviewing the authorities from England and Scotland and the historical development of the doctrine in Scots law.
The doctrine only applies to secondary obligations arising out of a breach of contract, but is not confined to cases requiring the payment of money on breach.
It applies to clauses withholding payments on breach, clauses requiring the party in breach to transfer property, and clauses requiring payment of a non refundable deposit if that deposit is not reasonable as earnest money (particularly where such a clause exceeds the percentage set by long established practice) [234 241].
The test is whether the sum or remedy stipulated as a consequence of a breach of contract is exorbitant or unconscionable when regard is had to the innocent partys interest in the performance of the contract.
A clause fixing a level of damages payable on breach will be a penalty if there is an extravagant disproportion between the stipulated sum and the highest level of damages that could possibly arise from the breach [255].
Lord Toulson agrees with Lord Hodges formulation of the test above, and with Lord Mance and Lord Hodge on the relationship between penalty and forfeiture clauses [294].
Application to Cavendish v El Makdessi The court concludes that neither clause 5.1 nor clause 5.6 are unenforceable penalty clauses, and accordingly allows the appeal.
Clause 5.1 is a price adjustment clause.
It is not a secondary provision but a primary obligation.
The Sellers earn consideration for their shares by (amongst other things) observing the restrictive covenants.
Whilst clause 5.1 has no relationship with the measure of loss attributable to the breach, Cavendish also had a legitimate interest in the observance of the restrictive covenants, in order to protect the goodwill of the Group generally.
The goodwill of the business was critical to Cavendish and the loyalty of Mr Makdessi was critical to the goodwill.
The court cannot assess the precise value of that obligation or determine how much less Cavendish would have paid for the business without the benefit of the restrictive covenants.
The parties were the best judges of how it should be reflected in their agreement [73 75].
A very similar analysis applies to clause 5.6.
It is also a primary obligation, and it could not be treated as invalid without rewriting the contract [83 88].
It was said to be penal because the formula excluded goodwill from the calculation of the payment price.
It did not represent the estimated loss attributable to the breach.
But it reflected the reduced consideration which Cavendish would have been prepared to pay for the acquisition of the business on the hypothesis that they could not count on the loyalty of Mr Makdessi [79 83].
Lord Mance, Lord Hodge and Lord Toulson concur on both clause 5.1 and clause 5.6 [171 187; 269 282; 292].
Application to ParkingEye v Beavis The court dismisses the appeal by a majority of six to one, and declares that the charge does not contravene the penalty rule, or the Unfair Terms in Consumer Contracts Regulations 1999.
Mr Beavis had a contractual licence to park in the car park on the terms of the notice posted at the entrance, including the two hour limit.
The 85 was a charge for contravening the terms of the contractual licence.
This is a common scheme, subject to indirect regulation by statute and the British Parking Associations Code of Practice.
The charge had two main objects: (i) the management of the efficient use of parking space in the interests of the retail outlets and their users by deterring long stay or commuter traffic, and (ii) the generation of income in order to run the scheme [94 98].
Unlike in Cavendish v El Makdessi, the penalty rule is engaged.
However, the 85 charge is not a penalty.
Both ParkingEye and the landowners had a legitimate interest in charging overstaying motorists, which extended beyond the recovery of any loss.
The interest of the landowners was the provision and efficient management of customer parking for the retail outlets.
The interest of ParkingEye was in income from the charge, which met the running costs of a legitimate scheme plus a profit margin [99].
Further, the charge was neither extravagant nor unconscionable, having regard to practice around the United Kingdom, and taking into account the use of this particular car park and the clear wording of the notices [100 101].
The result is the same under the 1999 Regulations.
Although the charge may fall under the description of potentially unfair terms at para. 1(e) of Schedule 2, it did not come within the basic test for unfairness in Regulations 5 and 6(1), as that test has been recently interpreted by the Court of Justice in Luxembourg [102 106].
Any imbalance in the parties rights did not arise contrary to the requirements of good faith, because ParkingEye and the owners had a legitimate interest in inducing Mr Beavis not to overstay in order to efficiently manage the car park for the benefit of the generality of users of the retail outlets.
The charge was no higher than was necessary to achieve that objective.
Objectively, the reasonable motorist would have, and often did, agree to the charge [106 109].
Lord Mance and Lord Hodge both concur [188 214; 284 288].
Lord Toulson (dissenting) would have allowed the appeal, on the grounds that the clause infringes the 1999 Regulations, which reflect the special protection afforded to consumers under the European Directive on unfair terms in consumer contracts.
The burden is on the supplier to show that the consumer would have agreed to the terms in individual negotiations on level terms.
It is not reasonable to make that assumption in this case, and in any event ParkingEye had not produced sufficient evidence to that effect [309 315].
|
This appeal concerns the effect of the default clause in a standard form of contract which is widely used in the grain trade.
On 10 June 2010 the respondents, Nidera BV, whom I shall call the buyers, entered into a contract with the appellants, Bunge SA (the sellers), to buy 25,000 metric tonnes (+/ 10% in buyers option) of Russian milling wheat crop 2010, FOB Novorossiysk.
The shipment period was August 2010, but there were provisions for narrowing that period by notice.
In the event it was narrowed to 23 30 August 2010.
The contract incorporated GAFTA Form 49 (as in effect from 1 January 2006), which is the standard form of FOB sale contract of the Grain and Feed Trade Association, for goods delivered from central or Eastern Europe in bulk or bags.
Clauses 13 and 20 of GAFTA 49 are the main provisions relevant to the present dispute.
They provided: 13.
PROHIBITION In case of prohibition of export, blockade or hostilities or in case of any executive or legislative act done by or on behalf of the government of the country of origin of the goods, or of the country from which the goods are to be shipped, restricting export, whether partially or otherwise, any such restriction shall be deemed by both parties toapply to this contract and to the extent of such total or partial restriction to prevent fulfilment whether by shipment or by any other means whatsoever and to that extent this contract or any unfulfilled portion thereof shall be cancelled.
Sellers shall advise buyers without delay with the reasons therefor and, if required, Sellers must produce proof to justify the cancellation. 20.
DEFAULT In default of fulfilment of contract by either party, the following provisions shall apply: (a) The party other than the defaulter shall, at their discretion have the right, after serving notice on the defaulter, to sell or purchase, as the case may be, against the defaulter, and such sale or purchase shall establish the default price. (b) If either party be dissatisfied with such default price or if the right at (a) above is not exercisedand damages cannot be mutually agreed, then the assessment of damages shall be settled by arbitration. (c) The damages payable shall be based on, but not limited to the difference betweenthe contract price and either the default price established under (a) above or upon the actual or estimated value of the goods on the date of default established under (b) above. (d) In all cases the damages shall, in addition, include any proven additional expenses which would directly and naturally result in the ordinary course of events from the defaulter's breach of contract, but shall in no case include loss of profit on any sub contracts made by the party defaulted against or others unless the arbitrator(s) or board of appeal, having regard to special circumstances, shall in his/their sole and absolute discretion think fit. (e) Damages, if any, shall be computed on the quantity called for, but if no such quantity has been declared then on the mean contract quantity and any option available to either party shall be deemed to have been exercised accordingly in favour of the mean contract quantity.
On 5 August 2010 Russia introduced a legislative embargo on exports of wheat from its territory, which was to run from 15 August to 31 December 2010.
On 9 August 2010, the sellers notified the buyers of the embargo and purported to declare the contract cancelled.
The buyers did not accept that the sellers were entitled to cancel the contract at that stage.
They treated the purported cancellation as a repudiation, which they accepted on 11 August 2010.
On the following day, the sellers offered to reinstate the contract on the same terms, but the buyers would not agree.
Instead, they began arbitration proceedings under the GAFTA rules, in support of a claim for damages of US$3,062,500.
The proceedings below
At the hearing of the arbitration, there was a measure of common ground about the basis for assessing damages.
It was agreed (i) that clause 20 applied to anticipatory repudiation, (ii) that the buyers had not bought against the sellers pursuant to sub clause (a); (iii) that the date of default for the purpose of clause 20(c) was 11 August 2010, when the sellers repudiation was accepted, and (iv) that the difference between the contract and the market price at that date was US$3,062,500.
The sellers case was that they had been entitled to terminate the contract under clause 13 upon the announcement of the export ban, and that even if the termination was premature, the fact that shipment under the contract would have been subject to the ban when the time for shipment came meant that no loss had been suffered.
GAFTAs first tier arbitration tribunal issued its award on 1 November 2011.
It held that the sellers had repudiated the contract because their notice of cancellation was premature.
The embargo might have been lifted in time to permit shipment within the laycan period.
It was therefore impossible to say, as at the date when the sellers cancelled, that shipment would necessarily be prevented by the embargo.
But the tribunal declined to award substantial damages.
They held, in agreement with the sellers, that none had been suffered because in fact the embargo was not lifted.
It followed that the contract would have been cancelled in any event when the time came for delivery.
Both parties appealed to the GAFTA Appeal Board, which issued its own award on 22 June 2012.
The Board agreed with the first tier tribunal that the sellers had repudiated the contract by cancelling too early.
It accepted that if the contract had not been repudiated on 9 August 2010 it would have been cancelled because of the embargo.
But it awarded damages of US$3,062,500, representing the difference between the contract and the market price on 11 August 2010, the date that the repudiation was accepted.
In the Appeal Boards view, such an award was required by clause 20(c) of GAFTA 49.
The sellers argument, as summarised in the Appeal Boards award, was that at common law it was necessary to take account of events occurring after the breach which showed that the same loss would have been suffered even without the repudiation.
They relied on Maredelanto Compania Naviera SA v Bergbau Handel GmbH (The Mihalis Angelos) [1971] 1 QB 164, and Golden Strait Corporation v Nippon Yusen Kubishika Kaisha (The Golden Victory) [2007] 2 AC 535.
The issues were (i) whether that was indeed the position at common law in the case of a contract of this kind; and (ii) if so, whether the common law principle had any application to a contract containing clause 20.
The Appeal Board doubted whether at common law subsequent events would be relevant to the assessment of damages under a contract for the sale of a single cargo, as opposed to a contract for delivery by instalments.
But they considered that the issue on damages turned wholly on the effect of clause 20 as that clause was commonly understood in the trade.
They concluded that sub clause (c) was intended to produce an easily understood and readily applied formula for computing damages in a case where agreement was not reached under sub clauses (a) and (b).
That formula might produce a figure more or less than the actual loss.
Proceeding from the common ground that the default date for the purpose of sub clause (c) was 11 August 2010 and from the parties agreement on figures, they awarded the full amount of the buyers claim.
This conclusion was also determinative, in the view of the Appeal Board, of the sellers further argument that the buyers had failed to mitigate their loss by accepting the sellers offer to reinstate the contract on the same terms.
As the Appeal Board saw it, the buyers acted reasonably in rejecting the offer, because at the time it was made they had a vested right to a large sum by way of damages and acceptance of the offer would have substituted a right to delivery that would probably have been defeated by the embargo.
On 10 October 2012, Andrew Smith J gave permission to appeal against the award under section 69 of the Arbitration Act 1996, limited to the following issues: 2.1.
Is the application of the GAFTA prohibition clause limited to a case where it can be seen after the event that performance of the contract has in fact been prevented by the prohibition in question? 2.2.
Does the GAFTA default clause exclude common law principles for the assessment of damages for anticipatory repudiatory breach and in particular (i) the principle of mitigation and/or (ii) the compensation principle identified in The Golden Victory [2007] 2 AC 353? 2.3.
Is the overriding compensatory principle established by The Golden Victory limited to instalment contracts? 2.4.
Was the board wrong in law to conclude that the buyers rejection of the sellers offer to reinstate the contract did not constitute a failure to mitigate on the ground that the sellers did not offer to reinstate the contract on different and more favourable terms than contained in the original contract?
Hamblen J, who heard the appeal in the Commercial Court, dismissed the appeal on issues 2.1, 2.2 and 2.4: [2013] EWHC 84 (Comm); [2013] 1 Lloyds Rep 621.
Since he agreed with the Appeal Board that clause 20 determined the measure of damages whether or not it produced a result corresponding to the common law, he held that issue 2.3 did not arise.
But he shared the doubts of the Appeal Board about the application of The Golden Victory to a contract for a single cargo, observing that this was very much an open question.
In the Court of Appeal, the sellers abandoned their arguments on mitigation (issues 2.2(i) and 2.4).
On the remaining issues, the Court of Appeal (Moore Bick, Floyd and Clarke LJJ) affirmed the decision of Hamblen J: [2013] EWCA Civ 1628; [2014] 1 Lloyds Rep 404.
The common law
Anticipatory breach of contract, probably more accurately referred to as renunciation, is a concept which can be traced back to the earliest years of the common law but was first coherently formulated in terms of legal principle in Hochster v De la Tour (1853) 2 E & B 678 in England and Howie v Anderson (1848) 10 D 355 in Scotland.
In its modern form it is a response to the pragmatic concern of Victorian judges to avoid the waste of economic resources implicit in any inflexible rule which required the parties to go through the motions of performing a contract which was for practical purposes dead.
The same concern informs much of the law of contract, notably in the area of frustration and remedies.
The early rules of pleading, reflecting the terms of the contract, had required the plaintiff in an action for damages to plead that he had tendered performance of any obligation to be performed by him as a condition precedent to the defaulting partys obligation.
But as Lord Campbell explained in Hochster v De la Tour, the effect of the renunciation of a contract in advance of the time agreed for performance was (i) to confer on the injured party an option to accept the renunciation as bringing the contract to an end and to treat himself as discharged from that time onward from further performance; (ii) to enable the injured party to deal with the financial consequences by suing for damages at once, without waiting for the time fixed for performance; and (iii) to bring forward the injured partys duty to mitigate to the time when the renunciation was accepted.
An accepted renunciation gives rise to particular problems of legal analysis when it comes to the assessment of damages.
As Lord Mustill observed in a characteristically sardonic comment on recent case law: there is every reason to be wary about applying the ordinary rules of damages for breach of contract to this special type of breach unlike the position regarding actual breach I do not see how damages for an anticipatory breach can be awarded with any semblance of intellectual rigour without at least an attempt to inquire into what was the breach to which the damages are attached, and what kind of breach it was which could be committed before there was any present obligation to perform. the common law has never succeeded in finding a solution which is both theoretically sound and capable of producing sensible results in practice.
The attempt was, to all intents and purposes, given up a long time ago, and the courts have been content to employ that powerful but dangerous weapon of the common law, a fiction. in the field of anticipatory repudiation, a breach was simply assumed to have occurred when the repudiatory conduct took place, and at least where there was an available market for the goods or services in question those responsible for assessing damages were content to look directly to a comparison between the current market prices or rates and those prescribed by the contract, without any inquiry into why this comparison was being made.
M Mustill, The Golden Victory Some Reflections (2008) 124 LQR 569, 571 572.
The fundamental principle of the common law of damages is the compensatory principle, which requires that the injured party is so far as money can do it to be placed in the same situation with respect to damages as if the contract had been performed: Robinson v Harman (1848) 1 Exch 850, 855 (Parke B).
In a contract of sale where there is an available market, this is ordinarily achieved by comparing the contract price with the price that would have been agreed under a notional substitute contract assumed to have been entered into in its place at the market rate but otherwise on the same terms.
Section 51 of the Sale of Goods Act 1979 provides: 51.
Damages for non delivery (1) Where the seller wrongfully neglects or refuses to deliver the goods to the buyer, the buyer may maintain an action against the seller for damages for non delivery. (2) The measure of damages is the estimated loss directly and naturally resulting, in the ordinary course of events, from the seller's breach of contract. (3) Where there is an available market for the goods in question the measure of damages is prima facie to be ascertained by the difference between the contract price and the market or current price of the goods at the time or times when they ought to have been delivered, or (if no time was fixed) then at the time of the refusal to deliver.
Section 50 contains corresponding provisions for non acceptance by the buyer.
Sections 50 and 51 reproduce the corresponding provisions of the Sale of Goods Act 1893, and reflect common law principles which had already been established at the time of the earlier Act.
Section 51(2) states the compensatory principle in the context of a sellers non delivery.
Subsection (3) states the prima facie measure of damages where there is an available market, but it is not so much a rule as a technique which is prima facie to be treated as satisfying the general principle expressed in subsection (2).
It is not obvious from the terms of the section how it is to apply to a case where by reason of an accepted renunciation the contract has come to an end in advance of the contractual time for delivery.
That situation gives rise to two potential questions which are not always sufficiently distinguished in the case law.
The first question is: assuming that there is an available market, as at what date is the market price to be determined for the purpose of assessing damages? It is clear that once that date is determined, any subsequent change in the market price is irrelevant.
Most of the case law on the measure of damages for the repudiation of a contract of sale arises out of disputes about the relevant market price, and this is what judges speaking of the breach date rule are usually referring to.
The second question is: in what if any circumstances will it be relevant to take account of contingencies (other than a change in the market price) if subsequent events show that they would have reduced the value of performance, perhaps to nothing, even without the defaulters renunciation? This may happen, for example, if the injured party would have been unable to perform it when the time for performance arrived, or if the defaulter would have been relieved of the obligation to perform by frustration or under the express terms.
The answer to the first question, although like section 51(3) it is only a prima facie answer, is that where there is an available market for the goods, the market price is determined as at the contractual date of delivery, unless the buyer should have mitigated by going into the market and entering into a substitute contract at some earlier stage: Garnac Grain Co Inc v HMF Faur & Fairclough Ltd [1968] AC 1130, 1168; Tai Hing Cotton Mill Ltd v Kamsing Knitting Factory [1979] AC 91, 102.
Normally, however, the injured party will be required to mitigate his loss by going into the market for a substitute contract as soon as is reasonable after the original contract was terminated.
Damages will then be assessed by reference to the price which he obtained.
If he chooses not to do so, damages will generally be assessed by reference to the market price at the time when he should have done: Koch Marine Inc v dAmica Societa di Navigazione (The Elena DAmico) [1980] 1 Lloyds 75, 87, 89.
The result is that in practice where there is a renunciation and an available market, the relevant market price for the purposes of assessing damages will generally be determined not by the prima facie measure but by the principles of mitigation.
The answer to the second question was given initially by the Court of Appeal in Maredelanto Compania Naviera SA v Bergbau Handel GmbH (The Mihalis Angelos) [1971] 1 QB 164 and then by the House of Lords in Golden Strait Corpn v Nippon Yusen Kubishika Kaisha (The Golden Victory) [2007] 2 AC 353.
In the first of these cases the Court of Appeal held that on the assumption that the voyage charterers of The Mihalis Angelos had repudiated the contract they were nevertheless not liable for substantial damages.
This was because if the contract had continued they would have terminated it lawfully for breach of a condition as to the time of the vessels arrival at the port of delivery.
Lord Denning and Edmund Davies LJ put the matter entirely generally.
In Lord Dennings words (at p 196), You must take into account all contingencies which might have reduced or extinguished the loss.
But difficulty arose from the suggestion of Megaw LJ (at pp 209 210) that the result turned on the fact that the vessel was predestined to arrive late at the port of delivery.
The subsequent decision in The Golden Victory disposed of the argument, based on Megaw LJs dictum, that a subsequent event which would have reduced or extinguished the loss had to be inevitable, viewed at the time when the repudiation was accepted.
The facts were that a seven year time charter had been brought to an end by the charterers repudiation in the course of performance some four years before its contractual terms but only fourteen months before it would have been cancelled in any event under a war clause.
At the time when the charterers repudiation was accepted, war was far from inevitable.
It was found to be no more than a possibility.
The question was how long it should be assumed, in those circumstances, that the charterparty would have lasted if it had not been wrongfully terminated.
The House held by a majority that the overriding principle (or lodestar) was the compensatory principle.
Irrespective of the date as at which the market price was ascertained, it was necessary to take account of contingencies known at the date of the arbitrators assessment to have occurred, if their effect was that the contract would have been lawfully terminated at or before its contractual term.
It followed that damages were to be assessed on the assumption that the charter would have lasted for another 14 months.
The reasoning has to some extent been obscured by the focus on the implications of the so called breach date rule and on the competing demands of certainty and compensation.
The real difference between the majority and the minority turned on the question what was being valued for the purpose assessing damages.
The majority were valuing the chartered service that would actually have been performed if the charterparty had not been wrongfully brought to a premature end.
On that footing, the notional substitute contract, whenever it was made and at whatever market rate, would have made no difference because it would have been subject to the same war clause as the original contract: see Lord Scott of Foscote at para 37, and Lord Brown of Eaton under Heywood at paras 76 78 and 82.
The minority on the other hand considered that one should value not the chartered service which would actually have been performed, but the charterparty itself, assessed at the time that it was terminated, by reference to the terms of a notional substitute concluded as soon as possible after the termination of the original.
That would vary, not according to the actual outcome, but according to the outcomes which were perceived as possible or probable at the time that the notional substitute contract was made.
The possibility or probability of war would then be factored into the price agreed in the substitute contract: see Lord Bingham of Cornhill at paras 22 and Lord Walker of Gestingthorpe at paras 45 46.
I think that the majoritys view on this point was correct.
Sections 50 and 51 of the Sale of Goods Act, like the corresponding principles of the common law, are concerned with the price of the goods or services which would have been delivered under the contract.
They are not concerned with the value of the contract as an article of commerce in itself.
As Lord Brown observed at paras 82 83, even if the charterparty rights could have been sold for a capital sum, this was not a proper basis for assessing loss, and an assessment which proceeded as if it were would extend the effect of the available market rule well beyond its proper scope.
The leading speech for the majority, which was delivered by Lord Scott of Foscote, contains dicta which have sometimes been taken to suggest a distinction between a contract for a one off sale and a contract for the supply of goods or services over a period of time: see paras 34 35.
These dicta influenced both the Appeal Board and Hamblen J in the present case.
But I do not think that Lord Scott was suggesting that the underlying principle was any different in the case of a one off sale.
Where the only question is the relevant date for taking the market price, the financial consequences of the breach may be said to crystallise at that date.
But where, after that date, some supervening event occurs which shows that that neither the original contract (had it continued) nor the notional substitute contract at the market price would ever have been performed, the concept of crystallising the assessment of damages at that price is unhelpful.
The occurrence of the supervening event would have reduced the value of performance, possibly to nothing, even if the contract had not been wrongfully terminated and whatever the relevant market price.
The nature of that problem does not differ according to whether the contract provides for a single act of performance or several successive ones.
Nor, as it seems to me, is there any principled reason why the majoritys solution should be any different in the two cases.
If a distinction were to be made between them, it is difficult to see how The Mihalis Angelos, which concerned a contract for a single voyage, could have been decided as it was.
As Lord Scott observed in The Golden Victory at para 36, the compensatory principle would be equally offended by disregarding subsequent events serving to reduce or eliminate the loss under any anticipatory breach the acceptance of which had terminated an executory contract.
The most that can be said about one off contracts of sale is that the facts may be different.
In particular, if the injured party goes into the market and enters into a substitute contract by way of mitigation, it will not necessarily be subject to the same contingencies as the original contract.
The principle upheld in The Golden Victory has come in for a certain amount of academic criticism and judicial doubt.
To my mind both the criticism and the doubt are unjustified.
The most comprehensive and influential critic has been Professor Treitel.
His views were set out in their fullest form in a case note on the decision of the Court of Appeal, which had reached the same conclusion as the majority of the Appellate Committee: see Assessment of Damages for Wrongful Repudiation, (2007) 123 LQR 9.
Professor Treitels case note was cited to the Appellate Committee but evidently did not move them.
His main criticisms were, first, that the decision failed to distinguish between the different supervening events (successful mitigation by the defaulting party, inability of the innocent party to perform, cancellation under an express provision) which may serve to reduce or extinguish the loss; secondly, that it took no account of the collateral motives that might have moved the party who had repudiated the contract to cancel it lawfully at a later stage if it had continued; and, thirdly, that it attached insufficient weight to the commercial value of certainty.
I am no more convinced by these criticisms than the Appellate Committee was in The Golden Victory.
The principle which the Committee applied was neither new nor heterodox.
There is no principled reason why, in order to determine the value of the contractual performance which has been lost by the repudiation, one should not consider what would have happened if the repudiation had not occurred.
On the contrary, this seems to be fundamental to any assessment of damages designed to compensate the injured party for the consequences of the breach.
If the contract had not been repudiated, it would have been lawfully cancellable.
If it was lawfully cancellable, the charterer would have been entitled to avail himself of that right regardless of his motive.
The only question is whether he would in fact have done so, a question which in practice would probably have been determined by his financial interest.
Commercial certainty is undoubtedly important, although its significance will inevitably vary from one contract to another.
But it can rarely be thought to justify an award of substantial damages to someone who has not suffered any.
As Lord Mance pointed out in the Court of Appeal in The Golden Victory [2006] 1 WLR 533, para 24, the degree of uncertainty involved in that case was no greater than the uncertainty inherent in the contract itself.
The parties obligations were always defeasible in the uncertain event of war, just as their obligations under the contract presently in issue were always defeasible in the uncertain event of an export embargo.
Clause 20 of GAFTA 49
Mr Rainey QC, who appeared before us for the sellers, submitted that there was a strong presumption that an express damages clause was not intended to depart from the compensatory principle applied in The Golden Victory.
Unless the contract provided otherwise in clear terms, damages would not be awarded where no loss had been sustained.
This was not, he said, inconsistent with clause 20, which only required the assessment of damages to be based on the difference between the contract price and the market price or value at the relevant time.
He proposed that effect should be given to the parties presumed intention to adhere to the compensatory principle by distinguishing between two stages of the inquiry, namely (i) whether any loss has been sustained as a result of the breach, and (ii) if so, how much loss had been suffered.
Clause 20, he suggested, was concerned with stage (ii) but not stage (i).
Two preliminary observations are called for.
The first is that damages clauses are commonly intended to avoid disputes about damages, either by prescribing a fixed measure of loss (as in the case of a liquidated damages clause) or by a providing a mechanical formula in place of the more nuanced and fact sensitive approach of the common law (as in clause 20 of GAFTA 49).
In either case, it is inherent in the clause that it may produce a different result from the common law.
For that reason there can be no scope for a presumption that the parties intended the clause to produce the same measure of damages as the compensatory principle would produce at common law.
The mere fact that in some cases its application will over or under estimate the injured partys loss is nothing to the point.
Such clauses necessarily assume that the parties are willing to take the rough with the smooth.
However, I would accept a more moderate version of Mr Raineys presumption.
A damages clause may be assumed, in the absence of clear words, not to have been intended to operate arbitrarily, for example by producing a result unrelated to anything which the parties can reasonably have expected to approximate to the true loss.
The second preliminary observation is that such clauses are not necessarily to be regarded as complete codes for the assessment of damages.
A damages clause, like any other contractual provision, is conclusive of the matters with which it deals.
It may also implicitly exclude considerations which, although not directly within its scope, cannot be applied consistently with its terms.
But it is a question of construction whether the mere fact that it deals with damages means that it must have been intended to do so exhaustively, thereby impliedly excluding any considerations which it has not expressly addressed.
To treat a damages clause as a complete code in this all embracing sense is to tax the foresight of the draftsman in a way which is rarely appropriate unless the alternative is to undermine the coherence or utility of the clause.
Clause 20(a) (c) of GAFTA 49 is concerned with the determination of the difference between the contract price of the goods and their market price or value.
Detailed analysis of the way that it works does not affect the outcome of this appeal, and argument on the point was largely foreclosed by the way that the case was put to the arbitrators.
But given the importance of the GAFTA default clause, it is right to deal with it.
The position may in my view be summarised as follows: (1) The clause applies, as its opening words declare, in default of fulfilment of contract by either party.
As a matter of ordinary language, the fulfilment of the contract means its performance, and default of fulfilment means its non performance.
This is the sense in which fulfilment is used throughout GAFTA 49.
Thus clause 4 deals with brokerage, and provides that it is payable contract fulfilled or not fulfilled, but not if such non fulfilment is due to the (lawful) cancellation of the contract under the prohibition or force majeure clauses.
Clause 13, the prohibition clause, provides that prohibition of export, blockade or of hostilities will cause the contract to be cancelled if and so far as it prevents fulfilment whether by shipment or by any other means whatsoever.
Clause 14 is a more general force majeure clause applicable to cases where the execution of this contract or any unfulfilled portion thereof is prevented by specified categories of event.
Clause 22 provides for the closing out of the contract in the event of insolvency supervening before fulfilment of this contract.
In each of these contexts the fulfilment of the contract clearly refers to the performance of the parties contractual obligations, and non fulfilment or default of fulfilment to their non performance.
The use of the same term in the opening words of clause 20 indicates that that clause is concerned with non performance.
For this purpose, it does not matter whether the contract has not been performed because it was repudiated in advance of the time for performance, or because it was simply not performed when that time arrived.
In either case, there is nothing other than contractual performance which can be said not to have been fulfilled. (2) Clause 20(a) gives the injured party the option, at its discretion, of selling or buying (as the case may be) against the defaulter, in which case the sale or purchase price will be the default price.
Either party is at liberty to reject the default price, if there is one, as the basis for assessing damages.
If either (i) there is no default price, because the injured party did not go into the market to buy or sell against the defaulter, or else (ii) there is a default price but one of the parties is dissatisfied with it, then damages must go to arbitration in accordance with sub clause (c). (3) Sub clause (c) provides for two alternative bases of assessment by the arbitrators.
The first, which applies if a default price has been established but not accepted, is the difference between the default price and the contract price.
In other words, if the injured party has gone into the market and bought or sold against the defaulter, the arbitrators may accept that the default price should be used to calculate damages, notwithstanding the objections of one or other party or even both of them.
The second basis of assessment is the difference between the contract price and the actual or estimated value of the contract goods at the date of default.
This means the date of the default of fulfilment referred to in the opening words of clause 20, ie the date on which the contract should have been fulfilled by performance in accordance with its terms. (The words established under (b) above merely refer to the value settled by arbitration, that being the only basis on which (b) provides for a value to be fixed.) (4) The combined effect of sub clauses (a), (b) and (c) is therefore to produce a measure of damages which differs in two main respects from the common law paradigm.
The first is that the injured party is not required to mitigate by going into the market and buying or selling against the defaulter, but has a discretion whether to do so.
Damages can be assessed as at the date when the injured party accepted the repudiation only if he actually went into the market to fix a price at that date.
The second is that if the injured party has not in fact gone into the market and made a substitute contract the contract price falls to be compared not with the market price of the goods but with their actual or estimated value.
This may be assessed by reference to the market price of different but comparable goods, for example goods of different origin or shipment date.
Mr Rainey submits that this careful scheme is concerned only with the question how much loss has been suffered, and that it applies only once it has been determined on a preliminary inquiry that there has been at least some loss.
It does not apply if at common law there has been none.
I do not accept this.
In my view there is one question, namely how much loss has been suffered.
Zero is simply one possible answer to that question.
Mr Raineys approach does not even secure the consistent application of the compensatory principle which is said to be its justification.
If the clause produces a high figure for the injured partys loss, it would fall to be applied if the figure calculated in accordance with the compensatory principle was low but not if it was zero.
If, for example, the injured party had suffered some modest out of pocket expenses recoverable under sub clause (d), that would result in the application of the clause to the whole of the rest of the claim, however much its effect was to overstate the actual loss.
These consequences seem at least as arbitrary and anomalous as those of which Mr Raineys clients complain.
The real distinction in my opinion is not between cases where there would be some damage at common law and cases where there would be none.
It is between the two questions which I have identified at para 16 above.
As applied to facts like these, they are, first, what is the relevant market price or value of the goods for the purposes of assessing damages? And, secondly, in what circumstances is it relevant to take account of contingencies, other than changes in the market price or value of the goods, which would have prevented the goods from being delivered whatever the market price or value, with the result that the buyer would have suffered the same loss in any event?
Leaving aside the provisions of sub clause (d) relating to additional expenses and losses on sub contracts, which have no bearing on the present issue, clause 20 is concerned only with the first of these questions.
Sub clauses (a) to (c) constitute an elaborate, indeed a complete, code for determining the market price or value of the goods that either were actually purchased by way of mitigation or might have been purchased under a notional substitute contract.
The clause does not deal at all with the effect of subsequent events which would have resulted in the original contract not being performed in any event.
The effect of these events could be excluded from consideration only if clause 20 were treated as a complete code not just for determining the relevant market price or value but for every aspect of the assessment of damages.
In my opinion clause 20 cannot be viewed in that way.
In the first place, it neither provides nor assumes that assessment will depend only on the difference between the contract price and the relevant market price or value.
It provides that the damages payable shall be based on that difference.
It does not exclude every other consideration which may be relevant to determine the injured partys actual loss.
The clause is consistent with a conclusion that because of a subsequent supervening event the contract would never have been performed and the same loss would have been suffered even if it had not been renounced.
Secondly, this is what one would in any event infer from the limited subject matter of the clause.
Clause 20 is not sufficiently comprehensive to be regarded as a complete code covering the entire field of damages.
Sub clause (c) covers the same territory as sections 50(3) and 51(3) of the Sales of Goods Act, and sub clauses (a) and (b) cover the territory occupied by the common law principles concerning the mitigation of losses arising from price movements.
But this is very far from the entire field.
These provisions bring a valuable measure of certainty to issues arising from price movements which have given rise to difficulty and dispute at common law for 150 years.
That is a valuable purpose which the clause achieves whatever the answer to the question now before us.
But clause 20 is not concerned with bases of assessment which do not depend on the terms of a notional substitute contract or on any determination of the market price: for example expenses incurred by the buyer in the course of performance, which are not occasioned by the breach of contract but have been rendered futile by it, and would normally be recoverable as an alternative to the prima facie measure.
Moreover, although the clause deals with the injured partys duty to mitigate by going into the market to buy or sell against the defaulter, it does not deal with any other aspect of mitigation.
It therefore leaves open the possibility that damages may be affected by a successful act of mitigation on the part of the injured party or by an offer from the defaulter which it would have been reasonable for the injured party to accept.
Likewise, in my opinion, clause 20 neither addresses nor excludes the consideration of supervening events (other than price movements) which operate to reduce or extinguish the loss.
A similar conclusion was reached in two decisions concerning similar default clauses, both of which I respectfully regard as consistent with principle.
Bem Dis A Turk S/A TR v International Agri Trade Co Ltd (The Selda) [1998] 1 Lloyds Rep 416 (Clarke J), [1999] 1 Lloyds Rep 729 (CA) arose out of the sellers repudiation of a C&F contract containing an earlier version of the GAFTA default clause, which was similar to clause 20 but did not include the provision of sub clause (d) allowing the recovery of expenses occasioned by the breach.
The buyers made no claim for damages based on the difference between the contract price and the market price or value, presumably because the market had moved in their favour since the original contract was made.
They claimed only the expenses occasioned by the repudiation.
They recovered them from the arbitrators, and the award was affirmed by both Clarke J and the Court of Appeal.
Among the arguments which were rejected at all three stages was that the default clause was a complete code covering the whole field of damages.
This was because it was concerned only with the computation of damages based on the difference between the contract price and the market price or value, or on the losses incurred on sub contracts.
A claim for expenses lay outside its scope and was not therefore implicitly excluded.
The argument rejected in The Selda was that the default clause impliedly excluded any head of loss which it did not expressly allow, and some significance was attached to the analogy with exclusion clauses drawn by Lord Diplock in Gilbert Ash (Northern) Ltd v Modern Engineering (Bristol) Ltd [1974] AC 689, 717 718.
But I think that the analysis would have been the same in the converse case, where it was suggested that the clause impliedly required the award of a head of damage which has not been suffered.
This was the position in Novasen SA v Alimenta SA [2013] 1 Lloyds Rep 647, the facts of which were indistinguishable from those of the present case.
The contract incorporated a standard form of the Federation of Oil, Seeds and Fats Associations which included a default clause similar to clause 20(a) (c) and (e) of GAFTA 49, except that the difference between the contract and the market price was expressed to be the maximum measure of damages.
The issue was whether a loss computed in accordance with the clause had been extinguished by the later operation of an export ban at the contractual point of shipment.
Popplewell J held that it had, on the ground that nothing in the clause required a loss calculated in accordance with the default clause to be awarded to the injured party if supervening events showed that it had not been suffered.
This result seems to me to be consistent with principle.
The alternative is to allow the clause to operate arbitrarily as a means of recovering what may be very substantial damages in circumstances where there has been no loss at all.
In the present case, the sellers jumped the gun.
They repudiated the contract by anticipating that the Russian export ban would prevent shipment at a time when this was not yet clear.
But fortunately for them their assumption was in the event proved to have been correct.
The ban would have prevented shipment when the time came.
The buyers did nothing in consequence of the termination, since they chose not to go into the market to replace the goods.
They therefore lost nothing, and the arbitrators should not have felt inhibited from saying so.
Conclusion
In my opinion the answer to question 2.3 in Andrew Smith Js order granting permission to appeal from the award is that the compensatory principle established in The Golden Victory is not limited to instalment contracts, and that the GAFTA Appeal Board was in error in thinking that it was.
The answer to question 2.2(ii) in the order is that the default clause in GAFTA 49 does not exclude the principle identified in The Golden Victory [2007] 2 AC 353.
In both respects, the correct conclusion had been reached in the first tier award.
It follows that I would allow this appeal and vary the award of the Appeal Board by excising so much of it as awards substantial damages to the buyers and substituting an award of nominal damages in the sum of US$5.
The parties should be directed to deal in writing with the question whether the award should also be varied so far as it awarded costs against the sellers (para 6.4), and with the incidence of costs of the proceedings following the award.
LORD TOULSON: (with whom Lord Neuberger, Lord Mance and Lord Clarke agree)
The appellants (the sellers) contracted to sell to the respondents (the buyers) 25,000 metric tonnes of Russian milling wheat FOB Novorossiysk.
The contract incorporated the GAFTA 49 form of contract designed for the delivery of goods from central and Eastern Europe in bulk or bags on FOB terms.
The appeal raises questions about the construction of a clause of the contract and about the applicability and correctness of the decision of the majority of the House of Lords in Golden Strait Corporation v Nippon Yusen Kubisha Kaisha (The Golden Victory) [2007] UKHL 12, [2007] 2 AC 353.
I agree with the conclusions of Lord Sumption, but because we are disagreeing with the judgments of the Court of Appeal, Hamblen J and the GAFTA Appeal Board, and the decision in The Golden Victory has generated much debate, I will set out my reasoning in my own words.
GAFTA 49 includes these terms: 13.
PROHIBITION In case of prohibition of export, blockade or hostilities or in case of any executive or legislative act done by or on behalf of the government of the country of origin of the goods, or the country from which the goods are to be shipped, restricting export, whether partially or otherwise, any such restriction shall be deemed by both parties to apply to this contract and to the extent of such total or partial restriction to prevent fulfilment whether by shipment or by any other means whatsoever and to that extent this contract or any unfulfilled portion thereof shall be cancelled.
Sellers shall advise buyers without delay with the reasons therefor and, if required, Sellers must produce proof to justify the cancellation. 20.
DEFAULT In default of fulfilment of contract by either party, the following provisions shall apply: (a) The party other than the defaulter shall, at their discretion have the right, after serving notice on the defaulter, to sell or purchase, as the case, may be, against the defaulter, and such sale or purchase shall establish the default price. (b) If either party shall be dissatisfied with such default price or if the right at (a) above is not exercised and damages cannot be mutually agreed, then the assessment of damages shall be settled by arbitration. (c) The damages shall be based on, but not limited to, the difference between the contract price and either the default price established under (a) above or upon the actual or estimated value of the goods on the date of default established under (b) above. (d) In all cases the damages shall, in addition, include any proven additional expenses which would directly and naturally result in the ordinary course of events from the defaulters breach of contract, but shall in no case include loss of profit on any sub contracts made by the party defaulted against or others unless the arbitrator(s) or board of appeal, having regard to special circumstances, shall in his/their sole and absolute discretion think fit. (e) Damages, if any, shall be computed on the quantity called for, but if no such quantity has been declared then on the mean contract quantity and any option available to either party shall be deemed to have been exercised in favour of the mean contract quantity. 24.
ARBITRATION (a) Any and all disputes arising out of or under this contract or any claim regarding the interpretation or execution of this contract shall be determined by arbitration in accordance with
the GAFTA Arbitration Rules
The contract was made on 10 June 2010 and provided for delivery in August 2010.
The delivery period was later narrowed to between 23 and 30 August 2010.
On 5 August 2010 the buyers nominated a vessel to take delivery, but on the same day the Russian government announced the passing of a resolution imposing a prohibition on the export of agricultural products including wheat from the territory of the Russian Federation between 15 August and 31 December 2010.
On 9 August 2010 the sellers sent an email to the buyers notifying them of the export ban and saying that the contract was therefore cancelled under GAFTA 49, clause 13.
This was a mistake.
The notification was sent six days before the ban was due to come into effect and 14 days before the start of the contractual delivery period.
It was not beyond the bounds of possibility that the ban might in the meantime be lifted, and the sellers therefore jumped the gun by their unqualified statement that the contract was cancelled.
On 11 August 2010 the buyers responded by saying that the sellers email was a repudiation of the contract, which the buyers accepted; that the sellers were now in default; and that the buyers claim would follow shortly.
On 12 August 2010 the sellers replied expressing puzzlement over the buyers position.
They said that their earlier email had been sent in accordance with the prohibition clause, since under the ban it would not be possible to deliver the goods, and they stated that they would perform the contract if the ban were lifted or changed.
They queried whether the buyers truly believed that it was sensible to incur the costs of chartering a vessel and presenting it for loading, but they stated that they formally offered to reinstate the contract on all its terms including the prohibition clause.
The buyers declined the sellers offer.
The export ban was not lifted but was later extended.
It is not now in dispute that the buyers were entitled as a matter of law to treat the sellers email of 9 August 2010 as a wrongful repudiation of the contract.
A fair minded outsider would say that the buyers suffered no loss from the sellers mistake in prematurely treating the export ban as making the performance of the contract impossible.
As soon as the sellers received the buyers email on 11 August 2010 treating the contract as repudiated, the sellers immediately made it plain that the original terms remained available to the buyers (not that it would have made the slightest commercial difference to the buyers whether they accepted them since the ban remained in place, as both parties no doubt expected).
By contrast, arbitration proceedings have resulted in an award to the buyers of US$3,062,500, which has been upheld by judgments of Hamblen J and the Court of Appeal (respectively [2013] EWHC 84 (Comm); [2013] 1 Lloyds Rep 621 and [2013] EWCA Civ 1628; [2014] 1 Lloyds Rep 404).
It is necessary to explain how this has happened in order to understand the issues before this court.
The contract price of the wheat was $160 per metric tonne.
Before the first tier GAFTA arbitration panel the buyers relied on statements from two brokers putting the market value of wheat at the termination of the contract as $285 and $280 respectively.
The buyers contended for a midway figure of $282.50.
The sellers did not contest that evidence but they argued that the buyers had suffered no loss since the contract would have been cancelled in any event.
The first tier panel accepted the sellers argument and rejected the buyers claim.
The GAFTA Appeal Board allowed the buyers appeal.
It is important to understand what was agreed and what was in issue.
Paragraph 5.7 of the appeal award recorded the following points, which I will break up into sub paragraphs: i) It was common ground that an anticipatory repudiatory breach of a contract for the sale of goods on GAFTA terms is a default within the meaning of the default clause. ii) It was also common ground that the date of the default for the purposes of the default clause was the date on which the repudiation is accepted as bringing the contract to an end. iii) Here the relevant date was 11 August 2010. iv) The buyers market evidence was not challenged by the sellers. v) Neither side suggested any other figure as the correct measure of damages and it was a question whether the buyers recover the full sum claimed, ie $3,062,500, or whether they recover nothing.
In its award the appeal panel said that the default clause is designed to achieve certainty and it observed that this object is reinforced by clause 20(e), which avoids inquiry as to the quantity that would have been shipped but for the default.
The sellers argued that the first tier tribunal had been right to reject the buyers claim for the reasons given by it, that is to say, because the ban remained in place and the lost contract would therefore have been cancelled in due course in any event.
The sellers relied in support of their argument on the decision of the majority of the House of Lords in The Golden Victory.
The appeal panel held that the fact that the contract would subsequently have been cancelled was irrelevant, since the default clause required the loss to be assessed on the date of default, which was agreed to be 11 August 2010.
The sellers applied for and were given permission to appeal to the High Court on the following points of law: i) Is the application of the GAFTA prohibition clause limited to a case where it can be seen after the event that performance of the contract has in fact been prevented by the prohibition in question? ii) Does the GAFTA default clause exclude common law principles for the assessment of damages for anticipatory breach and in particular (i) the principle of mitigation and/or (ii) the compensation principle identified in The Golden Victory? iii) Victory limited to instalment contracts? iv) Was the Board wrong in law to conclude that the buyers rejection of the sellers offer to reinstate the contract did not constitute a failure to mitigate on the ground that the sellers did not offer to reinstate the contract on different and more favourable terms than contained in the original contract?
Is the overriding compensatory principle established by The Golden
The first question related to liability.
Hamblen J decided it in the buyers favour and it is no longer in issue.
The other questions related to damages.
The sellers argued that on common law principles the buyers had suffered no loss and were entitled to no more than nominal damages for two reasons.
First, The Golden Victory established that whether loss had been suffered as a result of the early termination of a contract depends on what would have happened in the absence of that termination.
Secondly, by offering to reinstate the contract on its original terms the sellers had offered to restore to the buyers precisely what any damages claim would assert had been lost.
The buyers rejection of the offer was a failure properly to mitigate.
The sellers further argued that the operation of those common law principles was not excluded by the default clause.
First, there was a distinction to be drawn between proof of loss and the assessment of its amount.
The default clause went only to the assessment of quantum.
It did not displace the application of common law principles in deciding whether there was a loss to be assessed.
Secondly, the words based on in clause 20(c) did not exclude the operation of common law principles of compensation or the doctrine of mitigation.
Hamblen J rejected the sellers argument about the effect of the default clause.
He did not accept that there was a clear dividing line between the causation and assessment of loss.
The default clause prescribed how damages were to be assessed and the Appeal Board had correctly applied it.
On the mitigation issue he added that the Board had found that the buyers had acted reasonably and their finding was a finding of fact which could not be appealed.
He described it as an open question whether The Golden Victory approach was applicable to a one off contract of sale of goods, but it was not necessary for him to decide the third question on which permission to appeal had been given.
The judgment of the Court of Appeal was given by Moore Bick LJ, with whom Floyd and Christopher Clarke LJJ agreed.
He dealt with the issue of damages quite briefly.
Counsel who appeared for the sellers (not Mr Simon Rainey, QC) raised the issue whether the opening words of the default clause In default of fulfilment of contract limited the operation of the clause to breaches by non delivery or non acceptance, rather than a default resulting from an accepted repudiation of the contract.
He recognised that this argument had not been advanced before the Appeal Board or the judge, but he reserved his position on it.
His main argument was that the default rule was to be read as being subject to the compensatory principle applied in The Golden Victory and that, since the export ban had remained in force throughout the contractual shipment period, the sellers would have been unable to perform the contract in any event and the buyers had suffered no loss.
He also repeated the argument advanced before Hamblen J about the distinction between the proof of loss and measurement of loss.
Moore Bick LJ recorded that the sellers did not challenge the judges decision on mitigation.
On the points about damages which the sellers argued, the Court of Appeal upheld the reasoning and conclusions of Hamblen J.
Like him, it expressed no view about the effect of the decision in The Golden Victory.
The parties have agreed that the issues on this appeal can be summarised as follows: Issue 1: On the assumption, in the sellers favour, that The Golden Victory applies to the present case and that the buyers on the facts of the present case would be entitled only to recover nominal damages for the sellers default absent the GAFTA default clause, does that clause entitle the buyers to recover damages in the sum awarded by the GAFTA Appeal Board? Issue 2: If not, is the assumption valid (it being the buyers contention that it is not valid, but the sellers contention that it is valid)?
I will take issue 1 first.
The question turns on the meaning to be given to the words of clause 20(c) The damages shall be based on, but not limited to, the difference between .
According to the buyers argument, clause 20 is a complete code; and these words set a minimum level of damages equal to the difference between a) the contract price and b) the default price or estimated value of the goods, in addition to which the claimant may recover other expenses provided that they are not too remote and do not include loss on a subcontract save in exceptional circumstances.
According to the sellers argument, the words based on are not to be read as fixed at or consist of but permit a more flexible approach.
On this construction, the provision does not set a floor below which damages may not fall; it prescribes one or other method of valuation of the goods as a baseline for the calculation of damages but no more.
It therefore does not preclude a tribunal from adopting the approach which was taken by the first tier panel.
Before considering the particular problem in the present case, it is instructive to consider a situation in which at the time of the breach there is no available market for the purchase or sale of goods answering precisely to the description of the contract goods.
Mr Philip Edey QC on behalf of the buyers submitted that under clause 20(a) the party which is not in breach may decide to sell or purchase against the defaulter goods which are not identical to the contract goods.
Mr Rainey on behalf of the sellers submitted the opposite.
One answer would be that the innocent party, if he is a buyer, is entitled to purchase non identical goods and hold the seller liable for damages equal to the difference in price, without any adjustment even if the replacement goods are of a higher quality than the contract goods.
Another answer would be that under clause 20(a) the replacement goods have to be precisely the same.
A third answer would be that the price of goods bought as a replacement, even if not identical, provides the basis or foundation for calculating damages, but that adjustment should be made for the superior quality of the replacement goods in order to avoid over compensation and to achieve a just result.
The first answer is not one which the parties could reasonably have intended.
The second and third answers would lead to the same practical result.
Either the clause was premised on there being an available market for identical goods, in the absence of which ordinary common law principles would apply for the assessment of damages, or else the clause accommodates the situation by the words based on affording the necessary flexibility to make a fair adjustment.
I prefer the former interpretation, because it seems most likely that the purpose of this part of the clause is to provide a surrogate for the valuation of the contract goods, which presupposes that they are identical, but the point is academic.
In the present case the hypothetical contract on which the buyers claim for damages was based was on identical terms, save as to price, but the contract and its notional substitute were extremely unlikely to be capable of fulfilment for reasons beyond the control of the parties.
The contract stood to be automatically cancelled unless the Russian government ban was raised.
The clause does not in terms address such a situation.
As in the previous example there are three possible answers.
One is that however improbable it may have been that the ban would be lifted, the language of the clause precludes that factor from being taken into consideration.
The second is that the clause is concerned only with placing a mathematical value on the goods, assuming the contract to be capable of performance, and that it is not intended to oust the application of ordinary common law principles where that assumption is inappropriate.
The third is that the language of the clause has sufficient flexibility to make a fair adjustment in the assessment of what the buyers have lost.
Again, the second and third answers would lead to the same outcome.
In disagreement with the appeal panel, the judge and the Court of Appeal, I do not consider that the language of the clause is sufficiently clear to have the preclusive effect for which the buyers contend.
In my view the second, or (if I am wrong) the third, is a more reasonable interpretation.
The first construction would require the tribunal to adopt a blinkered approach to the facts, which would place the buyers financially in a far better position than if the breach had not occurred.
This is most unlikely to have been the drafters intention.
It is far more likely that the drafter had in mind the usual situation of a non delivery or non acceptance of goods for which there was an available market.
I am reinforced in this view by the judgment of Clarke J in Bem Dis A Turk S/A TR v International Agri Trade Co Ltd (The Selda) [1998] 1 Lloyds Rep 416, where he held that the words shall be based on were not to be construed as synonymous with shall consist exclusively of or shall be limited to. (His judgment was approved by the Court of Appeal at [1999] 1 Lloyds Rep 729).
I also reject the argument that the clause precludes the operation of the common law principle regarding mitigation of loss, but, perhaps unfortunately, the I would therefore answer issue 1 in the sellers favour and turn to issue 2 application of the principle to the facts of this case has not been the subject of argument before this court.
concerning The Golden Victory.
The Golden Victory was a case of wrongful repudiation of a time charter by the charterers.
The charter contained a war clause entitling either party to cancel the charter if war or hostilities broke out between any of a number of countries including the USA, UK and Iraq.
At the time of the repudiation in December 2001 there was a minimum period of nearly four years to run under the contract.
A reasonably well informed person would have regarded the outbreak of hostilities between the USA or UK and Iraq as a possibility but no higher.
In fact, hostilities began in March 2003.
In October 2004 the arbitrator delivered an award declaring that no damages were recoverable in respect of the period from March 2003 onwards.
His decision was upheld on appeal by the judge, the Court of Appeal and a majority of the House of Lords.
Their decisions are reported at [2005] EWHC 161 (Comm), [2005] 1 Lloyds Rep 443; [2005] EWCA 1190, [2006] 1 WLR 533; and [2007] UKHL 12, [2007] 2 AC 353.
In a succinct judgment Langley J held that the arbitrators award accorded with the basic compensatory rule for the assessment of damages.
The charterparty which the owners lost was subject to the uncertainty of the war clause.
If the owners recovered damages for the period after the outbreak of hostilities they would be recovering more than the charterparty was worth to them.
That essential reasoning was affirmed by the Court of Appeal and a majority of the House of Lords.
In giving the judgment of the Court of Appeal, Lord Mance (with whom Auld and Tuckey LJJ agreed) said about the available market rule at para 27: The purpose of that rule is to fix a rate which then falls to be compared with the original charter rate.
In this way, the owners are put back notionally in the same position as they would have been under the original charter.
Assuming that the owners grant a substitute charter, they can operate the vessel subject to that charter or dispose of her with it, as they like.
But the aim in assessing damages on such an assumption is not to eliminate from consideration any of the original charter terms, or any effect which they might have had.
Indeed, the market rate for a substitute charter must be ascertained by postulating a charterparty which corresponds as closely as possible with the actual charterparty: cf Arta Shipping Co Ltd v Thai Europe Tapioca Service Ltd (The Johnny) [1977] 2 Lloyds Rep 1, 4, per Sir David Cairns.
In the House of Lords the majority comprised Lords Scott, Carswell and Brown.
Lords Bingham and Walker dissented.
Lord Scott, at para 36, described the lodestar as being that the damages should represent the value of the contractual benefits of which the claimant had been deprived by the breach of contract, no less but also no more.
It had been accepted in argument that the owners charterparty rights would not in practice have been marketable for a capital sum.
The contractual benefit to the owners, of which they were deprived by the repudiatory breach, was the right to receive the hire rate during the currency of the charterparty, but that right was subject to the war clause.
The owners were seeking compensation exceeding the value of the benefits of which they were deprived.
Lord Scott contrasted the case with that of a contract for a one off sale.
He said, at para 34, that the assessment at date of breach rule is particularly appropriate in such a case where there is an available market, by reference to which the amount of the loss can be fixed, but he noted that even here some period must normally be allowed for arrangements for a substitute sale to be made (Kaines (UK) Ltd v Osterreichische Warrenhandelgesellschaft [1993] 2 Lloyds Rep 1).
But, he said at paras 35 and 36, in a case of a contract for the supply of goods over an extended period, or any anticipatory breach the acceptance of which terminated an executory contract, the application of the breach date rule may not be apt because [t]he contractual benefit for the loss of which the victim of the breach can seek compensation cannot escape the uncertainties of the future.
Lord Brown, agreeing with Lord Scott, emphasised that any hypothetical substitute contract would have been subject to the same conditions as the repudiated contract.
Although the arbitrator had said that if the owners had sold the vessel with the benefit of a four year charter the value of that charter would have been taken into account with war being regarded as no more than a possibility, the measure of loss did not fall to be crystallised on the basis of a hypothetical sale of the vessel herself.
Lord Bingham (with whom Lord Walker agreed) took as his starting point that an injured party such as the owners may not, generally speaking, recover damages against a repudiator such as the charterers for loss which he could reasonably have avoided by taking reasonable commercial steps to mitigate his loss.
Thus, where there was an available market for the chartering of vessels, the injured partys loss would be calculated on the assumption that he had, within a reasonable time of accepting the repudiation, taken reasonable commercial steps to obtain alternative employment for the vessel for the best consideration reasonably available, and damages would ordinarily be assessed at that date.
In support of this approach he referred to the decision of Robert Goff J in The Elena DAmico [1980] 1 Lloyds Rep 75, which he described as authoritative.
Lord Bingham accepted that the courts had been willing to depart from the general rule about the date of assessment if the court judged it necessary or just to do so in order to give effect to the compensatory principle.
He accepted too that if at the date of acceptance of a repudiatory breach the court judged that the contract was bound to be lawfully cancelled in the near future it would be proper to award only nominal damages.
This would not involve taking into account later events, but merely recognising that the value of the contract in such circumstances was nil.
In that respect he regarded the Court of Appeals decision in Maredelanto Cia Naviera SA v Bergbau Handel GmbH (The Mihalis Angelos) [1971] 1 QB 164 as entirely orthodox.
He also accepted that the value of a contract in the market may be reduced if terminable on an event which the market judges to be likely but not certain.
Lord Bingham attached critical significance to what he said was the clear and crucial finding of the arbitrator that what the owners lost was a charterparty with slightly less than four years to run and that on the arbitrators finding it was marketable on that basis (para 22).
While acknowledging that the value of a contract in the market may be reduced if terminable on an event which the market judges to be likely, he said but that was not what the arbitrator found to be the fact in this case.
I have difficulty with this part of Lord Binghams reasoning.
According to the law reporters note, counsel for the owners had submitted that they had lost a charterparty with slightly less than four years to run and that had they sold the vessel on that day the value which they would have received would have been calculated on that basis.
But that value would have been undiminished if the owners had re chartered the vessel on identical terms, and there was no suggestion that the owners could not have done so.
Indeed, Lord Mance noted in his judgment in the Court of Appeal, at para 12, that counsel for the owners submitted that it had to be assumed for present purposes that the owners could, within a relatively short time, have arranged a substitute charter for the balance of the charter period.
So the charterers repudiation would not have brought about a loss in the marketable value of the vessel with a substitute charter.
Nor would the repudiation have affected the potential duration of the charterparty.
In neither respect, therefore, were the owners financially worse off by reason of the charterers repudiation.
Because the issue raised by the arbitrators award was confined to whether the assessment of damages should take account of the period after the outbreak of hostilities in Iraq, the House of Lords was not directly concerned with the supplementary question how damages in respect of that period were to be assessed.
Lord Bingham did not address that question beyond observing that it would of course be very difficult to calculate loss of profit prospectively over a four year period, but an injured party could recover damages for loss of a chance of obtaining a benefit and that the difficulty of accurate calculation was not a bar to recovery.
In his review of the authorities Lord Bingham referred with approval to a decision of mine in Dampskibsselskabet Norden A/S v Andre & Cie (Norden v Andre) [2003] EWHC 84 (Comm), [2003] 1 Lloyds Rep 287, as an example of the application of the general principle.
In that case a forward freight agreement (FFA) for a period of 12 months was terminated by reason of the defendants breach in the third month.
The claimant sought damages equal to the amount to which it would have been entitled under the contract if it had run its full course, amounting to over US$750,000.
The evidence established that there was an available market in which the claimant could have obtained a substitute contract or contracts at average price amounting to a little over $185,000.
I held that the amount recoverable was the lesser figure, following the analysis of the relevant legal principles in the judgment of Robert Goff J in The Elena DAmico.
The fundamental principle for the assessment of damages in cases of breach of contract (reiterated in The Elena DAmico) is the principle of restitutio in integrum within the limits expressed in Hadley v Baxendale (1854) 9 Exch 341.
In the present case the sellers offered the buyers total restitution in integrum immediately upon the termination of the contract.
There was no finding by the Appeal Board that the offer was not genuine, and on the fundamental compensatory principle it provides a full answer to the claim.
Secondary to the fundamental restitutionary principle, in various types of case there is a normal measure of recovery which the courts have developed to give effect to that principle.
The Elena DAmico, like The Golden Victory, involved the premature wrongful repudiation of a charterparty.
The judge held that if there was at the time of termination an available market for chartering in a substitute vessel, damages would normally be assessed on the basis of the difference between the contract rate for the balance of the contract period and the market rate for a substitute charter.
He arrived at this result by analogy with cases of sale of goods or shares in which either the seller failed to deliver or the buyer failed to accept delivery: Jamal v Moolla Dawood Sons and Co [1916] 1 AC 175 and Campbell Mostyn (Provisions) Ltd v Barnett Trading Co [1954] 1 Lloyds Rep 65.
The broad principle deducible from The Elena DAmico and the cases there considered is that where a contract is discharged by reason of one partys breach, and that partys unperformed obligation is of a kind for which there exists an available market in which the innocent party could obtain a substitute contract, the innocent partys loss will ordinarily be measured by the extent to which his financial position would be worse off under the substitute contract than under the original contract.
The rationale is that in such a situation that measure represents the loss which may fairly and reasonably be considered as arising naturally, ie according to the ordinary course of things, from the breach of contract (Hadley v Baxendale).
It is fair and reasonable because it reflects the wrong for which the guilty party has been responsible and the resulting financial disadvantage to the innocent party at the date of the breach.
The guilty party has been responsible for depriving the innocent party of the benefit of performance under the original contract (and is simultaneously released from his own unperformed obligations).
The availability of a substitute market enables a market valuation to be made of what the innocent party has lost, and a line thereby to be drawn under the transaction.
Whether the innocent party thereafter in fact enters into a substitute contract is a separate matter.
He has, in effect, a second choice whether to enter the market similar to the choice which first existed at the time of the original contract, but at the new rate prevailing (the difference being the basis of the normal measure of damages).
The option to re enter or stay out of the market arises from the breach, but it does not follow that there is a causal connection between the breach and his decision whether to re enter or to stay out of the market, so as to make the guilty party responsible for that decision and its consequences.
The guilty party is not liable to the innocent party for the adverse effect of market changes after the innocent party has had a free choice whether to re enter the market, nor is the innocent party required to give credit to the guilty party for any subsequent market movement in favour of the innocent party.
The speculation which way the market will go is the speculation of the claimant.
It is well recognised that the so called duty to mitigate is not a duty in the sense that the innocent party owes an obligation to the guilty party to do so (Darbishire v Warran [1963] 1 WLR 1067, 1075, per Pearson LJ).
Rather, it is an aspect of the principle of causation that the contract breaker will not be held to have caused loss which the claimant could reasonably have avoided.
There are three important things to note about measurement of damages by reference to an available market.
First it presupposes the existence of an available market in which to obtain a substitute contract.
Secondly, it presupposes that the substitute contract is a true substitute.
The claimant is not entitled to charge the defendant with the cost of obtaining superior benefits to those which the defendant contracted to provide.
Thirdly (and in the present case most importantly), the purpose of the exercise is to measure the extent to which the claimant is (or would be) financially worse off under the substitute contract than under the original contract.
Depending on the nature of the market, cases in which this method is appropriate may include an anticipatory repudiatory breach of a one off contract of sale, a contract of sale in instalments or a period contract.
A single unconditional contract of purchase or sale of a commodity in the futures market is an example of the first.
The accepted repudiation by the buyer or seller amounts to the premature closing out of the transaction.
The innocent party can then use the market to put himself back in the same position at a price which will reflect the markets assessment of the value of the contract.
The same may apply equally in the case of a periodic futures agreement (Norden v Andre).
However, in this case the lost contract and its hypothetical substitute were subject to automatic cancellation unless the Russian government ban was lifted, and the extent to which the buyers were worse off by loss of the original contract could not be measured by a simple comparison of the contract price with the price of a hypothetical substitute contract.
The fundamental compensatory principle makes it axiomatic that any method of assessment of damages must reflect the nature of the bargain which the innocent party has lost as a result of the repudiation.
In this case the bargain was subject to a high risk of cancellation.
Leaving aside for the purposes of this discussion the sellers offer to reinstate the contract, what the buyers lost was the chance of obtaining a benefit in the event of the export ban being lifted before the delivery period, only in which case would the contract have been capable of lawful performance.
In The Golden Victory Lord Bingham observed, uncontroversially, that although it may be difficult to calculate a loss prospectively, an injured party can recover damages for the loss of a chance of obtaining a benefit.
He also acknowledged that the market value of a contract may be reduced if terminable on an event which the market judges to be likely but not certain.
But how is the chance to be valued if there is no market risk index to which the court can refer? (In this case the Appeal Board merely found that there was a possibility that the ban might be lifted or relaxed in some way.) The assessment would have to be made by the arbitrator or judge doing the best he can.
Should the assessment be made on the facts as known at the date of the assessment or should the tribunal apply a retrospective assessment of how the chances would have appeared at the date of the repudiation? I see no virtue in such circumstances in the court attempting some form of retrospective assessment of prospective risk when the answer is known.
To do so would run counter to the fundamental compensatory principle.
In The Golden Victory Lord Bingham acknowledged that the saying you need not gaze into the crystal ball when you can read the book is in many contexts a sound approach in law as in life.
He did not consider that approach to be appropriate in that particular context because of the available market rule.
I have given my reasons for not regarding that rule as apt for the circumstances of this case, by contrast with cases such as The Elena DAmico and Norton v Andre.
Mr Edey submitted that the present case is distinguishable from The Golden Victory because it involved a single sale rather than a period contract, but I can see no logical foundation for the distinction.
It is founded on the passage in Lord Scotts judgment where he distinguished the charterparty in that case with a simple contract for a one off sale, but I take him to have been referring to the simple case of repudiation by non delivery or non acceptance.
It makes no sense to differentiate between a contract for a single sale or for more than one sale.
The relevant criterion is whether the contract is reasonably replaceable by a substitute contract at a readily ascertainable market price, in which case it will ordinarily be right to measure the innocent partys loss by reference to the substitute contract.
Alternatively, Mr Edey submitted that the majority of the House of Lords were wrong in The Golden Victory.
He suggested that it was inconsistent with the decisions of the House of Lords in Gill and Duffus SA v Berger and Co Inc (No 2) [1984] AC 382 and Fercometal SARL v Mediterranean Shipping Co SA (The Simona) [1989] AC 788.
Neither of those cases was directly concerned with the assessment of damages for the anticipatory breach of a contract which was subject to a condition likely to cause its cancellation.
It was common ground in The Golden Victory that the risk of cancellation was potentially relevant to the assessment of damages.
The difference was whether (as the minority held) it was irrelevant on the facts because it did not affect the market value of the contract at the date of breach, or (as the majority held) proper application of the compensatory principle made it right to take into account the facts known at the date of assessment.
For the reasons given I support the decision of Langley J, the Court of Appeal and the majority of the House of Lords.
Accordingly, I agree with Lord Sumption as to the disposal of this appeal.
| UK-Abs | GAFTA Form 49 is the standard form of FOB sale contract of the Grain and Feed Trade Association for goods delivered from central or eastern Europe in bulk or bags. (Under an FOB sale contract, the seller agrees to pay to deliver the goods free on board the purchasers chosen transporter.) This appeal is about the Default Clause in GAFTA 49, which provides in part: DEFAULT In default of fulfilment of contract by either party, the following provisions shall apply: (a) The party other than the defaulter shall, at their discretion have the right, after serving a notice on the defaulter, to sell or purchase, as the case may be, against the defaulter, and such sale or purchase shall establish the default price. (b) If either party be dissatisfied with such default price or if the right at (a) above is not exercised and damages cannot be mutually agreed, then the assessment of damages shall be settled by arbitration. (c) The damages payable shall be based on, but not limited to, the difference between the contract price and either the default price established under (a) above or upon the actual or estimated value of the goods, on the date of default, established under (b) above.
Nidera BV, the buyers, entered into a contract with Bunge SA, the sellers, under which they agreed to buy 25,000 tonnes (+/ 10% in buyers option) of Russian milling wheat crop 2010, FOB Novorossiysk (a port in Russia).
The shipment period was 23 30 August 2010.
The contract incorporated GAFTA 49.
On 5 August 2010, Russia introduced a legislative embargo on exports of wheat from its territory, which was to run from 15 August to 31 December 2010.
The sellers notified the buyers of the embargo on 9 August 2010 and purported to declare the contract cancelled under GAFTA 49s Prohibition Clause.
The buyers maintained that the sellers were not yet entitled to cancel the contract and treated the purported cancellation as a repudiation of the contract, which they accepted on 11 August 2010.
The sellers offered to reinstate the contract on the same terms on 12 August 2010, but the buyers refused and began arbitration proceedings under the GAFTA rules.
At the arbitration, the parties agreed that the Default Clause applied to anticipatory repudiation, that the buyers had not bought against the sellers pursuant to sub clause (a), that the date of default for the purpose of sub clause (c) was 11 August 2010, and that the difference between the contract and the market price at that date was US$3,062,500.
The sellers no longer dispute that they were in breach of contract and the only issue between the parties concerns damages.
The first tier panel held that the buyers were not entitled to a substantial damages award, because the embargo was still in place when the time for delivery arrived and so the contract would have been cancelled in any event.
The GAFTA Appeal Board accepted that the contract would have been cancelled in any event, but held that the buyers were entitled under sub clause (c) of the Default Clause to a damages award of US$3,062,500, reflecting the difference between the contract price and the market price on the agreed date of default.
The sellers appeal was dismissed by both Hamblen J and the Court of Appeal.
The Supreme Court unanimously allows the appeal.
Lord Sumption gives the leading judgment.
Lord Toulson agrees with Lord Sumption but sets out his reasoning in his own words.
Lord Neuberger, Lord Mance and Lord Clarke all agree with both Lord Sumption and Lord Toulson.
Lord Sumption first addresses the position at common law.
The fundamental principle of the common law of damages is the compensatory principle.
The cases have addressed two questions relating to the calculation of damages at common law following an anticipatory breach.
First, where there is an available market, the prima facie measure of damages is the difference between the contract price and the market price of the goods at the time when they ought to have been delivered, unless the buyer should have mitigated by going into the market and entering into a substituted contract at some earlier stage, in which case damages will be assessed with reference to the market price at that earlier date.
Once the relevant market price has been determined, any subsequent change in the market price is irrelevant.
Second, as the House of Lords explained in The Golden Victory [2007] 2 AC 353, it will be relevant to take account of contingencies other than a change in the market price if subsequent events known at the time of the judges or arbitrators assessment would have reduced the value of performance, perhaps to nothing, even without the defaulters renunciation.
This principle applies to contracts both for the supply of goods or services over a period of time and for one off sales. [12 23] Lord Sumption then considers the effect of the GAFTA 49 Default Clause.
Damages clauses are not necessarily intended to be complete codes for the assessment of damages.
In this case, the clause applies in default of contractual performance, and to anticipatory breach as well as actual breach.
The combined effect of sub clauses (a), (b) and (c) of the Default Clause differs from the common law, first, in that they give the injured party a discretion about whether to go into the market to buy or sell against the defaulter, so that damages are required to be assessed as at the date when the injured party accepted an anticipatory repudiation only if he actually went into the market to fix a price at that date; and, secondly, in that they provide that the relevant comparator is the actual or estimated value of the goods rather than their market price. [24 28] The Default Clause provides a complete code for determining the market price or value of the goods that falls to be compared with the contract price.
It does not deal at all with the effect of subsequent events which would have resulted in the original contract not being performed in any event, to which the common law still applies. [29 31] Applying The Golden Victory to this case, the buyers in fact lost nothing and should receive only nominal damages in the sum of US$5. [35 36] Lord Toulson agrees with Lord Sumption and holds that the language of the Default Clause is not sufficiently clear to preclude the application of The Golden Victory.
The most reasonable interpretation is that the clause is concerned only with placing a mathematical value on the goods, assuming the contract to be capable of performance, and that it is not intended to oust the application of ordinary common law principles where that assumption is inappropriate.
He also rejects the argument that the clause precludes the operation of the common law mitigation of loss principle, but the application of this principle was not the subject of argument before this court. [58 62] Where a contract is discharged by reason of one partys breach, and there exists an available market in which the innocent party could obtain a substitute contract, the innocent partys loss will ordinarily be measured by the extent to which his financial position would be worse off under the substitute contract than under the original contract.
Whether the innocent party in fact enters into a substitute contract is a separate matter.
The assessment should be made on the facts as known at the date of the assessment, as the House of Lords held in The Golden Victory and consistently with the fundamental compensatory principle.
The Golden Victory applies to one off sales. [63 89]
|
This appeal raises difficult and important issues about the effect of adjudication pursuant to provisions implied into a construction contract under section 108(5) of the Housing Grants, Construction and Regeneration Act 1996, read with the Scheme for Construction Contracts (England and Wales) Regulations 1998 (SI 1998 No 649).
The construction contract (within the broad meaning assigned by section 104(2) of the 1996 Act) was a contract by the respondent, Aspect Contracts (Asbestos) Ltd (Aspect), to carry out an asbestos survey and report on blocks of maisonettes in Hounslow which the appellant building contractor, Higgins Construction Plc (Higgins), was considering redeveloping.
The survey was conducted in March 2004 and the report was dated 27 April 2004.
During the redevelopment in early 2005, Higgins allegedly found and had to have removed asbestos containing materials which had not been identified in the report.
A dispute consequently arose with Aspect.
Negotiation and mediation having failed, Higgins referred the dispute to adjudication, claiming 822,482 damages plus interest.
The claim was for breach of contractual and/or conterminous tortious duties to exercise reasonable skill and care.
By a decision dated 28 July 2009, the adjudicator, Ms Rosemary Jackson QC, concluded that Aspect had been in breach of such duties causing Higgins loss in various, though not all, respects alleged by Higgins, and ordered that Aspect pay Higgins 490,627, plus interest which amounted, at the date of the decision, to 166,421.05.
She also ordered Aspect to pay her own fees of 8,750 plus VAT.
On 6 August 2009 Aspect duly paid Higgins 658,017, a sum which included further interest from the date of the decision.
Higgins did not commence any proceedings, whether to recover the balance of its claim, 331,855 plus interest, or otherwise.
The limitation period expired on the face of it on or about 27 April 2010 for any action by Higgins founded on breach of the construction contract and at the very latest by early 2011 for any action founded on tort: Limitation Act 1980, sections 2 and 5.
Higgins was evidently content to let matters rest.
It did not, so far as appears, ask Aspect to agree, and Aspect did not agree, to treat the adjudicators decision as final.
Aspects claim
Only after the expiry of both the above mentioned limitation periods did Aspect on 3 February 2012 itself commence the present proceedings seeking to recover the sum it paid on 6 August 2009.
It did so without giving prior notice that it was dissatisfied with Ms Jacksons decision or going through any pre action protocol procedure.
Aspect confines itself expressly to a contention that no sum was due to Higgins on an examination of the merits of the original dispute, regarding the alleged failure to identify and report the existence of asbestos containing materials beyond those mentioned in its report.
It claims that the sum of 658,017 is repayable accordingly.
Higgins however seeks to counterclaim for the 331,855 balance of its claim and interest.
Only in relation to this balance does Aspect raise a limitation plea, under sections 2 and 5 of the Limitation Act.
These sections provide that any action founded on, respectively, tort or simple contract shall not be brought after the expiration of six years from the date on which the cause of action accrued.
Aspect rests its claim on an implied term, alternatively in restitution.
The implied term is that: in the event that a dispute between the parties was referred to adjudication pursuant to the Scheme and one party paid money to the other in compliance with the adjudicators decision made pursuant to the Scheme, that party remained entitled to have the decision finally determined by legal proceedings and, if or to the extent that the dispute was finally determined in its favour, to have that money repaid to it.
The present proceedings
By consent on 31 January 2013 Akenhead J ordered the trial of a preliminary issue as to (a) the existence of the implied term, (b) the limitation period applicable to any such implied term, (c) the limitation period applicable to the counterclaim, and (d) the existence or otherwise of a claim for restitution.
By a clear and comprehensive judgment dated 23 May 2013, he held that there was no such implied term as alleged, that Aspect could have claimed a declaration of non liability at any time within six years after performance of the contract, upon the grant of which declaration the court would then have had ancillary and consequential power to order repayment, but that any such claim was now time barred.
He also held that there was, in these circumstances and in the absence of any recognised basis like mistake or duress and of any right to have the adjudicators decision set aside, no claim in restitution.
The Court of Appeal (Longmore, Rimer and Tomlinson LJJ) [2014] 1 WLR 1220, in a concise judgment given by Longmore LJ, reached an opposite conclusion.
It held that the Scheme implied that any overpayment could be recovered.
It noted that Higginss contrary case faced a number of difficult questions, such as, first, the fairness of a conclusion that required any claim for repayment to be made within six years of the original contractual performance, second, the juridical basis for a conclusion that a declaration of non liability would carry with it a right to order repayment and, third, the correctness of the judges conclusion that a declaration of non liability was liable to be time barred.
Aspect did not pursue its pleaded restitutionary claim before the Court of Appeal.
The present appeal follows by this courts permission.
In giving permission, the court informed the parties that: without prejudging whether it would be open to [Aspect] to raise any positive point on restitution, the Supreme Court may wish as part of the context to have explained the legal position regarding restitution.
The parties accordingly exchanged cases which addressed the position regarding restitution, and, during the course of the hearing, Miss Fiona Sinclair QC for Aspect sought permission to raise a case in restitution based on the payment made.
Mr Andrew Bartlett QC for Higgins resisted this, and the court heard submissions on it de bene esse.
In the event, since the issue was raised at first instance and is one of pure law, I consider that permission should be granted to Aspect to rely upon restitution as an alternative to its primary claim based on an implied term.
The legislation
Section 108 of the Housing Grants, Construction and Regeneration Act 1996 (in its original form, as in force before its presently immaterial amendment by the Local Democracy, Economic Development and Construction Act 2009) provides: 108.
Right to refer disputes to adjudication. (1) A party to a construction contract has the right to refer a dispute arising under the contract for adjudication under a procedure complying with this section.
For this purpose dispute includes any difference. (2) The contract shall (a) enable a party to give notice at any time of his intention to refer a dispute to adjudication; (b) provide a timetable with the object of securing the appointment of the adjudicator and referral of the dispute to him within 7 days of such notice; (c) require the adjudicator to reach a decision within 28 days of referral or such longer period as is agreed by the parties after the dispute has been referred; (d) allow the adjudicator to extend the period of 28 days by up to 14 days, with the consent of the party by whom the dispute was referred; (e) impose a duty on the adjudicator to act impartially; and (f) enable the adjudicator to take the initiative in ascertaining the facts and the law. (3) The contract shall provide that the decision of the adjudicator is binding until the dispute is finally determined by legal proceedings, by arbitration (if the contract provides for arbitration or the parties otherwise agree to arbitration) or by agreement.
The parties may agree to accept the decision of the adjudicator as finally determining the dispute. (5) If the contract does not comply with the requirements of subsections (1) to (4), the adjudication provisions of the Scheme for
Construction Contracts apply
Section 114 provides that: (1) The Minister shall by regulations make a scheme (the Scheme for Construction Contracts) containing provision about the matters referred to in the preceding provisions of this Part. (4) Where any provisions of the Scheme for Construction Contracts apply by virtue of this Part in default of contractual provision agreed by the parties, they have effect as implied terms of the contract concerned.
The Scheme contained in the Schedule to the Regulations is in parallel terms to those indicated in section 108(1) to (4), with slight differences which no one suggests are significant.
It provides: 1(1) Any party to a construction contract (the referring party) may give written notice (the notice of adjudication) at any time of his intention to refer any dispute arising under the contract, to adjudication. (3) The notice of adjudication shall set out briefly the nature and a brief description of the dispute (a) and of the parties involved, (b) details of where and when the dispute has arisen, 19(1) The adjudicator shall reach his decision not later than twenty eight days after receipt of the referral (a) notice mentioned in paragraph 7(1), or (b) if the referring party so consents, or forty two days after receipt of the referral notice (c) such period exceeding twenty eight days after receipt of the referral notice as the parties to the dispute may, after the giving of that notice, agree. 23(2) The decision of the adjudicator shall be binding on the parties, and they shall comply with it until the dispute is finally determined by legal proceedings, by arbitration (if the contract provides for arbitration or the parties otherwise agree to arbitration) or by agreement between the parties.
By providing that the decision of an adjudicator is binding and that the parties shall comply with it, paragraph 23(2) of the Scheme makes the decision enforceable for the time being.
It is enforceable by action founded on the contractual obligation to comply with the decision combined, in a normal case, with an application for summary judgment.
The limitation period for enforcement will be six years from the adjudicators decision.
But the decision is only binding and the obligation to comply with it only lasts until the dispute is finally determined in one of the ways identified.
By use of the word until, paragraph 23(2) appears to contemplate that there will necessarily be such a determination.
The short time limits provided by paragraph 19(1) also indicate that adjudication was envisaged as a speedy provisional measure, pending such a determination.
But there is nothing to prevent adjudication being requested long after a dispute has arisen and without the commencement of any proceedings.
Further, it seems improbable that the Scheme imposes on either party any sort of obligation to start court or arbitration proceedings in order to confirm its entitlement.
Either or both of the parties might understandably be content to let matters rest.
Section 108(3) of the Act and paragraph 23(2) of the Scheme might in the above circumstances have been more realistic if they had expressed the binding nature of an adjudicators decision as extending unless and until.
As already explained, it seems clear that neither party is obliged ever to commence legal proceedings, and that if neither does the adjudicators decision continues to bind.
In this respect, an adjudication cannot be equated with an interim payment ordered by the court in the course of court proceedings.
The recipient of such an interim payment cannot discontinue the proceedings without the payers consent or the courts permission, and is therefore at risk of being ordered to make repayment as a condition of discontinuance: see CPR 25.8(2)(a) and 38.2(2)(b).
Analysis of the question on this appeal
The key question is how far a paying party, here Aspect, is able to disturb the provisional position established by an adjudicators decision, by itself commencing proceedings after the time has elapsed when Higgins could bring any claim founded on the original breach of contract or tort.
That depends upon the basis of any claim by Aspect to recover the sum it has provisionally paid under the adjudicators decision.
Just as Higgins has a right to enforce payment pursuant to an adjudicators decision, so Aspect must on some basis be able to recover such a payment, if it is established, by legal proceedings, arbitration or agreement, that such sum was not due in respect of the original dispute.
Without the ability to recover such a payment, the Scheme makes no sense.
Adjudication is conceived as a provisional measure.
At a cash flow level, Higgins remains entitled to the payment unless and until the outcome of legal proceedings, arbitration or negotiations, leads to a contrary conclusion.
But at the deeper level of the substantive dispute between the parties, the parties have rights and liabilities, which may differ from those identified by the adjudication decision, and on which the party making a payment under an adjudication decision must be entitled to rely in legal proceedings, arbitration or negotiations, in order to make good a claim to repayment on some basis.
Aspects case is, as I have noted, that this entitlement arises from the payment, to the extent that this is subsequently shown not to have been due, and is based on an implied term or alternatively restitution.
Higginss primary case
In contrast, on Higginss case, Aspects only entitlement is to seek declaratory relief, and, after obtaining a declaration, to rely on a power in the court to grant consequential relief by way of an order for repayment.
Higgins submits that any such claim to declaratory relief became time barred in contract in April 2010 and in tort at the same date (or at latest by early 2011), so that there is now no way in which Aspect can in the present proceedings ask the court to order repayment.
That corresponds with the result at which Akenhead J arrived.
It involves in Higginss submission an appropriate correlation of the time limits within which Higgins can pursue claims against Aspect and Aspect can pursue claims against Higgins.
I have no difficulty in accepting that Aspect could at any time, from at least the development in early 2005 of the original dispute, have asked the court to declare that it had not committed any breach of contract or incurred any tortious liability to Higgins, and that the court would have regarded proceedings of this nature for a declaration as entirely admissible and appropriate.
But, in common with the Court of Appeal, I cannot accept that this is a complete analysis of the route by which Aspect could and should have pursued the claim which it now brings.
It ignores a core ingredient of and the immediate trigger to Aspects current claim, which is that it has been ordered to make and has made a large payment in 2009.
It is artificial to treat a claim to recover that sum as based on an alleged cause of action accruing in 2004 or early 2005.
To treat Aspects remedy as being to seek a declaration, and then to invite the court to use its alleged consequential powers in order to grant the relief which is the true object of the proceedings, is equally artificial.
Mr Bartlett did not, to my mind, identify any authority for the proposition that a court can or should make orders consequential upon a declaration of non liability for the payment of any sums which the recipient would not have a right to claim on some independent juridical basis.
The majority judgments in Guaranty Trust Company of New York v Hannay [1915] 2 KB 536 do not support such a proposition.
They show that declarations may be given in situations where there is, or is as yet, no cause of action.
A common example is where a claim is made by an insured against liability insurers seeking a declaration that they will be liable to indemnify him in respect of any third party liability which he may be found to have.
But consequential relief depends, as Pickford LJ indicated at pp 558 559, upon the existence of a cause of action, or interference, actual or threatened, with a right.
When Bankes LJ said at p 572 that the word relief was not confined to relief in respect of a cause of action, he was referring to the requirement under the Judicature Act 1873, section 100 and the then RSC O XVI rule 1 that there must in every action be a person seeking relief, and to the possibility of claiming relief by way of a declaration when no such cause of action exists.
He was not suggesting that a claim for such a declaration could be accompanied by consequential relief ordering a payment to which there was no independent right.
I am furthermore unable to accept that a claim for a declaration that a person has not committed a tort or breach of contract is a claim falling within, respectively, section 2 or 5 of the Limitation Act 1980, or that either section could be applied by analogy as Higgins also submitted.
A claim for a declaration that a contractual right has accrued has been held at first instance to be a claim involving a cause of action founded on simple contract: P&O Nedlloyd BV v Arab Metals Co (The UB Tiger) [2005] EWHC 1276 (Comm), [2005] 1 WLR 3733, para 20.
Accepting without considering that analysis, a claim for a declaration that a person has not broken a contract might also be regarded as a claim founded on simple contract (though a claim that a person was not party to any contract certainly could not be); however a claim that a person has not broken a contract could not be a claim in respect of which it could sensibly be said that any cause of action had accrued, still less accrued on any particular date.
On that basis section 5 could not apply, directly or by analogy.
As to section 2, a claim that a person had not committed a tort could not in any circumstances sensibly be regarded as a claim founded on tort, quite apart from the impossibility of identifying any date on which the cause of action accrued, for the purpose of applying section 2 either directly or by analogy.
The special time limit for negligence claims provided by section 14A of the Limitation Act 1980 would also be impossible to apply in relation to a claim for negative declaratory relief as to the absence of any liability in tort.
Miss Sinclair submitted that what the adjudicator described as Higginss coterminous tort claim was capable of being submitted to adjudication, along with its contract claim.
In support of that proposition, Miss Sinclair referred to Premium Nafta Products Ltd v Fili Shipping Co Ltd [2007] UKHL 40, as superseding the more limited approach taken in Fillite (Runcorn) Ltd v Aqua lift (1989) 45 BLR 27 (CA) see also Woolf v Collis Removal Service [1948] 1 KB 11, 18 19, Astro Vencedor Co Na SA v Mabanaft GmbH [1971] 2 QB 588, 595, Empresa Exportadora de Azucar v Industria Azucarera Nacional SA [1983] 2 Lloyds Rep 171, 183 and Chimimport plc v G DAlexio Sas [1994] 2 Lloyds Rep 366, 371 372; Mr Bartlett did not accept that the approach taken in Premium Nafta could apply to statutory adjudication, but I am very content to proceed on that basis.
But Mr Bartlett went on to submit, with reference to section 108(1) of the 1996 Act and paragraph 1(1) of the Scheme, that this would necessarily mean that any tort claim which Higgins has must, even if it could be the subject of adjudication at all, be capable of being regarded as a claim arising under the contract, and to submit that such a claim would not be subject to section 14A of the 1980 Act (or, presumably, to section 2).
It is unnecessary to say more than that I do not, as at present advised, accept this submission.
Assuming, as I am presently prepared to, that a coterminous tort claim can fall within the language of section 108(1) of the 1996 Act and paragraph 1(1), it does not follow that it ceases to be a tort claim for limitation purposes.
So the usual rule would apply that limitation periods in contract and tort are separate matters, even where the tort claim is based essentially on negligence in the performance of contractual obligations: see eg Henderson v Merrett Syndicates Ltd [1995] 2 AC 145, esp at p 185E G per Lord Goff.
Finally, I understand Mr Bartlett also to suggest that, whatever the limitation position, Aspect, having been adjudicated liable in both contract and tort, would need to bring proceedings to establish that it was not liable within the limitation periods applicable to both, if it was to recover anything.
Suffice it to say that I am unpersuaded by this suggestion, though this is not critical to the decision of this appeal in view of what follows below.
In my view, it is a necessary legal consequence of the Scheme implied by the 1996 Act into the parties contractual relationship that Aspect must have a directly enforceable right to recover any overpayment to which the adjudicators decision can be shown to have led, once there has been a final determination of the dispute.
I agree with the Court of Appeal that the obvious basis for recognition of this right is by way of implication arising from the Scheme provisions which are themselves implied into the construction contract.
I prefer to express the implication in the way I have, because it focuses on the core element of Aspects claim which is to recover an alleged overpayment.
The implied term which Aspect pleads tends to open the way to Higginss argument, which I reject, that the essence of Aspects claim is to declaratory relief and that this is relief which Aspect has always been (remained) entitled to pursue, since the contract was first performed, and has now become time barred.
I emphasise that, on whatever basis the right arises, the same restitutionary considerations underlie it.
If and to the extent that the basis on which the payment was made falls away as a result of the courts determination, an overpayment is, retrospectively, established.
Either by contractual implication or, if not, then by virtue of an independent restitutionary obligation, repayment must to that extent be required.
The suggested implication, on which the preliminary issue focuses, goes to repayment of the sum (over)paid.
But it seems inconceivable that any such repayment should be made in a case such as the present, years later without the payee having also in the meanwhile a potential liability to pay interest at an appropriate rate, to be fixed by the court, if not agreed between the parties.
In restitution, there would be no doubt about this potential liability, reflecting the time cost of the payment to the payer and the benefit to the payee: see eg Sempra Metals Ltd v Inland Revenue Commissioners [2007] UKHL 34, [2008] AC 561.
Whether by way of further implication or to give effect to an additional restitutionary right existing independently as a matter of law, the court must have power to order the payee to pay appropriate interest in respect of the overpayment.
This conclusion follows from the fact that, once it is determined by a court or arbitration tribunal that an adjudicators decision involved the payment of more than was actually due in accordance with the parties substantive rights, the adjudicators decision ceases, retrospectively, to bind.
Since Aspects cause of action arises from payment and is only for repayment, it is, whether analysed in implied contractual or restitutionary terms, a cause of action which could be brought at any time within six years after the date of payment to Higgins, ie after 6 August 2009.
For this purpose an independent restitutionary claim falls to be regarded as founded on simple contract within section 5 of the Limitation Act: Kleinwort Benson Ltd v Sandwell Borough Council [1994] 4 All ER 890, 942 943, per Hobhouse J, not questioned by the House of Lords in Kleinwort Benson Ltd v Lincoln City Council [1999] 2 AC 349, when it had to consider whether, in the circumstances of that case, section 32(1)(c) of the Act operated so as to extend the normal six year limitation period.
Higgins complains that this gives Aspect a one way throw and undermines finality.
By delaying commencement of the present claim until 2012, Aspect can sue to recover all or part of the 658,017 paid to Higgins, without having the risk of ending up worse off, since Higgins is barred by limitation from pursuing the 331,855 balance of its original claim.
That consequence follows, however, from Higginss own decision not to commence legal proceedings within six years from April 2004 or early 2005 and so itself to take the risk of not confirming (and to forego the possibility of improving upon) the adjudication award it had received.
Adjudication was conceived, as I have stated, as a provisional mechanism, pending a final determination of the dispute.
Understandable though it is that Higgins should wish matters to lie as they are following the adjudication decision, Higgins could not ensure that matters would so lie, or therefore that there would be finality, without either pursuing legal or arbitral proceedings to a conclusion or obtaining Aspects agreement.
Further, as Akenhead J pointed out in para 43 of his judgment, this is not one of those very typical building contract cases where there are set offs and cross claims on each side, each allegedly over topping the other.
In such cases, if there is an adjudication award within six years from performance, without any further proceedings being commenced, both sides are after the six year period time barred in respect of any claim to any balance which they originally contended to be due them.
Any further proceedings would be limited to a claim for repayment by the party required by the adjudication to pay a net balance to the other.
Aspect accepts by its pleadings and Miss Sinclair confirmed in her oral submissions that what Aspect contends for, in support of its claim for repayment, is the determination of the parties original rights and liabilities as they stood when they were adjudicated upon by the adjudicator.
Aspect does not suggest that it is of any relevance that the limitation period would now have expired, if Higgins were now assumed to be bringing an action for the total of 822,482 plus interest originally claimed, or for the 490,627 plus interest awarded by the adjudicator.
Aspect is in my view correct in this approach.
What the Scheme contemplates is the final determination of the dispute referred to the adjudicator, because it is that which determines whether or not the adjudicator was justified in his or her assessment of what was due under the contract.
The Scheme cannot plausibly mean that, by waiting until after the expiry of the limitation period for pursuit of the original contractual or tortious claim by Higgins, Aspect could automatically acquire a right to recover any sum it had paid under the adjudicators award, without the court or arbitration tribunal having to consider the substantive merits of the original dispute, to which the adjudicators decision was directed, at all.
If and so far as the adjudicator correctly evaluated a sum as due between the parties, such sum was both due and settled.
A subsequent court or arbitration determination to the same effect would simply confirm that such sum was due and was correctly settled as being due.
Any limitation period which would apply to a claim for such a sum, if it had not yet been settled, is in these circumstances quite irrelevant.
I accept, without further examination, that the final determination of the dispute might be affected in a particular case by circumstances occurring after the adjudicators decision, and that in such a case any payment ordered by the adjudicator might be shown now to have been more than was, in the light of subsequent events, justified.
A claim for an adjustment could then exist, but it would exist on the basis of those subsequent events.
As I have already indicated, the justification for an adjudicators decision cannot however be undermined by pointing out that, if payment of a sum which was due when ordered had not in fact been ordered and made, it would have become too late by virtue of limitation to pursue a separate claim for such sum by whatever date the proceedings for final determination were begun.
If the adjudicators order was justified on the basis of the underlying dispute, the payment made pursuant to it was due: the payment met obligations which the payer had.
It meant that the payee had no claim to any further payment, while retaining the right to ask the court finally to determine that this was the case.
One further point requires stating.
In finally determining the dispute between Aspect and Higgins, for the purpose of deciding whether Higgins should repay all or any part of the 658,017 received, the court must be able to look at the whole dispute.
Higgins will not be confined to the points which the adjudicator in his or her reasons decided in its favour.
It will be able to rely on all aspects of its claim for 822,482 plus interest.
That follows from the fact that the adjudicators actual reasoning has no legal or evidential weight.
All that matters is that a payment was ordered and made, the justification for which can and must now be determined finally by the court.
Similarly, if Aspects answer to Higginss claim to the 490,627 plus interest ordered to be paid had been not a pure denial of any entitlement, but a true defence based on set off which the adjudicator had rejected, Aspect could now ask the court to re consider and determine the justification for that defence on its merits.
Higginss alternative case
Higgins also submitted that, if, as I conclude, Aspect had six years from the making of payment under the adjudication in which to commence proceedings for repayment, asking the court for this purpose to determine the original dispute, the corollary ought to be that Higgins also has a fresh six year period from the making of such payment in which to bring proceedings for any balance which the adjudicator refused to award.
But there is no basis upon which to recognise a payee as acquiring by virtue of the receipt of a payment a fresh right to claim any further balance allegedly due.
Higgins argued that the adjudicators refusal of the balance might be regarded as an allowance, analogous to a payment.
Even if, contrary to the fact, the balance had been disallowed because of some set off which Aspect had asserted, I would not accept this argument.
Higgins would have had a claim to the balance which it could and should have pursued within six years of the cause of action for such balance first arising on performance of the contract or the commission of any tort by Aspect.
Conclusion
It follows that, in my opinion, the Court of Appeal was correct in its disposal of the present appeal.
A differently constituted Court of Appeal in Walker Construction (UK) Ltd v Quayside Homes Ltd [2014] EWCA Civ 93, [2014] 1 CLC 121 indicated, obiter, that it would follow the decision of Akenhead J in the present case, without having had drawn to its attention the present Court of Appeals decision, given during the interlude between submissions and judgment in Walker.
It follows from the present judgment that the obiter observations in Walker were wrong and must be over ruled, and that the present appeal should be dismissed.
| UK-Abs | Aspect Contracts (Asbestos) Limited (Aspect) contracted with Higgins Construction Plc (Higgins) to survey and report on a block of maisonettes which Higgins was considering redeveloping.
Aspects report was dated 27 April 2004.
During the redevelopment in 2005, Higgins discovered asbestos not identified in Aspects report and a dispute arose between the parties [1 2].
The contract contained an implied term (under sections 108 and 114 of the Housing Grants, Construction and Regeneration Act 1996, read with The Scheme for Construction Contracts (England and Wales) Regulations 1998 (SI 1998 No 649)) enabling disputes to be referred to adjudication [1].
Higgins referred the dispute to adjudication and claimed 822,482 plus interest for breach of Aspects contractual and/or tortious duties to exercise reasonable skill and care in carrying out the survey.
On 20 July 2009, the adjudicator found that Aspect had been in breach of such duties and awarded Higgins 490,627 plus interest.
Aspect duly paid Higgins 658,017 on 6 August 2009 [3].
It was also an implied term of the contract, under sections 108(3) of the 1996 Act and paragraph 23(2) of the 1998 Regulations, that the decision of the adjudicator is binding until the dispute is finally determined by legal proceedings, by arbitration or by agreement.
The parties did not agree to treat the adjudicators decision as final.
Higgins did not commence any proceedings to recover the 331,855 balance of its claims.
The limitation period for any such claim by Higgins expired in contract on or about 27 April 2010, and in tort by early 2011 [4].
On 3 April 2012 Aspect issued proceedings to recover the sum it had paid to Higgins, claiming that no payment had been due to Higgins on the merits of the original dispute.
Higgins then sought to counterclaim the 331,855 balance of its original claims.
Aspect responded that any such counterclaim became time barred after six years in 2010 or latest 2011.
The High Court (Akenhead J) rejected Aspects claim on the basis that there was no implied term for repayment and no entitlement to restitution after the expiry in 2010 or 2011 of a six year limitation period during which Aspect could have claimed a declaration of non liability with consequential relief.
The Court of Appeal allowed Aspects appeal on the basis that the contract contained an implied term for repayment by Higgins of any sum paid by Aspect which Aspect could show had not been due on the merits, and that this attracted a six year limitation period running from the date of Aspects payment.
The alternative restitutionary basis was not pursued by Aspect in the Court of Appeal.
Both courts held Higgins counterclaim for 331,855 to be time barred.
Permission having been granted to Higgins to appeal to the Supreme Court, the Supreme Court invited submissions on restitution as well as on the implied term.
The Supreme Court unanimously dismisses Higgins appeal in a judgment given by Lord Mance.
The Court concludes that: (1) Adjudication is intended to be a speedy provisional measure, pending final determination.
The decision of an adjudicator is binding from the time it is given, but lasts only until the dispute is finally determined by one of the ways identified in paragraph 23(2) of 1998 the Regulations or section 108 of the 1996 Act [14 15]. (2) Higgins argument that Aspects only claim was for declaratory relief and consequential orders and that such relief is time barred in the same way as Higgins own counterclaim is misconceived.
Consequential orders cannot be made for the repayment of money to which there is no independent basis for claiming [19 20]. (3) Aspect has an independent basis for having the original dispute finally determined, and for repayment, arising on an implied contractual or restitutionary basis.
That right arises upon and from Aspects payment [16 17].
It was an implied contractual term that Aspect, having made payment as ordered by the adjudicator, would have a directly enforceable right to recover such payment if, on a final determination on the merits of the original dispute, those sums were shown not to have been due to Higgins [23].
Repayment can also be claimed by way of restitution, it being retrospectively established by final determination that the sums paid pursuant to the adjudication amounted to an overpayment [24]. (4) The limitation periods for Aspects claims in contract and restitution are six years from the date of payment [21 22] and [25].
Aspect can require repayment by reference to a determination of the parties original rights and liabilities as they stood when they were adjudicated upon. (5) Higgins on the other hand is time barred from pursuing its counterclaim for the balance of its original claim.
This is the consequence of Higgins own decision not to commence legal proceedings to have the dispute finally determined within the limitation periods applicable to its claims [26 29 and 33]. (6) The Court of Appeals obiter observations in Walker Construction Ltd v Quayside Homes Ltd [2014] EWCA Civ 93, approving Akenhead Js decision in the present case, were wrong [34].
|
This is an application for directions in a pending appeal for which permission was granted by this court on 25 March 2014.
The appeal arises out of a transaction by which Mr Richard Gabriel, the claimant in the proceedings below, lent 200,000 to a company called Whiteshore Associates Ltd. The courts below have found that his solicitors, BPE Solicitors, were negligent in their handling of the transaction.
For present purposes, all that need be said about the issues is that they relate mainly to damages.
The trial judge awarded the full amount that Mr Gabriel would have recovered under the facility agreement if Whiteshore had been good for the money.
The Court of Appeal held that this loss was not within the scope of the solicitors duty.
They accordingly reduced the award to a nominal 2.
They also held, in the alternative, that even if substantive damages had been awarded, they would have been reduced by 75% on account of Mr Gabriels contributory negligence.
The trial judge awarded the costs of the claim up to the conclusion of the trial to Mr Gabriel.
The Court of Appeal set aside the judges costs order and ordered Mr Gabriel to pay BPEs costs of the proceedings up to and including the appeal.
The costs claimed by BPE under this head amount to 469,170.60.
The Court of Appeals order was pronounced on 22 November 2013.
On 5 March 2014, Mr Gabriel was made bankrupt on his own petition by order of the Gloucester and Cheltenham County Court.
On 25 March 2014, Mr Hughes Holland was appointed as his trustee in bankruptcy.
As a result, the right to pursue the appeal vests in the trustee.
Mr Hughes Holland has not yet decided whether to pursue it.
The reason is the uncertainty, on the current state of the authorities, about the extent of his potential liability for costs if the appeal fails.
The ordinary rule is that a trustee in bankruptcy is treated as party to any legal proceedings which he commences or adopts, and is personally liable for any costs which may be awarded to the other side, subject to a right of indemnity against the insolvent estate to the full extent of the assets.
Accordingly, Mr Hughes Holland accepts that he is personally at risk for BPEs costs of the appeal to the Supreme Court.
But he contends that he is not personally at risk by virtue of having adopted the appeal as trustee in bankruptcy for BPEs costs of the proceedings below in the event that the Court of Appeals order against Mr Gabriel should be affirmed.
The italicised words are important.
The present application is not concerned with costs that may be awarded against the trustee on any other ground.
I shall return to this point below.
The answer to this question has significant implications for the trustees decision whether to adopt the current appeal.
The evidence is that if the appeal is not pursued, unsecured creditors are likely to receive a modest dividend of between about 3p and 5p in the pound.
If it is pursued and succeeds, that figure is expected to rise to between 23p and 25p in the pound.
But if it is pursued and fails, the impact on creditors will depend on whether in that event the trustee would be personally liable only for the costs of the appeal, or for the costs of the proceedings below as well.
If the trustees liability for BPEs costs is limited to the costs of the appeal to this court, the dividend available to creditors will be reduced, subject to ATE insurance.
But if the trustees liability for costs extends to the costs below as well, they will exceed the entire assets of the estate.
The creditors will receive no dividend and the trustee will be personally exposed for the balance subject to any indemnity which he is able to obtain from the creditors.
It is far from clear that such an indemnity will be forthcoming.
The largest creditor, accounting for about 60% by value of claims, is the Nautilus Trust, a discretionary settlement in which Mr Gabriel has a life interest.
The evidence is that it has few assets other than debts owed to it by Mr Gabriel.
In these circumstances, we were not surprised to learn from Mr Chichester Clark, for the trustee, that if he is potentially liable for BPEs costs below, the appeal is unlikely to be pursued.
Jurisdiction
Mr Stewart QC, who appears for BPE, raises a preliminary issue about this courts jurisdiction to deal with this application.
He submits that we have no jurisdiction to deal with the incidence of costs except (i) as a condition imposed at the time of granting permission to appeal, or (ii) as part of the ultimate disposition of the appeal.
This point is in my view misconceived.
Section 40(5) of the Constitutional Reform Act 2005 confers on this court the power to determine any question necessary to be determined for the purposes of doing justice in an appeal to it under any enactment.
The Supreme Court Rules 2009 (SI 2009/1603 (L17)) provide: Orders for costs 46. (1) 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. (2) The courts powers to make orders for costs may be exercised either at the final determination of an appeal or application for permission to appeal or in the course of the proceedings.
The question which the trustee wishes to have decided is not among the substantive issues on the appeal, but it is a question which will have to be decided at some stage of the proceedings if the court is to perform its duty to determine the incidence of costs.
If an order for costs may be made at any stage of the proceedings, it is clear that a decision on a question of principle arising in relation to costs may be made at any stage.
This court would not normally decide an issue going to costs before the hearing of the substantive appeal.
But that is because it is not normally just or even practical to do so.
In the present case there is every reason for ruling on the trustees potential liability now, and no reason for deferring it until after judgment.
In the first place, the ruling which is presently sought is necessary in order to enable the trustee and the creditors to make an informed decision about whether to proceed with the appeal.
A decision on the point after judgment will be of no use to them for that purpose.
There is no interest of justice and no public interest which would be served by requiring the trustee and the creditors to make their decision in ignorance of the true position.
Secondly, the trustees application is, as I have pointed out, limited to the question whether a liability for BPEs costs below would follow as a matter of law from his adoption of the appeal.
There are no discretionary considerations involved.
In particular, nothing that we decide now (or indeed after judgment) will affect any issue which may arise about the propriety of any decision of the trustee to pursue the appeal, which is a matter for the High Court.
This court is therefore in as good a position to deal with the matter now as it would be at any other time.
The question of principle
A trustee in bankruptcy, unlike the liquidator of a company, is personally a party to legal proceedings which he has adopted.
The reason is that the assets of the bankrupt at the time of the commencement of the bankruptcy vest in him personally, and the bankrupt has no further interest in them.
The rule, which dates back to the beginning of bankruptcy jurisdiction in England, is currently embodied in section 306 of the Insolvency Act 1986.
The trustees position differs in this respect from that of a liquidator, for although a liquidator is a trustee for the proper administration and distribution of the estate, the assets remain vested in the company and proceedings are brought by or against the company.
It follows that with the exception of a limited (and for present purposes irrelevant) class of purely personal actions, a bankrupt claimant has no further interest in the cause of action asserted in the proceedings.
Likewise, as Hoffmann LJ observed in Heath v Tang [1993] 1 WLR 1421, 1424, where the bankrupt is the defendant, he has no further interest in the defence, because the only assets out of which the claim can be satisfied will have vested in the trustee.
None of this means that the trustee is bound to adopt the action.
If the trustee does not adopt it, the action cannot proceed and will be stayed or dismissed if the bankrupt is the claimant: Heath v Tang [1993] 1 WLR 1421.
If the bankrupt is the defendant, an action which the trustee does not adopt is liable to be stayed under section 285(1) and (2) of the Insolvency Act 1986.
If, however, the trustee does adopt the action, he becomes the relevant party in place of the bankrupt.
In the ordinary course, he will be substituted for the bankrupt under what is now CPR 19.2.
But it is well established that he will be treated as the party if he has in fact adopted the proceedings by conducting the litigation, even if there has been no formal substitution: Trustee of the Property of Vickery (a bankrupt) v Modern Security Systems Ltd [1998] 1 BCLC 428.
It follows that an order for costs in favour of the other side is made against the trustee personally in the same way as it would be made against any other unsuccessful litigant.
The cost of satisfying the order is treated as an expense of performing his office, for which he assumes personal liability just as he does for any other expenses and liabilities incurred in the administration and distribution of the estate, but subject to a right of indemnity against the assets if the expenses and liabilities were properly incurred.
These principles are easy enough to apply in a case where substantially all the costs of the other side were incurred at a time when the litigation was being conducted by the trustee.
But what is to happen if the proceedings were begun by or against a litigant who subsequently became bankrupt, and part of those costs was incurred by the other side before bankruptcy supervened?
The only authority which deals directly with this question is Borneman v Wilson (1884) 28 Ch D 53, in which the Court of Appeal extended the personal liability of the trustee to cover costs incurred by the other side before his adoption of the proceedings.
The facts were that the Wilsons, father and son, had acted as commercial agents of one Borneman.
He began an action against them in the Chancery Division for an account of their dealings with his goods and obtained interlocutory relief on motion including an injunction and the appointment of a receiver.
The Wilsons served a notice of appeal, but shortly afterwards a bankruptcy order was made against them.
On 7 October 1884, a trustee in bankruptcy was appointed.
On 18 October, the trustee was substituted as a defendant, apparently ex parte on the application of Borneman.
On 31 October, he gave notice abandoning the appeal.
He then entered an appearance in the substantive proceedings and called for a statement of claim.
Borneman applied for an order against the trustee requiring him to pay the costs of the appeal which he had incurred before receipt of the notice of abandonment.
The Court of Appeal (Bowen and Fry LJJ) made that order.
Their reason was that notwithstanding the trustees prompt and express abandonment of the appeal, by appearing and calling for a statement of claim in the Chancery proceedings he had adopted the action, and that meant the entire action including the appeal.
The trustee, said Bowen LJ, cannot adopt part of the action and leave out the rest.
Fry LJ agreed.
The trustee, he said, had put himself into the place of the bankrupt as regards the action and cannot take one part of it and reject another.
On the face of it, Borneman v Wilson is authority for the proposition that the proceedings must as a matter of law be adopted either in their entirety (including any discrete prior proceedings conducted by the bankrupt before his appointment), or not at all.
The decision has not subsequently been applied in any reported case, although it was treated as correct by a strong Court of Appeal (Lord Esher MR and Lopes and Kay LLJJ) in School Board for London v Wall Brothers (1891) 8 Morr 202 and by Sir John Vinelott in Trustee of the Property of Vickery (a bankrupt) v Modern Security Systems, supra, at 434.
However, in my opinion it is no longer good law.
The Court of Appeals rather cursory judgments give no reason for its all or nothing approach to the adoption of current legal proceedings.
But their conclusion is nevertheless understandable in the light of the law as it then was, or at least as it was thought to be.
At the time when Borneman v Wilson was decided, an order for costs could be made only against a party to the proceedings.
The modern jurisdiction to make an order for costs against a non party is conferred by section 51(3) of the Senior Courts Act 1981, which dates back to section 5 of the Supreme Court of Judicature Act 1890.
Even after 1890 the existence of the power was not recognised by the courts until the decision of the House of Lords in Aiden Shipping Co Ltd v Interbulk Ltd [1986] AC 965.
It followed that once a party to subsisting legal proceedings had become bankrupt and the trustee had been substituted for him, there was no possibility of obtaining an order for costs against the bankrupt himself.
Moreover, even if such an order had been possible (for example, because no formal substitution had occurred), it would have been pointless because a liability arising from a costs order made after the commencement of the bankruptcy would not have been provable against the estate.
Although debts which were contingent at the commencement of the bankruptcy had in principle been provable since the Bankruptcy Act 1869, it was considered that the discretionary character of a costs order meant that it was not even a contingent liability until the order had actually been made: see In re Bluck, Ex p Bluck (1887) 57 LT 419, In re British Gold Fields of West Africa [1899] 2 Ch 7, In re A Debtor (No 68 of 1911) [1911] 2 KB 652, In re Pitchford [1924] 2 Ch 260, Glenister v Rowe [2000] Ch 76.
These cases were overruled in In re Nortel GmbH (in administration); In re Lehman Brothers International (Europe) (in administration) [2014] AC 209: see paras 87 93 (Lord Neuberger), and 136 (Lord Sumption).
This court held in that case that by participating in litigation, a party submitted himself to a liability to pay costs in accordance with rules of court, contingently upon an order for costs being made against him.
It followed that where proceedings were begun by or against a company before it went into liquidation, a liability for costs under an order made after it went into liquidation was provable as a contingent debt.
The position is the same in bankruptcy.
Against this background, it is easy to understand why late Victorian judges should have been unwilling to allow the trustee to adopt an action for his own account without assuming the liabilities for what had gone before.
The result would have been to allow the action to proceed while leaving the other side with no remedy in costs in respect of earlier stages of the proceedings, irrespective of the outcome.
Freed of the baggage of earlier misconceptions, however, it is possible to revisit the issue as a matter of principle.
Where an action in progress at the time of the trustees appointment is adopted by the trustee, one issue now open for reconsideration is whether there is any reason in principle why the trustee should necessarily be required, simply by virtue of his adoption of the action, to pay the other sides costs of legal proceedings including those incurred at a time when he was not a party and the action was being conducted by the bankrupt for his own account.
Although this issue was not as such addressed by the parties submissions, I think that there can no longer be any absolute rule to that effect.
The most that can be said is that it may be appropriate as a matter of discretion to make such an order.
The trustee will have conducted the action for the benefit of the estate.
The expenditure of costs on both sides will have been directed to achieving the desired outcome, and it may well be reasonable for that outcome to determine the incidence of costs whether they were expended before or after the trustees adoption of the action.
Equally, it will be for the court, in the exercise of its discretion, to decide whether a non party order should be made against the bankrupt himself in respect of some part of the costs incurred while he was conducting the litigation before bankruptcy supervened.
If this was the issue in the present case, it could not be right to pre empt the discretion in advance on an application like this one.
But it is not the issue in the present case, because a trial and the successive appeals from the order made at trial are distinct proceedings for the purposes of costs, albeit distinct proceedings in the same action.
A distinct order for costs will be made in respect of each of them.
Costs incurred in generating material for the trial will be recoverable, if at all, under the costs order made in respect of the trial.
It will not be recoverable as part of the costs of a subsequent appeal even if the material is reused on the appeal: Wright v Bennett [1948] 1 KB 601 (CA).
Mr Gabriel was responsible for the entire conduct of the trial and the appeal to the Court of Appeal.
The Court of Appeal has disposed of that appeal, and has ordered Mr Gabriel to pay BPEs costs at both stages.
All of this happened before Mr Gabriel became bankrupt.
His liability under the costs order of the Court of Appeal is a provable debt.
Indeed, a proof has been lodged.
If this court were in due course to dismiss the appeal, it would normally make no order of its own in relation to the costs below other than to affirm (or possibly to vary) the order which had already been made by the Court of Appeal.
That order would continue to represent a liability of Mr Gabriel and not of the trustee.
The mere fact that the trustee has adopted the appeal could not possibly justify this court in ordering the trustee to pay the costs which the Court of Appeal has ordered to be paid by Mr Gabriel.
The trustee is entitled to adopt the appeal to this court without adopting the distinct proceedings below.
Indeed, the adoption of proceedings below would be contrary to principle.
In a case where the proceedings below had been conducted to their conclusion before the bankruptcy by the bankrupt himself, to order the trustee to pay them personally would in effect enable BPE to obtain an unwarranted priority for its claim under the Court of Appeals costs order.
The trustee would recover an indemnity from the estate in respect of a provable debt to the full extent of the assets before any distribution fell to be made to other creditors.
I would expect the result to be the same if the bankrupt had succeeded in the courts below and failed in this court, so that an order for costs in respect of the proceedings below was made in favour of the other side for the first time in this court.
It is difficult to see any principled distinction between the two situations.
But the position would be procedurally more complicated, because it would involve making a non party order against the bankrupt so that the resultant liability could be proved against the estate as a contingent debt.
For that reason other questions may arise which are best left to a case where they are relevant.
I would declare that in the event that the Trustee adopts the appeal to the Supreme Court he will not be held personally liable for any costs incurred by the respondent in relation to this action up to and including the order of the Court of Appeal dated 22 November 2013, by virtue only of the fact of his office as Trustee of Mr Gabriels estate in bankruptcy or of his adoption of the appeal.
| UK-Abs | This is an application for directions in a pending appeal.
The appeal concerns a claim in negligence by Mr Gabriel (the Appellant) against his solicitors (the First Respondent).
The trial judge awarded Mr Gabriel 200,000 in damages and ordered the solicitors to pay Mr Gabriels costs.
The Court of Appeal reduced the damages award to a nominal 2, set aside the judges costs order, and ordered Mr Gabriel to pay the solicitors costs of the proceedings up to and including the appeal.
That order was made on 22 November 2013.
On 5 March 2014, Mr Gabriel was made bankrupt.
On 25 March 2014, Mr Hughes Holland was appointed as his trustee in bankruptcy.
Also on 25 March 2014, permission was granted for the appeal to proceed to the Supreme Court.
The right to pursue the appeal now rests with the trustee.
If a trustee in bankruptcy decides to adopt legal proceedings which were on foot at the time of the bankruptcy, the trustee personally becomes a party to those proceedings in place of the bankrupt, either by way of formal substitution or simply by virtue of being treated as if he has been substituted.
An order for costs may therefore be made against the trustee personally if the proceedings are unsuccessful.
The trustee then has a right of indemnity against the bankrupts assets if the costs liability is properly incurred.
Mr Hughes Holland accepts that if he decides to pursue this appeal and loses he will be personally liable for the solicitors costs before the Supreme Court.
However, he says that he is not personally at risk by virtue of adopting the appeal as trustee in bankruptcy for the solicitors costs of the proceedings before the trial judge and the Court of Appeal.
If Mr Hughes Holland pursues the appeal and wins, then Mr Gabriels creditors will receive between 23p and 25p in the pound instead of between 3p and 5p in the pound.
But if Mr Hughes Holland pursues the appeal and loses, and he is ordered to pay not only the costs of the appeal to the Supreme Court but also the costs of the hearings below, the costs liability will exceed the value of the estate and Mr Hughes Holland will probably have to make up the difference from his own pocket.
He therefore seeks confirmation as to the costs position so that he can decide whether to pursue the appeal.
The solicitors argue that the Supreme Court does not have jurisdiction to make any order as to costs at this stage and in any event that Mr Hughes Holland should be personally liable for the costs of the proceedings below if he loses the appeal.
The Supreme Court unanimously holds that if Mr Hughes Holland decides to pursue the appeal he will not by virtue only of his office as Mr Gabriels trustee in bankruptcy or of his adoption of the appeal be held personally liable for costs of the hearings before the trial judge and the Court of Appeal.
Lord Sumption gives the only judgment, with which all other members of the Court agree.
The Supreme Court has jurisdiction to deal with this application and it is proper to exercise it.
Section 40(5) of the Constitutional Reform Act 2005 empowers the Court to determine any question necessary to be determined for the purposes of doing justice in an appeal to it under any enactment.
Rule 46 of the Supreme Court Rules 2009 further provides that the court may make such costs orders as it considers just, and that it may do so either at final determination of an appeal, or application for permission to appeal, or in the course of proceedings.
It is not usual for the court to decide an issue going to costs before the hearing of the substantive appeal.
However, the ruling is necessary now to enable the trustee to decide whether to proceed, and the court is in as good a position to decide this issue now as it would be later: the application does not raise any discretionary considerations, nor does it affect the propriety of any decision of the trustee to pursue the appeal. [6 8] The Court of Appeal authority Borneman v Wilson (1884) 28 Ch D 53 suggests that a trustee in bankruptcy must either adopt proceedings in their entirety or not at all, even where there are discrete prior proceedings conducted by the bankrupt before his appointment.
At that time, the court did not have jurisdiction to award costs against a non party, which would have included the bankrupt where the trustee had been substituted for the bankrupt; moreover, liability under such an order would not have been provable against the estate because of a line of case law which said that such liability was not contingent at the time of bankruptcy.
The jurisdiction to award costs against a non party was recognised by the House of Lords in 1986 and the possibility of proving liability under a costs order against a company in liquidation, and consequently also against a bankrupts estate, was recognised by the Supreme Court in 2014.
The reasons behind the Court of Appeals conclusion in Borneman are therefore no longer relevant and it is possible to revisit the issue as a matter of principle. [11 14] It may be appropriate as a matter of discretion to order a trustee in bankruptcy to pay the other sides costs of legal proceedings including those incurred before the trustee became a party, but there is no longer any absolute rule to that effect. [15] But the issue in this application does not concern that discretionary assessment.
A trial and the successive appeals from the order made at trial are distinct proceedings in the same action and a distinct order for costs is made in respect of each stage. [16] Mr Gabriel was responsible for the entire conduct of the trial and the appeal to the Court of Appeal, and the costs order which was made against him by the Court of Appeal is a provable debt in his bankruptcy.
It would be contrary to principle for Mr Hughes Holland to be held liable for costs in the proceedings below, as this would merely give the solicitors an unwarranted priority for their claim under the Court of Appeals costs order. [17]
|
The appellant (Mr Youssef), an Egyptian national, has been living in this country since 1994.
He challenges a decision made by the respondent Secretary of State on 14 September 2005, in his capacity as a member of the committee of the United Nations Security Council, known as the Resolution 1267 Committee or Sanctions Committee.
The committee is responsible for maintaining a list of persons and entities subject to the asset freeze imposed on persons associated with Al Qaida under Chapter VII of the United Nations Charter.
The committee acts by consensus: all members must agree to a nomination for inclusion on the list, or to de listing.
The United Nations sanctions regime, and the constitution of the committee, are described in more detail in the judgment under appeal of Laws LJ in the Court of Appeal, as is the drastic effect of listing on the individuals concerned: [2013] EWCA Civ 1302; [2014] QB 728, paras 3 12.
The decision under challenge removed the hold which the United Kingdom had previously placed on the appellants designation by the committee.
It had the consequence that thereafter he became subject to the asset freeze imposed by virtue of the Charter and of implementing European and national legislation.
The appellants first contention is that, although the Secretary of State made his own decision on untainted evidence, he was aware that information on which other members were proceeding was or might have been obtained by torture; and that accordingly he was under an obligation, enforceable in domestic law, not to lend his aid to a committee decision which might be so tainted.
The appellants case, with others, came before this court in earlier judicial review proceedings in Ahmed v HM Treasury [2010] UKSC 2; [2010] 2 AC 534 (to which I will return below).
They related to an implementing order in this country made under section 1 of the United Nations Act 1946.
The court held that the order was outside the powers conferred by the Act.
However, that decision left in place Council Regulation (EC) No 881/2002, which implemented the asset freeze under European law, and had direct effect in the United Kingdom under the European Communities Act 1972.
Although this court declined to suspend its order to enable new regulations to be made under that Act ([2010] UKSC 5; [2010] 2 AC at p 689), such provisions, including the related licensing provisions and criminal sanctions, were made soon afterwards, in effect reproducing the controls previously imposed under the 1946 Act (Al Qaida and Taliban (Asset Freezing) Regulations 2010 (SI 2010/1197), since superseded by 2011 Regulations (SI 2011/2742) to similar effect).
In evidence in the Ahmed proceedings it was disclosed that, following a review of the information then available, the government had decided that the appellant no longer met the criteria for designation.
From June 2009 until late 2012 the Secretary of State actively supported his removal from the Sanctions Committees Consolidated List, and attempted to persuade other members to agree, but without success.
The appellant complains of the Secretary of States failure at that stage to extend his grounds for seeking delisting to include the tainted nature of the evidence apparently relied on by other members.
Findings of the United Nations Ombudsperson
Meanwhile (by Resolution 1904 of 2009) the Security Council had established the new office of Ombudsperson, inter alia, to assist the committee in considering and responding to requests for delisting.
The appointment of the first Ombudsperson (Judge Kimberly Prost) and her understanding of this new role were described by Laws LJ in the Court of Appeal (para 8).
In April 2013 the appellant applied to the Ombudsperson requesting delisting.
Her report to the committee, submitted in February 2014, recommended that he be retained on the list.
On 30 July 2014 she wrote to the appellant informing him of her recommendation and the reasons for it.
Her letter indicated that she had excluded from her analysis material tainted by torture (p 4).
It reviewed a number of public statements attributed to the appellant between 2011 and 2013.
It is sufficient to refer, as an example, to the most recent: a sermon given in May 2013, in which he offered extensive praise of Usama bin Laden, labelled certain Al Qaida linked groups as the fruits of this Martyr [Bin Laden] and his good devout brethren, and asserted that America will crumble thanks to those Mujahids and by virtue of this Martyr.
The Ombudsperson commented that such repeated statements clearly glorify Usama Bin Laden and the Al Qaida organisation for its various activities in different locations, and could be categorised as an exhortation to others to join in the continued expansion of the organisation in its aims, which includes the destruction of America (p 9).
On 10 September 2014 the Secretary of State informed the appellant that he agreed with the Ombudspersons recommendation and would no longer support delisting.
On 30 October 2014 the committees narrative summary of reasons for listing was updated to take account of the Ombudspersons findings.
The revised summary includes the following: [The appellant] is a known figure within extremist circles.
He uses an Internet site, and other media, to support terrorist acts or activities undertaken by Al Qaida as well as to maintain contact with a number of supporters around the world.
He offers praise for Al Qaida as an organisation and, directly or by inference, encourages individuals to join and support that organisation and its activities on a global basis.
As of early 2014, [the appellant] provided Al Qaida and Al Nusrah Front for the People of the Levant (QE.A.137.14) with guidance and justification for their operations and tactics.
The court has no evidence from the appellant to counter the allegations on which the 1267 committee now relies.
In his only witness statement in these proceedings, dating from 3 December 2010, he simply rejected (without further explanation) the notion that he is in any way involved in terrorism, or linked in any way to Al Qaida or the Taliban.
The court was told that he intends to challenge the Secretary of States recent decision not to support delisting, but not on what grounds.
It has been agreed between the parties that further action will await the decision of the court in this appeal, at which point the Secretary of State will reconsider his decision so far as necessary in the light of this courts findings and of any representations made by the appellant.
Immigration
The appellants immigration status is not in issue in these proceedings.
He claimed asylum on arrival in 1994, but that claim was rejected under article 1F(c) of the Refugee Convention (serious reasons for considering that he has been guilty of acts contrary to the purposes and principles of the United Nations).
Since October 1999 he has remained under a series of grants of discretionary leave to remain.
An appeal against refusal of asylum under article 1F(c) is currently pending before the Upper Tribunal.
Consideration of his application for indefinite leave to remain has been deferred by the Home Office pending a final decision on his asylum application.
European proceedings
Decisions of the European Court of Justice in Kadi v Council of the European Union (Joined Cases C 402/05P and C 415/05P), [2009] AC 1225 (Kadi I), and of the General Court in Kadi v Commission of the European Communities (Council of the European Union intervening) (Case T 85/09) [2010] ECR II 5177 (Kadi II) established that inclusion of an individual within a list under EC Regulation 881/2002 (regulation 881) was subject to judicial review in Europe, inter alia on grounds relating to the accuracy and reliability of the evidence relied on (Kadi II paras 141 143).
Regulation 881 was amended by Council Regulation (EU) No 1286/2009 to create a mechanism for review by the Commission (articles 7(a) and 7(c)).
In July 2010 the appellant applied to the General Court of the European Union for removal from the list in regulation 881.
In a decision given on 21 March 2014 (Case T 306/10) the court held that the Commission had failed to review his inclusion under the required procedures, but it dismissed his claim that his retention on the list was irrational.
On 17 December 2014 the European Commission sent to the appellant an updated statement of reasons for listing under regulation 881 in the same terms as the 1267 committees summary.
The appellant responded on 26 January 2015 denying those allegations.
He has lodged an application for legal aid with the EU General Court to enable him to challenge the decision to continue his listing under the regulation.
The present proceedings and the issues in the appeal
The present claim for judicial review was issued in December 2010.
It challenged the legality both of the Secretary of States decision in 2005 to lift his hold on designation, and also of his refusal, in a letter of 14 October 2010, to extend his request for delisting to include the ground that the committees decision had been based on torture tainted evidence.
The claim was dismissed by the Divisional Court in July 2012, and by the Court of Appeal in October 2013.
Permission to appeal to this court was granted on 9 July 2014.
The appeal raises issues about the tests to be applied in judging the legality of the relevant decision, and about their consequences under domestic law.
It also raises issues about the remedies if any to which the appellant should be entitled, if otherwise successful, having regard in particular to the developments since the Court of Appeal decision.
Mr Otty QC summarised his submissions on behalf of the appellant under four main heads: i) Torture tainted material The exceptional status accorded to the prohibition against torture, under international and domestic law, required the Secretary of State not merely himself to make no use of torture tainted evidence, but to forego participation in a decision which might be affected by such evidence. ii) Absence of power The intended and inevitable effect of the committees decision was a serious interference with the appellants right to peaceful enjoyment of his property.
That could only be achieved by a clear statutory provision or common law rule, neither of which existed. iii) Standard of proof The test of reasonable grounds to suspect that the appellant met the criteria for designation as having been associated with Al Qaida through his participating in the financing, planning, facilitating, preparing or perpetrating of acts or activity in conjunction with, under the name of or on behalf of Al Qaida adopted by the Secretary of State was too low, as shown by the reasoning of this court in Ahmed. iv) Standard of review Given the gravity of the context, the courts below were wrong to limit the standard of review to that of Wednesbury unreasonableness or irrationality.
Following the more recent guidance of this court in Kennedy v Information Comr (Secretary of State for Justice intervening) [2014] UKSC 20, [2015] AC 455 and Pham v Secretary of State for the Home Department (Open Society Justice Initiative intervening) [2015] UKSC 19, [2015] 1 WLR 1591, the appellant was entitled to a full merits review, or at least one involving a proportionality analysis.
It will be convenient to take them in this order, expanding the account of law and facts so far as necessary under each head.
Torture tainted material
Background
The factual background to this issue, so far as not already explained, is uncontentious.
On 29 March 2005 a designating state (now known to have been Egypt) requested the committee to add 20 individuals, including the appellant, to the UN sanctions list.
The information submitted in support relied on his conviction in Egypt in absentia for membership of a terrorist group.
This information, as the Secretary of State knew, included evidence that had been or may have been obtained by torture.
However, the Secretary of States decision on 14 September 2005 to agree to his designation was not based on this information but on a separate Security Service assessment.
This referred to his previous links with a terrorist group known as Egyptian Islamic Jihad (EIJ), his arrest in 1998 in connection with a planned bomb attack on the US embassy in Tirana, and his views which remained extreme.
The assessment was that he had had strong historical links to EIJ in the mid to late 1990s and that the potential remains for him to re engage with EIJ.
Under the guidelines in effect in 2005 the committee was not required to make a statement of the reasons for its decision.
However, under later guidelines (first introduced in June 2008 by SCR 1822), it was required to publish on its website a narrative summary of reasons for listing.
Such a summary in respect of the appellant was published in September 2010.
This referred to him being wanted in Egypt in connection with terrorist crimes committed in that country.
The appellant asserts (without specific contradiction by the Secretary of State) that these allegations were the result of torture of his co accused.
As already noted, by this time, the Secretary of State had formed the view on other grounds that the listing was no longer justified.
The Security Service assessment on which this was based (May 2009), included the following: We assess that were [the appellant] to be removed from the Consolidated List he would be unlikely to re engage with EIJ.
Although [the appellant] continues to maintain his extremist views, he appears very reluctant to be directly involved in terrorist activities.
Legal principles and the courts below
For the legal principles governing the use of evidence obtained by torture we need look no further than the opinions given in the House of Lords in A v Secretary of State for the Home Department (No 2) [2005] UKHL 71; [2006] 2 AC 221, notably that of Lord Bingham which contains an extensive review of the international materials (paras 30ff).
Having quoted from the United Nations Convention against Torture and Other Cruel, Inhuman or Degrading Treatment or Punishment, he noted as common ground that the international prohibition of the use of torture enjoys the enhanced status of a jus cogens or peremptory norm of general international law.
He quoted at length from the authoritative exposition by the International Criminal Tribunal for the Former Yugoslavia in Prosecutor v Furundzija (1998) 38 ILM 317 (10 December 1998), including this statement of the obligations of states, both individually and collectively: 151.
Furthermore, the prohibition of torture imposes upon states obligations erga omnes, that is, obligations owed towards all the other members of the international community, each of which then has a correlative right.
In addition, the violation of such an obligation simultaneously constitutes a breach of the correlative right of all members of the international community and gives rise to a claim for compliance accruing to each and every member, which then has the right to insist on fulfilment of the obligation or in any case to call for the breach to be discontinued.
Lord Bingham interpreted these extracts as indicating the requirement on states both to eschew the practice of torture and to cooperate to bring to an end through lawful means any serious breach of an obligation under a peremptory norm of general international law.
The same principles required states save perhaps in limited and exceptional circumstances to reject the fruits of torture (para 34).
Similarly article 15 of the Torture Convention prohibited the use of any statement which is established to have been made as a result of torture (para 35), a principle recognised also in the European Convention on Human Rights and in the common law (para 52).
The Court of Appeal held that the Secretary of State was responsible for the lawfulness of his own reasons, but not in effect for policing the reasoning of other member states.
Laws LJ (paras 54 55) accepted that the court cannot ignore an established rule of international law, far less one which has the force of ius cogens erga omnes, and declined therefore to base his decision on the proposition that the Governments conduct of foreign relations enjoys something close to an immunity from judicial review.
He continued: The true answer to Mr Ottys argument on ground 2 rests in my judgment on the facts of the case.
In R (Al Rawi) v Secretary of State for Foreign and Commonwealth Affairs [2008] QB 289 I said, at para 102: [T]he status of ius cogens erga omnes empowers but does not oblige a state to intervene with another sovereign state to insist on respect for the prohibition of torture (para 151 of Prosecutor v Furundzija) .
But Mr Ottys submission entails an obligation on the Secretary of State so to intervene.
Given that the Foreign Secretarys own reasons for lifting the hold were not tainted by torture evidence, there is nothing in Mr Ottys case save an insistence that the United Kingdom should, in effect, have stymied the designation because other states were not so pure.
The law did not require him to do so.
Submissions
In this court Mr Otty challenges both the reasoning of the decision in Al Rawi on which Laws LJ relied, and its applicability to this case.
The Court of Appeal in Al Rawi had been wrong to interpret the passage cited from Furundzija as support for an entitlement rather than an obligation to act.
In any event, unlike Al Rawi in which the Secretary of State had had no control over the treatment of inmates in Guantanamo Bay, in this case he had the power to determine whether or not designation would proceed.
Further, the courts below erred in holding that the Secretary of State could disassociate himself from the reasoning of the committee of which he was a member.
Although the committees reasons were not published (nor required to be published) until some years later, the narrative summary must be treated as representing the views of the committee as a body, and so attributable also to its members individually.
For the Secretary of State, Mr Swift QC accepted that the decision is reviewable, but subject to defined limits.
As he put it in his printed case: It is common ground that the decision taken by the Foreign Secretary as a member of the 1267 committee as to whether or not the appellant met the designation criteria is justiciable as a matter of domestic law, applying standard public law principles.
It is equally clear, however, that neither similar decisions taken by other members of the committee, nor decisions of the committee itself, are justiciable as a matter of UK domestic law.
In his submission, the Secretary of State in removing the hold on designation was agreeing to the fact of designation and no more.
Provided his own reasons were valid, the law did not make him responsible for the decisions of others.
He had no means of knowing what evidence might be relied on by them, nor any duty to make inquiries.
At the time, under the current UN guidance there was no expectation that the committee would form a single collective view or adopt collective reasons.
Discussion
In choosing between these competing submissions, it is important to define the scope of the courts powers.
Mr Swifts concession that the decision of the Secretary of State is subject to judicial review begs a potentially important question as to the legal basis of the concession and its proper limits.
Judicial review does not operate in the abstract.
The standard public law principles to which Mr Swift refers cannot be divorced from the legal context, statutory or common law, in which the particular executive action is taken or decision made.
The legal context in which the 2005 decision was made was that of a body operating under international law, not subject to the domestic courts.
If the Secretary of State alone is to be subject to review, there must be some legal principle by which under domestic law his vote can be distinguished from those of other members.
The point can be illustrated by reference to the committees narrative summary of reasons published in 2010.
I agree with Mr Swift that there is no valid basis for attributing that statement retrospectively to the decision made in 2005, at a time when there was no requirement for a collective statement of any kind.
But I would reach the same view looking at the matter in 2010.
Although I see force in Mr Ottys submission that the Secretary of State, as a voting member of the committee, cannot divorce himself from its collective statement, this would lead me to the opposite conclusion from that drawn by him.
It does not mean that the Secretary of States vote, infected by the committees reasons, acquires a separate status for the purpose of domestic law.
They remain the reasons of the international body, challengeable if at all only under international law (or by virtue of their specific adoption under the European regulation).
The object of the present challenge therefore has to be the logically prior decision of the Secretary of State in 2005 to remove his hold on the proposal for designation.
The source of his powers under domestic law lay not in any statute but in the exercise of prerogative powers for the conduct of foreign relations.
That did not make it immune from judicial review, but it is an area in which the courts proceed with caution, as is apparent from the authorities reviewed by the Court of Appeal in R (Abbasi) v Secretary of State for Foreign and Commonwealth Affairs [2002] EWCA Civ 1598; [2003] UKHRR 76 (cited with approval in this court in R (Sandiford) v Secretary of State for Foreign and Commonwealth Affairs [2014] UKSC 44; [2014] 1 WLR 2697, paras 49ff).
In Abbasi the issue was whether the Secretary of State could be required by the court to intervene with the American government on behalf of a British prisoner held in Guantanamo Bay.
Following Council of Civil Service Unions v Minister for the Civil Service [1985] AC 374 (GCHQ), it was accepted as settled law that the issue of justiciability depends, not on general principle, but on subject matter and suitability in the particular case (para 85).
The court cited R v Secretary of State for Foreign and Commonwealth Affairs, Ex p Everett [1989] QB 811, relating to the issue of a passport, in which Taylor LJ summarised the effect of GCHQ: The majority of their Lordships indicated that whether judicial review of the exercise of prerogative power is open depends upon the subject matter and in particular upon whether it is justiciable.
At the top of the scale of executive functions under the prerogative are matters of high policy, of which examples were given by their Lordships; making treaties, making war, dissolving Parliament, mobilising the Armed Forces.
Clearly those matters and no doubt a number of others, are not justiciable.
But the grant or refusal of a passport is in a quite different category.
It is a matter of administrative decision affecting the rights of individuals and their freedom of travel.
It raises issues which are just as justiciable as, for example, the issues arising in immigration cases. (p 820) In Abbasi the court held that the exercise of the Secretary of States powers to protect British citizens abroad was in principle subject to judicial review, although the court could not enter the forbidden areas, including decisions affecting foreign policy; but it declined to intervene on the facts of that case (paras 106 107).
The present case falls somewhere between the two ends of the spectrum indicated by Taylor LJ.
The conduct of foreign policy through the United Nations, and in particular the Security Council, is clearly not amenable to review in the domestic courts so far as it concerns relations between sovereign states.
The distinguishing factor in the present context is that the Security Councils action, through the 1267 committee, is directed at the rights of specific individuals, and in this case of an individual living in the United Kingdom.
Furthermore, at the time the decision was taken, the Security Council procedures provided no other means for the individual to challenge their decision.
It is no doubt such considerations that led to Mr Swifts concession.
I am content (without deciding the point) to proceed on the basis that it is correct.
That said, the decision under challenge in the domestic proceedings is that of the Secretary of State not of the committee, and it is by reference to his reasons that it must be judged.
There is no legal basis for attributing to him reasons which he did not have.
Since his own reasons were untainted, Mr Otty has to show that he was in breach of a distinct duty to inquire into the reasons of the other members, and to withhold his support if they appeared tainted in any way.
For the existence of such a duty he relies on the obligation of states to reject the fruits of torture, and places particular weight on the following passages from Furundzija (in addition to those cited above): 148. given the importance that the international community attaches to the protection of individuals from torture, the prohibition against torture is particularly stringent and sweeping.
States are obliged not only to prohibit and punish torture, but also to forestall its occurrence . 149. in the case of torture the requirement that states expeditiously institute national implementing measures is an integral part of the international obligation to prohibit this practice.
Consequently, states must immediately set in motion all those procedures and measures that may make it possible, within their municipal legal system, to forestall any act of torture or expeditiously put an end to any torture that is occurring.
He also relies on Lord Binghams reference in this context (A (No 2), para 34) to the obligations held by the International Court of Justice to arise from its ruling on the illegality of the wall in occupied Palestinian territory: see Legal Consequences of the Construction of a Wall in the Occupied Palestinian Territory (Advisory Opinion (unreported) 9 July 2004 (General List No 131) para 159).
That placed other states under an obligation not to recognise the illegal situation resulting from the construction of the wall and not to render aid or assistance in maintaining the situation created by such construction.
These passages leave no doubt as to the importance of the rules against torture and the use of torture tainted evidence, and the duty of states to take the necessary measures within their municipal legal systems to give full effect to those rules.
However, taken at their highest, they do not suggest or imply any duty on states to inquire into the possible reliance on such evidence by other states, whether on their own or as parts of an international organisation such as the 1267 committee.
The obligations held to arise out of the International Courts decision on the Palestinian wall are nothing in point.
They followed a definitive finding of illegality.
There was no suggestion that, absent such a finding, mere suspicion of illegality could give rise to an equivalent obligation on other states.
In agreement with the courts below I would reject this ground of appeal.
Absence of power
Mr Ottys submission under this head starts from the principle, established by authorities dating back at least to Entick v Carrington (1765) 19 State Tr 1029, that interference by the state with individual property rights cannot be justified by the exercise of prerogative powers, unsupported by specific statutory authority.
The Secretary of States decision to remove his hold on designation, which led inexorably and designedly to the freezing of the appellants assets, fell within that principle, even if the actual interference was authorised (see R (M) v Hackney London Borough Council [2011] EWCA Civ 4; [2011] 1 WLR 2873, in which a local authority was held liable for procuring the detention of the claimant by the hospital trust, albeit that the latter was acting under statutory powers).
The Court of Appeal accepted the relevance of the Entick principle (a constitutional principle of the first importance) but held that the necessary authority was provided by the European regulation.
Laws LJ said: I accept that if the Foreign Secretarys release of the hold on the claimants designation rested solely on the Prerogative power, then it would appear to have been done without legal authority.
But that is not the position.
As a matter of domestic law the Foreign Secretary was obliged to apply the Consolidated List regime to its proper subjects by force of article 2(1), (3) of and Annex I to Regulation 881/2002.
There might be an argument on the question whether the general words of the European Communities Act 1972, by virtue of which the Regulation has the force of law in the United Kingdom, are sufficient to authorise the EU legislature to empower or require the Secretary of State to deprive an individual of access to any economic resources (with or without proper proof of what was said against him); but no such argument has been run in this or any case, and it would plainly not be appropriate to canvass it now. (para 26)
In this court Mr Swift puts his case rather differently.
He declined to support the Court of Appeals reliance on regulation 881 as providing statutory authority for the Secretary of State to approve the designation.
That power rested on the exercise of the prerogative, which was however sufficient for its purpose.
It was not that decision which resulted in interference with the appellants rights, but rather the decision of the European Commission, giving effect in turn to the decision of the 1267 committee.
The fact that the Secretary of States decision was a step along the path to those later decisions was insufficient to engage the Entick principle.
In my view, there is a short answer to this ground.
The respective submissions, and indeed the reasoning of the Court of Appeal, pay insufficient regard to the legal means by which the listing took effect in this country.
It is here that the interference with the appellants rights, like the intrusion on Mr Enticks property, took place.
It was directly and specifically authorised by regulation 881, which was given legislative effect in this country by the European Communities Act 1972.
No issue has been raised as to the effectiveness of the Act for that purpose.
The regulation is subject to challenge, but in the European rather than the domestic courts.
In my view the regulation, taken with the 1972 Act, provides ample statutory authority to satisfy the Entick principle.
That is not affected by the causative role played by the 1267 committee, nor by the Secretary of State as a member of that committee.
That was a lawful exercise of his prerogative powers (unlike the actions of the local authority in the Hackney case, which had no lawful basis).
For the purpose of domestic law regulation 881, given effect by a United Kingdom statute, stands on its own feet.
Laws LJ was right to place reliance on the regulation.
He was wrong with respect to read it as implying statutory authority for the prior decision of the Secretary of State as a member of the 1267 committee, but wrong also to think that statutory authority was required at that stage.
As Mr Swift rightly submits, the exercise of the prerogative power for that purpose involved no breach of any common law principle.
Standard of proof
The arguments
It is common ground that the standard applied by the Secretary of State in 2005 when considering whether the appellant was associated with Al Qaida was that of reasonable grounds for suspicion.
This appears not from any formal statement but from the evidence of the responsible officer in the Foreign Office who says: When deciding whether to support another member states designation proposal, the Secretary of State considers whether or not there are reasonable grounds for suspecting that the individual concerned meets the criteria for designation; ie whether or not the individual is associated with Al Qaida.
Although it is not specifically stated in the submission of 12 September 2005, I understand that this is the standard of proof that the then Secretary of State (Jack Straw MP) would have applied when he considered whether or not to lift his hold on another member states proposal to designate the claimant.
I say this because I understand that this was the standard which was applied at the time and which continues to be applied today. (Adrian Scott, third witness statement, para 5) He adds that, had the evidence then available been assessed on the basis of a balance of probabilities, he would have expected the same conclusion.
Mr Otty submits that the standard applied by the Secretary of State in making his decision in 2005 was too low, having regard to the serious consequences for the appellants rights.
He relies strongly on the reasoning of members of the Supreme Court in Ahmed, where the application of such a test led to the quashing of the order made under the relevant United Kingdom statute.
He argues further that the test is not supported by the wording of the relevant Security Council resolution (1617) which refers to participating in or supporting the offending activities, not merely being suspected of doing so.
Finally he relies on the doctrine of proportionality under the common law (as discussed in recent cases in the Supreme Court), which he says embraces concepts of necessity and suitability similar in substance to the tests of necessity and expedience prescribed by the statute in issue in Ahmed.
The Court of Appeal rejected those submissions.
Laws LJ, like Toulson LJ in the Divisional Court ([2012] EWHC 2091 (Admin); [2013] QB 906), took as his starting point the recognition that, in lifting the hold, the Secretary of State was exercising a power derived not from an Act of Parliament but in the exercise of prerogative powers acting on behalf of the Government as a member of an international body.
The basis of judicial review must lie, therefore, not in the actual or presumed intention of Parliament in passing empowering legislation; but must found entirely on standards which are the product of the common law [of which] reason and fairness are the cornerstones (para 23).
He continued: In this case the application of these standards requires in my judgment that the court be satisfied that the Foreign Secretary reached his decision conformably with the Consolidated List regime.
His decision was as a participant in that regime.
Reason and fairness having effect, perhaps, as a species of legitimate expectation (but I do not mean to involve that expressions panoply of conceptual footnotes) surely demand that he should act according to the grain of the scheme and not across it. (para 24)
Having distinguished Ahmed (for reasons to which I will return) he found support for the Secretary of States approach in the preamble to resolution 1617, which emphasised the preventive purpose of the regime.
That aim, he said, is more effectively promoted by the adoption of a reasonable suspicion test (para 32).
He noted also that paragraph 7 of the same resolution urges the implementation of recommendations of the Financial Action Task Force (FATF) relating to money laundering and terrorist financing.
The interpretative notes to Special Recommendation III (para 2) referred to the objective of freezing terrorist related assets based on reasonable grounds, or a reasonable basis, to suspect or believe that the assets could be used to finance terrorist activity.
A similar test was later adopted by the Ombudsperson in her report to the Security Council in January 2011 (quoted at para 8 of his judgment), in which she proposed the test whether there is sufficient information to provide a reasonable and credible basis for the listing.
Mr Swift in substance adopts the reasoning of the Court of Appeal.
He adds that the test proposed by the Ombudsperson in 2011 has not in the ensuing four years been questioned by the 1267 committee.
In 2013 it was reaffirmed by her, following exchanges with Ben Emmerson QC who as UN Special Rapporteur had proposed a more stringent balance of probability test.
Furthermore in 2012 the Security Council by resolution 2083 (para 44), when urging member states to take note of best practices for effective implementation of targeted financial sanctions, referred to the need to apply an evidentiary standard of proof of reasonable grounds or reasonable basis.
In view of the reliance understandably placed by Mr Otty on the reasoning of this court in Ahmed it is necessary to refer to the judgments in a little more detail.
As Mr Otty explains, the court had to consider the legality of two regimes introduced by Orders in Council under the United Nations Act 1946: the first designed to give effect to the resolution 1267 which is in issue in this case (referred to as AQO 2006); the other, the Terrorism (United Nations Measures) Order 2006 (or TO 2006) relating to a different Security Council resolution (1373).
That was directed at persons who commit or attempt to commit terrorist acts, but left their selection to member states.
Both Orders were enacted under section 1(1) of the 1946 Act, which permitted the making by order of such provision as appears necessary or expedient for enabling [Security Council] resolutions to be effectively applied.
Both Orders were quashed by this court.
Although only the first was applicable to the appellant, Mr Otty finds more assistance in the reasoning of this court in respect of the second.
He relies in particular on the definition of the issue by Lord Phillips (para 131): The wording of the TO tracks the wording of the Resolution, save that those who can be made subject to the Order are not only those described in the Resolution but those whom the Treasury have reasonable grounds for suspecting fall or may fall within that description.
The issue is whether it can properly be said to be necessary or expedient to apply this test of reasonable suspicion in order to ensure that the measures in the Resolution are effectively applied to those described in the Resolution.
Lord Phillips answered that question in the negative.
He said that by applying a test of reasonable suspicion the Order goes beyond what is necessary or expedient to comply with the relevant requirements of Resolution 1373 and thus beyond the scope of section 1 of the 1946 Act. (para 143)
Although those passages were not dealing directly with resolution 1617, Mr Otty finds parallels in the reasoning in respect of the AQO made to give effect to that resolution, particularly that of Lord Phillips (paras 139 143).
He had looked at the parallel series of resolutions adopted by the Security Council under article 41 (including resolution 1617) for guidance on the intended scope of resolution 1373, but had found nothing to indicate that the Security Council has decided that freezing orders should be imposed on a basis of mere suspicion (para 139).
Mr Otty submits that Lord Phillips reasoning was sufficiently reflected in other judgments to give it majority support.
I am doubtful whether that is so.
The clearest support comes from Lord Mance who relied strongly on the differences of language between the resolution and the Order: The relevant wording of Security Council Resolution 1373 paragraph 1(c)(d) is directed at the prevention and suppression and the criminalisation and prosecution of actual terrorist acts; This wording does not suggest that the Security Council had in mind reasonable suspicion as a sufficient basis for an indefinite freeze (para 225).
In my opinion, there is an objective limit to the extent to which section 1(1) permits the executive by Order in Council to enact any measure that appears to it expedient to enable the effective application of the core prohibition mandated by Resolution 1373.
A measure cannot be regarded as effectively applying that core prohibition, if it substitutes another, essentially different prohibition freezing the assets of a different and much wider group of persons on an indefinite basis (para 230).
However, in the leading judgment Lord Hope (with whom Lord Walker and Lady Hale agreed) saw the issue as turning more on principles of domestic law as applied to section 1 of the 1946 Act: SCR 1373 (2001) is not phrased in terms of reasonable suspicion.
It refers instead to persons who commit, or attempt to commit, terrorist acts.
The Preamble refers to acts of terrorism.
The standard of proof is not addressed.
The question how persons falling within the ambit of the decision are to be identified is left to the member states.
Transposition of the direction into domestic law under section 1 of the 1946 Act raises questions of judgment as to what is necessary on the one hand and what is expedient on the other.
It was not necessary to introduce the reasonable suspicion test in order to reproduce what the SCR requires.
It may well have been expedient to do so, to ease the process of identifying those who should be restricted in their access to funds or economic resources.
But widening the scope of the Order in this way was not just a drafting exercise.
It was bound to have a very real impact on the people that were exposed to the restrictions as a result of it.
Is it acceptable that the exercise of judgment in matters of this kind should be left exclusively, without any form of Parliamentary scrutiny, to the executive? (para 58 emphasis added) He held that, by introducing the reasonable suspicion test as a means of giving effect to SCR 1373, the Treasury had exceeded its powers under section 1(1): This is a clear example of an attempt to adversely affect the basic rights of the citizen without the clear authority of Parliament.
As Lord Hoffmann said in R v Secretary of State for the Home Department, Ex p Simms [2000] 2 AC 115, 131, fundamental rights cannot be overridden by general or ambiguous words (para 61).
Similarly, Lord Rodger noted that resolution 1373 itself provided no express guidance as to the test, but simply prescribed the result to be achieved: it does not indicate how states are to identify the people in question (para 168).
He observed, however, that the reasonable suspicion test meant that sooner or later, someone will be designated who has not actually been committing or facilitating terrorist acts.
He agreed with Lord Hope that the making of an Order, which, in effect, amounts to permanent legislation conferring powers to affect, directly, very basic domestic law rights of citizens and others lawfully present in the United Kingdom went well beyond the general power conferred by section 1(1) of the 1946 Act (para 174).
Lord Brown (dissenting in part) also referred to what he called the Simms principle or principle of legality, concluding: Where, as here, those to be designated under the proposed measure will suffer very considerable restrictions under the regime, I would hold that it can only properly be introduced by executive Order in Council if the measure is in all important respects clearly and categorically mandated by the UN resolution which it is purporting to implement.
If the implementing measure is to go beyond this, then, consistently with the Simms principle, it can only properly be introduced by primary legislation. (para 196)
Laws LJ dealt with Mr Ottys arguments under Ahmed relatively briefly.
He said that, on a reading of the whole case, the reach of the courts concern was no wider than the question whether the reasonable suspicion test in the regulation was authorised by section 1 of the 1946 Act.
He noted Lord Hopes comment that: The standard of proof is not addressed.
The question how persons falling within the ambit of the decision are to be identified is left to the member states. and Lord Rodgers comment to similar effect (both quoted above).
He continued: It is in my judgment clear that if the imposition of sanctions is in principle authorised by [regulation 881], the general law does not impose a further requirement to the effect that the sanction may only bite if the material facts are proved on the balance of probability.
By force of article 2(1), (3) of and Annex I to [regulation 881] the procedures of the material Security Council resolutions the Consolidated List regime are effectively incorporated into the [regulation].
There is no doubt but that the imposition of sanctions is in principle authorised by [regulation].
The question then is whether the Foreign Secretary has lawfully deployed the Prerogative power to invoke that authority by lifting the hold on the claimants designation.
That in turn depends on the correct resolution of the issue I stated earlier: did the Foreign Secretary reach his decision conformably with the Consolidated List regime? (paras 27 28) As already noted, he answered that question in favour of the Secretary of State.
Discussion
I have found this issue more troubling than (seemingly) did the courts below, particularly having regard to the strength of views expressed by this court in Ahmed.
From the victims point of view it may seem strange that a process which, as applied under domestic legislation, was found to involve an unacceptable interference with his property rights, should be capable of automatic and immediate reinstatement by the indirect route of a European regulation.
Indeed, it is unclear from the substantive judgments in Ahmed to what extent the court was made aware of the limited practical effects of its decision. (Some reference was made by Lord Hope to that regulation in his dissenting judgment following a later hearing on the issue of suspension: Ahmed v HM Treasury (No 2) [2010] UKSC 5; [2010] 2 AC 634, 692, 693, at paras 12, 15.)
However, as I have said, the majority judgments turned principally on the interpretation of a 1946 statute designed to give effect to United Nations resolutions but expressed in relatively general terms.
Particular care was needed in applying it to a novel form of UN measure, directly targeted at the rights of individuals, as under the present resolution.
The same considerations do not apply to an EU regulation designed specifically to give effect to the current UN regime, and itself subject to judicial review in the European courts.
I note also that Lord Phillips was influenced by his inability to find anything in UN practice to support a reasonable suspicion test. (It seems that the FATF guidelines were referred to in argument, under the name UN International Task Force guidelines: see for example per Lord Hope para 59.) We have the advantage of the more recent evidence, on which Mr Swift is now able to rely as to the current practice of the UN committee, supported by the Ombudsperson.
Although this later evidence was not available at the time of the decisions under review, there is no indication that it represented a material change of practice or loosening of the tests previously applied by the committee.
Had this been available to the court in Ahmed, it might well have influenced some aspects of the reasoning, even if it is unlikely materially to have affected the majoritys view of the interpretation of the 1946 Act.
In substance therefore I agree with reasoning of the Court of Appeal, supported by the more recent evidence relied on by Mr Swift.
The position of a decision maker trying to assess risk in advance is very different from that of a decision maker trying to determine whether someone has actually done something wrong.
Risk cannot simply be assessed on a balance of probabilities.
It involves a question of degree.
The Court of Appeal were right to attach weight to the notes to the FATF Special Recommendation which referred to the preventative purpose of designation, and the requirement to freeze terrorist related funds based on reasonable grounds, or a reasonable basis, to suspect or believe that they could be used to finance terrorist activity.
This is similar in substance to the language used by the Ombudsperson in her Fifth Report dated 31 January 2013, where she rejected a test based on probability, and proposed the standard whether there is sufficient information to provide a reasonable and credible basis for the listing.
She saw this as one which recognised a lower threshold appropriate to preventative measures, while setting a sufficient level of protection for the rights of individuals.
As a member of the 1267 committee, the Secretary of State was not only entitled, but would be expected, to apply the same approach as the committee as a whole.
On this ground also the appeal must fail.
Standard of review
The issues
In the Divisional Court, under the heading rationality, Toulson LJ considered Mr Ottys submission that there was insufficient evidence to support the Secretary of States finding in 2005 of a subsisting association between the appellant and any Al Qaida organisation, and nothing to show any difference from the position in 2009 when he reached the opposite conclusion.
Toulson LJ concluded that the Secretary of State was entitled to rely on the assessment by the Security Service that the appellant continued to hold extremist views and presented a continuing risk of participation in the activities of the EIJ.
It was well established that the courts should pay very high respect to ministerial security assessments on competence and constitutional grounds.
The fact that four years later the Security Service came to a different assessment did not mean that the view taken in 2005 was irrational (paras 82 84).
rationality review was inappropriate: In the Court of Appeal Laws LJ rejected Mr Ottys submission that a there is no question of precedent fact.
Nor is there any issue of proportionality: not only because we are outside the territory of the European Convention but also because the Foreign Secretary was not required to exercise a discretionary judgment where there might have been alternative outcomes fertile ground for a proportionality approach.
Here, however, once satisfied that the claimant met the criteria for designation, the Foreign Secretarys duty was to include him in the Consolidated List. (para 42)
Mr Otty challenges this reasoning on three grounds: the claim did include a challenge brought pursuant to the European i) Convention which required an assessment of proportionality; ii) in the context of the present case concerning interference with fundamental rights, common law review is not restricted to a Wednesbury rationality test; iii) the court was wrong to hold that the case involved no discretionary judgment by the Secretary of State, and therefore no basis for assessing its proportionality.
The second submission relies on cases decided in this court since the decision of the Court of Appeal (Kennedy v Information Comr [2015] AC 455, Pham v Secretary of State for the Home Department [2015] 1 WLR 1591, which are said to confirm that a simple Wednesbury test was inappropriate: see Associated Provincial Picture Houses Ltd v Wednesbury Corpn [1948] 1 KB 223).
Mr Swift for the Secretary of State accepts that the court is likely to take the approach signalled in Kennedy and Pham as its starting point, and that the facts of the case make it one in which the review to be conducted will be towards the intense end of the scale, conducted in accordance with common law principles, incorporating notions of proportionality.
He does not, as I understand him, adopt Laws LJs suggestion that such an approach is inappropriate because the Secretary of State was not exercising a discretionary judgment where there might have been alternative outcomes.
He emphasises, however, that application of the doctrine of proportionality does not mean that there has been a shift to merits review (citing, inter alia, R (Daly) v Secretary of State for the Home Department, [2001] UKHL 26; [2001] 2 AC 532 paras 27 28, per Lord Steyn).
He submits that the review conducted by the Divisional Court, albeit under the heading rationality, was entirely consistent with the new approach indicated by Kennedy and Pham.
Toulson LJ [2013] QB 906 recognised the gravity of the consequence of the designation for the claimant and conducted a review of commensurate intensity.
Discussion
In Keyu v Secretary of State for Foreign and Commonwealth Affairs [2015] UKSC 69; [2015] 3 WLR 1665 (decided since the hearing in this appeal) this court had occasion to consider arguments, in the light of Kennedy and Pham, that this court should authorise a general move from the traditional judicial review tests to one of proportionality.
Lord Neuberger (with the agreement of Lord Hughes) thought that the implications could be wide ranging and profound in constitutional terms, and for that reason would require consideration by an enlarged court.
There was no dissent from that view in the other judgments.
This is a subject which continues to attract intense academic debate (see, for example, the illuminating collection of essays in The Scope and Intensity of Substantive Review: Traversing Taggarts Rainbow ed Wilberg and Elliott, 2015).
It is to be hoped that an opportunity can be found in the near future for an authoritative review in this court of the judicial and academic learning on the issue, including relevant comparative material from other common law jurisdictions.
Such a review might aim for rather more structured guidance for the lower courts than such imprecise concepts as anxious scrutiny and sliding scales.
Even in advance of such a comprehensive review of the tests to be applied to administrative decisions generally, there is a measure of support for the use of proportionality as a test in relation to interference with fundamental rights (Keyu paras 280 282 per Lord Kerr, para 304 per Lady Hale).
Lord Kerr referred to the judgment of Lord Reed in Pham (paras 113, 118 119) where he found support in the authorities for the proposition that: where Parliament authorises significant interferences with important legal rights, the courts may interpret the legislation as requiring that any such interference should be no greater than is objectively established to be necessary to achieve the legitimate aim of the interference: in substance, a requirement of proportionality. (para 119) See also my own judgment in the same case (para 60), and those of Lord Mance (paras 95 98) and Lord Sumption (paras 105 109), discussing the merits of a more flexible approach in judging executive interference with important individual rights, in that case the right to British citizenship.
On the other hand, in many cases, perhaps most, application of a proportionality test is unlikely to lead to a different result from traditional grounds of judicial review.
This is particularly true of cases involving issues of national security.
In Bank Mellat v HM Treasury (No 2) [2013] UKSC 39; [2014] AC 700 (which concerned another security council regime, relating to nuclear weapons), there was not only majority and minority agreement as to the steps involved in an assessment of proportionality (demanded in that case by the relevant statute), but also, within that context, general recognition that on issues of national security a large margin of judgment was accorded to the executive (paras 20 21 per Lord Sumption, para 98 per Lord Reed).
The difference turned on contrasting views as to the allegedly discriminatory nature of the restrictions in that case.
Similar considerations apply in the present case.
Mr Otty asks us to go further and to hold that the Divisional Court should have conducted a full merits review of the Secretary of States decision.
He finds support in the judgments of the Court of Appeal in Ahmed in which such a submission appeared to find favour with Sir Anthony Clarke MR and Wilson LJ ([2008] EWCA Civ 1187; [2010] 2 AC 534 at pp 578, 587).
I agree with the Court of Appeal (para 38) that those observations were made in the context of an Order made under a domestic statute, and were overtaken by the decision of this court that the Order was ultra vires.
In my view, they can have no application in the present context, which concerns the Secretary of States functions as a member of a UN committee.
Even accepting that his decision is judicially reviewable, it is to the member states, as members of the committee, that the Security Council has entrusted the task of determining whether the criteria for listing are fulfilled.
It would be quite inconsistent with that regime for a national court to substitute its own assessment of those matters.
On the basis that a proportionality review is appropriate, two issues arise: first, whether the application of such a test to the decisions under challenge would have made any difference; secondly, if so, whether or not, having regard in particular to the subsequent changes in the basis of the appellants designation, the court should refuse any remedy in respect of the earlier decisions.
As to the first, I agree with Mr Otty that, in the light of subsequent authority, Toulson LJ was wrong to lay emphasis on a test based on irrationality.
However, apart from the general criticism, he has failed to highlight any particular aspect of the reasoning which is open to challenge even applying a proportionality test.
Apart from a general denial of involvement in terrorism, the appellant has not addressed the specific incidents referred to in the 2005 security assessment.
Nor in my view has he provided any grounds for questioning the Secretary of States assessment of future risk, given the wide margin allowed to him on such an issue.
In any event, whatever grounds there may be for criticism of Toulson LJs reasoning, they have in my view been entirely overtaken by subsequent events.
Even if we were to find a legal flaw in the 2005 decision, that would not of itself entitle the appellant to a remedy.
Mr Otty has been unable to show how an order quashing the 2005 decision, or a declaration of illegality, would have any substantive effect on his present position.
Even in 2010 quashing the Secretary of States decision would not have detracted from the continuing effect of the committees listing, or its application in the United Kingdom through regulation 881.
So far as it concerns the Secretary of States own position, he had already decided by 2009 to support the application for de listing.
His subsequent change of mind in 2014 followed the Ombudspersons report.
There is no reason to link it to any flaws that might have been shown in his reasoning in 2005.
More generally, the court should in my view be very slow to grant a substantive remedy in the circumstances now facing the court.
Judicial review is a discretionary remedy.
The court is not required to ignore the appellants own conduct, or the extent to which he is the author of his own misfortunes.
I appreciate that the material disclosed by the Ombudspersons report became available after the Court of Appeals judgment, and indeed after the grant of permission to appeal to this court.
It is not formally in issue before us.
Further the appeal raised important issues of law which needed a decision.
I can understand therefore why it was decided to defer for the moment detailed consideration of any challenge to the latest decision.
However, the fact remains that there is before the court unchallenged evidence showing that the appellant is at least a strong vocal supporter of Al Qaida and its objectives.
That stands uneasily with his simple denial in 2010 of any involvement in terrorism.
If those allegations were misplaced, I would have expected him to want to say so publicly at the first opportunity.
I raised my concern with Mr Otty at the opening of the appeal, but I heard no convincing answer.
Even if the appellant were otherwise entitled to some relief, I would be very hesitant about granting it so long as these allegations stand unrefuted.
Conclusion
For the reasons I have given, I would dismiss this appeal.
| UK-Abs | The appellant is an Egyptian national who has lived in the UK since 1994.
He is subject to an asset freeze imposed on persons associated with Al Qaida under Chapter VII of the United Nations Charter.
The United Nations Security Council Sanctions Committee maintains a list of persons and entities subject to the asset freeze.
All members of the committee must agree to a nomination for inclusion on the list, or to de listing.
The sanctions imposed on designated persons have a drastic impact on the individuals and entities concerned, and are of an indeterminate length.
The United Kingdom had originally placed a hold on the appellants designation by the Sanctions Committee.
On 14 September 2005 the respondent, in his capacity as a member of the Sanctions Committee, removed the United Kingdoms hold on the appellants designation.
As a consequence, the appellant became subject to the asset freeze.
The appellant challenged the respondents decision of 14 September 2005 to remove the hold the United Kingdom had placed on the appellants designation.
The appellant challenged the respondents decision on four grounds: (i) although the respondents decision was made on untainted evidence, he was aware that the information on which other members of the Sanctions Committee were proceeding was or might have been obtained by torture, and this placed the respondent under an obligation not to support a tainted committee decision; (ii) the intended and inevitable effect of the committees decision was a serious interference with the appellants right to peaceful enjoyment of his property, which could only be achieved by a clear statutory power or common law rule, neither of which existed; (iii) the standard of proof adopted by the respondent, namely reasonable grounds to suspect that the appellant met the criteria for designation, was too low; (iv) the Wednesbury standard of review, that of reasonableness or irrationality, was wrong given the gravity of the context, and the appellant was entitled to a full merits review or at least one involving a proportionality analysis.
The appellants judicial review was dismissed by the Divisional Court and the Court of Appeal.
He was subsequently granted permission to appeal to the Supreme Court.
The Supreme Court unanimously dismisses Mr Youssefs appeal.
Lord Carnwath gives the only judgment, with which Lord Neuberger, Lord Mance, Lord Wilson and Lord Sumption agree.
The court finds that the respondents 2005 decision to remove his hold on the proposal for the appellants designation by the Sanctions Committee was the exercise of prerogative powers for the conduct of foreign relations.
This does not make it immune from judicial review, but the courts should proceed with caution [24].
On the first ground, torture tainted evidence, the court finds that the respondents decision must be judged by reference to his reasons, which were untainted, and not by the reasons of the committee which were published in 2010 [27].
Whilst there is no doubt as to the importance of the rules against torture and the use of torture tainted evidence, these rules do not imply a duty on states to inquire into the possible reliance on torture tainted evidence by other states, acting alone or as part of an international organisation [29].
On the second ground, absence of power, the court finds that there is statutory authority to satisfy the principle in Entick v Carrington that interference by the state with individual property rights cannot be justified by the exercise of prerogative powers, unsupported by specific statutory authority.
The requisite statutory authority is provided by EU Regulation 881, which was given legislative effect by the European Communities Act 1971.
The causative role played by the prior decision of the Sanctions Committee and the respondent as a member of the committee does not affect this conclusion [34].
The appellants third ground, that the standard of proof of reasonable grounds for suspicion is too low, is rejected.
The court holds that the position of a decision maker trying to assess risk in advance is very different from that of a decision maker trying to determine whether someone has actually done something wrong.
Designation has a preventative purpose [50].
The Financial Action Task Force (FATF) recommendations relating to money laundering and terrorist financing refer to the objective of freezing terrorist related assets based on reasonable grounds, or a reasonable basis, to suspect or believe that the assets could be used to finance terrorist activity.
A similar test of whether there is sufficient information to provide a reasonable and credible basis for the listing was proposed by the Ombudsperson in her report to the Security Council in January 2011 and reaffirmed by her in 2013 [38 9].
The appellants reliance on the criticisms of a reasonable suspicion test by this court in Ahmed v HM Treasury (no. 2) [2010] UKSC 5 is rejected on the basis that the majority judgments in Ahmed turned principally on the interpretation of the United Nations Act 1946, and that this court has the advantage of more recent evidence as to the current practice of the UN committee court [49].
The fourth ground is the standard of review.
The respondent accepted in light of the approach in Kennedy v Charity Commission [2014] UKSC 20 and Pham v Secretary of State for the Home Department [2015] UKSC 19, that the facts of the case are such that the review to be conducted will be in accordance with common law principles, incorporating notions of proportionality, but submitted that this does not imply a shift to merits review [54].
The court finds that whilst there is support for the use of proportionality as a test in relation to interference with fundamental rights, in many cases the application of a proportionality test is unlikely to lead to a different result from traditional grounds of judicial review, particularly in cases involving national security, where a large margin of appreciation is accorded to the executive [56 7].
The court rejects the appellants submission that a full merits review was required, finding that the UN Security Council has entrusted member states, as members of the Sanction Committee, with determining whether the designation criteria are met.
It would be inconsistent with that regime for a national court to substitute its own assessment [58].
The court finds that whilst the Divisional Court was wrong to lay emphasis on an irrationality test, the applicant had failed to identify any particular aspect of the reasoning which is open to challenge even applying a proportionality test [59].
The court holds that even if there were a flaw in the respondents 2005 decision, this of itself would not entitle the appellant to a remedy.
Quashing the decision would not have any substantive effect on the appellants present position, as it would not detract from the continuing effect of the Sanction Committees listing or its application in the United Kingdom through Regulation 881 [60].
|
The respondent stood trial at the Central Criminal Court on a charge of entering into or becoming concerned in a money laundering arrangement, contrary to section 328(1) of the Proceeds of Crime Act 2002.
The particulars of the offence were that he and another between the first day of August 2011 and the 13th day of January 2012 entered into or became concerned in an arrangement which they knew or suspected would facilitate the retention, use or control of criminal property, namely money received into a Lloyds Bank account and a Barclays bank account from the sale of motor insurance through the [AM Insurance] website, by or on behalf of [B].
At the close of the evidence, the respondent submitted that there was no case to answer because at the time that the respondent entered into the arrangement no criminal property was yet in existence.
The trial judge, Recorder Greenberg QC, upheld the submission.
The prosecution appealed against her ruling pursuant to section 58 of the Criminal Justice Act 2003.
The appeal was dismissed.
The Court of Appeal (Lloyd Jones LJ and Irwin and Green JJ) held in summary that under section 328 it is not necessary for criminal property to exist at the moment when parties come to a prohibited arrangement, but that the arrangement must relate to property which is criminal property at the time when the arrangement begins to operate on it; and that on the facts of this case the property had not become criminal property at the time when the arrangement began to operate on it.
The court certified that the case involves the following point of law of general public importance: Where, by deception, A induces the payment of money to a bank account opened for that purpose by B (pursuant to an arrangement with A to receive and retain that money, then may B commit an offence contrary to section 328 of the Proceeds of Crime Act 2002, on the basis that the arrangement to receive and retain the money in that bank account can be treated as both
8. rendering the property criminal property and facilitating its retention, use or control? The prosecution was given leave to appeal by this court.
In order to avoid the possibility of prejudice in the event of a new trial, I will avoid using the names of the parties involved.
The case arose from the activities of a fraudster, B, who pleaded guilty to a number of offences.
He established four ghost websites falsely pretending to offer cut price motor insurance and recruited associates to open bank accounts for channelling the proceeds.
One of the websites was established in the name of AM Insurance.
It operated from 1 September 2011 to January 2012.
Shortly before the website went live, H opened two bank accounts, one with Lloyds Bank and the other with Barclays.
B took control of the documentation and bank cards relating to them.
During the short active lifetime of the website, unsuspecting members of the public were duped into paying a total of 417,709 into the Lloyds Bank account and 176,434 into the Barclays account for non existent insurance cover.
The prosecution opened the case to the jury on the basis that H may not have known the details of Bs fraud, but that the circumstances in which the accounts were opened were such that H must have known or at least suspected that B had some criminal purpose.
POCA money laundering offences
Part 7 of the Proceeds of Crime Act (POCA) is concerned with money laundering as defined in section 340(11).
The expression includes any act which constitutes an offence under sections 327, 328 or 329.
Those sections criminalise various forms of dealing with criminal property, as defined in section 340.
Section 340(3) provides that property is criminal property if (a) it constitutes a persons benefit from criminal conduct or it represents such a benefit (in whole or part and whether directly or indirectly), and (b) the alleged offender knows or suspects that it constitutes or represents such a benefit. 9.
Section 340(5) provides that a person benefits from conduct if he obtains property as a result of or in connection with the conduct. 10.
Criminal conduct is defined in section 340(2) as conduct which (a) constitutes an offence in any part of the United Kingdom, or (b) would constitute an offence in any part of the United Kingdom if it occurred there. 11.
Section 340(4) provides that It is immaterial (a) who carried out the conduct; (b) who benefited from it; (c) whether the conduct occurred before or after the passing of the Act.
The respondent relies on the use of the past tense, for the purposes of an argument to which I will come. 12.
Section 340(9) provides that property includes money; all forms of property, real or personal, heritable or moveable; and things in action and other intangible or incorporeal property. 13.
Section 329 deals with acquisition, use and possession of criminal property.
Section 327 deals with concealing or transferring criminal property and the like.
Section 328, with which we are directly concerned, deals with arrangements facilitating the acquisition, retention, use or control of criminal property by or on behalf of another person. 14.
Together, sections 327, 328 and 329 form the principal money laundering offences and they cover a wide range of conduct.
There are supplementary offences relating to tipping off and to businesses operating in the regulated financial sector (who have positive reporting duties if they have cause to suspect money laundering). 15.
The material words of section 328 for present purposes are in subsection (1).
This states: A person commits an offence if he enters into or becomes concerned in an arrangement which he knows or suspects facilitates (by whatever means) the acquisition, retention, use or control of criminal property by or on behalf of another person. 16.
Although on a literal interpretation these words could be read as creating criminal liability if the defendant suspects that the effect of the arrangement is to facilitate the acquisition, etc, of criminal property, even where his suspicions are misplaced and the property concerned is not criminal, that is not its accepted or correct interpretation.
The actus reus of the offence is entering or being concerned in an arrangement which in fact facilitates the acquisition etc of criminal property, and the mens rea required is knowledge or suspicion. (See R v Montila [2004] UKHL 50, [2004] 1 WLR 3141, a decision of the House of Lords regarding different but analogous wording in earlier legislation.) 17.
The present case arises under section 328 but the arguments advanced on either side effect also sections 327 and 329.
Subject to immaterial exceptions, a person commits an offence under section 327 if he (a) conceals criminal property; (b) disguises criminal property; (c) converts criminal property; (d) transfers criminal property; (e) removes criminal property from England and Wales or from Scotland or from Northern Ireland. 18.
Subject to similar exceptions, a person commits an offence under section 329 if he (a) acquires criminal property; (b) uses criminal property; (c) has possession of criminal property. 19.
As the Court of Appeal explained in Bowman v Fels (Bar Council intervening) [2005] EWCA Civ 226, [2005] 1 WLR 3083, POCA gave effect to Council Directive 91/308/EEC on prevention of the use of the financial system for the purpose of money laundering (as amended by Council Directive 2001/97/EC), but the Directive set minimum requirements and in some respects POCA was more stringent.
For example, money laundering as defined in POCA includes dealing with property known or suspected to constitute or represent a benefit from criminal conduct; by contrast, the definition in the Directive required knowledge.
The current version of the Directive is 2005/60/EC.
This repealed and replaced 91/308/EEC.
Case law on criminal property 20.
There is an unbroken line of Court of Appeal authority that it is a prerequisite of the offences created by sections 327, 328 and 329 that the property alleged to be criminal property should have that quality or status at the time of the alleged offence.
It is that pre existing quality which makes it an offence for a person to deal with the property, or to arrange for it to be dealt with, in any of the prohibited ways.
To put it in other words, criminal property for the purposes of sections 327, 328 and 329 means property obtained as a result of or in connection with criminal activity separate from that which is the subject of the charge itself.
In everyday language, the sections are aimed at various forms of dealing with dirty money (or other property).
They are not aimed at the use of clean money for the purposes of a criminal offence, which is a matter for the substantive law relating to that offence. 21.
The first authority was the decision of the Court of Appeal Criminal Division (Clarke LJ, Hughes and Dobbs JJ) in R v Loizou [2005] 2 Cr App R 618. 22.
The defendants were charged under section 327 with transferring a large quantity of cash, knowing or suspecting that it constituted a persons benefit from criminal conduct.
The defendants were under police surveillance and the transfer took place in the car park of a hotel.
The prosecution put its case in alternative ways.
The first was that the money represented the proceeds of earlier criminal conduct.
That approach was legally uncontroversial.
The prosecutions alternative case was that the money became criminal property at the moment of the transfer because it was paid for a criminal purpose, namely the purchase of smuggled cigarettes.
At a preliminary hearing the judge ruled that so long as the prosecution could prove that the money was transferred for a criminal purpose, the actus reus of the offence was established by the act of transfer, at which moment the money became criminal property.
His ruling was reversed by the Court of Appeal.
The court held that criminal property within section 327 meant property which was already criminal at the time of the transfer, by reason of constituting or representing a benefit from earlier criminal conduct and not the conduct which was the subject of the indictment.
In Kensington International Ltd v Republic of Congo (formerly Peoples Republic of Congo) (Vitol Services Ltd, Third Party) [2007] EWCA Civ 1128 [2008] 1 WLR 1144, the question arose whether a person who commits a criminal offence of bribery also thereby commits an offence under section 328.
It was argued that the giving of a bribe necessarily involves the briber entering into an arrangement which he knows facilitates the acquisition of criminal property by the recipient, since the bribe, once received, constitutes the latters benefit from criminal conduct.
The argument was rejected.
Moore Bick LJ said at para 67: 23.
I accept that section 328 is of broad application, but in my view that seeks to stretch its scope too far.
As section 340(3)(b) makes clear, the mental element of the offence includes knowledge or suspicion on the part of the defendant that the property in question is criminal property, but that cannot be the case until it has been acquired by means of criminal conduct.
In order for an offence under section 328 to be committed, therefore, the arrangement into which the defendant enters, or in which he becomes involved, must be one which facilitates the acquisition, retention, use or control by another of property which has already become criminal property at the time when it becomes operative.
That requirement is not satisfied if the only arrangement into which he enters is one by which the property in question first acquires its criminal character. 24. 25. 26.
In R v Geary [2010] EWCA Crim 1925, [2011] 1 WLR 1634, another case under section 328, a further argument was raised which is relevant in the present case.
The defendant agreed to help a friend named Harrington to hide some money for a period.
Under the arrangement Harrington transferred around 123,000 into the defendants bank account.
The defendant used some of it to make some purchases for Harrington and, after an interval, he repaid the balance to Harrington less about 5,000.
The prosecutions case was that the money represented proceeds of a fraud carried out by a bank official, who stole it from dormant accounts.
The stolen money was laundered through a network of recipients, each of whom retained a small sum as payment for his services.
The recipients included Harrington and the defendant.
The defendants case was that he was approached by Harrington with a story that he was about to become involved in divorce proceedings, and that the defendant was asked to help Harrington to hide the money from Mrs Harrington (and the court), which he agreed to do.
He denied any knowledge that the money had a criminal source.
In the course of the trial the judge was invited to indicate how he proposed to direct the jury.
He said that in his view the defendants account of the facts did not provide him with a defence to the charge under section 328.
The defendant then pleaded guilty on the basis of the facts alleged by him, which the prosecution perhaps surprisingly were content to accept, and he appealed against his conviction on the ground that the judges ruling was wrong.
The Court of Appeal allowed his appeal and quashed the conviction.
It was argued by the prosecution that the arrangement on the accepted version of the facts involved a conspiracy to pervert the course of justice.
The money transferred was therefore criminal property at the moment of being paid into the defendants account.
Alternatively, the arrangement involved not merely the receipt of the money but also its retention, use or control, and so constituted the offence.
Both parts of the argument were rejected.
Moore Bick LJ said at para 19: In our view the natural and ordinary meaning of section 328(1) is that the arrangement to which it refers must be one which relates to property which is criminal property at the time when the arrangement begins to operate on it.
To say that it extends to property which was originally legitimate but became criminal only as a result of carrying out the arrangement is to stretch the language of the section beyond its proper limits.
An arrangement relating to property which has an independent criminal object may, when carried out, render the subject matter criminal property, but it cannot properly be said that the arrangement applied to property that was already criminal property at the time it began to operate on it.
Moreover, we do not accept that an arrangement of the kind under consideration in the present case can be separated into its component parts, each of which is then to be viewed as a separate arrangement.
In this case there was but one arrangement, namely, that the appellant would receive money, hold it for a period and return it.
To treat the holding and return as separate arrangements relating to property that had previously been received is artificial. 28. 27.
Moore Bick LJ added, obiter, at para 39 that, on the assumption that the purpose for which the money was transferred to the defendant involved perverting the course of justice, it became criminal property in his hands on its receipt, and he could therefore have been charged with an offence of converting or transferring criminal property contrary to section 327 by returning most of it to Harrington, together with the goods which he had purchased with part of it.
In R v Amir and Akhtar [2011] EWCA Crim 146, [2011] 1 Cr App R 464, Akhtar entered into an arrangement with a mortgage broker to obtain money from mortgage companies by submitting false mortgage applications on behalf of third parties.
He was prosecuted under section 328.
The particulars of the offence in the indictment do not appear from the report, but the prosecution argued that Akhtar was guilty because he entered into an arrangement which he knew would facilitate the acquisition of property for third parties by deception, and, as an alternative submission, that the funds had the character of criminal property at the time when the arrangement began to operate on them.
The Court of Appeal quashed Akhtars conviction.
As to the first part of the argument advanced by counsel for the prosecution, Elias LJ said at para 21: On his analysis an offence is committed where a defendant becomes concerned in an arrangement which facilitates the criminal acquisition of property.
The statute requires an arrangement facilitating the acquisition of criminal property.
There is a material distinction.
He also rejected the argument that the funds had the character of being criminal property at the time when the arrangement began to operate.
Issues 29.
The following issues arise: (1) Does the commission of an offence under section 328 require the property to constitute criminal property prior to the arrangement coming into operation? (2) Does the property have to exist at the time when the defendant enters into or becomes concerned in the arrangement? (3) Did the sums received into the respondents accounts constitute criminal property before being paid into those accounts? (4) Was the actus reus of the offence committed by reason of the arrangement facilitating the retention, use or control of the money paid into the respondents accounts? Does the commission of an offence under section 328 require the property to constitute criminal property prior to the arrangement coming into operation? 30.
Mr Kennedy Talbot submitted that the Court of Appeal authorities to which I have referred were wrong, and that the same conduct could both cause property to become criminal and simultaneously constitute the offence charged under section 328.
He made the same submission in relation to sections 327 and 329, correctly recognising that the three sections have to be construed coherently.
So, he submitted, a thief who steals legitimate property is necessarily at the same time guilty of acquiring criminal property contrary to section 329. 31.
As Elias LJ pithily put it, this argument elides the distinction between a person who acquires criminal property and one who acquires property by a criminal act or for a criminal purpose. 32.
The Court of Appeals interpretation of criminal property in the various money laundering sections as meaning property which already has the quality of being criminal property, as defined in section 340, by reason of criminal conduct distinct from the conduct alleged to constitute the actus reus of the money laundering offence itself, accords not only with the natural meaning of the sections but also with the purpose underlying them. 33.
Paragraph 6 of the Explanatory Notes to POCA describes money laundering as the process by which the proceeds of crime are converted into assets which appear to have a legitimate origin, so that they can be retained permanently or recycled into further criminal enterprises.
That is a fair description of the ordinary meaning of the expression.
With reference to the individual offences, para 469 of the explanatory notes states: Section 327 creates one of three principal money laundering offences.
The other two are to be found in sections 328 and 329.
Because of the definition of criminal property at section 340, all three principal money laundering offences now apply to the laundering of an offenders own proceeds as well as those of someone else.
The reference to proceeds of crime is clearly a reference to the proceeds of an earlier offence. 34.
The Court of Appeals interpretation is also consistent with the definition of money laundering in the Council Directive.
The version of the Directive which was in force at the date of enactment of POCA defined money laundering as meaning the following conduct, when committed intentionally: the conversion or transfer of property, knowing that such property is derived from criminal activity or from an act of participation in such activity, for the purpose of concealing or disguising the illicit origin of the property or of assisting any person who is involved in the commission of such activity to evade the legal consequences of his action; the concealment or disguise of the true nature, source, location, disposition, movement, rights with respect to, or ownership of property, knowing that such property is derived from criminal activity or from an act of participation in such activity; the acquisition, possession or use of property, knowing, at the time of receipt, that such property was derived from criminal activity or from an act of participation in such activity; participation in, association to commit, attempts to commit and aiding, abetting, facilitating and counselling the commission of any of the actions mentioned in the foregoing indents. 36. 35.
The 2005 Directive retains this wording but extends the scope of the Directive by a separate provision relating to terrorist financing.
This expression is defined to include the provision or collection of funds with the intention that they should be used or the knowledge that they are to be used, to carry out certain offences identified in the Council Framework Decision of 13 June 2002 on combatting terrorism (2002/475/JHA).
In the UK, the Terrorism Act 2000 contains provisions relating to terrorist property which are similar to, but wider than, the money laundering offences under POCA.
Terrorist property is defined in section 14(1) as meaning: (a) money or other property which is likely to be used for the purposes of terrorism (including any resources of a proscribed organisation), (b) proceeds of the commission of acts of terrorism, and (c) proceeds of acts carried out for the purposes of terrorism.
In para (a) the definition includes words which are forward looking, to use Mr Tim Owen QCs description, whereas the definition of criminal property in Part 7 of POCA looks backward. 37.
Sections 327, 328 and 329 were aptly described by Moses LJ in JSC BTA Bank v Ablyazov [2009] EWCA Civ 1124, [2010] 1 WLR 976, at para 14, as parasitic offences, because they are predicated on the commission of another offence which has yielded proceeds which then become the subject of a money laundering offence.
A wider interpretation would have serious potential consequences for third parties including banks and other financial institutions.
They already have an onerous reporting obligation if they know or suspect, or have reasonable grounds for knowing or suspecting, that another person is engaged in money laundering.
That obligation would be considerably enlarged and its limits potentially difficult to gauge if they are required, on pain of criminal sanctions, to report any suspicion, or reasonable grounds for suspicion, of a customers intended use of property either in connection with an offence within the UK or in connection with conduct elsewhere in the world which would be an offence if committed within the UK.
In HKSAR v Li Kwok Cheung George [2014] HKCFA 48, a similar issue arose on the wording of a Hong Kong money laundering ordinance.
Ribeiro and Fok PJJ said in their joint judgment with which the other members of the Court of Final Appeal agreed, at para 84: It is one thing to criminalise dealing with funds where the dealer knows or has reasonable grounds to believe that they are the proceeds of crime, it is quite a different matter to stigmatise as a money launderer, a lender dealing with its own clean funds because of what the borrower does or intends to do with them.
However, that would be the consequence if property obtained in connection with criminal conduct (section 340(5)) bears the extended meaning for which the prosecution contends.
Does the property have to exist at the time when the defendant enters into or becomes concerned in the arrangement? 38.
The Court of Appeal held in the present case that there is no basis on the plain meaning of the words used in section 328 for restricting the offence to a case where the criminal property is already in existence at the time at which a defendant enters into or becomes concerned in the arrangement.
Mr Owen argued that the court was wrong.
He relied on the use of the present tense in sections 327, 328 and 329, which he contrasted with the use of the past tense in the definition of criminal property in section 340(4). (See paras 8 10, 15, 17 and 18 above.) He observed that sections 327 and 329 presuppose the existence of the relevant criminal property at the time of the actus reus.
Similarly, he submitted that under section 328 the court must take a snapshot view of the position at the moment when the defendant entered into the arrangement.
There must at that moment have been criminal property to which the arrangement related.
The words in section 328 an arrangement which he knows or suspects facilitates the acquisition, retention, use or control of criminal property are not to be read, in his submission, as an arrangement which he knows or suspects will facilitate. 39.
That submission is right inasmuch as the offence requires actual facilitation of the acquisition etc, of criminal property as well as the requisite knowledge or suspicion.
As a matter of strict English, the way in which the section has been drafted may be criticised for condensing the separate ingredients of actus reus and mens rea into one.
But it places no undue strain on the language to read the section as providing that a person commits an offence if a) he enters into or becomes concerned in an arrangement which facilitates the acquisition, retention, use or control of criminal property by or on behalf of another person, and b) he knows or suspects that it does so.
It has sensibly to be read in that way or else a party might be guilty by reason of having the necessary mens rea even if it transpired that the property was not criminal.
The offence is complete when the arrangement becomes one which facilitates the acquisition, etc, of criminal property and the defendant knows or suspects that this is so.
At that point he becomes a participant in an arrangement which is made criminal by section 328. 40.
The Court of Appeal was therefore right in the present case to hold that it does not matter whether criminal property existed when the arrangement was first hatched.
What matters is that the property should be criminal at a time when the arrangement operates on it.
To take a practical example, if defendants make arrangements for the transportation and warehousing of a quantity of illegally imported drugs, it would make no difference for the purposes of section 328 whether the vessel carrying the goods were still on the high seas or had entered UK territorial waters, ie whether the act of importation had occurred, at the moment when the arrangements were made, save that the offence would not become complete until the goods were imported.
The contrary interpretation would not accord either with a natural reading of the words used or with the obvious purpose of this section.
Did the sums received into the respondents account constitute criminal property before being paid into those accounts? 41.
Mr Talbot submitted that the money paid by the victims into the respondents accounts was criminal property at the time of payment because it represented a chose in action, namely the obligation of the purchasers of insurance to pay the price.
The fact that the contracts were procured by fraud and therefore voidable made no difference, in his submission, because the contracts were valid until avoided.
This argument was first advanced in the Court of Appeal and was rejected.
It appears from the judgment of the Court of Appeal that the argument presented to it was put in a slightly different form.
The prosecution is recorded as having argued that B had acquired a proprietary interest in a chose in action, but the argument does not appear to have been developed as to how this fed through into the charge made against the respondent.
Lloyd Jones LJ, delivering the judgment of the Court of Appeal, said that the argument did not assist the prosecution in this case because the particulars in the indictment identified the criminal property as money received into the accounts opened by the respondent.
He added that the court did not consider it necessary to express a view on whether the fraud transactions may have given rise to property of another character, which he said was only touched upon and not fully argued before the court.
In this court Mr Talbot took the point that property will amount to criminal property if it constitutes or represents a benefit from criminal conduct; and so, if there was an underlying chose in action which the money paid into the account represented, the money paid would satisfy the definition of being criminal property. 42.
That argument is sound as far as it goes, but the appellant faces a more fundamental problem in seeking to identify the alleged chose in action.
POCA defines property as including a thing in action, but, if the prosecution is going to advance a case on that basis, it has to identify and prove the nature of the proprietorial right.
Mr Talbot suggested initially that B had some sort of contractual right against the victims of his fraud, but any supposed contract would presumably have been between AM Insurance and the victims, and there is no evidence before the court to show what form any such putative contract may have taken.
The prosecution would have to establish the existence of a prior bilateral contract (ie a contract which bound the purchaser in advance of paying the supposed premium), rather than a unilateral contract (ie an offer by AM Insurance which was available for acceptance by the would be insured paying the premium quoted).
Other questions might arise as to whether there was any legal chose in action prior to the payments made by the victims, but it is sufficient to say that there is a stark absence of material before this court to substantiate a case of the nature suggested.
There may be cases properly founded on the laundering of property in the form of a chose in action, but it is not a subject with which jurors or, for that matter, judges of the Crown Court are likely to be readily familiar.
If the prosecution is going to advance a case on that basis, it has not only to consider whether the case is capable of being presented in a readily comprehensible way (or whether there might be a different and simpler method of approach) but also to ensure that its tackle is properly in order.
Abstract references to a chose in action, without the basis being clearly and properly identified and articulated, are a recipe for confusion.
Was the actus reus of the offence committed by reason of the arrangement facilitating the retention, use or control of the money paid into the accounts? 43.
The particulars in the indictment made no reference to the acquisition of criminal property.
They alleged that the respondent and another entered into or became concerned in an arrangement which they knew or suspected would facilitate the retention, use or control of criminal property.
As a matter of pleading, the Court of Appeal rightly criticised the form of the particulars for including the words would facilitate.
It should have been alleged that the defendants entered into or became concerned in an arrangement which, as they knew or suspected, facilitated the retention, use or control of criminal property (or words to that effect). 45. 44.
Looking at the substance of the matter, the money paid by the victims into the accounts was lawful money at the moment at which it was paid into those accounts.
It was therefore not a case of the account holder acquiring criminal property from the victims.
But by the arrangement the respondent facilitated also the retention, use and control of the money by or on behalf of B. Did the arrangement regarding the facilitation of the retention, use and control of the money fall foul of section 328 on the basis that it was criminal property at that stage, since it was the proceeds of a fraud perpetrated on the victims? It was submitted on behalf of the prosecution before the Court of Appeal and in this court that in that respect the arrangement fell squarely within the ambit of section 328.
The Court of Appeal treated the case as indistinguishable from Geary and rejected the argument.
Lloyd Jones LJ said at para 39: Although the arrangement particularised in count two is limited to facilitation of the retention, use and control of criminal property, facilitation of the acquisition of the money via those accounts is, on the Crowns factual case, an integral part of that arrangement.
It seems to us that in these circumstances it is both artificial and illegitimate to seek to sever one element of an integral arrangement (facilitation of acquisition) in order to leave other elements (facilitation of retention, use and control) which, if considered in isolation to constitute the arrangement, would relate to criminal property.
Moreover, the position cannot be improved by artificially limiting the particulars of offence alleged in count two to certain elements of the wider arrangement which the Crown maintains was in fact entered into. 46.
There is an important distinction between the facts of Geary and the present case.
In Geary it would indeed have been artificial to regard the property as changing its character between the defendant receiving it and repaying it.
The property belonged to Harrington at all times and, more importantly, his interest in it was lawful on the facts known to the defendant.
It was not a case of the defendant holding proceeds originating from a crime independent of the arrangement made between them.
It was Harringtons lawfully owned property when it was paid to the defendant, and it remained his lawfully owned property throughout the time that the defendant had possession of it.
It bore no criminal taint apart from the arrangement made between them.
The fact that the arrangement involved a conspiracy to pervert the cause of justice did not mean that the money had a criminal quality independent of the arrangement. 47.
The present case is different.
The character of the money did change on being paid into the respondents accounts.
It was lawful property in the hands of the victims at the moment when they paid it into the respondents accounts.
It became criminal property in the hands of B, not by reason of the arrangement made between B and the respondent but by reason of the fact that it was obtained through fraud perpetrated on the victims.
There is no artificiality in recognising that fact, and I do not see it as illegitimate to regard the respondent as participating in (or, in the language of section 328, entering into or becoming concerned in) an arrangement to retain criminal property for the benefit of another.
For that reason, the ruling that the respondent had no case to answer was erroneous and this appeal should be allowed. 48.
The same reasoning applies to sections 327 and 329.
A thief is not guilty of acquiring criminal property by his act of stealing it from its lawful owner, but that does not prevent him from being guilty thereafter of an offence under one or other, or both, of those sections by possessing, using, concealing, transferring it and so on.
The ambit of those sections is wide.
However, it would be bad practice for the prosecution to add additional counts of that kind unless there is a proper public purpose in doing so, for example, because there may be doubt whether the prosecution can prove that the defendant was the thief but it can prove that he concealed what he must have known or suspected was stolen property, or because the thiefs conduct involved some added criminality not just as a matter of legal definition but sufficiently distinct from the offence that the public interest would merit it being charged separately.
Brinks Mat Ltd v Noye [1991] 1 Bank LR 68 provides a notorious example of the laundering of the proceeds of the theft of gold bars from a warehouse, but the conduct of thieves in laundering property stolen by them would not have to be on such a grand scale to merit them being prosecuted for it. 49.
The courts should be willing to use their powers to discourage inappropriate use of the provisions of POCA to prosecute conduct which is sufficiently covered by substantive offences, as they have done in relation to handling stolen property.
A person who commits the offence of handling stolen property contrary to section 22 of the Theft Act 1968 is also necessarily guilty of an offence under section 329 of POCA, but the Court of Appeal has discouraged any practice of prosecuting such cases under POCA instead of charging the specific statutory offence under the Theft Act (see R (Wilkinson) v Director of Public Prosecutions [2006] EWHC 3012 (Admin) and R v Rose [2008] EWCA Crim 239, [2008] 1 WLR 2113, para 20).
It is unlikely that the prosecution would fail to respect the view of the court in such a matter and it is unnecessary to consider what power the court might have in such an unlikely event.
I have some doubt about the correctness of Moore Bick LJs obiter dictum in Geary that on the facts of that case the defendant could have been charged with an offence of converting or transferring criminal property contrary to section 327, for the same reasons as I have given in differentiating that case from the present.
However, the object of Moore Bick LJs observation was to make the broader point that it is undesirable to give a strained and unduly broad interpretation to section 328, particularly where the conduct would fall within another section of the Act, and with that broad proposition I am in full agreement. 50.
The phrasing of the certified question is not entirely apt because it asks whether the arrangement to receive and retain money in a bank account can be treated as both rendering the property criminal property and facilitating its retention, use or control.
What rendered the property which the respondent received from the victims criminal property was not the arrangement made between B and the respondent, but the fact that it was obtained from the victims by deception.
For the reasons explained, the arrangement between B and the respondent for its retention is capable of constituting an offence under section 328.
| UK-Abs | A fraudster, B, established four ghost websites falsely pretending to offer cut price motor insurance.
In order to carry out this plan he recruited associates to open bank accounts for channelling the proceeds.
H was one such associate.
One website was named AM Insurance, which operated from 1 September 2011 to January 2012.
Shortly before the website went live, H opened two bank accounts, one with Lloyds Bank and one with Barclays Bank.
Subsequently, B took control of these accounts and the related bank cards.
In total, members of the public were duped into paying 417,709 into the Lloyds account and 176,434 into the Barclays account for non existent insurance cover.
B pleaded guilty to a number of offences.
H stood trial at the Central Criminal Court charged with entering into or becoming concerned in an arrangement which he knew or suspected would facilitate the retention, use or control of criminal property, namely the money received into the accounts, by or on behalf of B, contrary to section 328(1) of the Proceeds of Crime Act 2002 (POCA).
The trial judge upheld the submission that H had no case to answer, finding that at the time H entered into the arrangement no criminal property existed.
The Court of Appeal dismissed the prosecutions appeal; although it was not necessary for criminal property to exist when B and H came to the prohibited arrangement, the arrangement must relate to property which was criminal property when the arrangement begun to operate on it.
In this case, the money was not criminal property when the arrangement began to operate on it, in other words at the moment the money was paid into the accounts.
The prosecution appealed to the Supreme Court.
The Supreme Court unanimously allows the appeal.
Lord Toulson (with whom all the other Justices agree) delivers the judgment of the Court.
Whether s 328 POCA requires property to constitute criminal property prior to the arrangement operating Criminal property in sections 327 329 of POCA refers to property which already has the quality of being criminal property (as defined in section 340 of POCA) by reason of prior criminal conduct distinct from the conduct alleged to constitute the commission of the money laundering offence itself.
This accords with the natural meaning and underlying purpose of these sections [32], the explanatory notes to POCA [33] and Council Directives 91/308/EEC and 2005/60/EC [34].
If section 328 did not require property to constitute criminal property before an arrangement came into operation, it would have serious potential consequences in relation to, for example, banks and other financial institutions who are already under onerous obligations to report known, suspected or reasonably suspected money laundering [37].
Whether criminal property has to exist when the defendant enters or becomes concerned with the arrangement The Court of Appeal was correct to hold that it does not matter whether criminal property existed when the arrangement was first made.
What matters is that the property should be criminal when the arrangement operates on it [40].
Whether the sums received into the bank accounts constituted criminal property before being paid into the accounts The submission that the money paid into the accounts represented underlying choses in action and that, therefore, criminal property existed before money was received in the accounts would presumably have involved a contract between AM Insurance and the victims.
There is a stark absence of material to substantiate the existence of such a contract [42].
Whether the actus reus of the s 328 POCA offence was committed Nonetheless, in the present case the character of the money although lawful at the moment of payment changed on being paid into the bank accounts.
The money became criminal property in the hands of B by reason of the fraud perpetrated on the victims.
As such, it is legitimate to regard H as entering into or becoming concerned in an arrangement to retain criminal property for the benefit of another.
Consequently, the ruling that H had no case to answer was erroneous [47].
Although this same reasoning applies to sections 327 329 of POCA, the wide ambit of these sections can be managed by: (i) the prosecution only adding parasitic counts to substantive ones where there is a proper public purpose in doing so [48]; and, (ii) courts using their powers to discourage inappropriate use of the POCA provisions to prosecute conduct sufficiently covered by substantive offences [49].
|
The present appeals involve claims by prisoners sentenced to indeterminate prison sentences (life or IPP) that they were not sufficiently progressed during their sentences towards release on or after the expiry of their tariff periods.
The principal issue is what the Supreme Court should now hold the law of the United Kingdom to be, taking account of the judgment of the European Court of Human Rights (ECtHR) in James, Lee and Wells v United Kingdom (2012) 56 EHRR 399 (James v UK) disagreeing with the decision of the House of Lords in R (James, Lee and Wells) v Secretary of State for Justice [2009] UKHL 22; [2010] 1 AC 553 (R (James)).
The House of Lords in R (James) held that no breach of article 5(1) of the European Convention on Human Rights (ECHR) was involved in a failure properly to progress prisoners towards post tariff release.
The ECtHR in James v UK took a different view.
Correctly, the courts below, from which the present appeals lie, held themselves bound by the House of Lords reasoning and decision.
The Supreme Court must now consider whether and how far to modify its jurisprudence.
Indeterminate prison sentences in English law: summary
Since the abolition of capital punishment in 1965, the most severe form of sentence imposed under English law has been a sentence of life imprisonment.
A life sentence does not mean imprisonment for the rest of the defendants natural life; it means a sentence composed of two parts.
The first part is a minimum term, fixed by the court according to the gravity of the offence and the circumstances of the offender.
The second is an indefinite term beyond that minimum, in which period the prisoner may be released, not unconditionally but on licence, if he is judged no longer to present an unacceptable risk to the public.
In modern times the decision on release is committed to the Parole Board, an independent body correctly treated as a court by the ECtHR.
Release on licence is required by statute when the Parole Board has directed it, but it may so direct only when satisfied that it is no longer necessary for the protection of the public that the prisoner be confined: sections 28(5) and (6) of the Crime (Sentences) Act 1997.
Such a life sentence may be passed in defined circumstances only: (a) (b) It is required by law for those convicted of murder (a mandatory life sentence).
It is available as a discretionary penalty (a discretionary life sentence) for a restricted group of offenders convicted of a few of the most serious offences known to the law, for which the maximum sentence available is life imprisonment, where the gravity of the offence warrants a very long sentence and where the risk of grave future harm to the public from the offender cannot reliably be estimated at the time of sentencing (R v Hodgson (1967) 52 Cr App R 113 and R v Chapman [2000] 1 Cr App R 77). (c) Unless its imposition would in the circumstances be unjust it is required in the case of those convicted for a second time of a defined group of very serious violent or sexual offences, where both offences called for determinate terms of ten years or more, or their equivalent: see section 122 of the Legal Aid, Sentencing and Punishment of Offenders Act 2012 (LASPO). (d) Between 1997 and April 2005 it was required, unless in the circumstances its imposition would be unjust because the offender did not pose a risk to the public of serious harm, in the case of a few offenders convicted for the second time of a restricted group of the most serious violent or sexual offences: section 109 Powers of Criminal Courts (Sentencing) Act 2000, repealed by section 303 of and Schedule 37 to the Criminal Justice Act 2003.
This form of life sentence was generally known as an automatic life sentence. 4.
In addition to these forms of life sentence, the Criminal Justice Act 2003 created from April 2005, until it was abolished by LASPO, the different form of indeterminate sentence called Imprisonment for Public Protection (IPP).
As is well known, IPP was available (and for the first three years was in some circumstances mandatory) for a much wider class of offences than was a life sentence.
It was, however, structured in a similar manner to a life sentence, formed of a minimum term fixed by the court in accordance with the gravity of the offence and the circumstances of the offender, to be followed by an indefinite period with release on licence only when the prisoner was judged by the Parole Board no longer to present an unacceptable risk to the public of serious harm.
The terms of section 28(5) and (6) of the Crime (Sentences) Act 1997, governing release, apply to IPP prisoners as they do to life sentence prisoners. 5.
As is also well known, and chronicled in both R (James) and to a lesser extent in James v UK, the advent of IPP in April 2005 put the prison administration in England and Wales under an entirely new strain.
Previously there had been fairly steady numbers of prisoners serving indeterminate periods, namely those serving one or other of the forms of life sentence set out at (a), (b) and (d) above.
IPP prisoners were also indeterminate prisoners but their numbers greatly increased the total, which by 2008 was effectively doubled.
The present claimants 6.
The four appellants were convicted of various offences and were sentenced as follows: (a) Mr Haney was on 13th November 2003 ordered to serve an automatic life sentence, with a minimum specified term expiring on 13th November 2012, the sentence being passed for robbery committed with others while armed with sawn off shot guns. (b) Mr Robinson was on 2nd October 2006 sentenced to IPP for sexual offences, with a seven year minimum term (to which time on remand counted as usual) expiring on 10th December 2012. (c) Mr Massey was on 15th May 2008 sentenced to IPP for sexual offences, with a minimum term of two years six months (again allowing for time on remand) expiring on 11th September 2010. (d) Mr Kaiyam was on 20th July 2006 sentenced to IPP with a minimum term of two years and 257 days, expiring on 3rd April 2009.
Mr Haneys life sentence was passed under section 109 of the Powers of Criminal Courts (Sentencing) Act 2000.
The sentences on Mr Robinson, Mr Massey and Mr Kaiyam were passed under section 225 of the Criminal Justice Act 2003. 7.
All these sentences were, when passed, outside the scope of the provisions of section 142(1) of the Criminal Justice Act 2003 requiring a sentencing court to have regard to reform and rehabilitation as an express purpose of sentencing.
As from 14th July 2008, section 142 was amended to require regard to be had to reform and rehabilitation as an express purpose of any life or IPP sentence passed under section 225.
In R (James) the House on 6 May 2009 held that, prior to this amendment, the only purposes of section 225 were commensurate punishment and public protection.
It accepted however that the premise of section 225 and the context in which it was enacted were that prisoners would be given a fair chance of rehabilitating themselves; and, consistently with this, the Ministry of Justices National Offender Management Service instruction issued in July 2010 indicated (para 4.1.1) that ISP [indeterminate sentence prisoner] sentence plans will aim to identify the risks the prisoner must reduce and offer the effective and timely delivery of properly identified interventions, having regard to available resources, so that Parole Board reviews can be meaningful; the release of ISPs is facilitated where it is safe to do so; [and] any period of continued detention beyond tariff is necessary because the risk of harm remains too high for release to be appropriate.
The instruction also recognised (para 4.8.1) that In most mandatory lifer cases, a phased release from closed to open prison is necessary in order to test their readiness for release into the community on life licence.
In James v UK the ECtHR took a different view from the House of the purposes of IPP sentences in the context of the ECHR.
It regarded a real opportunity for rehabilitation [as] a necessary element of any part of the detention which is to be justified solely by reference to public protection and on this basis held that one of the purposes of IPP sentences was the rehabilitation of those so sentenced (para 209). 8.
Each of the appellants now complains that his progress towards post tariff release was hampered by failures relating to his rehabilitation for which the respondent Secretary of State was responsible.
In summary: (a) Mr Haney complains under article 5 that he was only transferred to open prison conditions on or around 16th July 2012, too close to the expiry date of his minimum term to allow release immediately upon such expiry.
The Secretary of State conceded that a systemic failure (to provide adequately for the increase in numbers of prisoners serving indeterminate terms) had led to excessive delay in transferring him to open conditions, and Lang J proceeded on that basis.
But both she and the Court of Appeal dismissed his claim under article 5 in the light of the Houses decision in R (James). (b) Mr Haney also complains under article 14 that he was discriminated against by a decision of the prison authorities, taken in October 2011 in the light of the shortage of available places in open prisons, to prioritise the movement to open conditions of those whose tariff period had already expired.
Lang J and the Court of Appeal dismissed this complaint, as they were bound to, in the light of the Houses decision in R (Clift) v Secretary of State for the Home Department [2006] UKHL 54, [2007] 1 AC 484, notwithstanding the later judgment of the ECtHR in Clift v United Kingdom (Application No 7205/07) (13 July 2010), disagreeing with this decision of the House. (c) Messrs Robinson and Massey complain that they were unable to commence an extended sexual offenders treatment programme (ESOTP) until, in the case of Robinson, 1st July 2013, over five years after the course was first recommended for him and over nine months after his tariff period expired, and, in the case of Massey, until May 2013, nearly three years after it was first recommended and over three years since his tariff period expired.
The Divisional Court (Richards LJ and Irwin J) on 4th December 2013 found that the number of IPP prisoners at the relevant times greatly exceeded the number of ESOTP places on courses, and held itself satisfied that there is a continuing failure on the part of the Secretary of State to make reasonable provision of systems and resources, specifically the reasonable provision of ESOTP courses, for the purpose of allowing IPP prisoners a reasonable opportunity to demonstrate to the Parole Board, by the time of the expiry of their tariff periods or reasonably soon thereafter, that they are safe to be released. (para 62) Having dismissed the claims in the light of R (James) but stating also that it did not consider that they would have succeeded under the principles indicated in James v UK the Divisional Court certified the cases as suitable for leapfrog appeal to this Court. (d) Mr Kaiyams complaint under article 5 is not based on any allegation of systematic failure by the Secretary of State.
It is a complaint about various decisions and delays which he says affected him individually and meant that he was not offered or put on various courses during the period 2010 to 2013, after his tariff period expired.
Supperstone J and the Court of Appeal dismissed his claim in the light of R (James).
Analysis of the duty of the Secretary of State 9.
Article 5 of the ECHR reads: the lawful detention of a person after conviction by a 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: (a) competent court; (b) the lawful arrest or detention of a person for noncompliance 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; (d) the detention of a minor by lawful order for the purpose of educational supervision or his lawful detention for the purpose of bringing him before the competent legal authority; (e) the lawful detention of persons for the prevention of the spreading of infectious diseases, of persons of unsound mind, alcoholics or drug addicts or vagrants; (f) the lawful arrest or detention of a person to prevent his effecting an unauthorised entry into the country or of a person against whom action is being taken with a view to deportation or extradition. 2.
Everyone who is arrested shall be informed promptly, in a language which he understands, of the reasons for his arrest and of any charge against him.
Everyone arrested or detained in accordance with the provisions of para 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.
Release may be conditioned by guarantees to appear for trial.
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.
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. 10.
The cases of R (James) and James v UK concerned mandatory IPP sentences with tariffs of respectively two years, 12 months and nine months, at the expiry of which the three applicants still remained in their local prisons without access to recommended rehabilitative courses.
Messrs James, Wells and Lee were only transferred to first stage lifer prisons five months, 21 months and 25 months after their respective tariffs expired.
The Divisional Court and Court of Appeal in R (James) held the Secretary of State to have been in systemic breach of his public law duty, and granted a declaration to that effect.
In the House of Lords there was no appeal against that declaration, but explicit reference was made to its correctness (see per Lord Hope, para 3).
However the House of Lords dismissed the claims for breach of articles 5(1) and (4).
It held that continued detention remained lawful until the Parole Board was satisfied that it is no longer necessary for the protection of the public that the prisoner should be confined, as provided by section 28(6)(b) of the Crime (Sentences) Act 1997 and in accordance with the principles since considered by this Court in R (Sturnham) v Parole Board (No 2) [2013] UKSC 47, [2013] 2 AC 254. 11.
The only possible exception that the House contemplated was for the (hypothetical) case of detention continuing for a very lengthy period in circumstances where the system of review had completely broken down or ceased to be effective: per Lord Hope at para 15 and Lord Brown at para 51.
This exception reflected case law of the ECtHR (to which we will return in greater detail) to the effect that compliance with article 5(1)(a) requires more than that the detention is in compliance with domestic law.
As the European court stated in Weeks v United Kingdom (1987) 10 EHRR 293, para 42: "The 'lawfulness' required by the Convention presupposes not only conformity with domestic law but also conformity with the purposes of the deprivation of liberty permitted by sub paragraph (a) of article 5(1).
Furthermore, the word 'after' in sub paragraph (a) does not simply mean that the detention must follow the 'conviction' in point of time: in addition, the 'detention' must result from, 'follow and depend upon' or occur 'by virtue of' the 'conviction'.
In short, there must be a sufficient causal connection between the conviction and the deprivation of liberty at issue." On that basis, the ECtHR in Weeks went on in relation to a discretionary life sentence imposed for the purpose of public protection (para 49): "The causal link required by sub paragraph (a) might eventually be broken if a position were reached in which a decision not to release or to re detain was based on grounds that were inconsistent with the objectives of the sentencing court. 'In those circumstances, a detention that was lawful at the outset would be transformed into a deprivation of liberty that was arbitrary and, hence, incompatible with article 5'." In relation to article 5(4), the House in R (James) held that article 5(4) required a system providing for assessment at reasonable intervals which meets the requirements of procedural fairness: per Lord Hope at para 21.
As such a system existed on the facts, it held that there was no breach of article 5(4). 12.
The ECtHR took a different view from the House of Lords on article 5(1).
It concluded that following the expiry of the applicants tariff periods and until steps were taken to progress them through the prison system with a view to providing them with access to appropriate rehabilitative courses, their detention was arbitrary and therefore unlawful within the meaning of article 5(1) of the Convention. (para 221) It regarded the complaints under article 5(4) regarding the failure to provide relevant courses as raising no separate issue (para 226).
The ECtHR later commented that it had found the applicants post tariff detention to have been arbitrary and therefore in breach of article 5(1) during the periods in which they were not progressed in their sentences and has no access to relevant courses to help them address the risk they posed to the public. (para 231) and that It cannot be assumed that, if the violations had not occurred, the applicants would not have been deprived of their liberty.
It also logically follows that once the applicants were transferred to first stage prisons and had timeous access to relevant courses, their detention once again became lawful. (para 244) 13.
The ECtHR was not concerned with life sentence prisoners in James v UK, but it is clear from cases decided under article 5(4) that it would adopt similar reasoning.
As Lord Reed explained in R (Faulkner) v Secretary of State for Justice, R (Sturnham) v The Parole Board (No 1) [2013] UKSC 23 [2013] 2 AC 254, paras 9 10, the ECtHR held in Thynne, Wilson and Gunnell v The United Kingdom (1990) 13 EHRR 666 that, since the need for public protection was likely to change over time, discretionary life prisoners whose tariff periods had expired were entitled to invoke article 5(4): 9.
Since there was a question whether their continued detention was consistent with the objectives of the sentencing court, it followed that they too were entitled under article 5(4) to have the question determined.
The subsequent judgment in Stafford v United Kingdom (2002) 35 EHRR 1121 confirmed that a mandatory life prisoner was also entitled to the protection of article 5(4), by means of regular reviews of the risk which he presented, once the punitive period of his sentence had expired. 10.
The implications of these judgments were then reflected in domestic case law.
In relation to automatic life prisoners, in particular, it was held in R (Noorkoiv) v Secretary of State for the Home Department [2002] 1 WLR 3284 that article 5(4) requires a review by the Board of whether the prisoner should continue to be detained once the tariff period has expired, and therefore requires a hearing at such a time that, whenever possible, those no longer considered dangerous can be released on or very shortly after the expiry date.
In practice, that meant that the Board should hold hearings prior to the expiry of the tariff period.
Since Noorkoiv's case had not been heard until two months after the expiry of his tariff period, he was therefore the victim of a violation of article 5(4).
That approach has been followed in the subsequent case law. 14.
James v UK has subsequently been applied by the 4th section of the ECtHR in Dillon v UK (Application No 32621/11; 4 Nov 2104) and Thomas v UK (Application No 55863/11; 4 Nov 2014), summarily rejecting the Governments submission that it had been wrongly decided.
However in both cases the claims of the applicants failed on the merits. 15.
The ECtHRs reasoning in James v UK opens the possibility, discussed in In re Corey [2013] UKSC 76, [2014] AC 516, that it was contemplating that detention could, at least post tariff, fluctuate between the lawful and unlawful, depending upon whether a prisoner serving a sentence of IPP was being offered appropriate opportunity to progress in his or her sentence.
Not surprisingly, counsel for the appellants on the present appeal were as keen to disclaim such an analysis as counsel for the Secretary of State.
But common ground between counsel in a particular case cannot avoid the need to address an important point of law, which may arise in other cases in which counsel may take different attitudes.
In In re Corey, para 62, Lord Mance pointed out that the ECtHR did not directly address the apparent logical consequences of its analysis of article 5(1), when this was questioned by the British Government.
Instead, it contented itself with saying simply (para 217) that: The Court accepts that where an indeterminate sentence has been imposed on an individual who was considered by the sentencing court to pose a significant risk to the public at large, it would be regrettable if his release were ordered before that risk could be reduced to a safe level.
However, this does not appear to be the case here. 16.
It may not have been the case with Messrs James, Wells and Lee that their release was sought or ordered before their risk was reduced to a safe level.
But the Supreme Court was informed that various life or IPP prisoners are now relying upon James v UK to challenge in the Administrative Court the legitimacy of their continued detention, before the Parole Board has expressed itself satisfied as to their safety for release.
In these circumstances, Mr James Eadie QC for the Secretary of State invites the Supreme Court to rule on the legal position under United Kingdom law, and submits that, whatever the position in Strasbourg, we should declare life and IPP prisoners continuing detention to be lawful, unless and until the Parole Board determines such detention to be unnecessary subject only to the remote possibility, identified by the House in R (James) that a complete breakdown of the parole system might destroy the causal link between the original sentence of life or IPP and the continuing detention.
We should in short adhere in this respect to the Houses previous reasoning and decision in R (James). 17.
The logical starting point of this submission consists in sections 2, 3 and 6 of the Human Rights Act 1998.
These sections read: judgment, decision, declaration or advisory opinion of 2.
A court or tribunal determining a question which has arisen in connection with a Convention right must take into account any (a) the European Court of Human Rights, . 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. 6(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. 18.
The Convention Rights are those set out in Schedule 1 to the Act.
It follows from the wording of the Act that domestic courts in interpreting and applying such rights are not bound by the jurisprudence of the ECtHR, but are bound to take it into account.
Usually, domestic and Strasbourg jurisprudence march hand in hand, as contemplated by the mirror principle no more, but certainly no less (as put by Lord Bingham in R (Ullah) v Special Adjudicator [2004] UKHL 26, [2004] 2 AC 323, para 20 or no less, but certainly no more (as put by Lord Brown in Al Skeini v Secretary of State for Defence [2007] UKHL 26, [2008] 1 AC 153, para 106).
But increasingly it has been realised that situations are not always so simple.
The domestic court may have to decide for itself what the Convention rights mean, in a context which the ECtHR has not yet addressed: see eg Rabone v Pennine Care NHS Foundation Trust [2012] UKSC 2, [2012] 2 AC 72.
More radically, the domestic court may conclude that such Strasbourg authority as exists cannot be supported, and may decline to follow it in the hope that it may be reconsidered: R v Horncastle [2009] UKSC 14, [2010] 2 AC 373. 19.
The position was summarised by Lord Neuberger in Manchester City Corporation v Pinnock [2010] UKSC 45, [2011] 2 AC 104, as follows: 48.
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 eg R v Horncastle[2010] 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 HRA 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. 20.
More recently in R (Chester) v Secretary of State for Justice [2013] UKSC 63, [2014] AC 271, para 27, Lord Mance said: 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 [2010] 2 AC 373, 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. 21.
The degree of constraint imposed or freedom allowed by the phrase must take into account is context specific, and it would be unwise to treat Lord Neubergers reference to decisions whose reasoning does not appear to overlook or misunderstand some argument or point of principle or Lord Mances reference to some egregious oversight or misunderstanding as more than attempts at general guidelines, or to attach too much weight to his choice of the word egregious, compared with Lord Neubergers omission of such a qualification. 22.
The starting point, when considering Mr James Eadie QCs submission, must be the language of article 5.
Article 5 lists the cases in which a person may, in accordance with a procedure which must be prescribed by law, be deprived of his or her liberty.
The first (article 5(1)(a)) is lawful detention after conviction by a competent court.
Article 5(4) entitles anyone detained purportedly pursuant to this or any other of the listed grounds 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. 23.
On the face of it, the express wording of article 5(1) and of the last ten words of article 5(4) contemplate that any detention not authorised by article 5(1) should lead to release.
On the reasoning of the ECtHR in James v UK, failure after the tariff period properly to progress a life or IPP prisoner towards release makes detention during the period of such failure arbitrary and therefore unlawful.
If that reasoning be adopted, then such detention is in breach of the express language of article 5(1)(a), and the prisoner should (in the eyes of the ECtHR) be entitled to an immediate order for speedy release under article 5(4).
Under United Kingdom domestic law, release would however be impossible, since primary legislation requires such a prisoner to remain in detention unless and until the Parole Board is satisfied that this is no longer necessary for the protection of the public and section 6(2)(a) of the Human Rights Act 1998 would apply.
But, even so, it would then be open to the prisoner under section 4 of the Act to seek a declaration of incompatibility if domestic courts were to interpret the Convention rights scheduled to the Act in the same way as the ECtHR interprets the ECHR at the international level.
Considerable importance may therefore attach to the question whether the reasoning of the ECtHR in James v UK is followed and adopted domestically. 24.
The reasoning in James v UK has, as its premise, that whether detention is lawful is not conclusively decided by the fact that there has been a valid conviction by the domestic court.
In its previous case law the Court had made clear that, although the primary requirement of article 5(1)(a) is that the detention should have a legal basis in domestic law, the article also relates to the quality of the law, requiring it to be compatible with the rule of law, a concept inherent in all the articles of the Convention: Stafford v United Kingdom (2002) 35 EHRR 1121, para 63; Amuur v France (1996) 22 EHRR 533, para 50; Saadi v United Kingdom (2008) 47 EHRR 427, para 67; Kafkaris v Cyprus (2008) 49 EHRR 877, para 117; M v Germany (2009) 51 EHRR 976, para 90; see also Radu v Germany (Application No 20084/07), para 112.
In this as in other contexts, the ECHR has not infrequently resorted to a concept of arbitrariness to explain what it means by unlawfulness.
The natural meaning of this English word connotes some quite fundamental shortcoming.
But it is also clear that, when used at the international level, its sense can depend on the context.
Thus, in Saadi v United Kingdom (2008) 47 EHRR 427, the Grand Chamber identified a distinction between arbitrariness in the context of article 5(1)(a) and in the context of other sub paragraphs of article 5(1).
It said: 25. 69.
One general principle established in the case law is that detention will be arbitrary where, despite complying with the letter of national law, there has been an element of bad faith or deception on the part of the authorities (see, for example, Bozano v France, 18 December 1986, Series A no 111, and onka v Belgium, Application No 51564/99, ECHR 2002 I).
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) (see Winterwerp, cited above, 39; Bouamar v Belgium, 29 February 1988, 50, Series A no 129; and OHara v The United Kingdom, Application No 37555/97, 34, ECHR 2001 X).There must in addition be some relationship between the ground of permitted deprivation of liberty relied on and the place and conditions of detention (see Bouamar, 50, cited above; Aerts v Belgium, 30 July 1998, 46, Reports 1998 V; and Enhorn v Sweden, Application No 56529/00, 42, ECHR 2005 I). 70.
The notion of arbitrariness in the contexts of sub paras (b), (d) and (e) also includes an assessment whether detention was necessary to achieve the stated aim.
The detention of an individual is such a serious measure that it is justified only as a last resort where other, less severe measures have been considered and found to be insufficient to safeguard the individual or public interest which might require that the person concerned be detained (see Witold Litwa, cited above, 78; Hilda Hafsteinsdttir v Iceland, Application No 40905/98, 51, 8 June 2004; and Enhorn, cited above, 44).
The principle of proportionality further dictates that where detention is to secure the fulfilment of an obligation provided by law, a balance must be struck between the importance in a democratic society of securing the immediate fulfilment of the obligation in question, and the importance of the right to liberty (see Vasileva v Denmark, Application No 52792/99, 37, 25 September 2003).
The duration of the detention is a relevant factor in striking such a balance (ibid, and see also McVeigh and Others v The United Kingdom, Applications Nos 8022/77, 8025/77, 8027/77, Commissions report of 18 March 1981, Decisions and Reports 25, p 15 at pp 37 38 and 42). 71.
The court applies a different approach towards the principle that there should be no arbitrariness in cases of detention under article 5(1)(a), where, in the absence of bad faith or one of the other grounds set out in para 69 above, as long as the detention follows and has a sufficient causal connection with a lawful conviction, the decision to impose a sentence of detention and the length of that sentence are matters for the national authorities rather than for the Court under article 5(1) (see T v The United Kingdom [GC], Application No 24724/94, 103, 16 December 1999, and also Stafford v The United Kingdom [GC], Application No 46295/99, 64, ECHR 2002 IV). 26.
According to Saadi, the arbitrariness which might at an international level affect lawfulness under article 5(1) is relatively confined.
The main examples which the European Court gave of situations in which detention might, although lawful under domestic law, be unlawful under the Convention, were: (a) Detention following upon the unlawful kidnapping or luring within the domestic jurisdiction of a person wanted for trial can render a persons detention following his or her subsequent conviction unlawful: see the citation of Bozano v France (1986) 9 EHRR 297 and onka v Belgium (2002) 34 EHRR 1298 in footnote 50 to para 69 of the Courts judgment in Saadi.
Under English common law a similar result would follow: such conduct would call for a stay of the criminal proceedings and the release of the defendant on the grounds of abuse of process: R v Horseferry Road Magistrates Court, Ex p Bennett [1994] 1 AC 42. (b) The deprivation of liberty must genuinely be for one of the purposes permitted by article 5(1) and must, in the case of a sentence, retain a sufficient causal connection with the original conviction: see eg van Droogenbroeck v Belgium (1982) 4 EHRR 443, paras 35 and 40 (referring to detention based on grounds that had no connection with the objectives of the legislature and the court or on an assessment that was unreasonable in terms of those objectives), Weeks v The United Kingdom (1987) 10 EHRR 293, Kafkaris, para 118 and the Houses reasoning in R (James), paras 15 and 49. 27.
However, other authority indicates a tendency on the part of at least some sections of the court to expand the concept of unlawfulness under article 5(1).
Thus, in M v Germany, para 90, the fifth section said on 17 December 2009 in a context where article 5(1)(a) was in issue that: Quality of the law in this sense implies that where a national law authorises deprivation of liberty it must be sufficiently accessible, precise and foreseeable in its application, in order to avoid all risk of arbitrariness (see Amuur v France, 25 June 29. 1996, 50, Reports 1996 III; Nasrulloyev v Russia, Application No 656/06, 71, 11 October 2007; and Mooren v Germany [GC], Application No 11364/03, 76, 9 July 2009).
The standard of lawfulness set by the Convention thus requires that all law be sufficiently precise to allow the person if need be, with appropriate advice to foresee, to a degree that is reasonable in the circumstances, the consequences which a given action may entail (see Steel and Others v The United Kingdom, 23 September 1998, 54, Reports 1998 VII, and Baranowski v Poland, Application No 28358/95, 52, ECHR 2000 III). 28.
In contrast, the First Section in Zagidulina v Russia (Application No 11737/06) (02 May 2013) appears to have deliberately limited itself to article 5(1)(e), when it stated (para 51) that: the notion of lawfulness in the context of article 5(1)(e) of the Convention might have a broader meaning than in national legislation.
Lawfulness of detention necessarily presumes a fair and proper procedure, including the requirement that any measure depriving a person of his liberty should issue from and be executed by an appropriate authority and should not be arbitrary (see Winterwerp, cited above, 45, Johnson v The United Kingdom, 24 October 1997, 60, Reports of Judgments and Decisions 1997 VII, and more recently Venios v Greece, Application No 33055/08, 48, 5 July 2011 with further references).
Even in the context of article 5(1)(e), the dictum seems to have been unnecessary for the decision, since it is clear from para 61 of the First Sections judgment that the claimants detention on the ground that she was of unsound mind, when she had neither been present in person nor represented at the hearing ordering such detention, was not in accordance with a procedure prescribed by law within the express language of article 5(1), even if attention was confined to domestic law.
The extent to which the concept of lawfulness may require a domestic law authorising detention to meet some higher international standard of procedural fairness did not require attention at all.
In neither situation covered by points (a) and (b) mentioned in paragraph 26 above does there appear domestically to be any difficulty about accepting that the prisoner should not have been detained and should be, or have been, released.
That is subject to the important proviso that the possibility of a break in the chain of causation envisaged by point (b) is understood as we consider that it must and should be in domestic law in the remote and restricted sense indicated by the House in R (James).
A requirement that any law authorising detention should be sufficiently accessible, precise and foreseeable (see para 27 above) would probably also be capable of being accommodated within domestic law, again provided that it was understood as directed to situations where the relevant law was palpably defective.
As to the reasoning in Zagidulina v Russia (para 28 above), the requirement that any deprivation of liberty be in accordance with a procedure prescribed by law is general to all the heads covered by article 5(1).
It is directed primarily to domestic law, but, if one assumes that it may also connote satisfaction of a certain standard of procedural fairness set at the international level, the implications of this have not been worked out in any case law, and it does not follow that any shortfall in procedural fairness must lead to immediate release. 30.
The present appeal does not in any event concern procedural fairness.
It concerns alleged failures in the provision of appropriate opportunities to prisoners to progress towards release from sentences about the imposition of which, as such, no complaint is or can be made.
In this context, there is a real difficulty about accepting a proposition that the Convention rights require a life or IPP prisoners release, before the Parole Board is satisfied that his detention is no longer required for the protection of the public.
Not only would this in the United Kingdom context mean that primary legislation section 28(6)(b) of the Crime (Sentences) Act 1997 (para 10 above) was in conflict with the Convention rights.
It would also involve the release of someone whose safety for release had not been established; and, as soon as he could be offered appropriate facilities to make progress towards eventual release, it would involve re detaining him always assuming that he either surrendered voluntarily or could be found and rearrested.
In In re Corey, paras 63 69 Lord Mance questioned whether the ECtHR could have meant this.
He identified certain features of its reasoning which suggest that it did not.
We will treat them as repeated here, without setting them out.
However, if the ECtHR did not mean this, that seems to undermine the central part of its reasoning that detention becomes arbitrary and unlawful under article 5(1) after the expiry of the tariff period, if the prisoner is not given the facilities to enable him to progress towards release.
Detention which is unlawful under the express wording of article 5(1) is, as we have said, detention from which a person is under article 5 entitled on the face of it to be released. 31. 32.
The central part of the Courts reasoning in James v UK under article 5(1) finds little if any support in the previous Strasbourg authority.
The need for a coherent framework for progression towards release of persons subject 33. to a measure of preventive detention is mentioned in M v Germany, at para 129, but in a quite different part of the judgment from that dealing with the lawfulness of detention namely in the context of considering whether the extension of such a measure from ten years to an unlimited period after six years in preventive detention constituted the introduction of a retrospective penalty.
In Grosskopf v Germany (2010) 53 EHRR 280, paras 50 52 the Court again expressed concern about the apparent absence of any special measures, instruments or institutions to address the danger presented by persons subject to preventive detention and to limit the duration of their detention, but did so purely in the context of considering whether a sufficient causal connection existed between the applicants original conviction and his continuing preventive detention.
If anything, the courts reference to its concern, coupled with its decision to uphold the continuing detention as not unreasonable in terms of the objectives of the preventive detention order, suggest that the court did not see the absence of any special measures as capable of affecting the lawfulness of the detention, so long as the causal connection based on danger to the public existed.
In James v UK the Fourth Section of the ECtHR did however unequivocally identify the absence of measures to assist progression through the prison system as arbitrariness making the detention unlawful.
It treated the situation as falling within the language of article 5(1)(a), despite the continuing existence of sufficient causal link between sentence and detention (see para 198).
On this basis, it had also to identify the period of detention which was unlawful.
It did so by referring, in its holding, to the detention following the expiry of their tariff periods and until steps were taken to progress them through the prison system.
That exposes a problem.
Particularly where a tariff is of a relatively long period, a prisoners progression towards release through courses and experience in open conditions should, where and to the extent feasible, be facilitated not merely after but also in advance of the tariff period, so as to keep open the possibility of release on or shortly after its expiry.
That is indeed Mr Haneys complaint in the present case.
Yet, on the ECtHRs approach, treating the present issue as falling within the text of article 5(1)(a), no complaint can apparently arise until the expiry of the tariff period, and any complaint can then only arise if the failure to provide courses, etc continues after the expiry of the tariff period. 34.
The second, much more substantial problem about the Fourth Sections approach is that logically it would, if followed in the United Kingdom, mean, as we have stated, that any prisoner not being progressed through the system should be released, and that the Crime (Sentences) Act 1997 section 28(6)(b) should be declared incompatible with the Convention rights insofar as it precludes this.
As noted in para 15 above, the ECtHR in para 217 of its judgment avoided, rather than addressed, this difficulty.
Mr Southey QC for the appellants suggested, ingeniously, that the difficulty could not arise, because, as soon as a prisoner gets to court and establishes that he is not being duly progressed towards release, the courts order would redress the situation.
This does not however follow.
Many of the failings revealed by the cases which have come before the courts to date are simply incapable of being redressed at the drop of a hat or wig.
Systems failed, due to lack of resources and facilities, and it takes time to mend such failures, whatever order a court might make.
Moreover, in a case where the failure was repaired, as it might be by the time a court came to consider the case, by the provision of adequate opportunity to the prisoner, then the court would be left, on this view of the ECtHR decision, with detention which had been unlawful for a time but was no longer. 35.
For the reasons which we have given, we do not think that it is possible to follow the reasoning of the Fourth Section of the ECtHR in James v UK.
It appears to us to be based on an over expanded and inappropriate reading of the word unlawful in article 5(1)(a), which would not give rise to a sensible scheme.
That does not however mean that we would revert to the Houses decision in R (James).
The Fourth Section has underlined the link which should be recognised between preventive detention and rehabilitation, and has also concluded that there should be an individual remedy in damages under the ECHR for failure to provide prisoners serving indeterminate sentences with proper means of progression towards release.
The Houses refusal of a Convention remedy in R (James) was based on a contrary conclusion that the aim of a life or IPP sentence does not include rehabilitation, at least for the purposes of the ECHR, as well as upon the Houses view that the continuing causal link between sentence and detention prevented any breach of article 5. 36.
We consider that the Supreme Court should now accept the Fourth Sections conclusion, that the purpose of the sentence includes rehabilitation, in relation to prisoners subject to life and IPP sentences in respect of whom shorter tariff periods have been set.
We also consider that the Supreme Court can and should accept as implicit in the scheme of article 5 that the state is under a duty to provide an opportunity reasonable in all the circumstances for such a prisoner to rehabilitate himself and to demonstrate that he no longer presents an unacceptable danger to the public.
But we do not consider that this duty can be found in the express language of article 5(1).
Treating it as an aspect of the duty to avoid arbitrariness under article 5(1)(a) has unacceptable and implausible consequences which we have already identified.
The Grand Chamber decision in Saadi also remains important authority that arbitrariness has a confined meaning, when used as a test of lawfulness in the context of article 5(1)(a). 37.
Article 5(4) would be a more satisfactory home for any duty of the nature identified in the previous paragraph, if its language covered it (which it does not).
Article 5(4) gives rise to an ancillary duty on the state, breach of which does not directly impact on the lawfulness of detention.
The duty is to make available access to judicial review by a court or here the Parole Board, which will consider whether the information put before it justifies continued detention or release.
Speedy access to the Parole Board like reasonable access to proper courses and facilities represents an important aspect of a prisoners progression towards release.
But the language of article 5(4) is in terms confined to access to judicial review by the Parole Board on the basis of the information available from time to time.
It does not cover the prior stage of provision of courses and facilities in prison, which gives rise to the information necessary on any Parole Board review. 38.
The duty to facilitate the progress of such prisoners towards release by appropriate courses and facilities cannot therefore be brought, in our opinion, within the express language of either article 5(1)(a) or article 5(4).
But it is on any view closely analogous, at an earlier stage, to the duty involved under article 5(4), and it is far more satisfactory to treat it as an analogous duty arising by implication at an earlier stage than that covered by article 5(4), rather than to treat article 5(1)(a) as incorporating it.
We consider that a duty to facilitate release can and should therefore be implied as an ancillary duty a duty not affecting the lawfulness of the detention, but sounding in damages if breached.
Such a duty can readily be implied as part of the overall scheme of article 5, read as a whole, as suggested in In re Corey. 39.
The appropriate remedy for breach of such duty is, for the reasons explained, not release of the prisoner, for his detention remains the direct causal consequence of his indefinite sentence until his risk is judged by the independent Parole Board to be such as to permit his release on licence.
The appropriate remedy is an award of damages for legitimate frustration and anxiety, where such can properly be inferred to have been occasioned.
Except in the rarest cases it will not be possible to say what might have been the outcome of an opportunity by way of a prison programme which was not provided or was provided late.
It will thus not, except in the rarest cases, be possible to establish any prolongation of detention.
Such a breach is likely to attract relief similar to that recognised as appropriate under article 5(4) in frustration/anxiety cases where a Parole Board hearing has been wrongly delayed: we refer to the very full analysis of Strasbourg awards in R (Faulkner) v Secretary of State for Justice, R (Sturnham) v The Parole Board (No 1) [2013] UKSC 23, [2013] 2 AC 254, and we note that in some of them the award needed to reflect not only delay but also procedural unfairness.
It may be legitimate to infer rather greater frustration in at least some cases when the point of impending decision, which may be for release, has been arrived at, than at the more speculative earlier stage of delay in the provision of prison treatment.
The round figure levels of damages awarded by the ECtHR in James v UK, para 244, do not appear to us to offer appropriate general guidance for future cases under the ancillary duty now recognised.
The general approach set out by Lord Reed at points 10 15 in para 13 of R (Faulkner) and R (Sturnham) and the detailed examination of authority later in his judgment should however provide valuable guidance as to the appropriate approach to damages in respect of any such breach of the ancillary duty. 40.
This approach will be more satisfactory in result than that which would, apparently, follow from the ECtHRs analysis in James v UK.
There would be no risk of detention fluctuating between the legitimate and illegitimate, no requirement to release before the Parole Board is satisfied that this would be safe, and no risk therefore to public safety.
But, equally, the prisoner will be able (a) to complain and to seek mandatory orders if and when any breach of such duty occurs and (b) to claim damages in respect of any period of extended detention or other loss which he or she can establish (and this could often prove a very difficult task, bearing in mind the speculative nature of the exercise) to have flowed from the failure properly to progress him or her towards rehabilitation.
These rights would exist and damages would be recoverable in respect of any period of extended detention which could be shown to have resulted after the expiry of the tariff period whether the failure occurred before or after the expiry of the tariff period.
The prisoners rights would not therefore depend upon showing an overlap between a period during which such a failure occurred and a period of increased detention post tariff, as the ECtHRs approach in James v UK appears to require.
The content of the duty 41.
On that basis the question arises in what precise terms and in particular at what precise level the duty should be put.
As a matter of domestic public law, complaint may be made in respect of any systemic failure, any failure to make reasonable provision for an individual prisoner so egregious as to satisfy the Wednesbury standard of unreasonableness or any failure to apply established policy.
The question is whether liability for breach of article 5 is similarly limited.
In our opinion, it is not.
The express rights conferred by article 5 are individual rights.
The ancillary right which we identify as existing under article 5 is also a right in favour of each individual prisoner and its satisfaction or otherwise depends upon the particular circumstances of the individual case.
Although the ECtHR was concerned in James v UK with circumstances in which there had been systemic failures in the United Kingdom, the ECtHRs decision was based on a careful individual analysis of each applicants prison history: see eg paras 218 222. 42.
The ECtHR does not however insist at the international level on standards of perfection that would be unrealistic, bearing in mind the numbers of prisoners involved and the limits on courses, facilities and resources in the prison system.
Nor should domestic courts do so.
In Hall v The United Kingdom (Application No 24712/12) (12 November 2013), the ECtHR was concerned with a complaint by an IPP prisoner sentenced on 13 June 2006 with (after appeal) a 30 month tariff expiring on 13 December 2008.
Although the ECtHR said that it appears that there may have been some delay from around March 2008 [when the Extended Sex Offenders Treatment Programme ESOTP was identified as a course he should take] until early 2010 [when he completed that programme], it passed over this delay with the comment that it seems that the applicant was able to access the Cognitive Skills Booster programme in the meantime (para 33).
It appears that this Booster programme was in fact undertaken in or around 2008, that he was on 23 February 2009 transferred to HMP Usk in order to complete the ESOTP and that he in fact completed the ESOTP in early 2010: paras 10 13.
The ECtHR was therefore prepared to look at the matter overall, and to accept that no system is likely to be able to avoid some periods of waiting and delay, especially for a highly intensive course such as the ESOTP.
Similarly, a delay from 1 March 2012 when transfer to open conditions was recommended by the Parole Board (or from 20 March 2012 when the Secretary of State accepted the recommendation, saying that such a transfer was envisaged in about three months) until July 2012, when transfer actually occurred was not regarded as unreasonable.
Black v The United Kingdom (Application No 23543/11; 1 July 2014) was another admissibility decision where the court had regard to the period of detention as a whole. 43.
We turn to the individual cases, considered in the light of the ancillary obligation under article 5 which we have identified.
Whether there has been a breach of the duty is a highly fact sensitive question in each case.
Haney article 5 44.
In November 2003 Haney was 43 years old.
He had previous convictions for robbery, firearms, dishonesty and violence.
On 13 November 2003 he was sentenced for a very serious armed bank robbery, carried out by himself and two other masked men armed with sawn off shotguns.
He had untruthfully denied he was guilty.
At the time he committed this robbery, Haney was on parole from an earlier sentence, also for robbery, having not long been released.
In other words, he appears to have been a professional criminal, committing offences for high stakes which carried a grave risk to the public of death or serious injury. 45.
He was sentenced to an automatic life sentence, then required (unless such would be unjust) by section 109 of the Powers of Criminal Courts (Sentencing) Act 2000 for a few criminals convicted for a second time of a small number of specified grave offences.
The minimum term attached to that sentence was nine years.
At that stage, sentencing practice was to set the minimum term associated with a life sentence at between half and two thirds of what the punitive determinate term would have been if a life sentence had not been passed.
Generally the proportion adopted was one half.
This was to reflect the then prevailing arrangements for early release of long term determinate prisoners, which could be allowed at half of their term and became mandatory at two thirds.
Thus, the nine year minimum term represented a determinate term of something like 18 years, which would indeed have been the kind of term to be expected for a recidivist of Haneys history committing a further armed robbery on parole and receiving no credit for admitting what he had done.
The nine year minimum term (or tariff) expired on 13 November 2012.
In prison, Haneys progress was a great deal better than might have been expected.
After some years in HMP Frankland prison he was moved to HMP Blundeston, which has a therapeutic community designed to facilitate rehabilitation.
Well before then he had admitted his most recent offence.
After about a year there, the reports on him were favourable.
He was judged to be confronting his criminal lifestyle.
There had been some adjudications for misbehaviour but the last was two to three years previously in July 2008 for possession of drugs, and since then he had achieved enhanced status as a prisoner.
A sentence plan formulated in March 2010 foresaw the prospect of onward transfer to an open prison, as an essential stage in assessing whether the risk which Haney presented could be managed, first there and, if successfully there, then afterwards on licence in the community.
Critically, a year later, in June 2011, the Secretary of State wrote formally to him approving a transfer to an open prison for this purpose, and indeed without the need for a Parole Board assessment upon that issue.
Haney was accepted in principle by a suitable open prison (HMP Kirklevington Grange) in the summer of 2011. 46. 47.
The proposed transfer did not, however, then happen.
His transfer eventually occurred about a year later on or about 16 July 2012, and thus not long before his tariff was due to expire in November of that year.
This was not Haneys fault.
The reason lay in the intervening logjam to which the introduction of IPP sentences in April 2005 had led, and which is so clearly chronicled in the judgments of the House of Lords in R (James).
Although Haney is not an IPP prisoner, and his sentence pre dated the introduction of the IPP system, he was a life prisoner competing with other life prisoners and, importantly, also with IPP prisoners for resources in the prison service which were, temporarily at least, greatly under supplied.
In response to the excess of demand over supply, the prison service had to introduce a new practice in October 2011, under which priority was given, amongst indefinite prisoners of one kind or another, to those whose tariffs had expired, and then to those who were nearest to tariff expiry.
A separate common law challenge to the reasonableness and lawfulness of that expedient rightly failed before Lang J in the Administrative Court, for it was a perfectly sensible and lawful response to the unanticipated backlog.
The common law claims which then failed are not before this court.
A further challenge is, however, mounted to the October 2011 policy in this court, invoking article 14 ECHR (discrimination) but as explained below this must also fail. 48.
However, the failure of the challenges to the October 2011 remedial policy adopted by the ministry leaves untouched the question whether there was a failure to meet the requirements set out in James v UK, and thus a breach of the ancillary obligation contained in article 5.
This ancillary obligation clearly exists throughout the prisoners detention, and is separate from any obligation to release, whether under domestic law or the Convention.
It is geared towards the prisoner having a reasonable opportunity to establish that he is safe to release at or within a reasonable time after the expiry of the tariff period.
A failure before tariff expiry may thus constitute a breach if it remains uncorrected so that he is deprived of such reasonable opportunity, which he ought to have had.
Such a breach may sound in modest damages if the impact on the prisoner warrants it.
It cannot of itself give rise to a duty to release, for whilst the prisoner remains unsafe to the public, there is ample justification under article 5(1)(a) for his continued detention.
The question is accordingly this: was Haney afforded a reasonable opportunity to reform himself and (crucially in his case) to demonstrate that he no longer presented an unacceptable risk to the public? 49.
The answer to this question is, in Haneys case, given by the letter to him from the Secretary of State of June 2011.
By this letter the Secretary of State identified what a reasonable opportunity was for Haney to demonstrate that he was no longer a danger that is to say a transfer to open conditions and adjudged that he should have that opportunity there and then.
Unlike the cases of other appellants, there was no other opportunity which could be afforded to him to demonstrate this.
That he did not have this reasonable opportunity was the result of the systemic failures identified in R (James) and in James v UK.
It is clear that but for those failures, Haney would have been transferred to open conditions in or about late Summer 2011.
What he would have made of that opportunity cannot be known, nor can it be known when or whether the Parole Board would have adjudged him safe for release on licence which would endure for the rest of his life.
But that he was deprived of the reasonable opportunity which the Secretary of State himself said that he 50. should have is clear.
Worrying as his criminal history is, career criminals may change course, and the middle years are ones sometimes characterised by such change.
There could have been no reasonable claim to actual release on licence before tariff expiry, even if such is technically possible.
But depending on his response, there might have been some prospect of release on licence sometime after tariff expiry in November 2102.
It follows that in Haneys case there was a breach of the ancillary obligation in article 5.
The delay in transfer was of about a year.
He would have known that he could not realistically expect release at least until after his tariff expired, and it would not follow that any postponement of release would follow or, if it did, be of the same period as the delay.
But the delay in transfer until just before the expiry of the tariff period is sufficient, applying the principles explained in R (Faulkner and Sturnham) (No 2) set out in para 39 above, to justify the inference of legitimate frustration.
An appropriate award is 500.
Haney discrimination 51.
We turn to Mr Haneys alternative case that he was discriminated against, by the decision taken by the prison authorities in October 2011 to resolve the crisis arising from the shortage of course and facilities to progress prisoners towards release by prioritising the movement to open prisons of those whose tariff periods had already expired.
Mr Haneys had not.
It is not clear what practical impact this issue could have, particularly in the light of the ancillary duty to afford prisoners a reasonable opportunity to rehabilitate themselves and to demonstrate that they no longer present an unacceptable danger to the public, which we have now recognised.
To the extent that there was a continuing systemic failure, which affected Mr Haney because it meant that he could not be transferred to open conditions at a time pre tariff when this should, but for such failure, have occurred, the ancillary duty should afford him a remedy, independently of any case based on discrimination. 52.
For completeness, however, we consider his case on discrimination.
The question of law is whether the Supreme Court should recognise the difference between those whose tariff periods had and had not expired as a difference of status for the purposes of article 14 of the ECHR.
The House in R (Clift) v Secretary of State of the Home Department [2006] UKHL 54, [2007] 1 AC 484 was, in the absence of clear Strasbourg authority, not prepared to accept the difference between prisoners serving determinate sentences over 15 years and life prisoners or prisoners serving determinate sentences of less than 15 years as a difference in status.
The ECtHR in Clift v The United Kingdom (Application No 7205/07) took a different view, and expressed itself at one 53. point (at the end of para 60) in terms which might, literally read, eliminate any consideration of status.
In the light of the ECtHRs decision, we see some force in the submission that the difference between pre and post tariff prisoners should now be taken to represent a relevant difference in status.
But we need not determine that finally.
That is because the difference in treatment appears to us to have been clearly justified on the basis of the evidence put before and findings made by the judge.
Her findings were in the context of a complaint at common law that the difference in treatment was irrational and unfair, but they appear to us relevant and decisive in the present context also: 69.
The defendant's [the Secretary of States] response was that he considered the various options for clearing the backlog and made a rational decision to prioritise the post tariff prisoners, because they were eligible for release and continued detention could only be justified if they represented a risk to the public.
It was not feasible to transfer all the ISPs at one go, because of the need to ensure that sufficient resources were in place to manage and support ISPs at open prisons.
The defendant denied that he was applying an inflexible policy; there was provision for exceptional cases.
The defendant also denied that he was operating an unpublished policy which conflicted with published policy.
The published policy related to categorisation and allocation, whereas these were merely arrangements for clearing the backlog of transfers.
Rationality, fairness and taking into account relevant considerations 70.
In my judgment, the defendant's evidence was cogent and convincing.
Mr Mercer said in his first witness statement: Prioritisation criteria 2.
A system of prioritisation was required to address the backlog, because it would not be possible or safe, to transfer all the ISPs awaiting transfer at the same time.
Whilst NOMS aims to transfer prisoners who are identified as being part of the backlog into open conditions as soon as possible, it is extremely important, given the numbers involved, together with the complexity of individual cases and the risks and needs which offenders concerned present, that transfers are managed with care.
Thus it is necessary to consider both the needs of the prisoners and the pace at which transfers are operationally manageable for individual establishments.
For these reasons, the process of identifying and allocating suitable establishments and effecting transfers is being phased, with prisoners' cases being dealt with by PMS in tranches, initially of 50 at a time, since increased to 100, and potentially increasing still further. 3.
For purposes of clearing the backlog, prisoners whose tariff has expired were considered to be a higher priority than pre tariff prisoners because they have served the punitive part of their sentence and progression through their sentences is now entirely focused on reducing their risk to the point where the Parole Board determines that they may be safety released.
The decision was taken to prioritise post tariff prisoners over pre tariff prisoners because the earliest pre tariff prisoners can be released is at tariff expiry.
The view was taken that the further away from tariff expiry a prisoners is, the less likely it is that they would be prejudiced by a non immediate transfer to open conditions after the Secretary of State's approval. 4.
When considering how to prioritise pre tariff prisoners, considerations included: i. the need to ensure fair treatment between prisoners, including that prisoners who were often difficult to place (such as sex offenders) were not disadvantaged compared to those with less complex needs; ii. to take account of the length of time for which prisoners had waited for transfer; iii. to take account of the amount of time remaining prior to tariff expiry; iv. to provide a transparent system so that prisoners could be given reasonable estimate as to when they were likely to move; vs to set up a system that was straightforward and would avoid complex and resource intensive administration; and vi. to permit exceptional circumstances to be considered on request in individual cases. 5.
Among pre tariff prisoners, it was decided, after considering various alternative means of prioritisation, that the fairest solution was to prioritise prisoners in orders of proximity to tariff expiry.
This solution also had the benefit of being transparent, straightforward and practical.
There were a number of prisoners approaching tariff expiry and we considered these prisoners to be of the highest priority and wanted to ensure that the criteria did not allow them to be leapfrogged by other prisoners.
Prisoners who had a year or two to go until their tariff expiry would have plenty of time to utilise open conditions to demonstrate to the Parole Board a reduction in risk even if there was a delay in transferring them.
Consideration was given to other way of prioritising pre tariff prisoners, such as proximity to next parole review; individual circumstances; length of tariff; and date of Secretary of State approval; but these options would disadvantage many prisoners who were approaching their tariff expiry date, leading to anomalous and unfair treatment: i. Proximity to parole review date: Once a pre tariff prisoner is approved for open conditions by the Secretary of State their parole review will take place on tariff expiry.
Therefore there is not much difference between prioritisation using next parole review or tariff expiry date.
However, parole reviews can be subject to delay for a number of reasons including late submission of reports; awaiting completion of offending behaviour work; or availability of panel members or witnesses.
Parole reviews may also be deferred whereas tariff expiry dates remain the same.
In cases where there is a delay or a deferral, prisoners placement on the list would have to be revised to take account of the new timetable.
As parole review dates vary from one prisoner to the next in this manner, a waiting list organised by reference to this would be extremely fluid and the result of this would be that prisoner's positions on the waiting list would be subject to continual change.
Re consideration and prioritisation of each case would have to be repeated on an unacceptably frequent basis as ISPs were added to, or removed from the list, or otherwise reprioritised following deferral or delay.
It would, therefore, be impossible to give a meaningful estimate of the likely period a prisoner would have to wait for transfer.
We therefore believe that this solution would be unfair, as well as lacking in transparency and being difficult to manage. ii.
Length of tariff was considered to be irrelevant to the prioritisation process as it has no bearing on the Secretary of State's approval for a transfer to open conditions, which is based on risk pertaining at the time rather than either of these factors.
The Secretary of State's decision to allow an ISP to transfer to open conditions is the earliest point at which this progressive move can take place. iii.
Considering each case individually on its merits: Consideration was also given to prioritising each prisoner's position on a case by case basis rather than using specific criteria.
It was decided that this would have been extremely time consuming and resource intensive, as well as making it hard to ensure fairness.
It would have involved very difficult judgments about the relative merits of each case against all other case.
In addition, fresh judgments would have been required about each case in the backlog every time a new case came through where a prisoner had been approved for transfer to open prison by the Secretary of State.
Having said that, notwithstanding the prioritisation criterion outlined above, exceptional circumstances are considered upon request, and are reviewed on an individual basis. iv.
Date of Secretary of State approval: Prioritising pre tariff prisoners in this way would mean that prisoners who were approaching tariff expiry could be leapfrogged by other prisoners who were not approaching tariff expiry but who had been approved by the Secretary of State for transfer earlier.
This was considered to be unfair to those prisoners approaching tariff expiry who could potentially be released on tariff.
ISPs who had been approved for their transfers earlier but whose tariff expiry date was further away had not yet reached the point where they could be considered for release and would not be disadvantaged by waiting longer for a move.
Therefore, although NOMS accepts that the criterion of proximity to tariff expiry is not sensitive to some individual factors it was considered to be the fairest, most transparent and most practical means of establishing an order in which to transfer pre tariff ISPs to open conditions.
Implementation of the October 2011 policy . 9.
We reviewed the approach we were planning to take with pre tariff prisoners early in 2012 in light of progress made with transferring post tariff prisoners and began the process of referring pre tariff prisoners to PMS for transfer on 3 July.
Prioritisation of pre tariff prisoners is determined by proximity to tariff expiry date; the closer to tariff expiry a prisoners is the higher will be the priority to transfer them.
We have increased the amount of referrals made to PMS each month and will continue to monitor progress. 10.
At the beginning of the new process, there were around 300 post tariff ISPs located in closed conditions awaiting transfer to open.
At the beginning of December 2011 this figure had risen to 405 however as at 30 June this figure had fallen to 243.
The current list of post tariff prisoners contains those who have been approved by the Secretary of State for a move to open conditions from late May 2012 onwards.
The average waiting time for post tariff prisoners was, prior to the implementation of the central process in October 2011, around eight to nine months; this has been reduced to around three to four months now.
The original backlog of post tariff prisoners has been virtually cleared and the majority have either now transferred to open conditions or are unable to transfer due to medical reasons, imminent parole hearings, courses or re categorisation to category C.
The Secretary of State has approved 927 ISPs (both pre and post tariff) for open conditions between the months of October 2011 and June 2012.
The number of ISPs being released continues to rise with 173 releases in the first quarter of 2012.
This is in comparison with 543 releases during the whole of 2011, 258 in 2010 and 195 in 2009. 11.
Turning to the rate at which ISPs are transferred under this exercise, at present the policy remains to refer a minimum of one tranche per month to PMS for action.
The estimate of the rate at which the backlog will be reduced was based on the assumption that PMS would be able to organise a transfer for all prisoners in the tranche within a month of submission.
We have been monitoring progress carefully and have reviewed this arrangement on a regular basis; if more that 50 prisoners could be safely transferred per month then more would be referred.
That has now been reviewed and, beginning in March 2012, we increased the number of referrals to PMS each month to 100 prisoners; in May 2012, over 200 prisoners were transferred.
As at 20 June, 914 post tariff prisoners had transferred under the central process.
We will continue to monitor progress carefully and review this arrangement on a regular basis; if more than 100 prisoners can be safely transferred per month, as was the case in May 2012, then more be referred. 71.
Mr Read added, at paras 28 and 29 of his statement: 28.
In respect of individual prisoners, it is important to progress at the right pace.
This means ensuring that any ISP sent to open conditions can be managed safely and given appropriate support to help make the progression from restrictive, closed conditions to relaxed, open conditions, often after a long time in custody.
In respect of the overall prison population, our primary responsibility is to protect the public.
Any measures which resulted in large waves of ISPs being moved into open conditions in an unmanaged way could result in an increase in prisoners absconding and seriously undermine what we are looking to achieve.
In addition, NOMS must be mindful of the needs of determinate sentence prisoners, some of whom benefit from a period in an open prison before release, even though their release is not contingent on the direction of the Parole Board. 29.
I believe that NOMS made a good response to the problems associated with the lack of movement for ISPs into the open estate.
We have taken back central control of the management for ISPs so that they are moved in a transparent and fair way; we have increased the rate of transfers to from approximately 50 per month approximately 150 per month over the past 5 months and will continue at this rate for the immediate future; and we are increasing capacity significantly to allow more opportunity for ISPs to move. 3.
It became clear to us in early 2012 that the initial rate of transfer was not having the desired effect as the rate of movement was not keeping pace with the number of new ISPs being approved for Category D conditions.
From February 2012, PMS therefore increased the transfer rate to a target of 100 per month and this was maintained or surpassed through to the end of April 2012.
With a view to clearing the backlog as rapidly as could safely be achieved, PMS decided to establish whether there was a tipping point beyond which open establishments found it difficult to manage.
We moved a total of 211 prisoners during the course of May 2012.
When we did so, however, we began to receive telephone calls from a number of open establishments raising concerns about the 72.
Mr Hay, Head of PMS, said in his second witness statement, at paras 3 and 4: increased number of ISPs that they were being required to receive.
In particular, concern was raised at the increase in initial Offender Management (OM) work on reception into open prisoners and whether these prisons were able to provide reassurance that all relevant OM work was being undertaken. 4.
As a result, we decided to reduce the rate of moves to a target of 150 per month from June onwards.
This decision was reached on the basis of the anecdotal evidence available to PMS which indicated that this was the maximum rate at which establishments could safely manage prisoners without putting the public at risk.
This rate was maintained through November with the effect that the backlog was cleared by the end of August 2012. 73.
I am satisfied, on this evidence, that the Defendant carefully considered all available options, took into account all relevant considerations, and reached a rational conclusion.
I consider it is important to bear in mind that this was a temporary arrangement, which lasted for only about 10 months.
From the end of August 2012, when the backlog was cleared, the transfers of post tariff and pre tariff prisoners were being processed at the same rate.
The strategy achieved the desired result within a reasonable timescale.
Prioritisation of post tariff prisoners was rational and fair because they were already eligible for release, and administrative delay might result in a prisoner being detained when he should be free, in breach of both article 5 and arguably his article 8 rights (considered in more detail below).
As Buxton LJ said in Noorkoiv, at para 25, the post tariff prisoners were at least presumptively detained unlawfully and the legality of their detention was subject to article 5(4) ECHR.
In my view, there was a pressing need for the Defendant to address their position.
The way in which the Defendant prioritised pre tariff prisoners, according to their tariff expiry date, was also rational and fair, bearing in mind the significance of the tariff expiry for prisoners. 74.
The only other alternative immediately available, namely, ceasing the transfer of determinate prisoners and thus increasing the number of ISPs transferred, would have resulted in unacceptable pressures on the management of the prisoners in open prisons, as described in the evidence. 75.
It may well have been desirable for the Defendant to have changed the policy in relation to ROTL at an earlier date, so as to make ISPs eligible for ROTL from closed conditions, but I cannot find any basis upon which to hold that he acted unlawfully in not doing so sooner.
The Defendant's decision, and the timescale within which the change of policy was implemented, was a lawful exercise of his discretion. 54.
In the light of this evidence and the judges findings, we do not consider that the Secretary of States policy can realistically be regarded as anything other than a proportionate and realistic reaction to the crisis with which the prison system was faced.
We would reject Mr Haneys complaint under article 14 accordingly.
Kaiyam 55.
Kaiyam (formerly Fish) was born in February 1981.
By 2006 (aged 25) he had accumulated convictions for a variety of offences, including robbery (four different offences) possession of firearms and several cases of assault.
He had been sent to prison and released on licence, but had broken the terms of his licence and so had been recalled.
He was a regular abuser of a variety of drugs and of alcohol and an habitual dealer in cannabis.
On 20 July 2006 he was sentenced for two groups of offences.
First, he hi jacked a valuable car, intending to sell it to finance his drug use.
The car was being driven by a young woman alone, whom he ejected, apparently bruising her in the process.
He drove dangerously when chased by the police, and repeated this the following day in a different car when en route to try to sell the stolen vehicle.
Secondly, and when on bail for these offences, he arranged to supply drugs to others, but was spotted by the police in a car; further dangerous driving followed until he crashed the car; a gun and ammunition were found in it, which it seems had been brought to the meeting by his intended purchasers. 56.
For these offences a combination of determinate and IPP sentences were passed, but the lead sentence was IPP for the robbery, with a minimum term of three years.
Allowing for time spent on remand, this period expired on either 3 or 5 April 2009. 57. 58.
Initially Kaiyam was classified as a category B prisoner in the four level system employed throughout the prison service.
In June 2008 (just on two years after sentence) he was reduced in category to C.
However, his behaviour in prison was very poor.
He was disciplined on no less than 23 occasions for offences which included disobedience, assault, drugs and the possession of mobile telephone parts.
The latter is particularly serious in prison, since it not only has security implications but involves the possession of a very important item of prison currency and power.
In January 2009, as a result of his misbehaviour, Kaiyam was reverted to the higher security category B. Later, also as a result of his misbehaviour, and following an assessment at HMP Dovegate (which has extensive rehabilitation experience) as being involved in the drug subculture, he was transferred to a high security prison at HMP Long Lartin in January 2010.
In the meantime, efforts had been made to provide him with appropriate rehabilitative courses.
There were regular sentencing planning meetings at which there was discussion as to how best to progress him.
He completed a six week Enhanced Thinking Skills (ETS) course in July 2008.
He also completed a drug awareness course in July 2008 and a victim awareness course in October 2008.
He was assessed as having made some progress on the ETS course, but there was doubt about his ability to carry the lessons into practice, and about his honesty, self control in prison and drug use.
Once he was placed at HMP Long Lartin, he was at a prison where the priority is security and rehabilitative courses are comparatively few.
He nevertheless had the benefit of continuing one to one anger management consultations with his Offender Manager, which lasted for more than two years from July 2009 to October 2011, until they came to an end when the officer concerned moved on.
Although there were few courses available at HMP Long Lartin, there were regular sentencing planning meetings in May 2010, June 2011, August 2012 and October 2012.
His behaviour underwent a significant improvement.
The most suitable course for him was considered to be a Prison Addressing Substance Abuse (PASRO) course, with further anger management work.
HMP Long Lartin does not offer either kind of course.
Efforts were made to find a prison which did have such courses and which could accept him, but without success.
At one stage, a transfer was planned and would have taken place but for the fact that he was accused of a further disciplinary offence in May 2011, which as a matter of general practice normally means that the prisoner must remain where he is until the accusation is resolved.
In the end, this particular allegation (of assault on an officer) was not proceeded with, but only because the officer who made it fell ill and could not continue.
In October 2012 a new managing officer suggested a different course, known as the Self Change Programme (SCP) in addition to PASRO, and by December 2012 the former was begun, being available in HMP Long Lartin.
In the meantime, his tariff had expired in April 2009.
As at the time of the hearing before this court, he had been transferred to HMP Lindholme, categorised as C, and was undertaking a course which had replaced PASRO, namely the Building Skills for Recovery Programme (BSR). 59.
Kaiyam disclaimed any complaint of the systemic failure, such as had been evident in the James cases.
There was no question of his being left in limbo without sentencing planning and without any attempt to provide an opportunity to rehabilitate himself.
Nor was there any question of his being left for an unconscionable time in a local prison without access to any courses.
The logjam which the introduction of IPP sentencing had occasioned after April 2005 was not suggested to have had any impact on him.
On the contrary there were courses provided and completed, regular planning meetings throughout and efforts made to find appropriate rehabilitative work for him, and, latterly, to transfer him to that end.
The complaint made on his behalf was of delays in applying acceptable systems to him.
The principal complaint was that it took the prison authorities too long to think of the SCP course.
That course or its predecessor (Cognitive Self Change Programme or CSCP) had been available in HMP Long Lartin throughout his time there.
It was further said that time was wasted considering a CALM course when he had been assessed early on as unsuitable for it since, although he had been prone to lose self control in prison, his offences were not characterised by such loss.
Similarly it was said that there had been mistakes made in considering him for an intensive drug course (FOCUS) when he was unsuitable for it, rather than for the differently emphasised PASRO targeted on those who misused drugs in prison.
Lastly it was said that there was delay and muddle in the efforts which were undoubtedly made to find a prison to which he could be transferred away from HMP Long Lartin.
Time spent considering a transfer to HMP Garth was particularly criticised because HMP Garth did not offer SCP. 60.
The careful witness statement of Mr Dennehy, the prison service manager who reviewed the history after the issue of proceedings, accepted that there had been regrettable delays at some points in it.
It is no doubt the case that the prison system could have achieved what would have been, for Kaiyam, a more extensive provision of courses, for example if the possibility of an SCP course had been identified sooner than it was.
However, to say that more extensive coursework could have been made available to him is a very long way from saying that he has not been provided with a reasonable opportunity to rehabilitate himself and to demonstrate that he no longer presented an unacceptable risk of serious harm to the public, and thus that there has occurred a breach of the implied ancillary obligation in article 5.
Article 5 does not create an obligation to maximise the coursework or other provision made to the prisoner, nor does it entitle the court to substitute, with hindsight, its own view of the quality of the management of a single prisoner and to characterise as arbitrary detention (in the particular sense of James v UK) any case which it concludes might have been better managed.
It requires that an opportunity must be afforded to the prisoner which is reasonable in all the circumstances, taking into account, among all those circumstances, his history and prognosis, the risks he presents, the competing needs of other prisoners, the resources available and the use which has been made of such rehabilitative opportunity as there has been.
It is plain that Kaiyam was not denied a fair or reasonable opportunity to rehabilitate himself or to demonstrate that his risk is acceptable.
In the three years of his minimum term he was provided with courses in enhanced thinking, drug awareness and victim awareness.
Sadly, his response was poor, there was doubt about his honesty, and his behaviour in prison attracted the many disciplinary adjudications mentioned above, all of which demonstrated that the risk he presented was far from removed.
The transfer to HMP Long Lartin somewhat reduced the availability of rehabilitative courses, but there will inevitably be differences between prisons which can give emphasis to rehabilitation and those where the priority is security.
It was his own misbehaviour which led to his transfer there, over a year after the expiry of his minimum term.
The consequence was that PASRO, which was the course judged, plainly bona fide, as that most suitable for him, was not available.
Even without PASRO, there was sustained one to one anger management work for over a year after transfer to HMP Long Lartin.
Even if, with the benefit of hindsight, consideration of CALM and FOCUS courses involved some misjudgement, it was perfectly understandable.
He very plainly had anger problems, whether or not his index offences were the result of loss of temper, and he very plainly had a drug use and drug supply background.
The advice to take an SCP course was plainly a sensible expedient, given that transfer to a place where the first choice PASRO was available had proved unavailable despite considerable efforts.
Once it was identified, SCP was begun within about two months.
The attempts to find a transfer were clearly persisted in; they were complicated by Kaiyams wish to be in a prison near to his family, by the pending adjudication in May 2011 and by a parole window in Spring Summer 2012, quite apart from the competing needs of other prisoners in a large prison population.
His case does not begin to approach the kind of failure of provision considered and chronicled in R (James).
He was afforded reasonable opportunity to rehabilitate himself and to demonstrate that he was no longer a risk to the public, but did not do either.
There was no breach in his case of the ancillary obligation under article 5.
Massey 61.
Geoffrey Massey is now 55 (born October 1959).
He has been convicted from time to time of offences which include robbery with a knife, burglary and benefit fraud.
For the first of these offences he was sent to prison at the age of 20 for three years.
He appears to have worked from time to time, chiefly as a driver, and latterly as a train guard.
He was married for approximately twenty years from the early 1980s until separation in 2001.
He has been a heavy abuser of drink for many years and was assessed by a psychiatrist at the time of his most recent sentence as meeting the criteria for alcohol dependence. 62.
He also had, before the present convictions, two previous sex related offences.
In 1986 he was convicted of indecent assault of an 18 year old male passenger in his taxi.
The allegation was that he had lured the young man to a secluded spot by telling him that his girlfriend had been injured, and that he there locked him in the car and masturbated him against his will, afterwards obtaining a signed promise to tell no one.
Massey denies that these were the facts.
In 2005 he was convicted of using threatening/harassing words. 63.
He was then convicted in May 2008 of a total of five sexual assaults on four unrelated young men, committed over an extended period, the first in 1992 and the last in 2005.
The first victim was a 12 year old boy who had run away from home.
The second offence, in about 1998 2000, involved promising to find a job for a learning disabled 17 year old and engineering an opportunity to persuade him that a test involving masturbation was required.
The third and fourth counts involved an attempt to masturbate a work experience boy of 15 when Massey was a train guard.
The last offence consisted of an assault over clothing against a 22 year old whom Massey had previously pestered with some hundreds of text messages.
All the victims were either young or vulnerable.
In each case he manipulated them to create an opportunity to molest them.
All were significantly affected by what Massey did.
He pleaded guilty to three counts and was convicted of the other two, which he continues to deny.
The sentence passed was imprisonment for public protection with a minimum term of two and a half years.
Allowing for time on remand to count in the usual way, that minimum term expired in September 2010. 64.
Massey gave a detailed self history at the time of his conviction.
His account of his own sexuality appears to be confusing.
He attributes his offences to alleged multiple homosexual abuse from the age of seven onwards, involving, he has asserted, a family friend, a schoolteacher and later, when he was an adult, two unconnected clergymen.
Since the details given have not always been consistent, there may be some room for doubt about what occurred.
His own account of his offending against the young men has involved, more than once, the perhaps surprising suggestion that he committed the offences because he wanted to see what his own abusers had got out of the experience. 65.
Massey was placed on the Enhanced Thinking Skills (ETS) programme which he completed in April 2009.
He then completed the Core Sexual Offender Treatment Programme (CSOTP) in November of the same year.
In addition, he has completed an alcohol awareness course, a cognitive skills booster course and a proof reading course with a view to post release employment.
He is a well behaved prisoner, and has taken on leadership roles as Activities Co ordinator, organising games and events, and as editor of the Prison Magazine.
In July 2010 a long and thoughtful Structured Assessment of Risk and Need (SARN) report was prepared upon him by a forensic psychologist.
It recorded some progress in recognising his pattern of sexual thoughts and fantasies and towards a degree of victim empathy.
On the other hand, concern was noted that he asserted that he now had no sexual thoughts about teenage males, which was unlikely since sexual interests are hard to change.
There had been an apparently dramatic shift in his attitude towards his offending in a very short time as a consequence of the CSOTP, whereas the view was taken that three decades of behaviour and interests were unlikely to be reversed by a single programme.
The SARN report recommended assessment to see whether the ESOTP would be suitable, as well as suggesting the likely desirability of a following Better Lives Booster (BLB) programme and a PCL R assessment for psychopathy to inform responsivity.
In due course the Offender Manager concurred and offered tight suggested licence terms for release when it occurred. 66.
Shortly after the SARN, the National Offender Management Service wrote formally to Massey in October 2010, accepting its recommendations.
Whilst cautioning him that the Secretary of State could not guarantee to place him on the specific courses recommended, given the limits on resources, the letter formally set the time for his Parole Board review at 24 months, and set out a timetable on which this was based, namely two months for the PCL R assessment, 10 months to complete ESOTP including assessment and waiting list, six months for the BLB, again including assessment and waiting list, and six months afterwards for post programme testing and the completion of reports.
That would have meant a Parole Board hearing in or about June 2012, already nearly two years beyond the expiry of his short minimum term or tariff. 67.
Assessment for ESOTP followed in April 2011, and it was at this stage that he completed the Cognitive Skills Booster (CSB) programme.
In the meantime the Parole Board had recorded in March 2012 that the ESOTP could only be completed in closed conditions.
There was, however, no place on the ESOTP for him until May 2013.
It is apparent that the wait for ESOTP was attributable to excess of demand over supply and to the need to make difficult choices about who to prioritise.
It was not until September 2013 that he completed the ESOTP and subsequently was afforded further behavioural work known as the Wheel of Life. 68.
Has Massey been denied a reasonable opportunity to reform himself and to demonstrate by or within a reasonable time after tariff expiry that he is no longer a danger? It is apparent that the less than two and a half years of his tariff (somewhat shortened, properly, by time spent on remand awaiting trial and sentence) was as well furnished with offender behaviour work as one could reasonably expect.
He first completed the ETS course, which is a frequent if not conventional first step, and he was placed on the CSOTP within his comparatively short tariff period.
He completed the CSOTP in November 2009, and since it is a six month course it would appear that he must have been placed on it almost immediately after completing the ETS in April of that year.
The SARN report which first mooted the ESOTP was in July 2010, so that there could never have been any prospect of his being both assessed for, and completing, the ESOTP by the time of his tariff expiry in September 2010.
The chronology illustrates the fact that if standard, intensive, course work such as the CSOTP does not succeed and if lack of risk is not demonstrated at the end of it, it will be inevitable that a prisoner with this kind of tariff period will pass the end of the tariff without being able to be offered every course which the system has. 69.
However, it is important to note that, no doubt mindful of the comparative brevity of his tariff, the Secretary of State by the formal letter of October 2010 effectively defined what was regarded as a reasonable opportunity for Massey to build on the partial progress which he had made and to demonstrate (if he could) that he was safe to release, namely over a two year period.
Neither this timetable nor anything approximating to it was honoured.
Instead, it was not until after that period had come and gone that he was able to begin the ESOTP, and the letter shows that even if this produced a successful outcome, a further year or thereabouts was contemplated.
We conclude that in Masseys case there was a failure to provide him with the opportunity to try to demonstrate that he was safe for release which the Secretary of State regarded as reasonable.
The assessment for ESOTP was in Spring 2011.
If there had been a plentiful supply of places he might have been on it by about Autumn of that year, but no real complaint could have been made merely because this kind of course was not immediately available; if it had been provided in or about Spring 2012, there would we conclude have been no breach.
There is thus an unacceptable delay of about a year, and all post tariff.
The inference of legitimate frustration is justified and that period calls for an award of damages.
Given that it was post tariff we assess it at 600.
Robinson 70.
There is a difference of opinion between members of the court as to the appropriate disposition of Robinsons appeal.
But before explaining the difference in separate judgments, we can set out the facts about which there is no dispute. 71.
Andrew Robinson is now 53 (born November 1961).
The papers before this court do not include his formal record of convictions, but their gist is reasonably clear.
In the background are convictions between 1977 (aged 15 16) and 1981 (aged 19 20) which consist of four offences of arson (two pairs), seven offences of theft and two of criminal damage.
Thereafter and from at least his mid twenties, he has been a repetitive sex offender.
He says that he has never had a cohabiting relationship with an adult woman.
In about 1988 (aged 26 27) he was convicted of unlawful sexual intercourse with a girl of 15 (C).
He asserted that he was protecting her from her father whom he said was violent.
The sentence was a conditional discharge.
The sexual relationship seems to have continued afterwards for a few years during which time he lived with C, now just past 16. 72. 73.
When this relationship was ended by the girl, Robinson befriended a mother who was a passenger on a bus he drove, and who had a teenage daughter (K).
In due course he committed sexual offences against K when she was 14.
Subsequently he befriended a second mother, who was alcoholic, and who had a daughter (L).
At around this time he began a sexual relationship with a young woman of 19 who had learning difficulties, and she gave birth to his daughter.
Social services became concerned about the relationship and intervened on the young womans behalf.
Robinson then abused L, aged 14; subsequently he has said that he did this as an act of revenge against the social workers.
In 1998 he was prosecuted for the offences against both K and L and sentenced to 15 months imprisonment. 74.
On his release he obtained a job driving schoolchildren to an afterschool club, dishonestly concealing his conviction in order to do so.
He indecently assaulted a 12 year old girl whom he met in this way.
He was sentenced to six months imprisonment, and it would appear that subsequently a Sexual Offences Prevention Order (SOPO) was made in an effort to restrict his contact with teenage girls.
In breach of this Order, he befriended two further vulnerable families.
The first consisted of a single mother with three young children.
He took on 75. decorating at their house, arranging to be there when the children came home from school.
In due course he was found to have made a video recording of one of the little girls in her night clothes.
The second family consisted of an alcoholic single father with learning difficulties and his young daughter (N).
Robinson was repeatedly warned by the Police to keep away but did not do so.
He groomed the family, giving the father money for drink.
He committed a series of offences of digital and attempted penile penetration of this girl when she was 13; they were committed in her home while her father slept downstairs.
He was found to be in possession of a CS gas canister and of a DVD of teenage girls engaged in ballet and yoga.
He was convicted also of breach of the SOPO.
On this last occasion he was sentenced, on 2 October 2006, to imprisonment for public protection, with a minimum term of seven years.
Allowing for time on remand to count in the usual way, that minimum term (tariff) expired in December 2012. 76.
Robinson has never admitted that he committed the offences for which he was last sentenced, which are much the most serious of which he has been convicted.
He asserts that he was set up by the police and that N was bullied into giving false evidence against him.
Denial of offending is an obvious impediment to therapeutic treatment but need not be a bar to it.
Robinson was provided with treatment on the basis of the earlier, albeit less serious, offences, which he admitted.
In the first year of his sentence he completed the cognitive behaviour programme ETS, which is designed to confront offenders with what leads to their criminal behaviour and to help them address it.
In 2008 he completed the Core Sexual Offenders Treatment Programme (CSOTP).
This is a sustained course consisting of some 90 sessions at the rate of three or four per week over a period of six to eight months.
Targeted specifically at sexual offending, it is designed to challenge thinking patterns which lead to sex offending and to the offenders justification for it, to help prisoners to see things from the perspective of the victim, and to devise strategies to avoid being in positions of temptation in future.
In July 2008 a long psychologists report (Structured Assessement of Risk and Need or SARN) recorded the position after this work had been done.
The author was able to identify some encouraging signs.
Robinson had begun to see the possible relevance of his own childhood abuse when in care as a teenager, although he described it as affectionate.
He was able to suggest not offering to drive teenagers as a way of avoiding temptation.
He said that he was now aware of the harm his conduct had caused and that he now realised that he was not in a relationship with his victim, since they were too young.
He appeared to have made some progress in self esteem and in recognising his strong desire for intimacy.
His behaviour in prison was generally good.
On the other hand, there was considerable cause for concern.
Although at the conclusion of the CSOTP, his scores on assessment of child abuse supportive 77. beliefs had been adjudged to be below the threshold for treatment, the psychologist found that he continued to harbour such beliefs; for example he believed that whereas rape was a sexual offence, other offences contain more affection and care.
He was deeply suspicious of those trying to help him; he reported them as twisting what he said and he said that he would be very wary of any further such course.
He remained very angry about the social workers who had dealt with his daughter and offered such resentment as a justification for some of his offences.
While he said that the cause of his offending was inability to relate to adults, his history demonstrated that he was adept at gaining the confidence of the parents whose children he abused.
Manipulative behaviour and his sense of grievance were reported to have impeded his progress.
He continued to deny the more serious offences, and for that matter all or some of the arson offences.
The wing staff reported a tendency to manipulative behaviour, surreptitiously encouraging others to complain.
The various risk measurement tests applied to him all concluded that the risk to the public remained high. 78.
This report concluded with the recommendation that there should be a full psychopathy assessment (PCL R) and that, so long as that did not provide contra indications, he was suitable for the extended sexual offences treatment programme (ESOTP).
This latter course is designed for only nine prisoners at a time.
It lasts for about six months and involves 74 sessions plus some individual work, at roughly three per week.
Each such course needs a staff of four, one supervisor who must be a chartered psychologist, plus three facilitators (officers, group workers or forensic psychologists in training and preferably a mixture of disciplines).
Each such team can deliver only one such course per year, no doubt because of the members other commitments.
The ESOTP can be provided at only a limited number of prisons specialising in sexual offenders; the judgment of the Divisional Court records at para 7 that over the relevant period it was available at some ten such prisons. 79.
The recommendation for consideration of an ESOTP was consistent with published Prison Service indicia of the courses which are likely to be suitable for different prisoners.
The prison service runs a variety of programmes for sexual offenders.
They include, as well as the CSOTP, a Rolling Sexual Offenders Treatment Programme (for those presenting mild risk), Becoming New Me, Better Lives Booster, Healthy Sexual Functioning (now replaced by the Healthy Sex Programme), Adapted Better Lives Booster (for those with intellectual difficulties), and the ESOTP.
Reference to the ESOTP may be justified, inter alia, by an assessment of high or very high risk and, more particularly, by severe grievance thinking, severe sexual entitlement thinking and severe lack of intimacy.
Robinson fitted those criteria, although less obviously others, and, since the risk remained after completion of the CSOTP, ESOTP was a justified suggestion.
There was and is a substantial waiting list for the ESOTP, as also for other programmes.
Apart from life or IPP prisoners, there are numbers of determinate sentence sexual offenders, who are likewise recommended for this programme in the hope that they will not present an unacceptable risk to the public when their release is mandatory, under the Criminal Justice Act 2003, at the half way stage in their sentences.
The ESOTP in particular is clearly very resource intensive. 80.
Robinson was moved to HMP Whatton, which specialises in sexual offenders, in February 2010.
The PCL R psychopathy test, involving nine hours of interviews, was conducted in February/March 2011.
Although he was showing limited signs of accepting that the children were victims, the assessment of him was not encouraging.
He was found to see himself as a victim, the manipulative behaviour was noted, and he was recorded as asserting that he had not harmed the children but was only seeking a relationship with them.
Nevertheless, the foregoing apart, he did not display psychopathic traits; he was comparatively controlled and his offences were planned rather than impulsive.
There was no psychopathy based obstacle to participation in the ESOTP.
A final assessment of suitability for the ESOTP followed in April 2012, undertaken by the Deputy Treatment Manager for the programme.
She pointed out that the ESOTP would not address his sexual interest in teenage girls, but could and would target his feelings of inadequacy, his lack of adult relationships and his marked distrust of others.
She observed that he might yet need also a Healthy Sexual Functioning course, which does directly address unsuitable sexual interests.
In the end, an ESOTP became available for him only in July 2013, when he was specially transferred to HMP Risley which could provide it earlier than HMP Whatton.
By this time, his minimum term of seven years had recently expired in December 2012. 81.
The evidence from HMP Whatton, the specialist prison for sexual offenders, makes it clear that the delay was caused by excess of demand over supply.
The prison authorities were operating on a budget set by the Ministry in a time of general national financial stringency, although course provision targeted at sexual offending cost just under 1m per year at that prison alone.
They were obliged to prioritise amongst those who had been assessed as suitable for the ESOTP.
As between them, priority was given to those who were determinate sentence prisoners within six months of release and to those longest past the end of their minimum terms. 82.
The Divisional Court examined the national evidence relating to the availability of the ESOTP.
It concluded that there was overall under provision of this course and accordingly a breach of the Secretary of States public law duty.
There was no appeal against that finding, which must be accepted.
It is not, however, to be taken as meaning that the Secretary of State is under an obligation to provide an ESOTP to every prisoner for whom it may be suggested, and the court said no such thing.
Nor does it mean that the court took the view that, assuming that James v UK fell to be applied rather than R (James), there had been the kind of breach of article 5 which the Strasbourg court identified; on the contrary, the Divisional Court specifically adverted to the opportunities which Robinson had had to demonstrate his safety and rejected the assertion of breach of article 5. 83.
Accepting that there was a national shortfall in the provision of ESOTP courses, the question under article 5 remains: did the Secretary of State afford Robinson a reasonable opportunity to reform himself and to demonstrate to the Parole Board, by the time of tariff expiry or within a reasonable time thereafter, that he no longer presented an unacceptable risk to the public? On the answer to this question, different members of the court take different views, which are therefore set out in separate judgments.
Outcome 84.
In the result, the appeals of Haney and Massey should be allowed, and there should be awards of 500 for Haney and of 600 for Massey, reflecting in each case the inference of justifiable frustration and anxiety.
The appeals of Kaiyam and, and in the light of the opinion of the majority set out in their separate judgment, of Robinson must be dismissed.
The findings in the two cases of Haney and Massey of breach of the duty ancillary to article 5 are a further regrettable consequence of the manner in which the seriously flawed system of Imprisonment for Public Protection came to be introduced without sufficient funding to cope with it.
It was a system subsequently reformed and it has since been altogether removed from the sentencing regime provided by statute for courts charged with the trial of criminal cases.
LORD HUGHES: (with whom Lord Neuberger, Lord Toulson and Lord Hodge agree) 85.
This separate judgment addresses the appropriate disposition of appeal by Robinson, the one matter left outstanding by the main judgment delivered by Lord Mance and Lord Hughes.
The facts have been set out in paras 70 83 of the main judgment.
The critical question identified in para 83 is whether the Secretary of State afforded Robinson a reasonable opportunity to reform himself and to demonstrate to the Parole Board, by the time of tariff expiry or within a reasonable time thereafter, that he no longer presented an unacceptable risk to the public.
This critical question must not be transmuted into the different question, namely did the Secretary of State make reasonable provision for a particular course which might have been relevant to Robinson? Once the right question is identified, the answer given by the Divisional Court is plainly correct.
It should in passing be made clear that the Divisional Court was not basing its conclusion upon doubts about what was meant in James v UK by characterising the detention as arbitrary.
On the contrary, it was assuming for the sake of addressing the question that in the particular sense there used the detention would be arbitrary if a breach of the duty there identified was established, and it was contrasting the kind of wholesale failing found in James with the kind of delays identified in the cases before it. 86.
The breach of the ancillary obligation under article 5, which the Strasbourg court identified in James v UK involved a wholesale failure to address rehabilitation.
It was of a quite different order from the complaint made by Robinson.
Whereas the prisoners James, Lee and Wells in James v UK were left for a long time to languish in local prisons with no sentence planning and no rehabilitative work at all, no little effort was made with Robinson, who was provided with successive courses and had ample opportunity to change himself and to demonstrate that he was no longer a predatory sexual offender.
The ETS and CSOTP courses with which he was provided supplied ample reasonable opportunity to do so.
The latter in particular lasted six months or more and involved three or four sessions per week.
Unfortunately, what was demonstrated was that Robinson remained a serious risk, since the initial scores for child abuse supportive beliefs proved false positives, and he remained manipulative, mistrustful and denying his principal offences, seeing himself as the real victim It was contended on behalf of Robinson that the Parole Board had recommended an ESOTP in March 2010 and again in December 2012.
As a matter of accuracy, on neither occasion did it do so, although on both occasions it recorded the extant proposal for such a course which had been made within the Prison Service.
The Parole Board decision of March 2010 was that Robinson was not suitable for transfer to an open prison.
It included the following: 87.
There are a number of risk assessments in the dossier.
OGRS 3 assesses the risk of reconviction as 14% at 12 months and 25% at 24 months.
OASys assesses the risk of general and violent offending as low with a very high risk of harm to children in the community.
RM2000 assesses Mr Robinson as posing a very high risk of sexual reconviction and the SARN concluded that he has a high level of dynamic risk as a result of having strongly characteristic risk factors in the sexual interests, offence supportive attitudes and relationship domains.
Specific risk factors include having offence related sexual interests, child abuse supportive beliefs, suspicious, angry and vengeful attitudes and not having an intimate relationship.
Mr Robinson's dossier states that he is a standard prisoner on the IEP, although for much of his sentence he has been enhanced.
He has completed ETS and the core SOTP, although the latter was on the basis of admissions to previous convictions.
Mr Robinson maintains his innocence of the index offences, stating that he was set up by the Police.
The post programme report from the SOTP indicates that some progress was made but the report writer notes that Mr Robinson could be manipulative in a group, still held child abuse supportive beliefs and that his suspicious thinking (against staff) had impacted upon his development.
It was recommended that Mr Robinson complete the ESOTP in order to address his interest in pubescent girls and that a full psychopathy assessment be completed.
The panel noted that whilst he is willing to do further offending behaviour work, denial of the index offences may make it difficult to transfer Mr Robinson to an appropriate establishment to undertake ESOTP and that as a result completion of this sentence plan target remains extant. 88.
The Boards written reasons were duly sent to Robinson by the Secretary of State who added that the next reference to the Board would be shortly before tariff expiry, to allow for completion of the ESOTP if assessed as suitable and a full psychopathy assessment [and] to further assess your outstanding risk factors.
That was by no means to make completion of the ESOTP a condition of future consideration of release, still less to lay down a timetable for it, as was done in the case of Massey.
If a case were to arise in which the Parole Board made it, in effect, a condition of consideration for release that a particular piece of behavioural work be undertaken, that would no doubt be relevant to the question of whether the prisoner was thereafter afforded a reasonable opportunity to rehabilitate himself and to demonstrate absence of risk.
Even then, such a Parole Board decision would not mean that the prisoner had not had reasonable opportunity before then, nor would it necessarily justify prioritising that prisoner over others for scarce resource intensive courses.
However, this was not in any event Robinsons case. 90.
There is a great danger, in considering Robinsons case, of classifying the ESOTP as the acid test by which alone he could demonstrate his safety for release.
Even if it were, it would not mean that he had not had reasonable opportunity to demonstrate this already.
But it was not.
The fact that the psychological recommendation that Robinson should take part in this programme did not have spoken conditions attached to it, does not mean that it was the only way in which he could demonstrate his safety.
It was in fact neither a necessary nor a sufficient means of doing so.
It was not sufficient since it is not designed to address the offenders sexual interest in pre pubescent girls; even if made available, it would have been only part of the possible programmes which Robinson might have needed in the absence of his accepting that his behaviour, which he continued to characterise as innocent victimhood, was in fact a considerable danger to children, and in the absence of his recognition that it needed to alter.
It was not necessary, because by this time he had had ample confrontation with his failings, and if he had recognised them and shown real willingness to change, for example in the course of the nine hours of interviews for the PCL R assessment, then there may well have been no occasion for six months of ESOTP work. 91.
The concomitant danger lies in treating Robinsons case as if the ancillary duty under article 5 involves a positive duty on the prison service in England and Wales to furnish an ESOTP course.
That is not the law, and there is nothing in James v UK which entitles any court to go so far.
Indeed, if it were, it would presumably follow that any other European country which imposes any form of indefinite sentence would be under a similar duty to provide either it or its equivalent.
The responsibility for deciding what form of rehabilitative assistance is to be afforded to the prisoner must rest with the individual State, providing that the minimum standard is met of a reasonable opportunity to him to demonstrate his safety.
The availability of limited resources, particularly at a time of the kind of national financial stringency which characterised the years of delay in Robinsons case (2008 2013) is an unavoidable factor.
The Core Sex Offenders Treatment Programme (CSOTP) administered in the prisons of England and Wales is of considerable intensity and makes extensive psychological demands on those offenders who take part in it.
It is very likely that if it stood by itself it would meet the duty contemplated by James v UK and even more likely that it would do so if coupled, as it is, with the EST, BLB, HSP and other programmes, which are available.
There is no legal obligation to provide an ESOTP course in the first place.
It is simply one possible way of tackling recalcitrant attitudes in some prisoners and a welcome arrow in the quiver for the case of those who prove very difficult to change.
To hold that a delay (including an unacceptable delay) in providing it constitutes a breach of article 5, via the ancillary duty recognised, would be likely to have the perverse effect of discouraging the prison service from providing it at all, and/or of discouraging recommendations for courses unless and until they are known to be shortly available, and/or of discouraging the prison service from devising and suggesting new forms of programme, especially if they are extremely expensive, as clearly the ESOTP is.
All these effects would be an impediment to individualised prisoner assessment and management, and to eventual rehabilitation of those for whom it is possible. 92.
Coursework is important and may succeed, but it holds no guarantees.
In order for Robinsons article 5 ancillary duty claim to succeed, that duty would have to go beyond the duty to afford an indeterminate prisoner a reasonable opportunity to reform himself and to demonstrate, by or within a reasonable time after tariff expiry, that he is no longer a danger.
It would have to be a duty to provide, or at least to take reasonable steps to provide, within such time frame, any specific coursework for which the prisoner has been judged eligible.
That is not the content of the duty. 93.
This conclusion is illuminated by the decision of the ECtHR in Hall v UK (Application No 24712/12, referred to at para 42 above).
Like Robinson, Hall had completed the ETS and then the CSOTP courses but remained a risk and was recommended for further work in the form of the ESOTP.
Halls recommendation was in March 2008, and he experienced the same unavailability as did Robinson, at much the same time and doubtless for the same reasons.
The delay in finding a place on the ESOTP in Halls case was certainly not as long as it was in the case of Robinson, but the delay has to be put in the context of his tariff, which at 30 months, was less than a third as long as Robinsons.
Halls was a plainer case, as the threshold decision of inadmissibility by the Strasbourg court demonstrates.
He had undertaken some other courses, which Robinson had not, such as victim awareness and alcohol awareness and when, after the ESOTP, concerns remained, he had been provided with the Better Lives Booster.
But the essential point is that the court was satisfied that he had (beyond argument) been provided with a reasonable opportunity to rehabilitate himself by courses throughout his detention, and this despite the delay in finding space on the ESOTP for some eighteen months after it was recommended, which had had the result that he was not able to complete it until he had served more than a year beyond his tariff of 30 months, that is to say getting on for half as long again (see para 33).
Lord Mance 94.
I have the misfortune to differ from Lord Hughes and the majority on the disposition of Robinsons appeal.
The basic facts are set out in paras 71 83 of the joint judgment written with Lord Hughes.
The test is whether Robinson was supplied with a reasonable opportunity to demonstrate that he was no longer a risk.
It was of the nature of his offending that he received a sentence involving a relatively long tariff period which expired on 10 December 2012.
It was of the nature of his character and propensities that, despite some encouraging signs, he remained in identified respects a high risk after completing the CSOTP in 2008.
The psychologists report dated 9 July 2008 made a recommendation in the body of her report, that a full psychopathy assessment [PCL R] is competed prior to Mr Robinson undertaking any further treatment (para 4.6), but ended the report with unqualified recommendations and a conclusion dealing exclusively with the ESOTP as follows: 95. 7.
Recommendations for continued risk management My recommendations are as follows: To successfully complete the Extended SOTP in order to address outstanding treatment needs in offence supportive attitudes and suspicious thinking and provide further opportunities to develop his intimacy skills.
Upon completion of this, to re assess the extent of Mr Robinsons suspicious thinking and the appropriateness of further treatment for his sexual interest in pubescent girls.
Conclusion: I recommend that Mr Robinson is moved to an establishment where he can access the Extended SOTP and continue working on his risk factors for future sexual offending.
The psychologists combined recommendations that Robinson undertake a PCL R followed by an ESOTP were both therefore unconditional. 96.
The Administrative Court further found (para 6) that The ESOTP became a formal sentence objective by at least February 2009.
The psychologists recommendation was referred to without demur in the Parole Boards reports dated 31 March 2010 and 8 November 2012, the latter confirming expressly that it is acknowledged that all parties accept ESOTP to be necessary. 97.
The Administrative Court further noted that ESOTP courses are courses which many sex offenders serving an IPP need to complete before they can have any realistic prospect of demonstrating to the Parole Board that they are safe for release. (para 59) This is borne out by the Ministry of Justices publication Suitability for Accredited Interventions (June 2010), which tabulates such a course as a requirement for all high or very high risk offenders, as well as for one category of medium risk offender with three or four domains of strong treatment need (p 42).
It adds (p 43): Some offenders, particularly high risk offenders, are likely to attend more than one SOTP so that their combination of dynamic risk factors can be fully addressed. (Eg a high risk offender with both offence supportive attitudes and grievance thinking would likely need to attend both Core and Extended SOTPs). 99. 98.
The Administrative Court had no hesitation about finding the Secretary of State in breach of the public law duty accepted in R (James).
As Lord Hope there said, it was and is implicit in the legislative scheme for IPPs that the Secretary of State would make provision which allowed IPP prisoners a reasonable opportunity to demonstrate to the Parole Board that they should be released, and that, on the facts of those cases, he failed deplorably in that public law duty in that he failed to provide the systems and resources that prisoners serving those sentences needed to demonstrate to the Parole Board by the time of the expiry of their tariff periods, or reasonably soon thereafter, that it was no longer necessary for the protection of the public that they should remain in detention: [2010] 1 AC 553, para 3.
In summary, a legislative scheme like that for IPPs must allow a reasonable opportunity to demonstrate safety, and must be accompanied by reasonable systems and resources to enable offenders to change and develop so as to be able to demonstrate that they are now safe and to achieve release by the tariff expiry date or reasonably soon thereafter.
I stress the word reasonable, since it is clear that a realistic and flexible approach should be taken regarding prison resources and the specialist, time intensive and costly nature of some courses provided in prison: see also paras 100 101 below.
But, as an element of this duty, there should in my opinion be a reasonable degree of access for IPP prisoners to the ESOTPs which many prisoners will need before they can hope to show that they are now safe.
That is the consequence of the scheme itself, under which it was otherwise inevitable (and entirely predictable) that prisoners would (as has happened) languish in gaol long after the tariff periods set by reference to the seriousness of their actual offending.
It is a consequence of the rehabilitative purpose which must in this context be accepted as having always attached in the light of the provisions of the ECHR to an IPP sentence: see paras 205 209 of the European Court of Human Rights judgment in James v UK, as well as paras 7 and 36 above. 100.
The European Court of Human Rights further observed in James v UK, para 194 that: for reasons linked to the efficient management of public funds, a certain friction between available and required treatment and facilities is inevitable and must be regarded as acceptable and a reasonable balance must be struck between the competing interests involved.
But it added that in striking this balance, particular weight should be given to the applicants right to liberty, bearing in mind that a significant delay in access to treatment is likely to result in a prolongation of the detention and noted that in Brand v The Netherlands (Application No 49902/99) (11 May 2004) the court had held (para 66) that even a delay of six months in the admission of the applicant to a custodial clinic could not be regarded as acceptable in the absence of evidence of an exceptional and unforeseen situation on the part of the authorities. 101.
In the present case, the Administrative Court also noted that the public law duty was only to make reasonable provision of services and resources for the relevant purpose and was not an absolute one (para 55).
It went on: 59.
It is clear from the factual circumstances of the claimants' own cases, and from the general evidence we have summarised concerning systems and resources, that a serious problem still exists in relation to the provision of ESOTP courses which many sex offenders serving an IPP need to complete before they can have any realistic prospect of demonstrating to the Parole Board that they are safe for release.
The delays experienced by these two claimants are troubling in themselves.
Despite pressure over a lengthy period, neither claimant managed to get admitted to an ESOTP course until after the expiry of his tariff period (in Mr Massey's case, almost three years after its expiry); and since, after completion of the course, each of them has to wait for a substantial further period until their next Parole Board review, their first reasonable opportunity to demonstrate to the Parole Board that they are safe to be released will come long after the expiry of their tariffs. 60.
It is clear that the claimants' experience is far from exceptional.
The evidence summarised at paras 34ff. above shows that the number of IPP prisoners with a requirement for an ESOTP greatly exceeds the number of placements available on ESOTP courses and that many such prisoners are failing to get onto courses until after the expiry of their tariff periods.
In some cases the delay can no doubt be explained by reasons specific to the individual prisoner, but the under provision of courses appears to us to be the primary reason for delay and to be accurately described as a systemic problem.
Nor is there any immediate prospect of improvement.
On the contrary, we have noted at para 45 above that at HMP Whatton demand for places on ESOTP courses is set to rise as the provision of places has fallen. 61.
We understand the tight financial situation across the entire prison estate and the difficulty of allocating limited resources between a range of competing demands.
But the duty is to make reasonable provision, and that duty plainly requires sufficient resources to be made available for its fulfilment. 62.
In conclusion, we are satisfied that there is a continuing failure on the part of the Secretary of State to make reasonable provision of systems and resources, specifically the reasonable provision of ESOTP courses, for the purpose of allowing IPP prisoners a reasonable opportunity to demonstrate to the Parole Board, by the time of the expiry of their tariff periods or reasonably soon thereafter, that they are safe to be released.
In this respect the Secretary of State is in continuing breach of the R (James) public law duty. 102.
When it came to considering whether there had been a breach of article 5, the Administrative Court was in an odd position.
The European Court of Human Rights had in James v UK disagreed with the reasoning and conclusions of the House of Lords in R (James), but the Administrative Court remained bound by R (James) and, moreover, the European Courts own reasoning, based on arbitrariness and consequent unlawfulness, presented obvious problems, which have been addressed in the main judgment written by Lord Hughes and myself. 103.
In these circumstances, the Administrative Court reasoned as follows: 78.
We have held in relation to issue (1) that the Secretary of State is in continuing breach of the R (James) public law duty.
That breach, however, is less serious than the deplorable default that was of such concern to the House of Lords in R (James).
Yet even the factual circumstances under consideration in R (James) were regarded by the House of Lords as falling far short of a situation rendering continued detention arbitrary and unlawful under article 5(1).
Thus, applying the approach laid down by the House of Lords, it is clear that the circumstances of the present case come nowhere near to rendering the claimants' continued detention arbitrary for the purposes of article 5(1). 79.
Although the ECtHR in R (James) (Strasbourg) differed from the House of Lords in finding arbitrariness on the facts of that case, the default in the present case is again less serious.
The ECtHR laid stress on the complete failure to progress the applicants through the prison system with a view to providing them with access to appropriate rehabilitative courses.
In the case of each of the present claimants, by contrast, a great deal was done to progress them through the system and to provide them with access to appropriate rehabilitative courses.
The one real failure was in providing them with timely access to the ESOTP.
Whilst that was an important failure, given the practical importance of the ESOTP for their ability to satisfy the Parole Board of their safety for release, it was in our judgment insufficient to render their detention arbitrary even on the approach that the ECtHR took in applying the concept of arbitrariness in R (James) (Strasbourg). 104.
The first paragraph, loyally applying R (James), cannot stand in the light of our judgment on the present appeal.
The second paragraph appears, clearly and not surprisingly, to have been influenced by the oddity in the present context of reasoning based on arbitrary detention, which, again in the light of our judgment on this appeal, is no longer an issue. 105.
In reality, a conclusion that there was no breach of the ancillary duty which we have identified in our judgment on this appeal, cannot stand with a finding clearly correct on the facts of this case that the Secretary of State was in breach of the public law duty to make reasonable provision of systems and resources for the purpose of allowing not merely Massey, but also Robinson a reasonable opportunity to demonstrate to the Parole Board, by the time of the expiry of his tariff period on 10 December 2012 or reasonably soon thereafter that he was safe to be released: see para 62 of the Administrative Courts judgment, quoted above. 106.
The majority disagree with this conclusion, and in para 91 (above) advance the following propositions: (a) There is no legal obligation to provide an ESOTP course in the first place; (c) (b) if [there] were, it would presumably follow that any other European country which imposes any form of indefinite sentence would be under a similar duty to provide either it or its equivalent; to hold that a delay in providing it constitutes a breach of article 5, via the ancillary duty recognised, would be likely to have the perverse effect of discouraging the prison service from providing it at all, and/or of discouraging recommendations for courses and/or of discouraging the prison service from devising and suggesting new forms of programme, especially if they are extremely expensive. 107.
As to these propositions: (a) No one suggests that there is an absolute obligation to provide an ESOTP course.
But it may be identified as appropriate in a particular case by psychiatric or other professionals and then be required in conjunction with a system of indefinite detention which would otherwise mean that a particular prisoner would remain in gaol long past the expiry of his or her tariff date, without hope of release, perhaps for ever.
I do not see how a contrary proposition is reconcilable with the ECtHRs approach in James v UK and much other Strasbourg authority, including Hall v UK.
Quite apart from this, since the prison service in fact operates a system which provides and holds out the prospect of undertaking ESOTP courses as part of a process of promoting progress towards release, it seems to me incumbent on the state to resource and operate it efficiently, in a way which enables all prisoners who prison service professionals conclude should have such a course to have a fair opportunity of undertaking one within a reasonable time frame. (b) This proposition assumes information about other European countries, which we do not have.
It is commonly believed that British sentencing is comparatively more rigorous that that in most other European countries, though that must for present purposes also be regarded as an anecdotal statement.
For all that we know, indefinite detention may be a rarity the English experience certainly suggests that other European countries might have been wise to avoid it.
Those like Germany (and I believe Austria and Switzerland) which do have a form of indefinite detention (Sicherungsverwahrung) which has at least in its original form, also occupied the time of the ECtHR may well have equivalent courses to ESOTP.
We cannot assume the contrary. (c) This is another proposition which I regard as speculative.
I question how many of the psychiatrists and other professionals and staff who work in our prison service think in this way.
If they do, there may well also be incentives in the form of prisoners ability to complain to the ECtHR if they are detained indefinitely without access to courses which would very likely be required if they are to progress through the system towards release. 108.
Turning to the facts of this particular case, as the Administrative Court noted in para 31, and adverted to again in para 59, also quoted above, the successful completion of an ESOTP programme would not itself lead to release.
Before any question of release, there would need to be further work, which the Secretary of State in a programme set in April 2012 put as lasting a further 16 months. 109.
In the upshot, Robinson only commenced an ESOTP in July 2013, some eight months after expiry of his tariff, the ESOTP would last for some six months, and then he would have to do further work lasting around 16 months.
His release was not going to occur for around two and a half years after the expiry of his seven year tariff period.
In my opinion, that involved a breach of the ancillary duty.
It was far in excess of any delay arising from the inevitable and acceptable friction between available and required treatment which the European Court of Human Rights acknowledged would also exist in James v UK, para 194.
This is clear both from the Administrative Courts conclusions on breach of the public law duty in this case and from the European Court of Human Rights reference to Brand v The Netherlands in James v UK, para 194. 110.
Each case must turn on its own facts, and the case of Hall v UK, cited by Lord Hughes, involved shorter delays with regard to the provision of an ESOTP, a delay of at most about 18 months from March 2008 when an ESOTP was identified as appropriate to some time, probably, in autumn 2009 when the six to eight month course must have been commenced (judgment, paras 8 and 13).
The applicants detention had been coupled over the course of the time spent in detention with regular access to a wide range of courses designed to assist him in addressing his offending behaviour and demonstrating a reduction of his risk to the satisfaction of the Parole Board (Hall v UK, para 33) and it had also been complicated by a continuing series of minor offences committed in prison (Hall v UK, paras 7, 18 and 19). 111.
In my opinion, therefore, Robinson is entitled to succeed in his complaint about delays in the Secretary of States performance of the ancillary duty which we have recognised and so to recover a modest award of damages, of at least the same amount as, and probably higher than, Haney has received, to compensate for the inevitable frustration and anxiety which he thereby suffered. 89.
The strongest part of Robinsons claim under article 5 is no doubt the passage of time after the psychologists report of July 2008 before the ESOTP was begun in July 2013.
But given that his tariff was not due to expire until December 2012, there could have been very little complaint before at least the Secretary of State recognised the course as an objective in August 2010, and perhaps not until well after that.
Moreover in the meantime, in March 2011, still well before the expiry of his tariff, there had been the further detailed PCL R sessions.
These were of course principally assessment rather than therapy, but they provided ample opportunity over nine hours to demonstrate that there had been a change, or at least encouraging understanding of the true nature of what he had done.
Sadly, what those sessions revealed was that he still saw himself as the victim, denied his principal offences, believed that he had not harmed any of the children and remained manipulative.
There could be no clearer demonstration of the risk he continued to present.
There has certainly been considerably greater delay in putting him onto the even more intensive ESOTP than one would choose to see in an ideal prison management system, but that is not the same as saying that he has not had a fair opportunity to reform himself or to demonstrate that he is no longer a danger.
Despite the delay he was able to begin the ESOTP quite shortly after the expiry of his tariff.
| UK-Abs | The appellants received indeterminate prison sentences comprising (a) a fixed tariff period; and (b) an indeterminate post tariff period.
Post tariff detention was to continue until the appellants satisfied the Parole Board that that they were no longer a danger to the public.
The appellants, relying upon the decision of the European Court of Human Rights (ECtHR) in James v United Kingdom (2012) 56 EHRR 399, claimed that their post tariff detention was unlawful because the Secretary of State had failed to provide them with a reasonable opportunity to progress their rehabilitation and release [1].
In James v United Kingdom, the ECtHR found that a failure properly to progress prisoners towards post tariff release breached their article 5(1) rights to liberty under the European Convention on Human Rights and made their continued detention unlawful [1].
The appellants claimed that the Secretary of State had failed to provide them with a reasonable opportunity to progress their rehabilitation and release: (1) Haney, relying on articles 5 and 14, claimed that he had been transferred to open prison conditions too close to the expiry of his tariff period to enable his immediate release. (2) Kaiyam, Massey and Robinson, relying on article 5, claimed that they had not been able to commence particular rehabilitative treatment programmes within a reasonable time of their tariff period expiring.
The Supreme Court (a) unanimously allows Haney and Masseys article 5 appeal, awarding Haney damages of 500 and awarding Massey damages of 600; (b) unanimously dismisses Haneys article 14 appeal and Kaiyams article 5 appeal; and (c) dismisses the article 5 appeal in the case of Robinson by a majority of 4 1 (Lord Mance dissenting).
Lord Mance and Lord Hughes give the unanimous judgment in the appeals of Haney, Kaiyam and Massey.
Lord Hughes (with whom Lord Neuberger, Lord Toulson and Lord Hodge agree) gives a separate lead judgment in the Robinson appeal.
Lord Mance delivers a dissenting judgment.
Haney, Kaiyam and Massey Lord Mance and Lord Hughes hold that: (1) The Supreme Court is not bound to follow the decision of the ECtHR in James v United Kingdom.
The ECtHRs reasoning that a failure properly to progress prisoners towards post tariff release amounted to a breach of their article 5(1) right to liberty would not be followed.
The express wording of article 5(1) or 5(4) did not create any relevant duty to provide prisoners with a reasonable opportunity to progress their rehabilitation and release [18 23], [30 37]. (2) However, the overall scheme of article 5 did impose an implied ancillary duty on the Secretary of State to facilitate prisoners rehabilitation and release.
Breach of that duty would not affect the lawfulness of the detention, but would entitle prisoners to damages [38 39]. (3) In respect of the appellants in the present case: (a) Haneys delay in being transferred to open prison conditions had deprived him, contrary to article 5, of a reasonable opportunity to demonstrate that he was no longer a danger to the public, an opportunity which the Secretary of State himself had said that he should have [49 50].
However, there had been no breach of article 14 in discriminating between pre and post tariff prisoners [53 54]. (b) Kaiyams delay in being able to commence various rehabilitative treatment programmes did not breach his article 5 rights.
He had been provided with a reasonable opportunity to demonstrate that he was no longer a risk to the public through courses on enhanced thinking, drug awareness and victim awareness but his responses to those programmes had been poor [59 61]. (c) Masseys delay in being able to commence an extended sexual offenders treatment programme until nearly three years after the expiry of his tariff period (and after the Secretary of State had provided for a timetable which was not fulfilled) had deprived him of the reasonable opportunity to demonstrate that he was no longer a danger, in breach of article 5 [68 69].
Robinson Lord Hughes holds that Robinsons delay in being able to commence an extended sexual offenders treatment programme until nearly nine months after the expiry of his tariff period did not breach his article 5 rights.
The question was not whether the appellant had been deprived of access to a particular course, but whether he had been given a reasonable opportunity to demonstrate that he was no longer a danger to the public [85], [89 92].
Lord Mance (dissenting) considers that article 5 required that Robinson be given a reasonable degree of access to the extended sexual offenders treatment programme, which he had not been given in the circumstances of the present case [99], [109 111].
|
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.
| UK-Abs | 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].
|
This reference, made by the Counsel General for Wales, raises for determination whether the Recovery of Medical Costs for Asbestos Diseases (Wales) Bill is within the legislative competence of the National Assembly for Wales (the Welsh Assembly).
The issues involved are novel and important, and the Counsel General was right to recognise them as such and to make the present reference with a view to resolving them.
The reference has been well presented and argued on both sides.
The Bill contains in section 1 its own overview.
It (a) imposes liability on persons by whom or on whose behalf compensation payments are made to or in respect of victims of asbestos related diseases to pay charges in respect of National Health Service services provided to the victims as a result of the diseases; (b) makes provision for the certification of the amount of the charges to be paid, for the payment of the charges, for reviews and appeals and about information; (c) extends insurance cover of liable persons to their liability to pay the charges.
Liability to pay NHS charges arises under section 2 where a compensation payment is made to or in respect of a person (the victim) in consequence of any asbestos related disease suffered by the victim.
It is imposed on the person who is or is alleged to be liable to any extent in respect of such disease and by whom or on whose behalf the compensation payment is made after the Bill comes into force.
It is convenient to describe such a person as the compensator.
The liability is to reimburse the Welsh Ministers in respect of any relevant Welsh NHS services provided to the victim as a result of the disease, in an amount set or amounts out in, or determined in accordance with, regulations under section 6(2) and specified in a certificate to be issued
by the Welsh Ministers subject to any limit fixed by regulations under section
6(5)(a).
The Bill contains extensive provisions requiring sufferers, compensators and others to provide information (section 12), requiring compensators to apply for and the Welsh Ministers to issue certificates specifying the relevant charges arising under section 2 in accordance with regulations and reduced where appropriate to reflect any contributory fault on the part of the sufferer (section 6) as well as regulating other matters, such as the time for payment of charges (section 7), the recovery of charges (section 8), the review of certificates (section 9), appeals against certificates (section 10 and 11) and cases in which compensators make lump sum or periodical payments (section 13).
Section 14 deals with the liability of insurers.
It provides: (1) Where the liability or alleged liability of the person by whom or on whose behalf a compensation payment is made is, or (if established) would be, covered to any extent by a policy of insurance, the policy is to be treated as covering the persons liability under section 2. (2) Liability imposed on the insurer by subsection (1) cannot be excluded or restricted. (5) This section applies in relation to policies of insurance issued before (as well as those issued after) the date on which this section comes into force. (6) References in this section to policies of insurance and their issue include references to contracts of insurance and their making.
Section 15 provides: (1) The Welsh Ministers must, in the exercise of their functions under the National Health Service (Wales) Act 2006, have regard to the desirability of securing that an amount equal to that reimbursed by virtue of section 2 is applied, in accordance with that Act, for the purposes of research into, treatment of, or other services relating to, asbestos related diseases. (2) The Welsh Ministers must report annually to the National Assembly for Wales on the application of amounts equal to sums reimbursed by virtue of section 2.
The Bill in these circumstances has the following characteristics: (i) First, by section 2, it imposes a novel statutory or quasi tortious liability towards the Welsh Ministers on compensators (defined as set out in para 3 above). a.
This liability is a liability for pure economic loss which does b. not exist and has never existed at common law.
It does not reflect any liability which the compensator had to the victim, since the victim has no liability to the Welsh Ministers to meet any economic loss the Welsh Ministers may have suffered. c.
The liability exists whether the compensation is paid to the victim with or without admission of liability; the Counsel General in written submissions states that a key point is that it is a necessary condition of the Bill attaching to insurers that there must be liability established or conceded.
But a payment without admission of liability does not in law or even de facto amount to a concession of liability. d.
The liability is based on future compensation payments made in respect of actual or potential wrongs, the operative elements of which were committed many decades ago, though the victims are or will only suffer the consequences and the Welsh National Health Service will only have to bear the hospitalisation costs in the future. (ii) Second, by section 14, the Bill imposes a new contractual liability on the liability insurers of compensators (typically employers liability insurers such as those involved in the Trigger litigation: Durham v b. c. d. BAI (Run Off) Ltd [2012] UKSC 14, [2012] 1 WLR 867) to cover any liability which such compensators have as a result of section 2. a.
It imposes this new liability on any insurer whose policy would to any extent cover the compensator for any liability which the compensator has or would (if established) have towards the victim.
It imposes it irrespective of any policy exclusion or restriction.
It imposes it in relation to policies issued before as well as after the date section 14 comes into force and so in relation to policies issued and covering events occurring many decades ago.
It does all this although indeed no doubt because such liability insurers would not otherwise be likely to have to answer for any charges levied under section 2.
This is clear on any reading of the typical employers liability policy wordings summarised in annex A to my judgment in the Trigger case.
In essence, such policy wordings cover employers liability in damages for claims by actual or former employees suffering injury or disease.
They are, furthermore, triggered by the original exposure to asbestos during the course of the insurance, not by the imposition of charges under section 2 as a result of compensation payments made, with or without admission of liability, long after the expiry of the policy period. (iii) Third, section 15 provides that the Welsh Ministers must, in the exercise of their functions under the National Health Service (Wales) Act 2006 (the NHS (Wales) Act), have regard to the desirability of securing that an amount equal to that reimbursed by virtue of section 2 is applied, in accordance with that Act, for the purposes of research into, treatment of, or other services relating to, asbestos related diseases.
The Bill thus imposes new liabilities on compensators in respect of past conduct and on liability insurers under past insurance contracts.
The Counsel General stresses that compensators would only incur such liabilities as a result of their making future compensation payments to or in respect of victims of asbestos related diseases who suffer future hospitalisation; and that insurers would only incur such liabilities under such contracts upon such compensation payments being made and then only if such contracts would to some extent cover any liability which the compensator might have towards the asbestos related disease sufferer to make such compensation payments.
The Bill is thus not retrospective in the fullest sense, but it does significantly restructure both the consequences of actual or possible negligence or breach of statutory duty committed long ago by compensators, and the terms of and liabilities attaching under insurance policies also underwritten years ago to cover any such negligence or breach of duty.
Unsurprisingly, in view of the identity of the interveners, the Association of British Insurers, the primary focus of submissions before the Supreme Court has been on section 14 of the Bill.
But, inevitably, attention has also had to be given to the aim and effect of other provisions of the Bill, particularly section 2, which is directed to compensators.
The question referred to the court subdivides into two more specific issues: whether the Bill, and in particular, but not exclusively, section 14, falls within section 108(4) and (5) of the Government of Wales Act 2006 (GOWA), which in turn depends in this case upon whether it relates to Organisation and funding of national health service in paragraph 9 of Part 1 of Schedule 7 to GOWA an issue on which section 15 has a potential bearing; and whether, if it does fall within section 108(4) and/or (5), it is nonetheless outside the Welsh Assemblys competence by virtue of section 108(6), read with section 158(1), on the ground that it is incompatible with the Convention rights scheduled to the Human Rights Act 1998.
It is logical to take these issues in that order, since section 108(6) operates as a restriction on the Assemblys legislative competence in respect of matters which fall within section 108(4) and/or (5).
The Counsel General must however succeed on both issues in order to make good his submission that the Bill is within the Assemblys legislative competence.
The issue whether the Bill falls within section 108(4) and/or (5) was not originally raised by the interveners or therefore addressed in the Counsel Generals written case.
It was nonetheless raised squarely in the interveners written case, and has been covered by oral submissions and written notes on both sides.
Competence under section 108(4) and (5)
Consequent upon the referendum held in 2011 under section 105(1) of GOWA, the competence of the Welsh Assembly is no longer determined by section 94 read with Schedule 5 to the Act.
Section 94 has, along with the rest of Part 3 of the Act, ceased under section 106(1) to have effect.
Instead the Welsh Assembly has (since 5 May 2011: see The Government of Wales Act 2006 (Commencement of Assembly Act Provisions, Transitional and Saving Provisions and Modifications) Order 2011 No 1011 (W.150)) had the expanded legislative competence provided by sections 108 and 109 read with Schedule 7.
Under section 108(3) a provision is only within the Assemblys legislative competence if it falls within subsection (4) or (5).
A provision falls within section 108(4) if it relates to one or more of the subjects listed under any of the headings in Part 1 of Schedule 7 and does not fall within any of the exceptions specified in that Part of that Schedule .
A provision falls within section 108(5) if (a) it provides for the enforcement of a provision (of that or any other Act of the Assembly) which falls within subsection (4) or a provision of an Assembly Measure or it is otherwise appropriate for making such a provision effective, or (b) it is otherwise incidental to, or consequential on, such a provision.
The relevant matter specified in Part 1 of Schedule 7 on which reliance is placed to establish competence to enact the Bill is para 9 headed Health and health services and reading: Promotion of health.
Prevention, treatment and alleviation of disease, illness, injury, disability and mental disorder.
Control of disease.
Family planning.
Provision of health services, including medical, dental, ophthalmic, pharmaceutical and ancillary services and facilities.
Clinical governance and standards of health care.
Organisation and funding of national health service.
Exceptions Abortion.
Human genetics, human fertilisation, human embryology, surrogacy arrangements. Xenotransplantation.
Regulation of health professionals (including persons dispensing hearing aids). Poisons.
Misuse of and dealing in drugs.
Human medicines and medicinal products, including authorisations for use and regulation of prices.
Standards for, and testing of, biological substances (that is, substances the purity or potency of which cannot be adequately tested by chemical means).
Vaccine damage payments.
Welfare foods.
Health and Safety Executive and Employment Medical Advisory Service and provision made by health and safety regulations.
The critical phrase is Organisation and funding of national health service.
The questions arise, firstly, whether this covers the imposition of a statutory liability on compensators who were or are alleged to have been wrongdoers, and, secondly, if it does, whether it also covers the amendment of any insurance contracts which would cover such compensators to any extent for any liability they had to the sufferers of the relevant asbestos related disease, so as to make the relevant insurers answer for any compensation payment made irrespective otherwise of the terms of the insurance contract.
These questions raise for consideration the vires of the core elements of the Bill under section 108(4) and para 9.
But, if the conclusion is that section 2 does, but section 14 does not, fall within section 108(4) and para 9, then the question still arises whether section 14 can be regarded as providing for the enforcement of that provision or as being otherwise appropriate for making such a provision effective or otherwise incidental to, or consequential on, such a provision within section 108(5).
On behalf of the interveners, Mr Michael Fordham QC submits that para 9 gives general competence to regulate the Welsh NHS, the services which it provides and the standards its meets, but that it lacks, noticeably, any provision enabling charging for such services.
The phrase Organisation and funding of national health service concerns, in his submission, the allocation by the Welsh Ministers of monies to fund the Welsh NHS and their control of spending by the Welsh NHS of any other monies available to it under (now) section 175 of the NHS (Wales) Act, enacted by the United Kingdom Parliament on 8th November 2006, just over three months after GOWA.
He submits that there is nothing in para 9 to suggest any wider meaning.
More specifically, on the interveners case, para 9 gives general competence in areas such as those dealt with specifically in Chapter 6 (Finance) of Part 11 of the NHS (Wales) Act.
Chapter 6 provides that the Welsh Ministers are to decide what funds to allot to Special Health Authorities, what directions to give or conditions to attach regarding such funds (section 171) and what duties and resource limits to impose on such Authorities (sections 172 and 173).
It further identifies what funding the Welsh Ministers must in each financial year provide to each Local Health Board (section 174) and the financial duties and resource limits to which such Boards are subject (sections 175 and 176) and makes further provision about the expenditure of such Boards (section 177 and Schedule 8).
Exercising the competence provided in these areas, the Welsh Assembly has by the National Health Service Finance (Wales) Act 2014 recently amended section 175, to provide for each Local Health Board to balance its expenditure and income in each three year accounting period, rather than in respect of each financial year as originally enacted.
But what para 9 is not, Mr Michael Fordham QC submits, is a provision which itself enables the Welsh Assembly to impose (or authorise the Welsh Ministers to impose) charges on anyone either for Welsh NHS services or on any other basis.
It is common ground that the Welsh Ministers do not have (and the Welsh Assembly does not have and cannot confer) general fiscal powers, an exception noted expressly in relation to economic development in paragraph 4 of Part 1 of Schedule 7 GOWA.
The Welsh Government has large spending powers, but its funding of the services it supports is, at present, fundamentally dependent on the United Kingdoms block grant.
The Welsh Assembly has
limited powers or control in respect of business rates and council tax, in
which connection the reference to Local government finance in paragraph 12 of Schedule 7 is relevant.
That paragraph gives competence (subject to exceptions which I need not set out here) in respect of the Constitution, structure and areas of local authorities.
Electoral arrangements for local authorities.
Powers and duties of local authorities and their members and officers.
Local government finance.
The framework within which business rates and council tax are charged is provided by the Local Government Finance Act 1988, as amended in 1992 and 2012.
Such taxes are payable to the relevant local government authorities, not to the Welsh Ministers.
The reference to Local government finance enables the Welsh Assembly, for example, to determine the level of business rates or limit council tax increases chargeable under these statutes (though, under the block grant system, this does not appear to affect the overall level of funding available to the Welsh Government).
But, it cannot on any view be read as a general power enabling the Welsh Assembly to raise funds in any way it may decide, even if such funds are ear marked for use to support local government activities.
In support of a generous interpretation of the concept of Organisation and funding of national health service, the Counsel General drew attention to the previous legislative competence under section 94 and Schedule 5 of GOWA, to enact measures relating to the red meat industry in relation to increasing efficiency or productivity, improving marketing, improving or developing services or ways in which the industry contributes to sustainable development.
This was treated by the Welsh Assembly as enabling the enactment of the Red Meat Industry (Wales) Measure 2010, permitting the imposition of a levy to meet expenditure incurred on such objectives.
He points out that that measure was not challenged.
Equally, this means that there is no authority throwing light on its competence.
The argument in favour of a generous interpretation can be further advanced, as Lord Thomas notes, by the consideration that the Welsh Assembly is undoubtedly entitled to expend monies out of the block grant on matters covered by other paragraphs of Schedule 7, such as para 5 covering education, training and the careers service, which do not make any specific reference to finance or funding.
The specific reference to funding in para 9 may therefore suggest an intention to cover matters other than mere allocation of funds.
I do not on the other hand find any assistance in the exception to para 9 relating to the regulation of prices of human medicines and medicinal products.
Schedule 8 to the NHS (Wales) Act contains provisions relating to the reimbursement of any remuneration referable to the cost of drugs which is paid by any Local Health Board in any year.
The exception in para 9 appears simply to make clear that the Welsh Assembly has no competence to regulate the price of such drugs.
It does not to my mind carry either sides argument on the present issues.
The language of paragraph 9 of Schedule 7 addresses matters all closely linked to the internal organisation and the delivery of national health services promoting health, preventing, treating and alleviating (or controlling) disease, illness, injury, disability or mental disorder, providing services, governance and standards of care and finally organisation and funding of national health service.
A natural inference is, I think, that funding was also seen as closely linked with the internal organisation and delivery of health services.
As background to an understanding of para 9, it is not, I consider, inadmissible to take note of the position regarding charging for health services as it was under the National Health Service Act 1977 in force when GOWA was passed and as it was re enacted, in relation to Wales, by the NHS (Wales) Act 2006, passed three months after GOWA was enacted, and still in force.
A fundamental tenet of the National Health Service from its outset has been that the services it provides should be free of charge, except where any relevant statutory provision expressly provides for the making and recovery of charges: section 1(2) of the National Health Service Act 1946, section 1(2) of the National Health Service Act 1977, and, now, in relation to Wales, section 1(3) of the NHS (Wales) Act 2006, described as an Act to consolidate certain enactments relating to the health service, among which were necessarily the National Health Service Act 1977 so far as it concerned Wales.
Section 1(3) provides that the services provided must be free of charge except in so far as the making and recovery of charges is expressly provided for by or under any enactment, whenever passed.
The Counsel General addressed submissions to the question whether in context this refers only to enactments by the Westminster Parliament, or whether it extends to the Welsh Assembly.
I have no difficulty in accepting that it extends to the latter, but it does not itself confer competence.
Competence to provide for such charges must be found elsewhere.
Within the NHS (Wales) Act itself there are provisions which do expressly confer on the Welsh Ministers power to make regulations providing for the making and recovery of charges prescribed in respect of the supply under that Act of drugs, medicines or appliances except for a patient who is resident in hospital or in respect of pharmaceutical services: see sections 121 and 122.
These, as the Counsel General points out, are the successors to the powers to make or remit prescription charges formerly existing under sections 77, 83, 83A (as inserted by section 14(1) of the Social Security Act 1988) and 126(4) of the National Health Service Act 1977, which powers were then devolved to the Welsh Assembly by Schedule 1 to the National Assembly for Wales (Transfer of Functions) Order 1999 (SI 1999/672), under the Government of Wales Act 1998.
Section 126(1) of the 1977 Act was also amended by section 6 of the National Health Service Reform and Health Care Professions Act 2002 to provide expressly that regulations made under the 1977 Act might be made by an instrument made by the Welsh Assembly.
It was pursuant to the powers so devolved and conferred that the Welsh Assembly enacted its flagship reform, The National Health Service (Free Prescription and Charges for Drugs and Appliances) (Wales) Regulations 2007 (SI 2007/121 W11), which abolished prescription charges with effect from 1st April 2007.
By the same token, if it were so decided, prescription charges could now be restored by regulations made by the Welsh Ministers under sections 121 and 122.
But section 122 would in terms prevent their imposition in respect of a patient resident in hospital.
Another provision of the same Act enables the Welsh Ministers to recover in respect of accommodation in single rooms or small wards which is not needed by any patient on medical grounds: section 137.
On the Counsel Generals case, the coming into force on 5 May 2011 of paragraph 9 of Schedule 7 of GOWA gives the Welsh Assembly competence to override or vary the scheme which existed under the 1977 Act when GOWA was passed and was consolidated in relation to Wales three months later by the NHS (Wales) Act by imposing charges on any basis which can be said to contribute to funding the Welsh NHS (with the sole qualification that the exception from para 9 would preclude it regulating the prices of Human medicines and medicinal products).
The schemes of the National Health Service Acts and of GOWA are legally separate, and nothing in principle prevents the conclusion which he advocates.
Against such a conclusion, it may however be said that it gives rise to duplication of competences, with the Welsh Assembly having legislative competence in areas where the Welsh Ministers have delegated powers under the NHS (Wales) Act, and that it gives para 9 an extended scope of uncertain width, when its more obvious aim is the allocation to health boards and other health authorities or professionals of resources available to the Welsh Ministers and the Welsh National Health Service, rather than the raising of revenue.
I do not consider that the essentially budgetary, accounting, auditing and macro financial provisions of Part 5 (sections 117 145) of GOWA are by themselves a necessary answer to this point.
In these circumstances, although I see the force of the Counsel Generals submission that organisation and funding in para 9 goes beyond allocation of resources, I prefer to approach the present appeal on an assumption, rather
than deciding, that para 9 is, at least to some extent, capable of covering the
raising of monies, for example by levying charges for services.
But this cannot, in my opinion, mean that para 9 confers on the Welsh Assembly a general power to raise monies, even if they are to a greater or lesser extent hypothecated to the Welsh Health Service (as to which, see further para 28 below).
The key question is whether, on the assumption I am making, GOWA provides legislative competence for the imposition of liabilities on compensators and insurers, and to this I therefore turn.
Section 108(7) provides that For the purposes of this section the question whether a provision of an Act of the Assembly relates to one or more of the subjects listed in Part 1 of Schedule 7 (or falls within any of the exceptions specified in that Part of that Schedule) is to be determined by reference to the purpose of the provision, having regard (among other things) to its effect in all the circumstances.
The expression relates to, used in section 108(4), has been examined in the context of the Scotland Act, where it is by section 29(3) given a definition identical to that in section 108(7) of GOWA.
But it is used in the Scotland Act 1998 to define not the competence conferred to the devolved Parliament, but the competence reserved to the Westminster Parliament.
Despite this difference, there is no reason to give the words a different meaning in the two pieces of legislation.
The expression involves words of neutral meaning, used to define the parameters of competence.
In a Scottish context, it was considered by the Supreme Court in Martin v Most [2010] UKSC 10, 2010 SC (UKSC) 40, paras 15 and 49 and in Imperial Tobacco Ltd v Lord Advocate [2012] UKSC 61, 2013 SLT 2, para 16.
In Martin v Most Lord Walker said that the expression 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 (para 49).
In Imperial Tobacco, Lord Hope, in a judgment with which all other members of the court agreed, endorsed Lord Walkers approach that the expression indicates something more than a loose or consequential connection (para 16).
In a Welsh context, the test adopted in both these authorities was referred to with approval in the recent decision in In re Agricultural Sector (Wales) Bill [2014] UKSC 43; [2014] 1 WLR 2622, para 50, where the Supreme Court added that 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. 27.
The provision of health services and the organisation and funding of the Welsh Health Service clearly cannot permit the Welsh Assembly to raise monies generally, by relying on the fact that any monies raised from any source increase the funds available for all its spending, including spending on the Health Service.
The question is whether the position is different if the monies raised can be said to be specifically intended or hypothecated to provide funds for use in the Health Service.
But, if that were sufficient, it would be difficult to see any real limit to the persons on whom or basis on which such charges might be imposed, provided only that the charges were levied on that express basis.
The reality is also that, unless the charges are for research, treatment or other services which would not otherwise be undertaken or provided by the National Health Service, even a hypothecated charge is in substance no different from a general charge boosting the Welsh Governments resources.
In these circumstances, any raising of charges permissible under para 9 would have, in my opinion, to be more directly connected with the service provided and its funding.
The mere purpose and effect of raising money which can or will be used to cover part of the costs of the Welsh NHS could not constitute a sufficiently close connection.
In the case of prescription or other charges to users of the Welsh NHS service, a direct connection with the service and its funding exists, in that users are directly involved with and benefitting by the service.
In the case of charges under section 2, the argument would have to be that a sufficient connection can be found in the actual or alleged wrongdoing that led to a compensator making a compensation payment to or in respect of a sufferer from an asbestos related disease.
But that is at best an indirect, loose or consequential connection.
The expression organisation and funding of national health service could not, in my opinion, have been conceived with a view to covering what would amount in reality to rewriting the law of tort and breach of statutory duty by imposing on third persons (the compensators), having no other direct connection in law with the NHS, liability towards the Welsh Ministers to meet costs of NHS services provided to sufferers from asbestos related diseases towards whom such third persons decide to make a compensation payment for liability which may or may not exist or have been established or admitted.
I add that, even if (contrary to my view) hypothecation were the test of part of the test of competence, section 15(1) of the Bill does not achieve it in terms.
Under section 15, the Welsh Ministers must have regard to the desirability of expending amounts equalling the charges levied under section 2 on research into, treatment of, or other services relating to, asbestos related diseases.
If what is desirable is achieved, then, whether or not the expenditure on such research, treatment or other services would anyway have occurred, the effect would be to cover part of the Welsh Ministers budget 28. for NHS services.
But what is desirable is not necessarily achievable or achieved.
Lord Thomas suggests (para 90) that the effect of para 9 would anyway be to confine the use of any monies raised to the Health Service, even if they were not used in relation to asbestos related diseases.
But for the reasons already given, para 9 cannot in my opinion permit the Welsh Ministers to raise money in any way they choose even if the only purpose for which the monies raised can be used is on the Welsh NHS. 29.
Even if a different view were to be taken about the existence of a sufficient connection in the case of section 2, I have no doubt that section 14 would fall outside the Welsh Assemblys legislative competence.
It is argued that, assuming that section 2 falls within section 108(4) GOWA, then section 14 falls within section 108(5).
That was also the basis on which the Presiding Officer made her statement of compatibility regarding section 14.
But in my opinion it is not sustainable.
The provisions of sections 5 13, summarised in para 3 above, could all be capable of being regarded as providing for the enforcement of, or otherwise appropriate for making effective, or incidental or consequential on, the provision contained in section 2, whereby compensators must pay the Welsh Ministers charges for NHS services provided to sufferers.
But section 14 is directed to an entirely different relationship, that between compensators and their liability insurers.
The only basis on which it could be argued to provide for enforcement of section 2, or be otherwise appropriate for making it effective, or be incidental or consequential on it, is financial.
Without section 14, compensators required to pay under section 2 may lack the funds to do so.
But section 108(5) is not, in my opinion, directed to or wide enough to cover what amounts to a separate scheme for the provision of financial recourse against third party insurers by the compensators who are primarily affected by the scheme introduced under section 108(4), as opposed to provisions enhancing the legal enforceability or, maybe, even the practical effectiveness of the scheme as against compensators.
In law and practice, section 2 is part of a coherent, enforceable and effective scheme, irrespective of the financial means of compensators.
And section 14 is just as incapable of being regarded as incidental or consequential to section 2.
The limited role of the words incidental to, or consequential on is clear from Martin v Most 2010 SC (UKSC) 40.
In that case, Lord Rodger at para 128 spoke of the kinds of modifications which are obviously necessary to give effect to a piece of devolved legislation, but which raise no separate issue of principle, contrasting these with other provisions which were independent and deal with distinct aspects of the situation.
This guidance was adopted as being of assistance in the context of GOWA in Attorney General v National Assembly for Wales Commission [2012] UKSC 53, [2013] 1 AC 792, at paras 50 53 by Lord Neuberger, with the agreement of three other members of the court, while Lord Hope, with whom the same three members also agreed, distinguished at para 83 between, on the one hand, provisions which are merely subsidiary to other provisions and have consequences which can be seen to be minor or unimportant in the context of the Act as a whole and, on the other, provisions with an end and purpose of their own. 30.
Section 14 clearly raises important issues of principle separate from sections 2 13.
Unlike compensators, insurers are neither actual nor alleged wrongdoers.
The rationale which exists for imposing liability for NHS charges on compensators does not apply to insurers.
The rationales of imposing liability on insurers towards compensators are no doubt (i) that this favours the Welsh Ministers prospects of making a financial recovery under section 2, and (ii) perhaps also that it lessens the blow for, and is likely to avoid objections by, compensators, or at least those who remain solvent and had arranged liability insurance.
But legislation imposing on insurers new contractual liabilities under old insurance policies years after they were made engages obvious and important general principles.
None of the provisions of section 108(5) could in my opinion justify section 14, and the Bill would be outside the legislative competence of the Welsh Assembly on this ground also. 31.
Lord Thomas suggests (paras 96 98) that any doubt about competence can be resolved by reference to the consideration that, if the present legislation had imposed charges in respect of National Health Service services on National Health Service patients generally or on victims of asbestos related diseases specifically, then neither the compensators nor their insurers could have had any complaint.
The compensator would then have had to meet them, as any other loss, and they would have been recoverable from any liability insurer of the compensator subject to the terms of cover.
This is a submission on which the Counsel General also relies in relation to the case under A1P1 (to which I turn later in this judgment), in which context Mr Michael Fordham QC for the interveners accepts that, if this is what had occurred, the compensators and insurers would have no case under A1P1.
Their possessions would not have been disturbed, because what happened would have been within the scope of the legal obligations which they had incurred under the existing law of tort and the insurance contracts into which they had entered. 32.
However, in the context of competence, reference to what might or might not have been done by other routes is in my view both irrelevant and detrimental for the coherent development and application of provisions of the kind contained in the devolution legislation.
Either the Welsh Assembly has competence to do what it proposes, or it does not.
It cannot confer competence on itself by hypothesising (however accurately) that it might legitimately have chosen a different route.
The fact would remain that it had not chosen the right route.
Questions of competence depend on whether what 33. is done is permitted, not on whether something which has not been done would have been permitted.
I know of no authority for a contrary proposition, which would seem to me not only novel but confusing, deleterious and likely to give rise to extensive difficulties and arguments in application.
The scenario in the present case also appears an unreal one.
The suggested alternative route has not been used, and it seems highly improbable that it would be attempted.
The National Health Service is a prized asset throughout the United Kingdom, founded on the basic principle of free care according to needs.
Imposing NHS hospitalisation charges on sufferers of asbestos related diseases would seem even less thinkable than charging patients generally.
It was also suggested that charges might be imposed on sufferers only insofar as such sufferers were able to recover from others in respect of them.
This is not in fact what the Bill proposes it makes compensators liable in the first instance, although it aims to assist those with relevant insurance to recover under it and to do so also overrides or varies the insurance terms as far as necessary.
The suggested scenario does not therefore match the Bill; it would be artificial and would highlight the reality that what were in reality being imposed were liabilities on compensators and insurers, not on victims.
But in any event it is irrelevant, for the basic reason that competence must be judged by reference to what the Bill proposes, not by reference to some different scheme the competence to enact which would have to be assessed in the light of its own terms. 34.
For all these reasons, I conclude that the Bill falls outside the legislative competence of the Welsh Assembly, in that it does not relate to any of the subjects listed in paragraph 9 of Part 1 of Schedule 7 to the Government of Wales Act 2006, and I would answer the Counsel Generals reference accordingly.
Does the Bill infringe A1P1? 35.
In the light of the conclusion I have reached in paras 27, 30 and 34, this issue does not strictly arise for decision.
But it has been fully argued, and involves a disagreement about the applicable principles which has general importance.
I will therefore express my views on it.
For this purpose, it is necessary to assume, contrary to my conclusion in para 34, that the Bill falls within section 108(4) and/or (5) of GOWA.
The question is whether, on that basis, it is compatible with the Convention rights scheduled to the Human Rights Act 1998 as required by section 108(6)(c).
The relevant right allegedly infringed is article 1 of Protocol No 1 (A1P1).
This reads: 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. 36.
The relevant NHS costs and compensation payments will be incurred only in the future, once the Bill is in force.
But the liability or alleged liability which under section 2 triggers the Welsh Ministers right to recover in respect of them arises from exposure to asbestos which occurred decades ago.
The effect of the Bill is therefore to impose on compensators, in the first instance, and their insurers, in the second instance, burdens which have not previously existed.
The interveners submit that the Bill would thus deprive both employers and their insurers of their previous legal freedom from exposure to the relevant charges and of their possessions in the form of the assets they would have to use to discharge the new liabilities imposed by the Bill. 37.
The Counsel General for Wales submits, in response, that it is not free from doubt whether A1P1 is engaged in these circumstances.
Focusing only on the insurance position, his written case argues that a contract of insurance operates at the individual level, not at the level of the balance sheet of the insurer.
The essence of insurance is however the pooling of risks and premia.
The bottom line of an insurers balance sheet depends upon the rating and writing of individual contracts, which in their totality make up its underwriting book.
All individual contracts are a piece of the whole, a part of the main.
Any additional liability imposed on a category of policy will feed through into the balance sheet.
The complex inter relationship between payments out and past, current and future premium receipts, and (since 1969) compulsory employers insurance for broadly defined liabilities, to which the Counsel General also refers, cannot obscure this simple truth. 38.
The Counsel General points out, correctly, that insurers could have had no complaint if the sufferer had decided to use and had the means or insurance to cover hospitalisation in a private hospital.
The sufferer could then have held the compensator liable and the compensator could in turn have looked to any insurer he had.
That is true, but the liability would have arisen by a conventional route, and the likelihood or unlikelihood of its arising is something which compensators and their liability insurers could assess and factor into their accounts and plans.
In reality, the likelihood of liability arising by this route must always have been small. 40. 39.
The Counsel General also points out, correctly, that neither the compensators nor their insurers could have had any complaint if the present legislation had imposed the charges on the sufferer.
The compensator would then have had to meet them, as any other loss, and they would have been recoverable from any liability insurer of the compensator subject to the terms of cover.
In such circumstances, Mr Michael Fordham QC for the interveners accepts that the compensators and insurers would have no case under A1P1.
Their possessions would not have been disturbed, because what happened would have been within the scope of the legal obligations which they had incurred under the existing law of tort and the insurance contracts into which they had entered.
However, for reasons already noted in paras 32 and 33 above, this scenario is also an unreal one.
It has not, and would never have, occurred.
The further suggestion that charges might be imposed on sufferers only insofar as such sufferers were able to recover from others in respect of them seems equally remote.
If any of these remote scenarios was to be treated as conceivable, it would fall within the exposure accepted by those causing victims to suffer asbestos related diseases and the risks accepted by their liability insurers.
But it does not mean that either employers or employers liability insurers are taken to accept other, yet further risks, deriving from the positive intervention of the legislature, cutting across the ordinary law of tort and the agreed policy terms.
The present case must again be judged by what the legislature has actually chosen to do no doubt because it concluded that this was necessary rather than by reference to remote contingencies, the non adoption of which by the legislature tends to confirm their unreality.
In my opinion, and in agreement on this point with Lord Thomas (paras 103 104), A1P1 is engaged as regards both compensators and their liability insurers.
Both are affected and potentially deprived of their possessions, in that the Bill alters their otherwise existing legal liabilities and imposes on them potentially increased financial burdens arising from events long past and policies made long ago.
A persons financial resources are capable of being possessions within the meaning of A1P1, as Lord Hope of Craighead put it in AXA General Insurance Ltd v HM Advocate [2011] UKSC 46, [2012] 1 AC 868, para 25; the question is whether the alleged victim is a member of a class of people who risk being directly affected by the legislation, rather than subject to some purely hypothetical risk: paras 25 26, with reference to Burden v United Kingdom (2008) 47 EHRR 857, para 34.
Lord Hopes judgment on these points carried the support of all members 41. 42. of the House: paras 73, 85 90, 109 114 and 177, with Lord Reed noting at para 111 that the Convention was intended to guarantee rights that were practical and effective and that the Convention concept of a victim was correspondingly broad.
In AXA, the Scottish Parliament had by the Damages (Asbestos related Conditions) (Scotland) Act 2009 Act reversed the House of Lords decision in in Rothwell v Chemical & Insulating Co Ltd [2007] UKHL 39, [2008] AC 281 that pleural plaques did not constitute damage for the purposes of a claim for breach of tortious or statutory duty.
The effect was to make employers liable for loss not previously recoverable occurring as a result of long past breaches of duty.
Employers insurers challenged the statute because of the additional burden which could thus fall on them.
It was objected that they were not victims for the purposes of the Convention rights.
The objection failed: paras 23 28 per Lord Hope, para 73 per Lord Brown of Eaton under Heywood, paras 85 90 per Lord Mance, paras 109 114 per Lord Reed and para 177 per all three other members of the Court agreeing with Lord Hope and Lord Reed.
Lord Brown regarded the answer to the objection as clear almost beyond argument (para 73).
Lord Reed and I pointed out that the logical consequence of the argument (had it been accepted) would have been that the true or only persons with victim status were employers: paras 110 and 190. 43.
The position under the present Bill is a fortiori to that which existed in AXA.
The Bill is clearly directed at both compensators and insurers, but it is also expressly directed at insurers as well as compensators.
Moreover it imposes liabilities on both not only in conjunction with existing liabilities, but in addition to them.
It does so in the case of compensators by making it irrelevant whether the compensation reflects any actual or admitted liability.
It does so in the case of insurers by making them liable in circumstances where the insurance cover which they granted would not apply.
For all these reasons, both compensators and insurers are in my opinion entitled to be regarded as victims for the purposes of A1P1.
General principles under A1P1 44.
The European Court of Human Rights has examined the application of A1P1 in a number of cases.
These are all cases at an international level, in which the margin of appreciation had therefore an important potential role.
We are concerned with the domestic application of the Convention.
The margin of appreciation does not apply.
Instead, the issue is with what intensity we should review the Bill and what deference is due or weight attaches to the legislatures view as to the appropriateness of the Bill: see per Lord Reed in AXA [2012] 1 AC 868, 131, R (Huitson) v Revenue and Customs Comrs [2011] EWCA Civ 893, [2012] QB 489, 85. 46. 45.
The general principles according to which a court will review legislation for compliance with the Convention rights scheduled to the Human Rights Act 1998 have been comprehensively reviewed in recent case law, particularly Bank Mellat v Her Majestys Treasury (No 2) [2013] UKSC 39, [2014] AC 700, paras 68 76 per Lord Reed, with whose observations in these paragraphs Lord Sumption, Lady Hale, Lord Kerr and Lord Clarke agreed at para 20 and Lord Neuberger agreed at para 166, and R (Nicklinson) v Ministry of Justice (CNK Alliance Ltd intervening) [2014] UKSC 38, [2014] 3 WLR 200.
There are four stages, which I can summarise as involving consideration of (i) whether there is a legitimate aim which could justify a restriction of the relevant protected right, (ii) whether the measure adopted is rationally connected to that aim, (iii) whether the aim could have been achieved by a less intrusive measure and (iv) whether, on a fair balance, the benefits of achieving the aim by the measure outweigh the disbenefits resulting from the restriction of the relevant protected right.
The European Court of Human Rights has however indicated that these stages apply in relation to A1P1 with modifications which have themselves been varied over the years.
Initially, in Handyside v United Kingdom (1976) 1 EHRR 737, para 62, followed in Marckx v Belgium (1979) 2 EHRR 330, para 63, the court said that the State was the sole judge of necessity for the purposes of deciding whether a deprivation of property was in the public interest.
That no longer represents the position on any view.
But the Counsel General for Wales and Mr Michael Fordham QC disagree as to the current position.
The Counsel General submits that the court will at each of the four stages of the analysis respect the legislatures judgment as to what is in the public interest unless that judgment be manifestly without reasonable foundation: James v United Kingdom (1986) 8 EHRR 123, para 46.
Mr Michael Fordham QC on the other hand submits that this passage was or, at least in subsequent authority, has been restricted in application to the first or at all events the first to third stages.
In my opinion, Mr Michael Fordham QC is basically correct on this issue, at least as regards the fourth stage which presently matters, although that does not mean that significant weight may not or should not be given to the particular legislative choice even at the fourth stage.
In James itself, the court went on in paras 47 49 to address the question whether the aim of the legislation was a legitimate one in principle concluding that the United Kingdom Parliaments belief in the existence of a social injustice was not such as could be characterised as manifestly unreasonable.
But, turning in para 50 to the means chosen to achieve the aim, it then said: 47.
This, however, does not settle the issue.
Not only must a measure depriving a person of his property pursue, on the facts as well as in principle, a legitimate aim in the public interest, but there must also be a reasonable relationship of proportionality between the means employed and the aim sought to be realised (see, amongst others, and mutatis mutandis, the above mentioned Ashingdane judgment (1985) 7 EHRR 528, 57).
This latter requirement was expressed in other terms in the Sporrong and Lnnroth judgment by the notion of the fair balance that must be struck between the demands of the general interest of the community and the requirements of the protection of the individuals fundamental rights ((1982) 5 EHRR 35, para 69).
The requisite balance will not be found if the person concerned has had to bear an individual and excessive burden (para 73).
Although the court was speaking in that judgment in the context of the general rule of peaceful enjoyment of property enunciated in the first sentence of the first paragraph, it pointed out that the search for this balance is . reflected in the structure of article 1 (P1 1) as a whole (para 69). 48.
Later authority confirms the principle governing the validity of the means chosen to achieve the aim is one of fair balance.
The court has developed the distinction introduced in James.
The court will accept the legislatures judgment as to what is in the public interest unless that judgment is manifestly without reasonable foundation.
But an interference with peaceful enjoyment of possession must nevertheless strike a fair balance between the demands of the public or general interest of the community and the requirements of the protection of the individuals fundamental rights : see eg AGOSI v United Kingdom (1986) 9 EHRR 1, at paras 48 and 52, Gasus Dosier und Frdertechnik v Netherlands (1995) 20 EHRR 403, at para 62, Pressos Cia Naviera SA v Belgium (1995) 21 EHRR 301, at para 35 (covering in the public interest, with a footnote reference to James) and paras 36 44 (covering proportionality of the interference), Bck v Finland (2004) 40 EHRR 48, at paras 53 and 55, Grainger v United Kingdom (Application No 34940/10) (unreported) 10 July 2012, at paras 35 and 36 and, most recently, Paulet v United Kingdom The Times, 19 May 2014; [2014] ECHR 477, at para 63 (citing AGOSI). 49.
Pressos and Bck are of particular interest in the present reference as cases of retrospective interference.
In Pressos legislation removed retrospectively the tortious right to compensation which shipowners had, on the basis of longstanding Belgian Supreme Court authority, enjoyed.
The Belgian government invoked the enormous financial implications of such liability (para 40), but the court said: 43.
The financial considerations cited by the Government and their concern to bring Belgian law into line with the law of neighbouring countries could warrant prospective legislation in this area to derogate from the general law of tort.
Such considerations could not justify legislating with retrospective effect with the aim and consequence of depriving the applicants of their claims for compensation.
Such a fundamental interference with the applicants rights is inconsistent with preserving a fair balance between the interests at stake. 50.
In Bck retrospective legislation had granted relief to impecunious debtors allowing them to write down their debts very substantially on the basis of a greatly reduced payment schedule.
The retrospective nature of this legislation meant that a special justification [was] required for such interference with existing contracts.
It was however remedial social legislation and in particular in the field of debt adjustment, 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 (para 68).
The striking amount of the reduction was justified by the consideration that the debt was already worth much less than its nominal value and any claim to recover it had already been rendered highly precarious before the debt adjustment for reasons not attributable to the State (paras 69 70). 51.
Domestic law is to like effect.
Lord Hope in AXA General Insurance Ltd v HM Advocate [2011] UKSC 46, [2012] 1 AC 868 addressed separately the issues of Legitimate aim (paras 29 33) and Proportionality (paras 34 41).
Only in relation to the former did he identify the relevant test as being whether the legislatures choice as to what was in the public interest was manifestly unreasonable, citing in this connection James, 8 EHRR 123, at para 46.
In relation to proportionality, he applied the fair balance test, citing Sporrong and Lnnroth and Pressos.
Lord Reeds judgment contains the same distinction in paras 124 125 and 126 128.
Save for Lord Brown, all the other four members of the court including myself were content to agree with Lord Hopes and Lord Reeds judgments on this aspect.
However, Lord Brown at paras 80 and 83 took a different, rolled up approach to the issues of legitimate aim and proportionality.
His approach would, if adopted, 52. 53. support the Counsel Generals approach that any challenge on either score must, to succeed, show that the measure was manifestly without reasonable justification.
If Lord Browns judgment is read in this way, he was in a minority on the point and his view on it does not in my opinion represent the law.
I conclude that there is Strasbourg authority testing the aim and the public interest by asking whether it was manifestly unreasonable, but the approach in Strasbourg to at least the fourth stage involves asking simply whether, weighing all relevant factors, the measure adopted achieves a fair or proportionate balance between the public interest being promoted and the other interests involved.
The court will in this context weigh the benefits of the measure in terms of the aim being promoted against the disbenefits to other interests.
Significant respect may be due to the legislatures decision, as one aspect of the margin of appreciation, but the hurdle to intervention will not be expressed at the high level of manifest unreasonableness.
In this connection, it is important that, at the fourth stage of the Convention analysis, all relevant interests fall to be weighed and balanced.
That means not merely public, but also all relevant private interests.
The court may be especially well placed itself to evaluate the latter interests, which may not always have been fully or appropriately taken into account by the primary decision maker.
It is also clear that The European Court of Human Rights scrutinises with particular circumspection legislation which confiscates property without compensation or operates retrospectively.
In the case of confiscation, it will normally be disproportionate not to afford reasonable compensation, and a total lack of compensation will only be justifiable in exceptional circumstances.
In the case of retrospective legislation, special justification will be required before the court will accept that a fair balance has been struck: paras 48 49 above.
The Counsel General in his written case (paras 89 and 126) himself states that It is of course accepted, as the case law makes clear, that there is a need for special justification where a statutory provision has retrospective effect, while maintaining that this is present in the circumstances of this case. 54.
At the domestic level, the margin of appreciation is not applicable, and the domestic court is not under the same disadvantages of physical and cultural distance as an international court.
The fact that a measure is within a national legislatures margin of appreciation is not conclusive of proportionality when a national court is examining a measure at the national level: In re G (Adoption: Unmarried Couple) [2008] UKHL 38, [2009] AC 173; R (Nicklinson) v Ministry of Justice [2014] 3 WLR 200, at paras 71, 163 and 230, per Lord Neuberger, Lord Mance and Lord Sumption.
However, domestic courts cannot act as primary decision makers, and principles of institutional competence and respect indicate that they must attach appropriate weight to informed legislative choices at each stage in the Convention analysis: see AXA, para 131, per Lord Reed, R (Huitson) v Revenue and Customs Comrs [2011] EWCA Civ 893, [2012] QB 489, at para 85.
But again, and in particular at the fourth stage, when all relevant interests fall to be evaluated, the domestic court may have an especially significant role. 55.
To put a legislative measure in context, domestic courts may (under a rule quite distinct from that in Pepper v Hart [1993] AC 593) examine background material, including a white paper, explanatory departmental notes, ministerial statements and statements by members of parliament in debate: Wilson v First County Trust Ltd (No 2) [2003] UKHL 40, [2004] 1 AC 816.
But care must at the same time be taken not to question the sufficiency of debate in the United Kingdom Parliament, in a way which would contravene article 9 of the Bill of Rights.
In Wilson, at para 67, Lord Nicholls of Birkenhead put this point as follows (para 67): Lack of cogent justification in the course of parliamentary debate is not a matter which counts against the legislation on issue of proportionality.
The court is called upon to evaluate the proportionality of the legislation, not the adequacy of the ministers exploration of the policy options or of his explanations to Parliament.
The latter would contravene article 9 of the Bill of Rights.
The court would then be presuming to evaluate the sufficiency of the legislative process leading up to the enactment of the statute. 56.
There is in this connection a potential tension.
If, at the fourth stage when the court is considering whether a measure strikes a fair balance, weight attaches to the legislative choice, then the extent to which the legislature has as the primary decision maker been in or put in a position to evaluate the various interests may affect the weight attaching to its assessment: see Belfast City Council v Miss Behavin Ltd [2007] UKHL 19, [2007] 1 WLR 1420, at paras precedent actually applies, and, if it does not, the same assistance cannot be obtained from the legislative choice as might otherwise be the case.
Application of A1P1 to the present reference 57.
I have already concluded that the Bill engages A1P1, and addressed the Counsel Generals argument that there are other means by which compensators and insurers might have become or been made liable to bear hospitalisation costs, without altering the laws of tort and contract in the way undertaken by the Bill.
More generally, the Counsel General also submits that insurers (as well no doubt as compensators) run a considerable risk of unforeseen exposure, and that this is particularly so in relation to asbestos related diseases, as recent decades have shown.
Accepting that as correct, it is, however, no justification for the retrospective imposition of further exposure, which they could legitimately expect could not and would not fall upon them.
They could legitimately expect this not only when issuing their original policies, but also when considering their reserves for incurred but as yet unreported claims, as any long tail insurer must do regularly for accounting and solvency purposes and must no doubt also do when considering what, if any, reinsurance or further reinsurance it should from time to time purchase.
I note in parenthesis, because no such points were developed before us and I do not therefore rely on them, that it is unclear what insurance policies could or would be caught by the Bill.
The Bill is limited to Welsh NHS services, but it purports to apply to all insurance contracts issued to compensators.
The proper law of such contracts might be English or Scottish or even foreign, and any indemnity might be due for performance outside, rather than in, Wales.
It is not clear to me how Welsh legislation could affect a Scottish or foreign policy, and it might be arguable whether it could affect an English policy due for performance in (say) London.
Another point on which the Bill is silent is reinsurance.
Having imposed on insurers uncovenanted liabilities, the Bill leaves insurers to make whatever recovery they can under any reinsurances which may be in wide enough terms, without alteration, to cover such new liabilities. 59.
The Counsel General relies on the Supreme Courts reasoning as well as the decision in the AXA case.
The Counsel General and Mr Michael Fordham QC differ in their analysis of this reasoning.
The Counsel General relies upon Lord Hopes identification in paras 37 38 of a special feature of that case as being 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 (para 38).
Lord Hope went on to point out that phrases such as bodily injury or disease might expand as medical knowledge and circumstances changed, that new diseases might become familiar, as occurred with asbestos related diseases, and that the number, nature and value of claims were always liable to develop in ways that were unpredictable.
Lord Hope was addressing the expansion of insurance liabilities by conventional routes, including the relaxed approach to causation taken in cases such as Fairchild v Glenhaven Funeral Services Ltd [2002] UKHL 23, [2003] 1 AC 32 and the Trigger litigation, and using that as a stepping stone for consideration of the issue before the Supreme Court in AXA which was whether a legislative reversal of the prior House of Lords decision in Rothwell v Chemical & Insulating Co Ltd [2007] UKHL 39, [2008] AC 281 could be similarly categorised. 60.
Lord Hopes words commanded the agreement of a majority of other members of the court, but I do not accept the Counsel Generals submission that this means that there was disagreement between him and the judgments of either Lord Brown or myself in this area.
Lord Hope was careful to make clear in para 40 that the case was not one where the law was settled the Scottish Parliament was restoring a position which might well have represented the law.
He also stressed at para 37 that the liability imposed by the Act depended on establishing negligence and preserved all other defences, other than the single question whether pleural plaques are as such actionable.
Consistently with this, Lord Brown at para 83 made clear that the case turned on the absence of any legitimate expectation as to the irrecoverability of damages for pleural plaques, rather than on the fact that the appellants as insurers are in a business inevitably associated with risks and unpredictable events.
I expanded this point at para 91, when I said: 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 ) were not otherwise such, in the hope or expectation that the relevant policies will respond to that development. 61.
As the outcome of AXA itself shows, the mere fact that legislation changes the pre existing law retrospectively does not make it incompatible with A1P1.
Lord Brown was in AXA (para 78) exercised in this connection by a possible distinction between the power of the courts to 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 and the position of the legislature.
But the answer to this concern appears to me to lie at least generally in Lord Browns own words adapt and develop and well recognised limits.
The common law moves, so far as possible, incrementally and, when some greater shift takes place, it can be expected to be based on some general social consensus that it is appropriate.
Common law courts have themselves accepted the possibility of prospective overruling, with express reference to its potential utility in a Convention context: In re Spectrum [2005] UKHL 41, [2005] 2 AC 680 and A v HM Treasury (JUSTICE intervening) [2010] UKSC 5, [2010] 2 AC 534, 693 694, at para 17 per Lord Hope.
As this implies, common law jurisprudence must itself take account of the principle that special justification is required for retrospective changes upsetting legitimate expectations. 62.
That failure to do this may contravene Convention rights has recently been underlined by the European Court of Human Rightss decision in del Ro Prado v Spain (Application No 42750/09) (unreported) given on 21 October 2013.
In that case, the periods to be served under various prison sentences had, in accordance with previous case law stemming from a decision of the Spanish Supreme Court dating in 1994, been ordered in 2000 to be combined and capped at 30 years.
However, in 2006 the Spanish Supreme Court in its Parot judgment (STS 197/2006) departed from this previous case law, holding that the sentences should be viewed individually, with the result that the applicants release date was refixed by the Audiencia Nacional in 2008 to expire at a date some nine years later than it would have done.
The Strasbourg Court adopted a test of foreseeability (para 130), holding that at the time when the applicant was convicted, detained and notified of the decision to combine the sentences and set a maximum term of imprisonment, she could not have foreseen to a reasonable degree that the method used to apply remissions of sentence for work done in detention would change as a result of a departure from case law by the Supreme Court in 2006 and that the new approach would be applied to her.
Her detention after the expiry of the combined period of 30 years was accordingly unlawful under article 5(1) of the Convention, and Spain was ordered both to compensate her and to ensure her release.
Whether the issue of retrospectivity arises in a statutory or common law context, there are therefore potential constraints which reflect the legitimate expectations of those affected. 63.
The Counsel General submits that AXA was a stronger case for treating the legislation as incompatible than the present, yet the Supreme Court did not do so.
I do not accept the Counsel Generals analysis.
The Scottish statute in issue in AXA affected all outstanding and future claims, and the present Bill on its face also affects all future compensation payments made in respect of outstanding and future claims.
But the two differ in other important respects: a.
The Scottish statute was passed to rectify a perceived injustice directly affecting those suffering from asbestos related diseases, and was in this very real sense social remedial legislation.
Despite the Counsel Generals contrary submission, the same cannot in my opinion be said of the Bill.
It has no effect on sufferers from asbestos related diseases.
Its purpose is to transfer the financial burden of costs of their hospitalisation from the Welsh Ministers to compensators and their insurers. b.
The Scottish statute was passed to restore the legal position as it had been understood at first instance for some decades, and it might well have been accepted as being at the highest instance.
The present Bill aims to change a well understood position which has existed since the NHS was created, by introducing a new right of recourse which has never previously existed, though it is one which Parliament could at or at any time since the creation of the NHS have decided to introduce without any legal problem in relation to future events giving rise to liability claims against compensators (and so to liability insurance claims by compensators against their liability insurers). c.
The Scottish statute built on established legal principles, requiring liability to exist before compensators could be compelled to meet claims for pleural plaques and for insurance cover to exist before such compensators could recover from their liability insurers.
This was one of the two points stressed by Lord Hope in AXA, as I have mentioned in the preceding paragraph.
The Bill bypasses such principles, making the liability of compensators dependent simply on the payment of compensation, even if made without admission of liability and making the liability of insurers arise independently of the terms of the insurance policies issued, by reference to the fact of payment of such compensation, provided such policies would to some extent cover any liability which such compensators would, if it were established, have had. 64.
The first of these points requires further treatment.
The Counsel General submits that, although the Bill has no effect on sufferers from asbestos related diseases, it is a measure passed as a matter of economic and social policy, in relation to which the Welsh Assembly should be recognised as having a wide area of appreciation and discretionary judgment: see Huitson [2012] QB 489, at para 85 per Mummery LJ.
He also cites in support the Houses decision in Wilson [2004] 1 AC 816.
Both these were cases where the relevant legislation had retrospective aspects.
But in both there were directly applicable and compelling social interests militating in favour of retrospectivity.
Wilson concerned consumer protection legislation regarding the enforceability of loan agreements which failed correctly to state the amount of credit.
Huitson concerned legislation protecting a grave challenge to the public exchequer, posed by wholly artificial tax arrangements taking advantage of double taxation treaties to avoid the payment of United Kingdom tax by United Kingdom residents.
The arrangements were anyway doubtfully legal and such residents had no legitimate expectation that they could avoid such tax. 65.
Although the Bill would either save the Welsh Ministers money or add to their resources, it is not shown that it would achieve a directly applicable or compelling social or economic interest comparable with those involved in these previous cases.
Section 15 of the Bill contains the specific enjoinder that the Ministers should have regard to the desirability of equivalent sums being made available for research into, treatment of or other services relating to asbestos related diseases, but it is not shown that any such sums so expended would add to existing sums already being spent in these areas, or resolve any exceptional social or economic problem.
It is common knowledge that the funding of the National Health Service is under increasing strain throughout the United Kingdom, and it may be so even more in Wales than elsewhere, but that is a different level of general problem to any shown on the authorities to be relevant in the present context. 66.
The Counsel General maintains that special justification exists for the retrospectivity involved in the Bill because, without it, the Bill cannot achieve its legitimate policy aim.
That is a circular submission, which, if accepted, would eliminate the important balancing stage of the proportionality exercise identified by Lord Reed in Bank Mellat (para 43 above) by Lord Hope in AXA (para 49 above) and by the Strasbourg Court in its case law (paras 44 48 above).
As a matter of legislative policy it could be thought appropriate by the relevant legislature that the Welsh NHS should be able to recover hospitalisation costs from those whose breach of tortious or statutory duty caused them to be incurred.
But that is, as I have noted, a provision which could have been made by the United Kingdom when or at any time since the NHS was introduced.
It is a provision which would no doubt have been proportionate if introduced in relation to future exposure to asbestos and future insurance contracts.
But rewriting historically incurred obligations to impose it in relation to future Welsh NHS costs is a quite different step.
It is a step for which, on the authorities and as the Counsel General accepts, special justification is necessary, and none is shown.
I therefore conclude that, even assuming the Bill to satisfy section 108(4) and/or (5), it falls outside the legislative competence of the Welsh Assembly. 67.
Lord Thomas attaches great weight to the judgment of the Welsh Assembly that this is a measure which should in the interests of Wales be enacted.
I agree that weight should be given to the Welsh Assemblys judgment.
But it is the courts function, under GOWA, to evaluate the relevant considerations and to form its own judgment, on the issue both of legislative competence and of consistency with the Convention rights.
I would arrive at the conclusions I have, even if the background to the Bill had consisted of a full presentation and appreciation of its implications by those responsible for promoting and passing the legislation.
My conclusion is merely reinforced by the consideration that this does not appear to have been the case.
Rather, the Bill was seen as a mere extension in degree of a United Kingdom measure which had already been accepted in principle by the United Kingdom Parliament despite its retrospectivity.
The measure in question is the Health and Social Care (Community Health and Standards) Act 2003.
This applies to enable the recovery from compensators of costs of hospitalisation incurred by the National Health Service in consequence of any injury, whether physical or psychological: section 150(1) and (2).
Injury is specifically defined as not including any disease: section 150(5).
The exclusion of disease was in the light of strong representations about the retrospective implications of covering disease, and a lead time of (in the event) three years was allowed before the Act came into force in relation to injury, following representations that a lead time of two or more years was required to allow insurers to re rate policies to cover the relative short tail exposure arising from injury.
In short, the 2003 Act shows the United Kingdom Parliament concerned not to legislate in a manner which was to any significant extent retrospective. 68.
The 2003 Act was explained by the Health and Social Care Committee which reported on the Bill for the Welsh Assembly in March 2013 as not differing in principle on the question of retrospectivity, though it was said that due to the lengthy latency period for asbestos related diseases, compared with the immediacy of accidental injuries, there may well be a difference in scale between the functions of the two pieces of legislation; that is the degree of retrospectivity will be greater in the Bill than the 2003 Act (para 98).
Nevertheless, the Committee went on to add that it was content that the Bill will not apply to compensation payments that have already made [sic] and that it is inevitable that insurance claims arise for matters and amounts that could not be fully foreseen when the original policies were taken out.
We believe that is the nature of the insurance business. (para 99). 69.
The Committees assessment of the Bill as no different in principle, but only different in degree, from the 2003 Act does not reflect the very real and substantial difference in both aim and effect of the two measures.
The Committees final comment in para 99 would, if carried to a logical conclusion, justify any retrospective re writing of any insurance contract, and, for the reasons which I gave in AXA, is not a justification for imposing on compensators and insurers unforeseen and unforeseeable new obligations which they had no opportunity to assess, rate or make reserves to cover.
Conclusion 70.
It follows from the above that I regard the Bill as outside the legislative competence of the Welsh Assembly under both section 108(4) and section 108(5) GOWA, and, had I reached a contrary conclusion on that, as outside its legislative competence under section 108(6)(c).
I would answer the Counsel Generals reference to that effect.
LORD THOMAS: (with whom Lady Hale agrees) Introduction 71.
I agree with the result set out in the judgment of Lord Mance on the referred question, namely whether the National Assembly for Wales (the Welsh Assembly) had legislative competence to impose the liabilities set out in the Bill on insurers under section 14 of the Bill.
However, as my reasons for reaching that conclusion are much narrower and as I have reached a different conclusion on other issues, I will set out my own views. 72.
The original challenge to the legislative competence of the Welsh Assembly was the contention by the Association of British Insurers that section 14 of the Bill was incompatible with the Convention rights of insurers under article 1 of Protocol 1 (A1P1) and therefore infringed section 108(6)(c) of the Government of Wales Act 2006 (GOWA 2006).
The Association of British Insurers subsequently raised in their written case the further issue as to whether the legislative competence conferred on the Welsh Assembly under section 108(4) and (5) to pass primary legislation included competence to impose the liabilities set out in the Bill on insurers and others. 73.
It became apparent as the argument developed that, although the question referred by the Counsel General was limited to the legislative competence of the Welsh Assembly to enact section 14 of the Bill which related only to insurers, the issues also necessarily encompassed the position of those within section 2 whose alleged negligence or breach of statutory duty in the past had caused asbestos related diseases.
As those within section 2 will in the overwhelming number of cases be the employers of those who are suffering from asbestos related diseases, it is convenient to refer to those within section 2 as employers.
It is important to note that it is by no means clear that any employer or any other person encompassed within section 2 objected to the provisions of the Bill which imposed liability on them.
Certainly no argument was advanced before the court by anyone instructed on behalf of any such person.
The argument was solely advanced by the Association of British Insurers to protect their own interests.
The legislative background 74.
It has been clear since at least the late 1970s that the majority of persons suffering from asbestos related diseases are employees of industrial enterprises who contracted the disease whilst in such employment.
If the negligence or breach of statutory duty of their employer caused the injury giving rise to the disease, the employer will be liable for damages as a tortfeasor.
Those damages will include medical expenses incurred by the employee if, for example, the employee has incurred them by seeking private treatment or required a level of care not provided under the National Health Service.
The employer, if insured under the usual form of employers liability policy, will be entitled to recover an indemnity for such damages under the policy, subject to the terms of the policy and any permitted limits or deductibles. 75.
However, as the National Health Service in the United Kingdom (NHS) has, since its establishment under the National Health Service Act 1946, provided care on the basis of the service being free of charge at the point of delivery, the cost of medical treatment and of long term care has for the overwhelming majority of those suffering from asbestos related diseases been met from the financial allocation made by the State to the NHS.
That cost has therefore been a charge to the general revenue of the State rather than being met by the tortfeasor, namely the employer whose negligence brought about the disease, and by the insurers of that employer.
It is in reality a state benefit provided by the State to such employers and their insurers which relieves them of some of the consequences of the employers wrongdoing as a tortfeasor. 76. 77. 78.
In 2006, separate legislative provision was made by the United Kingdom Parliament for the National Health Service in Wales by the National Health Service (Wales) Act 2006 (the NHS (Wales) Act), a consolidating Act which replaced the National Health Service Act 1977 and set out a framework for the National Health Service in Wales (the Welsh NHS).
The Act was enacted by the United Kingdom Parliament at a time when the Welsh Assembly did not have legislative competence to pass primary legislation.
In 2013, about two years after the provisions of Part 4 of the GOWA 2006 came into effect, conferring on the Welsh Assembly competence to enact primary legislation in defined areas, the Bill referred was enacted as primary legislation by the Welsh Assembly.
On my analysis of the provisions of the Bill, it should be seen as having two distinct aims. (i) The first and central aim of the Bill is to withdraw the requirement that the Welsh NHS continue the delivery of the benefit to employers and their insurers of not having to meet the cost of medical treatment and care of an employee where the employers are responsible for causing asbestos diseases as tortfeasors.
It is intended that the costs of medical treatment and long term care of such employees incurred by the Welsh NHS after the coming into force of the Bill are to be met by employers responsible at any time in the past for causing asbestos related diseases and by the employers insurers, rather than being met out of the monies generally provided by the Welsh Government to the Welsh NHS out of the block grant allocated by Her Majestys Treasury to the Welsh Assembly. (ii) The second, but necessarily subsidiary, aim is to establish machinery for collection of the costs which is as simple and as efficient as possible and causes those with asbestos related diseases the least stress.
It is intended that the machinery would enable employers to recover under their employers liability policy the sums payable by way of charges to the Welsh NHS which would have been payable if the liability for such charges had been imposed on the employees and recovered in the conventional way as damages from the employers.
It is against that short summary of the background that I turn to consider the issues of legislative competence under section 108 (4) and (5) and in respect of A1P1.
It is important to underline two points at the outset. (i) The basis of the view I have formed is that the Bill has the two distinct objectives which I have set out and which it is necessary to analyse separately. (ii) Secondly, it is necessary in such an analysis first to consider the liability of the employer.
That is because the effect of the Bill on the liability of insurers under their employers liability policies depends on an examination of the two distinct objectives of the Bill as they affect any employer who has the benefit of employers liability insurance.
My approach was not the central focus of the argument, particularly because the only challenge was from the insurance industry and not from any of the employers.
However because the procedure to refer a question to this court operates as a direct reference resulting in a final decision without the benefit of a prior decision of another court and because the effect of the judgment of Lord Mance, as the view of the majority of the court, is far reaching and final, it is necessary to set out my own analysis.
The position of employers under section 2 of the Bill (1) Legislative competence under section 108(4) and (5) (a) The legislative competence to fund the Health Service under section 108(4) and (5) and Schedule 7 79.
The legislative competence of the Welsh Assembly to enact primary legislation extends to legislating afresh by a new Act of the Welsh Assembly or by amending by means of a new Act of the Welsh Assembly a statute previously enacted by the United Kingdom Parliament.
Its competence to do so, apart from compliance with the Convention on Human Rights, is set out in section 108(4) and (5) of the GOWA 2006 and the 20 headings enumerating specific competence set out in Part 1 of Schedule 7.
These provisions which operate on a conferred powers model were recently considered and explained in In re Agricultural Sector (Wales) Bill [2014] UKSC 43, [2014] 1 WLR 2622. 80.
The relevant heading in Part 1 of Schedule 7 is Heading 9: Health and health services: Promotion of health.
Prevention, treatment and alleviation of disease, illness, injury, disability and mental disorder.
Control of disease.
Family planning.
Provision of health services, including medical, dental, ophthalmic, pharmaceutical and ancillary services and facilities.
Clinical governance and standards of health care.
Organisation and funding of national health service. 81.
Although none of the exceptions listed under this heading is relevant, it is clear from the whole of Part 1 of Schedule 7 and the exceptions under other headings that no general competence in relation to taxation is conferred on the Welsh Assembly. 83. 82.
The main issue in relation to the specific competence under section 108(4) and (5) to impose charges on employers for the services in providing medical treatment and long term care of employees is therefore whether the Bill relates to the Organisation and funding of national health service.
There are two relevant meanings which the term funding might ordinarily bear (1) raising funds or (2) allocating funds.
Interpreting the GOWA 2006 by giving the words their ordinary meaning in their context, I consider that this term has the first of those meanings raising funds for the Welsh NHS by, for example, charging for the services it provides.
I do not consider that it has the second of those relevant meanings the provision and allocation to the Welsh NHS of the monies made available to the Welsh Consolidated Fund under sections 118 120 of the GOWA 2006.
The extensive powers to allocate expenditure from that Fund are governed by sections 124 to 129.
It would therefore be unnecessary to include in Schedule 7 a specific power referable to the Welsh NHS.
This is not done elsewhere in Part 1 of Schedule 7; for example, another important part of the expenditure of the Welsh Assembly is expenditure on education, but there is no reference under Heading 5 education and training to funding.
This strongly supports the interpretation of the phrase funding of National Health Service in the context in which it appears in the GOWA 2006 as having the first of these meanings. 84.
The submission to the contrary advanced on behalf of the Association of British Insurers (clearly summarised in paras 15 and 16 of the judgment of Lord Mance) was that organisation and funding of national health service should be construed by reference to the subordinate legislative powers conferred under the NHS (Wales) Act and effectively limited to those powers.
It is necessary to examine the background in some detail. 85.
Prior to the first phase of devolution in 1999 (as explained at para 19 of the judgment in In re Agricultural Sector (Wales) Bill [2014] 1 WLR 2622, section 1(2) of the National Health Service Act 1977 provided that: The services so provided must be free of charge except in so far as the making and recovery of charges is expressly provided for by or under any enactment whenever passed. 86.
Sections 77 to 83A of that Act (as amended prior to 1999) enabled charges to be made for specified services; the powers to set prescription and other charges were set out in section 77.
These were exercisable by the Secretary of State by subordinate legislation.
Under the National Assembly for Wales (Transfer of Functions) Order 1999, the powers of the Secretary of State under the National Health Service Act 1977 were simply transferred to the Welsh Assembly, as under the first phase of devolution the Welsh Assembly only had the power to make subordinate legislation.
In 2006, the UK Parliament consolidated the legislation in relation to the NHS.
It enacted for the National Health Service in England the National Health Service Act 2006 and for Wales the NHS (Wales) Act 2006.
The powers under section 77 of the National Health Service Act 1977 (as amended) were re enacted in section 121 of the NHS (Wales) Act as powers to make subordinate legislation.
Section 1(2) was re enacted as section 1(3). 87.
The NHS (Wales) Act was enacted by the United Kingdom Parliament in 2006 three months after the enactment of the GOWA 2006; the provisions of Part 4 and Schedule 7 of the GOWA 2006 conferring on the Welsh Assembly competence to pass primary legislation required a referendum before such competence would take effect.
The legislative competence of the Welsh Assembly under the GOWA 2006 was at first limited under Part 3 and Schedule 5 to what was described as the second phase of Welsh devolution in paras 24 26 of the judgment in In re Agricultural Sector (Wales) Bill.
Primary legislative provision relating to the Welsh NHS could only therefore be made by the United Kingdom Parliament, unless specific powers were granted to the Welsh Assembly to pass an Assembly Measure under Part 3. 88.
Whilst the competence of the Welsh Assembly was limited under the second phase of Welsh devolution, it was entirely appropriate to consider Part 3 and Schedule 5 of the GOWA 2006 and the NHS (Wales) Act together.
It followed that during the currency of the second phase of Welsh devolution amendments to prescription charges were made under subordinate legislation under section 121 of the NHS (Wales) Act.
It was through these powers that the National Health Service (Free Prescription and Charges for Drugs and Appliances) (Wales) Regulations 2007 were by the Welsh Assembly made as subordinate legislation constrained by the terms of the NHS (Wales) Act 2006. 89.
However, since Part 4 and Schedule 7 has come into effect after the referendum and has brought about the third phase of Welsh devolution, the Welsh Assembly may within the competence conferred by Part 4 and Schedule 7 amend legislation passed by the United Kingdom Parliament prior to March 2011 or supplement it by new primary legislation. 90.
The construction advanced on behalf of the Association of British Insurers sought to limit the primary legislative competence of the Welsh Assembly in the third phase of devolution under Part 4 and Schedule 7 by reference to the powers originally conferred by legislation of the United Kingdom Parliament on the Secretary of State to make subordinate legislation and continued under the first and second phases of Welsh devolution.
Viewed against the background I have set out, I cannot accept the submission. 91.
First the GOWA 2006 and in particular Part 4 and Schedule 7 should, in my view, be construed by reference to the other terms of the GOWA 2006 and not by reference to other statutes of the United Kingdom Parliament such as the NHS (Wales) Act.
The position is, in my view, no different to that set out in para 42 of the judgment in In re Agricultural Sector (Wales) Bill with respect to interpreting the legislative competence of the Welsh Assembly.
That has to be determined by an interpretation of the terms of Part 4 and Schedule 7 and not by reference to the way in which functions may have been distributed between the United Kingdom Parliament and United Kingdom Ministers on the one hand and the Welsh Assembly on the other hand in the first and second phases of Welsh devolution. 92.
Second, although the provision in section 121 of the NHS (Wales) Act was necessary to enable the Welsh Assembly to exercise subordinate legislative powers before it received primary legislative competence, once it received primary legislative competence, I see no reason to hold that the powers under the GOWA 2006 should remain so limited.
Although the provisions of the National Health Service Act 1977 and the NHS (Wales) Act set out detailed provisions setting out what could be done by secondary legislation and what required primary legislation, there is nothing to suggest that Parliament intended these to be of relevance once the Welsh Assembly acquired primary legislative powers. 93.
Third, there is a clear distinction between exercising general tax raising powers and charging for services provided by the NHS.
A specific cost can be attributed to the services.
The funds so raised can then be used to defer the costs of those services rather than utilising the grant provided to the Welsh Consolidated Fund.
Thus it is entirely consistent with the grant to the Welsh Assembly of primary legislative powers in respect of health under Heading 9, that the Welsh Assembly was given competence to vary the NHS (Wales) Act and to charge for services provided without being constrained by the terms of that Act.
If on the interpretation of Heading 9 in its context in the GOWA 2006, funding means raising funds, then it was open to the Welsh Assembly either to amend the provisions of the NHS (Wales) Act which restrict the services for which a charge can be made or to enact primary legislation which imposes charges for services as an enactment within the scope of section 1(3) of the NHS (Wales) Act: 94.
The services so provided must be free of charge except in so far as the making and recovery of charges is expressly provided for by or under any enactment, whenever passed.
The terms of the NHS (Wales) Act are not, in my view, therefore relevant to limiting the meaning of Heading 9.
I consider for these reasons that funding has the meaning I have set out in para 83 which I have derived from an interpretation of the terms of the GOWA 2006 without reference to the NHS (Wales) Act.
In principle, therefore, the Welsh Assembly has competence to enact legislation that makes provision for charging for services by way of the treatment and long term care of those with asbestos related diseases provided that the moneys so raised are used exclusively for the Welsh NHS. (b) Charging employees who can recover from their employers 96.
As I have set out, the first and central aim of the Bill is to transfer the cost of medical treatment and care of an employee from the State to the employer in circumstances where the cost would be recoverable as a recognised head of damages from the employer as a tortfeasor.
I do not see what objection there could be in law, given my views of legislative competence, to a scheme where the Welsh NHS would have imposed charges directly on such an employee and the employee would have recovered such charges from the employer. 95. 97. 98. 99.
Such a scheme would have been analogous to the scheme for Road Traffic accidents set out in the Republic of Irelands Health Amendment Act 1986.
In my view, the Welsh Assembly could also have made provision in such a scheme which ensured that the employee with an asbestos related disease, though liable for the charges, did not have to pay until reimbursed or indemnified by the employer or the employers insurers.
Moreover, the employers liability insurers would have had to indemnify the employer under a standard form liability policy when the employer was called on to pay the charges by way of damages.
It is argued on behalf of the Association of British Insurers that such a scheme would be politically objectionable, but I cannot accept that submission.
The Welsh Assembly would, in my view, be seen simply as taking steps to change the position of employers so that for the future they would actually meet the costs of treatment and care of a very serious disease which they had caused through their negligence or breach of statutory duty at some time in the past, rather than that cost continuing to be carried by the State.
It is difficult to see what political objections there could be to such a scheme in withdrawing the State benefit to employers and their insurers and providing more funds to the Welsh NHS.
The benefits of such a scheme for the Welsh NHS would be no different to the machinery proposed by the Bill, though it would be more expensive to administer and undoubtedly risk causing stress to the persons suffering from asbestos related diseases.
I therefore consider that the Welsh Assembly could, either by amendment to the NHS (Wales) Act or by separate legislation, have permitted the Welsh NHS to charge employees for treatment if they suffered from an asbestos related disease as a result of the negligence or breach of statutory duty of the employer.
Such a scheme would have achieved the first and central aim of the Bill.
No part of the liability of the employers or their insurers would have been re written; they might simply become liable on ordinary principles if their liability to the employee for the asbestos related disease was established. (c) The machinery provided for in the Bill Instead of achieving the first and central aim of the Bill by such a scheme, the Bill seeks to achieve its aims by choosing machinery which can be seen as a better way of collecting such charges directly from employers by imposing liability for such charges on the employers: (i) Sections 2 and 3 impose liability to pay the charges for treatment by the Welsh NHS directly on any employer who is or is alleged to be liable to any extent in respect of the asbestos related disease. (ii) The charges can only be recovered if incurred after the coming into force of the Bill. (iii) The liability only arises if a payment of compensation in respect of the asbestos related disease is made to the employee after the coming into force of the Bill. (iv) Section 5 provides the means by which Welsh Ministers certify the amount of the charges. (v) Section 15 provides that Welsh Ministers must have regard to the desirability of securing that an amount equal to the funds it received through these payments is spent on research or treatment of asbestos related diseases. 100.
As the Welsh Assembly has, in my view, competence to impose such charges directly upon the employees, I can see no objection to the competence of the Welsh Assembly under the provisions of section 108(4) and (5) and Heading 9 of Part 1 of Schedule 7 in imposing such charges directly on the employers to achieve the aims of the Bill.
Lord Mance suggests (para 33) that it is not relevant to consider in the context of legislative competence what might have been done.
Although I agree that what might have been done may not generally be relevant, that is not the analysis I have set out.
I have simply sought by this means to demonstrate that in reality, the imposition of direct liability on employers is no more than machinery for the collection of charges for services which, on my interpretation of Heading 9 of Schedule 7 the Welsh Assembly has legislative competence to impose. 101.
If charges are to be imposed for NHS services in the Welsh NHS, then, in my view, the monies collected have to be used to fund the Welsh NHS, as that is the sole purpose for which there is legislative competence to raise funds by way of the imposition of charges.
Section 15 requires Ministers, in the exercise of their functions under the NHS (Wales) Act to have regard to the desirability that an amount equal to the monies raised are applied for the purposes of research into, treatment of, or other services relating to, asbestos related diseases.
Is that sufficient? In my view it is.
In the context of the duties under the NHS (Wales) Act, the provision does no more than to require Ministers to have regard to the desirability of applying the monies so collected specifically in relation to asbestos diseases within the work of the Welsh NHS.
It does not permit them to use it for any purpose other than for the Welsh NHS. 102.
I thus consider that there is legislative competence under section 108(4) and (5) to impose charges under section 2 directly on employers. (d) Is there retrospectivity in respect of the liability imposed on employers? 103.
Although the charges which can be recovered are only those that are incurred after the coming into force of the Bill and the liability to pay Ministers arises only where a compensation payment is made after the coming into force of the Bill, there is an element of retrospectivity in the imposition of the machinery of direct liability on employers.
The liability imposed, though only in respect of future charges, is retrospective, as it is a new liability owed directly to Welsh Ministers which arises only by reason of negligence or breach of statutory duty which had occurred prior to the coming into force of the Bill.
It is not simply an obligation to make future payments to an employee in respect of a recognised head of damages for an established liability, as would be the case if the machinery adopted had been to impose charges directly on the employees and recovery been obtained from employers.
In the case of the employers, prior to the Bill, they would have had no such direct liability to Welsh Ministers.
Thus the second aim and effect of the Bill has an element of retrospectivity. 104.
I therefore agree with Lord Mance that imposing such direct liabilities retrospectively can be viewed as amounting to the deprivation of the possessions of the employers (and others within section 2) so as to engage A1P1. (2) The effect of A1P1 (a) The applicable principles under A1P1 105.
I gratefully adopt the summary of the general principles applicable to A1P1 set out at paras 44 to 53 of Lord Mances judgment.
The paragraphs trace the development in the increase in the jurisdiction of the judicial branch of the State and of the Strasbourg Court under A1P1 to review the judgement of a legislative branch of the State in relation to the legislation it has enacted.
I agree that in the light of the judgments in AXA General Insurance Ltd v Lord Advocate [2011] UKSC 46, [2012] 1 AC 868 there are two separate questions which arise.
These are: (i) Can it be said that the judgement of the Welsh Assembly was manifestly unreasonable in its decision to legislate first to make employers bear the future cost of medical treatment of a disease they had caused rather than such costs being borne by the State and secondly to impose machinery that creates a new direct liability? This can be properly described as the issue of legitimate aims. (ii) Was a fair balance struck, in the judgement of the court, between the demands of the general interest of the community and the requirements of the protection of the employers fundamental rights? This can properly be described as the issue of proportionality. (b) Was the Welsh Assembly entitled to view the Bill as having legitimate aims? 106.
I turn therefore to consider the first question.
I have set out the main and subsidiary aims of the Bill at para 77.
Those aims must be viewed in the social and economic context of Wales and the legislative competence of the Welsh Assembly to which I have referred: (i) Since the establishment of the NHS in the United Kingdom in 1946, the general expectation has been that it would provide medical treatment and care free at the point of delivery, subject to limited exceptions, such as prescription charges.
However, it does not follow from that general expectation that a legislature with responsibility for the NHS cannot change the extent to which its services are funded by the State so that they are not free at the point of delivery.
Indeed, charges for NHS services (such as prescription charges) have been imposed or increased on many occasions.
In Wales there was a concentration of heavy industry.
Wales, along with some other parts of the United Kingdom, has a long and direct experience of serious industrial diseases, such as pneumoconiosis, and their devastating effect on employees.
It has long been seen as a matter of social justice that proper compensation and care be provided at the expense of employers in those industries to those suffering from such diseases through negligent acts and breach of statutory duty.
Given the period of time that elapses after exposure to asbestos before the disease (ii) manifests itself, it cannot be an objection that the wrongdoing occurred many years ago. (iii) The cost of the provision of health services through the Welsh NHS is an escalating cost.
One of the reasons is the effect of serious industrial diseases caused by the concentration of heavy industry and the past negligence and breach of statutory duty by employers.
The cost of the Welsh NHS is now a very significant part of the expenditure of the Welsh Assembly which has to be met out of the overall grant to the Welsh Assembly by HM Treasury, as described at para 83 above.
There can be little doubt that provision of finance for the Welsh NHS and the Welsh NHS continued ability to provide the requisite health services out of monies made available to it out of the grant to the Welsh Assembly by Her Majestys Treasury is a matter of pressing legitimate concern to the Welsh Assembly. 107.
Taking into account this context, I consider that the first and central aim of making the employer (when a tortfeasor) pay for the cost of treating the disease caused by it, is an aim which the Welsh Assembly, as a democratically elected legislature within its area of primary legislative competence, is entitled to reach and has an entirely reasonable foundation. (i) Given the choices which are open to a democratically elected legislature in how the escalating overall cost of health care is to be met and taking account of the very long period of time before an asbestos related disease caused by the employer manifests itself, the Welsh Assembly has to make a judgement.
It must be entitled to consider in such circumstances which benefits and services it is to continue to provide free of charge.
I cannot therefore see a reason why it is not open to the Welsh Assembly to make a judgement that there is a real social and economic need to withdraw the benefit of free medical treatment and care and impose charges on the employers in industries where negligence or breach of statutory duty has occurred in the past. (ii) The fact that the consequences of such wrongdoing take years to manifest themselves and the escalating cost of treating and caring for those suffering from the diseases can indeed be seen as providing a justification for the Welsh Assembly, in the context I have set out, in withdrawing the benefit hitherto provided and allowing the cost to be borne by those tortfeasors in the same way that those tortfeasors bear the other costs of their wrongdoing which has brought about the diseases. (iii) I cannot therefore see a basis for contending that the Welsh Assembly is not reasonably entitled to reach a judgement that there is a strong public interest in doing so.
Nor can I see the basis for questioning as reasonable the judgement of the Welsh Assembly that it would be desirable that the funds so raised would directly benefit those suffering from asbestos related diseases. (iv) Choices have to be made in setting overall policy in relation to the level of service, treatment and care to be provided by a national health service, the funding of such services and the services in respect of which charges are to be made.
These are choices of social and economic policy which in my view can and should only be made by the Welsh Assembly as a democratically elected legislature. (v) The Welsh Assembly is also entitled to make the judgement that instead of a scheme which would have involved levying a charge on employees and collecting it from the employers through a scheme of the type I have described at paras 96 98, machinery for direct collection would confer a further benefit on those suffering from asbestos related diseases by relieving them of further worry and stress. (vi) That public interest can therefore be seen as reflecting choices of social and economic policy and of social justice in Wales which may be different to the views of social and economic policy and social justice reasonably held in other parts of the United Kingdom or by other people.
As these choices are being exercised in matters within the primary legislative competence of the democratically elected Welsh Assembly, the Welsh Assembly is, in my view, reasonably entitled to adopt such choices and views for Wales. 108.
For these reasons therefore the Welsh Assemblys objective in making the tortfeasor pay rather than the public as a whole is a choice which can properly be regarded as having an economic and social purpose.
This is clearly an objective on which different views can reasonably be held.
However, it is in every respect pre eminently a political judgement in relation to social and economic policy on which it is for the legislative branch of the State to reach a judgement.
The judicial branch of the State should not therefore question this first and central aim of the Bill, as there are manifestly reasonable grounds for reaching the view which the Welsh Assembly has reached: AXA General Insurance Ltd v Lord Advocate at para 49 and following. (c) No objection could be taken to charges being claimed by employees from employers 109.
If the Welsh Assembly had imposed charges directly on employees as I have set out at paras 96 98 and thus limited the Bill to the first and central aim, there could, in my view, be no question of any rights of employers being affected in any impermissible way.
The employers may have had an expectation that the cost of medical treatment and care of a disease caused by their wrongdoing in the past would always be met by the State through the NHS budget rather than by them; and that they would therefore continue to enjoy a benefit from the State in respect of their past wrongdoing. 110.
However, such an expectation gave them no legitimate expectation giving rise to legal rights.
A legislature would not be constrained by A1P1 from enacting primary legislation to make them liable for future payments in respect of their past wrongdoing as were made after the coming into force of the Bill because it was doing no more than withdrawing a benefit to which employers had no entitlement to enjoy for an unlimited period of time.
Thus, even though the obligation to make such payments arose out of a liability to the employee that had arisen in the past, there would be no issue of retrospectivity. (i) The payments would be in respect of a recognised head of damages caused by an asbestos related disease or condition for which liability under existing law had been incurred.
The position is, in my view, different to that in AXA General Insurance Ltd v HM Advocate.
The Damages (Asbestos related Conditions) (Scotland) Act 2009 imposed liability for a condition, asymptomatic pleural plaques, where it had been declared by the courts that there was no liability under existing law.
The Bill in the Welsh Assembly has imposed no new liability in respect of responsibility for the asbestos related disease or condition.
The Bill is premised on existing liability for the disease, the existing consequent liability to pay damages and an existing well recognised head of damages, namely medical treatment and care. (ii) The payments would only be payments made after the coming into force of the Bill. (iii) The payments could not be recovered in cases where a settlement had been made of the liability incurred by the employer, as the liability would have been discharged. 111.
Thus the first and central aim of the Bill in making the employer bear the responsibility for the cost of medical treatment and care could have been achieved without any objection of retrospectivity on the part of the employer. (d) The limited retrospectivity 112.
It is evident therefore from the terms of the Bill viewed in its legislative context that the provisions contained in sections 2, 3 and 5 which give rise to retrospectivity were drafted in a way necessary to achieve the second and subsidiary aim of the Bill, namely to provide the best machinery to collect the charges for NHS Services incurred as a result of the enactment of the first and central aim of the Bill. 113.
I have already set out my view that the first and central aim of the Welsh Assembly as to the public interest was an aim which it was open to the Welsh Assembly to adopt as a legitimate aim.
It is therefore my view that the Welsh Assemblys second aim in seeking to provide machinery to recover the costs of treatment in the best manner possible can properly and reasonably be judged to be a legitimate aim.
It is not one manifestly without reasonable foundation. (e) The approach to proportionality 114.
I therefore turn to the second question in relation to A1P1 the issue of proportionality.
I agree with Lord Mance that the issue of proportionality is, on the established case law, an issue where the court must itself determine whether the interference by the legislature strikes a fair balance between the benefits to be derived from the public interest of the community and the requirements of the protection of the individuals fundamental rights.
In my view, for reasons which I explain at paras 118 126 below, it is an essential part of the balancing exercise that the court accords great weight to the judgement of the legislature as to the public interest, provided that the judgement is not manifestly without reasonable foundation, as I have concluded in respect of the Bill, it is.
It is then necessary, whilst according great weight to the judgement of the legislature as to the public interest, for the court to weigh all the factors to determine whether the legislation achieves a fair or proportionate balance between the public interest being promoted (together with the benefits to be derived therefrom) and any infringements of the rights of other interests, including private interests.
As the Counsel General accepted, special justification is required where there is retrospectivity. (f) The detriment to employers arising from the Bill 115.
The first perceived detriment to the employer is the imposition of direct liability.
However, as I have set out at para 110, there could be no legitimate expectation which would have stood in the way of the first and central aim of the Welsh Assembly if the Bill had set out a scheme under which the Welsh NHS charged the employee suffering from the disease and that employee obtained recovery from the employer liable for causing the disease.
It is difficult to see therefore how a Bill that encompassed the second aim through providing machinery for the recovery of payment directly from the employer in principle infringes any legitimate expectation or imposes any significant detriments beyond that which the employer would have incurred if he had to pay to the employee by way of damages the charges imposed by NHS Wales.
The charges imposed under the Bill will be no greater, and may be less, than the actual cost to NHS Wales of the treatment and care. 116.
The second perceived detriment is that the liability of the employer for the payments does not merely arise if negligence or breach of statutory duty is established.
The liability for the payments arises if compensation is paid where negligence or breach of statutory duty is alleged, but not admitted, as would be the case under most forms of settlement agreement.
However, there is, in my view, no material detriment.
The liability to make the payment directly to Ministers only arises in respect of settlements made after the coming into force of the Bill.
The employer will know that if any settlement is made, then a direct liability will arise for future medical charges.
This would not be any different in its effect to what would be claimed by the employee from the employer if the charges were imposed on the employee in cases where there had been no settlement.
The employer would, in deciding whether to settle after the coming into force of the Bill, therefore have to take into account the potential direct liability to Ministers in the same way as the employer would have to take into account potential claims for payments to reimburse an employee for medical charges imposed by the Welsh NHS.
This again is the case because the Bill in its effects does no more than provide machinery for the collection of charges which it imposes. 117.
The third perceived detriment is the exposure of employers to a direct liability to Ministers in respect of which they would not be indemnified by their policies of employers liability insurance.
It has been properly assumed in the argument before the court that the direct liability imposed on employers is not a liability for which there would be an indemnity under the policy; I agree with the view of Lord Mance at para 5(ii) that it is not a liability which would be indemnified under the ordinary form of employers liability policy.
However, for the reasons I set out at paras 130 132 below, I consider that there is legislative competence in a manner that would not infringe A1P1 under section 108(4) and (5) to make provision so that insurers would be liable to pay under their policies charges recovered through the machinery of the Bill.
Such charges would have been recoverable if the Bill had been confined to its first and central aim of making employers pay for the cost of NHS medical care and treatment through the conventional route of imposing the charges on the employee who would recover the sums as a recognised head of damages from the employer.
It is also important to note that some employers, such as the nationalised industries, did not carry insurance and therefore this head of detriment would not apply to them. (g) The weight to be accorded to the public interests as perceived by the Welsh Assembly 118.
In considering the public interest, as I have reached the view that the judgement of the Welsh Assembly on the legislative choices open to it as expressed in the Bill, is a judgement that it was reasonable for it to reach (and certainly not manifestly without reasonable foundation), I would accord great weight to the Welsh Assemblys judgement, not simply weight as Lord Mance states at para 67.
I do not dispute that, on the present development of the case law, at a domestic level, a margin of appreciation is not applicable.
Nonetheless, as a domestic court within the constitutional structure of the United Kingdom, a United Kingdom court should attach great weight to informed legislative choices as expressed in the legislation.
This is particularly so where the judgement is made, as it is in this case, on matters of social and economic policy: see para 131 of the judgment of Lord Reed in AXA General Insurance v Lord Advocate. 119.
Although the Welsh Assembly is a body, like the Scottish Parliament and Northern Ireland Assembly, to which section 9 of the Bill of Rights does not apply, I would find it difficult to make any logical distinction in the context of the United Kingdoms devolved constitutional structure between these legislatures and the United Kingdom Parliament in according weight to the evaluation of the different choices and interests in respect of matters which are within the primary competence of the legislatures. 120.
Under the devolution settlements, in areas where legislative competence has been devolved, the Assemblies and the Scottish Parliament, as the democratically elected bodies with primary legislative competence, have to exercise the same legislative choices as the United Kingdom Parliament would have to exercise in areas of legislative competence which it has not devolved. 121.
Although this is an issue which it may not be desirable to have to consider at the present time, the issue plainly arises as to how the court is to treat the judgement of the Welsh Assembly, in contradistinction to the United Kingdom Parliament, in relation to a matter of social and economic policy such as the funding of a national health service. 122.
I cannot see why in principle the United Kingdom Parliament in making legislative choices in relation to England (in relation to matters such as the funding of the NHS in England) is to be accorded a status which commands greater weight than would be accorded to the Scottish Parliament and the Northern Ireland and Welsh Assemblies in relation respectively to Scotland, Northern Ireland and Wales.
As each democratically elected body must be entitled to form its own judgement about public interest and social justice in matters of social and economic policy within a field where, under the structure of devolution, it has sole primary legislative competence, there is no logical justification for treating the views of one such body in a different way to the others, given the constitutional structure that has been developed.
The judgement of each must have the same effect and force.
Although the weight to be accorded to the judgement of these legislative bodies will vary according to the matter in issue, there is no reason in determining weight to treat the judgement of the Scottish Parliament, the Northern Ireland Assembly and the Welsh Assembly in any way different to the United Kingdom Parliament. 123.
I do not consider the judgments in Belfast City Council v Miss Behavin Ltd [2007] UKHL 19, [2007] 1 WLR 1420 assist.
The case concerned the judgement of a municipality, not a legislature enacting primary legislation.
I therefore consider that the judgement of the Welsh Assembly in relation to social and economic policy underpinning primary legislation enacted by it should not be treated in any way different to the judgement of the United Kingdom Parliament underpinning primary legislation enacted by it. 124.
In the present case, as I have concluded that the view taken by the Welsh Assembly is a view which is reasonably open to it as a view of the public interest and of social justice on a matter of social and economic policy, I therefore consider great weight should be attached to the legislative choice made by the Welsh Assembly as expressed in the Bill enacted by it as primary legislation within its competence.
It must follow therefore that the judgement of the Welsh Assembly as to the public interest and social justice should be preferred on matters of social and economic policy to a judicial view of what it regards as being in the public interest and representing social justice. 125.
I have reached the views I have set out as to the judgement reached by the Welsh Assembly by the analysis I have set out of the terms of the Bill in its overall context, following the approach of Lord Nichols of Birkenhead at para 67 of his judgment in Wilson v First County Trust (No 2) [2003] UKHL 40, [2004] 1 AC 816. 126.
I have not done so by an analysis of the reports and debates in the Welsh Assembly.
There are, in my view, considerable constitutional dangers, if the judicial branch of the State in the United Kingdom assumes the role of examining the debate in any of the legislative branches of the State in the United Kingdom in relation to primary legislation it is considering and then passing judgment on the quality of the debate, the evidence received, the reasons expressed in the debate and whether in the opinion of the judicial branch of the State the legislative branch of the State has put itself in a proper position to evaluate the differing interests.
Such an approach might be viewed as being more in the nature of an evaluation by a higher court of the judgment of a lower court on an appeal where the exercise of a discretion is being examined.
The better course, in my view, is to examine the legislation itself in its context, as I have set out. (h) The benefits to be derived from the provisions of the Bill 127.
In my view, the Bill in imposing the charges directly on the employers does no more than provide machinery which makes it easier and more effective to recover the costs of medical care and treatment in respect of which employers as tortfeasors would be liable as part of the ordinary measure of damages.
This would follow as a consequence of the Welsh Assembly no longer continuing the provision of a State benefit to such tortfeasors by providing such treatment at the cost of the State.
The assessment of the overall public good in charging such costs for the future and the machinery employed are matters on which it is for the Welsh Assembly to make the choice and judgement. (i) Conclusion 128.
Weighing up the detriment to the private interests which I have set out and the public interest and the benefits to be derived therefrom, in my view, a fair and proper balance has been struck as regards the position of employers.
The element of retrospectivity in the Bill is, as regards employers, limited to providing machinery for the collection of a head of damages which a legislative body is entitled to ask the employer to bear as a tortfeasor instead of the State bearing the cost itself.
The special justification which the Counsel General accepted was required, has been established, given the social and economic policy in dealing with the present consequences of past wrongdoing by employers by discontinuing a benefit to the wrongdoer.
There is, in my view, therefore no excessive burden for employers to bear and no violation of the fundamental rights of the employers under A1P1 as regards the machinery adopted of imposing direct liability on employers under section 2 of the Bill.
I would have reached the same view if the Welsh Assembly was not able to protect the insurance position of the employers, given the weight that I consider should be attached to the judgement of the Welsh Assembly in a matter of social and economic policy and the limited nature of the retrospectivity.
The position of insurers (a) The extent of the liability imposed on insurers under section 14 of the Bill 129.
Section 14 imposes liability for the payments made under section 2 of the Bill on the insurers of those within section 2 who are liable to any extent in respect of an asbestos related disease (described by me as an employer).
Section 14(2) prevents the insurer from excluding or restricting that liability.
Section 14(5) makes clear that the section applies to policies issued before the Bill comes into force.
As I have set out at para 117, there would be no liability under the policy for the direct liability imposed by section 2.
Thus section 14 was intended to ensure that the direct liability imposed on employers would be met by their insurers. (b) Legislative competence under section 108(4) and (5) 130.
The Counsel General contended that the competence to enact such a provision was contained in section 108(5)(a) and (b) either under (a) as a provision for the enforcement of another provision or which would make another provision effective or under (b) as a provision incidental to or consequential on such a provision. 131.
The scope of section 108(5)(b) and a similar provision in the Scotland Act 1998 has been considered in Martin v Most [2010] UKSC 10, 2010 SC (UKSC) 40, at paras 40 and 123 and Attorney General v National Assembly for Wales Commission [2012] UKSC 53, [2013] 1 AC 792, at paras 49 53 and 83.
The approach which has been adopted is, in summary, to identify the primary purpose of the main provision of the Bill to which the provision in question is incidental or consequential and then to form a judgement on whether the provision in question is subsidiary to that primary purpose and has no end in itself.
In the light of that approach to section 108(5)(b), it seems to me that a similar approach should be adopted in relation to section 108(5)(a), namely to identify the primary purpose of the main provision and then form a view on whether the provision in question is intended for the enforcement of the main provision or to make it effective and has no end in itself. 132.
The primary purpose of the imposition of direct liability under section 2 of the Bill is to provide machinery for the collection of charges imposed by the Welsh NHS for medical treatment and care which would have fallen on employers as tortfeasors in the circumstances I have set out.
In my view, section 14 of the Bill is intended to have no purpose other than to ensure that the machinery operated in such a way that employers can claim from their insurers as if the charges had been reimbursed to the employees as a recognised head of damage.
It has no other purpose or end in itself.
It is intended as part and parcel of the scheme that provided machinery for collection. 133.
However, the terms of section 14 go much further.
When subsections (1) to (3) are read together, I agree with Lord Mance that they have the effect of extending the liability under the employers liability insurance policy to an extent greater than the liability would have been if any charges payable to the Welsh NHS had been paid as damages by the employer to the employee.
In my view, the provisions would override deductibles and policy limits, as the effect of the provision as drafted is to extend the policy to indemnify the employer for all liability under section 2, if the policy provides cover to any extent.
In my view, therefore, section 14 as drafted goes beyond what would be permissible under section 108(5)(a) and (b). (c) The retrospective nature of the provision 134.
In whatever way section 14 is drafted, even if limited in the way I have indicated, section 14 would retrospectively amend any policy which the employer has to indemnify the employer against his liability for asbestos related disease by extending it to provide indemnity for payments made to Ministers for charges payable to the Welsh NHS.
The imposition of such liabilities retrospectively, in my view, could be seen as the deprivation of the possessions of insurers, so as to engage A1P1. (d) Legitimate aim and retrospectivity 135.
As I have set out, the aim of the Welsh Assembly in relation to the position of insurers is to provide protection to employers by amending insurance policies so that they provide cover in relation to the imposition of direct liability under section 2.
Imposing direct liability is, for the reasons I have given in essence the provision of machinery for the collection of charges for which the employers would have been liable to the employees once the Welsh NHS withdrew free treatment and care and imposed charges. 136.
In my view, the position of insurers must be seen in the light of the two aims of the Bill.
If the Bill had been limited to its first and central aim and a scheme of the kind I have described at paras 96 98 enacted, insurers would ordinarily have been liable under the ordinary form of policy to indemnify employers for the charges payable by them to the employees.
There would have been no need for the legislation to amend any policy as it would have had to indemnify employers on its existing terms.
The only ground on which the Association of British Insurers, as representing the interests of the insurance industry, could therefore have sought to avoid such a liability would be the contention that it was impermissible for a State to change its policy of providing medical care free at the point of delivery and instead charge employers for the consequences of their past wrongdoing.
It would have to be contended that the insurance industry had a legitimate expectation that the States policy in relation to providing a benefit to them by funding the future cost of medical care could not be changed in respect of past wrongdoing. 137.
I have set out in relation to employers why I take the view that there is no legitimate interest which prevents the Welsh Assembly withdrawing for the future its funding of medical treatment and care for asbestos related diseases which have been caused by the employers past wrongdoing.
Clearly in making reserves for known claims and IBNR (incurred but not reported claims) and in preparing their accounts and in making their reinsurance arrangements, insurers will have assumed that the State would go on providing free medical treatment and care for employees who did not choose private treatment and thus provide them with a benefit.
However, I cannot see how that could give rise to a legitimate expectation on the part of those who insure employers against the consequences of their past wrongdoing that the State would not be entitled to change its policy for charging and withdrawing the benefit enjoyed by wrongdoers, particularly where the consequences of the wrongdoing take many years to become apparent.
In my view, insurers therefore have no legitimate interest which prevents a State changing its charging policy for health care and replacing care free at the point of delivery with the imposition of charges.
If insurers have, contrary to my view, a legitimate interest, then the ambit of their interest would need further analysis, as a State has, particularly in times of budgetary stringency, a real interest in amending its charging policy, as it does, for example, in relation to prescriptions. 138.
It follows therefore, as it does in the case of employers, that the element of retrospectivity is limited to the machinery for collection.
I have set out at para 133, my view that section 14 goes much further than providing an indemnity for collecting sums that would otherwise have been payable by the employer as damages as a tortfeasor.
I can see no justification in the balancing exercise under A1P1 for extending the liability of insurers under section 14 further than the indemnity which insurers were bound to provide under their policies if the indemnity had been called upon to indemnify the sums which would have been payable by the employers as damages. (e) Conclusion in relation to insurers 139.
It is for that reason, I have come to the conclusion that section 14 as drafted, besides being beyond the competence under section 108(4) and (5), infringes A1P1.
However if section 14 had been limited in the way I have suggested, I would have considered it as a provision that achieved a fair balance under A1P1.
That is because the retrospectivity would have been limited to providing an indemnity solely in respect of the machinery of collection of sums that would have been otherwise due under the insurance policies if the charges imposed by the Welsh Assembly had been payable by way of damages by the employers as tortfeasors in the ordinary way. 140.
For the reasons I have given, insurers, just as employers, have no legitimate interest which protects them against the withdrawal of the State benefit conferred in the provision of free medical treatment and care for diseases caused by negligence or breach of statutory duty, irrespective of whether that negligence or breach of statutory duty occurred in the past, particularly in circumstances where the consequences of such wrongdoing take many years to become manifest. 27, 37 and 46 47, per Lord Rodger, Lady Hale and Lord Mance.
That was a case involving subordinate legislation, to which article 9 of the Bill of Rights does not apply.
Perhaps in the light of article 9 there is a relevant distinction between cases concerning primary legislation by the United Kingdom Parliament and other legislative and executive decisions.
It is, I think, unnecessary to go further into this difficult area on this reference.
On any view, if the admissible background material shows that the Bill was put before and passed by the Welsh Assembly on the basis of a supposed analogy or precedent, it must be possible to consider whether that analogy or 58.
| UK-Abs | The Counsel General for Wales (the Applicant) is, by section 99(1) of the Government of Wales Act 2006, empowered to refer the question whether a proposed Act of the Welsh Assembly is within its devolved legislative competence to the Supreme Court for decision.
In the present case, the Applicant referred to the Supreme Court the question whether the Welsh Assembly has the legislative competence to enact the Recovery of Medical Costs for Asbestos Diseases (Wales) Bill [1].
The Bill has two provisions of particular importance.
Section 2 makes persons by whom or on whose behalf compensation payments are made to victims of asbestos related diseases (compensators) liable to Welsh Ministers for the cost of NHS services provided to such victims.
Section 14 extended the scope of the compensators liability insurance policies to cover the sums which they would be required to pay under section 2 [2] [8].
In determining this reference, the Supreme Court therefore has to decide two issues: (1) Whether the Bill comes within the legislative competence of the Welsh Assembly concerning the organisation and funding of [the] national health service under the Government of Wales Act 2006 (GOWA 2006) section 108(4) (5) and paragraph 9 of Part 1 of Schedule 7; and (2) Whether the Bill is nonetheless outside the legislative competence of the Welsh Assembly by virtue of section 108(6) of the GOWA 2006, on the grounds that it was incompatible with the rights of compensators and insurers under article 1 of Protocol 1 of the European Convention on Human Rights to the peaceful enjoyment of their possessions (A1P1 rights) [9].
The Supreme Court unanimously finds that the Welsh Assembly lacks legislative competence to enact the Recovery of Medical Costs for Asbestos Diseases (Wales) Bill in its present form.
Lord Mance (with whom Lords Neuberger and Hodge agree) gives the lead judgment and holds that the Bill is:
(1) Outside the legislative competence of the Welsh Assembly concerning the organisation and funding of [the] national health service [34]; and (2) Incompatible with the A1P1 rights of compensators and insurers to the peaceful enjoyment of their possessions [65] [69].
Lord Thomas (with whom Lady Hale agrees) concurs in the result set out in the judgment of Lord Mance for narrower reasons [71].
The reasoning of the majority in the lead judgment is as follows: (1) The critical phrase, in determining the legislative competency of the Welsh Assembly to enact the Bill, is Organisation of funding of the National Health Service in paragraph 9 of Part 1 of Schedule 7 to the GOWA 2006 [13].
It is common ground that Welsh Ministers do not have general fiscal powers [17] and even assuming (without deciding) that the Welsh Assembly has competence to levy charges for Welsh NHS services, the Bill is not sufficiently related to the organisation of funding of the National Health Service under section 108(4) of the GOWA 2006 to come within that competence.
The charges provided for by the Bill are to be imposed on compensators and insurers rather than patients and lack any direct or close connection with the provision of Welsh NHS services.
The Bill seeks to impose what are in effect new tortious or statutory duties on third parties to pay for the relevant Welsh NHS treatment [24] and [27]. (2) The Bill also interferes with the A1P1 rights of compensators and insurers to the peaceful enjoyment of their possessions.
The new financial liabilities of compensators and insurers would arise from asbestos exposure and liability insurance policies which long pre dated the Bill [36] and [41].
The retrospective effect of the Bill requires special justification, which is absent in the present case [53], [57] and [65] [69].
Lord Thomas and Lady Hale agree that the Bill is beyond the competence of the Welsh Assembly, but on narrower grounds.
Section 2 of the Bill is within the competence of the Welsh Assembly, because the organisation of funding of the National Health Service encompasses a general power to raise funds for the Welsh NHS through the imposition of charges on patients, who could recover those charges from an employer who has exposed him to asbestos.
The employer could then claim indemnification from its liability insurer [83] and [96].
It is therefore open to the Welsh Assembly to impose charges directly on the employer/compensator [100] [102].
The interference of the Bill with the A1P1 rights of employers/compensators is proportionate to its economic and social purpose of funding Welsh NHS services for asbestos victims [108], [124] and [128].
However, section 14 of the Bill is outside the competence of the Welsh Assembly because its effect is retrospectively to extend or override the provisions of existing liability insurance policies, contrary to section 108(5) of the GOWA 2006 and the A1P1 rights of insurers [133] and [138] [140].
|
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.)
| UK-Abs | 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]
|
The appellants have four things in common.
They have Afghan nationality.
They came to the UK as unaccompanied minors.
They claimed asylum.
Their claims were rejected.
The present appeals involve two discrete sets of issues.
They relate a) to the sufficiency of the appellate process and b) to the respondents obligations with regard to family tracing.
Background
In 1999 the EU Council of Ministers resolved to work towards a Common European Asylum System.
There followed a group of Council Directives which together form a code.
They are Directive 2003/9/EC of 27 January 2003 laying down minimum standards for the reception of asylum seekers (the Reception Directive), Directive 2004/83/EC of 29 April 2004 on 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 granted (the Qualification Directive) and Directive 2005/85/EC of 1 December 2005 on minimum standards on procedures in Member States for granting and withdrawing refugee status (the Procedures Directive).
Article 39 of the Procedures Directive requires Member States to ensure that applicants for asylum have the right to an effective remedy before a court or tribunal, against a decision taken on their application for asylum.
The main provisions of domestic law regarding challenges to asylum decisions are in the Nationality, Immigration and Asylum Act 2002 (NIAA).
The provisions applicable in these cases are those contained in that Act as it was prior to the Immigration Act 2014.
In the form with which we are concerned, section 82 gives a general right of appeal to the First tier Tribunal (Immigration and Asylum Chamber) from an immigration decision as defined in section 82(2).
This includes a refusal of leave to enter the UK; a refusal to vary a persons leave to enter or remain if the result is that the person has no leave to enter or remain; or a decision to remove them.
Additionally, section 83 (as amended by section 26(3) of the Asylum and Immigration (Treatment of Claimants, etc) Act 2004) provides: (1) This section applies where a person has made an asylum claim and a) his claim has been rejected by the Secretary of State, but b) he has been granted leave to enter or remain in the United Kingdom for a period exceeding one year (or for periods exceeding one year in aggregate). (2) The person may appeal to the Tribunal against the rejection of his asylum claim. (Section 82 was substantially amended and section 83 was repealed by section 15 of the Immigration Act 2014, which came into force, subject to various savings, on 20 October 2014.)
Lindblom J explained in his judgment in TNs case, [2011] EWHC 3296 (Admin) at para 22, the reason given by the government, when introducing section 83, for confining it to cases where an unsuccessful applicant for asylum is given leave to remain for more than a year.
The reason was that in circumstances where a person arrives from a country in turmoil, and their claim for asylum is rejected, but it is not immediately safe or practicable to return them, they will be given leave to remain for a short period with a view to reconsidering at the end of that period whether the situation has become sufficiently stable for it to be possible to return them.
Kosovo was given as an example.
If at the end of the period of leave there is a refusal to extend it, the person concerned will have an immediate right of appeal under section 82 against the refusal and against any removal decision.
The likely effect of providing an earlier right of appeal under section 83 would be to clog up the appeal system before it became necessary for their appeals to be heard.
It has long been the policy of the government not to return an unaccompanied asylum seeking child (UASC) unless the respondent is satisfied that there are proper reception arrangements in the country to which they are to be removed.
Under section 55 of the Borders, Citizenship and Immigration Act 2009 the respondent has a duty, in summary, to ensure that any of her functions in relation to immigration, asylum or nationality are discharged having regard to the need to safeguard and promote the welfare of children who are in the UK.
Statutory guidance issued under that section, Every Child Matters (November 2009), para 2.7, requires the Border Agency to act in accordance with principles which include the following: In accordance with the UN Convention on the Rights of the Child the best interests of the child will be a primary consideration (although not necessarily the only consideration) when making decisions affecting children.
Children should be consulted and the wishes and feelings of children taken into account wherever practicable when decisions affecting them are made, even though it will not always be possible to reach decisions with which the child will agree.
The respondents published guidance on Processing an Asylum Application from a Child states at para 17.7: Discretionary Leave under UASC Policy The UK Border Agency has a policy commitment that no unaccompanied child will be removed from the United Kingdom unless the Secretary of State is satisfied that safe and adequate reception arrangements are in place in the country to which the child is to be removed.
Where: the child does not qualify for asylum or HP [humanitarian protection] or otherwise under the general DL policy, and; we are not satisfied that the child will be able to access adequate reception arrangements in the country to which they will be removed; the child should normally be granted DL for three years or, with effect from 1 April 2007, until they are 17.5 years of age, whichever is the shorter period.
This applies in all cases except where stated otherwise in country specific operational guidance notes (OGN).
Paragraph 17.8 states: Best interests and duty under section 55 of the Borders, Citizenship and Immigration Act 2009.
The availability of safe and adequate reception arrangements is only one factor to consider in deciding on whether the person should be granted Discretionary Leave under the UASC policy.
Full account also needs to be given to the following: the best interests of the child must be taken into account as a primary consideration in the decision; and the duty to have regard to the need to safeguard and promote the welfare of the child in accordance with section 55 of the Borders, Citizenship and Immigration Act 2009 and the statutory guidance that accompanies it (Every Child Matters ).
The best interests of a child, whilst a primary consideration, is not the sole consideration when considering whether a child should be granted leave to remain or return to the country of origin.
Other factors, including the need to control immigration, are also relevant.
In some cases, it may be reasonably clear that the childs best interests may be served by returning to the country of origin for example where the family has been traced and it is clear that the return arrangements can be made direct to parents.
In other cases, the decision on whether to return will be a matter of making a careful assessment of the childs best interests and balancing those interests against the wider public interest of controlling immigration.
In the case of UASCs from Afghanistan whose applications for asylum are rejected, it has been the respondents settled practice at all relevant times to grant them discretionary leave to remain until they reach the age of 17 years six months.
Whether the period of leave exceeds one year will therefore depend on the age of the individual child.
Family tracing is one aspect of concern for an unaccompanied childs welfare.
The Reception Directive lays down minimum standards for the reception of asylum seekers in Member States: article 1.
Chapter IV (articles 17 to 20) contains provisions for protecting the welfare of persons with special needs.
Article 19 is concerned with unaccompanied minors.
Article 19.1 requires the host Member State to ensure that the minor is represented by legal guardianship, or by an organisation which is responsible for the care and well being of minors, or by another appropriate organisation.
Article 19.2 requires the placement of UASCs, from the moment that they are admitted to the territory until they are obliged to leave, with adult relatives, or with a foster family, or in accommodation centres with special provisions for minors, or in other accommodation suitable for minors.
Article 19.3 provides: Member States, protecting the unaccompanied minors best interests, shall endeavour to trace the members of his or her family as soon as possible.
In cases where there may be a threat to the life or integrity of the minor or his or her close relatives, particularly if they have remained in the country of origin, care must be taken to ensure that the collection, processing and circulation of information concerning those persons is undertaken on a confidential basis, so as to avoid jeopardising their safety.
The importance of the second sentence cannot be overstressed.
Recognising the potential delicacy and sensitivity of the problem, article 19.4 provides: Those working with unaccompanied minors shall have had or receive appropriate training concerning their needs, and shall be bound by the confidentiality principle as defined in the national law, in relation to any information they obtain in the course of their work.
The only reference to family tracing in the Qualification Directive is in Chapter VII, which deals with the content of international protection, ie the rights of those who have refugee status or are entitled to humanitarian protection, rather than the process of determining whether they qualify for such protection.
Article 30.1 requires Member States, as soon as possible after the granting of refugee status or subsidiary protection status, to take the necessary measures to ensure the representation of unaccompanied minors by legal guardianship, or by an organisation responsible for the care and well being of minors, or by any other appropriate representation including that based on legislation or court order.
The rest of article 30 in effect echoes article 19 of the Reception Directive.
The Procedures Directive lays down minimum standards on procedures in Member States for granting and withdrawing refugee status: article 1.
Article 17 contains certain provisions about unaccompanied minors (essentially to ensure that they are properly represented, properly informed and that their best interests are taken into account in the process as a primary consideration), but the Procedures Directive makes no mention of family tracing as part of the process for determining the application.
Article 19.3 of the Reception Directive was implemented in domestic law by regulation 6 of the Asylum Seekers (Reception Conditions) Regulations 2005 (SI 2005/7).
Regulation 6(1) provides: So as to protect an unaccompanied minors best interests, the Secretary of State shall endeavour to trace the members of the minors family as soon as possible after the minor makes his claim for asylum.
Regulation 6(2) provides: In cases where there may be a threat to the life or integrity of the minor or the minors close family, the Secretary of State shall take care to ensure that the collection, processing and circulation of information concerning the minor or his close family is undertaken on a confidential basis so as not to jeopardise his or their safety.
TN travelled to the UK in August 2010 in the back of a lorry.
On 8 September he was arrested while working illegally and was put into accommodation provided by Birmingham City Council social services.
Two days later he applied for asylum.
The basis of his claim was that in July 2009 two paternal uncles, who were members of the Taliban, visited the home where TN lived with his parents, two sisters and two younger brothers, and asked his fathers permission for him to join the Taliban.
His father refused.
After the visit it was decided that TN should leave Afghanistan.
His father arranged for him to escape with an agent in October 2009.
He said that since his arrival in the UK he had not had any contact with his family, but he feared that if he returned to Afghanistan he would be killed by his paternal uncles because of his refusal to join the Taliban.
On 12 November 2010 the respondent rejected TNs application but, in accordance with her published Asylum Policy Instruction on Discretionary Leave, she granted him leave to enter and remain in the UK until the age of 17 years six months.
His agreed date of birth is 1 January 1994, and the period of leave was therefore eight months.
On 14 February 2011 TN began judicial review proceedings claiming a declaration that sections 82 and 83 of NIAA are incompatible with his right under article 39 of the Procedures Directive to an effective remedy before a court or tribunal against the decision made in his asylum application, and compensation.
His claim was dismissed by Lindblom J in a comprehensively detailed judgment, which was upheld by the Court of Appeal (Maurice Kay, V P, and Beatson and Briggs LJJ) [2013] EWCA Civ 1609, [2014] 1 WLR 2095.
TNs case now comes before this court on appeal from that decision.
Separately, on 29 June 2011 TN applied to extend his discretionary leave by an application for humanitarian protection.
He repeated his claim to be at risk if returned to Afghanistan.
Humanitarian protection is leave granted under the Immigration Rules ((HC 395), paras 339C Q) to a person who is in the UK, does not qualify for refugee status and in respect of whom substantial grounds have been shown for believing that he or she would face a real risk of suffering serious harm in the country of return.
It fulfils the UKs obligation to provide such persons with subsidiary protection under the Qualification Directive, as well as protection under articles 2 and 3 of the European Convention for the Protection of Human Rights and Fundamental Freedoms.
On 29 September 2011 the respondent sent a family tracing pro forma for TNs completion in order to assist in tracing his family members.
It was completed by him on 25 October 2011.
In it he stated that he had been in contact with the British Red Cross, who had taken details of his family and village, but they had not been able to locate any members of his family.
He said that before leaving Afghanistan his parents were living in Mohammad Agha district, but that since leaving Afghanistan he had not had any contact with them and that he did not know where they were.
On 8 November 2011 the respondent refused to extend TNs discretionary leave.
He appealed to the First tier Tribunal and his appeal was dismissed by FTTJ Camp, but that decision was set aside in the Upper Tribunal by deputy UTJ Juss in a determination dated 30 August 2012.
UTJ Juss held that the First tier Tribunals decision was flawed by reason of a number of matters including the failure of the respondent to comply with her tracing duty.
The effect of the Upper Tribunals order was that the respondent must now re take her decision on TNs application.
She is waiting for the outcome of this appeal before doing so.
MA arrived in the UK on 27 July 2009.
He was provided with accommodation by Birmingham City Council social services on 30 July and claimed asylum on 6 August.
He claimed to be 13 years old but was assessed to be aged 16 and was given a notional birth date of 1 January 1993.
He said that his father was a member of the Taliban and used to be away for lengthy periods.
MA was uneducated and worked as a shepherd.
His claimed that his elder brother was killed in an explosion cause by American forces and that a few months later his father was taken away by the government.
His mother and maternal uncle told him that it would not be safe for him to remain in Afghanistan as the government would come after him even though he was only 13 years of age.
He was subsequently told that his father had been killed.
Arrangements were made with an agent for him to leave Afghanistan.
He and his mother had lived in a village in Babrak District, Khost, but he had no contact with her after leaving the village and he did not know her whereabouts.
His uncle was a shepherd in Khost and had no permanent address.
On 23 November 2009 the respondent rejected MAs application but granted him discretionary leave until 1 July 2010, when he would be aged 17 years six months.
On 26 June 2010 MA applied to extend his period of leave on grounds of humanitarian protection.
The application was refused and MA appealed to the First tier Tribunal.
MA gave oral evidence in support of his claim.
His account was disbelieved by IJ Sangha and his appeal was dismissed.
On appeal to the Upper Tribunal, deputy UTJ Hall described it as a claim to be entitled to refugee status or humanitarian protection or protection under the European Convention.
He found that IJ Sanghas decision contained an error of law because of an absence of adequate findings but he re made the same decision.
He too heard oral evidence from MA and disbelieved his account.
MA was given permission to appeal to the Court of Appeal on the issues whether he had been deprived of a significant chance of establishing refugee status by the respondents failure to endeavour to trace his family members, and whether section 83 of NIAA denied him the opportunity of establishing refugee status as an unaccompanied minor.
His appeal was heard by the Court of Appeal jointly with TNs appeal and was dismissed.
AA travelled to the UK in the back of a lorry on an unknown date in mid 2011.
Following arrest by the police, he claimed asylum on 13 October 2011.
According to his account, his father had been a known Taliban commander in Nangarhar Province in eastern Afghanistan and was killed in April or May 2011.
He then came under pressure both from the local Taliban, who wanted him to become a suicide bomber to avenge his fathers death, and from the police because it was common for sons to follow their fathers path.
With his mother and younger brother he left their family home in the village of Baghak, which was sold, to join his grandfather in the village of Jokan.
But he said that this was still not safe, because they had further visits from the Taliban and the police, and so his grandfather arranged for him to leave the country.
On 19 February 2012 the respondent wrote to AAs solicitors asking whether they required assistance in tracing AAs family and enclosing a family tracing pro forma.
On the following day the Secretary of State rejected AAs asylum claim but granted him discretionary leave until the age of 17 years six months.
His accepted date of birth was 29 December 1995 and so the period of leave was for more than a year.
AA appealed to the First tier Tribunal and gave oral evidence but the judge, IJ Hodgkinson, disbelieved his core account and dismissed his appeal.
That decision was upheld in the Upper Tribunal by deputy UTJ Drabu CBE.
AA was given permission to appeal to the Court of Appeal on the question of the respondents failure to take steps to trace his family members.
The appeal was dismissed for reasons given in a judgment by Underhill LJ, with which McFarlane and Beatson LJJ agreed: [2013] EWCA Civ 1625.
Compatibility of section 83 of NIAA with article 39 of the Procedures Directive
TN and MA were both aged over 16 years six months at the time when their applications for asylum were rejected and they were given discretionary leave to remain until they reached 17 years six months.
In the interim period they had no statutory right to appeal to the First tier Tribunal and the only form of legal challenge open to them was to bring judicial review proceedings (a course taken by TN but not MA).
It is their case that they were thereby deprived of an effective remedy in breach of article 39.
This argument was rejected by the Court of Appeal unanimously but in part for different reasons.
Maurice Kay V P accepted the respondents submission that judicial review was an effective remedy within the meaning of the Procedures Directive.
He was not persuaded by the respondents alternative submission that the availability of an appeal to the First tier Tribunal under section 82 at the end of the period of discretionary leave was itself an effective remedy.
He did not consider that a delayed remedy would necessarily be as effective as an immediate remedy.
Beatson LJ agreed that judicial review was, in the circumstances, an effective remedy which satisfied the requirements of article 39.
He also accepted the respondents alternative submission, as to which he said: 31.
I do not consider that the short delay before claimants such as these would be able to appeal against an adverse decision by the Secretary of State made after their eighteenth birthday means that the totality of the remedy they have is not an effective remedy within article 39.
As was stated in Samba Diouf v Ministre du Travail, de lEmploi et de lImmigration (Case C 69/10) [2012] CMLR 204], the Procedures Directive lays down minimum standards.
Article 39 requires Member States to ensure that applicants have the right to an effective remedy, not that they should have the most effective remedy.
The suggestion that a delayed remedy by way of appeal would not, in principle, suffice because it would not necessarily be as effective as an immediate one would have been appears to require a higher threshold than an effective remedy. 32.
I also consider that to regard the right of appeal after the short delay envisaged in cases such as these as inadequate and not an effective remedy could undermine the legislative decision to restrict the right of appeal under section 83 of the Nationality, Immigration and Asylum Act 2002 to those who have been given leave to enter for more than 12 months.
That policy was not criticised by this court in FA (Iraq) v Secretary of State for the Home Department [2010] 1 WLR 2545.
It serves the useful purpose of helping to avoid duplication between decision making at first instance and on appeal in cases in which the Secretary of State will be reconsidering a persons position in the near future. 33.
It may be the case that delaying an appeal until after a persons eighteenth birthday would mean that it would not be necessary for the best interests of that person as a child to be a primary consideration in the decision making process pursuant to section 55 of the Borders, Citizenship and Immigration Act 2009.
But such applicants will, in the light of KA (Afghanistan) v Secretary of State for the Home Department [2013] 1 WLR 615, be treated as young people and their whole history will be considered.
I am concerned that to regard the fact that an immediate appeal would be an appeal by a child whereas an appeal within what would otherwise be a reasonable period would be an appeal by a young adult as a reason for finding the remedy to be inadequate and not an effective remedy under article 39 would be undesirable from a policy point of view.
Briggs LJ agreed that judicial review was an effective remedy, and, if necessary, he said that he would have been inclined like Beatson LJ to accept the respondents alternative submission, but he preferred not to express a final view.
The Strasbourg court has consistently accepted that judicial review is capable of satisfying the requirement of providing an effective remedy within the meaning of article 13 of the European Convention in the context of asylum cases: Vilvarajah v United Kingdom (1991) 14 EHRR 248, para 126, D v United Kingdom (1997) 24 EHRR 423, para 71, and Bensaid v United Kingdom (2001) 33 EHRR 205, para 56.
Those cases undoubtedly establish an important general principle, but I regard it as a mistake to concentrate on the remedy of judicial review in the particular circumstances that Parliament has established a statutory procedure under NIAA for granting and withdrawing refugee status.
In general, a right of appeal to an immigration judge, involving a full factual review, arises at the point when an applicant would otherwise be liable to removal.
Additionally, section 83 enables an applicant to appeal at a time when he is not at risk of removal, despite the rejection of his claim, if he has been given discretionary leave to remain for over a year.
Such an applicant is in the position that his case will not be reviewed for some time, but his longer term outlook is uncertain.
Does the scheme satisfy the requirement of providing an effective remedy for an applicant who is refused asylum but given leave to remain for a matter of months?
I agree with Beatson LJ that the answer is yes for essentially the reasons which he gave.
The right of appeal of the person to the tribunal is not immediate but is still effective.
The deferment is not for long and there are understandable reasons for it.
In a situation where crisis conditions in a particular country lead to a surge of asylum applications resulting in a large number of applicants being granted short term leave to remain, it is not in the public interest or the interest of applicants for tribunals to become clogged with cases which are due to be reviewed by the respondent before long in any event.
The point is made that TN and MA were deprived of the chance of establishing that they were entitled to refugee status as members of a particular vulnerable social group, namely minors who were effectively orphans.
But as Maurice Kay LJ observed in KA (Afghanistan) v Secretary of State for the Home Department [2012] EWCA Civ 1014, [2013] 1 WLR 615, para 18, when it comes to the kinds of risk such as the forcible recruitment or the sexual exploitation of young males, persecution is not respectful of birthdays.
And if, however unrealistically, the relevant social group and attendant risk are identified in a way which is strictly age specific, any corresponding entitlement to refugee status would be time limited in the same way.
If the statutory scheme failed to provide an effective remedy, it would be necessary to consider whether the availability of judicial review made good the deficit, but that situation does not arise.
TN and MA also relied on article 47 of the Charter of Fundamental Rights of the European Union, which provides: Everyone whose rights and freedoms guaranteed by the law of the Union are violated has the right to an effective remedy before a tribunal in compliance with the conditions laid down in this Article.
A denial of refugee status to an applicant does not, as such, concern a right or freedom guaranteed under the European Convention (A v Netherlands (2010) 59 EHRR 1098), and in relation the law of the Union the argument under article 47 adds nothing to the argument under the Procedures Directive.
Family tracing: the issues
The appellants all contend that the respondents decision to reject their asylum claims was vitiated by her failure to carry out her tracing duty and, in particular, that they were prejudiced by the failure because proper inquiries may have produced evidence to support their accounts which the respondent disbelieved.
Mr Stephen Knafler QC on behalf of AA argued that the only lawful conclusion open to the tribunal, applying corrective justice, was to find that AA was entitled to asylum (or make findings which required the respondent to grant corrective leave) and that this court should so hold.
Alternatively, he submitted that the case should be remitted to the Upper Tribunal, which should (a) decide the case on the facts as they were at the time of the respondents decision and (b) apply a presumption that AA was credible, since he had cooperated in providing all the information relevant to tracing which he had been asked to provide and the respondent had failed to carry out inquiries which could well have corroborated his account.
The Upper Tribunal should only reject his appeal if it was satisfied that his claim, notwithstanding its presumptive credibility, was clearly not capable of belief.
Mr Becket Bedford on behalf of TN and MA also submitted that the proper remedy for the respondents breach of duty with regard to family tracing was for the tribunal to have held that they were entitled to asylum.
Before considering the reasoning of the Court of Appeal in the present cases it is necessary to refer to some of its earlier decisions.
In Ravichandran v Secretary of State for the Home Department [1996] Imm AR 97 the Court of Appeal held that asylum appeals should be determined by reference to the position at the time of the appellate decision rather than by reference to the factual situation at the time of the original decision against which the appeal was brought.
This makes good sense and the general policy has not been doubted.
The subject matter is whether the applicant requires refugee protection.
Hearings before the First tier Tribunal involve immigration judges receiving evidence and making up their own minds about the facts.
As Simon Brown LJ observed in Ravichandran, at p 112, this may fairly be regarded as an extension of the decision making process.
Moreover, as he also pointed out, immigration judges build up a body of knowledge, and it would not serve the public interest if they were required to ignore matters which they know to have happened after the date of the Secretary of States decision.
The situation might have changed for the better or for the worse.
Similar considerations apply, at least to some extent, to the Upper Tribunal.
If it finds that there has been a material error by the First tier Tribunal it will ordinarily re make the decision and for that purpose may well hear fresh oral evidence (as in the case of MA).
And the point about the judges constantly developing bank of knowledge is equally applicable to the Upper Tribunal.
It would not make sense for the First tier Tribunal to take into account its knowledge about the situation at the time of its decision, but for the Upper Tribunal to have to ignore its more recent knowledge.
In R (Rashid) v Secretary of State for the Home Department [2005] EWCA 744, [2005] Imm AR 608, the Court of Appeal created in effect an exception to the Ravichandran principle.
The facts were unusual.
The claimant was an Iraqi Kurd.
He came to the UK during the regime of Saddam Hussein and claimed asylum.
In December 2001 his claim was rejected on the ground that internal relocation was available to him within the Kurdish Autonomous Zone (KAZ).
The decision was upheld by an immigration adjudicator and in July 2002 he was refused permission to appeal to the Immigration Appeal Tribunal.
In February 2003 he was given permission to apply for judicial review to argue whether the KAZ was an entity capable of providing the necessary protection for the purposes of the Refugee Convention.
The same point was due to be considered by the Court of Appeal in the following month in appeals brought by M and A, and Rashids judicial review claim was ordered to be listed after the hearing of those appeals.
On 6 March 2003 the Treasury Solicitor wrote to M and As solicitors, saying that the Secretary of State was not as a matter of policy at that time relying on the availability of relocation to the KAZ, and they were granted refugee status.
The policy in question had existed from October 2000, but not all Home Office case workers were aware of it and it had not been consistently applied.
Rashids solicitors learned about the policy as a result of the Treasury Solicitors letter to M and As solicitors, and on 12 March 2003 they wrote asking for Rashids case to be reconsidered.
The Treasury Solicitor replied that he was aware of cases stacked behind those of M and A, and that Rashids case had been sent back to a case worker for reconsideration.
In the same month military action in Iraq began, and on 21 March it was announced that all decision making on claims by Iraqi nationals had been suspended.
At the end of the war the Secretary of State adopted a new policy, and Rashids claim was rejected on the ground that after the collapse of Saddam Husseins regime he was not at risk.
On Rashids application for judicial review, the Court of Appeal held that he was entitled to unconditional leave to remain in the UK.
The Secretary of State relied on the Ravichandran principle.
The leading judgment was given by Pill LJ, with whom May LJ agreed.
He based his decision on the principle that an abuse of power called for the court to intervene to give such relief as it properly and appropriately can (para 37).
He found that there was an abuse of power because there was conspicuous unfairness in Rashids treatment.
After startling and prolonged failures of the Home Office (para 13), the correct policy emerged in the cases of M and A. Rashids case had been stacked behind them, the issues were identical and fairness required that the same treatment be given to him as to them.
Pill LJ recognised that the court could not declare that Rashid was entitled to be granted refugee status, as M and A had been, because that is a status conferred on the basis of criteria prescribed in an international treaty and should not be conferred if the criteria are not satisfied at the time of the decision.
But he held that the court could and should declare that Rashid was entitled to indefinite leave to remain.
This, he said, provided a remedy for the unfairness and was the appropriate response in the circumstances.
In a concurring judgment Dyson LJ said that the case presented the stark question which of two considerations should prevail: justice and fairness, which suggested that the claimant should not be returned to Iraq, or the Ravichandran principle.
He accepted that to hold the Secretary of State to an earlier policy which had been withdrawn by the final stage of the decision making process would infringe the principle established by Ravichandran, but this consideration was outweighed by the conspicuous unfairness which there had been.
The reasoning in Rashid has been criticised.
In R (S) v Secretary of State for the Home Department [2007] EWCA Civ 546, [2007] Imm AR 781, para 39, Carnwath LJ described the reasoning as not altogether convincing, and that it appeared to turn abuse of power into a factor able to achieve remedial results not open to the courts in other instances of illegality.
He also had doubts about the weight placed by the court on the Departments conduct.
The courts proper sphere is illegality, not maladministration.
If the earlier decision to refuse the asylum application was unlawful, it was the unlawfulness rather than the cause of it (whether bad faith or muddle) which justified the courts intervention and provided the basis for the remedy.
Having made those criticisms, Carnwath LJ said that the courts task was to try to extract a principled basis for the decision, which must be found in the majority judgment of Pill LJ.
Although Pill LJ appeared to have expressed the result as an exercise of the courts remedial discretion, the court had no power to grant indefinite leave to remain; the power and discretion rested with the Secretary of State, and it was not open to the court to assume that function.
The principled basis for the decision must be that it was open to the court to determine that a legally relevant factor in the exercise of the discretion was the correction of injustice, and that in an extreme case the court could find that the unfairness and the remedy were so plain that there was only one way in which the Secretary of State could exercise his discretion.
In DS (Afghanistan) v Secretary of State for the Home Department [2011] EWCA Civ 305, [2011] INLR 389, the Court of Appeal remitted an asylum claim by an unaccompanied minor to the Upper Tribunal because no consideration had been given to the respondents duty to consider the appellants best interests as required by section 55 of the 2009 Act.
The respondent had also made no attempt to trace his family.
As to that aspect, Lloyd LJ said in his judgment with which Rimer LJ agreed: 68.
The obligation to endeavour to trace under regulation 6 applies when a child has made an asylum application, but the application is to be determined on its merits, whether or not any steps have been taken pursuant to the obligation.
To that extent I would accept the submission for the respondent that the obligation to endeavour to trace is distinct from the issues that arise on an application for asylum.
If steps have been taken pursuant to the obligation under regulation 6, the results, if any, may be relevant to the determination of the asylum application, depending on what the issues are on that application.
In fact, no attempt to trace was made by UK Border Agency in the present case.
All that was done was to draw to the attention of the applicant or his foster carer the facilities of the Red Cross, with a view to his attempting to trace his relatives through that agency.
It seems to me that that failure is not, by itself, relevant to the determination of the appellants asylum application.
However, the Secretary of State is still subject to the obligation, and steps ought now to be taken to comply with that obligation.
In KA (Afghanistan) v Secretary of State for the Home Department [2012] EWCA Civ 1014, [2013] 1 WLR 615, the eight appellants came, unaccompanied, from Afghanistan to the UK aged 15 or 16 and claimed asylum.
Their applications were refused and they were all granted discretionary leave until the age of 17 in accordance with the standard policy.
Shortly before its expiry they applied for a variation which was refused.
Each appealed unsuccessfully to the First tier Tribunal.
Two of the appeals were heard while the appellants were still minors.
All appealed to the Upper Tribunal, and their appeals were heard and dismissed after they had reached the age of 18.
In each case the Upper Tribunal approached the assessment of risk on the basis of the facts at the time of the hearing before it, including the fact that the appellant had recently reached that age.
They were given leave to appeal to the Court of Appeal on the grounds that the respondent had failed in her tracing duty and that, although they had now reached their majority, the illegality should be remedied by the grant of leave to remain as the necessary corrective action on the Rashid principle.
In any event it was submitted that the Upper Tribunal was wrong to apply the general rule established by Ravichandran.
The judgment of the Court of Appeal was given by Maurice Kay LJ, with whom Hooper and Moore Bick LJJ agreed.
He accepted that on the evidence there was a systemic breach of the respondents duty to endeavour to trace.
He described it as a complicated question whether this gave rise to the Rashid principle, about which he agreed with Carnwath LJs analysis in section It was not a simple matter of the systemic breach entitling the appellants to have their appeals allowed with remittal to the respondent to consider grants of leave to remain, but nor did the case admit of the simple analysis that the breach was irrelevant at the time of the hearings by the Upper Tribunal on the Ravichandran principle.
The burden of proof was on the claimant to establish not only the failure to discharge the duty to endeavour to trace but also that he was entitled to the relief sought.
There was, he said, a hypothetical spectrum.
He continued (para 25): At one end is a claimant who gives a credible and cooperative account of having no surviving family in Afghanistan or having lost touch with surviving family members and having failed, notwithstanding his best endeavours, to re establish contact.
It seems to me that, even if he has reached the age of 18 by the time his appeal is considered by the tribunal, he may, depending on the totality of the established facts, have the basis of a successful appeal by availing himself of the Rashid/S principle and/or section 55 by reference to the failure of the Secretary of State to discharge the duty to endeavour to trace.
In such a case the Ravichandran principle would not be an insurmountable obstacle.
I do not find this easy to follow.
If the applicants account is accepted as credible, it is difficult to see why the fact that he has passed the milestone of his 18th birthday should result in his appeal failing in circumstances where it would have succeeded if he had been only 17 years 11 months old.
In that sense I see why the Ravichandran principle would not be an obstacle.
But I do not see precisely how the Rashid principle would apply or what would be the evidential significance of the respondents breach of duty.
Maurice Kay LJ went on: At the other end of the spectrum is a claimant whose claim to have no surviving family in Afghanistan is disbelieved and in respect of whom it is found that he has been uncooperative so as to frustrate any attempt to trace his family.
In such a case, again depending on the totality of established facts, he may have put himself beyond the bite of the protective and corrective principle.
This would not be because the law seeks to punish him for his mendacity but because he has failed to prove the risk on return and because there would be no causative link between the Secretary of States breach of duty and his claim to protection.
Again it is not easy to identify the necessary causative link between the breach of duty and the claim for protection, but it cannot be the absence of the result of family tracing in assessing the credibility of the claimant.
What is clear in Maurice Kay LJs analysis is that the assessment of the credibility of the claimants account of not having available family protection must necessarily be made on the evidence available to the tribunal, without a presumption in the claimants favour.
The court allowed one of the eight appeals, on other grounds, and gave directions in relation to the remaining seven appellants for them to lodge supplemental skeleton arguments setting out how their case was put in in the light of the way in which Maurice Kay LJ had mapped out the general principles.
The appeals came back before a differently constituted court (Maurice Kay VP, Jackson LJ and Sir Stanley Burnton).
The second stage of their appeals is reported under the title EU (Afghanistan) v Secretary of State for the Home Department [2013] EWCA Civ 32, [2013] Imm AR 496.
Sir Stanley Burnton gave the leading judgment, with which the other members of the court agreed.
He was unsparing in his criticism of Rashid (para 6): I have to say that, like the Court of Appeal in S, I have great difficulties with the judgments in Rashid.
In cases that are concerned with claims for asylum, the purpose of the grant of leave is to grant protection to someone who would be at risk, or whose Convention rights would be infringed, if he or she was returned to the country of nationality.
Of course, breaches of the duty of the Secretary of State in addressing a claim may lead to an independent justification for leave to remain, of which the paradigm is the article 8 claim of an asylum seeker whose claim has not been expeditiously determined, with the result that he has been in this country so long as to have established private and family life here.
But to grant leave to remain to someone who has no risk on return, whose Convention rights will not be infringed by his return, and who has no other independent claim to remain here (such as a claim to be a skilled migrant), is to use the power to grant leave to remain for a purpose other than that for which it is conferred.
In effect, it is to accede to a claim to remain here as an economic migrant.
The principle in Rashid has been referred to as the protective principle, but this is a misnomer: the person relying on this principle needs to do so only because he has been found not to be in need of protection.
I do not think that the court should require or encourage the Secretary of State to grant leave in such circumstances either in order to mark the courts displeasure at her conduct, or as a sanction for her misconduct.
Sir Stanley Burnton acknowledged that the respondents breach of her tracing duty could have evidential relevance, because in assessing the risk to a claimant on return to his or her country of nationality the lack of evidence from the respondent as to the availability of familial support was a relevant factor.
The failure to endeavour to trace a claimants family might also result in a claimant, who had lost contact with his family, putting down roots here and establishing an article 8 claim.
But Sir Stanley Burnton emphasised the need for the claimant to establish some causative relevance of the respondents breach to the protection claimed.
On this approach, it is not for the tribunal or the court, in considering a claim for asylum, to try to compensate the claimant for some past breach of duty which does not affect the question whether he is presently exposed to a risk entitling him to the protection of the Refugee Convention (or to humanitarian protection).
The consequences of a breach of duty by the respondent may be a relevant factor in the assessment of present risk, because of the possible effect on the nature and quality of the available evidence.
But that is different from exercising some form of remedial jurisdiction entitling the tribunal or court to order that the claimant should have indefinite leave to remain, on account of the respondents breach of duty, in a case where the evidence does not establish the present existence of a right to refugee status or humanitarian protection.
Sir Stanley Burnton referred to two other points of general application.
First, he added to the courts comments in KA (Afghanistan) v Secretary of State for the Home Department about the boundary line between minority and adulthood that in many cases the date of birth of 1 January (in a particular year) given to an applicant after an age assessment is notional.
The fact that the true date of birth is unknown is an additional reason for not regarding the supposed date of majority as necessarily changing the assessment of risk.
Secondly, Sir Stanley Burnton saw force in a point made by the respondent that UASCs who arrive in this country from Afghanistan have done so as a result of someone, presumably their families, paying for their fare and/or for an agent to arrange their journey.
The costs are likely to have been considerable, relative to the wealth of an average Afghan family.
They are unlikely to want to cooperate with an agent of the respondent for the return of their child to Afghanistan.
The individual appeals were dismissed.
EUs case was typical.
The immigration judge disbelieved his account of how and why he came to leave Afghanistan and his claim to have lost contact with his family.
The Upper Tribunal treated the respondents failure to endeavour to trace his family as irrelevant.
The Court of Appeal held that it was right to do so in view of the immigration judges rejection of his evidence about losing contact with his family.
In the present appeals by TN and MA, Maurice Kay V P affirmed the general principle established in Ravichandran that an appellate tribunal considers an asylum case on the basis of the latest evidence and material, including any which postdates the original decision.
He described Ravichandran as not a one way street because the most recent material may enhance an applicants case just as it may undermine it.
It was an even handed principle, which ensures that, when asylum cases are considered on appeal, those currently at risk on return to their countries of origin are not returned and those who are not or are no longer at such risk are not accorded a status which they do not merit (paras 25 26).
He recognised that the concept of corrective relief which was considered in KA is an exception because it contemplates relief on the basis of a previous error or breach of obligation which has lost current significance because of the passage of time (for example, attaining majority) or a change of policy (para 24).
He did not grapple with the conflict between a) the general principle by which an appellate tribunal looks even handedly at the position at the date of review, and b) the exception by which the tribunal grants relief, to which the applicant is not otherwise entitled, by reason of an error which has lost current significance.
Nor did he address the criteria for determining when the purported exception should apply, apart from referring in general terms to a hypothetical spectrum of cases.
He said that in the case of MA, any assessment of his position on the KA hypothetical spectrum was bound to be conditioned by the reasoned rejection of his evidence about not having attempted to contact his family, and he described MAs difficulties in this respect as insurmountable.
MAs appeal was therefore dismissed.
He said nothing about TNs position in this regard, because his case had been remitted to the respondent.
In AAs case, the respondents reasons for refusal letter stated: 82.
In light of findings in DS efforts have been made to establish a method by which the Secretary of State can assist in locating the families of unaccompanied asylum seeking children in Afghanistan.
Should you wish the UK Border Agency to make efforts to locate your family, please fill in and return the tracing pro forma as soon and provide as much detail as possible in regards to all of your family in Afghanistan to allow this to be explored. 83.
It should be noted that the UK Border Agency is currently unable to attempt to trace your family within Afghanistan.
The Foreign and Commonwealth Office has confirmed that there is no presence in Afghanistan that would currently be able to assist in conducting family tracing in Afghanistan.
In the Court of Appeal AA relied on a report by Mr Tim Foxley MBE, an expert on political and social conditions in Afghanistan, which was admitted as evidence without objection by the respondent.
His overall conclusion was that a blanket assertion that UKBA could not trace families in Afghanistan was not sustainable.
He recognised that there were significant security problems in Nangarhar district.
However, the British Embassy in Kabul had extensive local contacts and for the purpose of family tracing it would be possible for embassy staff to tap into links with the Afghan national government (Ministry of Refugees and Repatriation), local government, the Afghan police or various NGOs operating in Afghanistan.
A witness statement on behalf of the respondent described the methods by which, in principle, the families of UASCs may be traced, and also the difficulties of doing so in Afghanistan on account of the security situation (other than by telephone or email, if the applicant provided the telephone number or email address).
Underhill LJ concluded that the respondent was in breach of the tracing duty in her handling of AAs case by a) not initiating the process earlier and b) not asking sufficiently searching questions aimed at eliciting ways in which his family might have been traced by remote means, that is, other than by trying to telephone or email them.
The second criticism is puzzling because Underhill LJ himself noted that the effect of AAs answers in interview, confirmed in his own witness statement, was that he had given all the information that he could.
In this court Mr Knafler realistically accepted that there was nothing more which the respondent could have hoped to glean from questioning AA, but he concentrated on the respondents failure to pursue any of the avenues identified by Mr Foxley before reaching a decision whether to accept the asylum claim.
Underhill LJ accepted that the tracing process must be treated as part of the process of deciding the asylum claim and it was therefore right to consider what evidence might have been elicited if the duty had been properly performed.
On the facts, he rejected the submission that if UKBA had asked the right questions from the start, and if the respondent had established an effective system of tracing in Afghanistan prior to 2012, there was a real prospect that information would have been obtained that would have supported AAs asylum claim.
He concluded that whatever tracing procedures were in place, the information available to the respondent afforded no opportunity for remote tracing.
Underhill LJ added that it was AAs own case that his family arranged for him to leave Afghanistan and come to the UK, no doubt at considerable cost.
They were very unlikely to want him to be returned, and, even if it were possible to contact any member of his family, they would have a strong incentive to support his account of persecution.
Any corroboration from that source would therefore be of doubtful value.
Drawing the threads together, it was submitted in the present appeals on behalf of MA and AA that the tribunal ought to have made a presumption of credibility in each the tracing duty was an integral part of the decision making process; the Court of Appeal was wrong to find in each case that the breach of i) ii) duty was immaterial on the facts; iii) appellants favour; iv) the tribunal and Court of Appeal ought not to have followed Ravichandran but, applying Rashid, ought to have held that each appellant was entitled to asylum or unconditional leave.
It was submitted on behalf of TN that the Upper Tribunal was right to allow his appeal, but should have gone further and held that he was entitled to asylum or unconditional leave, rather than remitting the matter to the respondent for a fresh decision.
Commissioner for England (OCC) submitted that: In a written intervention in AAs case, the Office of the Childrens i) the respondent is under a duty to assess the childs best interests before seeking to discharge any of her obligations, including the tracing obligation; ii) the methods used in fulfilling the tracing obligation must take into account the childs wishes and feelings and the need for the child to give informed consent to any family tracing process; iii) no adverse credibility finding should be reached without an assessment of the childs ability to provide information or further information for the purposes of family tracing; iv) the best interests assessment and the family tracing process should be regarded as a necessary part of the search for a durable solution for the child based on his or her own individual circumstances; v) if an unaccompanied minor becomes 18 before a final decision on his or her appeal, the duty to trace is still a component of the search for a durable solution, that is, one which will last beyond their 18th birthday.
Analysis
I begin with section 55 of the 2009 Act and the statutory guidance issued in Every Child Matters.
Officials who discharge the respondents functions in relation to immigration and asylum must take into account the best interests of a child as a primary consideration when making decisions which affect them.
Protection of the childs best interests provides the rationale for the respondents tracing obligation, as regulation 6(1) of the Asylum Seekers (Reception Conditions) Regulations 2005 explicitly recognises.
The OCC rightly emphasised that before any tracing process is embarked upon the child must be properly consulted about his or her wishes.
This is a necessary part of considering the childs best interests.
There may be all sorts of reasons why the child may not want any such process to be carried out, or may be concerned about the way in which it is carried out, because of potential consequences for the child, members of their family or others.
Article 19.4 of the Reception Directive requires that those working with unaccompanied minors shall have had appropriate training.
I turn next to Ravichandran and Rashid.
The principle in Ravichandran is sound.
As Simon Brown, LJ said in that case, on an asylum appeal the subject matter is whether the appellant requires refugee protection.
The function of the court is quite unlike its function when adjudicating, for example, on a private law claim for breach of contract or tort.
A claimant who establishes that there has been a breach of contract or tort is entitled to be put, so far as the court is able to do so, in the same position as if the wrong had not been committed.
In Ravichandran the court rightly held that on an asylum appeal the question is one of present status: does the appellant meet the criteria of the Refugee Convention or is he in need of humanitarian protection?
I agree with the criticisms made of Rashid by Carnwath LJ in R(S) v Secretary of State for Home Department and by Sir Stanley Burnton in EU (Afghanistan) v Secretary of State for the Home Department.
In Rashid the sloppiness of procedures in the Home Office resulted in the appellant being unfairly denied refugee status when he applied for it; but refugee status is not bound to endure for ever.
By the time that his case reached the Court of Appeal the source of persecution in Iraq had been overthrown, and the effect of the courts decision was to give him a right which he did not need for his personal protection.
Because the Rashid exception to Ravichandran lacks a satisfactory principle, it is also impossible to state its scope with any degree of clarity.
In KA (Afghanistan) v Secretary of State for the Home Department Maurice Kay LJ (para 17) described it as a complicated question whether the facts of the cases under consideration gave rise to the Rashid principle, and the court struggled in its attempt to articulate what needed to be shown for the principle to apply.
I would hold that the Ravichandran principle applies on the hearing of asylum appeals without exception, and Rashid should no longer be followed.
The question whether the appellant qualifies for asylum status is not a question of discretion.
It is one which must be decided on the evidence before the tribunal or court, and there is no legal justification for approaching that question with a presumption that the appellant is credible arising from a failure of the respondent properly to discharge her obligation in relation to family tracing.
Discretionary leave by definition involves a discretion, but it is a discretion which belongs to the respondent and not to the court.
The respondent must of course exercise her discretion lawfully, with proper regard to any policy which she has established, but I agree with Sir Stanley Burnton that it is not proper for a court to require the respondent to grant unconditional leave to an appellant who would not be entitled to such relief under current policy (or have a current right to remain in the UK on other grounds, such as article 8), as a form of relief for an earlier error or breach of obligation.
There remains the question how the tribunal should approach an asylum appeal where the respondent has failed in her tracing obligation.
If the appellant believes that he may have been prejudiced, it would be open to him to ask the respondent to attempt to carry out a tracing process and to ask the tribunal to adjourn the appeal for that to be done.
There would be force in the argument that it should not make a difference whether the appellant has by then turned 18, since that would not remove an obligation which had arisen under the Reception Directive and the effects of which were intended to last beyond their minority (as the OCC has submitted).
However, in deciding whether it accepts the appellants account, the tribunal must act on the evidence which it has.
In that respect I agree with what was said by Lloyd LJ in DS (Afghanistan) v Secretary of State for the Home Department (set out at para 43 above).
If the appellant has identified people who might be able to confirm his account, but the respondent has not pursued that lead, the tribunal might fairly regard the appellants willingness to identify possible sources of corroboration as a mark of credibility, but this would be an evidential assessment for the tribunal.
There is no presumption of credibility.
In MAs case and AAs case the appellants account was disbelieved by the Upper Tribunal.
I agree with the Court of Appeals rejection of the argument that the Upper Tribunal should have allowed the appeals by reason of the respondents breach of her tracing obligation.
The tribunal was right to assess the case on the evidence which it had.
Neither of the appellants gave any information from which their family could be traced, and the tribunals conclusion that their accounts lacked credibility was properly open to it.
As explained at para 18 above, the outcome of TNs appeal leaves a decision still to be made in his case by the respondent, following the remission of his asylum claim by the Upper Tribunal.
I would dismiss the appeals.
| UK-Abs | TN, MA and AA: (a) are Afghan nationals; (b) were smuggled into the UK as unaccompanied minors; (c) claimed asylum here; and, (d) had their accounts disbelieved and their claims rejected.
TN travelled to the UK in August 2010 and was arrested on 8 September 2010.
TNs agreed date of birth is 1 January 1994.
MA arrived in the UK on 27 July 2009.
He claimed to be 13 years old but was assessed to be 16 and given a notional birth date of 1 January 1993.
AA arrived in the UK in mid 2011 and was, subsequently, arrested by the police.
AAs accepted date of birth was 29 December 1995.
They all claimed asylum on the asserted basis that if they returned to Afghanistan they would be in danger from the Taliban, the government and/or the police.
When making these asylum decisions, the Respondent had to comply with the three EU Directives harmonising the asylum systems of the EU Member States: the Reception Directive (2003/9/EC), the Qualification Directive (2004/83/EC) and the Procedures Directive (2005/85/EC).
Article 19.3 of the Reception Directive requires Member States to endeavour to trace the members of [the unaccompanied minors] family as soon as possible.
The Respondent failed to do this in making the decision to reject the Appellants asylum claims.
Article 39 of the Procedures Directive requires Member States to ensure that applicants for asylum have the right to an effective remedy before a court or a tribunal against a decision taken on their application for asylum.
Sections 82 and 83 of the Nationality, Immigration and Asylum Act 2002 (NIAA) (as in force at the material time) allow an appeal of an asylum rejection only in certain circumstances.
The relevant circumstances are where the applicant no longer has leave to enter and remain in the UK, where a decision to remove the applicant has been made, or where the applicant has been granted leave to enter or remain in the UK for over one year.
Otherwise, the decision can only be judicially reviewed.
In accordance with the Respondents published policy, TN, MA and AA were granted discretionary leave to enter and remain in the UK until the age of 17 years and six months.
As TN and MA were aged over 16 years and six months when their asylum applications were rejected, they could not appeal their asylum decisions (although they could: (a) judicially review it; and/or, (b) appeal the length of their discretionary leave) as they did not fall within the section 82 and 83 NIAA circumstances.
They could only appeal the asylum rejection when a decision to remove them had been taken at the end of their discretionary leave at which point they would be unable to rely on their age as a ground for claiming refugee status.
TN and MA appealed the length of their discretionary leave and judicially reviewed their exclusion from an appeal until their removal, arguing this violated their rights to an effective remedy under
article 39 of the Procedures Directive.
TNs appeal as to the length of discretionary leave was allowed by the Upper Tribunal but the Court of Appeal dismissed the other appeals.
AA appealed pursuant to section 83 NIAA.
Along with TN and MA, he argued that the Respondents failure to carry out her tracing duty vitiated her decision to reject the asylum claims.
Moreover, if the Respondent had complied with her tracing duty it would have produced evidence to support their accounts which the Respondent had disbelieved.
The Court of Appeal also dismissed these appeals.
The Supreme Court (with Lord Toulson giving its judgment) unanimously dismisses the appeals.
Right to an effective remedy issue TNs and MAs right of appeal to the tribunal was not immediate but was still effective.
The deferment was not for long and there were understandable reasons for it.
For example, where there is a surge of asylum applications following short term crisis conditions in a particular country it is not in the public interest, or the interest of the applicants, for tribunals to become clogged with cases which are due to be reviewed before long in any event [32].
Although it was argued that TN and MA would thereby be deprived of the ability to argue that they should be protected on the basis of the status as minors who were effectively orphans, when it comes to the kinds of risk including forcible recruitment and sexual exploitation persecution is not respectful of birthdays.
In any event, any entitlement to refugee status on the basis of age would be time limited in the same way to correspond with the attendant risk [33].
As a result, it is not necessary to consider whether judicial review provides an effective remedy [34].
Tracing issue The principle established in the case of Ravichandran is sound; asylum appeals should be determined by reference to the situation at the time of the appellate decision rather than by reference to the situation at the time of the original decision [70].
The exception to this established in the case of Rashid that an abuse of power by the state enables the court to intervene to give appropriate relief to compensate a past breach of duty even if the asylum applicant is presently no longer in need of protection lacks a satisfactory principle, is unclear and should no longer be followed [71 72].
In deciding whether to accept an applicants account, the tribunal must act on the evidence before it with no presumption of credibility.
The fact that the Respondent fails properly to discharge her tracing obligation does not affect this [72 73].
Given that MAs and AAs accounts were disbelieved by the Upper Tribunal, their appeals should not have been allowed merely by reason of the Respondents breach of her tracing obligation [74].
The purpose of tracing a childs family is for the childs welfare in promoting reunification, not for the purpose of gathering evidence, although it may lead to that result.
The child should be consulted about tracing before any steps are taken [69].
Neither MA nor AA gave any information from which their family could be traced and the conclusion that their accounts lacked credibility was properly open to the Upper Tribunal.
In relation to TNs discretionary leave application, the Respondent can now re take her decision pursuant to these principles [74].
|
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
| UK-Abs | 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]
|
In 2008 the appellant, Mr Mandalia, who was then aged 25, came from India to the UK in order to study.
His visa, as extended, was due to expire on 9 February 2012.
On 7 February 2012 he applied to the UK Border Agency (the agency) for a further extension of it in order to study accountancy.
The rules referable to his type of application were that it had to be accompanied by a bank statement or statements showing that he had held at least 5,400 for a consecutive period of 28 days ending no earlier than a month prior to the date of his application.
Mr Mandalia accompanied his application with a bank statement but it showed that he had held at least 5,400 for a consecutive period of only 22 days ending no earlier than a month prior to the date of his application.
The statement which he provided did not cover six of the requisite 28 days.
The extra coverage might have been either of the six days immediately following the period of 22 days covered by his statement or of the six days immediately preceding it; but in what follows it will be convenient to address the deficit in his coverage as being the latter.
The agency refused Mr Mandalias application for a further extension.
The question is: did it act unlawfully in refusing his application without having first invited him to supply a further bank statement or statements which showed that he had also held at least 5,400 throughout those six preceding days? On 20 January 2014 the Court of Appeal, by a judgment delivered by Davis LJ with which Pitchford LJ and Sir Stanley Burnton agreed, gave a negative answer to that question: [2014] EWCA Civ 2, [2014] Imm AR 588.
Mr Mandalias appeal to this court requires us to consider, in particular, the agencys instructions to caseworkers which then applied to their processing of such applications.
The Rules
In March 2006 the Secretary of State presented to Parliament a White Paper entitled A Points Based System: Making Migration Work for Britain Cm 6741.
In Australia the rules for controlling immigration for the purposes of work or study had been encompassed in a points based system and the White Paper heralded the introduction of an analogous system in the UK for the control of immigration for such purposes from outside the EU.
According to the White Paper a key outcome of the system would be a more efficient, transparent and objective application process (paragraphs 3, 25).
The system was introduced into the Immigration Rules (the rules) as Part 6A: POINTS BASED SYSTEM, which became operative in stages beginning in November 2008.
Since becoming operative, the provisions of Part 6A, including the appendices to it, have been amended on numerous occasions.
In Pokhriyal v Secretary of State for the Home Department [2013] EWCA Civ 1568, [2014] INLR 291, Jackson LJ observed at para 4 that they had now achieved a degree of complexity which even the Byzantine emperors would have envied.
On any view, and contrary to a forecast in the White Paper, it is difficult for applicants, for many of whom English is not even their first language, to navigate their way around the requirements.
It may be, however, that, as intended, the system is not difficult for caseworkers to administer.
Certainly they have to a substantial extent been relieved of the obligation to consider whether to exercise discretions in their processing of applications.
The sharp edges of the rules have cut out hard cases which have found their way to the courts and which have inevitably attracted at any rate the sympathy of the judges and sometimes I speak for myself nascent reservations about the suitability of the system which have not been easy to suppress.
But suppressed they must be.
For the management of this type of immigration, in principle highly valuable for the UK, is a profound social challenge, of which the complexities are beyond the understanding of the courts; and, by not exercising its right to disapprove Part 6A of the rules, Parliament has indorsed the Secretary of States considered opinion that a points based system is the optimum mechanism for achieving management of it.
The points based system has five tiers.
Into Tier 1 fall highly skilled workers, entrepreneurs and investors.
Into Tier 2 fall ordinary skilled workers if sponsored by a UK employer.
Tier 3, designated for certain low skilled migrants, has never been brought into operation.
Into Tier 4 fall students if sponsored by educational establishments and they are subdivided into General students, broadly encompassing adults, and Child students, broadly encompassing minors.
Into Tier 5 fall temporary workers.
Mr Mandalias application was therefore for leave to remain in the UK as a Tier 4 (General) Student.
Mr Mandalia wished to become a certified accountant by pursuing a two year course of study at the BPP University College of Professional Studies.
The college furnished him with a document entitled Confirmation of Acceptance for Studies, by which he secured the points which satisfied requirement (c) of Rule 245ZX of the rules and paragraph 113 of Appendix A: Attributes.
But requirement (d) of Rule 245ZX obliged Mr Mandalia also to secure points under Appendix C: Maintenance (Funds).
An understanding of requirement (d) is achieved only by travel through seven stages. i. Paragraph 1A of Appendix C provided: (a) The applicant must have the funds specified in the relevant part of Appendix C at the date of the application. (b) (c) If the applicant is applying as a Tier 4 migrant, the applicant must have had the funds referred to in (a) above for a consecutive 28 day period of time.
The relevant part of Appendix C was in paragraphs 10 to 14. ii.
Paragraph 10 provided that, as a Tier 4 (General) Student, Mr Mandalia had to score ten points for funds. iii.
Paragraph 11 provided that he would secure ten points only if the funds shown in tabulated form were available to him in the manner specified in paragraph 13. iv.
The table in paragraph 11 required him to show not only funds with which to pay the fees for the first year of the course (being a requirement which Mr Mandalia satisfied) but also, and here I refer to the figures in the table as they stood on 7 February 2012, 600 per month for nine months (ie 5,400), as evidence of his ability to maintain himself while pursuing the course. vs Paragraph 13 provided that funds would be available to Mr Mandalia only where specified documents so demonstrated. vi.
Rule 245A of the rules, as it stood on 7 February 2012, provided that specified documents meant documents specified by the Secretary of State in a publication entitled Tier 4 of the Points Based System Policy Guidance (the policy guidance). vii.
The version of the policy guidance operative on 7 February 2012, namely the version dated July 2011, made clear, at para 182, that the consecutive 28 day period identified in para 1A(c) of Appendix C to the rules was a period ending no earlier than a month prior to the date of the application and, at para 188, that, of the five types of document which could demonstrate availability of the funds, one was Mr Mandalias bank statements.
The rules therefore required Mr Mandalia to demonstrate, in particular by the provision of bank statements, that he had held at least 5,400 for a consecutive period of 28 days ending no earlier than 7 January 2012.
Mr Mandalias Application
Mr Mandalia completed the form appropriate to an application for leave to remain as a Tier 4 (General) Student.
It ran to 43 pages.
Section L of it was entitled Maintenance (Funds).
Section L7 said: The student must have 600 for each calendar month of their course up to a maximum of nine months.
Please state what this amount is: In the box Mr Mandalia wrote 5,400.
Section L24 said: Please tick to confirm the documents submitted as supporting evidence to show the student has access to the required amount of money for maintenance and funds.
Mr Mandalia ticked the first box, entitled Personal bank or building society statements.
The bank statement which Mr Mandalia enclosed with his application form, submitted by post with the requisite fee on 6 February 2012 and received by the agency on the following day, was a statement relating to a current account held in his name with HSBC.
It covered the period from 29 December 2011 to 19 January 2012, namely 22 days.
Importantly the statement was numbered sheet 64 and the opening entry for 29 December 2011 was a credit balance brought forward of 11,090.60.
The closing balance was a credit balance carried forward of 12,071.05.
Transactions occurring between those dates amounted only to eight modest debits and two less modest credits.
The balance was at its lowest on 6 January 2012: it was then 11,018.34.
By letter to Mr Mandalia dated 8 February 2012, the agency acknowledged receipt of his application and said that it would be passed to a casework unit.
The agency added: If there is any problem with the validity of the application, such as missing documentation or omissions on the form, a caseworker will write to you as soon as possible to advise you what action you need to take to rectify the problem.
By letter to Mr Mandalia dated 21 April 2012, the agency, which had made no further contact with him following its letter dated 8 February 2012, informed him that his application had been refused in accordance with the rules and the policy guidance and that a decision had also been made for his removal from the UK pursuant to section 47 of the Immigration, Asylum and Nationality Act 2006 (the 2006 Act).
The agency made clear that the ground for refusal of his application was that he had failed to demonstrate that he had held 5,400 for a full 28 day period and that he had therefore failed to secure the requisite ten points.
It will already be apparent that nothing in the application form itself could have alerted Mr Mandalia to the requirement to enclose bank statements which demonstrated that his holding of at least 5,400 had endured for a consecutive period of 28 days (the 28 day requirement).
It would have been easy for the agency to explain the 28 day requirement in its instruction in section L24.
It is probable that, when he obtained the form, Mr Mandalia also obtained a leaflet entitled Help Text which, on the front of the form, the agency advised him to read prior to completing it.
But, although not every page of the leaflet in its then current form is before the court, the agency accepts that, again, there was nothing in it to alert Mr Mandalia to the 28 day requirement.
The Secretary of State relies, however, on the following advice set out at the beginning of section L of the form: Before filling in this section of the form, the student should refer to the Immigration Rules the help text leaflet available with the form and Policy Guidance The respective links to gaining access to the rules and to the policy guidance on the agencys website were duly set out within that sentence.
So the Secretary of State is able to say that, were an applicant such as Mr Mandalia to follow the advice set out at the beginning of section L, he would, on arrival at Rule 245ZX of the rules and at para 1A of Appendix C, learn of the 28 day requirement; and that, on arrival at para 182 of the policy guidance, he would notice it again and would also learn that the 28 day period was required to end no earlier than a month prior to the date of the application.
The Proceedings
Mr Mandalia appealed to the First tier Tribunal (Immigration and Asylum Chamber) against the agencys refusal of his application.
He represented himself at the hearing before the Tribunal Judge; a Home Office Presenting Officer represented the Secretary of State.
On 2 July 2012 the tribunal dismissed Mr Mandalias appeal on the ground that his application had fallen foul of the 28 day requirement.
He had enclosed with his notice of appeal statements numbered 62 and 63 relating to his account with HSBC.
The statement numbered 63 was confined to transactions on 28 December 2011 and so Mr Mandalia had also enclosed statement numbered 62, which covered all preceding transactions from 29 November 2011 onwards.
The statements demonstrated that, on the missing six days between 23 and 28 December 2011, Mr Mandalias credit balance had been 11,280.30 for the first five days and 11,127.98 for the sixth day.
In May 2011 a controversial provision, inserted (by section 19(2) of the UK Borders Act 2007) into the Nationality, Immigration and Asylum Act 2002 as section 85A, had come into force.
The effect of subsections (3) and (4) had been to disable the First tier Tribunal from considering evidence adduced by Mr Mandalia in the course of his appeal unless he had submitted it to the agency in support of his application.
Strictly speaking, therefore, his bank statements numbered 62 and 63 were inadmissible before the tribunal.
The judge probably took the view that reference to those statements would be impermissible only if they were to provide a basis for allowing the appeal; and that, in briefly setting out his reasons for dismissing it, it would be unrealistic for him not to explain that Mr Mandalias possession of the requisite 5,400 throughout the first six of the 28 days had by then become clear.
At the end of his reasons the judge of the First tier Tribunal observed that, in the light of the fresh evidence, a further, more careful, application by Mr Mandalia for extension of his visa might well succeed.
This court has received vigorous submissions on each side about the circumstances in which, on payment of a further fee, Mr Mandalia might have been able to make a further application.
But in my view his ability to do so, to the extent that it existed, is irrelevant to the issue raised in the appeal.
Mr Mandalia took specialist advice about the possibility of an appeal to the Upper Tribunal (Immigration and Asylum Chamber) and, with the help of the adviser, applied to the Upper Tribunal for permission to appeal.
The adviser was aware of a document which had been issued by the agency to caseworkers on 17 June 2011 entitled PBS Process Instruction: Evidential Flexibility (the process instruction) and which had subsequently been published on the agencys website.
The grounds of the proposed appeal were that, in refusing Mr Mandalias application without first having first drawn his attention to his failure to demonstrate that he had held the requisite 5,400 throughout the first six of the 28 days, the agency had unlawfully departed from its policy set out in the process instruction.
Mr Mandalia also sought permission to appeal against the agencys decision to remove him from the UK on the ground that, in the light of the Upper Tribunals construction of the terms, as they then were, of section 47 of the 2006 Act in Ahmadi v Secretary of State for the Home Department (which was later to be upheld in the Court of Appeal [2013] EWCA Civ 512, [2014] 1 WLR 401), the decision had been premature.
A judge of the Upper Tribunal duly granted to Mr Mandalia permission to appeal but he did so in somewhat ambiguous terms.
Two other judges of the Upper Tribunal construed his permission as limited to the appeal against the removal decision; and on 12 December 2012, in the light of its decision in the Ahmadi case, the Upper Tribunal allowed Mr Mandalias appeal in that respect.
The result was however that the Upper Tribunal never addressed his challenge, by reference to the process instruction, to the First tier Tribunals decision to dismiss his appeal against the refusal of his application.
When in the Court of Appeal Mr Mandalia sought to renew his challenge to the refusal of his application, the Secretary of State responded to the effect that permission to make that challenge had been refused in the Upper Tribunal and that the Court of Appeal therefore had no jurisdiction to entertain an appeal in relation to it.
Mr Mandalia countered by submitting that, on its proper construction, the Upper Tribunals grant of permission had included permission to make that challenge; that the two judges of the Upper Tribunal who had considered otherwise had been wrong; that the Upper Tribunal should accordingly be taken to have dismissed that part of his appeal; and that the Court of Appeal therefore had jurisdiction to entertain his appeal against the dismissal of it.
This issue was not resolved until the start of the substantive hearing of Mr Mandalias appeal in the Court of Appeal, when it upheld his submissions in relation to it and turned to consider the merits of his appeal.
It follows, however, that the Court of Appeal was handicapped by the lack of any analysis of the effect of the process instruction on the lawfulness of the agencys decision by either of the specialist tribunals below.
It was unfortunate not only that the judges grant of permission to appeal to the Upper Tribunal was couched in ambiguous terms but also that other judges of the Upper Tribunal misconstrued it and so declined to address that part of Mr Mandalias appeal which was based on the process instruction.
But it was still more unfortunate that no reference had been made to the process instruction before the First tier Tribunal.
Mr Mandalia could not be expected to have been aware of it.
But, irrespective of whether the specialist judge might reasonably be expected himself to have been aware of it, the Home Office Presenting Officer clearly failed to discharge his duty to draw it to the tribunals attention as policy of the agency which was at least arguably relevant to Mr Mandalias appeal: see AA (Afghanistan) v Secretary of State for the Home Department [2007] EWCA Civ 12 at para 13.
The Court of Appeal determined Mr Mandalias appeal together with two other appeals in which the effect of the process instruction was also raised.
In the first of the other appeals the Secretary of State was the appellant and Ms Rodriguez was the respondent.
The agency had refused her application for extension of her student visa for failure to secure points under Appendix C. By reference to the process instruction, the Upper Tribunal had ordered that the agencys refusal be quashed.
In the second of the other appeals Ms Patel was the appellant and the Secretary of State was the respondent.
She was appealing against the order of the Upper Tribunal by which, in contrast, it had declined to quash the agencys refusal of her application for extension of her student visa for failure to secure points under Appendix C.
In all three appeals the decision of the Court of Appeal went in favour of the Secretary of State.
So it allowed her appeal in Ms Rodriguez case and dismissed the appeals of Mr Mandalia and Ms Patel.
There was some difference which Davis LJ described as no real difference between the facts in Mr Mandalias case and those in the cases of Ms Rodriguez and Ms Patel.
For they had both enclosed bank statements which did indeed cover the requisite 28 days but which showed that, on four of those days in the case of Ms Rodriguez and on one of them in the case of Ms Patel, their credit balances had fallen below the amount of which they were required to demonstrate possession.
The Court of Appeal accepted that each of them would have been able to demonstrate possession of other funds which, had the agency drawn their attention to the deficit, would have repaired it; but it held that the agency had nevertheless been entitled to refuse their applications without having drawn it to their attention.
The Process Instruction
As its full title indicated, the process instruction was addressed to the agencys caseworkers who were processing applications for visas by reference to the points based system.
The reference in the title to evidential flexibility was an indication in shorthand that the instruction was that caseworkers should show some, albeit limited, flexibility in relation to applications from which requisite information had been omitted and, in particular, which had not been accompanied by requisite evidence.
The introduction to the process instruction was as follows: In response to significant feedback from the caseworking teams, as well as from our customers, from August 2009 a flexible process was adopted allowing PBS caseworkers to invite sponsors and applicants to correct minor errors or omissions in applications both main and dependant submitted under Tiers 1, 2, 4 and 5.
The instruction enabled caseworkers to query details or request further information, such as a missing wage slip or bank statement from a sequence.
Three working days [were] given to the customer to provide the requested information.
This instruction only applied to cases which would be refused solely on the absence of a piece of evidence or information.
Where the application would fall for refusal even if the missing evidence was submitted, a request to submit this further information would not be made.
The introduction of this instruction resulted in a reduced refusal rate.
However, those that fell for refusal where multiple pieces of information were missing were often successful on appeal.
Following analysis of allowed appeals and feedback from the National Audit Office and Chief Inspector , the original Evidential Flexibility instruction has been reviewed to meet the recommendations put forward in these reports As such, there have been two significant changes to the original Evidential Flexibility instruction: 1) The time given to applicants to produce additional evidence has been increased to seven working days; and 2) There is now no limit on the amount of information that can be requested from the applicant.
However, requests for information should not be speculative, we must have sufficient reason to believe that any evidence requested exists.
The process instruction then identified 19 steps which the caseworker was to take when an application has missing evidence or there is a minor error.
In step one the caseworker was to ask himself whether there was missing
evidence.
If his answer was yes, he was to proceed to step two.
In step two he was to ask himself whether the application would fall to be refused even if the missing evidence was provided.
If his answer was no, he was to proceed to step three.
Step three was as follows: We will only go out for additional information in certain circumstances which would lead to the approval of the application.
Before we go out to the applicant we must have established that evidence exists, or have sufficient reason to believe the information exists.
Examples include (but are not limited to): 1) bank statements missing from a series; 2) 3) 4) The evidence listed in Annex A is not exhaustive, but provides caseworkers with guidance as to the circumstances when evidence can be requested.
In Annex A it was reiterated that it might be appropriate to ask an applicant under Tier 4 to provide [m]issing bank statements from a series.
Step four addressed the caseworker who was unsure whether the evidence existed.
He was to discuss the issue with his line manager.
Here the instruction was that [w]here there is uncertainty as to whether evidence exists, benefit should be given to the applicant and the evidence should be requested.
So the question was whether the line manager was satisfied that the missing evidence existed or had reasonable grounds to believe that it existed.
If the answer to the question was yes or even if the answer was unsure, the caseworker was to proceed to step five, which was to contact the applicant.
The later steps are irrelevant to the appeal.
In that Mr Mandalias application was made on 7 February 2012, it is agreed that the process instruction represented agency policy which in principle applied to it.
It should be noted, however, that, in respect of all applications made on or after 6 September 2012, the process instruction was withdrawn and the facility for a caseworker to seek further information or evidence prior to determining an application was instead governed by a new rule, namely rule 245AA, inserted into the rules.
The new rule, which was amended with effect from 13 December 2012 and re amended with effect from 1 October 2013, seems to give caseworkers substantially less flexibility than did the process instruction.
But the encouragement to contact an applicant survives if [s]ome of the documents in a sequence have been omitted (for example, if one bank statement from a series is missing).
The Legal Effect of Policy
In 2001, in R (Saadi) v Secretary of State for the Home Department [2001] EWCA Civ 1512, [2002] 1 WLR 356, Lord Phillips of Worth Matravers MR, giving the judgment of the Court of Appeal, said in para 7: The lawful exercise of [statutory] powers can also be restricted, according to established principles of public law, by government policy and the legitimate expectation to which such a policy gives rise.
Since 2001, however, there has been some departure from the ascription of the legal effect of policy to the doctrine of legitimate expectation.
Invocation of the doctrine is strained in circumstances in which those who invoke it were, like Mr Mandalia, unaware of the policy until after the determination adverse to them was made; and also strained in circumstances in which reliance is placed on guidance issued by one public body to another, for example by the Department of the Environment to local planning authorities (see R (WL) (Congo) v Secretary of State for the Home Department [2010] EWCA Civ 111, [2010] 1 WLR 2168, para 58).
So the applicants right to the determination of his application in accordance with policy is now generally taken to flow from a principle, no doubt related to the doctrine of legitimate expectation but free standing, which was best articulated by Laws LJ in R (Nadarajah) v Secretary of State for the Home Department [2005] EWCA Civ 1363, as follows: 68 Where a public authority has issued a promise or adopted a practice which represents how it proposes to act in a given area, the law will require the promise or practice to be honoured unless there is good reason not to do so.
What is the principle behind this proposition? It is not far to seek.
It is said to be grounded in fairness, and no doubt in general terms that is so.
I would prefer to express it rather more broadly as a requirement of good administration, by which public bodies ought to deal straightforwardly and consistently with the public.
Thus, in R (Lumba) v Secretary of State for the Home Department (JUSTICE intervening) [2011] UKSC 12, [2012] 1 AC 245 (in which this court reversed the decision of the Court of Appeal reported as R (WL) (Congo) but without doubting the observation in para 58 for which I have cited the decision in para 29 above), Lord Dyson said simply: 35.
The individual has a basic public law right to have his or her case considered under whatever policy the executive sees fit to adopt provided that the adopted policy is a lawful exercise of the discretion conferred by the statute.
There is no doubt that the implementation of the process instruction would have been a lawful exercise of the power conferred on the Secretary of State by section 4(1) of the Immigration Act 1971 to give or vary leave to remain in the UK.
But, in his judgment in the Lumba case, Lord Dyson had articulated two qualifications.
He had said: 21 it is a well established principle of public law that a policy should not be so rigid as to amount to a fetter on the discretion of decision makers.
But there was ample flexibility in the process instruction to save it from amounting to a fetter on the discretion of the caseworkers.
Lord Dyson had also said: 26 a decision maker must follow his published policy unless there are good reasons for not doing so.
But the Secretary of State does not argue that there were good reasons for not following the process instruction in the case of Mr Mandalia.
Her argument is instead that, properly interpreted, the process instruction did not require the caseworker to alert Mr Mandalia to the deficit in his evidence before refusing his application.
So the search is for the proper interpretation of the process instruction, no more and no less.
Indeed in that regard it is now clear that its interpretation is a matter of law which the court must therefore decide for itself: R (SK (Zimbabwe)) v Secretary of State for the Home Department (Bail for Immigration Detainees intervening) [2011] UKSC 23, [2011] 1 WLR 1299, para 36, Lord Hope of Craighead).
Previous suggestions that the courts should adopt the Secretary of States own interpretation of her immigration policies unless it is unreasonable, made for example in Gangadeen and Jurawan v Secretary of State for the Home Department [1998] Imm AR 106 at p 115, are therefore inaccurate.
Interpretation of the Process Instruction
In step three of the process instruction a specific example was given of a situation in which the caseworker should request the applicant to provide further evidence: it was where a bank statement was missing from a series.
This court has received elaborate submissions about whether, in circumstances in which Mr Mandalia had submitted a bank statement numbered 64, his statements numbered 62 and 63 can be said to have been missing from a series.
The conclusion of the Court of Appeal was that they were not missing from a series.
Davis LJ said: 102 this was not a missing sequence case; and it would again have been complete speculation on the part of the Secretary of State as to whether bank statements if available at all for the preceding period or the succeeding period would have shown the availability of funds in the required amounts.
The Secretary of State concedes that a bank statement numbered 64 clearly indicates that statements for the preceding period are available; but otherwise she commends the analysis of Davis LJ.
Indeed in R (Gu) v Secretary of State for the Home Department [2014] EWHC 1634 (Admin), [2015] 1 All ER 363, Foskett J adopted it.
The facts in the Gu case were almost identical to those in the present case but, by the date of Mr Gus application, the process instruction had been withdrawn and instead the court had to consider the references in the first version of rule 245AA to a document omitted from a sequence as well as to a bank statement missing from a series.
In dismissing Mr Gus application for judicial review of the refusal of his application, Foskett J held: 24 something cannot be missing from a sequence until the sequence itself exists.
To my mind that means that at least the start and the end of the sequence must be in evidence for the sequence to exist.
Something missing from it can only, therefore, be from within those two limits.
Thus emboldened by the analysis of two highly respected judges, the Secretary of State submits that it is only when the applicant has provided the caseworker with what she calls two pillars, namely the pillar which marks the start of a series and the pillar which marks its end, that the caseworker can properly conclude that something is missing from the series which he should invite the applicant to provide.
Speaking for myself, I consider the Secretary of States submission to be misplaced even at the high level of pedantry on which it has been set.
Mr Mandalias bank statements numbered 62, 63 and 64 formed a series.
It must have been obvious to the caseworker, as he studied statement numbered 64, that it formed the last in a series and that the statement or statements which covered the preceding six days, and which turned out to be the statements numbered 62 and 63, were missing from the series.
But in my view it was not the task of the unfortunate caseworker even to attempt to split such hairs.
The process instruction rightly stressed the need for flexibility by telling him: a) b) c) in the introduction that there was now no limit on the amount of information that could be requested, provided that the request was not speculative; in step three that bank statements missing from a series represented only an example of the further evidence which should be requested; and in step four that, where there was uncertainty as to whether evidence existed, the applicant should be given the benefit of the doubt and it should be requested.
Conferred, as he was, with that necessary degree of flexibility, how could the caseworker have followed the process instruction otherwise than by requesting Mr Mandalia to provide the statement or statements which covered the first six of the 28 days? Of course it would have seemed possible to the caseworker that, although Mr Mandalia had held more than double the requisite funds throughout the later 22 days, he had not held the requisite funds throughout the first six days.
But why was that possibility more likely than that an applicant who had provided statements covering only the first and last of the 28 days had not held the requisite funds throughout the intervening 26 days? In one sense every request by a caseworker for further evidence would have been speculative but what was there in Mr Mandalias application to render a request to him more speculative than any other? Was there not, at the very least, doubt, the benefit of which should have been given to him?
Answer
I conclude that the answer to the question identified in para 1 above is yes: the agencys refusal of Mr Mandalias application was unlawful because, properly interpreted, the process instruction obliged it first to have invited him to repair the deficit in his evidence.
I reach this conclusion without reference to the terms of the agencys letter to Mr Mandalia dated 8 February 2012, set out in para 10 above.
The Secretary of State may well be correct to say that, however broad the apparent assurance that Mr Mandalia would be advised about deficits in his application, the intention of the letters author was to limit the assurance to deficits in what the Secretary of State describes as the initial validity of the application as opposed to deficits which might emerge on its substantive consideration.
But this distinction carries a subtlety which would have been lost on Mr Mandalia.
No doubt he would reasonably have understood the letter to make clear that, were there to have been a deficit in his evidence of having held the requisite funds, it would be drawn to his attention before his application was refused.
It is, however, unnecessary to decide whether the letter conferred on Mr Mandalia a legal entitlement to that effect.
The court should therefore allow this appeal; should overrule the decision in the Gu case; and should quash the refusal of Mr Mandalias application so that, no doubt following the provision of further, updated information made by him pursuant to request, it may lawfully be re determined.
| UK-Abs | Mr Mandalia came to the UK from India in 2008 to study.
His visa was due to expire on 9 February 2012 and on 7 February 2012 he applied to the UK Border Agency (the Agency) for a visa extension in order to study accountancy [1].
To secure an extension, Mr Mandalia needed to satisfy certain requirements for student visas under the points based system set out in the Immigration Rules.
In particular, he needed to demonstrate, by the provision of certain documents (including bank statements), that he had held at least 5,400 for a consecutive period of 28 days ending no earlier than one month prior to the date of his application (the 28 day requirement) [2 7].
In his application form, Mr Mandalia confirmed that he held at least 5,400 and submitted a bank statement covering the period from 29 December 2011 to 19 January 2012.
The statement was numbered 64 and showed an opening credit balance of 11,090.60, a closing credit balance of 12,071.05, and a lowest intervening balance of 11,018.34.
However, as the statement covered a consecutive period of only 22 days, it did not satisfy the 28 day requirement [8 9].
Following an acknowledgment of receipt, Mr Mandalia did not hear from the Agency again until a letter dated 21 April 2012 informing him that his extension application had been refused because of the failure to satisfy the 28 day requirement and that a decision had been made for his removal from the UK [10 11].
Mr Mandalias appeal to the First tier Tribunal (Immigration and Asylum Chamber) was dismissed [13 15].
In the course of those proceedings, the Tribunal was not referred to the Agencys instructions to its caseworkers on handling visa applications (the Process Instruction), which provided a degree of flexibility where an applicant had failed to provide information or evidence.
On appeal to the Upper Tribunal, Mr Mandalia successfully challenged the decision to remove him.
However, owing to some confusion over his grounds of appeal, the Upper Tribunal did not consider his challenge to the First tier Tribunals decision regarding the refusal of his visa extension application by reference to the Process Instruction [16 17].
Although the Court of Appeal accepted that it had jurisdiction to determine the issue, it dismissed Mr Mandalias appeal [18 20].
The question before the Supreme Court was whether the Agency had acted unlawfully in refusing the visa extension application without first inviting Mr Mandalia to supply a further bank statement(s) in accordance with the guidance set out in the Process Instruction [1].
The Supreme Court unanimously allows Mr Mandalias appeal and quashes the refusal of his visa extension application.
Lord Wilson (with whom Lady Hale, Lord Clarke, Lord Reed and Lord Hughes agree) delivers the only judgment.
The Court of Appeal did not have the benefit of the analysis of the Process Instruction by either of the specialist immigration tribunals.
It was unfortunate that no reference had been made to the Process Instruction before the First tier Tribunal.
Mr Mandalia could not be expected to have been aware of it, and the Home Office Presenting Officer clearly failed to discharge his duty to draw it to the Tribunals attention as policy of the Agency which was at least arguably relevant to Mr Mandalias appeal [19].
Legal effect of the Process Instruction The exercise of statutory powers can be restricted by government policy.
An applicants right to the determination of an application in accordance with government policy is now generally taken to flow from a principle related to the doctrine of legitimate expectation, but freestanding from it.
Individuals have a basic public law right to have their cases considered under whatever policy the executive sees fit to adopt, provided that the policy is a lawful exercise of the discretion conferred by statute.
The Process Instruction was a lawful exercise of the power conferred on the Secretary of State under s.4(1) of the Immigration Act 1971.
It was also accepted that there was ample flexibility to prevent the Process Instruction from being a fetter on the discretion of caseworkers, and that there were no good reasons for not following the Process Instruction in this case.
The only issue is as to the correct interpretation of the Process Instruction, which is a question of law for the Court [29 31].
Interpretation of the Process Instruction The Process Instruction provided that caseworkers should show some limited flexibility in relation to applications from which requisite information or evidence had been omitted [21 22].
In particular, the Process Instruction set out several steps which should be followed when there is missing evidence [23]: Step three provided that, where there was evidence missing from an application which might affect its outcome, further information could be requested from the applicant where either it was established that evidence exists, or [there was] sufficient reason to believe the information exists.
One of the examples given in the Process Instruction of where this might apply was where there were bank statements missing from a series [24 26].
Step four provided that [w]here there is uncertainty as to whether evidence exists, benefit should be given to the applicant and the evidence should be requested [27].
It was clear that Mr Mandalias bank statements numbered 62 64 formed a series, and it would be obvious to a caseworker looking at a statement numbered 64 that it formed the last in a series, and that the statement(s) covering the preceding six days were missing from that series (R (Gu) v Secretary of State for the Home Department overruled) [32 33, 37].
Caseworkers were not required to split hairs in construing the Process Instruction, as it stressed the need for flexibility.
In particular (a) there was no limit on the amount of information that could be requested from an applicant, (b) bank statements missing from a series were only one example of further evidence which should be requested, and (c) where there was uncertainty as to whether evidence existed, the applicant should be given the benefit of the doubt [34].
Conferred with that degree of flexibility, a caseworker should have followed the Process Instruction by requesting Mr Mandalia to provide the statement(s) which covered the first six days of the 28 day period.
The Agencys refusal of Mr Mandalias application was therefore unlawful [35 36].
|
An employer which proposes to dismiss as redundant 20 or more employees at one establishment within a period of 90 days or less has an obligation to consult the appropriate representatives, usually a recognised trade union, of any of the employees who may be affected: section 188(1), Trade Union and Labour Relations (Consolidation) Act 1992 (the 1992 Act).
The question in this case is whether those employees include people employed on limited term contracts (LTCs) whose contracts will come to an end without renewal during the relevant period.
This in turn depends upon two questions, one straightforward and one not so straightforward.
The first is whether the expiry and non renewal of an LTC amount to a dismissal for this purpose: it does (see para 15 below).
The second is whether such a dismissal is for a reason not related to the individual concerned, which is the statutory definition of a dismissal as redundant in this context: section 195(1), 1992 Act.
That is the issue.
These proceedings
In the year 2009 to 2010, the University of Stirling had a projected deficit of some 4.4m.
It proposed, therefore, to make up to 140 of its permanent staff redundant.
It notified the Department of Business, Innovation and Skills to this effect.
On 15 July 2009, it began collective consultation with the relevant trade unions, including the University and College Union.
It also launched a voluntary severance scheme and accepted 134 applications from members of staff to take part.
In October 2009, therefore, the University concluded that there was no need for compulsory redundancies and the collective consultation process was concluded.
However, the University did not consider that it needed to include in the collective consultation process employees who were employed under LTCs which were to come to an end during the consultation period.
The Union, on the other hand, considered that they should have been included and brought complaints that the University had failed to comply with its legal obligations.
It was decided that the Employment Tribunal should consider whether such employees were dismissed as redundant by reference to four test cases.
Dr Harris was employed as a post doctoral research assistant.
Her contract was due to expire on 16 August 2009 and the University resolved not to renew it.
Dr Doyle was employed to co ordinate and deliver three undergraduate modules in English Studies in the spring semester of 2009.
Her contract was not renewed when the semester ended on 29 May 2009.
Ms Fife was employed to provide maternity cover, initially until 2 May 2009, extended until 4 September 2009, and again until 9 October 2009.
Between 10 October 2009 and 10 September 2010 she was employed on a casual basis.
Ms Kelly was originally employed to provide sick leave cover for one month in July 2007, and then from 1 October 2007 to 31 March 2008.
Her employment was then extended until 30 September 2008 and then to 30 September 2009, partly because she was a named researcher on a number of projects and partly to cover for a colleague who was working reduced hours after returning from maternity leave.
It is, as the Employment Tribunal found, common practice for this University (and indeed other universities) to obtain external funding for specific research projects.
Those funds will allow for the employment of research assistants to work on the particular research project under the supervision of a permanent member of the academic staff.
It is common for the researchers contract of employment to be limited either in time or by the specific task to be carried out.
When that happens the researcher will not be re employed unless funding for the project has been extended or funding is obtained for a new project for which he or she is suitable.
Some researchers therefore move from institution to institution, according to the research projects which become available.
This is considered beneficial to their own career development as well as to the institutions involved.
The Employment Tribunal held that Dr Harris, Dr Doyle and Ms Kelly had all been dismissed as redundant for the purpose of the consultation requirement; it was not satisfied that Ms Fife had been dismissed at all.
The Employment Appeal Tribunal held that all four of the test case employees had been dismissed, but that none of them had been dismissed as redundant: [2012] ICR 803.
The Inner House agreed with the Employment Appeal Tribunal: [2014] CSIH 5, 2014 SLT 352.
The Union appeals to this court.
The law
The provisions with which we are concerned were first enacted in Part IV of the Employment Protection Act 1975 (the 1975 Act).
This was designed to implement in UK law the requirements of European Union law contained in Council Directive 75/129/EEC on the approximation of the laws of the member states relating to collective redundancies.
Part IV of the 1975 Act was consolidated as Part IV, Chapter II, of the 1992 Act.
In its turn, Council Directive 75/129/EEC was consolidated in Council Directive 98/59/EC of the same name (the Directive).
For the purpose of the Directive collective redundancies means dismissals effected by an employer for one or more reasons not related to the individual workers concerned (article 1.1(a)).
This definition was also contained in the earlier Directive.
However, the Directive does not apply to collective redundancies effected under contracts of employment concluded for limited periods of time or for specific tasks except where such redundancies take place prior to the date of expiry or the completion of such contracts (article 1.2(a)).
Thus, the United Kingdom does not have to include workers employed under such LTCs in its provision for consultation about collective redundancies, and in fact, with effect from 6 April 2013, they have been excluded.
But that was after these proceedings were begun.
Before then, UK law gave such workers greater protection than is required by EU law (see the Opinion of Advocate General Wahl in Andrs Rabal Caas v Nexea Gestin Documental SA, Fondo de Garanta Salarial (Case C 392/13), 5 February 2015, paras 72 75).
The evolution of the relevant UK law, as contained in the Trade Union and Labour Relations (Consolidation) Act 1992, is relevant.
The duty to consult is contained in section 188(1) (formerly section 99(1) of the 1975 Act).
As originally enacted, this required an employer who proposed to dismiss as redundant a single employee to consult the recognised trade union.
This obligation did not apply to employment under a contract for a fixed term of three months or less or for a specific task which was not expected to last for more than three months where the employee had not been continuously employed for more than three months (section 282(1)); but it did apply to anyone else employed under a contract limited to a term or a task whom the employer proposed to dismiss as redundant.
The definition of being redundant, in section 195(1) of the 1992 Act (and formerly in section 126(6) of the 1975 Act), originally adopted the classic definition which dates back to the Redundancy Payments Act 1965, and survives to this day in the definition of redundancy for the purpose of the right to a redundancy payment, in section 139(1) of the Employment Rights Act 1996.
That is, references to being redundant were references to (a) the fact that the employer has ceased, or intends to cease, to carry on the business for the purposes of which the employee is or was employed by him, or has ceased, or intends to cease, to carry on that business in the place where the employee is or was so employed; or (b) the fact that the requirements of that business for employees to carry out work of a particular kind, or for employees to carry out work of a particular kind in the place where he is or was so employed, have ceased or diminished or are expected to cease or diminish.
In Association of University Teachers v University of Newcastle upon Tyne [1987] ICR 317, the Employment Appeal Tribunal held that this definition covered the lack of further funding for the post of a lecturer employed under an LTC and so the consultation duty should have been observed when the contract was not renewed.
The same reasoning would probably apply to the contracts of employees such as Dr Harris, whose research project came to an end, and Dr Doyle, whose undergraduate course came to an end.
There might be more room for argument where the need for the work remained the same but there was no longer a need to replace the employee who normally did it.
No doubt the United Kingdom thought that this definition would be adequate to cover the same ground as the definition in the Directive.
However, the Commission of the European Communities brought enforcement action against the UK on the ground that it was not wide enough.
In particular, it did not cover cases where workers have been dismissed as a result of new working arrangements within an undertaking unconnected with its volume of business: Commission of the European Communities v United Kingdom (Case C 383/92), [1994] ECR I 2479, para. 32; [1994] ICR 664 at 724.
The UK conceded that this was so even before the case got to court.
The definition in section 195 (but not elsewhere in the law) was amended in August 1993, to take its present form: (1) In this Chapter references to dismissal as redundant are references to dismissal for a reason not related to the individual concerned or for a number of reasons all of which are not so related. (2) For the purposes of any proceedings under this Chapter, where an employee is or is proposed to be dismissed it shall be presumed, unless the contrary is proved, that he is or is proposed to be dismissed as redundant. (Emphasis supplied)
On 26 October 1995, the consultation duty in section 188(1) was amended so that the duty now only arises where the employer proposes to dismiss as redundant 20 or more employees at one establishment within a period of 90 days or less (the option which is provided for in article 1.1(a)(ii) of the Directive).
Finally, on 6 April 2013, section 282 was amended so as to exclude, inter alia, employment under an LTC unless the dismissal takes place before the expiry of the term or the completion of the task.
Thus both elements of gold plating provided in UK law have now come to an end.
As we are dealing with a definition which is for the particular purpose of the duty to consult about proposed collective redundancies, the statutory purpose and content of that duty are of some relevance.
Under section 188(2), the consultation has to include consultation about ways of avoiding the dismissals, reducing the numbers of employees to be dismissed, and mitigating the consequences of the dismissals.
Under section 188(4), the employer has to disclose the reasons for his proposals, the numbers and description of employees whom it is proposed to dismiss as redundant, the total number of employees of any such description employed by the employer at the establishment in question, the proposed method of selecting the employees who may be dismissed, the proposed method of carrying out the dismissals, and the proposed method of calculating any redundancy payments to be made.
For completeness, if an employer fails to comply with section 188(1), the trade union may present a complaint to an Employment Tribunal (section 189(1)).
If the tribunal finds the complaint well founded it must make a declaration to that effect and also has power to make a protective award (section 189(2)).
This is an award of remuneration for the protected period to those employees who have been dismissed as redundant, in respect of whose dismissal or proposed dismissal the employer failed to comply with section 188 (section 189(3)).
The protected period is also within the discretion of the tribunal but cannot be for more than 90 days (section 189(4)).
The employer also has a duty to give advance notice of proposed collective redundancies to the Secretary of State (section 193) and failure to do so is a criminal offence (section 194).
Finally, by virtue of section 298 of the 1992 Act, dismiss and dismissal are to be construed in accordance with Part X of the Employment Rights Act 1996.
Section 95(1)(b) of that Act provides that an employee is dismissed if he is employed under a limited term contract and that contract terminates by virtue of the limiting event without being renewed under the same contract.
It is common ground, therefore, that these employees were dismissed.
The only question is whether they were dismissed as redundant within the meaning of section 195(1) of the 1992 Act.
This in turn depends upon whether the reasons for the dismissal were not related to the individual concerned.
Discussion
The Employment Tribunal held that the required relationship between the individual and the reason for dismissal must be a close and direct one with a reason personal to the individual, such as the employees conduct or capability, rather than the employees job or the employers need to have work done being identified (para 51).
The Employment Appeal Tribunal, on the other hand, held that A reason relates to the individual if it is something to do with him such as something he is or something he has done.
It is to be distinguished from a reason relating to the employer, such as his (or in the case of insolvency, his creditors) need to effect business change in some respect (para 73).
In these cases, at least one of the reasons for all four dismissals was that the employee had agreed to [an LTC], accepting that it would come to an end at a particular date or on the occurrence of a particular event.
This was a reason relating to the individuals concerned (para 74).
The Inner House agreed: the reason for the dismissal was the fact that the employee had entered into an LTC.
That was a reason related to the employee (para 72).
Mr Caspar Glyn QC, for the Union, understandably complains that that is not how the University had first put its case before the Employment Tribunal.
It had explained that the contracts had come to an end because the funding for a post had ended, or a project had been completed, or another employee had returned from maternity leave or a fixed term contract had expired.
It had argued that fixed term contracts were, as a class, excluded from the consultation requirement.
But their witness, Professor Simpson, had stated that the fact that a person had entered into a fixed term contract would be a consideration in deciding not to renew their employment.
Only before the Employment Appeal Tribunal did the Universitys position become that at least one of the Universitys reasons in each of the test cases was that the employee had agreed to accept that his or her contract would come to an end at a particular time or on the occurrence of a particular event.
This was a question of fact and the Employment Appeal Tribunals jurisdiction is confined to questions of law.
However, the more serious complaint about the approach of both the Employment Appeal Tribunal and the Inner House is that it is difficult to imagine that any employer, when considering whether to offer another contract to an employee whose LTC has just come to an end, does not have in mind the very reason why that decision falls to be made, namely that the employee had agreed to an LTC in the first place.
The reality is that this approach would exclude all LTCs from the scope of the duty.
The Inner House was particularly clear about this, when saying that the reason for the dismissal was the fact that the employee had entered into an LTC.
This cannot be right, for two reasons: first, if Parliament had intended to exclude all LTCs, as it was entitled to do, it would have said so; and second, by expressly excluding some, and now (almost) all, of them, Parliament must have accepted that, without the exclusion, at least some LTCs would fall within the scope of the duty.
However, it is easier to say what is wrong with the approach of the Employment Appeal Tribunal and the Inner House than it is to discern the true meaning of the phrase.
Mr Glyn argues that many, if not all, non renewals of LTCs would have fallen within the original definition of a redundancy.
When changing the definition in 1993, Parliament was intending to broaden the scope of the protection offered by the 1992 Act.
It cannot have been intended that, in relation to LTCs, it should have been narrowed almost to extinction.
However, as the Employment Appeal Tribunal pointed out, not all failures to renew an LTC automatically fell within the former definition of a redundancy: it would depend upon the circumstances.
Moreover, Parliament was changing the definition in response to how the Commission and the Court of Justice considered that the Directive should apply to employees generally.
They will not have had its application to LTCs in mind, as these do not fall within the scope of the Directive at all.
The question for us is how those words for a reason relating to the individual apply to an LTC.
It is, however, important to bear in mind that Parliament will certainly not have intended to narrow the scope of the consultation duty from the classic redundancy situations covered under the earlier law: the cessation or reduction in business.
Furthermore, it intended to add to those situations the reorganisation of the business: classically, where employees are dismissed and offered new contracts so that their terms and conditions of employment can be changed.
This lends powerful support to Mr Glyns contention that the terms and conditions of the employees contracts of employment cannot be a reason related to the individual, because if they were, such business rearrangements, although the very reason why the definition was changed, would not be covered.
The context and content of the duty to consult all suggest that it is concerned with the needs of the business or undertaking as a whole.
The employer has to explain why he wishes to make a substantial number of employees redundant, which descriptions of employee he proposes to make redundant, and how he proposes to choose among the employees within those descriptions.
Employees on LTCs might be a description of employees for this purpose, and being on an LTC might be a criterion for selecting for dismissal, but it is a collective description rather than a reason relating to the individual concerned.
Where an LTC comes to an end, the dismissal in question is the non renewal of the LTC or rather the failure to offer a new contract, the LTC having come to an end.
The fact that it was an LTC, or even that the employee agreed to it, cannot by itself be a reason for the non renewal.
Many LTCs are in fact renewed or new contracts offered.
The question is whether the reasons for the failure to offer a new contract relate to the individual or to the needs of the business.
Sometimes, no doubt, it will relate to the individual.
The employer may still need to have the work done, but for one reason or another considers that this employee is not suitable to do it.
That would not be a dismissal for redundancy.
But the ending of a research project or the ending of a particular undergraduate course would not be a reason related to the individual employee but a reason related to the employers business.
The business no longer has a need for someone to do the research or someone to teach the course.
The same would usually be true of the ending of maternity or sickness cover.
The need for the job would not have ended but the need for the job to be done by someone other than the person who usually does it would have ended.
That too is not a reason related to the individual employee but a reason related to the employers business.
In short, the Employment Appeal Tribunal stated an admirable test: A reason relates to the individual if it is something to do with him such as something he is or something he has done.
It is to be distinguished from a reason relating to the employer, such as his (or in the case of insolvency, his creditors) need to effect business change in some respect.
The error was to place the coming to an end of an LTC into the first rather than the second category.
I would allow this appeal and remit the case to the Employment Tribunal for consideration of the remaining issues.
| UK-Abs | Section 188(1) of the Trade Union and Labour Relations (Consolidation) Act 1992 (the 1992 Act) requires that employers which propose to dismiss as redundant twenty or more employees at one establishment within a period of 90 days or less have an obligation to consult with the representatives of any employees who may be affected.
In order to deal with a budget deficit in the year 2009 2010 the University of Stirling proposed to make up to 140 of its permanent staff redundant.
In accordance with section 188(1) of the 1992 Act, it undertook collective consultation with the relevant trade unions, including the University and College Union (the Union).
However, it did not consider that it needed to include in the collective consultation process employees who were employed under limited term contracts (LTCs) which came to an end during the consultation period.
The Union considered that employees on LTCs should have been included on the grounds that they had been dismissed as redundant and brought four test cases in the Employment Tribunal on this basis.
The Employment Tribunal held that the employees in three of the four test cases had been dismissed as redundant for the purpose of the consultation requirement and that the fourth employee had not been dismissed at all.
The Employment Appeal Tribunal held that all four of the test case employees had been dismissed, but that none of them had been dismissed as redundant.
The Inner House agreed with the Employment Appeal Tribunal.
The Supreme Court unanimously allows the Unions appeal and remits the case to the Employment Tribunal for consideration of the remaining issues.
The Court considered that the issue of whether employees on LTCs, whose contracts come to an end within the relevant period have been dismissed as redundant depends upon two questions.
The first question was whether the expiry and non renewal of an LTC amounts to a dismissal for this purpose.
It was common ground between the parties that it did [15].
The second question was whether such a dismissal is for a reason not related to the individual concerned, which is the statutory definition of dismissal as redundant pursuant to section 195(1) of the 1992 Act.
The Court held that it was.
The fact that the employee had entered into an LTC could not mean that the dismissal was a reason related to the individual.
In passing the 1992 Act, Parliament did not intend to narrow the scope of the consultation duty from situations where business ceased or was reduced.
Further, Parliament had specifically legislated in order to encompass situations where employees are dismissed and offered new contracts on different terms.
If the terms and conditions of
employees employment contracts were reasons related to the individual concerned then such business rearrangements would not be covered [20].
The context and content of the duty to consult suggest that it is concerned with the needs of the business as a whole.
While being on an LTC might be a criterion for selecting employees for dismissal, it is a collective description rather than a reason relating to the individual concerned [21].
Where an LTC comes to an end, the dismissal is the failure to offer the employee a new contract.
The fact that it was an LTC, or even that the employee agreed to it, cannot by itself be a reason for the non renewal.
The question is whether the reasons for the failure to offer a new contract relate to the individual or to the needs of the business [22].
A reason relates to the individual if it is something to do with him or something he has done.
It is to be distinguished from a reason relating to the employer, such as the need to effect change in the business.
The coming to an end of an LTC was a reason related to the employers business, not to the individual concerned [23].
|
A school minibus draws up on a country road on a winters evening.
Two children get off.
One of the children tries to cross the road.
She steps out from behind the minibus, into the path of an oncoming car.
The driver is driving too fast: he has seen the bus, but has made no allowance for the possibility that a child might attempt to cross in front of him.
He is not keeping a proper look out, and does not see her, but he is going too fast to have stopped in time even if he had seen her.
His car hits the child, causing her to sustain severe injuries.
If he had been driving at a reasonable speed, and had been keeping a proper look out, he would not have hit her.
The trial judge finds that the accident was caused by the drivers negligence, but that the child was also contributorily negligent.
He assesses her contributory negligence at 90%, and reduces the award of damages accordingly.
On appeal, the court reduces that assessment to 70%.
On a further appeal, this court is invited to reduce the assessment further.
How should responsibility be apportioned in a case of this kind? What principles should govern the review of an apportionment by an appellate court? These are the central questions posed by this appeal.
The facts of the case
The facts of the case, as found by the Lord Ordinary, Lord Tyre, are not in dispute.
It should be said at the outset that he faced considerable difficulties in establishing the facts, and he exercised notable care in doing so.
The accident occurred on 12 January 2004 on the A98 road between Banff and Fraserburgh, near its junction with a private road leading to the farm where the pursuer lived with her parents and her twin sister.
At that point, the A98 is 7.6 metres wide.
Traffic is subject to a 60 mph speed limit.
There is no street lighting.
The pursuer was then 13 years old.
She and her sister travelled to and from school every day by school minibus.
On the way home, the minibus dropped off the various children at or near their homes.
In particular, it dropped off the pursuer and her sister on the opposite side of the road from the entrance to the farm road.
They would then cross the road to the farm road.
On the day of the accident, the bus arrived at the farm road end at about 4.30 pm.
It was then about 40 minutes after sunset, and the light was fading.
Vehicles had their lights on.
The bus stopped, with its headlights on, and signs to the front and rear indicating that it was a school bus.
The driver put on the buss hazard lights.
A number of vehicles following the bus stopped behind it.
The defender was driving home in the opposite direction.
His lights were switched on.
As he approached the scene, he saw the stationary bus on the other carriageway.
He had a view of the stationary bus for at least 200 metres.
He had seen the school bus on this road before.
He was travelling at about 50 mph.
He did not slow down.
His position in evidence was that he could not remember whether he had thought at the time that the bus might have stopped to drop children off.
He regarded the risk of children running out unexpectedly as irrelevant: such a risk was not his fault, as he put it.
Partly in view of the defenders evidence about the irrelevance, to his responsibilities as a driver, of the possibility that children might unexpectedly attempt to cross the road, the Lord Ordinary inferred that he did not address his mind to the risk that a person might emerge from behind the stationary bus and attempt to cross the road in front of his car.
The pursuer and her sister got off the bus on its nearside.
The pursuer passed between the rear of the bus, which was still stationary, and the car behind it.
She paused briefly at the offside rear of the bus and then took one or two steps into the road, before breaking into a run.
She was struck by the defenders car, still travelling at about 50 mph.
She was projected into the air by the force of the impact, and the car passed beneath her.
She landed on the road surface.
At the point of impact, she was running across the road.
The defender was unaware of her presence until the moment of impact.
Since she must have been within his line of vision for approximately 1.5 seconds between emerging from behind the bus and the moment of impact, the Lord Ordinary inferred that he was not keeping a look out for the possibility of such an event occurring.
If he had had in mind the possibility that someone might emerge, he would have seen her earlier than he did.
The negligence of the defender
The Lord Ordinary found that the defender had failed to drive with reasonable care.
He ought in the first place to have kept a proper look out.
In the exercise of that duty, he ought to have identified the bus as being a school bus, or at least as a bus from which children were likely to alight.
He ought then to have foreseen that there was a risk that a person might, however foolishly, attempt to cross the road.
The defender had not done so.
Either he did not identify the bus as a school bus, or he did not regard that as relevant to the manner in which he ought to drive towards it and past it.
Secondly, the defender had failed to modify his driving.
He did not reduce his speed from 50 mph as he approached the stationary bus.
That was too high a speed at which to approach the hazard which it potentially presented.
A reasonable speed in the circumstances would have been somewhere between 30 and 40 mph.
He ought to have been travelling at no more than 40 mph for at least 100 metres before reaching the bus.
Thirdly, the defender had failed to be vigilant for any child stepping out or running into the road.
These findings are not now in dispute.
Causation
The Lord Ordinary found that the defender could not have reacted in the time available to him, after the pursuer emerged from behind the bus, so as to avoid hitting her.
If, however, he had been travelling at a reasonable speed, the pursuer would have made it safely past the line of the cars travel before the car arrived at the point of impact, and the accident would not have occurred.
Contributory negligence
The Lord Ordinary considered that the principal cause of the accident was the recklessness of the pursuer in attempting to cross the road without taking proper care to check that the road was clear to allow her to do so.
At the age of 13, she was fully aware of the danger of crossing a major road without taking reasonable care to check that no cars were approaching.
The pursuers own account of the critical events was unreliable, and there was a paucity of other reliable evidence.
Her decision to cross could not however have been the result of a justifiable misjudgement: at the time when she emerged from behind the minibus, the defenders car could only have been about 30 40 metres away.
The Lord Ordinary concluded: 46.
Either she did not look to the left before proceeding across the road or, having done so, she failed to identify and react sensibly to the presence of the defender's car in close proximity.
On either scenario, the overwhelmingly greater cause of this unhappy accident was the movement of the pursuer into the path of the defender's car at a time when it was impossible for him to avoid a collision. 47.
One has, therefore, in my opinion, a situation in which the pursuer bears responsibility for having committed an act of reckless folly, and the defender bears responsibility for having failed to take reasonable care for the safety of a person such as the pursuer who might commit an act of reckless folly.
In that situation, I consider that a very large proportion of the overall responsibility rests upon the perpetrator of the act.
On that basis, the Lord Ordinary assessed contributory negligence at 90%.
An appeal against that finding was allowed by an Extra Division of the Inner House (Lord Clarke, Lord Drummond Young and Lord Wheatley), for reasons explained in an opinion delivered by Lord Drummond Young.
His Lordship noted that it had been said in Porter v Strathclyde Regional Council 1991 SLT 446, 449 that the Inner House would not interfere with the Lord Ordinarys apportionment of negligence except in exceptional circumstances which must demonstrate that he has manifestly and to a substantial degree gone wrong.
The Extra Division considered that the Lord Ordinary had clearly been entitled to hold that contributory negligence existed in this case.
At the age of 13, the pursuer must have been fully aware of the danger of crossing a major road from behind a bus without taking reasonable care to check for approaching cars.
She was familiar with the location and accepted that she was aware of the potential dangers of crossing this particular road.
She was aware of the risk of traffic on what was a relatively major road.
In those circumstances it was difficult to imagine any reason that she might have for not checking properly for approaching cars and, if a car was approaching, not crossing the road.
On that basis, the obvious course for her to take was to remain on the verge or at least to remain behind the bus until it moved off and she had a clear view of other traffic and drivers had a clear view of her.
At the very most she could have stopped between the bus and the centre line of the road.
The argument that these points should have been put to the pursuer in cross examination, and had not been put, was rejected: they were too obvious for cross examination on these points to be necessary.
In relation to apportionment, the Extra Division considered that the Lord
Ordinarys apportionment of 90% of the responsibility for the accident to
the pursuer was too high.
The court reduced this to 70%.
It gave four reasons for its decision, at paras 27 28: (1) In the first place, we are of opinion that insufficient regard was had to the circumstances of the pursuer.
The pursuer was only 13 at the time of the accident.
While at 13 she was old enough to understand the dangers of traffic, a 13 year old will not necessarily have the same level of judgment and self control as an adult.
Moreover, in assessing whether it was safe to cross, she was required to take account of the defender's car approaching at a fair speed, 50 mph, in very poor light conditions with its headlights on.
The assessment of speed in those circumstances is far from easy even for an adult, and even more so for a 13 year old. (2) In the second place, we are of opinion that greater stress should have been placed on the actings of the defender.
He was found to have been driving at excessive speed and not to have modified his speed to take account of the potential danger presented by the minibus.
The danger was obvious because the minibus had its hazard lights on.
The Lord Ordinary inferred that as he approached the minibus the defender did not address his mind to the risk that a person might emerge from behind it and attempt to cross the road.
In all the circumstances we consider that the defender's behaviour was culpable to a substantial degree, and that that is a factor which should be taken into account. (3) In the third place, we are of opinion that the Lord Ordinary was wrong to describe the actings of the pursuer as an act of reckless folly.
Those actings were clearly negligent, but recklessness implies that the pursuer acted without caring about the consequences.
We do not think that such a description of the pursuer's conduct is justified on the facts found by the Lord Ordinary. (4) In the fourth place, the causative potency of the parties' actings must be taken into account.
Two factors are relevant in this connection.
First, in apportioning responsibility account must be taken not only of the relative blameworthiness of the parties but also the causative potency of their acts.
As is pointed out in Eagle [v Chambers [2003] EWCA Civ 1107; [2004] RTR 115] and Smith [v Chief Constable Nottinghamshire 18.
Police [2012] EWCA Civ 161; [2012] RTR 294], a car is potentially a dangerous weapon, and accordingly the attribution of causative potency to the driver must be greater than that to the pedestrian.
Secondly, the Lord Ordinary held that the pursuer would have escaped the accident had she had an additional 1.12 seconds available.
That suggests that the defender's excessive speed was causally significant.
The court concluded, at para 28: When all of these factors are taken together, we are of opinion that they clearly support an apportionment that is more favourable to the pursuer than the Lord Ordinary's apportionment.
We nevertheless recognize that the major share of responsibility must be attributed to the pursuer, because her negligence was both seriously blameworthy and of major causative significance.
Was there contributory negligence?
It is contended on the pursuers behalf that, on the findings of fact made by the Lord Ordinary, there was no basis for a finding of contributory negligence.
It had been assumed that the pursuer ought to have looked to her left very shortly before emerging from behind the bus, and that if she had done so, the defenders car would have been so close that she ought to have realised that it was unsafe for her to cross the road.
The pursuer had however also to bear in mind the possibility of traffic emerging from her right, or from the farm track across the road.
She could reasonably have looked to her left at a time when the defenders car was far enough away for her to think that it was safe to cross the road, unaware of the excessive speed at which the car was being driven.
I am unable to accept this contention.
Counsel for the pursuer neither challenges the findings in fact made by the Lord Ordinary nor proposes that any additional findings should be made.
On the findings made, either she did not look to the left before proceeding across the road or, having done so, she failed to identify and react sensibly to the presence of the defender's car in close proximity.
The contention now advanced is inconsistent with either of those scenarios.
I should add, in relation to the latter scenario, that the Lord Ordinary calculated that a vehicle travelling at 50 mph covers a distance of 100 metres in 4.47 seconds.
He also concluded that the defenders car was only 30 40 metres away when the pursuer stepped out.
He was entitled to conclude that, if the pursuer had looked to her left within a reasonable time before stepping out into the road, the defenders car would have been within such proximity that she ought to have realised that it was unsafe to cross.
Apportionment 19.
Section 1(1) of the Law Reform (Contributory Negligence) Act 1945 provides: Where any person suffers damage as the result partly of his own fault and partly of the fault of any other person or persons, a claim in respect of that damage shall not be defeated by reason of the fault of the person suffering the damage, but the damages recoverable in respect thereof shall be reduced to such extent as the court thinks just and equitable having regard to the claimants share in the responsibility for the damage. 20.
Section 1(1) does not specify how responsibility is to be apportioned, beyond requiring the damages to be reduced to such extent as the court thinks just and equitable having regard to the claimants share in the responsibility for the damage (not, it is to be noted, responsibility for the accident).
Further guidance can however be found in the decided cases.
In particular, in Stapley v Gypsum Mines Ltd [1953] AC 663, 682, Lord Reid stated: A court must deal broadly with the problem of apportionment and in considering what is just and equitable must have regard to the blameworthiness of each party, but the claimants share in the responsibility for the damage cannot, I think, be assessed without considering the relative importance of his acts in causing the damage apart from his blameworthiness. 21.
That approach is illustrated by its application to the facts of that case, where the deceased and a co worker had been instructed by their employer to bring down a dangerous roof, and not to work beneath it in the meantime.
In disobedience of the instruction, they had given up their attempts to bring down the roof, and the deceased had then proceeded to work beneath it.
It collapsed and killed him.
Although there was held to have been negligence on the part of the co worker, for which the employer was responsible, the deceaseds conduct had contributed much more immediately to the accident than anything that the co worker did or failed to do: both men were at fault up to the stage when the deceased entered the area in question, but he alone was at fault in working beneath the dangerous roof.
The House of Lords therefore assessed the contributory negligence of the deceased at 80%, altering the 50% apportionment made by the trial judge. 22.
A further illustration is provided by Baker v Willoughby [1970] AC 467.
The case was one in which the plaintiff was a pedestrian who had been struck by the defendants car while crossing the road.
The plaintiff had negligently failed to see the defendants car approaching.
The defendant had a clear view of the plaintiff prior to the collision, but was driving at an excessive speed or failing to keep a proper look out or both.
The judge found that the plaintiff was 25% to blame.
On appeal, the Court of Appeal increased that apportionment to 50%.
The House of Lords restored the judges assessment. 23.
Lord Reid, with the agreement of the other members of the House, made some general observations about apportionment in cases of this kind at p 490: The Court of Appeal recognised that the trial judge's assessment ought not to be varied unless some error in the judge's approach is clearly discernible.
But they appear to have thought it impossible to differentiate when both parties had a clear view of each other for 200 yards prior to impact and neither did anything about it.
I am unable to agree.
There are two elements in an assessment of liability, causation and blameworthiness.
I need not consider whether in such circumstances the causative factors must necessarily be equal, because in my view there is not even a presumption to that effect as regards blameworthiness.
A pedestrian has to look to both sides as well as forwards.
He is going at perhaps three miles an hour and at that speed he is rarely a danger to anyone else.
The motorist has not got to look sideways though he may have to observe over a wide angle ahead: and if he is going at a considerable speed he must not relax his observation, for the consequences may be disastrous .
In my opinion it is quite possible that the motorist may be very much more to blame than the pedestrian. 24.
That dictum was applied by the Second Division in McCluskey v Wallace 1998 SC 711, a case in which a child aged 10 had crossed the road without taking reasonable care to check whether traffic was coming.
She was struck by a driver who was driving at an appropriate speed but had failed to notice 28. her, and could have avoided her if he had been paying proper attention.
An assessment of the childs contributory negligence at 20% was upheld. 25.
A similar approach to the assessment of blameworthiness, in cases concerning motorists who drive negligently and hit careless pedestrians, can be seen in the judgment of the Court of Appeal, delivered by Hale LJ, in Eagle v Chambers [2003] EWCA Civ 1107; [2004] RTR 115.
The claimant had been walking down the middle of a well lit road, late at night, while in an emotional state.
The defendant motorist would have seen and avoided her if he had been driving with reasonable care.
He had however failed to see her.
His ability to drive safely was impaired by alcohol.
The trial judge reduced the claimants damages by 60%.
On appeal, that apportionment was reduced to 40%. 26.
Hale LJ noted that there were two aspects to apportioning liability between claimant and defendant, namely the respective causative potency of what they had done, and their respective blameworthiness.
In relation to the former, it was accepted that the defendants causative potency was much greater than the claimants on the facts of the case.
In relation to blameworthiness, the defendant was equally if not more blameworthy.
In that regard, Hale LJ noted that a car could do much more damage to a person than a person could usually do to a car, and that the potential destructive disparity between the parties could be taken into account as an aspect of blameworthiness.
The court had consistently imposed a high burden upon the drivers of cars, to reflect the potentially dangerous nature of driving.
In the circumstances of the case, the judges apportionment had been plainly wrong.
Review of apportionment 27.
It is not possible for a court to arrive at an apportionment which is demonstrably correct.
The problem is not merely that the factors which the court is required to consider are incapable of precise measurement.
More fundamentally, the blameworthiness of the pursuer and the defender are incommensurable.
The defender has acted in breach of a duty (not necessarily a duty of care) which was owed to the pursuer; the pursuer, on the other hand, has acted with a want of regard for her own interests.
The word fault in section 1(1), as applied to the person suffering the damage on the one hand, and the other person or persons on the other hand, is therefore being used in two different senses.
The court is not comparing like with like.
It follows that the apportionment of responsibility is inevitably a somewhat rough and ready exercise (a feature reflected in the judicial preference for round figures), and that a variety of possible answers can legitimately be given.
That is consistent with the requirement under section 1(1) to arrive at a result which the court considers just and equitable.
Since different judges may legitimately take different views of what would be just and equitable in particular circumstances, it follows that those differing views should be respected, within the limits of reasonable disagreement.
In Kerry v Carter [1969] 1 WLR 1372, the Court of Appeal reviewed some earlier authorities concerned with appellate review of apportionments under the 1945 Act.
Lord Denning MR said, with the agreement of the other members of the court: 29.
We have been referred to cases on this subject, particularly the recent case of Brown v Thompson [1968] 1 WLR 1003.
Since that case it seems to have been assumed in some quarters that this court will rarely, if ever, alter an apportionment made by the judge.
Such is a misreading of that case.
I think that the attitude of this court was correctly stated in that case, at p 1012, by Edmund Davies LJ when he quoted from the judgment of Sellers LJ in Quintas v National Smelting Board [1961] 1 WLR 401, 409.
This court adopts in regard to apportionment the same attitude as it does to damages.
We will interfere if the judge has gone wrong in principle or is shown to have misapprehended the facts: but, even if neither of these is shown, we will interfere if we are of opinion that the judge was clearly wrong.
After all, the function of this court is to be a Court of Appeal.
We are here to put right that which has gone wrong.
If we think that the judge below was wrong, then we ought to say so, and alter the apportionment accordingly. (p 1376) In that case, the court altered an apportionment which placed 80% of the responsibility on the defendant to one which placed two thirds of the responsibility on the plaintiff.
The dictum of the Master of the Rolls has been applied in subsequent cases: see, for example, Pride Valley Foods v Hall and Partners [2001] 76 Con LR 1. 30.
The same approach is in principle appropriate in the event that a question of apportionment comes before this court.
In practice, such a question would not ordinarily raise an arguable point of law of general public importance, and therefore would not ordinarily meet the criteria for the granting of permission to appeal.
Where, however, permission has been granted (as, for example, in Dubai Aluminium Co Ltd v Salaam [2002] UKHL 48; [2003] 2 AC 366, where there was a question concerning apportionment under the Civil Liability (Contribution) Act 1978), or is not required (as in the present case), then this court also approaches the matter as a court of appeal. 31.
Given the broad nature of the judgment which has to be made, and the consequent impossibility of determining a right answer to the question of apportionment, one can say in this context, as Lord Fraser of Tullybelton said in relation to an exercise of judgment of a different kind in G v G (Minors: Custody Appeal) [1985] 1 WLR 647, 651: It is comparatively seldom that the Court of Appeal, even if it would itself have preferred a different answer, can say that the judge's decision was wrong, and unless it can say so, it will leave his decision undisturbed. 32.
As one would expect, given that section 1(1) applies throughout the United Kingdom, the same approach has been followed in Scotland.
In McCusker v Saveheat Cavity Wall Insulation Ltd 1987 SLT 24, 29, Lord Justice Clerk Ross cited the dictum of Lord Justice Clerk Wheatley in the unreported case of Beattie v Halliday, 4 February 1982: An appeal court will not lightly interfere with an apportionment fixed by the judge of first instance.
It will only do so if it appears that he has manifestly and to a substantial degree gone wrong.
The case of Beattie concerned contribution between joint wrongdoers, where the court is concerned with the comparative responsibility of persons who are both liable for the damage.
The dictum would apply a fortiori to apportionment under the 1945 Act, where the difficulties are more acute, for the reasons I have explained. 33.
Applying the dictum in Beattie v Halliday, Lord Justice Clerk Ross said in McCusker that although he would have made a different apportionment from the Lord Ordinary, he was not satisfied that the Lord Ordinary had gone so far wrong that the court would be warranted in interfering with his apportionment.
The same approach was followed in MacIntosh v National Coal Board 1988 SLT 348 and Porter v Strathclyde Regional Council 1991 SLT 446.
In McFarlane v Scottish Borders Council 2005 SLT 359, and in the present case, the court confirmed the general approach while overturning the assessment of contributory negligence made at first instance. 34.
It should be noted that words such as manifestly and to a substantial degree merely add emphasis, and do not modify the substance of the test.
As Lord Fraser said in G v G, at p 652: Certainly it would not be useful to inquire whether different shades of meaning are intended to be conveyed by words such as blatant error used by the President in the present case, and words such as clearly wrong, plainly wrong, or simply wrong used by other judges in other cases.
All these various expressions were used in order to emphasise the point that the appellate court should only interfere when they consider that the judge of first instance has not merely preferred an imperfect solution which is different from an alternative imperfect solution which the Court of Appeal might or would have adopted, but has exceeded the generous ambit within which a reasonable disagreement is possible. 35.
The question, therefore, is whether the court below went wrong.
In the absence of an identifiable error, such as an error of law, or the taking into account of an irrelevant matter, or the failure to take account of a relevant matter, it is only a difference of view as to the apportionment of responsibility which exceeds the ambit of reasonable disagreement that warrants the conclusion that the court below has gone wrong.
In other words, in the absence of an identifiable error, the appellate court must be satisfied that the apportionment made by the court below was not one which was reasonably open to it. 36.
There may be cases of apportionment under the 1945 Act where the appellate court can identify an error on the part of the court below.
In the case of Stapley, for example, although Lord Reid observed at p 682 that normally one would not disturb such an award, the trial judge appeared to have left out of account a material fact, namely that the deceased deliberately and culpably entered the area of danger.
Similarly, in the present case, the Extra Division identified an error on the part of the Lord Ordinary in categorising the pursuers conduct as reckless. 37.
Even in the absence of an identifiable error, a wide difference of view as to the apportionment which is just and equitable, going beyond what Lord Fraser described as the generous ambit within which a reasonable disagreement is possible, can in itself justify the conclusion that the court below has gone wrong.
The point is illustrated by the case of National Coal Board v England [1954] AC 403, in which the trial judge considered a 50% apportionment to be appropriate, on the basis that the plaintiff and the defendants employee were equally to blame.
The House of Lords held that the damages should be reduced by only 25%.
Lord Reid observed at p 427 that it was not right to disturb the trial judges apportionment lightly, but that the difference between holding the parties equally to blame and holding the ones share of responsibility to be three times that of the other is so substantial that we should give effect to it.
Lord Porter, with whom Lord Oaksey agreed, similarly considered that, as in Stapley, the wide difference between [the Houses] view and that held in the court of first instance warranted a variation in the proportional amount awarded (p 420). 38.
The need for the appellate court to be satisfied, in the absence of an identifiable error, that the apportionment made by the court below was outside the range of reasonable determinations is reflected in the fact that apportionments are not altered by appellate courts merely on the basis of a disagreement as to the precise figure.
In Kerry v Carter, as I have explained, the appellate court disagreed with the trial judge as to which party bore the greater share of responsibility.
In Quintas v National Smelting Co Ltd [1961] 1 WLR 401, Brannan v Airtours Plc, The Times, February 1, 1999 and McFarlane v Scottish Borders Council, as in Stapley v Gypsum Mines Ltd, National Coal Board v England and Baker v Willoughby, the appellate court intervened on the basis of a difference of view as to whether the parties bore equal responsibility or one party bore much greater responsibility than the other.
The same is true of Eagle v Chambers, where Hale LJ observed that a finding as to which of the parties, if either, was the more responsible for the damage was different from a finding as to the precise extent of a less than 50% contribution.
There was a qualitative difference between a finding of 60% contribution and a finding of 40% which was not so apparent in the quantitative difference between 40% and 20%.
The present case 39.
Having explained the reasons for their conclusion that the Lord Ordinarys apportionment of 90% of the responsibility for the accident to the pursuer was too high, the Extra Division provided only a very brief explanation of their own apportionment of 70% of the responsibility to the pursuer, at para 28: We nevertheless recognize that the major share of responsibility must be attributed to the pursuer, because her negligence was both seriously blameworthy and of major causative significance.
The Extra Division had however already stated, at para 27, that the defenders behaviour was culpable to a substantial degree.
They had also stated, at para 28, that the defenders excessive speed was causally significant and that the attribution of causative potency to the driver must be greater than that to the pedestrian.
It would appear to follow that it could be said of the defender, as well as the pursuer, that his negligence was both seriously blameworthy and of major causative significance.
Why then did the Extra Division conclude that the major share of responsibility must be attributed to the pursuer? 40.
As the Extra Division recognised, it is necessary when applying section 1(1) of the 1945 Act to take account both of the blameworthiness of the parties and the causative potency of their acts.
In relation to causation, the Extra Division based its view that the attribution of causative potency to the driver must be greater than that to the pedestrian on the fact that a car is potentially a dangerous weapon.
Like the Court of Appeal in Eagle v Chambers, I would take the potentially dangerous nature of a car being driven at speed into account when assessing blameworthiness; but the overall assessment of responsibility should not be affected by the heading under which that factor is taken into account.
Even leaving out of account the potentially dangerous nature of a car being driven at speed, I would not have assessed the causative potency of the conduct of the defender as being any less than that of the pursuer.
This is not a case, such as Ehrari v Curry [2007] EWCA Civ 120; [2007] RTR 521 (where contributory negligence was assessed at 70%), in which a pedestrian steps directly into the path of a car which is travelling at a reasonable speed, and the driver fails to take avoiding action as promptly as he ought to have done.
In such a case, the more direct and immediate cause of the damage can be said to be the conduct of the pedestrian, which interrupted a situation in which an accident would not otherwise have occurred.
Nor is it a case, such as Eagle v Chambers (in which contributory negligence was assessed at 40%) or McCluskey v Wallace (where the contributory negligence of a child was assessed at 20%), in which a driver ploughs into a pedestrian who has been careless of her own safety but has been in his line of vision for long enough for him easily to have avoided her.
In the present case, the causation of the injury depended upon the combination of the pursuers attempting to cross the road when she did, and the defenders driving at an excessive speed and without keeping a proper look out.
If the pursuer had waited until the defender had passed, he would not have collided with her.
Equally, if he had slowed to a reasonable speed in the circumstances and had kept a proper look out, he would have avoided her. 41.
Given the Extra Divisions conclusion that the causative potency of the defenders conduct was greater than that of the pursuers, their conclusion that the major share of the responsibility must be attributed to the pursuer, to the extent of 70%, can only be explained on the basis that the pursuer was considered to be far more blameworthy than the defender.
I find that difficult to understand, given the factors which their Lordships identified.
As I have explained, they rightly considered that the pursuer did not take reasonable care for her own safety: either she did not look to her left within a reasonable time before stepping out, or she failed to make a reasonable judgment as to the risk posed by the defenders car.
On the other hand, as the Extra Division recognised, regard has to be had to the circumstances of the pursuer.
As they pointed out, she was only 13 at the time, and a 13 year old will not necessarily have the same level of judgment and self control as an adult.
As they also pointed out, she had to take account of the defenders car approaching at speed, in very poor light conditions, with its headlights on.
As they recognised, the assessment of speed in those circumstances is far from easy, even for an adult, and even more so for a 13 year old.
It is also necessary to bear in mind that the situation of a pedestrian attempting to cross a relatively major road with a 60 mph speed limit, after dusk and without street lighting, is not straightforward, even for an adult. 42.
On the other hand, the Extra Division considered that the defenders behaviour was culpable to a substantial agree.
I would agree with that assessment.
He had to observe the road ahead and keep a proper look out, adjusting his speed in the event that a potential hazard presented itself.
As the Extra Division noted, he was found to have been driving at an excessive speed and not to have modified his speed to take account of the potential danger presented by the minibus.
The danger was obvious, because the minibus had its hazard lights on.
Notwithstanding that danger, he continued driving at 50 mph.
As the Lord Ordinary noted, the Highway Code advises drivers that at 40 mph your vehicle will probably kill any pedestrians it hits.
As in Baker v Willoughby and McCluskey v Wallace, that level of danger points to a very considerable degree of blameworthiness on the part of a driver who fails to take reasonable care while driving at speed.
In these circumstances, I cannot discern in the reasoning of the Extra Division any satisfactory explanation of their conclusion that the major share of the responsibility must be attributed to the pursuer: a conclusion which, as I have explained, appears to depend on the view that the pursuers conduct was far more blameworthy than that of the defender.
As it appears to me, the defenders conduct played at least an equal role to that of the pursuer in causing the damage and was at least equally blameworthy. 43. 44.
The view that parties are equally responsible for the damage suffered by the pursuer is substantially different from the view that one party is much more responsible than the other.
Such a wide difference of view exceeds the ambit of reasonable disagreement, and warrants the conclusion that the court below has gone wrong.
I would accordingly allow the appeal and award 50% of the agreed damages to the pursuer.
LORD HODGE: (with whom Lord Wilson agrees) 45. 46.
I am grateful to Lord Reed for setting out the facts of the case (in paras 4 9 and 12 of his judgment) and also the legal principles that govern the apportionment of responsibility under section 1(1) of the Law Reform (Contributory Negligence) Act 1945.
I agree with his presentation of those legal principles and consider it unfortunate that I find myself having to dissent in an appeal which does not raise a disputed issue of legal principle.
I agree that no court can arrive at an apportionment that is demonstrably correct.
The exercise is one of broad judgment and different views must be respected for the reasons which Lord Reed gives.
The ground on which this court or any appellate court can overturn the assessment of responsibility which another court has made is that the court below has manifestly and to a substantial degree gone wrong.
In Stapley v Gypsum Mines Ltd [1953] AC 663 Lord Reid observed (at p 682) that normally an appellate court would not disturb an award following an assessment of responsibility.
An appellate court can intervene only if it is satisfied that the court, whose judgment is under appeal, has gone wrong in the sense that its determination is outside the generous limits of reasonable agreement.
On that I agree with the majority view in this case.
My disagreement is in the application of the test in the circumstances of this case. 47.
The Lord Ordinary assessed the pursuers contributory negligence at 90%.
In reaching that view he appears to have been influenced by the evidence of the eyewitnesses of their impressions about what had occurred.
The bus driver, Mr Fraser, stated that the defenders car was not travelling at an excessive speed.
Mr Scroggie, an experienced driver who was in a stationary Land Rover two vehicles behind the bus, had told the police of his impression that the pursuer was 100% responsible for the accident.
Mrs Corbett, a passenger in another car immediately behind the bus, said that the defenders car was not going fast and denied that the pursuer had stopped and looked before attempting to cross the carriageway.
The late Mr Corbett, the driver of that car, had told the police that the pursuer had run into the westbound carriageway and that he had known that she was going to get knocked down. 48.
But the Lord Ordinary also preferred the defenders recollection of his speed to the eye witnesses estimates.
He held that the defender in the exercise of reasonable care should have reduced his speed from approximately 50 mph to somewhere between 30 and 40 mph before he approached the bus, and also inferred that he had not addressed his mind to the possibility of someone coming from behind the stationary bus to cross the road in front of his car.
While the defender could have done nothing to avoid the accident in the circumstances that existed at the moment when the pursuer suddenly appeared from behind the bus, his prior failure to reduce his speed on approaching the bus was a potent cause of the accident.
This assessment put a different perspective on the matter from that of the eye witnesses who appear to have focused on the immediate circumstances of the accident.
In my view, the Extra Division were entitled to conclude that in finding the pursuer responsible to the extent of 90% the Lord Ordinary had gone wrong to the requisite degree. 49.
Where I differ from the majority in this appeal is that I am not persuaded that the Extra Divisions assessment is open to the same criticism.
It is true that the Extra Division did more to explain why they were reducing the percentage to be attributed to the pursuers contributory negligence than they did to justify their acceptance of the Lord Ordinarys view that the major share of responsibility rested with her.
But there were findings of fact in the Lord Ordinarys opinion which are the background to their assessment and are capable of supporting their judgment.
In my view the Extra Division were entitled to share the Lord Ordinarys view that the pursuer was more responsible for the accident than the defender. 50.
Each case must depend upon its particular facts and a court gets little assistance from detailed comparisons of outcomes in other cases.
But case law points up general principles.
One such principle, which favours the pursuer, is the recognition of the moral blameworthiness or, alternatively, the causative potency of driving a motor vehicle without exercising reasonable care, because a vehicle can be a dangerous weapon.
The trend of the case law is to attribute more responsibility to the driver than to a pedestrian.
Hale LJ stated in Eagle v Chambers (at para 16): It is rare indeed for a pedestrian to be found more responsible than a driver unless the pedestrian has suddenly moved into the path of an oncoming vehicle.
The reason for that is not hard to find: it is the vehicles potential to injure.
The Highway Code states that a vehicle driven at 40 mph is likely to kill a pedestrian if it hits her.
The Extra Division recognised this and attributed greater causative potency to the defender than to the pursuer.
In reaching their apportionment the Extra Division clearly thought that the pursuers behaviour was significantly more blameworthy than the defenders.
The question therefore is: do the Lord Ordinarys findings of fact give sufficient support to that conclusion?. 52. 51.
Neither counsel sought to persuade this court to depart from the Lord Ordinarys findings of fact.
But there is a danger of an appellate court attaching significance to findings which they do not carry and reinterpreting them and what may have lain behind them in a way which the judge, who heard the evidence, did not intend.
I deal first with the fault of the defender.
Counsel for the pursuer in both the Inner House and this court put emphasis in his submissions on what he called the defenders failure to respond to the buss hazard lights.
But there is nothing in the Lord Ordinarys findings that treats the hazard lights as doing more than alerting the traffic to the stationary bus because it was holding up the traffic.
As Mr Hooghiemstra explained in his evidence, the principal use of hazard lights in the Highway Code (Rule 116) is when a vehicle is stationary to warn that it is temporarily obstructing traffic.
It was possible, as the defender conceded, that the hazard lights might have been used to alert of another risk.
But there was no evidence that they were used on this occasion, and would reasonably have been understood to be used, to warn of children crossing the opposite carriageway and no finding of fact to that effect.
The significance of the hazard lights was that they drew attention to the stationary bus and a careful driver could foresee the possibility that passengers, including children, might alight from the bus. 53.
The bus had its headlights on and the sign on the windscreen which identified it as a school bus was not illuminated.
The sign may not have been visible at dusk to a driver approaching the bus on the opposite carriageway.
The Lord Ordinarys conclusion was not that the defender should have identified the bus as a school bus.
He stated alternatives: if not, the defender should at least have identified the bus as a bus from which children were likely to alight. 54.
Counsel for the defender did not dispute that the defender was culpable to the extent that the Extra Division had found.
But the defenders negligence amounted to this.
While he was driving well within the statutory speed limit in a rural location, he failed to anticipate a foreseeable risk.
He approached the bus which was stationary in the opposite carriageway at what might have been a bus stop.
He was negligent in not reducing his speed by at least 10 mph and not keeping a proper lookout because there was a danger, which he ought to have foreseen, that a passenger, who might be a child, might emerge from behind the bus and attempt to cross the road without exercising care. 55.
Turning to the Lord Ordinarys findings concerning the pursuers responsibility, the Extra Division did not accept his characterisation of reckless folly because they thought it could not be said that she had acted without caring about the consequences.
But they treated her behaviour as being at the serious end of the spectrum of carelessness, rejecting her counsels submission that she had not darted out from behind the bus.
There was no challenge to the Lord Ordinarys finding that she was fully aware of the danger of crossing the road.
Such a challenge would have been difficult to mount having regard to her age and experience and as the bus driver, Mr Fraser, had given evidence that he had warned the pursuer and her sister in the past when they had run across the road. 56.
Counsel for the pursuer was not justified in suggesting that she faced significant risks from traffic approaching from several directions.
The predominant risk which the pursuer faced from traffic was from vehicles approaching on the westbound carriageway, as the defender did.
Vehicles on the eastbound carriageway were forbidden to overtake by a solid white line on the road; vehicles had to stop behind the stationary bus, as they did.
Traffic from the farm road was not a problem on this occasion.
The pursuers mothers car was in the bellmouth of the farm road opposite as she waited to pick her up in accordance with her normal practice and her fathers tractor had entered the farm road.
In short, faced with a clear and predominant risk from traffic approaching on the westbound carriageway of a major road, the pursuer ran out in front of the defenders vehicle when it was only 30 40 metres away. 57.
On the Lord Ordinarys unchallenged findings, there was no reason for the pursuer not to have seen the approaching car.
Either she did not look or (as he said, at para 46) she failed to identify and react sensibly to the presence of the defenders car in close proximity.
I construe the latter possibility as meaning that she saw the car and took the risk of running in front of it.
Not to look or knowingly to run into the path of the car displayed a very high degree of carelessness.
The Extra Division were entitled to view her behaviour as both very seriously blameworthy and of major causative significance and also, because of the extent of her blameworthiness, to attribute to her the major share of responsibility. 58.
As I have said, the opinion of the Extra Division must be read with the Lord Ordinarys findings of fact.
On those findings I might have concluded that the defender was one third responsible and the pursuer two thirds.
But that is not the role of an appellate court, which cannot substitute its judgment for that of a court below unless that court is plainly wrong.
Nobody has submitted that the Extra Division failed to take into account any material fact or misunderstood the evidence.
Thus their assessment is one of broad judgment in which there is ample room for reasonable disagreement. 59.
As I am not persuaded that the Extra Divisions determination was outside the generous limits of reasonable disagreement, I would have dismissed the appeal.
| UK-Abs | When she was 13 Ms Jackson, the pursuer, was hit by a car driven by the defender.
She appeals to the Supreme Court from the Inner House of Sessions assessment of her contributory negligence at 70%.
Section 1(1) of the Law Reform (Contributory Negligence) Act 1945 states: Where any person suffers damage as the result partly of his own fault and partly of the fault of any other person or persons, a claim in respect of that damage shall not be defeated by reason of the fault of the person suffering the damage, but the damages recoverable in respect thereof shall be reduced to such extent as the court thinks just and equitable having regard to the claimants share in the responsibility for the damage.
The collision took place on 12 January 2004 on the A98 road between Banff and Fraserburgh, near its junction with a private road leading to the farm where the pursuer lived with her family.
There was a 60mph speed limit, and no street lighting.
The pursuer alighted from her school bus, which had just parked on the opposite side of the road from the entrance to the farm road.
It was about 40 minutes after sunset and light was fading.
The respondent was driving home in the opposite direction, travelling at about 50mph.
His lights were on.
The pursuer passed between the rear of the bus, which was still stationary, and the car behind it.
She paused briefly at the offside rear of the bus, took one or two steps into the road into the path of the defenders oncoming car, before breaking into a run.
While running she was struck by the defenders car, still travelling at about 50mph.
She was projected into the air, the car passed beneath her and she landed on the road.
The pursuer sustained serious injuries.
The Lord Ordinary found that the defender had failed to drive with reasonable care and was negligent.
If he had been travelling at a reasonable speed the pursuer would have made it safely past him, so the accident would not have occurred.
The Lord Ordinary also considered that the principal cause of the accident was the reckless folly of the pursuer: either she did not look to the left before crossing or, having looked, she failed to identify and react sensibly to the presence of the car in close proximity.
On either scenario the greater cause of the accident was her movement into the path of the defenders car at a time when it was impossible for him to avoid a collision.
The Lord Ordinary assessed the pursuers contributory negligence at 90%.
On appeal the Extra Division of the Inner House allowed the pursuers appeal and assessed her contributory negligence instead at 70%.
The Supreme Court allows Ms Jacksons appeal by a majority of 3 2 (Lord Hodge and Lord Wilson dissenting) and awards her 50% of the agreed damages.
Lord Reed (with whom Lady Hale and Lord Carnwath agree) gives the lead judgment allowing the appeal.
Lord Hodge (with whom Lord Wilson agrees) would have dismissed the appeal.
Lord Reed did not accept the appellants contention that there was no basis for a finding of contributory negligence at all on the findings made by the Lord Ordinary. [17 18] Section 1(1) of the 1945 Act does not specify how responsibility is to be apportioned.
Decided cases show two aspects to apportionment: the respective causative potency of the parties acts and their respective blameworthiness.
The court consistently imposed a high burden on drivers to reflect the potentially dangerous nature of driving. [20 26] There is no demonstrably correct apportionment.
Since different judges may legitimately take different views of what is just and equitable in particular circumstances, those differing views should be respected, within the limits of reasonable disagreement. [27 28] The lower court must have gone wrong: in the absence of an identifiable error, only a difference of view as to apportionment that exceeds the ambit of reasonable disagreement will warrant that conclusion. [35] Apportionments are not altered because of disagreement as to the precise figure.
However, appellate courts have intervened on the basis of disagreement as to whether one party bore much greater responsibility than the other: there is a qualitative difference between a finding of 60% contribution and a finding of 40%. [38] The Extra Division provided only a very brief explanation of their apportionment of 70%.
Given their conclusion that the causative potency of the defenders conduct was greater than that of the pursuer, the result can only be explained on the basis that they considered the pursuer far more blameworthy.
They rightly considered that she did not take reasonable care for her own safety, but regard has to be had to her circumstances.
She was only 13.
An assessment of the defenders speed in the circumstances was far from easy.
Attempting to cross a relatively major road with a 60mph speed limit, after dusk and without street lighting, is not straightforward, even for an adult.
The Extra Division considered that the defenders behaviour was culpable to a substantial degree, with which Lord Reed agrees.
Overall the Extra Divisions reasoning does not provide a satisfactory explanation of their conclusion that the pursuer bore the major share of responsibility.
Lord Reed considered the defenders conduct played at least an equal role to that of the pursuer in causing the damage and was at least equally blameworthy.
He therefore allows the appeal and awards 50% of the agreed damages to the pursuer. [39 44] Lord Hodge would have dismissed the appeal.
He agrees on the facts and the legal principles set out in Lord Reeds judgment. [45] The Lord Ordinarys assessment of 90% appears to have been influenced by eyewitnesses impressions, however the defenders prior failure to reduce his speed was a potent cause of the accident, which put a different perspective on the matter.
The Extra Division was entitled to conclude the Lord Ordinary had gone wrong.
The Extra Divisions assessment is not open to the same criticism, given the Lord Ordinarys findings. [47 49] Not to look or to knowingly run into the path of the car displayed a very high degree of carelessness.
The Extra Division were entitled, because of the extent of her blameworthiness, to attribute to the pursuer the major share of responsibility. [57]
|
This is an appeal against a decision of the Court of Appeal allowing the respondents appeal from a decision of Mr Andrew Sutcliffe QC, sitting as a Deputy High Court Judge, who granted the appellants relief against a debarring order, in circumstances where such relief had already been refused by another judge.
The background facts and proceedings
The respondent had entered into an agreement with the appellants, John Riordan and Eugene and Barrington Burke, to buy the shares which they owned in Prestige Property Develper UK Ltd. Having paid 1.572m to the appellants, the respondent sought specific performance of the agreement and associated relief, in proceedings issued in March 2013.
After obtaining an initial order without notice a week earlier, the respondent obtained a freezing order (the freezing order) from Arnold J on 17 May 2013 at a hearing attended by the appellants and their legal representatives.
This order required the appellants to provide by 24 May 2013 information and documents relating to all their assets, including details of all of their bank accounts and bank statements going back to 1 October 2010.
The freezing order also stated that such assets extended to those held by Prestige Properties Ltd (the Company).
Arnold J also directed that the proceedings be heard during October 2013.
The appellants did not afford the disclosure required by the freezing order by 24 May 2013, and the respondent gave them the opportunity to comply out of time.
However, the appellants still failed to comply, although they gave some further disclosure.
The respondent issued an application for an unless order, which came before Henderson J.
On 21 June 2013, he gave a judgment in which he held that the appellants disclosure was in many respects seriously inadequate [2013] EWHC 3356 (Ch).
He also described the failure to disclose full bank statements for the period of three years in the names of the relevant defendants as a particularly glaring omission.
Accordingly, he made an unless order which required the appellants to disclose certain identified assets that they had failed to disclose, and which also provided that, in default of compliance by 1 July 2013, the appellants would be debarred from defending the claim.
Although the appellants gave some further disclosure, they failed to comply fully with the unless order.
On 9 August 2013, Hildyard J heard (i) the respondents application for an order debarring the appellants from defending as they had failed to comply with the unless order, and (ii) the appellants application for (a) a determination that they had complied with the unless order, or, if they had not (b) an order for relief from sanctions under CPR 3.9 (the first relief application).
The appellants application was partly based on the contention that they had given further disclosure on 31 July 2013.
Hildyard J made the debarring order sought by the respondent and dismissed the appellants application for relief from sanctions [2013] EWHC 3464 (Ch).
There was no appeal against that order.
In his judgment, Hildyard J recorded the appellants contention that their failures were de minimis [or] the product of matters beyond their control.
He did not accept that contention, and described the position as less than satisfactory.
He rejected the argument that the appellants failure to produce certain charges had been caused by the refusal of the Bank of Cyprus to cooperate, and also held that there had been an obvious failure to give disclosure of certain other documents.
He observed that it was most difficult to reach any other conclusion than that there have been substantial failures to comply with the unless order.
He then referred to the fact that just one page of a bank account at HSBC in the name of the Company had been produced, and described this as a very unsettling turn of events, and a further illustration of the reasons for my conclusion that there has been a material failure, which cannot be dismissed as de minimis.
He then carefully addressed the question whether he should grant the appellants relief under CPR 3.9 from the sanction of the debarring order.
Having considered the principles as laid down in earlier cases, he explained that he felt constrained to refuse any relief from sanctions, while personally regret[ting] the need for such a step.
The trial of the action was due to start on 3 October 2013, with a time estimate of five days (which apparently was not altered following Hildyard Js order).
Having instructed fresh solicitors, the appellants issued an application on 2 October 2013 for relief from sanctions (the second relief application), supported by a lengthy affidavit, which provided, at least according to the appellants, full disclosure as required by the freezing order.
The trial and the second relief application were adjourned to 7 October 2013, when they came on before Mr Sutcliffe.
He heard the second relief application, over the next four days, and granted the appellants relief from sanctions, adjourned the trial, and fixed a new trial window in January 2014 [2013] EWHC 3179 (Ch).
In his judgment, the Deputy Judge began by summarising the substantive facts and issues and the procedural history.
He mentioned that he did not have approved transcripts of the ex tempore judgments of Henderson or Hildyard JJ, but quoted from informal notes or reported summaries of their respective judgments.
The Deputy Judge then summarised the appellants case in support of the second relief application, namely that they had tried hard to comply with the requirements of the freezing and unless orders, that their failure to comply was due to the extensive nature of the disclosure required, that any such failure had been relatively slight and some of it due to their former solicitors, that any such failure had now been put right, and that to maintain the debarring order would, in all the circumstances, be disproportionate.
He then referred to the respondents case in reply, namely that the second relief application was an abuse of process, and that, in any event, the debarring order ought to be maintained on the merits not least because the appellants had still not given the requisite disclosure in full.
The Deputy Judge then addressed the question of how he should resolve the appellants second relief application.
He began by mentioning the courts power to grant relief from sanctions, contained in CPR 3.9, and the guidance as to its exercise in certain judicial decisions.
He then referred to the freezing and unless orders, and turned to the respondents contention that the appellants remained in breach of the unless order in that they had not disclosed bank statements in respect of the Companys account at HSBC.
Because other bank statements had been provided for the Company, the Deputy Judge concluded that the omission of this evidence does not amount to a breach of the unless order and even if it did, in the context of the disclosure provided as a whole, it is de minimis and would not justify a finding that the [appellants] had failed to comply.
He also accepted that the appellants former solicitors were in part to blame for any failure on the appellants part to comply with the freezing and unless orders.
After mentioning one or two other factors, he held that the appellants were in all the circumstances entitled to take a full part in the trial, and that the debarring order should be discharged.
He added that, if, as the respondent contended relying on CPR 3.1(7), it was necessary for the appellants to show a change of circumstances since the decision of Hildyard J, in order to justify a second application for relief from sanctions, the fact that they had now substantially complied with their disclosure obligations was a sufficient change.
The respondent appealed against the decision of the Deputy Judge to grant the appellants relief from sanctions, and, for reasons set out in a judgment of the court given by Richards LJ (sitting with Aikens and Davis LJJ), the Court of Appeal allowed the appeal and restored the debarring order imposed by Hildyard J [2014] CP Rep 19.
The essence of the Court of Appeals reasoning was that, as Hildyard J had already rejected the appellants first relief application, CPR 3.1(7) applied and the Deputy Judge could not properly have acceded to the second relief application unless there had been a material change of circumstances since Hildyard Js decision, and there had been no such change.
To complete the history, the appellants were granted permission to appeal against this decision to this court.
Meanwhile, the trial duly took place on 21 March 2014 before Mr David Donaldson QC, whose decision was reversed on 4 February 2015 by the Court of Appeal, who ordered, inter alia, that the appellants pay just over 2.205m to the respondent see [2014] EWHC 725 (Ch) and [2015] EWCA Civ 41.
Discussion
I have summarised the effect of the judgment given by Richards LJ in very brief terms because I agree with it, and what follows is not intended to differ from its essential reasoning.
Indeed, I had wondered whether simply to say that this appeal should be dismissed for the reasons given by the Court of Appeal at [2015] EWCA Civ 41, paras 23 32.
However, having given permission to the appellants to appeal to this Court, we may leave them with an understandable feeling of grievance if we do not explain to them in our own words why their appeal is being dismissed.
The effect of Henderson Js unless order, coupled with Hildyard Js finding that the appellants had failed to comply with the disclosure requirements in that order, was that, unless the appellants were granted relief from sanctions under CPR 3.9, they would be debarred from defending the claim.
CPR3.9(1) provides: On an application for relief from any sanction imposed for a failure to comply with any Rule, Practice Direction or court order, the court will consider all the circumstances of the case, so as to enable it to deal justly with the application including the need (a) for litigation to be conducted efficiently and at proportionate cost; and (b) to enforce compliance with Rules, Practice Directions and orders.
The basis upon which a court should approach an application for relief from sanctions under CPR 3.9 has been authoritatively considered by the Court of Appeal in Mitchell v News Group Newspapers Ltd (Practice Note) [2014] 1 WLR 795 and Denton v TH White Ltd (De Laval Ltd, Part 20 defendant) [2014] 1 WLR 3926.
Although Hildyard J gave his decision refusing relief from sanctions before those two decisions of the Court of Appeal, his reasoning and decision reflected the guidance and approach set out in them.
Quite rightly, there has been no suggestion that we should reconsider what was said in those decisions.
As explained above, the Court of Appeal in this case held that the Deputy Judge should not have considered the second relief application on its merits, as it failed to get off the ground, because CPR 3.1(7) applied and the appellants could not show that there had been a material change of circumstances since the hearing of the first relief application before Hildyard J. Mr Letman, who appears for the appellants, contends that the Court of Appeal erred in two respects, namely (i) in holding that the appellants needed to establish a material change in circumstances, or, in the alternative, (ii) in holding that they had failed to establish such a material change.
So far as the first point is concerned, the appellants raise rather an arid point, namely whether CPR 3.1(7) applied to the second relief application.
CPR 3.1(7) provides that [a] power of the court under these Rules to make an order includes a power to vary or revoke the order.
The reason that it is said to be significant whether CPR 3.1(7) should have been taken into account by the Deputy Judge is because, as Lord Dyson MR giving the judgment of the court put it in Mitchell at para 44, citing the judgment of Rix LJ in Tibbles v SIG plc (trading as Asphaltic Roofing Supplies) [2012] 1 WLR 2591, para 39(ii): The discretion [exercisable under CPR 3.1(7)] might be appropriately exercised normally only (i) where there had been a material change of circumstances since the order was made; (ii) where the facts on which the original decision was made had been misstated; or (iii) where there had been a manifest mistake on the part of the judge in formulating the order.
Moreover, as the court emphasised, the application must be made promptly.
This reasoning has equal validity in the context of an application under CPR 3.9.
Lord Dyson went on to explain in para 45 that, on an application for relief from a sanction, therefore, the starting point should be that the sanction has been properly imposed and complies with the overriding objective.
Nothing said in Denton, where the Court of Appeal clarified some of the reasoning in Mitchell, undermines these observations.
It is worth mentioning that none of this was revolutionary when it was expounded in Mitchell.
In Collier v Williams [2006] 1 WLR 1945, para 40, Dyson LJ giving the judgment of the Court of Appeal had approved an observation of Patten J in Lloyds Investment (Scandinavia) Ltd v Christen Ager Hanssen [2003] EWHC 1740 (Ch) at para 7 to this effect: Although this is not intended to be an exhaustive definition of the circumstances in which the power under CPR 3.1(7) is exercisable, it seems to me that, for the High Court to revisit one of its earlier orders, the applicant must either show some material change of circumstances or that the judge who made the earlier order was misled in some way, whether innocently or otherwise, as to the correct factual position before him.
In my view, the Court of Appeal in this case rightly held that CPR 3.1(7) did apply to the second relief application.
As a matter of ordinary language, the Deputy Judge was being asked to vary or revoke the order made by Hildyard J, who had refused relief from sanctions and thereby confirmed the debarring order, which the Deputy Judge was being asked, in effect, to set aside.
However, even if that were not right, it appears to me that, as a matter of ordinary principle, when a court has made an interlocutory order, it is not normally open to a party subsequently to ask for relief which effectively requires that order to be varied or rescinded, save if there has been a material change in circumstances since the order was made.
As was observed by Buckley LJ in Chanel Ltd v FW Woolworth & Co Ltd [1981] 1 WLR 485, 492 493: Even in interlocutory matters a party cannot fight over again a battle which has already been fought unless there has been some significant change of circumstances, or the party has become aware of facts which he could not reasonably have known, or found out, in time for the first encounter.
Accordingly, even if CPR 3.1(7) did not apply to the second relief application, it appears clear that the appellants would have faced the same hurdle before the Deputy Judge.
That conclusion also derives support from the last sentence in para 44 in Mitchell, quoted in para 15 above.
There was no question of the facts having been misstated by Hildyard J or of manifest mistake in formulating his order.
Accordingly, unless (perhaps) they could show that this was not a normal case, the appellants had to establish a material change in circumstances since the hearing before Hildyard J before the Deputy Judge could properly consider the second relief application on its merits.
Mr Letman was unable to point to any factors which rendered this case relevantly not normal.
Accordingly, I reject the appellants first point.
That brings me to the second point made by the appellants, namely that the Court of Appeal were wrong to hold that their subsequent alleged compliance with the unless order was not a material change of circumstances.
In my view, that point must also be rejected, and that is for two reasons.
The first reason is that, where a party is subject to a debarring order for failing to comply with an unless order to do something within a specified period and relief from sanctions is refused at a time when he is still in default, the mere fact that he then complies with the unless order (albeit late) cannot amount to a material change of circumstances entitling him to make a second application for relief from sanctions.
By refusing the partys first application for relief from sanctions, the court would have effectively been saying that it was now too late for that party to comply with the unless order and obtain relief from sanctions.
So, if the court on a second application for relief from sanctions granted the relief sought simply because the unless order had been complied with late, its reasoning would ex hypothesi be inconsistent with the reasoning of the court which heard and determined the first application for relief.
Of course, that does not mean that late compliance, subsequent to a first unsuccessful application for relief from sanctions, cannot give rise to a successful second application for relief from sanctions.
If, say, the unless order required a person or company to pay a sum of money, and the court subsequently refused relief from sanctions when the money remained unpaid, the payment of the money thereafter might be capable of constituting a material change of circumstances, provided that it was accompanied by other facts.
For instance, if the late payment was explained by the individual having inherited a sum of money subsequent to the hearing of the first application which enabled him to pay; or if the company had gone into liquidation since the hearing of the first application and, unlike the directors, the liquidator was now able to raise money.
These are merely possible examples, and I am far from saying that such events would always constitute a material change of circumstances, or, even if they did, that they would justify a second application for relief from sanctions.
In this case, such subsequent compliance with the unless order which did occur after the hearing before Hildyard J was not accompanied by any explanation which could possibly have justified a court concluding that there had been a material change of circumstances since that hearing.
Accordingly, the Deputy Judge simply had no grounds to justify his entertaining the second relief application on its merits.
Quite apart from this, it seems to me that the Deputy Judge was not entitled to hold that the appellants had complied with the terms of the unless order, or that any breach of that order was de minimis, as he did.
Hildyard J had found that the appellants should have disclosed the HSBC bank statements for the Company and that their failure to do so cannot be dismissed as de minimis.
In those circumstances, it was simply inappropriate for the Deputy Judge to reach a different conclusion on essentially the same facts. (Indeed, that is a very good illustration of why it would only have been open to the Deputy Judge to consider the second relief application on its merits if there had been a material change of circumstances.
He could not simply revisit the same issues as had already been considered by another judge and reach a different conclusion.)
Further, it was not appropriate for the Deputy Judge to conclude that the appellants former solicitors were partly to blame for any failure on their part to comply with the unless order.
The contention that the appellants former solicitors were responsible for some of the breaches of the unless order was based on very slight evidence indeed a mere statement to that effect in a witness statement and two emails each of three or four lines, one of which was plainly incomplete.
That was quite insufficient to justify the finding that the former solicitors were to blame.
The Court of Appeal also considered that the appellants should have been in difficulties on the second relief application because of the delay.
Given that they made that application eight weeks after Hildyard J made his order and one day before the trial was due to begin, without any satisfactory explanation for the delay or last minute nature of the application (except for a change of solicitors), I see considerable force in that view.
It is fair to the Deputy Judge to mention that he did not have approved transcripts of the judgments of Henderson J or Hildyard J, but he had a pretty clear note and summary of the latter judgment.
It was incumbent on the appellants, who made the second relief application, to have obtained approved transcripts of those judgments: it was certainly no fault of the respondent that they were not available.
It is also fair to the Deputy Judge to add that Mitchell and Denton were decided after he determined the second relief application.
However, he was referred to Collier, which should have led him to the conclusion which the Court of Appeal reached.
It should perhaps also be added that the respondent had adduced evidence before us, which had not been available to the Court of Appeal or the Deputy Judge, to support a contention that, if we had disagreed with the Court of Appeal, we should proceed to determine the second relief application on its merits and dismiss it.
This evidence suggested that the appellants failure to produce the Companys bank accounts was indeed a serious failure, but it is unnecessary, indeed it would be inappropriate, to consider that aspect further.
Conclusion
Accordingly, I would dismiss this appeal.
| UK-Abs | Mr Thevarajah entered into an agreement with the Appellants, Mr Riordan and Eugene and Barrington Burke, to buy the shares that they owned in Prestige Property Developer UK Ltd (the Company).
Having paid 1.572m to the Appellants, Mr Thevarajah sought specific performance of the agreement in proceedings issued in March 2013.
On 17 May 2013, Mr Thevarajah obtained a freezing order (the freezing order) which required the Appellants to provide by 24 May 2013 information and documents relating to all their assets, including assets held by the Company, as well as details of bank accounts.
The Appellants did not provide the disclosure required by the freezing order by 24 May 2013.
Mr Thevarajah subsequently applied for and obtained an unless order from Henderson J, which provided that: (i) the Appellants were required to disclose certain identified assets that they had failed to disclose; and (ii) in default of compliance by 1 July 2013, the Appellants would be debarred from defending the claim.
The Appellants failed to comply fully with the unless order.
Mr Thevarajah subsequently applied to the Chancery Division of the High Court for an order debarring the Appellants from defending their claim; the Appellants applied for a determination that they had complied with the unless order or, if they had not, for relief from sanctions.
On 9 August 2013, Hildyard J heard the applications, made the debarring order sought by Mr Thevarajah and dismissed the Appellants application for relief from sanctions.
There was no appeal against Hildyard Js order.
The trial of the action was due to start on 3 October 2013.
Having instructed fresh solicitors, the Appellants issued a second application for relief from sanctions (the second relief application) on 2 October, accompanied by a lengthy affidavit which provided what the Appellants considered to be full disclosure as required by the freezing order.
Mr Andrew Sutcliffe QC, sitting as a Deputy High Court Judge, heard the second relief application and granted the defendants relief against the debarring order, and fixed a fresh date for the trial.
Mr Thevarajah appealed to the Court of Appeal.
The Court of Appeal allowed the appeal and restored the debarring order imposed by Hildyard J.
The Appellants now appeal to the Supreme Court.
The Supreme Court unanimously dismisses the appeal.
Lord Neuberger gives the only judgment, with which the other Justices agree.
The Appellants contended that the Court of Appeal had erred in two respects: (i) in holding that the Appellants needed to establish a material change of circumstances in order to succeed on the second relief application; or, in the alternative (ii) in holding that the Appellants had failed to establish such a material change.
The Appellants first ground is rejected.
The effect of Henderson Js unless order, coupled with Hildyard Js finding that the Appellants had failed to comply with the disclosure requirements in that order, was that the Appellants were debarred from defending the claim unless they were granted relief from sanctions under CPR 3.9. [11] Hildyard Js reasoning in refusing relief from sanctions is consistent with authoritative guidance subsequently set out by the Court of Appeal in the cases of Mitchell v News Group Newspapers Ltd [2014] 1 WLR 795 and Denton v TH White Ltd [2014] 1 WLR 3926. [13] The Court of Appeals conclusion that the Deputy Judge should not have considered the second relief application on its merits because CPR 3.1(7) required the Appellants to show that there had been a material change of circumstances since the hearing of the first relief application, was correct. [14 19] Even if CPR 3.1(7) did not apply, this was the position as a matter of ordinary principle. [18] The Appellants second ground is also rejected.
Where a party has had imposed on it a debarring order for failing to comply with an unless order, its subsequent compliance with that unless order cannot without more amount to a material change of circumstances. [21] In refusing relief from sanctions, a court is effectively saying that it was now too late for that party to comply with the unless order and obtain relief from sanctions. [21] However, that does not mean that late compliance cannot, in certain circumstances, give rise to a successful second application for relief from sanctions, at least where it occurs in the context of some other relevant change in circumstances. [22] On the facts, there were no grounds which justified the Deputy Judge entertaining the second relief application on the merits. [23] The Deputy Judge was not entitled to come to a different conclusion on what where essentially the same facts as were before Hildyard J. [24] Further, the evidence before the Deputy Judge was insufficient to justify his finding that the Appellants former solicitors were partly to blame for the Appellants failure to comply with the unless order. [25] The issue of delay is also relevant.
There is considerable force in the Court of Appeals view that the Appellants should have been in difficulties on the second relief application because of their delay in bringing it.
The second relief application was made eight weeks after Hildyard J made his order and one day before the trial was due to begin, without any satisfactory explanation. [26]
|
What is the impact of fraud upon a financial settlement which is agreed between a divorcing husband and wife, especially where, as will almost always be the case, that agreement is embodied in a court order? Does fraud unravel all, as is normally the case when agreements are embodied in court orders, or is there some special magic about orders made in matrimonial proceedings, which means that they are different? This case happens to concern a husband and wife in divorce proceedings, but the same questions would also arise in judicial separation proceedings, and between same sex partners who are either married or in a civil partnership in divorce, dissolution or separation proceedings.
They entail consideration, in particular, of the leading case on non disclosure in matrimonial financial proceedings, Livesey (formerly Jenkins) v Jenkins [1985] AC 424 (Livesey).
The facts
The husband and wife (who are not yet divorced) were married in 1993 and separated 17 years later, in 2010, having had three children together.
When their financial proceedings were heard, in July 2012, the children were aged 17, 15 and 12.
The wife has been the childrens primary carer throughout the marriage and she anticipates that she will remain responsible for the care of their elder son, who has severe autism, for the rest of her life.
Sadly, the parties also cannot agree about matters relating to the future care of their son and so there are also proceedings in the Court of Protection about him.
The husband is a computer software entrepreneur.
He has developed a very successful software business, AppSense Holdings Ltd, in which he holds a substantial shareholding.
The value and manner of distribution between them of this shareholding was the principal matter in dispute between the parties.
It was not in dispute that, in addition to that shareholding, there were liquid assets of some 17m, of which around 13.8m was in cash, 2m in the parties three homes, and the balance in other assets and investments.
It is only necessary to give a brief outline of the dispute about the value of AppSense and the husbands shareholding in it.
In early 2011, Goldman Sachs had paid US$70m for a 33.5% share in the company.
The wife contended that this valued the company as a whole at around US$255m and the husband's remaining shares at around US$132m.
The husband contended that the development of the company was not going according to plan and it was worth far less.
Each party instructed a valuation expert.
Both valuers approached their task on the basis that there were no plans for an Initial Public Offering (IPO).
The wifes valuer concluded that the company as a whole was worth 88.3m (making the post tax valuation of the husbands shareholding something between 22.24m and 31.9m).
The husbands valuer concluded that the company was worth 60m (valuing the husbands shareholding at something between 6.674m and 8.085m).
The case came on for trial before Sir Hugh Bennett in July 2012.
The wifes case was that all the assets should be divided equally.
She should receive 50% of the liquid assets and 50% of the net proceeds of any sale of the AppSense shares, whenever that took place.
The husbands case was that the assets should be divided equally, but that the wife should receive the whole of her share from the liquid assets, leaving him with the unencumbered AppSense shares.
He also argued that, if his valuers view of the value of those shares was not accepted, his special contribution would justify a departure from the principle of equality.
However, under cross examination, he abandoned this second argument, at least in relation to assets acquired during the marriage.
Much of the husbands evidence was about when the value of his shares might be realised.
His written evidence was that an exit, although theoretically possible at any time, was unlikely before three, five or seven years after July 2012.
He also gave the impression that various exit strategies were being contemplated but only when the time was right.
In oral evidence he said that there might be an exit in between three and seven years time, but that [o]ne thing is for sure that theres nothing on the cards today.
After the parties had given their evidence, but before the valuers had given theirs, the parties reached an agreement.
The wife would receive over 10m in cash and property, and 30% of the net proceeds of sale of the AppSense shares (in the shape of a deferred lump sum), whenever that might take place.
They would also set up a trust for their elder son, into which each would pay 1m immediately and the husband would pay 4m from the proceeds of sale of his AppSense shares.
The husband would also pay child support for each of the children.
On 13 July 2012, this agreement was explained to the judge, who approved it.
A draft consent order was drawn up.
Before it was sealed, however, reports appeared in the press indicating that AppSense was being actively prepared for an IPO, which was expected to value the company at between US$750m and US$1000m.
The wife immediately invited the judge not to seal the order and applied for the hearing to be resumed.
The husband argued that the judge was functus officio, but the judge rejected that and ordered the husband to file an affidavit responding to the wifes allegation of material non disclosure.
He directed a further hearing, which was listed for 15 April 2013.
At that hearing he had before him the wifes application for the hearing to be resumed and the husbands application that the wife show cause why the order reflecting the agreement should not be sealed.
He gave judgment on 29 April 2013: [2013] EWHC 991 (Fam), [2013] 2 FLR 1598.
The husbands affidavit, filed in January 2013, continued to deny that there was any imminent prospect of an IPO of AppSense or that he had misled the court in his evidence.
The press reports were mere public relations fluff put out by one or more investment banks.
However, the documents which he exhibited to that affidavit told a very different story.
As the judge put it, planning for an IPO in early 2013 had been in full swing from January to August 2012 (para 29); by early July 2012 the company had sent out invitations to various banks inviting them to pitch for the role of bankers to the IPO; and the husband had been due to and did meet potential bankers the week after the hearing.
The husband had knowingly misled both of the expert valuers and his evidence at the hearing had been false.
It was absolutely plain that the husbands evidence about AppSense had been seriously misleading (para 29). [W]hen placed against the documents which he has now disclosed, his evidence can only be categorised as dishonest.
The documents exhibited to his affidavit had not previously been disclosed because he did not want the wife or the court to know the true facts.
He thus gave dishonest evidence, no doubt in the hope that this would lessen his exposure to the courts discretionary powers (para 31).
Had the judge known the true facts, it was inconceivable that he would not have regarded them as relevant to the exercise of his discretion.
This was not some relatively trivial minor matter, in the words of Lord Brandon in Livesey.
Why would the husband lay a false trail if what was sought to be suppressed was immaterial (para 33)?
The decisions of the High Court and Court of Appeal
The judge having reached that conclusion, it might have been expected that he would direct that the draft consent order agreed in July 2012 not be sealed and give directions for the case to be heard again.
Instead, however, he acceded to the husbands application that the order be perfected.
His grounds for doing so were, in summary, that had he known the truth about the plans for an IPO in 2012, he would have asked himself what is the likelihood of an IPO actually happening? (para 37); he would have progressed the hearing as far as he could and then adjourned to see whether an IPO did take place, on what terms, at what value and at what price (para 38); as in fact no IPO had taken place (para 40) and the husbands evidence that no IPO was now contemplated had not been challenged, he was compelled to accept that none was now in prospect (para 41); under the draft order, the wife had by far the greater share of the liquid assets; she was to make a smaller contribution to the sons trust; and she was to get 30% of the net value of the husbands shares whenever they were realised, although it was strongly arguable that the value of the shares would become less and less of a matrimonial asset in the future; she took the risk that crystallisation of her entitlement might occur sooner than three years by agreeing to a flat rate of 30% (para 42); and so the order he was now being asked by the husband to make was not substantially different from the order which he would have made had there been full disclosure at the outset; hence the non disclosure was not now material (para 43).
The Court of Appeal, by a majority, dismissed the wifes appeal: [2014] EWCA Civ 95, [2014] 2 FLR 89.
The leading judgment was given by Moore Bick LJ.
In summary, it was clear from Livesey v Jenkins and other cases that the authority of an order made in matrimonial financial remedy proceedings derives from the courts own exercise of its statutory powers under the Matrimonial Causes Act 1973 and not from the consent of the parties.
Hence misrepresentation that would normally entitle a wife to rescind a contract (and have a consent order in civil proceedings set aside) did not necessarily entitle her to renounce the agreement and resume the proceedings.
It was necessary for the wife to satisfy the judge that he should set the order aside (para 18).
In Livesey, Lord Brandon had said that it would only be in cases where the absence of full and frank disclosure had led to the court making an order substantially different from the order which it would have made if such disclosure had taken place that a case for setting aside the order could be made good (para 19).
So the judge had asked himself the right question (para 21).
The sooner the husband was likely to dispose of his shares, the stronger would be the wifes claim to an equal share and the stronger her argument for resuming the hearing.
Any challenge to the husbands evidence about his plans for the company ought to have been made at the hearing (para 23).
Although Livesey had not been a case of fraud, [i]t would be surprising if Lord Brandon had confined his analysis to the relatively uncommon cases of inadvertent non disclosure (para 20).
In her concurring judgment, Macur LJ placed particular emphasis on the wifes failure to cross examine the husband on his affidavit (paras 53, 54).
In a vigorous dissenting judgment, Briggs LJ explained that the husbands fraud was material to the agreement and the consent order for two reasons.
First, it undermined the basis on which his shareholding had been valued and therefore the ability of the wife to address the proportionality of agreeing a discount below her claimed 50% against the receipt of a larger share of the other family assets.
Secondly, it created a false basis for the wife to assume that a delayed realisation of the husbands shareholding might justify a tapered reduction in her share of the proceeds (para 30).
Once the judge had decided that the husbands fraud had undermined the parties agreement and the consent order, that should have been the end of the matter.
There were three inter related reasons for this (para 34).
First, the general principle that fraud unravels all is no less applicable to court orders than to contracts (para 35).
Second, Lord Brandons obiter dictum in Livesey had been misinterpreted.
He was drawing a distinction between triviality and materiality as at the date of the order, not at some later date (para 40).
The husband should not be allowed to hold onto an order tainted by material fraud on his part by rearranging his affairs so as to bring them broadly into line, but after the event, with the false picture originally portrayed by him (para 37).
Third, the wife had been deprived of a full hearing of her claim.
The purpose of the hearing in April 2013 was not to determine her claim but only to decide whether the order should be set aside and a rehearing ordered.
Cross examination of the husband was unnecessary (para 42).
The wife should not have to prove at that stage that she would have obtained a substantially different order, merely that the non disclosure had deprived her of a real prospect of doing better at a full hearing (para 46).
The wife now appeals to this court.
Settling matrimonial claims
It is in everyones interests that matrimonial claims should be settled by agreement rather than by an adversarial battle in court.
The financial resources of the family are not whittled away by the often substantial legal costs involved.
The emotional resources of the family are not concentrated on conflict.
The future relationship between the adult parties is not soured, or further soured, by that conflict.
This is not only good for them but also for their children, whatever their ages, and for the wider family.
It is for these reasons that there are processes, both within the procedures of the family court and independent of them, for helping the parties to reach agreement on the practical consequences of the breakdown of their relationship.
It has long been possible for a married couple to make a binding agreement about the financial consequences of their present separation.
However, it is not possible for such an agreement to oust the jurisdiction of the court to make orders about their financial arrangements.
This was a rule of public policy, because of the public interest in ensuring that proper provision is made for dependent family members: see Hyman v Hyman [1929] AC 601.
Any doubt about whether this meant that there was no consideration for the paying partys promise to pay was laid to rest by what is now section 34(1) of the Matrimonial Causes Act 1973.
This provides that any provision in a maintenance agreement purporting to restrict any right to apply to a court for an order containing financial arrangements shall be void but that any other financial arrangements contained in the agreement shall not thereby be rendered void or unenforceable and shall, unless they are void or unenforceable for any other reason , be binding on the parties to the agreement.
This has since been held to apply to post nuptial agreements for the consequences of a future separation between the parties and (albeit obiter) to ante nuptial agreements: see MacLeod v MacLeod [2008] UKPC 64, [2010] 1 AC 298 and Granatino v Radmacher (formerly Granatino) [2010] UKSC 42, [2011] 1 AC 534.
Thus it is impossible for the parties to oust the jurisdiction of the court, but the court also possesses powers to achieve finality (a clean break) in the parties financial arrangements which the parties cannot achieve for themselves.
For those reasons, it is now much more common for separating or divorcing spouses to negotiate with a view to embodying their agreed arrangements in a court order than to make a formal separation agreement.
If they do this, the fundamental principle is that an agreement to compromise an ancillary relief application does not give rise to a contract enforceable in law.
Furthermore, the court does not either automatically or invariably grant the application to give the bargain [the] force of an order.
The court conducts an independent assessment to enable it to discharge its statutory function to make such orders as reflect the criteria listed in section 25 of the Matrimonial Causes Act 1973 as amended: see Xydhias v Xydhias [1999] 2 All ER 386, per Thorpe LJ at 394.
Although the court still has to exercise its statutory role, it will, of course, be heavily influenced by what the parties themselves have agreed.
Section 33A of the Matrimonial Causes Act 1973 as inserted by section 7 of the Matrimonial and Family Proceedings Act 1984 provides that, notwithstanding the preceding provisions of Part II of the Act (which deal with the courts powers and duties in relation to financial provision and property adjustment), on an application for a consent order, the court may, unless it has reason to think that there are other circumstances into which it ought to inquire, make an order in the terms agreed on the basis only of the prescribed information furnished with the application (and see Family Procedure Rules 2010, rule 9.26).
This permits the court to make the order in the terms agreed, but does not in any way inhibit its power to make further inquiries or to suggest amendments to the parties.
Allied to the courts responsibility to safeguard both the parties and the public interest is the parties duty to make full and frank disclosure of all relevant information to one another and to the court.
In Livesey, the House of Lords decided two questions.
The first was whether the parties duty of full and frank disclosure continued after they had reached agreement on their financial arrangements.
The facts were that on or about 12 August 1982, the parties, who were by then divorced, reached agreement that, in return for the husband transferring to the wife his half share in the jointly owned matrimonial home, the wife would surrender all claims for financial provision for herself.
On 18 August, the wife became engaged to marry another man, but did not mention this either to her solicitor or to her former husband.
On 19 August, the solicitors issued a joint application for a consent order in the terms agreed and on 2 September the judge made the order.
On 22 September, the husband conveyed his half share in the home to the wife.
On 24 September, the wife re married.
When he learned of this, the husband applied for leave to appeal out of time against the consent order and for the order to be set aside.
Lord Brandon of Oakbrook emphasised that unless a court is provided with correct, complete and up to date information on the matters to which, under section 25(1), it is required to have regard, it cannot lawfully or properly exercise its discretion in the manner ordained by that subsection.
Hence each party owes a duty to the court to make full and frank disclosure of all material facts to the other party and the court (pp 437 438).
This principle applied just as much to the exchanges of information leading up to a consent order as it did to contested hearings.
Hence the wife was under a duty to disclose her engagement before the agreement made was put into effect.
The second question was whether, in the light of that, the consent order should be set aside.
Lord Brandon quoted (at p 442) with approval the judgment of Templeman LJ in Robinson v Robinson (Practice Note) [1982] 1 WLR 786, who said that In the Family Division, as has been said many times, this power to set aside final orders is not limited to cases where fraud or mistake can be alleged.
It extends, and has always extended, to cases of material non disclosure. [T]he power to set aside arises when there has been fraud, mistake or material non disclosure as to the facts at the time the order was made (at pp 786 787).
Lord Brandon concluded that since the fact which was not disclosed undermined, as it were, the whole basis on which the consent order was agreed, that order should be set aside and the proceedings remitted to the Family Division of the High Court for rehearing (at p 443).
Having reached that conclusion, Lord Brandon ended (at pp 445 446) with an emphatic word of warning which has been much quoted in this case: It is not every failure of frank and full disclosure which would justify a court in setting aside an order of the kind concerned in this appeal.
On the contrary, it will only be in cases where the absence of full and frank disclosure has led to the court making, either in contested proceedings or by consent, an order which is substantially different from the order which it would have made if such disclosure had taken place that a case for setting aside can possibly be made good.
Parties who apply to set aside orders on the ground of failure to disclose some relatively minor matter or matters, the disclosure of which would not have made any substantial difference to the order which the court would have made or approved, are likely to find their applications being summarily dismissed .
Lord Keith and Lord Bridge simply agreed with Lord Brandon.
Lord Scarman, however, expressed his firm support for the emphatic word of warning: orders were not to be set aside on the ground of non disclosure if the disclosure would not have made any substantial difference to the order which the court would have made (p 430).
Lord Hailsham, too, underscored the warning.
Consent orders leading to a clean break were much to be encouraged, and were therefore not lightly to be overthrown (p 430).
It must be emphasised, however, that Livesey was not a case of fraud.
Lord Brandon rejected the suggestion that the wife had made any misrepresentation to the husband or his solicitors, which had induced him to agree to the order (p 434).
Lord Hailsham was also understanding of the wifes position: I do not think she was fully aware (though she should have been) of the vital nature of the information she was withholding (p 430).
It is also worth bearing in mind that, until the case reached the House of Lords, there was authority for the proposition that the duty to make full and frank disclosure did not apply where the parties were bargaining at arms length with the help of their solicitors: see Wales v Wadham [1977] 1 WLR 199 and Tommey v Tommey [1983] Fam 15, both disapproved on this point by the House of Lords.
This was, therefore, what may now be an unusual case, where there was neither a misrepresentation nor deliberate non disclosure.
Family proceedings are different from ordinary civil proceedings in two respects.
First, in family proceedings it has been clear, at least since the House of Lords decision in de Lasala v de Lasala [1980] AC 546, that a consent order derives its authority from the court and not from the consent of the parties, whereas in ordinary civil proceedings, a consent order derives its authority from the contract made between the parties: see, eg, Purcell v FC Trigell Ltd [1971] 1 QB 358, CA.
Second, in family proceedings there is always a duty of full and frank disclosure, whereas in civil proceedings this is not universal.
However, the case of Dietz v Lennig Chemicals Ltd [1969] 1 AC 170 is an interesting example of a civil case which has some of the characteristics of a family case.
This was a claim brought against her deceased husbands employers by the widow, on behalf of her husbands estate and on behalf of herself and their child under the Fatal Accidents Acts.
It was settled for a global sum of 10,000 but, as the child was an infant, the settlement had to be approved by the court.
Between the summons for the courts approval and the courts approval, the widow remarried.
Thus she was no longer a widow as she was described in the title to the action and in the trust deed giving effect to the settlement.
The House of Lords held that the settlement agreement was not binding without the approval of the court and that the employers were entitled to have the consent order set aside as their consent had been induced by an innocent misrepresentation that the claimant was a widow at the date of the order.
Analysis
It follows that the majority in the Court of Appeal in this case were correct to say that matrimonial cases were different from ordinary civil cases in that the binding effect of a settlement embodied in a consent order stems from the courts order and not from the prior agreement of the parties.
It does not, however, follow that the parties agreement is not a sine qua non of a consent order.
Quite the reverse: the court cannot make a consent order without the valid consent of the parties.
If there is a reason which vitiates a partys consent, then there may also be good reason to set aside the consent order.
The only question is whether the court has any choice in the matter.
This may well depend upon the nature of the vitiating factor.
We know from Dietz that innocent misrepresentation as to a material fact is a vitiating factor.
The court set aside the order because the misrepresentation had induced the defendants to agree to the settlement.
We know from Livesey that in matrimonial cases innocent non disclosure of a material fact is a vitiating factor.
The court set aside the order because the undisclosed fact undermined the whole basis on which the order was made.
Although not strictly applicable in matrimonial cases, the analogy of the remedies for misrepresentation and non disclosure in contract may be instructive.
At common law, the general effect of any misrepresentation, whether fraudulent, negligent or innocent, or of non disclosure where there was a duty to disclose, was to render a contract voidable at the instance of a party who had thereby been induced to enter into it.
This has now been modified by the Misrepresentation Act 1967, which empowers the court to impose an award of damages in lieu of rescission for negligent or innocent misrepresentation.
This does not, however, apply in cases of fraudulent misrepresentation, where there is no power to impose an award of damages in lieu.
The victim always has the right to rescind unless one of the general bars to rescission has arisen.
There is no need for us to decide in this case whether the greater flexibility which the court now has in cases of innocent or negligent misrepresentation in contract should also apply to innocent or negligent misrepresentation or non disclosure in consent orders whether in civil or in family cases.
It is clear from Dietz and Livesey that the misrepresentation or non disclosure must be material to the decision that the court made at the time.
But this is a case of fraud.
It would be extraordinary if the victim of a fraudulent misrepresentation, which had led her to compromise her claim to financial remedies in a matrimonial case, were in a worse position than the victim of a fraudulent misrepresentation in an ordinary contract case, including a contract to settle a civil claim.
As was held in Smith v Kay (1859) VII HLC 749, a party who has practised deception with a view to a particular end, which has been attained by it, cannot be allowed to deny its materiality.
Furthermore, the court is in no position to protect the victim from the deception, or to conduct its statutory duties properly, because the court too has been deceived.
In my view, Briggs LJ was correct in the first of the three reasons he gave for setting aside the order.
The only exception is where the court is satisfied that, at the time when it made the consent order, the fraud would not have influenced a reasonable person to agree to it, nor, had it known then what it knows now, would the court have made a significantly different order, whether or not the parties had agreed to it.
But in my view, the burden of satisfying the court of that must lie with the perpetrator of the fraud.
It was wrong in this case to place upon the victim the burden of showing that it would have made a difference.
In my view, the second and third reasons given by Briggs LJ for setting aside the order flowed from the first.
Sir Hugh Bennett had been clear that the misrepresentation and non disclosure as to the husbands plans for the company was highly material to the decision made in July 2012.
Indeed, it could not have been anything else.
It had coloured both valuers approach to the valuation of the husbands shareholding.
That in turn had coloured the wifes approach to the proportionality of the balance struck between her present share in the liquid assets and her future share in the value of the husbands shareholding.
Sir Hugh may have been right to say, with the benefit of hindsight, that had he known the truth then he would have waited to see what transpired.
But in doing so, he would have had to bear in mind the husbands ability to manipulate the timing and manner of any offer to the public in a way which suited him best.
Be that as it may, it is enough that Sir Hugh would not have made the order he did when he did had the truth been known.
It being clear that the order should have been set aside, it is also clear that Sir Hugh should not have gone on to re make the decision then and there on the basis of the evidence then before him.
The wife was entitled to re open the case, when she might seek to negotiate a new settlement or a rehearing of her claims when all the relevant facts were known.
Thus, in my view, Briggs LJ was also correct in the third reason that he gave for allowing the appeal.
The wife had been deprived of a full and fair hearing of her claims.
That matter was not before the judge in April 2013.
The application and cross application before him related to whether or not the order made on 19 July 2012 should be perfected.
There was no need for the wifes counsel to cross examine the husband, as the documents he had now disclosed revealed that he had deceived the court.
It follows that, in my view, this appeal should be allowed; the consent order made on 19 July should not be perfected; and the matter should return to the Family Division of the High Court for further directions.
Procedural issues
The fact that this order had not yet been perfected makes no difference.
The principles applicable in this sort of case are the same whether or not the order agreed upon by the parties and the court has been sealed.
However, the fact that the order had not been sealed means that in this particular case the procedural problem about how such challenges to the final order of a court in family proceedings can be brought does not arise.
The trial judge was able to revisit his order: see In re L and another (Children) (Preliminary Finding: Power to Reverse) [2013] UKSC 8; [2013] 1 WLR 634.
This and other procedural issues do, however, arise in the case of Gohil v Gohil [2015] UKSC 61, which was heard at the same time as this case.
In L v L [2006] EWHC 956 (Fam), Munby J described this problem as a procedural quagmire.
There are three possible routes: (i) a fresh action to set aside the order; (ii) an appeal against the order; or (iii) an application to a judge at first instance in the matrimonial proceedings.
The difference is that permission is required for an appeal, and it may be required long after the time limit for appealing has expired, whereas the other two routes do not require permission.
A further difference is that an appeal is not the most suitable vehicle for hearing evidence and resolving the factual issues which will often, although not invariably, arise on an application to set aside.
In Livesey, the matter was dealt with by way of permission to appeal out of time.
But that was a simple case where the facts were clear.
A fresh action would be the normal route in ordinary civil proceedings to challenge a final judgment on account of fraud: see Jonesco v Beard [1930] AC 298.
This route is also available in matrimonial proceedings: see de Lasala v de Lasala [1980] AC 546.
Indeed, in that case, the Judicial Committee of the Privy Council held that, there being no power to vary the matrimonial financial order which had been made by consent, [w]here a party to an action seeks to challenge, on the ground that it was obtained by fraud or mistake, a judgment or order that finally disposes of the issues raised between the parties, the only ways of doing it that are open to him are by appeal from the judgment or order to a higher court or by bringing a fresh action to set it aside (at 561).
However, it has not been clear whether in matrimonial proceedings such a fresh action can be brought by making an application in the matrimonial proceedings themselves or whether an entirely separate application has to be brought.
In Gohil v Gohil (No 2) [2014] EWCA Civ 274, [2015] Fam 89, the wife had issued a summons in the matrimonial proceedings rather than a separate application, but the Court of Appeal approached the case as if Moylan J had been hearing a fresh application to set aside for material non disclosure (para 61).
In my view there is jurisdiction to entertain such an application within the matrimonial proceedings.
Unlike ordinary civil proceedings, it has always been the case that the divorce court retains jurisdiction over a marriage even after it has been dissolved.
While it is now possible for the court to achieve a clean break between the parties, the issue raised by an application to set aside for fraud, mistake or material non disclosure is whether it was consistent with the courts statutory duties so to do.
The most recent survey of the extensive jurisprudence in this field is by Munby P in CS v ACS and BH [2015] EWHC 1005 (Fam).
In that case, the issue was whether an appeal was the only route to set aside a consent order made in matrimonial proceedings.
He refers to the recent steps to remedy matters, in section 31F of the Matrimonial and Family Proceedings Act 1984, inserted by the Crime and Courts Act 2013, when setting up the family court.
Section 31F(3) provides that Every judgment or order of the family court is, except as provided by this or any other Act or by rules of court, final and conclusive between the parties (this provision is derived from the County Courts Act 1984, section 70).
But section 31F(6) gives the family court power to vary, suspend, rescind or revive any order made by it.
Rule 4.1(6) of the Family Procedure Rules provides that A power of the court under these rules to make an order includes a power to vary or revoke the order.
On the face of it, as the learned editors of The Family Court Practice 2015 point out (p 1299), this is a very wide power which could cut across some other provisions, for example those prohibiting variation of lump sum and property adjustment orders.
Clearly, as Munby P observed, the power, although general is not unbounded (para 11).
However, it does give the family court power to entertain an application to set aside a final order in financial remedy proceedings on the well established principles with which we are concerned in this case.
In CS v ACS and BH, Munby J held that the statement in Practice Direction 30A, which supplements the provisions for appeals in Part 30 the Family Procedure Rules 2010, at para 14.1 that An appeal is the only way in which a consent order can be challenged is ultra vires.
The Practice Direction could not purport to forbid a litigant to have recourse to a form of remedy long recognised by the common law, let alone to a remedy expressly conferred by both statute (section 31F(6) of the 1984 Act) and rule (FPR 4.1(6)) (para 36).
It is clear, therefore, that an application of this sort can be made either by way of an appeal or by way of an application to a first instance judge.
There remain difficult issues as to how such an application should be made, whether within or without the original proceedings, and whether it would be appropriate for the rules or a practice direction to specify criteria for choosing between an appeal and an application at first instance.
A Working Party of the Family Procedure Rule Committee is currently considering the whole issue.
In that connection I whole heartedly endorse the observations of Lord Wilson in para 18 of his judgment in Gohil v Gohil [2015] UKSC 61.
Finally, however, it should be emphasised that the fact that there has been misrepresentation or non disclosure justifying the setting aside of an order does not mean that the renewed financial remedy proceedings must necessarily start from scratch.
Much may remain uncontentious.
It may be possible to isolate the issues to which the misrepresentation or non disclosure relates and deal only with those.
A good example of this is Kingdon v Kingdon [2010] EWCA Civ 1251, [2011] 1 FLR 1409, where all the disclosed assets had been divided equally between the parties but the husband had concealed some shares which he had later sold at a considerable profit.
The court left the rest of the order undisturbed but ordered a further lump sum to reflect the extent of the wifes claim to that profit.
This court recently emphasised in Vince v Wyatt (Nos 1 and 2) [2015] UKSC 14, [2015] 1 WLR 1228 the need for active case management of financial remedy proceedings, which includes promptly identifying the issues, isolating those which need full investigation and tailoring future procedure accordingly (para 29).
In other words, there is enormous flexibility to enable the procedure to fit the case.
This applies just as much to cases of this sort as it does to any other.
For completeness, I should add that we have heard no argument about the correctness of the judges view that a tapering award might be appropriate where what had been a matrimonial asset remained in the hands of one of the parties where it would become less and less of a matrimonial asset.
There is obviously room for more than one view on this and so it would be inappropriate to comment further.
| UK-Abs | This appeal considers the impact of fraudulent non disclosure on a financial settlement agreed between a husband and wife on divorce, especially one embodied in a court order.
The parties were married in 1993 and separated in 2010.
They have three children, one of whom has severe autism and will require care from Mrs Sharland throughout his life.
Mr Sharland is an entrepreneur who has a substantial shareholding in a software business, AppSense Holdings Ltd, which he developed.
In the financial proceedings between the parties the value and manner of distribution of this shareholding was the principal matter in dispute.
Both parties instructed valuers, who produced valuations on the basis that there were no plans for an Initial Public Offering (IPO) of the company.
In the course of the trial in the High Court in July 2012, after Mr Sharland gave evidence confirming that there was no IPO on the cards today, the parties reached an settlement by which Mrs Sharland agreed to receive 30% of the net proceeds of sale of the AppSense shares whenever that took place, together with other assets.
The judge approved the agreement and a draft consent order was drawn up.
Before it was sealed, however, Mrs Sharland became aware that AppSense was being actively prepared for an IPO which was expected to value the company at a figure far in excess of the valuations prepared for the hearing.
Mrs Sharland immediately invited the judge not to seal the consent order and applied for the hearing to be resumed.
At the hearing of her application in April 2013 the judge found that Mr Sharlands earlier evidence had been dishonest and, had he disclosed the IPO plans, the court would have adjourned the financial proceedings to establish whether it was going ahead.
However, by the time of the hearing, the IPO had not taken place and an IPO was not now in prospect.
The judge declined to set aside the consent order on the ground that he would not have made a substantially different order in the financial proceedings, applying the decision of the House of Lords in Livesey (formerly Jenkins) v Jenkins [1985] AC 424.
The Court of Appeal upheld the judges order (Briggs LJ dissenting) and Mrs Sharland appealed to the Supreme Court.
The Supreme Court unanimously allows Mrs Sharlands appeal.
The consent order will not be sealed and Mrs Sharlands application for financial relief will return to the Family Division of the High Court for further directions.
Lady Hale gives the only judgment.
It is in the interests of all members of a family that matrimonial claims should be settled by agreement rather than adversarial battles in court [17].
Such an agreement cannot oust the power of the court to make orders for financial arrangements [18] and does not give rise to a contract enforceable in law [19], but the court will make an order in the terms agreed unless it has reason to think there are circumstances into which it ought to inquire [20].
Allied to this responsibility of the court is the parties duty to make full and frank disclosure of all relevant information to one another and to the court [21].
Family proceedings differ from ordinary civil proceedings in two respects: a consent order derives its authority from the court and not from the consent of the parties and the duty of full and frank disclosure always arises [27].
The consent of the parties must be valid.
If there is a reason which vitiates a partys consent there may also be good reason for the court to set aside a consent order.
Whether the court is bound to do so is the question arising on the appeal [29].
It is not necessary to decide in this case whether the greater flexibility which the court now has in cases of innocent or negligent misrepresentation in contract law, restricting a victims right to rescind the agreement, should also apply to such misrepresentations or non disclosure in consent orders in civil or family cases.
The present case is one of fraud.
It would be extraordinary if the victim of a fraudulent misrepresentation in a matrimonial case was in a worse position than the victim of a fraudulent misrepresentation in an ordinary contract case, including a contract to settle a civil claim.
Briggs LJ in the Court of Appeal was correct to apply the general principle that fraud unravels all and should lead to the setting aside of a consent order procured by fraud [32].
The only exception is where the court is satisfied that, at the time when it made the consent order, the fraud would not have influenced a reasonable person to agree to it, nor, had it know then what it knows now, would the court have made a significantly different order, whether or not the parties had agreed to it.
The burden of establishing this must lie with the perpetrator of the fraud [33].
On the facts of this case it is clear that the judge would not have made the order he did, when he did, in the absence of Mr Sharlands fraud, and the consent order should have been set aside.
The judge had misinterpreted Livesey, which had drawn a distinction between triviality and materiality at the date of the order and not at some later date [34].
He had also been wrong to deprive Mrs Sharland of a full and fair hearing of her claims by re making his decision at the hearing of the application on the basis of the evidence then before him [35].
The consent order should not be sealed and the matter should return to the Family Division for further directions [36].
The final part of the judgment discusses the procedure to be followed by parties seeking to challenge the final order of a court in family proceedings.
The court retains jurisdiction over a marriage even after it has been dissolved and s 31F(6) Matrimonial and Family Proceedings Act 1984 gives the family court power to vary, suspend, rescind or revive any order by it.
It is open to the parties either to make a fresh application or to appeal against the consent order.
Lady Hale endorses the observations of Lord Wilson in the judgment in Gohil v Gohil [2015] UKSC 61 on the question of how such applications should be made, while emphasising that the renewed financial remedy proceedings need not start from scratch and the court may be able to isolate the issues to which the misrepresentation or non disclosure relates [37 43].
|
PH has severe physical and learning disabilities and is without speech.
He lacks capacity to decide for himself where to live.
Since the age of four he has received accommodation and support at public expense.
Until his majority in December 2004, he was living with foster parents in South Gloucestershire.
Since then he has lived in two care homes in the Somerset area.
There is no dispute about his entitlement to that support, initially under the Children Act 1989, and since his majority under the National Assistance Act 1948.
The issue is: which authority should be responsible?
This depends, under sections 24(1) and (5) of the 1948 Act, on, where immediately before his placement in Somerset, he was ordinarily resident.
There are three possible contenders: Wiltshire, as the authority for the area where he was living with his family when he first went into care, and which remained responsible for him under the 1948 Act; Cornwall, where his family have lived since 1991; or South Gloucestershire, where he lived with his foster parents from the age of four until his move to Somerset.
The Secretary of State, acting under section 32 of the 1948 Act, decided that Cornwall were responsible.
In doing so, he followed the approach of his own published guidance on the determination of ordinary residence, which drew on two principal authorities R v Barnet LBC, Ex p Shah [1983] AC 309, and R v Waltham Forest, Ex p Vale (unreported, 11 February 1985).
The latter is the source of what have become known as Vale tests 1 and 2 (described at paras 45 46 below), the correctness of which is in issue in this appeal.
In judicial review proceedings brought by Cornwall, the Secretary of States decision was upheld in the High Court (Beatson J), but set aside by the Court of Appeal, who held that South Gloucestershire were responsible.
The Secretary of State and Somerset have appeals with the permission of this court.
The appeals are supported by South Gloucestershire and Wiltshire, but opposed by Cornwall.
Cornwall also disputes the Secretary of States jurisdiction to make the determination.
Although none of the other authorities has argued that Wiltshire should be responsible, the court indicated at the beginning of the hearing that this possibility should not be excluded from consideration.
It is regrettable that in this way so much public expenditure has been incurred on legal proceedings.
However, the amounts involved in caring for PH and others like him are substantial (some 80,000 per year, we were told).
The legal issues are of general importance, and far from straightforward.
The legislation
The Children Act 1989 Part III
Part III of the 1989 Act imposes duties on local authorities to provide support for children and their families.
By section 30(1), nothing in this Part of the 1989 Act shall affect any duty imposed on a local authority by or under any other enactment.
Section 17 is a general duty of authorities to safeguard and promote the welfare of children in need who are in their area.
Section 20 deals with provision of accommodation.
By section 20(1), every local authority is required to provide accommodation for any child in need within their area who appears to them to require accommodation as a result (inter alia) of (c) the person who has been caring for him being prevented (whether or not permanently, and for whatever reason) from providing him with suitable accommodation or care.
By section 22 the local authority have a duty to promote and safeguard the welfare of a child who is provided with accommodation under section 20 (and is thus looked after by them).
One of the ways in which the necessary accommodation and maintenance can be provided is by placing the child in foster care (section 22C).
Although under the 1989 Act the primary duty lies with the authority in whose area the child happens to be, ordinary residence also has a part to play.
By section 20(2), where a local authority provides accommodation under subsection (1) for a child who is ordinarily resident in the area of another local authority, that other local authority may following notification take over the provision of accommodation for the child.
Section 29 provides for recoupment of costs.
By section 29(7), where a local authority provide accommodation under section 20(1) for a child who, immediately before they began to look after him, was ordinarily resident within the area of another local authority, they may recover from that other authority the reasonable expenses of accommodation and maintenance.
By section 30(2) any question arising under these provisions as to the ordinary residence of a child is to be determined by agreement between the local authorities or, in default of agreement, by the Secretary of State.
By section 105(6): In determining the ordinary residence of a child for any purpose of this Act, there shall be disregarded any period in which he lives in any place (c) while he is being provided with accommodation by or on behalf of a local authority.
Under section 23C the authoritys duties to children maintained under the 1989 Act (referred to as former relevant children) continue to a limited extent after majority, generally until the age of 21 (section 23C(6)).
The authority have a continuing duty to provide for such a child various specific forms of support (not relevant in this case) and (by section 23C(4)(c)) other assistance, to the extent that his welfare requires it .
They should also have prepared a pathway plan indicating the support to be provided (sections 22B, 22E).
National Assistance Act 1948
Section 21 of the NAA provides: A local authority may with the approval of the Secretary of State, and to such extent as he may direct shall, make arrangements for providing . (a) residential accommodation for persons aged eighteen or over who by reason of age, illness, disability or any other circumstances are in need of care and attention which is not otherwise available to them.
By subsection (5) references to accommodation are references to accommodation provided under this and the five next following sections, and include references to board and other services, amenities and requisites provided in connection with the accommodation.
By subsection (8): Nothing in this section shall authorise or require a local authority to make any provision authorised or required to be made . by or under any enactment not contained in this Part of this Act .
By section 24(1) the duty falls generally on the authority in whose area the person is ordinarily resident.
Section 24(3) enables an authority to provide accommodation to someone urgently in need of it even though not ordinarily resident in the area.
By section 24(5): Where a person is provided with residential accommodation under this Part of this Act, he shall be deemed for the purposes of this Act to continue to be ordinarily resident in the area in which he was ordinarily resident immediately before the residential accommodation was provided for him.
By section 29(1) a local authority may, and shall if directed, make arrangements for promoting the welfare of certain categories of persons ordinarily resident in their area, including those who suffer from mental disorder of any description.
Certain specific forms of assistance are described in the section, but without prejudice to the generality of the power.
The Secretary of State has made directions (under circular LAC (93)10) which have the general effect of turning these powers into duties, and also sets out in some detail the nature of the arrangements which have to be made.
By section 32(3) any question arising under this Part as to a persons ordinary residence shall be determined by the Secretary of State .
The procedure for such a determination is governed by the Ordinary Residence Disputes (National Assistance Act 1948) Directions 2010 (made under sections 21(1) and 29(1) of the 1948 Act).
Article 2 deals with provision of services under Part III pending determination.
The dispute must not be allowed to prevent, delay or otherwise adversely affect the provision of services; one of the authorities in dispute must provisionally accept responsibility pending determination; and, if they are unable to agree, the local authority in whose area the subject is living must do so.
The authority providing provisional service is the lead local authority and as such must identify all the local authorities in dispute and co ordinate discussions between those authorities in an attempt to resolve the dispute (article 3(2)).
The Secretary of States guidance
Before turning to the determination in the present case, it is convenient to refer to the relevant parts of the Secretary of States guidance, which address the problem of defining ordinary residence of a person who is unable to make decisions for himself.
As already noted, this is done by reference in part to the Vale tests 1 and 2 (paras 31 34).
Of the first, which treats a mentally disabled person in the same way as a small child who was unable to choose where to live, the guidance says: the approach set out in test one of Vale may not always be appropriate and should be used with caution: its relevance will vary according to the ability of the person to make their own choices and the extent to which they rely on their parents or carers.
This Vale test should only be applied when making decisions about ordinary residence cases with similar material facts to those in Vale.
Of test 2, it says: 34.
The alternative approach involves considering a person's ordinary residence as if they had capacity.
All the facts of the persons case should be considered, including physical presence in a particular place and the nature and purpose of that presence as outlined in Shah, but without requiring the person themselves to have adopted the residence
voluntarily
Later paragraphs go into more detail in relation to young people in transition from childrens services to adult services: 147.
Although the provisions of the 1989 Act no longer apply once a young person reaches 18 (other than the leaving care provisions, if the young person is eligible for such services), local authorities could reasonably have regard to the 1989 Act and start from a presumption that the young person remains ordinarily resident in the local authority that had responsibility for them under the 1989 Act.
Section 105(6) of the 1989 Act provides that, in determining the ordinary residence of a child for any purposes of that Act, any period in which a child lives in the following places should be disregarded: while he is being provided with accommodation by or on behalf of a local authority. 148.
Therefore, where a local authority has placed a child in accommodation out of area under the 1989 Act, that local authority remains the childs place of ordinary residence for the purposes of the 1989 Act.
In such a case, there would be a starting presumption that the young persons place of ordinary residence remains the same for the purposes of the 1948 Act when they turn 18. 149.
However, this starting presumption may be rebutted by the circumstances of the individuals case and the application of the Shah or Vale tests (see Part 1 of this guidance).
Under these tests, a number of factors should be taken into account when considering a persons ordinary residence for the purposes of the 1948 Act.
These include: the remaining ties the young person has with the authority that was responsible for their care as a child, ties with the authority in which they are currently living, the length and nature of residence in this area and the young person's views in respect of where he/she wants to live (if he/she has the mental capacity to make this decision).
If the young person is being provided with residential accommodation under Part 3 of the 1948 Act at the time ordinary residence falls to be assessed, the deeming provision in section 24(5) applies and it would be necessary to assess their place of ordinary residence immediately before such accommodation was provided. 150.
In many cases, establishing a young persons local authority of ordinary residence will be a straightforward matter.
However, difficulties may arise where a young person has been placed in residential accommodation out of area as a child under the 1989 Act.
In this situation, the young person may be found to be ordinarily resident in the local authority that had responsibility for them under the 1989 Act, or they may be found to have acquired a new ordinary residence in the area in which they are living, depending on the facts of their case .
PH was born on 27 December 1986.
In 1991, PHs parents asked Wiltshire, in whose area they were then living, to provide accommodation for him.
Acting under section 20 of the 1989 Act, they placed him with foster parents, Mr and Mrs B, who lived in South Gloucestershire.
In November 1991, PHs family moved to Cornwalls area.
The parents have continued to be involved in decisions affecting PH and he has regular contact with them.
In May 2001, anticipating his 18th birthday on 27 December 2004, Wiltshire wrote to Cornwall regarding the planning of his transition to adulthood.
They suggested that his ordinary residence should be taken as that of his parents, in Cornwall.
Cornwall maintained that the responsibility for managing the transition rested, under the 1989 Act, with Wiltshire.
Inconclusive correspondence on this issue continued for more than a year.
It seems to have culminated, on the legal side, with an exchange in June 2002 in which Wiltshire were proposing a reference to the Secretary of State to enable the matter to be resolved before his 18th birthday; Cornwall were taking the position that a reference would be premature until a decision had been made whether he was able to express his own wishes and a suitable placement on that basis had been determined.
Meanwhile, on the basis of the residence of his parents in the county, Cornwalls social services department (in a letter of 25 July 2002) was asserting its own interest in assisting his transition to adult living.
It seems that Wiltshire did not again take up the issue of legal responsibility with Cornwall until October 2005.
In April 2004 Wiltshire conducted an assessment and a care review.
It appeared that PH was happy and settled with his foster parents, and that they would have been content for PH to stay with them after his 18th birthday.
However, it would not be possible for him to stay there, unless the foster placement were to be re registered as an adult placement.
It was noted that PHs parents visited him four or five times a year with occasional visits to the family home usually over Christmas and in the summer.
They wanted to maintain at least the current level of contact.
The foster parents also wished to help him settle into a new place and to visit him as regularly as possible.
Continuing contact with his parents and foster parents was regarded as vitally important.
A placement within the M4/M5 corridor was therefore thought to be best for ease of travel.
A care home was identified, Blackberry Hill in Somerset, where he would be able to move around the end of the year.
At the end of 2004, PH went to Cornwall to stay with his parents for Christmas (including the day before his 18th birthday).
He returned to stay with Mr and Mrs B until 24 January 2005, when he moved to Blackberry Hill.
This placement was funded by Wiltshire on a provisional basis.
Unfortunately, the placement at Blackberry Hill did not work well for him.
On 6 June 2005, he moved to Langley House, also in Somerset, where he has remained ever since.
His parents were involved in that decision.
They have continued to maintain regular telephone contact with him, and he stays with them over Christmas and occasionally in the summer.
Mr and Mrs B also keep in regular contact, now mainly by letters and cards.
Wiltshire carried out a capacity assessment on 15 April 2008 which concluded that overall and at that time, it was not considered that PH had the capacity to make an informed choice about where he would want to live nor did he have the communication skills for this to be expressed.
There appeared to be no evidence of any change in his intellectual abilities since 2004.
The Dispute and the Secretary of States determination
The question of responsibility as between the three possible authorities (Wiltshire, Cornwall and South Gloucestershire) remained unresolved for a number of years.
In August 2011, they jointly referred the dispute to the Secretary of State for determination under section 32(3).
On 22 March 2012 he issued a determination that PH had been on 26 December 2004, treated as the relevant date, ordinarily resident in Cornwall.
On the basis that the need for accommodation under section 21 of the 1948 Act arose on his 18th birthday, it was considered right to consider the question of ordinary residence at that date.
The determination continued: 19.
As stated in paragraph 147 of the guidance issued by the Department, local authorities in determining ordinary residence could reasonably have regard to the 1989 Act and start from a presumption that the young person remains ordinarily resident in the local authority that had responsibility for them under the 1989 Act. 20.
I consider that, for the purposes of the 1989 Act, [PH] was ordinarily resident in Wiltshire.
Residence while accommodation was being provided by or on behalf of a local authority, in this case with foster carers, would be disregarded in accordance with section 105(6)(c) of the 1989 Act. 21.
The starting presumption is that [PH] remained ordinarily resident in the area of the local authority which had responsibility for him under the 1989 Act, namely Wiltshire.
However, as para 149 of the guidance points out, this starting point may be rebutted by the circumstances of the case and the application of the Shah and Vale tests.
That paragraph refers to various factors that should be taken into account in applying those tests.
First, I do not consider that [PH] was ordinarily resident in Wiltshire.
He had no links to the area. [PHs] parents and siblings left Wiltshire in November 1991, and [by December 2004] there were no remaining ties with Wiltshire.
The mere fact that Wiltshire was the responsible authority for [PH] under the 1989 Act is not enough to affirm the presumption that he is ordinarily resident in Wiltshire from 27 December 2004. 24. [PH] has severe learning difficulties and lacks mental capacity to decide where to live.
The family home in Cornwall is a place to which [he] returns for holidays and his parents are in regular contact by telephone.
In 2004 it was the case that [his] parents visited him four or five times a year. [His] parents have also been closely involved in decisions made in relation to his care.
It is clear from the social services papers that proximity to the family home and ease of travel to and from Cornwall has been a consideration in planning the care and support needs of [PH].
I consider that [PHs] base is with [h]is parents. 25.
I note that Cornwall question whether the family home in Cornwall can properly be described as a base for [PH] given the infrequency of his visits there.
It is not merely the number or frequency of visits that are determinative.
The entirety of the relationship between [PH] and his parents is to be taken into account, and when regard is had to that, it is clear that [PHs] base remained with his parents. 26.
Nor do I consider that [PHs foster parents] can, despite the years spent caring for [PH], be treated, by analogy, as a parent, such that, in accordance with test 1 in Vale, [PH] could be considered to have been ordinarily resident in South Gloucestershire on 26 December 2004. [PHs] natural parents remained his base throughout [PHs] placement with [his foster parents].
His parents visited him, he stayed with them, and they were involved with decisions regarding his care and well being.
I do not consider [his foster parents] to have so far replaced the role of [PHs] parents to be treated by analogy as [his] parents. 27. [I]t was clear that [PHs] remaining in South Gloucestershire was at 26 December a temporary matter. [PH] was to remain with [his foster parents] in South Gloucestershire only until his section 21 accommodation became available.
It is clear from the papers that continuing contact with his foster carers was considered to be important and [they] have kept in regular contact, but this is now mainly by letters and cards.
His school, respite care and church life were associated with this foster care placement, and ceased once he removed to the accommodation provided under section 21 of the 1948 Act. 22.
For these reasons the Secretary of State determined that as at the relevant date, taken as 26 December 2004, PH was ordinarily resident in the area of Cornwall.
The court proceedings
The decision was upheld by Beatson J who, after a careful review of the authorities, held that the Secretary of States reasoning disclosed no error of law.
In summary, he concluded: The Secretary of State examined whether there was a real relationship between PH and his natural parents and whether they were in fact making relevant decisions.
He was entitled to take account of that and of the entirety of the relationship between [PH] and his parents.
As part of that, he was also entitled to take account of the time spent by PH with them in Cornwall.
The process of determining that PH was ordinarily resident in Cornwall may appear artificial.
There would, however, have been a similar artificiality in determining that he was ordinarily resident in any of the other counties under consideration (paras 87 89)
The Court of Appeal disagreed.
Elias LJ (with whom the rest of the court agreed) gave the leading judgment.
He took account of authorities since Shah, including Mohamed v Hammersmith and Fulham LBC [2001] UKHL 57; [2002] 1 AC 547 and A v A (Children: Habitual Residence) [2013] UKSC 60; [2014] AC 1.
In the former (at para 18) Lord Slynn had said of words like ordinary residence and normal residence that, while they may take their precise meaning from the legislative context, the starting point is where at the relevant time the person in fact resides, in the sense of the place where (voluntarily) he eats and sleeps, regardless of the reason.
In the latter the Supreme Court held that, in determining the habitual residence of a child for the purpose of the Brussels II Regulation revised and the Hague Convention, the Shah test should not be followed, the search being rather for the place which reflects some degree of integration by the child into the social and family environment, the intentions of the parents being no more than one relevant factor; in the majoritys view (Lord Hughes disagreeing on this point) physical presence was a necessary element.
Against this background, Elias LJ held that, although the Secretary of State had carefully considered the facts, he had wrongly applied the Vale test as if it were a rule of law.
He proceeded on the basis that section 105(6), which required the placement in South Gloucestershire to be disregarded for the purposes of the 1989 Act, applied only for the purposes of that Act, not the 1948 Act (citing by way of analogy R (Hertfordshire County Council) v Hammersmith and Fulham LBC [2011] EWCA Civ 77; [2011] PTSR 1623, 32).
Accordingly, the fact that he had for a long time lived with foster parents in South Gloucestershire was a relevant factor to consider when assessing his ordinary residence at that time (para 35).
He criticised the decision makers use of the term base (following Lord Denning MR in In re P (GE) (An infant) [1965] Ch 568) to describe PHs relationship to his parents home: Even if that is a helpful concept, I do not accept that Cornwall could properly be so described.
It was not a place where PH had any settled residence at all; it was simply a place which he occasionally visited for holidays.
His parents visited him in South Gloucestershire more frequently than he visited them in Cornwall.
PHs parents' house was not, to use Lord Dennings phrase, a place from whence he goes out and to which he returns.
Indeed, in so far as it is helpful to adopt the concept of his base at all, this was surely South Gloucestershire.
It was there where he lived day by day; it was from there that he left on his very occasional visits to Cornwall and to which he returned; and it was there that he received the visits from his parents. (para 76)
He held further that it was unnecessary to remit the matter for redetermination by the Secretary of State: Looking at the facts as at PHs 18th birthday, there was in my judgment only one conclusion properly open to the Secretary of State.
PHs place of ordinary residence was South Gloucestershire.
It could not be Wiltshire, because he ceased to have any connection with it at all.
At that stage he had never lived in Somerset and had no connection with it.
And for reasons I have given, the mere fact that his parents' place of ordinary residence was in Cornwall could not justify finding that to be PHs place of ordinary residence. (para 85)
Preliminary issues
Before turning to the main substantive issue, it is necessary to consider two preliminary issues raised by Mr Lock QC on behalf of Cornwall, for the first time in the court proceedings.
Although no objection has been taken to this course, I would wish to reserve my position as to its appropriateness in the context of a statutory power intended to encourage co operation and lack of technicality.
He submits, first, that under section 21 there is power to make provision of residential care services only if it is not otherwise available (section 21(1)(a)), and if it is not authorised or required to be made . by or under any enactment not contained in this Part of this Act.
In the three years following PHs 18th birthday, so it is said, Wiltshires powers to provide assistance under section 23C of the 1989 Act were wide enough to cover all the services in fact provided for him during that period.
There was therefore no place for section 21.
It follows that there was at that date no question as to his ordinary residence under the Act requiring determination by the Secretary of State, and his decision was made without jurisdiction.
Secondly, for good measure, he submits that Wiltshire itself had no power at all to incur expenditure under the 1948 Act, and no right to seek to recoup it from any other authority.
At the time of PHs majority, he was not within their area, and there was no basis for treating him as ordinarily resident there, his only practical connection with the county through his parents having been severed some 14 years before.
These arguments were rejected by Beatson J and by the Court of Appeal.
Without disrespect to the persistent arguments of Mr Lock QC in this court, I have no doubt that they were right to do so.
I would have been content to adopt their reasoning.
But there are, in my view, two short answers.
The first concerns the nature of the powers, the second timing.
The argument only works if there is identity between the two sets of powers.
In my view there is not.
Part III of the 1948 Act provides the exclusive statutory basis for securing the long term care and accommodation which PH needs and has needed since his majority.
That is not displaced by the relevant provisions of the 1989 Act, which are transitional in character.
I would not wish to place artificial restrictions of the types of assistance which may be provided if necessary under section 23C.
However, their purpose is, not to supplant the substantive regime, but to ease the transition (usually) to adult independence.
There may of course be some overlap in some of the specific provision made from day to day, but they are serving different ultimate purposes, one temporary, the other long term.
That potential overlap is not such in my view as to exclude section 21(1)(a), under its own terms or by reference to section 21(8).
Secondly, and in any event, section 32 should in my view be read broadly in respect of timing.
Even if the need for 1948 Act provision did not arise immediately on PHs 18th birthday, the nature of the dispute was already apparent, and needed to be resolved in the immediate future to ensure a smooth transition to the new regime.
That dispute was willingly referred to the Secretary of State by the three authorities concerned.
It was obviously desirable for all parties, most particularly PH, that it should be resolved without delay.
I see no reason to read section 32 as confined to those disputes arising in the period after the duties under the 1948 Act have come into effect.
On the contrary a purposive construction would extend it to disputes which need to be resolved in advance, so as to enable the duties under the Act to be exercised by the correct authority from the outset.
As to whether Wiltshire itself should have been excluded as a potential party to the dispute, Mr Locks argument is ingenious but unrealistic.
As has been seen from the decision determination, the Secretary of States starting point was a presumption that Wiltshire, as the authority responsible under the 1989 Act, should be treated as responsible also under the 1948 Act, unless and until displaced by another authority under the Shah or Vale tests.
Thus Wiltshire was (and still is) in the firing line for potential liability, and it would have been irresponsible to proceed on any other basis.
No amount of retrospective legal theorising by Cornwall can alter that position.
Ordinary residence the law
Background
The 1948 Act was designed, in the words of its long title, to terminate the existing poor law, and to replace it with a new scheme for the assistance of persons in need by the new National Assistance Board and by local authorities.
Miss Mountfield QC (for South Gloucestershire) has helpfully drawn our attention to the approach under the Poor Law Act 1930 to the allocation of responsibility for the old or infirm or those otherwise unable to work.
The duty to relieve and maintain such persons was placed on their father, grandfather, mother, grandmother husband or child (1930 Act section 14).
They were supported by the duty of the council of every county or county borough to provide such relief as may be necessary for the same group of people (section 15(1)), that duty applying generally to all persons within (their area) (section 15(2)).
The adoption by the 1948 Act of ordinary residence in this context, as the basis for allocation of responsibility between local authorities, was a new departure.
As will be seen, a similar approach was adopted at about the same time in relation to allocation of responsibilities between education authorities.
It is noteworthy that there was no repetition of the pre 1948 statutory duty of parents or family members for maintenance of incapacitated adults, and no recognition even of their practical role in making decisions on behalf of those unable to do so for themselves.
The common law could not fill the gap (see re F (Mental Patient: Sterilisation) [1990] 2 AC 1, confirming that the parent of a mentally disabled adult had no power at common law to consent to a medical operation on her behalf).
Even in such cases the criterion was to be the ordinary residence of the individual, not of his parent or family, or anyone else.
However, it was recognised from the outset that some modification was required in the case of those whose current residence was the result of care decisions, rather than their personal connections with the area in question.
Thus section 24(5) provides where a person is being provided with residential accommodation under the Act, he is deemed for the purposes of this Act to continue to be ordinarily resident in the area in which he was ordinarily resident immediately before the residential accommodation was provided.
This formulation left open the question whether residence in such accommodation would otherwise have been regarded as ordinary residence for the purpose of section 24 a question to which I shall return.
In policy terms it ensured that decisions on placements, inside or outside an authoritys area, were made solely with reference to the interests of the client, without affecting the placing authoritys continuing responsibility for his care.
It is common ground that in the present context, unlike others considered in the authorities, the subject can be ordinarily resident in the area of only one local authority.
Otherwise that test would not be an effective tool for allocating responsibility for services or their cost.
As Beatson J observed (para 55) this factor, combined with what he called the deeming provision in section 24(5), may sometimes lead to artificial and arbitrary results.
The ordinary residence test has proved resilient.
In its 2010 Consultation Paper on Adult Social Care (CP 192), para 8.12, the Law Commission noted that it had been adopted in a number of care statutes but not all, and that the resulting picture was complex and inconsistent.
However, it was not part of their remit to consider the meaning of the expression, nor whether it was the most effective way of determining which local authority is responsible for the provision of services.
In their final report (Law Commission Report: Adult Social Care (2011) Law Com 326), they declined invitations from consultees to extend their remit to these issues, regarding them as matters for political policy and not law reform (para 10.11).
Nonetheless, in their proposals for a single adult care statute they recommended that ordinary residence should continue to be the primary criterion of responsibility for all community care services (para 10.9).
The Care Act 2014, which generally gives effect to their proposals, adopts the criterion of ordinary residence.
The basic definition may be made subject to exceptions, to be defined by regulations, for placements in specified types of care accommodation, the effect of which is to substitute reference to the area of ordinary residence before the placement began, or the beginning of the period of consecutive placements of specified types (section 39).
The authorities on ordinary residence
At the time of the 1948 Act, most prior case law on the meaning of the expression ordinary residence related to income tax.
Liability depended on whether a person was resident or ordinarily resident in the United Kingdom for a particular tax year.
In that context it had long been established that a person could be ordinarily resident in two places.
This approach was affirmed by the House of Lords in two well known cases reported in 1928: Levene v Inland Revenue Comrs [1928] AC 217 and Inland Revenue Comrs v Lysaght [1928] AC 234.
In an earlier case, Cooper v Cadwalader (1904) 5 Tax Cases 101, an American resident in New York, who had taken a house in Scotland which he visited for two months each year, was held to be resident and ordinarily resident in the United Kingdom for tax purposes for each such year.
It mattered not that for other purposes he might be treated as ordinarily resident in New York.
As Viscount Sumner later observed Who in New York would have said of Mr Cadwalader his homes in the Highlands; his home is not here? (Lysaght at p 244).
The House of Lords confirmed that approach and reached the same conclusions on the facts of the two cases in the 1928 Reports.
Mr Levene lived abroad, but returned each year for about five months for the purpose of obtaining medical advice, visiting relatives and other matters.
Mr Lysaght lived in Ireland, but returned to England each month for business purposes, remaining for about a week and usually staying in a hotel.
In both cases the Special Commissioners had been entitled to hold that they were resident and ordinarily resident in this country.
Those authorities were followed in the leading modern authority on the meaning of the expression in a statutory context.
That is the speech of Lord Scarman in R v Barnet LBC, Ex p Shah [1983] AC 309.
The question was whether four foreign students qualified for an education grant on the basis that they had been ordinarily resident in the United Kingdom throughout the three years preceding the first year of their course.
The authorities had argued that their ordinary residence, in the sense of their real home, was elsewhere.
The House disagreed.
Lord Scarman, in the leading speech, treated the tax cases as authority for the natural and ordinary meaning of the expression.
In particular he cited Viscount Sumners reference to ordinary residence as that part of the regular order of a man's life, adopted voluntarily and for settled purposes (Lysaght p 243).
Lord Scarman echoed those words in his own statement of the natural and ordinary meaning of the term: Unless, therefore, it can be shown that the statutory framework or the legal context in which the words are used requires a different meaning, I unhesitatingly subscribe to the view that ordinarily resident refers to a mans abode in a particular place or country which he has adopted voluntarily and for settled purposes as part of the regular order of his life for the time being, whether of short or of long duration. (p 343G H) The mind of the subject was relevant in two respects.
First the residence must be voluntarily adopted, rather than for example enforced presence by reason of kidnapping or imprisonment.
Secondly, there must be a degree of settled purpose: This is not to say that the (subject) intends to stay where he is indefinitely; indeed his purpose, while settled, may be for a limited period.
All that is necessary is that the purpose of living where one does has a sufficient degree of continuity to be properly described as settled. (p 344D) A settled purpose did not need to be indefinite.
Education, business or profession or merely love of a place could be enough.
There was no justification for substituting a real home test, as the councils had argued (p 345B).
Although understandably this passage has been often quoted and relied on in later cases, the weight given to the concept of a settled purpose needs to be seen in context.
The focus of the passage was to explain why the undoubted residence of the claimants in this country for the necessary period, albeit for the temporary purpose of education, was sufficiently settled to qualify as ordinary under the accepted meaning.
It was relevant therefore to show that it was no less settled than, for example, the residence of Mr Cadwalader during his annual visit to Scotland, or that of Mr Levene on his five month visit for medical and other reasons.
Nor did it matter, it seems, that they might have had other ordinary residences in their countries of origin.
As Mr Sheldon QC (for the Secretary of State) points out, Lord Scarman made reference, albeit by way of contrast, to provisions in the same legislation for allocating financial responsibility between education authorities, which are not dissimilar to those now in issue.
Lord Scarman referred to provisions for allocation as between authorities in Education (Miscellaneous Provisions) Act 1953 section 7, Education Act 1962 section 1(7), and section 31 of the Education Act 1980 section 31 (see Shah pp 338F, 340B)).
They had contained a formula, for recoupment of costs as between education authorities, based in part on ordinary residence, and under which disputes were to be determined by the Minister or Secretary of State. (Similar provisions can be traced back to the same time as the 1948 Act: see Education (Miscellaneous Provisions) Act 1948 section 6.) The parallel is not necessarily exact.
For example, the 1962 Act contained a schedule dealing with ordinary residence (applied by 1962 Act section 1(7)), in which the primary test was linked with a discretionary power in certain circumstances for the Secretary of State to impose a different result by direction.
Lord Scarman described such provisions as administrative and fiscal . in character, by contrast with the justiciable issue before the House.
He noted, without expressing an opinion, the possibility that in that context ordinary residence might have a special meaning when the distribution of the fiscal burden between local education authorities is being considered as a matter for the exercise of executive decision by the Secretary of State (p 340B G).
This is helpful as illustrating that the meaning of the term ordinary residence may be strongly influenced by the particular statutory context.
However, it is common ground as I understand it that in the present context, once properly construed, the issue for the Secretary of State was one of factual judgement rather than executive discretion, and that his decision is justiciable, in the sense that it is reviewable by the courts on ordinary Wednesbury principles.
Another authority relied on by the Secretary of State, again from a very different area of the law, is In re P (GE) (An infant) [1965] Ch 568.
The Court of Appeal (applying the analogy of the law of treason) decided that the wardship jurisdiction of the Court of Chancery extended to any child ordinarily resident in this country.
Lord Denning MR spoke of the ordinary residence of a child of tender years who cannot decide for himself where to live: So long as the father and mother are living together in the matrimonial home, the childs ordinary residence is the home and it is still his ordinary residence, even while he is away at boarding school.
It is his base, from whence he goes out and to which he returns (p 585) This is the source of the word base, used in Vale and in the Secretary of States guidance, as indicative of ordinary residence.
However, it is important again to see it in context.
There is nothing to suggest that Lord Denning MR was intending to separate the idea of a base from the need for physical residence of some kind.
The underlying assumption seems to have been that the child would be living at his parents home for the parts of the year when he was not at school, and would remain ordinarily so resident throughout.
Shortly after the Shah judgment, in R v Waltham Forest London Borough Council, Ex p Vale (unreported, 11 February 1985), Taylor J had to consider a case much closer to the present, involving the application of the ordinary residence test under the 1948 Act to someone mentally incapable of forming a settled intention where to live.
Judith, an English woman, had been in residential care in Ireland for over 20 years where her parents had been living.
When her parents returned to England, it was decided that she should return to live near them.
She stayed with them at their house in Waltham Forest for a few weeks while a suitable residential home was being found, and she was then placed in a home in Buckinghamshire.
The shortfall in costs (so far as not borne by the Department of Health and Social Security) was sought from Waltham Forest on the grounds that she was ordinarily resident in the borough.
The case was argued and decided by reference to the Shah test of ordinary residence, adapted for the case of someone lacking the power to form for herself a settled intention where to live.
Taylor J adopted a two part approach suggested by counsel, but on either approach he considered that her residence with her parents could be treated as sufficiently settled to satisfy the Shah test.
The result is unremarkable, but in view of the weight later given (particularly in the Secretary of States guidance) to Vale tests 1 and 2, it is right to quote the judges own words.
For the first approach he made reference to Lord Denning MRs concept of a childs base: Where the (subject) . is so mentally handicapped as to be totally dependent upon a parent or guardian, the concept of her having an independent ordinary residence of her own which she has adopted voluntarily and for which she has a settled purpose does not arise.
She is in the same position as a small child.
Her ordinary residence is that of her parents because that is her base, to use the word applied by Lord Denning in the infant case cited. (emphasis added) The alternative approach, considering her as if she were a person of normal mental capacity, led to the same result: I cannot accept that during the relevant month Judith should be regarded as a squatter in her parents home.
Her residence there had, in my judgment, all the attributes necessary to constitute ordinary residence within Lord Scarmans test, albeit for a short duration.
There is no reason to quarrel with Taylor Js conclusion on the unusual facts of the case.
In circumstances where her only previous residence had been in Ireland, there was obvious sense in treating her few weeks living with her parents as sufficiently settled to meet the Shah test, whether by reference to the intentions of those making decisions on her behalf, or to the attributes of the residence objectively viewed.
With hindsight, it was perhaps unhelpful to elide the Shah test with the idea of a base, used by Lord Denning MR in a different context and for a different purpose.
The italicised words in the first passage quoted above cannot be read as supporting any more general proposition than that Judiths ordinary residence was to be equated with that of her parents, without reference to the period of her own actual residence with them.
Nor in my view should Taylor Js two approaches be treated as separate legal tests.
Rather they were complementary, common sense approaches to the application of the Shah test to a person unable to make decisions for herself; that is, to the single question whether her period of actual residence with her parents was sufficiently settled to amount to ordinary residence.
Most subsequent authorities on the issue of ordinary residence in the context of social services have relied on these authorities, without detailed discussion.
The Court of Appeal also referred to authorities on other comparable expressions (normal residence, habitual residence) in other statutes.
Without disrespect to the high authority of the statements quoted, their interpretation is a doubtful guide to the different language used in the provisions before us, and cannot in any event be considered without regard to the different statutory contexts in which they appear.
As was pointed out by Lady Hale in A v A (above, at para 24) the phrase habitual residence was adopted in family legislation partly to distinguish it from ordinary residence as used in the taxation and immigration context.
Ordinary residence in the present case
I agree with the Court of Appeal that the decision makers reasons for selecting Cornwall cannot be supported.
The writer started, not from an assessment of the duration and quality of PHs actual residence in any of the competing areas, but from an attempt to ascertain his base, by reference to his relationships with those concerned.
Thus in deciding that the family home in Cornwall could properly be described as a base for [PH] notwithstanding the infrequency of his visits, the determination stated that it was necessary to consider not merely the number or frequency of visits [but] the entirety of the relationship between [PH] and his parents .
There is no suggestion that his brief periods of staying with his parents at holiday times could in themselves amount to ordinary residence.
Mr Sheldon seeks to support this approach by reference to the guidance and the authorities there relied on.
He submits that, in the case of a person who is unable to make decisions for himself, it is necessary to determine the place which most appropriately represents at the material time, the seat of the persons decision making power given his lack of capacity to make decisions where to live, the coming to an end of a placement under the 1989 Act, and the extent to which his parents (or those in loco parentis) can and will make the relevant decisions on his behalf.
Miss Mountfield QC is even more explicit, submitting that it is right in principle to look to the ordinary residence of the decision maker in deciding the ordinary residence of a person who lacks capacity.
There might be force in these approaches from a policy point of view, since they would reflect the importance of the link between the responsible authority and those in practice representing the interests of the individual concerned.
They are however impossible to reconcile with the language of the statute, under which it is the residence of the subject, and the nature of that residence, which provide the essential criterion.
In so far as Vale is relied on to substitute an alternative test, based on the seat of (his) decision making, or otherwise on his relationship with his parents and their home, it depends on a misunderstanding of that judgment.
The seat of the decision making power in relation to a mentally disabled adult is the authority making the placement (subject to any contrary determination by the Court of Protection), not the parents.
For the same reason, the weight put by the decision maker on the so called Vale tests 1 and 2, both in the guidance and in the decision determination, was in my view misplaced.
The more difficult issue is to make a principled choice between the two alternatives South Gloucestershire or Wiltshire.
Applying the Shah tests without qualification it is easy to understand why the Court of Appeal chose the former.
If one asks where was PHs ordinary residence in the period immediately before his move to Somerset, an obvious answer for many purposes would be his home with his carers.
That is where he had lived happily for some fourteen years.
On an objective view it might be thought sufficiently settled to meet Lord Scarmans test, regardless of whether PH himself took any part in the decision making.
The Secretary of State rejected this alternative solely because he did not think that the foster parents had so far replaced the role of [PHs] parents to be treated by analogy as [his] parents under the Vale tests.
For the reasons I have given this involved a misunderstanding of the reasoning in Vale.
If the question is whether the residence of PH himself was sufficiently settled to satisfy the Shah test, the precise status of his foster parents was irrelevant.
On this point the intentions and perceptions of his parents and his foster parents were identical.
However, although the choice of South Gloucestershire may fit the language of the statute, it runs directly counter to its policy.
The present residence in Somerset is ignored because there is no connection with that county other than a placement under the 1948 Act.
By the same policy reasoning, South Gloucestershires case for exclusion would seem even stronger.
There is no present connection of any kind with that county, the only connection being a historic placement under a statute which specifically excluded it from consideration as the place of ordinary residence for the purposes of that Act.
The question therefore arises whether, despite the broad similarity and obvious underlying purpose of these provisions (namely that an authority should not be able to export its responsibility for providing the necessary accommodation by exporting the person who is in need of it), there is a hiatus in the legislation such that a person who was placed by X in the area of Y under the 1989 Act, and remained until his 18th birthday ordinarily resident in the area of X under the 1989 Act, is to be regarded on reaching that age as ordinarily resident in the area of Y for the purposes of the 1948 Act, with the result that responsibility for his care as an adult is then transferred to Y as a result of X having arranged for his accommodation as a child in the area of Y.
It is highly undesirable that this should be so.
It would run counter to the policy discernable in both Acts that the ordinary residence of a person provided with accommodation should not be affected for the purposes of an authoritys responsibilities by the location of that persons placement.
It would also have potentially adverse consequences.
For some needy children with particular disabilities the most suitable placement may be outside the boundaries of their local authority, and the people who are cared for in some specialist settings may come from all over the country.
It would be highly regrettable if those who provide specialist care under the auspices of a local authority were constrained in their willingness to receive children from the area of another authority through considerations of the long term financial burden which would potentially follow.
The Court of Appeal (para 35), apparently without argument to the contrary, proceeded on the basis that the deeming provision under each statute applied only for the purposes of its own Act.
Elias LJ cited R (Hertfordshire County Council) v Hammersmith and Fulham LBC [2011] EWCA Civ 77; [2011] PTSR 1623, in which the court held that section 24(5) was a self contained provision.
However, the court was there faced with a rather different argument, which depended on reading the Mental Health Act 1983 section 117 (in which responsibility was based on residence without any deeming provision) as though it had the same meaning as ordinary residence under section 24.
The court (para 45) rejected that argument, not only because it was inconsistent with the statute, but also because it was constrained by higher authority to hold that section 117 was a free standing provision not dependent on the 1948 Act.
In construing the relevant words in section 24 of the 1948 Act, the statutory context is critical.
The purpose of the provision is purely administrative and fiscal, to borrow Lord Scarmans phrase in R v Barnet London Borough Council, Ex p Shah (see para 43 above).
It does not affect the rights of the person concerned, but only the allocation of responsibility as between local authorities.
Lord Scarman recognised the possibility that such a context might justify a different approach as compared to one directed to a persons entitlement to a benefit.
In this respect the function of the relevant provisions in each Act is the same.
Section 24(5) poses the question: in which authoritys area was PH ordinarily resident immediately before his placement in Somerset under the 1948 Act? In a case where the person concerned was at the relevant time living in accommodation in which he had been placed by a local authority under the 1989 Act, it would be artificial to ignore the nature of such a placement in that parallel statutory context.
He was living for the time being in a place determined, not by his own settled intention, but by the responsible local authority solely for the purpose of fulfilling its statutory duties.
In other words, it would be wrong to interpret section 24 of the 1948 Act so as to regard PH as having been ordinarily resident in South Gloucestershire by reason of a form of residence whose legal characteristics are to be found in the provisions of the 1989 Act.
Since one of the characteristics of that placement is that it did not affect his ordinary residence under the statutory scheme, it would create an unnecessary and avoidable mismatch to treat the placement as having had that effect when it came to the transition in his care arrangements on his 18th birthday.
On this analysis it follows that PHs placement in South Gloucestershire by Wiltshire is not to be regarded as bringing about a change in his ordinary residence.
Throughout the period until he reached 18 he remained continuously where he was placed by Wiltshire, under an arrangement made and paid for by them.
For fiscal and administrative purposes his ordinary residence continued to be in their area, regardless of where they determined that he should live.
It may seem harsh to Wiltshire to have to retain indefinite responsibility for a person who left the area many years ago.
But against that there are advantages for the subject in continuity of planning and financial responsibility.
As between different authorities, an element of arbitrariness and swings and roundabouts may be unavoidable.
For these reasons, I would allow the appeals and in the declaration made by the Court of Appeal for references to South Gloucestershire I would substitute references to Wiltshire.
LORD WILSON: (dissenting)
My colleagues consider that, in making his determination under section 32(3) of the National Assistance Act 1948 (the 1948 Act) of the place of PHs ordinary residence on 26 December 2004 for the purpose of section 24(1) of the same Act, the Secretary of State could lawfully have reached only one conclusion.
It is, according to them, that on that date, which was the day prior to his 18th birthday, PH was ordinarily resident in a county (Wiltshire): a) in which in May 1991, ie about 13 years earlier, he had ceased to live upon his removal to live with the foster parents in South Gloucestershire; b) to which, during the following 13 years, he never returned, not even just to stay overnight; c) in which in November 1991, ie also about 13 years earlier, his parents had ceased to live upon their removal to live in Cornwall; d) in which by 1997, ie about seven years earlier, both sets of his grandparents had, in one case because of relocation and in the other because of death, ceased to live; and e) in which, from 1997 onwards until many years after 26 December 2004, no home remained available, even in principle, for his occupation.
Such is a conclusion to which, with great respect to my colleagues, I do not subscribe.
It is a conclusion for which no party has contended at any stage of these proceedings.
A court should tread cautiously before favouring a solution devised only by itself, particularly where, as here, it has been addressed by an array of excellent counsel instructed by public authorities widely experienced in this area of the law.
I agree that there was only one conclusion which the Secretary of State could lawfully have reached.
But, so I consider, his conclusion should have been that on 26 December 2004 PH was ordinarily resident in South Gloucestershire.
So I believe that the order of the Court of Appeal was correct.
I must squarely confront the problem.
There appear to be strong reasons of public policy which militate in favour of imposing upon Wiltshire, rather than upon South Gloucestershire, the obligation of making decisions about a suitable placement of PH following his 18th birthday and of funding whatever placement may thereafter be suitable for him from time to time.
It would be a heavy financial burden for Wiltshire but its burden in the case of PH would be borne to the same extent by some other local authority in a reverse situation: in other words the burdens should even out.
Public policy suggests: a) that it is desirable that a local authority which has exercised the decision making power (and has borne the funding burden) in relation to the placement of a mentally incapacitated minor should, in the light of its knowledge of his needs, continue to exercise that power (and bear that burden) following the attainment of his majority; and b) that it is undesirable that a local authority which is exercising the decision making power (and bearing the funding burden) in relation to the placement of an incapacitated minor should, while he remains a minor, be able to place him in a suitable facility in the area of another local authority (indeed, in the case of a private placement, without the consent of that local authority), with the result that, following the attainment of his majority, the decision making power and, in particular, the financial burden should fall upon that other local authority.
In the present case, for example, the evidence suggests that Wiltshires placement of PH in 1991 with his excellent specialist foster parents did not in any way involve the local authority of South Gloucestershire, which for the following 13 years appears to have played no part in directing or securing his care.
Yet, on my analysis, it is South Gloucestershire which should thereafter have begun to exercise the decision making power and, in particular, to bear the financial burden.
The Secretary of State accepts that, of the young people who move from being looked after by local authorities as minors to being provided with accommodation by them as adults, those lacking capacity are only a small proportion.
But he explains convincingly that, in the light of their specialised needs, the cost of maintaining them indefinitely is very high.
He proceeds to identify real concerns that a few local authorities might therefore be motivated (to use the crude shorthand which, only for convenience, has been deployed in the hearing before this court) to export such a minor to the area of another local authority prior to the attainment of his majority; and equally that, were that other local authority to be the administrator of a specialist resource entirely suitable to the needs of a minor, it might nevertheless be motivated to refuse him admission to it for fear of the financial consequences following the attainment of his majority.
But such is the result which in my view the law, as it stands, clearly compels.
I am not a legislator.
Nor, with respect, are my colleagues.
When, by section 24(1) of the 1948 Act, it decided to identify the local authority responsible for making the provision specified by the Act by reference to a persons ordinary residence in its area, Parliament deployed a well known phrase.
The courts confidently assume that, in deploying a phrase, Parliament understands the meaning which the courts have ascribed to it: Regina v G [2003] UKHL 50, [2004] 1 AC 1034, at p 1059 (Lord Steyn).
No doubt Parliament understands that in the future the courts may refine and develop their interpretation of a phrase.
Subject to that, however, Parliament in 1948 intended that the courts should construe the phrase in section 24(1) by reference to its established meaning.
Furthermore, insofar as the courts might encounter any difficulty in applying every aspect of its established meaning to any person entitled to provision under the Act, for example to a mentally incapacitated person, Parliament no doubt intended that the courts should, albeit only to the necessary extent, adapt their interpretation of the phrase.
To that extent the framework in which Parliament set the phrase might require the courts to ascribe to it a somewhat different meaning.
In 1948 the established meaning of the phrase ordinary residence was that which the House of Lords had ascribed to it in the Levene and Lysaght cases cited by Lord Carnwath at para 39 above.
In the former Viscount Cave LC had stated at p 225 that it meant residence in a place with some degree of continuity and apart from accidental and temporary absences.
In the latter Viscount Sumner had stated at p 243 that the converse to ordinarily is extraordinarily and that part of the regular order of a mans life, adopted voluntarily and for settled purposes, is not extraordinary.
In the Shah case, cited by Lord Carnwath at para 41 above, Lord Scarman, at p 341, quoted both these statements; and it can be seen that his classic definition of the phrase ordinary residence, set out by Lord Carnwath, was in effect no more than an amalgamation of what Viscount Cave and Viscount Sumner had said.
By applying his definition, Lord Scarman and the other members of the committee decided that the four foreign students, who had pursued a course of study in the UK for the previous three years with leave to remain in the UK limited thereto, and who aspired, with the aid of grants, to pursue courses of further education, had been ordinarily resident in the UK throughout those three years and were therefore entitled to the grants under the Education Act 1962.
Lord Scarman noted at pp 346 and 347 that each of the lower courts had attached importance to their belief that in 1962 Parliament would not have intended that foreign students with only limited leave to remain in the UK should be entitled to grants by which to further their education.
He continued, at pp 347 and 348: My Lords, the basic error of law in the judgments below was the failure to appreciate the authoritative guidance given by this House in Levene and Lysaght as to the natural and ordinary meaning of the words ordinarily resident.
They attached too much importance to the particular purpose of the residence; and too little to the evidence of a regular mode of life for a settled purpose, whatever it be, whether study, business, work or pleasure.
In so doing, they were influenced by their own views of policy and by the immigration status of the students.
The way in which they used policy was, in my judgment, an impermissible approach to the interpretation of statutory language.
Judges may not interpret statutes in the light of their own views as to policy. [Bold type supplied]
In 1948 the jurisdiction to commit a child to the care of a local authority was contained in section 62(1)(b) of the Children and Young Persons Act 1933 (the 1933 Act).
No doubt Parliament could have extended the disregard in section 24(5) of the 1948 Act so as to encompass any period in which, immediately prior to the provision of residential accommodation to a person under Part III of that Act, he had been in the care of a local authority under section 62(1)(b) of the 1933 Act.
But it did not do so.
Equally, following the rationalisation of the provisions for taking children into care achieved by the Children Act 1989 (the 1989 Act), Parliament could have extended the disregard in section 24(5) of the 1948 Act so as to encompass any period in which, immediately prior to the provision of such accommodation, the person had been looked after by a local authority within the meaning of section 22(1) of the 1989 Act.
But it did not do so.
By paragraph 9 of the Schedule to the Care Act 2014 and Children and Families Act 2014 (Consequential Amendments) Order 2015, (SI 2015/914), made pursuant to section 123(2) of the Care Act 2014 (the 2014 Act), the application of the 1948 Act has now been restricted to Wales.
In England accommodation for adults in need of it is now provided under the 2014 Act which, by section 39, has replaced the disregards formerly contained in section 24 of the 1948 Act with wider disregards.
But, even now, Parliament has not chosen to include a requirement to disregard a period in which, as a minor, the person has been looked after by a local authority within the meaning of section 22(1) of the 1989 Act.
It is instead my colleagues who have chosen to do so.
Indeed the statutory disregards, limited though they are, present another difficulty.
In para 59 above Lord Carnwath suggests that the legal characteristics of the residence of a minor provided with accommodation under the 1989 Act are such as to make it irrelevant to the determination of his ordinary residence for the purposes of section 24(1) of the 1948 Act.
But, if so, they must make it equally irrelevant to the determination of his ordinary residence for the purposes of the 1989 Act itself, including for those of section 31(8)(a) which requires the recipient of a care order to be the local authority within whose area he is ordinarily resident.
So then the question arises: why should Parliament, by section 105(6)(c) of the 1989 Act, have troubled to require that the period of provision of such accommodation be disregarded? Lord Carnwaths analysis renders the subsection redundant.
More broadly the same charge can, in my view, be levelled in relation to the disregards provided by section 24(5) of the 1948 Act and now by section 39 of the 2014 Act, which provide for the disregard of periods of accommodation which has legal characteristics analogous to those of accommodation provided under the 1989 Act.
The Secretary of State determined that on 26 December 2004 PH was ordinarily resident in Cornwall.
I agree that his determination was unlawful.
Although clearly PH had links with Cornwall which he lacked with Wiltshire, it was artificial to describe him as having had a base with his parents there; and it was unrealistic to regard them as having continued to be the decision makers in relation to him.
Having summarised approaches to the issue which, so counsel suggested, favoured the identification of Cornwall as the responsible local authority under the 1948 Act, Lord Carnwath states at para 51 above: There might be force in these approaches from a policy point of view.
They are however impossible to reconcile with the language of the statute, under which it is the residence of the subject, and the nature of that residence, which provide the essential criterion.
I agree with Lord Carnwaths statement which, by coincidence, encapsulates the reasons for my own rejection of his conclusion that on 26 December 2004 PH was ordinarily resident in Wiltshire.
But it is not only by a process of elimination that I conclude that PH was then ordinarily resident in South Gloucestershire.
In A v A (Children: Habitual Residence), [2013] UKSC 60, [2014] AC 1, this court determined the proper approach to an inquiry into a childs habitual residence for the purposes of article 8 of Council Regulation (EC) 2201/2003, namely the Brussels II Revised Regulation.
It ruled that, in the light of the identity of article 8 as a European regulation, the inquiry into a childs habitual residence was required to be conducted by reference to the interpretation of the phrase favoured by the Court of Justice of the European Union, namely to identify the place which reflects some degree of integration by the child in a social and family environment and that, for the purposes of article 8, such an inquiry was preferable to one determined by reference to Lord Scarmans classic definition of ordinary residence in the Shah case: see para 54(iii) and (v) of the judgment of Lady Hale.
The European approach is plainly tailored so as to allow for the inability of most children to make decisions for themselves and, as such, it seems well suited to an inquiry into the ordinary residence of a mentally incapacitated person such as PH.
I agree with the observation of Elias LJ in his judgment in the present case that there is much to be said in favour of a determination of PHs ordinary residence by reference to a similar approach.
Were the inquiry indeed to be into the place of PHs integration in a social and family environment, that place would plainly be South Gloucestershire.
But application of Lord Scarmans definition, subject to the alteration of one word required by PHs incapacity, yields the same conclusion.
For on 26 December 2004 South Gloucestershire represented the abode which he had adopted for settled purposes as part of the regular order of his life for the time being.
The word which requires alteration is voluntarily.
PH did not adopt his abode in the foster home voluntarily.
But, as the Secretary of State recorded in his determination, PH was very happy and settled in the foster home and had to leave it only because it was not possible for the foster parents to accommodate an adult under the 1948 Act while continuing to foster children under the 1989 Act.
One may confidently infer that, had he had capacity, PH would have adopted his abode in the foster home voluntarily.
In the light of his incapacity, however, the context requires a modest replacement of the word voluntarily with the word contentedly and, on that basis, his ordinary residence in South Gloucestershire is again plainly established.
I therefore take the view that both of these appeals should be dismissed.
| UK-Abs | This appeal concerns PH, a young man with physical and learning disabilities, who was born in Wiltshire in 1986.
He lacks capacity to decide for himself where he lives.
Since 1991, PH has been living with foster parents in South Gloucestershire.
In 1991 PHs parents moved away from Wiltshire to Cornwall.
PH occasionally visited them there, including at the end of 2004 just before his eighteenth birthday.
Since he turned eighteen, PH has lived in two care homes in Somerset.
The cost of PHs care is currently estimated to be 80,000 per year for the rest of his life.
There is no dispute that he is entitled to support.
The issue is which local authority is responsible for providing PHs support South Gloucestershire, Cornwall, or Wiltshire? This depends, under sections 24(1) and 24(5) of the National Assistance Act 1948, on where PH was ordinarily resident immediately before he attained majority.
Wiltshire Council arranged PHs foster placement under the Children Act 1989.
Section 105(6)(c) provides that, in determining a childs ordinary residence for the purposes of the 1989 Act, there shall be disregarded any period in which the child lives in any place while he is being provided with accommodation by or on behalf of the local authority.
At the time PH turned 18, the National Assistance Act 1948 section 21 obliged local authorities to arrange accommodation for people over eighteen with disabilities who need care and attention not otherwise available to them (the application of the 1948 Act has since been restricted to Wales).
By section 24(5), a person provided with accommodation under the 1948 Act is deemed to continue to be ordinarily resident in the area in which he was ordinarily resident immediately before that accommodation was provided for him.
Section 105(6)(c) and section 24(5) have been referred to as deeming or disregard provisions.
In August 2011, the three local authorities jointly referred the question of PHs ordinary residence to the appellant Secretary of State for determination, under section 32(3) of the 1948 Act.
The Secretary of State decided that Cornwall Council was responsible.
He followed his own guidance on determining ordinary residence, which draw on two principal authorities: R v Barnet LBC, ex p Shah [1983] AC 309, and R v Waltham Forest, Ex p Vale (unreported, 11 February 1985).
In Shah, the House of Lords held that ordinary residence connotes an abode voluntarily adopted for settled purposes.
In Vale the High Court held that an adult woman whose disabilities meant she was incapable of choosing where to live had her ordinary residence with her parents, because that was her base.
The Secretary of State applied this approach, which was challenged in this appeal.
Cornwall Council judicially reviewed the Secretary of States decision.
The High Court dismissed its challenge.
The Court of Appeal disagreed, holding that PHs place of ordinary residence as at his eighteenth birthday was South Gloucestershire, and further that the deeming provisions did not apply to PH since each applied only for the purposes of their own Act.
The Supreme Court allows the appeals by a majority of 4 1, and determines PHs ordinary residence at the relevant time to be Wiltshire.
Lord Carnwath gives a judgment with which Lady Hale, Lord Hughes and Lord Toulson agree.
Lord Wilson gives a dissenting judgment.
Lord Carnwath considers that the Secretary of States reasons for selecting Cornwall, which started not from assessment of the duration and quality of PHs actual residence but from an attempt to ascertain his base by reference to his family relationships, cannot be supported.
There is no suggestion that PHs brief periods of staying with his parents at holiday times could amount to ordinary residence. [49] Lord Carnwath further reasons that though attribution of responsibility to South Gloucestershire may fit the language of the statute, it runs directly counter to the statutes policy.
The only connection with that county was PHs historic placement under a statute, the 1989 Act, which specifically excluded the placement from consideration as ordinary residence for the purposes of the 1989 Act.
The policy in both the 1989 and 1948 Acts is that ordinary residence of a person provided with accommodation should not be affected, for the purposes of an authoritys responsibilities, by the location of that persons placement.
The purpose of the deeming provisions in both Acts is that an authority should not be able to export its responsibility for providing accommodation by exporting the person who is in need of it.
It would be undesirable if, despite the similarity and purpose of these provisions, there is a hiatus in the legislation.
It could also have adverse consequences on local authorities willingness to receive children who need specialist care from another local authority. [52 55] Lord Carnwath notes that in construing section 24 of the 1948 Act, the statutory context is critical.
The relevant provisions in each Act have the same function, namely allocating fiscal and administrative responsibility between local authorities. [57] PH was at the relevant time living somewhere he had been placed by a local authority under the 1989 Act.
It would be wrong to interpret section 24 of the 1948 Act so as to regard PH as having been ordinarily resident in South Gloucestershire by reason of a form of residence whose legal characteristics are found in the 1989 Act.
One of those characteristics is that the foster placement did not affect his ordinary residence under the 1989 Acts statutory scheme. [58 59] It follows that PHs placement in South Gloucestershire by Wiltshire is not to be regarded as changing his ordinary residence.
Until he turned eighteen, for fiscal and administrative purposes his ordinary residence continued to be in Wiltshire, regardless of where they determined that he should live. [60] Therefore the appeal is allowed and in the declaration of the Court of Appeal references to South Gloucestershire are substituted for references to Wiltshire. [61] Lord Wilson, dissenting, reasons that at the relevant date PH and his family had all moved away from Wiltshire. [62] South Gloucestershire is the result that the law clearly compels on the established meaning of ordinary residence, though public policy militates against it. [65 66, 68] Though he did not adopt it voluntarily, PH was happy and settled there. [74] Parliament has not chosen to widen the provisions in the 1948 Act so as to disregard an adults previous placement as a minor under the 1989 Act.
The majoritys analysis that the legal characteristics of a minors residence under the 1989 Act make it irrelevant to determining ordinary residence under section 24 of the 1948 Act makes the statutory disregards in section 105(6) of the 1989 Act and section 24(5) of the 1948 Act redundant. [70 71]
|
The Preamble to the Hague Convention on the Civil Aspects of International Child Abduction (the Convention) states that its purpose is to protect children internationally from the harmful effects of their wrongful removal or retention.
But under article 3 the taking or keeping of a child is only wrongful if it is in breach of rights of custody.
The same applies under the Brussels II Revised Regulation (the Regulation), which complements and takes precedence over the Hague Convention as between all but one of the member states of the European Union.
So what is meant by rights of custody? It might be thought that the meaning of a concept so central to the operation of both instruments would be well settled by now.
But this is not even true within the United Kingdom.
The Courts of Appeal in England and Wales and in Northern Ireland have taken different views.
It therefore falls to this court to resolve the difference.
If nothing else, the position should be the same throughout the United Kingdom.
The concept of rights of custody would appear to have at least two functions.
One is to identify those removals or retentions which are presumptively so harmful to the welfare of a child that the authorities must take swift action to return him to the country from which he has been taken or kept away.
Many international removals of children will not be harmful to them at all, for example where their united parents take a well planned sabbatical in another country or even emigrate permanently.
Other international removals may or may not be so harmful.
The Convention draws a clear distinction between rights of custody and rights of access.
It does not presume that removal or retention in breach of rights of access is so harmful that the child must instantly be returned.
Another function of rights of custody, therefore, is to secure that long term decisions about the childs future are taken in the country where he was habitually resident immediately beforehand and not in the country to which he has been taken.
The issue, therefore, is between two different approaches to the interpretation of the concept.
Is it to be interpreted strictly and literally as a reference to rights which are already legally recognised and enforceable? Or is it to be interpreted purposively as a reference to a wider category of what have been termed inchoate rights, the existence of which would have been legally recognised had the question arisen before the removal or retention in question? The issue is well illustrated by the facts of the present case.
The facts
We are concerned with a little boy whom I shall call Karl.
He was born in Lithuania on 13 March 2005 and so is now nine years old.
His father and mother separated before he was born and his father has played no part in his life.
From the time of his birth until his removal from Lithuania in March 2012 he lived with and was cared for by his maternal grandparents.
His mother returned to work in the Lithuanian army shortly after his birth.
There is an unresolved dispute of fact as to whether she remained based with the family for about a year after Karls birth.
It is however clear that in May 2006 she moved to live and work in Northern Ireland with her then partner, leaving Karl in the sole care of her parents, and that she has lived there ever since.
She and that partner had a child together in July 2010.
Some time after that they separated and the mother now has another partner.
There is also an unresolved dispute about the level of interest which the mother showed in Karl over the years.
Between May 2006 and October 2011, she sent 28 payments to the grandmother totalling some 2,590.
She was in contact with her family by telephone and by SKYPE but we do not know how often.
The grandmother came to visit her once in Northern Ireland in 2006 but did not bring Karl with her.
The mother visited the family once in Lithuania in November 2006 for five days or a week when Karl was 20 months old.
Otherwise Karl had not seen her until she returned to Lithuania in February 2012 shortly before his seventh birthday.
According to the solicitor working with the Official Solicitor in Northern Ireland, who interviewed Karl a year later, it was his firm belief that his grandmother was his mother.
He was confused as to who the woman he spoke to on the computer (via SKYPE) was.
His grandmothers evidence is that he referred to the mother as his mum from far away.
In February 2012 his mother returned to Lithuania in order to take Karl with her to Northern Ireland, where she now had suitable accommodation, employment and a stable relationship.
Her own evidence is that she knew that her parents would not agree to Karl moving to live with her.
A friend had told her that her mother was taking preliminary steps to obtain legal custody of the child.
A lawyer advised her that legal proceedings between her and her mother would be very protracted and costly.
So she decided to take matters into her own hands.
On 12 March 2012, as the grandmother was walking Karl home from school, the mother and her partner drew up beside them in a van and there was a tug of war which resulted in Karl being removed from his grandmother and taken away in the van.
Again, there is a dispute of fact.
The grandmother says that she heard the mother shouting pull him, pull him, a man jumped out of the van and grabbed the child.
When she would not let him go, the van door was shut on her hand, injuring her.
The mother says that her partner was driving the van and it was she who had the tug of war to remove Karl from his grandmothers grip.
Either way, it was a shocking episode of which any mother should be deeply ashamed.
Thereafter they travelled by car and ferry through Slovakia, Germany, France and England, arriving in Northern Ireland around 17 March 2012.
Karl had to leave behind his country, his home, his toys and his clothes, his school and many other activities, and the grandparents with whom he had lived all his life.
He was taken to a country he did not know, with a language he did not know, by a mother he scarcely knew, to live with her and a half sister and step father whom he had never met.
After arriving in Northern Ireland, Karl had some contact with his grandparents by telephone and by SKYPE, but this was terminated by the mother later in 2012 and there has been no contact since then.
Shortly after the removal, the grandmother contacted the Childrens Rights Division in her home city in Lithuania and a referral was made via Children and Families Across Borders to the local authority in Northern Ireland.
A social worker undertook an assessment using the Understanding the Needs of Children in Northern Ireland (UNOCINI) framework, which was completed on 24 May 2012.
Karl had been enrolled in school in April, after the Easter break.
His behaviour during the first week had been very disturbed and the school had requested specialist support for this.
Otherwise, the assessment was that the mother appeared to have good insight into the needs of her children, but that Karl had experienced a major change in his life, and would benefit from support in relation to the current language barrier and emotional support which would enable him to process his thoughts and feelings about the move.
Nevertheless it was agreed that the case should be closed as the school had involved behaviour support.
A letter from the head teacher in February 2013 reported that his behaviour since returning to school in September 2012 had been exemplary.
He had very quickly mastered English and was making excellent academic and social progress.
When the solicitor for the Official Solicitor interviewed Karl at his mothers home in April 2013, she found a little boy who presented as very young.
He expressed a desire to stay with his mother in Northern Ireland.
The solicitor concluded: [Karl] has experienced a situation where he was cared for by a grandmother, whom he believed was his mother, and had irregular contact with a woman with whom his relationship was unclear.
He was subsequently abducted from his grandmother in an extremely frightening manner by a person whom he believed at the time was a stranger.
He was removed from the country of his upbringing to a country where he struggled initially with the language.
Contact with his grandparents, who had been his primary carers and the significant adults in his life, was brought to an abrupt end by his mother and he was informed that his grandparents had lied to him throughout his entire life.
In light of the above, despite [Karls] assertion that he wants to remain with his mother, I have concerns about the emotional well being of this young boy and the impact of the traumatic events on his ability to formulate his wishes and feelings freely and without influence.
It is entirely possible that [Karl] has suffered emotional harm and I would consider that it might be in his best interests for an expert assessment to be carried out in order to identify appropriate supports for him.
The legal position in Lithuania
These proceedings are unusual in that we have no formal evidence as to the legal position of the grandparents in Lithuanian law.
The central authority in Lithuania has not supplied the central authority in Northern Ireland with a certificate or affidavit, such as is contemplated by article 8(f) of the Convention, concerning the relevant Lithuanian law.
There has been no contact through liaison judges.
The mothers legal advisers did attempt to obtain evidence of Lithuanian law but this could not be obtained within the tight time table for child abduction cases.
No one suggests that at this late stage it would be appropriate for the court to exercise its power, under article 15 of the Hague Convention, to request that the grandparents obtain from the Lithuanian authorities a decision or other determination that the removal was wrongful within the meaning of article 3 of the Convention.
We shall have to do the best we can with the limited material at our disposal.
On 13 April 2005, when Karl was one month old, the mother signed a document authorising the grandmother to visit all medical institutions and hospitals with her son.
On 20 April 2006, shortly before her move to Northern Ireland, the mother executed a notarised consent for Karl to travel to any foreign country together with the grandmother and/or the grandfather.
On the same date, she also executed a notarised power of attorney, to be valid for ten years, authorising the grandmother to receive the passport of my minor son . ; to represent me at the Migration Service Passports subdivision and other state, legal and governmental institutions, companies and organisations; to receive and submit all necessary documents; to make applications on my behalf; to sign on my behalf and to perform all other actions in relation to this authorisation.
On 10 January 2007, the Director of the City Municipality Administration for the city where the grandparents live made an order, pursuant to various articles of the Lithuanian Civil Code and Law on Child Benefits and in accordance with the Description of Care (Guardianship) Procedure of the City Child Crisis Centre.
According to one of the translations we have, this order put Karl under temporary care (custody); appointed the grandmother as his carer (guardian); determined that the place of care (custody) should be the carers (guardians) place; and transferred the supervision of this temporary care (custody) to the City Child Crisis Centre. (The Lithuanian original also uses alternative terminology, globa (rupyba), and globeja (rupintoja); given the etymological similarity between rupyba and rupintoja, it may well be that custodian would be a closer translation than guardian, but that is by the way.)
There matters stood until the mother returned to Lithuania in February 2012.
On 20 February 2012, the Manager of the Childrens Rights Division of the City Administration issued a notice to the mother stating that, under an Order of the Social Security and Labour Minister, it is indicated in the children temporary care provision that temporary care terminates when the parents return from a foreign state and inform Childrens Rights Division about it.
The mother had that day informed the Division that she had returned and would take her son into her own care.
The temporary care was therefore held to be terminated on that date.
On 2 March 2012, the mother issued applications to the notarys office to withdraw the two notarised consents which she had given on 20 April 2006.
It would appear, therefore, that she was doing whatever she could to withdraw the parental authority which she had delegated to the grandmother in 2006.
However, Karl obviously remained living with his grandparents.
The grandmother says in her affidavit that a little earlier the child had begun to suffer from anxiety and was afraid of leaving the house.
A psychologist had become involved through his school and had recommended that he be educated at home for a while.
We do not know whether this was in any way related to the mothers return but it may have been completely unrelated.
On 2 March 2012, the Manager of the Childrens Rights Division issued a notice to the grandfather, copied to the mother, headed Re: Request dated 20/02/12, but we do not know what that request was.
The notice recounted events subsequent to that request.
There was a meeting on 22 February 2012 in relation to the mothers contact with her son.
A temporary contact order was agreed, for the mother to see Karl on Wednesday of each week between 15.30 and 17.00.
A further meeting took place, attended by a psychologist from the family and childs welfare centre, on 27 February 2012.
A psychiatrists certificate was also submitted on that date.
The grandmother had said that the doctor forbade the child to have contact with other people except his family members, that he would not attend school for one to one and a half months and that he would be taught at home.
The staff of the Childrens Rights Division spoke to the doctor on 27 February, who advised that the child should see the medical staff once a week and that he could have contact with his mother.
They concluded that the temporary contact agreed on 22 February would not breach the childs interests and therefore recommended keeping it.
The mother was required to attend the appointments with the psychologist.
On 7 March 2012, the mother wrote to the Manager of the Childrens Rights Division informing her that she arrived for her contact visit with her son at the recommended time but that the child was not brought to the office for the visit.
Thus it would appear that the Childrens Rights Division was still actively managing the dispute between the mother and the grandparents in what they saw as the best interests of the child on the basis that, for the time being at least, he would live with his grandparents.
Nevertheless, after his abduction on 12 March, the grandmother was informed by the authorities that she had no rights.
Hence the application transmitted on behalf of the grandparents by the central authority of Lithuania to the central authority of Northern Ireland on 19 November 2012 was not for the immediate return of a child who had been wrongfully removed from his country of habitual residence but for arrangements to be made for him to spend 30 days holiday a year with them at their expense.
Unlike an application for return, such an application would not normally be accompanied by a certificate or affidavit concerning the relevant Lithuanian law relating to rights of custody.
This may explain why we do not have one.
These proceedings
However, the originating summons issued by the grandparents in the High Court in Northern Ireland sought a declaration that Karl was being wrongfully retained in Northern Ireland in breach of their rights of custody and an order that he be returned forthwith.
No doubt by that time the grandparents had been advised by their lawyers that there was case law in the Court of Appeal and High Court in England and Wales indicating that those courts would regard them as having rights of custody for purposes of the Hague Convention and that there was (at least) a realistic possibility that the High Court in Northern Ireland would take the same view.
As it turned out, Maguire J in the High Court declined to follow the English case law, on the ground that it was inconsistent with two House of Lords decisions on the Convention and with one decision in the Court of Justice of the European Union on the Regulation.
The Lord Chief Justice, Higgins and Coghlin LJJ in the Northern Ireland Court of Appeal took the same view: [2014] NICA 15.
Therefore, in the interests of consistency within the United Kingdom, if nowhere else, it is necessary for this court to resolve the matter.
The relevant provisions of the Convention and the Regulation
The crucial provision of the Convention is article 3: The removal or retention of a child is to be considered wrongful where (a) it is in breach of rights of custody attributed to a person, an institution or any other body, either jointly or alone, under the law of the State in which the child was habitually resident immediately before the removal or retention; and (b) at the time of removal or retention those rights were actually being exercised, either jointly or alone, or would have been so exercised but for the removal or retention.
The rights of custody mentioned in sub paragraph (a) above, may arise in particular by operation of law or by reason of a judicial or administrative decision, or by reason of an agreement having legal effect under the law of that State.
Rights of custody are further defined in article 5(a), which provides that, for the purposes of the Convention, rights of custody shall include rights relating to the care of the person of the child and, in particular, the right to determine the childs place of residence; while rights of access are further defined in article 5(b), which provides that rights of access shall include the right to take a child for a limited period of time to a place other than the childs habitual residence.
Rights of custody are respected by the obligation in article 12 to order the return of the child forthwith where he has been wrongfully removed or retained in terms of article 3, unless one of the limited exceptions provided for in articles 12 and 13 apply.
Rights of access are respected through the arrangements in article 21 for securing their effective exercise.
The Convention is supplemented as between the member states of the European Union (apart from Denmark) by the Regulation.
Under article 60(e), this takes precedence over the Convention.
The obligation to respect rights of custody by returning the child forthwith under article 12 of the Convention remains, subject to the limited exceptions in articles 12 and 13, but with some additional obligations in article 11 of the Regulation.
The relevant definitions are contained in article 2 of the Regulation.
Article 2(9) provides that: the term rights of custody shall include rights and duties relating to the care of the person of a child, and in particular the right to determine the childs place of residence; Article 2(11) provides that: the term wrongful removal or retention shall mean the childs removal or retention where: (a) it is in breach of rights of custody acquired by judgment or by operation of law or by an agreement having legal effect under the law of the Member State where the child was habitually resident immediately before the removal or retention; and (b) provided that, at the time of the removal or retention, the rights of custody were actually exercised, either jointly or alone, or would have been so exercised but for the removal or retention.
It is most unfortunate that the wording of the Convention and Regulation are not identical.
However, despite the difference in wording, the apparent intention of both instruments is that the attribution of rights of custody is to be determined according to the law of the country where the child was habitually resident immediately before his removal or retention.
Further, article 3 of the Convention contemplates that rights of custody may arise in particular in three ways: by operation of law, by administrative or judicial decision, and by an agreement having legal effect.
This does not rule out that such rights might arise in other ways (see the Explanatory Report by Professor E Perez Vera, para 67).
By contrast, the list in article 2(11) of the Regulation appears exhaustive.
Furthermore, a judicial or administrative decision in article 3 is intended in its widest sense (see Perez Vera, para 69).
By contrast, a judgment is defined in article 2(4) of the Regulation as a judgment relating to parental responsibility pronounced by a court of a Member State.
Given, however, that the whole thrust of the Regulation is to supplement and to strengthen the obligations laid down in the Convention, and that it would appear unlikely that the Regulation intended to cut down the possible sources of custody rights which are indirectly protected by the obligation to return the child, they should be construed consistently with one another wherever possible.
The English cases on inchoate rights
The line of cases begins with the majority decision of the Court of Appeal in Re B (A Minor)(Abduction) [1994] 2 FLR 249.
The childs parents were not married to one another and by the law of Western Australia where they lived an unmarried father enjoyed no parental rights by operation of law.
Nevertheless he had become the childs primary carer when the mother moved back to Britain, leaving the child in the shared care of the father and her mother.
The father agreed to the grandmother bringing the child to Britain for a holiday but only on terms to be embodied in a consent order giving the parents joint guardianship and him sole custody.
This was agreed by the mother and eventually approved by the Australian court but only after the mother had begun wardship proceedings in Wales.
Waite LJ held that the term rights of custody was capable of being applied in a Convention context to describe the inchoate rights of those who are carrying out duties and enjoying privileges of a custodial or parental character which, though not yet formally recognised or granted by law, a court would nevertheless be likely to uphold in the interests of the child concerned (p 261B).
In this case the fathers status was one which any court . would be bound to uphold; at least to the point of refusing to allow it to be disturbed abruptly or without due opportunity of a consideration of the claims of the childs welfare merely at the dictate of a sudden reassertion by the mother of her official rights.
Staughton LJ agreed with Waite LJ but he also accepted evidence that under the law of Western Australia parents could make valid agreements as to the custody or guardianship of their children which would be binding without a court order.
Peter Gibson LJ dissented on the ground that rights must mean more than de facto rights.
The agreement between father and mother did not confer rights of custody when the child left Australia and (under the authority of Re J (A Minor) (Abduction: Custody Rights) [1990] 2 AC 562, see para 42 below) a young child in the sole lawful custody of his mother had the same habitual residence as she did, which was now in Wales.
Re B was an incoming case, where England and Wales was the requested state.
The concept of inchoate rights of custody has been deployed in several later cases, both incoming and outgoing, in the High Court of England and Wales where, of course, the decision in Re B is binding.
In Re O (Child Abduction: Custody Rights) [1997] 2 FLR 702, another incoming case, the facts were not unlike those of the present case.
A German mother had left her German daughter in the care of the maternal grandparents in Germany.
They had taken sole responsibility for the child for over a year and had started custody proceedings in the German court.
But before these could be heard the mother kept the child, who was staying with her for the weekend, and brought her to England.
The grandmother obtained a provisional custody order in Germany and orders from the High Court in England, under both the Convention and the inherent jurisdiction of the High Court, for the immediate return of the child.
Cazalet J thought the non exhaustive wording may arise in article 3 of the Convention (see para 19 above) was important.
He asked himself whether the mother could properly be said to have agreed to the child making her home with the grandmother or whether some situation arose whereby the grandparents were carrying out duties and enjoying the privileges of a custodial or parental character which the court would be likely to uphold in the interests of the child concerned (p 709).
While he had some doubts about whether there was any such agreement he had no doubt that the grandparents had joint custodial rights within the provisions of Waite LJs definition (p 710).
Re G (Abduction: Rights of Custody) [2002] 2 FLR 703 was an outgoing High Court case in which Sumner J declared that the paternal grandmother in whose care the child had been left by the mother had rights of custody as defined in Re B, so that it was in breach of those rights for the mother to retain the child (and take her to South Africa) during an agreed holiday in this country.
In Re G, Sumner J also declared that the unmarried father, who had joined the household after the child had been left with the grandmother, had rights of custody.
Many of the cases have concerned unmarried fathers who do not have rights of custody by operation of law in the country where the child is habitually resident but who have nevertheless played a role in the childs care.
In Re W; Re B (Child Abduction: Unmarried Father) [1999] Fam 1, which concerned two different outgoing cases, I suggested that removing a child who is habitually resident here would be wrongful under the Convention if (a) the unmarried father has parental responsibility either by agreement or court order (or, it should now be added, by operation of law); (b) there is a court order in force prohibiting it; (c) there are relevant proceedings pending in a court in England and Wales; or (d), following Re B, where the father is currently the primary carer for the child, at least if the mother has delegated such care to him (p 20).
The facts of Re W fell within (c), but those of this Re B fell within none of these categories, as the mother had a residence order with no prohibition on removing the child from the jurisdiction and the father had only a contact order.
Re J (Abduction) (Declaration of Wrongful Removal) [1999] 2 FLR 653 was another outgoing case which fell within category (c); but I doubted whether the concept of inchoate rights could be extended to an unmarried father, who was living with and sharing care of the child with the mother in the way that mothers and fathers living under the same roof commonly do, because that would be difficult to reconcile with the House of Lords decision in Re J (pp 659 660) (see para 42 below).
In Re C (Child Abduction) (Unmarried Father: Rights of Custody) [2002] EWHC 2219 (Fam), [2003] 1 FLR 252, where the facts were similar, Munby J agreed with my formulation at (d), so long as it is understood as also applying to a case of shared primary care with someone other than the mother (para 41).
Like me, he held that there was nothing in the authorities to suggest that an unmarried father (or anyone else) could acquire rights of custody while the mother who had sole legal rights remained the primary carer, whether alone or sharing it with the father (para 37).
He pointed out that the common thread running through the Re B cases was the mother had left the scene and abandoned the care of the child to someone else (para 36).
Baron J also followed this approach in Re J (Abduction: Acquiring Custody Rights by Caring for the Child) [2005] 2 FLR 791, holding that the mother had not abandoned the child or delegated sole care to the father during the periods when he had been in the fathers care and thus that the father did not have rights of custody within the Re B principle.
In Re F (Abduction: Unmarried Father: Sole Carer) [2002] EWHC 2896 (Fam), [2003] 1 FLR 839, an outgoing case, there was doubt about whether the mothers former partner, and father of her three older children, was in fact the father of her youngest child, who had been left by the mother in his sole care (there were no pending proceedings when the child was abducted because his legal aid application had been lost).
Dame Elizabeth Butler Sloss P held that he had inchoate rights of custody, whether or not he was in fact the father, there being a reasonable prospect that a court would grant him a residence order.
Reunite, to whom this court is most grateful for their erudite and dispassionate intervention, has drawn our attention to the treatment of the concept of inchoate rights in other states parties to the Hague Convention.
In summary, the concept has received enthusiastic support in New Zealand: in the family court in Anderson v Paterson [2002] NZFLR 641; in the High Court on appeal from the family court in M v H [Custody] [2006] NZFLR 623; and by Baragwanath J in the Court of Appeal in Fairfax v Ireton [2009] 3 NZLR 289.
These were all cases of unmarried fathers who did not have guardianship rights under New Zealand law, but were enjoying regular contact with their children by agreement with the mother, so the question of inchoate rights was combined with the question of rights acquired by an agreement having legal effect.
In the Ontario Superior Court of Justice in Canada, in Courtney v Springfield [2008] CanL II 35920 (ON SC), unreported, Mackinnon J applied the English concept of inchoate rights when deciding whether two children had been wrongfully removed from England and Wales.
Both children had been placed with a same sex couple as foster parents and adopted by the abducting party alone because joint adoptions by same sex partners were not then permitted in English law.
A shared residence order had been made in relation to one of the children but not the other.
Nevertheless the left behind party had been their primary carer while the couple lived together.
Following their separation the children had at first spent roughly equal time with each party, and then two days a week with the left behind party, who had also continued her parental involvement in the childrens activities and schooling.
MacKinnon J held that it was not necessary to have been the primary carer in order to have inchoate custody rights within the meaning of Re B (para 56).
We do not know whether the same approach might be adopted in relation to children habitually resident in Canada, although in VW v DS [1996] 2 SCR 108, the Supreme Court held that the concept of custody must be given a large and liberal interpretation as a narrow reading would contradict the very object of the implementing legislation.
On the other hand, the Supreme Court of Ireland, in HI v MG [2000] 1 IR 110, held by a majority of four to one that the Hague Convention did not provide protection for inchoate rights of custody.
The mother and father had gone through an Islamic ceremony of marriage in the state of New York which was not valid in US law.
An unmarried father had no legal status and no rights of custody under New York law unless conferred by court order.
So although the family had been living together for some five and a half years, until shortly before the mother obtained a temporary order of protection and removed the child to Ireland, and the father had already begun proceedings for a visitation order, the father did not have rights of custody within the meaning of the Convention.
Barron J, dissenting, held that The reality is that the Hague Convention is not concerned with legal rights under the law of habitual residence but with rights which were actually being exercised and . which the courts of that state would not totally disregard as having no legal effect within that state (p 140).
Citing the Re B line of authorities with approval, he concluded that when the party entitled to the legal rights enters into an agreement whether by words or conduct whereby the de facto exercise of those rights is passed to another whether solely or jointly with the possessor of the rights such rights so passed arise within the meaning of article 3 of the Hague Convention (p 146).
The Re B concept of inchoate rights was applied as a back up reason by Morgan J in the Family Court of Australia in State Central Authority v LJK [2004] FamCA 724.
The child had been born before the parents were married and the mother had obtained a consent order in Australia making her solely responsible for the childs care.
But then she had returned to the United States with the child and married the father.
Morgan J held that the marriage had nullified the Australian order and so the father had rights of custody by operation of law.
But if he was wrong about that, he would have held that the father had inchoate rights within the Re B principle.
In MW v Director General of the Department of Community Services [2008] HCA 12, (2008) 244 ALR 205, the High Court of Australia, by a majority of four to one, overturned an order made in the family court that a child be returned to New Zealand.
The unmarried father had not established that he was a joint guardian under New Zealand law and his access order did not give him a right of veto over the childs removal.
Hence he had no rights of custody.
Kirby J dissented on both points.
But despite the length and erudition of the judgments, there is no mention of the concept of inchoate rights or of the New Zealand decisions (para 28 above) which would have recognised such a father as having them.
The diligence of Reunite, and indeed the other parties, has not unearthed any helpful United States authority on this issue, or indeed any authority from a non common law country.
The upshot is that England and Wales have embraced the concept of inchoate rights both for incoming (requested) and outgoing (requesting) abduction cases.
New Zealand has recognised it for outgoing (requesting) cases.
Canada has recognised it for an incoming (requested) case from England and Wales, thus as part of our law but not necessarily theirs.
Australia has recognised it for an incoming (requested) case from the USA but failed even to consider it in an incoming (requested) case from New Zealand.
Ireland has expressly refused to recognise it in an incoming (requested) case from the United States.
An agreement having legal effect
This third source of rights of custody is explained thus in Professor Perez Veras Explanatory Report, para 70: In principle, the agreements in question may be simple private transactions between the parties concerning the custody of their children.
The condition that they have legal effect according to the law of the State of habitual residence was inserted during the Fourteenth Session in place of a requirement that it have the force of law as stated in the Preliminary Draft.
The change was made in response to a desire that the conditions imposed upon the acceptance of agreements governing matters of custody which one convention seeks to protect should be made as clear and as flexible as possible.
As regards the definition of an agreement which has legal effect in terms of a particular law, it seems that there must be included within it any sort of agreement which is not prohibited by such a law and may provide a basis for presenting a legal claim to the competent authorities. (emphasis supplied)
As already noted, there is also some New Zealand authority on when rights of custody may arise by virtue of an agreement having legal effect in New Zealand.
Section 18 of the New Zealand Guardianship Act 1968 expressly provided that an agreement between the father and mother of a child as to the custody or upbringing of or access to a child was valid, although not to be enforced if the court was of the opinion that this would not be for the welfare of the child.
In Dellabarca v Christie [1999] 2 NZLR 548, the Court of Appeal pointed out that this was originally enacted so as to nullify the common law rule that an agreement by a father to part with custody was void as contrary to public policy.
While holding that there was no such agreement on the facts of that case, they were inclined to doubt the trial judges view that it would not have had legal effect for the purpose of article 3 of the Convention.
This was followed up by the High Court in M v H (para 28 above), holding that such agreements did not have to be in writing and if established on the evidence would have legal effect for the purpose of article 3.
By the time of Fairfax v Ireton (para 28 above), section 18 had been replaced by section 40 of the Care of Children Act 2004, which did not in terms state that such agreements were valid, and did provide that they could not be enforced as such, but that some or all of their terms could be embodied in a court order which could be enforced in the usual way.
The Court of Appeal held that such an agreement did have legal effect for the purpose of article 3.
Reunite have conducted a comprehensive search of the law reports in England and Wales, revealing 59 cases in the Family Law Reports where the phrase an agreement having legal effect appears, but only one in which its meaning was specifically considered.
In Hunter v Murrow (Abduction: Rights of Custody) [2005] EWCA Civ 976, [2005] 2 FLR 1119, there had been an article 15 request to the courts of New Zealand which (unsurprisingly in the light of the above) had replied that a father enjoying regular and frequent contact with the child by informal agreement with the mother did have rights of custody and therefore that the childs removal to England and Wales had been wrongful.
Nevertheless, both the English High Court and the Court of Appeal held that it was not: the English perception of the autonomous law of the Hague Convention (para 29) was that rights of access could not, without more, amount to rights of custody: citing the then most recent cases of Re V B (Abduction: Custody Rights) [1999] 2 FLR 192 and Re P (Abduction Consent) [2004] EWCA Civ 971, [2004] 2 FLR 1057 (paras 23 24).
The case is therefore of very little help in determining what is meant by an agreement having legal effect.
It is worth considering the answer which might be given by the English courts were an equivalent request to be made of them.
Indeed, in Re W; Re B (para 25 above) I was invited on behalf of the father in B to hold that the parties had agreed that the mother could not take the child out of the jurisdiction except for short periods.
I was unable to spell out any such agreement from the known facts and evidence.
Moreover (pp 161 162): Even if I had done so, I would have had difficulty in bringing it even within the wide definition given by Professor Perez Vera.
The common law does not permit parents to surrender their parental responsibilities (and see also the Children Act 1989, section 2(9)) nor does it recognise or enforce private agreements about the upbringing of children.
It regards such agreements as contrary to public policy (see Barnardo v McHugh [1891] AC 388; see also A v C [1985] FLR 445).
It cannot be suggested, therefore, that any such agreement could be enforced.
But neither does it provide a basis for presenting a legal claim to the competent authorities.
The father could at any time have applied for parental responsibility or prohibited steps orders: his basis for doing so would have been his relationship to the child rather than any alleged agreement with the mother.
Of course, had they earlier made a parental responsibility agreement under section 4 of the Children Act 1989, that would have been an excellent example of rights of custody arising from an agreement having legal effect in our law.
That was a brief and some might think inadequate summary of the position in English law.
The common law rule was indeed that a married father could not surrender his parental rights by agreement, but that was modified by a provision in the Custody of Infants Act 1873 similar to that in section 18 of the New Zealand Guardianship Act.
An agreement contained in a separation deed between husband and wife was not invalid by reason only that it provided for the father to give up custody or control of the child to the mother; but no court should enforce such an agreement if it would not be of benefit to the child to do so.
In the famous case of Re Besant (1879) 11 Ch D 508, it was held not to be for the benefit of a little girl to enforce the agreement in a separation deed between her parents that she should live with her mother for 11 months of the year.
Annie Besant had not only published atheistical books but also co operated with Charles Bradlaugh in publishing a pamphlet on birth control which the court considered obscene.
In Barnardo v McHugh [1891] AC 388, the common law rule was also applied to an agreement between the mother of an illegitimate child and Dr Barnardo that she would leave the boy in his care for 12 years.
To this extent, unmarried mothers were treated as on a par with married fathers.
When the Guardianship Act 1973 at last gave married mothers the same rights and authority as married fathers, section 1(2) repeated the rule that any agreement to give up such rights was unenforceable, but again made an exception for agreements between husband and wife which were to operate only while they were separated; but even those agreements were not to be enforced if it would not be for the benefit of the child to give effect to it.
Section 85(2) of the Children Act 1975 enacted the common law rule, providing that, subject to section 1(2) of the 1973 Act, a person cannot surrender or transfer to another any parental right or duty he has as respects a child.
Both provisions were repealed by the Children Act 1989, section 2(9) of which provides that A person who has parental responsibility for a child may not surrender or transfer any part of that responsibility to another but may arrange for some or all of it to be met by one or more persons acting on his behalf.
Section 2(10) provides that the person with whom any such arrangement is made may himself be a person who already has parental responsibility for the child concerned.
Thus any explicit recognition of agreements between parents has gone, no doubt because the court could always decline to enforce them if they were not for the childs benefit, but (again as in New Zealand) the whole thrust of the Act was to encourage parents to make their own arrangements for their childrens future without seeking the intervention of the courts unless it was needed (see, for example, section 1(5)).
Whether section 2(9) and (10) amount to giving such arrangements legal effect for the purpose of article 3 of the Hague Convention must await a fuller argument and more careful consideration than it was given in Re W; Re B.
But one obvious problem is that there would appear to be nothing to prevent the parent from unilaterally rescinding the delegation before the abduction.
The only other relevant case found by Reunite is the US decision in Shalit v Coppe 182 F 3d 1124 (9th Circuit 1999).
The question was whether an agreement between the parents that the child would live in Israel for three years had legal effect in Israeli law such as to give the father rights of custody and make the mothers removal of the child to Alaska wrongful in Convention terms.
The US Court held that it did not, because Israeli law specifically provided that agreements between parents were subject to the approval of the court.
Thus it is difficult to reconcile the English cases on inchoate rights with the concept of an agreement having legal effect, unless that concept is given an extremely wide meaning.
Although they all had a basis in the voluntary delegation or abandonment of the child to the care of the people from whom the child had been taken, it could not be said that such delegation had the effect of a legally binding agreement which could not be revoked without the approval of a court.
The abduction, and the steps leading up to it, were the clearest possible evidence that the delegation had been revoked.
Can inchoate rights be reconciled with Re J and other cases?
As will already be apparent, the courts in England and Wales have tried hard to reconcile the concept of inchoate rights recognised in Re B, Re O, Re G and Re F (paras 23, 24 25, 27, above) with the decision of the House of Lords in Re J (A Minor) (Abduction: Custody Rights) [1990] 2 AC 562, as well as with the careful distinction drawn in the Convention between rights of custody and rights of access.
Like Re B, Re J concerned a little boy born in Western Australia to unmarried parents.
Their relationship had its ups and downs, its separations and its reconciliations (Lord Donaldson of Lymington MR, p 566), but they were living together in their jointly owned home when the mother brought the child to live permanently in England without telling the father of her plans.
Under the law in Western Australia, an unmarried father had no right to the custody or guardianship of the child unless and until a court made an order in his favour.
The Family Court of Western Australia made a sole custody order in his favour after the mother had left and followed this with a declaration that removing the child was wrongful.
The House of Lords held that this was not correct.
Although there was no doubt that, while the mother and father were living together with J in their jointly owned home in Western Australia, the de facto custody of J was exercised by them jointly, the legal rights of custody, including the right to decide where the child should live, belonged to the mother alone (Lord Brandon of Oakwood, p 577).
Further, retaining the child in England after the court order in the fathers favour was not wrongful because by that time the child had become habitually resident in England and Wales.
In Re B, Peter Gibson LJ was unable to distinguish the de facto rights exercised by the father in that case from the de facto rights exercised by the father in Re J. Waite LJ, on the other hand, distinguished it on the basis that the mother had delegated the primary care of the child to the father and the grandmother, and any court would be bound to uphold his status at least in the short term.
All the cases in which inchoate rights have been recognised in this country, Re B itself, Re O, Re G and Re F, are cases in which the person with legal rights of custody had abandoned the child or delegated his primary care to others.
The cases in which inchoate rights have not been recognised are cases in which the person with legal rights of custody continues to have the primary care of the child, either alone, as in Re W; Re B, Re C, and Re J [2005] (paras 25 and 26 above) or jointly with the other parent, as in Re J [1990].
However, the courts in Northern Ireland found themselves unable to reconcile inchoate rights with Re J and also with an observation of mine in the House of Lords in Re D (Abduction: Rights of Custody) [2006] UKHL 51, [2007] 1 AC 619.
On their divorce in Romania, the mother had been granted a custody order and the father an access order.
Following a request under article 15, the courts in Romania had held that the fathers rights did not include a right to veto the mothers bringing the child to England, did not amount to rights of custody and that the removal was not wrongful.
In reaching the same conclusion, I observed (para 38): I would not, however, go so far as to say that a parents potential right of veto could amount to rights of custody.
In other words, if all that the other parent has is the right to go to court and ask for an order about some aspect of the childs upbringing, including relocation abroad, this should not amount to rights of custody.
To hold otherwise would be to remove the distinction between rights of custody and rights of access altogether.
It would also be inconsistent with the decision of this House in Re J [1990] 2 AC 562.
There an unmarried father had no parental rights or responsibility unless and until a court gave him some; but he did, of course, have the right to go to court to seek an order.
Re D was not a case where mother and father were sharing the primary care of the child.
Still less was it a case in which the mother had delegated the primary care of the child to the father.
It was a clear case of the distinction between rights of access and rights of custody.
The cases on inchoate rights were not cited to the House, no doubt because none of the experienced counsel appearing in the case considered them relevant.
But they can readily be reconciled.
The final case relied upon in the courts of Northern Ireland was the decision of the Court of Justice of the European Union in McB v E (Case C 400/10ppn) [2011] All ER (EC) 379.
This concerned an unmarried couple who had three children together and lived in Ireland.
The mother left the family home with her children and fled to a refuge.
The father prepared an application to the Irish court in order to obtain rights of custody but the mother took the children to England before this could be served upon her.
The father brought proceedings in England under the Convention and the Regulation for the return of the children to Ireland.
The English court requested that he obtain a determination from the Irish court under article 15.
The High Court held that he had no rights of custody at the time of the childrens removal.
On his appeal, the Supreme Court of Ireland referred this question to the CJEU: Does [the Regulation], whether interpreted pursuant to article 7 [of the Charter of Fundamental Rights] or otherwise, preclude a member state from requiring by its law that the father of a child who is not married to the mother shall have obtained an order of a court of competent jurisdiction granting him custody in order to qualify as having custody rights which render the removal of that child from its country of habitual residence wrongful for the purpose of article 2(11) of that Regulation?
The CJEU answered that question in the negative (para 44).
While article 2(9) gave an autonomous meaning to the rights of custody, it followed from article 2(11) (see para 21 above) that the Regulation does not determine who has such rights of custody as may render the removal wrongful within the meaning of article 2(11), but refers that question to the law of the member state where the child was habitually resident immediately before the removal.
It was the law of that member state which determines the conditions under which the natural father acquires rights of custody within the meaning of article 2(9).
That law may provide that his acquisition of such rights is dependent upon his obtaining a judgment from the national court (para 43).
This was not affected by article 7 of the Charter (which is the equivalent of article 8 of the European Convention on Human Rights) because it was sufficient for that purpose that the father had the right to go to court to seek rights of custody (paras 55 and 57, applying Guichard v France, (Application No 56838/00), 2 September 2003, unreported and B v United Kingdom [2000] 1 FLR 1, in the European Court of Human Rights).
It is not surprising, therefore, that the courts of Northern Ireland took the view that, if the Regulation throws the attribution of rights of custody entirely onto the law of the member state where the child was habitually resident, there is no room for the concept of inchoate rights.
The father had made the rather different argument that the Charter gave inchoate rights to those who could make an application to the court, but the CJEU rejected that (see para 47).
Given that this too is a case between member states of the European Union, however, McB v E does present a difficulty for the grandparents.
The answer may depend upon precisely what question is left entirely to the law of that member state.
Discussion
The dilemma presented by this case is summed up neatly in the Perez Vera Report, para 9: The Convention reflects on the whole a compromise between two concepts, different in part concerning the end to be achieved.
In fact one can see in the preliminary proceedings a potential conflict between the desire to protect factual situations altered by the wrongful removal or retention of a child, and that of guaranteeing, in particular, respect for the legal relations which may underlie such situations.
The Convention has struck a rather delicate balance in this regard.
On the one hand, it is clear that the Convention is not essentially concerned with the merits of custody rights (article 19), but on the other hand it is equally clear that the characterisation of the removal or retention of a child as wrongful is made conditional on the existence of a right of custody which gives legal content to a situation which was modified by those very actions which it is intended to prevent. (emphasis supplied)
Thus it is not enough that this was, as the Official Solicitor forcefully argues on behalf of Karl, a classic example of the sort of conduct which the Convention was designed to prevent and to remedy.
Looked at from his point of view, he was wrested away from the person he regarded as his mother, who had looked after him for the whole of his life, by one person whom he scarcely knew, if he recognised her at all, and another whom he did not know at all; he was taken away from his familiar home, his clothes and his toys, his school and his country; he was taken over land and sea to a place which he did not know, where they speak a language which he did not know, to live with people whom he did not know, and to go to a new school.
Small wonder that his behaviour in the first few weeks there was deeply disturbed.
These were indeed the harmful effects referred to in the preamble to the Convention.
But that is not enough.
We are looking for the existence of a right of custody which gives legal content to the situation which was modified by the abduction.
The second question, therefore, is where are we looking for this right? Some terms and provisions in an international treaty have an autonomous meaning, a meaning independent of that which they would be given in the domestic laws of any of the states parties.
Those terms are meant to be interpreted and applied consistently among all the states parties.
Where, as with the Convention, there is no supra national body responsible for its interpretation, the task falls to the national court.
But, as Lord Steyn explained in R v Secretary of State for the Home Department, Ex p Adan [2001] 2 AC 477, 517, in doing so, it must search, untrammelled by notions of its national legal culture, for the true, autonomous and international meaning of the treaty.
And there can be only one true meaning.
There can now be no doubt that the content of the rights of custody protected by the Convention has its own autonomous meaning.
The second conclusion of the Second Special Commission to Review the Operation of the Convention (held 18 21 January 1993) was that The key concepts which determine the scope of the Convention are not dependent for their meaning upon any single legal system.
Thus the expression rights of custody, for example, does not coincide with any particular concept of custody in a domestic law, but draws its meaning from the definitions, structure and purposes of the Convention.
This conclusion was more recently reaffirmed by the Sixth Meeting of the Special Commission (held 1 10 June 2011).
It was for this reason that England and Wales was able to conclude, from an early stage, that a right to veto the childs relocation abroad (what the Americans call a ne exeat right) was a right of custody for the purpose of the Convention, even if its purpose was to support rights of access rather than to protect rights of custody, a view which is now widely shared among member states: see C v C (Abduction: Rights of Custody) [1989] 1 WLR 654; Re D (Abduction: Rights of Custody) [2007] 1 AC 619, especially the discussion by Lord Hope at paras 8 to 19; and, now, Abbott v Abbott 560 US 000 (2010) in the United States.
It was also for that reason that Dyson LJ, in Hunter v Murrow (above, para 36) divided the question of whether the father had rights of custody into two.
The first, which he called the domestic law question, was what rights the father had in national law.
The second, which he called the Convention question, was whether those rights were to be characterised as rights of custody for the purposes of the Convention.
To which question are the inchoate rights recognised in Re B the answer? There is a suggestion, in the written submissions from Reunite, that the Hague Conference, in its INCADAT database, may see them as falling within the first, the domestic law question.
It is, of course, the case that their existence has been recognised in outgoing as well as incoming cases in England and Wales; and that MacKinnon J was persuaded that they were part of our national law in Courtney v Springfield (para 29 above).
But in my view there can be no doubt that the concept was developed as an answer to the second question: in Re B, the Court was asking itself whether the position of the father amounted to rights of custody for the purposes of the Convention, not whether the national law of Western Australia would so regard it.
Again, in outgoing cases such as Re W; Re B (para 25 above), the court was not suggesting that these were rights recognised for domestic law purposes, but whether they were rights which in English law were recognised for Convention purposes.
If it is indeed a Convention question, then the answer should be the same in all member states.
Yet we face the very real difficulty that there is very little support for such an expansive view of rights of custody among the other states parties to the Convention.
Once again, the courts of England and Wales, in their enthusiasm to support the object and purposes of the Convention, have pushed at the boundaries.
However they have done so for many years now, albeit in a very narrow category of cases, without apparent objection from the rest of the Hague community.
One reason may be that it is apparent from the Perez Vera report that, although there must be some legal content to the factual situation disrupted by the abduction, the listed sources of that legal content were not intended to be exhaustive, thus favouring a flexible interpretation of the terms used, which allows the greatest possible number of cases to be brought into consideration (para 67).
Another reason may be that the English approach is entirely consistent with the two fundamental purposes of the Convention, to protect children from the harmful effects of international abduction and to secure that disputes about their future are determined in the state where they were habitually resident before the abduction.
Does the decision of the CJEU in McB v E (paras 46 47 above) constitute an insuperable obstacle to our continuing to take that approach? After anxious consideration I have reached the view that it does not.
The CJEU stressed that, in the Regulation as in the Convention, the concept of rights of custody is an autonomous one (para 41).
It must follow that its content is not to be determined by reference to the laws of individual member states, even if the question of who enjoys such rights is left to them.
The CJEU were asked whether the Regulation precluded a member state from providing in its own law that the acquisition of rights of custody by a childs father depended upon his obtaining a judgment from a national court.
They were not asked whether the Regulation precluded a requesting state from regarding whatever legal situation the father might be in as being within the autonomous concept of rights of custody for the purpose of the Regulation.
If a strictly limited category of so called inchoate rights fall within that concept for the purpose of the Convention, there is no reason why they should not do so for the purpose of the Regulation, which is intended to strengthen rather than weaken the implementation of the Convention.
As it happens, the father in McB v E would not have fallen within the Re B concept, as at the very highest he was sharing care with the mother.
How then may the people who possess that strictly limited category of rights be defined, consistently with the principles and purposes of the Convention and the Regulation? In my view the continuum as described in Re B is imprecise.
It risks disrupting the important distinctions drawn in the Convention between rights of custody and rights of access and between those who do and those who do not have something which can plausibly be termed a right.
I would define such people thus. (a) They must be undertaking the responsibilities, and thus enjoying the concomitant rights and powers, entailed in the primary care of the child.
Thus, for example, our law recognises the obvious truth that people who are actually looking after a child, even if they do not have parental responsibility, may do what is reasonable in all the circumstances of the case for the purpose of safeguarding and promoting the childs welfare (Children Act 1989, s 3(5)). (b) They must not be sharing those responsibilities with the person or persons having a legally recognised right to determine where the child shall live and how he shall be brought up.
They would not then have the rights normally associated with looking after the child. (c) That person or persons must have either abandoned the child or delegated his primary care to them. (d) There must be some form of legal or official recognition of their position in the country of habitual residence.
This is to distinguish those whose care of the child is lawful from those whose care is not lawful.
Examples might be the payment of state child related benefits or parental maintenance for the child.
And (e) there must be every reason to believe that, were they to seek the protection of the courts of that country, the status quo would be preserved for the time being, so that the long term future of the child could be determined in those courts in accordance with his best interests, and not by the pre emptive strike of abduction.
Those requirements are consistent with the twin purposes of the Convention.
First, they protect the child from the harmful effects of international child abduction by recognising that he should not be peremptorily removed from their care.
Second, they enable the courts of the childs habitual residence to determine where his long term future should lie.
It is possible to analyse them in terms of an agreement having legal effect, but only if the unilateral (and usually clandestine) decision of the abducting parent is not seen as effective to revoke that agreement.
Applying the principle to the facts
How then does such a concept apply in this case? The grandparents had for many years undertaken the responsibilities entailed in the primary care of the child.
They had exercised all the decision making rights and powers associated with that.
Until days before the abduction they had done so with the benefit of some specific authorisations granted by the mother.
The mother had undoubtedly delegated the care of her son to them.
For most of that period the grandmothers status had been officially recognised.
Had it not been for what appears to have been the automatic cancellation of that status on the mothers notification of her return, there would have been no problem at all in ascribing rights of custody to the grandmother.
There would have been no need to involve any concept of inchoate rights.
But it seems to me that her position did still have some legal content after that order was revoked.
The Childrens Rights Division, which appears to have been the competent authority for this purpose, was monitoring and controlling the situation of the child.
An order was agreed on 22 February and confirmed on 27 February that the mother should have weekly contact with the child.
Obviously this was on the basis that it was in the best interests of the child to remain living with his grandparents for the time being.
The question for the authorities was whether, given the childs fragile psychological condition, it was in his best interests to be reintroduced to his mother.
It can also be concluded from the legal advice which the mother was given that had either she or the grandmother taken legal proceedings the status quo would have been preserved while these were resolved.
I conclude, therefore, that the grandmothers status did constitute rights of custody in relation to Karl on the day when he was removed for the purpose of the Convention and the Regulation.
Her status had legal content derived from the decisions taken by the competent authorities in the light of the mothers previous delegation of primary care to her.
It had not been deprived of all content by the mothers notice to the authorities (which may or may not have been communicated to the grandmother).
Thus to take him out of the country without her consent was in breach of those rights and wrongful in terms both of the Convention and the Regulation.
Conclusion
It follows that the appeal must be allowed.
It also follows that this court is obliged, pursuant to article 12 of the Convention and article 11 of the Regulation, to order that the child be returned to Lithuania forthwith.
The mother has not yet sought to raise any of the exceptions to that obligation contained in article 13 of the Convention; nor does the possible exception in article 12 for children who have become settled in the country to which they have been abducted apply, as these proceedings were begun less than a year after the abduction.
This is not, however, the result for which the Official Solicitor contends on behalf of the child.
While strongly arguing that this was indeed a wrongful removal, which should be recognised as such by this court, she submits that there should be a reconsideration of the childs position and the effect of another move upon him after two years of living with his mother and her family.
This submission, with all respect to her, is trying to have it both ways and ignores the binding effect of article 12 of the Convention and article 11 of the Regulation.
This court cannot allow the inevitable effect of the passage of time involved in the appellate process (however expedited) to affect its decision.
However, although they have given instructions to pursue this appeal, it may be that this is also what the grandparents would prefer.
In her second affidavit, the grandmother states that if the court in Northern Ireland is satisfied that it is in Karls best interests to remain in Northern Ireland with the mother, then they would be willing to consider allowing this, but only on condition that proper contact arrangements are put in place and incorporated in a court order which could be enforced against the mother.
Despite all that has passed, she may still be prepared to consider an agreed solution along those lines and the mother, of course, now has every incentive to do so.
The mother has indeed brought this situation upon herself, and more importantly upon her son, not only by her cruel and high handed actions in taking the law into her own hands, but also by her insensitive handling of the relationship between her son and the people whom he had regarded as his parents for so long.
She has cut off all contact between them and appears to have poisoned his mind against them by suggesting that they lied to him.
She should now be doing her best to put that right.
Otherwise, the only conceivable way of getting this case back before the High Court in Northern Ireland would be if the mother were to seek permission, even at this late stage, to raise one of the exceptions in article 13 to the courts obligation to order the return of the child.
We have not heard argument upon whether this is even possible, given the stage which the proceedings have reached.
But were the mother to make such an application, and were the High Court to grant her such permission, it would be necessary to stay this courts order until the case could be heard.
All these matters would be better dealt with by the High Court in Northern Ireland.
Accordingly, I would direct that if within 21 days the mother applies to the High Court for permission to apply for the child not to be returned, pursuant to article 13 of the Convention, the order of this court is to be stayed until the matter is mentioned, on the first available date, before the Family Division Judge in the High Court in Northern Ireland.
Should he permit the mother to make her application, and I am very far from suggesting that he should, he should also have power to stay the order of this court until the matter is determined.
It goes without saying that the time table for hearing and determining the whole matter should be very tight.
There is one final comment.
Cases like this are mercifully rare and ought to be rarer still.
This is because the High Court retains its inherent jurisdiction to order the immediate return of a child who has been removed from his country of habitual residence.
That jurisdiction is governed by the best interests of the child.
But it has long been recognised that there are situations in which those interests are best served by a swift return to his home country for his future to be decided there.
Indeed, in cases within the European Union, jurisdiction to determine matters of parental responsibility remains with the country of habitual residence unless and until the child acquires a new habitual residence.
There are therefore cases, and this is one, in which it is appropriate to allow an application under the inherent jurisdiction to proceed hand in hand with an application under the Hague Convention (as in fact happened in Re O, para 24 above, where Cazalet J made return orders under both).
The Family Division in Northern Ireland may therefore wish to reconsider its practice of automatically postponing such applications until the Hague case has been determined.
I consider that the court should have dismissed the appeal.
LORD WILSON
The grandparents need to establish that on 12 March 2012 they had rights of custody in relation to Karl.
But in my view they face an insuperable difficulty.
For on 20 February 2012 the Childrens Rights Division of the Social Security Department of Klaipeda City Municipal Administration in Lithuania revisited the order dated 10 January 2007 by which it had invested temporary care of Karl in them or, to be more accurate, in the grandmother.
Its order dated 20 February was as follows: RE: TERMINATION OF TEMPORARY CARE Under the Order 28.05.2007 of the Social Security Minister it is indicated in the children temporary care provision that temporary care terminates when the parents return from a foreign state and inform Childrens Rights Division about it. [The mother] informed Childrens Rights Division on 20.02.2012 that she came back from abroad and she will take her son into her own care.
Referring to the Order stated above and considering that [the mother] did inform about the return, [Karls] temporary care is held to be terminated from 20.2.2012.
There are grounds for suspecting that, in the translation of the order into English, that last date has been wrongly typed as 20 February and should have read 28 February 2012.
But whether it took effect immediately or eight days later, the order dated 20 February terminated the legal entitlement of the grandparents to care for Karl even on a temporary basis.
Why? Because the mother will take her son into her own care.
I cannot accept that the grandparents had rights of custody in relation to Karl after the order for temporary care of him was terminated.
I am convinced that the effect of the order dated 20 February 2012 was that they no longer had rights of custody.
Lady Hales ingenious conclusion otherwise seems to me to be strained.
She relies in particular, at para 59, on the agreed order for the mothers contact with Karl dated 22 February 2012.
The courts limited understanding of the order for contact largely derives from the notice to the grandfather dated 2 March 2012.
This refers to a meeting on 22 February between the mother and the grandmother in the presence of the child psychologist and to the arrangement of a contact visit on Monday 27 (or possibly Wednesday 29) February; and it makes a recommendation, as of 2 March, that temporary contact on Wednesdays should be maintained.
In one of her affidavits the grandmother casts light on these arrangements: she says that on 22 February the psychologist recommended that [the mother] take her time to get to know her son.
I infer that the temporary contact order reflected the mothers acceptance at that time of the advice that she should get to know Karl again through some contact visits prior to taking him into her care.
I cannot infer that its effect was to invest the grandparents with the rights of which the termination order, made almost simultaneously, clearly deprived them.
Lady Hale suggests at para 59 above that the corollary of the temporary contact order agreed on 22 February 2012 was the mothers acceptance that Karl should continue to reside temporarily with the grandparents.
She also suggests that, had any dispute about his future been presented to it, a Lithuanian court would have directed that he should continue to reside with them pending its resolution.
I agree with both of Lady Hales suggestions but I do not accept the significance which she attaches to them.
The search is for rights of custody in the grandparents.
The mothers apparent concession that, presumably only for a few weeks, she should delay her removal of Karl from the home of the grandparents says nothing about rights of custody other than her own.
And a courts usual concern to maintain a child in his existing environment pending its resolution of a dispute about his future reflects its usual inability to resolve a dispute immediately and a resultant concern that a childs initial move might later fall to be reversed.
Take a father without parental responsibility who, following a period of contact, refuses to return an adolescent child to the mother on the basis that the child refuses to return to her.
A court in the UK is likely to order the mother not to seek to remove the child from the fathers home pending its urgent inquiry but it does not thereby invest the father with anything which in Convention terms could be described as rights of custody.
Lady Hale has conducted a valuable tour dhorizon of the doctrine of inchoate rights and concludes that it is by reference to the doctrine that the grandparents establish that on 12 March 2012 they had the requisite rights.
I will explain why I agree with much, but not all, of Lady Hales analysis of the doctrine.
But it will be essential to bear in mind that, as Lady Hale accepts at para 24, the inchoate rights must be rights of custody.
Can the inchoate rights of a childs carer to prevent, for a few weeks, his removal by a person who on any view had rights of custody amount to inchoate rights of custody? In my view the closest scrutiny falls to be given to any deconstruction of the doctrine which yields an affirmative answer.
Article 3 of the Convention provides that rights of custody may arise in particular in any of three ways, namely by operation of law or by reason of a judicial or administrative decision or by reason of an agreement having legal effect under the law of the state of the childs habitual residence: see para 19 above.
Article 2.11 of the Regulation provides that rights of custody are acquired in any of the same three ways, albeit described in slightly different terms, but it omits the words may arise in particular: see para 21 above.
My view is that the omission was deliberate.
I infer that it reflects a study of Convention jurisprudence which gave no support for the view that rights of custody could arise otherwise than in one of the three ways and therefore a conclusion that the words were redundant and productive only of confusion.
At all events my view is that the doctrine of inchoate rights, first articulated in the courts of England and Wales, reflects a legitimate application of the third of the prescribed ways in which rights of custody may arise, namely by an agreement having legal effect.
Usually the agreement will be express and if, as Professor Perez Vera explains in the passage of her report quoted at para 34 above, it provides a basis for presenting a legal claim to the competent authorities, it will have the requisite legal effect.
Even in the absence of an express agreement, however, it may, in certain unusual circumstances, be proper to infer from the conduct of a person with rights of custody that she (or he) has agreed that another person should not just help to care for the child nor even care single handedly for him but should have rights of custody over him.
If in those circumstances there is a likelihood that, had it been asked to do so, a court in the state of habitual residence would have given legal effect to the inferred agreement by investing that other person with rights of custody, one can properly conclude that that other person had rights of custody even though they were inchoate.
The words of the Regulation seem to me to allow no wider principle.
The crux of Lady Hales judgment lies in para 59 above, where she identifies five requirements which must be satisfied before persons can be held to have had inchoate rights of custody.
She says: (a) that they must be undertaking the responsibilities, and thus enjoying the concomitant rights and powers, entailed in the primary care of the child; (b) that they must not be sharing these responsibilities with the person having a legally recognised right to determine where the child shall live and how he shall be brought up; (c) that that person must have either abandoned the child or delegated his primary care to them; (d) that there must be some form of legal or official recognition of their position in the country of habitual residence; and (e) that there must be every reason to believe that, were they to seek the protection of the courts of that country, the status quo would be preserved for the time being so that the long term future of the child could be determined in those courts in accordance with his best interests and not by the pre emptive strike of abduction.
Respectfully, I agree with (a), (b) and (c) above; discern no logical need for (d); and disagree with (e).
In my view (e) sets the bar too low.
For it fails to reflect the fact that the search is for rights of custody (defined in article 2.9 of the Regulation as including in particular the right to determine the childs place of residence) rather than a right to continue to care for a child in a specified place on an interim basis pending the resolution of proceedings.
So my formulation of the requirement at (e), which I would re label as the requirement at (d), would be that there is a likelihood that, had it been asked to do so, a court in the state of habitual residence would have inferred from the facts in (a), (b) and (c) an agreement that the carers should have rights of custody and would by virtue of the agreement have proceeded to invest them with such rights.
It is also important to remember, as Reunite points out, that the inquiry is not into whether the carers had at some earlier stage had rights of custody but whether they had them at the time of the childs removal.
In my view it follows that the facts required at (a), (b) and (c) must have existed immediately prior to the removal and that the hypothesis at (d) is of an application to the court at that same point.
No doubt the unilateral removal of the child amounts to revocation of the requisite agreement but the inquiry is of course into its subsistence immediately prior thereto.
It will be easy to understand the basis of my conclusion that the grandparents in the present case had no inchoate rights of custody on 12 March 2012 nor at any time after 20 February 2012.
In respect of the period from that date onwards it cannot be said, for the purposes of the fact required at (c), that the mother abandoned Karl; and I doubt that it can be said that she was continuing to delegate his primary care to the grandparents.
On any view, however, no court at any time after 20 February could have inferred an agreement on her part that the grandparents should have rights of custody or, by virtue of any agreement, could have invested them with such rights.
I am clear that the Lithuanian authorities were correct to advise the grandmother immediately after Karls removal that she had no rights in respect of him.
There is no need for this court to shoe horn into the Convention a case, like the present, which (so I consider) does not naturally fit into it.
The risk is that it thereby distorts the domestic jurisprudence relating to the Convention; sets it at odds with the international jurisprudence; and compromises the need for a swift and straightforward inquiry into the existence of rights of custody.
I would develop Lady Hales final comment in para 64 above.
The grandparents case was tailor made for a prompt application for an order for Karls immediate return to their care pursuant to the inherent jurisdiction of the High Court recently reaffirmed by this court in In re L (A Child) (Custody: Habitual Residence), [2013] UKSC 75, [2013] 3 WLR 1597, at para 28 (Lady Hale).
The courts inquiry would then have been into the best interests of Karl but who knows? its early conclusion might well have been that they were served by his immediate return to Lithuania on the basis that, irrespective of whether they retained jurisdiction under the Regulation, its courts were better placed to conduct the full inquiry.
The unsuitability of the present proceedings is further exemplified by the unusual order which Lady Hale proposes, namely that the mother should be afforded a limited opportunity (a) to seek to raise a defence under article 13 of the Convention to the grandparents application for an order for Karls return to Lithuania and (b) therefore also to apply to the High Court for a stay of the order for return which, so Lady Hale concludes, this court should make.
This court would, I respectfully suggest, turn elementary procedural rules on their head if it were to indorse the possibility that a defence to an application might be raised notwithstanding that an order granting it had already been made.
Were the possible defence apt, I would have expected this court to decline to make the substantive order for Karls return and to remit the grandparents application for re determination in the light of this courts rulings.
But would such a defence be apt?
The basis of it is the following submission of the Official Solicitor: It did take almost one year before the grandparents made the application under the Convention and now another year has passed.
If this Court decides the case by recognising [that] a wrongful removal has taken place, there should be a reconsideration of the childs position and the effect of another move upon him after two years of living with his mother and family, including a half sibling.
Expert evidence may be necessary and further enquiries can be made on behalf of the child about re establishing relationships with his home country, his grandparents and how he feels now.
In other words the Official Solicitor unsurprisingly calls for a welfare inquiry prior to any return of Karl to Lithuania.
The courts proposed response is that the only possible vehicle for inquiry would be a contention on the part of the mother pursuant to article 13 of the Convention that there is a grave risk that Karls return would expose him to psychological harm or otherwise place him in an intolerable situation and, conceivably also, that he objects to being returned and has attained an age and degree of maturity at which it is appropriate to take account of his views.
I consider, however, that the identified vehicle is not fit for its purpose.
Article 11.3 of the Regulation requires a member state to determine an application under the Convention expeditiously and, save in exceptional circumstances, within six weeks of its issue.
The grandparents application has already been on foot for more than a year.
In my view it would be contrary to principle for the mother to be allowed at this stage to raise a defence which would apparently be based to a substantial extent on the consequences for Karl of the existing delay in determination of the application and which would be productive of significant further delay.
The determination of an application under the Convention remains an exercise only in choosing the forum for the welfare inquiry in accordance with its rules and a defence under article 13 impacts only on that choice.
Irrespective of whether the mother could now establish the facts specified in article 13, the ultimate determination of the grandparents application, if reopened, can only be either that Karl should be returned to Lithuania (where it would surely now be increasingly difficult to conduct the welfare inquiry) or that he need not be returned to Lithuania (being an order which would entirely fail to address what at first sight is the most glaring shortcoming in the current arrangements for Karl, namely the absence of contact between him and the grandparents).
On my analysis of inchoate rights of custody, the way forward would, by contrast, have been clear.
If, as I consider to be the case, the grandparents lacked rights of custody on 12 March 2012, their application would correctly have been dismissed.
Under article 16 of the Convention the dismissal would have opened the door to an entitlement in the High Court in Northern Ireland to conduct a welfare inquiry in respect of Karl.
The grandparents would therefore have proceeded to seek leave to apply for an order for contact, or if so advised for an order for residence, in respect of Karl under article 10 (2)(b) of the Children (Northern Ireland) Order 1995, 1995 No.755 (N.I.2).
| UK-Abs | This appeal concerns the meaning of the words rights of custody in article 3 of the Hague Convention on the Civil Aspects of International Child Abduction (the Convention), and in the Brussels II Revised Regulation (EC) No 2201/2003 (the Regulation) which complements and takes precedence over the Convention between most member states of the European Union.
A child is wrongfully removed or retained in a country under the Convention if such removal or retention is in breach of rights of custody.
The issue is whether the rights of custody must already be legally recognised and enforceable, or include informal rights (termed inchoate rights), the existence of which would have been legally recognised had the question arisen before the removal or retention in question.
The proceedings concern a boy (K) born in Lithuania in March 2005.
From the time of his birth until 2012 he lived with and was cared for by his maternal grandparents.
His father separated from his mother before he was born and has played no part in his life.
His mother moved to Northern Ireland without K in May 2006 and has lived there ever since.
A month after Ks birth she authorised her mother to seek medical assistance for K and, before she left for Northern Ireland, executed a notarised consent for her mother to deal with all institutions in relation to K on her behalf.
In 2007 a court order was made in Lithuania putting K under the temporary care of his grandmother.
This order terminated when Ks mother returned in February 2012 seeking to take K into her own care.
Ks mother also applied to withdraw the notarised consents.
Meetings were held at the Childrens Rights Division of the local authority where orders were made for her to have weekly contact with K. She was advised that legal proceedings against her mother to obtain custody of K would be costly and protracted and decided instead to seize K forcibly in the street while he was walking home from school with his grandmother on 12 March 2012, and to travel immediately back to Northern Ireland with him by car and ferry.
The grandparents were told by the Lithuanian authorities that they had no right to demand the return of K.
However, in February 2013 they issued an originating summons in Northern Ireland seeking a declaration that K was being wrongfully retained in breach of their rights of custody.
Maguire J refused their application, and their appeal against his decision was dismissed by the Northern Ireland Court of Appeal.
The Supreme Court by a majority (Lord Wilson dissenting) allows the appeal, finding that the grandmother did enjoy rights of custody such that Ks removal from Lithuania was wrongful.
It orders that K should be returned to Lithuania forthwith.
If Ks mother wishes to apply for permission to argue at this very late stage that any of the exceptions to the courts obligation to return K found in
article 13 of the Convention apply, this order will be stayed if she makes her application within 21 days.
Lady Hale gives the only judgment of the majority.
Lord Wilson gives a dissenting judgment.
The courts of states parties to the Convention have on several occasions dealt with applications based on inchoate rights of custody [23 42].
In England and Wales such rights have been recognised where the person with legal rights of custody had abandoned the child or delegated his primary care to others [44], but other countries have taken a less expansive view.
The Convention is not concerned with the merits of custody rights but it will only characterise a removal of a child as wrongful if it interferes with a right of custody which gives legal content to the situation altered by the removal.
Thus it is not enough that Ks removal was a classic example of the sort of conduct which the Convention was designed to prevent and to remedy, given the harmful effects on K of wresting him from the person he regarded as his mother and taking him without notice to a country where he knew no one and did not speak the language [50 51].
The rights relied on by Ks grandparents must amount to rights of custody for the purposes of the Convention.
The majority considered that the English courts should continue to recognise inchoate rights as rights of custody under the Convention and the Regulation, provided that the important distinction between rights of custody and rights of access was maintained, and provided that (a) the person asserting the rights was undertaking the responsibilities and enjoying the powers entailed in the primary care of the child; (b) they were not sharing them with the person with a legally recognised right to determine where the child should live and how he should be brought up; (c) that person had abandoned the child or delegated his primary care to them; (d) there was some form of legal or official recognition of their position in the country of habitual residence (to distinguish those whose care of the child is lawful and those whose care is not); and (e) there is every reason to believe that, were they to seek the protection of the courts of that country, the status quo would be preserved for the time being while the long term future of the child could be determined in those courts in accordance with his best interests [59].
These conditions applied to the situation of Ks grandparents.
The Childrens Rights Division was supervising the situation on the basis that K remained living with his grandparents while having contact with his mother.
Taking K out of the country without his grandmothers consent was in breach of her rights of custody [61 62].
It followed that the court was bound under the Convention to make an order to return K to Lithuania forthwith.
It may be that the grandparents would be content with legally enforceable contact arrangements and the mother now has every incentive to agree to these.
If the mother were to seek permission at this late stage to raise one of the exceptions in article 13 to the courts obligation to order the return of the child within 21 days, the order would be stayed until the hearing on the first available date in the High Court to determine whether such permission should be granted to her [66].
Lord Wilson would have dismissed the appeal.
In his view the rights of custody enjoyed by Ks grandmother were terminated on the mothers return [71].
Even if the courts in Lithuania might have maintained the status quo while Ks future was decided, this did not amount to recognition of rights of custody in the grandparents [72].
The Convention application should therefore have been dismissed.
As a result, a welfare inquiry into Ks interests could then have been conducted under the Children (Northern Ireland) Order 1995, in which his grandparents might have been granted an order for contact or even residence [84].
|
This case is about the proper approach to ordering the unsuccessful party to pay the costs of a successful appeal in cases about the care and upbringing of children.
It arises in the specific context of a parents successful appeal to the Court of Appeal against care and placement orders made in a county court.
But that issue obviously has to be seen in the wider context of appeals in childrens cases generally.
This case
These are care proceedings concerning the four children of Ms A, a girl now aged 13, a boy aged 12, a girl aged seven and a boy aged three.
We are concerned only with the seven year old, whom I shall call Amelia.
The respondent to this appeal is the father of Amelia and her older brother.
He is also the social father of the oldest child, who was born during his marriage to the childrens mother.
The mother comes from Portugal and the father comes from Nepal.
They married in 2002 and separated in 2007, before Amelia was born.
The father is not the biological, social or legal father of the youngest child.
As it happens, the oldest and youngest have the same biological father, but he has played little part in their lives or in these proceedings.
From May 2009 there were increasing concerns about the presentation and behaviour of the children in their mothers care.
Care proceedings were eventually brought in January 2012 and in November 2012 Her Honour Judge Karp found that there had been a serious lack of supervision and neglect of the children; they had suffered physical injuries from each other as a result of not being properly supervised; the mother was unable to meet their emotional, developmental and educational needs; they were at risk of sexual abuse because of their mothers inability to safeguard them from men allowed into the home about whom she knew little; and the two oldest had shown inappropriate sexual behaviour.
She found, therefore, for the purpose of the threshold conditions in section 31(2) of the Children Act 1989, that they had suffered or were likely to suffer significant harm owing to a lack of proper parental care.
This is conceded by the father.
The mother was ruled out as a future carer for any of the four children.
The father had had only limited contact with the family since separating from the mother and was not implicated in her neglect of the children during that time.
He had since remarried.
When the proceedings were begun, it was agreed that the older boy would live with his father and his new wife under an interim supervision order.
In breach of his agreement with the local authority, however, the father left the boy with the mother for a short time while he went to work in Norway.
And in May 2012 the father asked the local authority to take the boy back into foster care because of his challenging behaviour.
He was soon joined by Amelia and their older sister, who had been removed from their mother.
They remained together as a sibling group with the same foster family for a year, until the two oldest had to be separated because of their sexual behaviour together.
Between August and October 2012 the father and his wife were assessed by an independent social worker as potential carers for the three older children, including Amelia.
The first assessment was positive, but the social worker had not been told that the wife was now pregnant.
At that stage, a consultant child and adolescent psychiatrist had reported that Amelias development appeared normal for a child of her age.
An updating assessment, conducted between October and December 2012, became negative, largely because of the couples lack of candour and the fathers lack of insight into the need to be resilient, consistent and able to implement firm boundaries when looking after children who had suffered as these children had suffered.
The father and his wife separated in February 2013, before their child was born.
The father decided to move permanently to Norway, where he had obtained steady and well paid employment and spacious accommodation.
He asked to be assessed there as a carer for all three children, but both the local authority and the childrens guardian resisted that.
The local authoritys plan was for long term fostering for the two oldest children and a closed adoption (that is without contact with the birth family) for the two youngest.
The childrens guardian had originally wanted the three children to stay with the foster family which had looked after them for a year, but when that placement failed because of the older childrens sexual behaviour with one another, he supported the local authoritys plan.
A placement order was made in relation to the youngest child in February 2013. (This has now been implemented; he was adopted in May 2014.) At the final hearing in relation to the elder three children in July 2013, the local authority sought a placement order for Amelia, by now aged five.
The father opposed this because it would result in her losing all her established family relationships with her parents and her siblings.
He had maintained good contact with the children since his move to Norway and asked to be assessed as her sole carer.
This was opposed by the local authority and the childrens guardian.
Amelia had been assessed by a social worker and family therapist in 2013 (in contrast to the view of the child psychiatrist in late 2012) as having a high level of emotional and behavioural need and their view was that the father did not have the capacity to meet this.
Judge Karp accepted their opinions and made a placement order authorising Amelias placement for adoption without her fathers consent.
The father appealed.
In the meantime, in September 2013, the Court of Appeal had delivered judgment in In re B S (Children) (Adoption Order: Leave to Oppose) [2013] EWCA Civ 1146, [2014] 1 WLR 563, emphasising the need for the court to evaluate all the options for the childs future where adoption was proposed, analysing the pros and cons of each in the light of the paramount consideration of the childs future in the long term.
The fathers appeal was allowed: [2014] EWCA Civ 135, [2015] 1 FLR 130.
The Court of Appeal held that the judge had been wrong to make the order without further assessment of the situation of the father and child and in any event did not adequately articulate her reasons to proceed to make a placement order in the circumstances of this case (para 4).
We are told that the process of assessing the father and increasing his contact with Amelia since then has been successful and she has now been placed with him in Norway under a child arrangements order.
The issue before us is not whether the Court of Appeal was right to allow the appeal.
The issue is whether it was right to order the local authority to pay the fathers costs of the appeal (assessed in the sum of 13,787.70).
The father had funded it privately, the non means tested legal aid which is available to all parents in care proceedings not being available on appeal.
It was not suggested that the local authority had behaved reprehensibly in relation to the child or unreasonably in the stance taken at first instance (para 30).
But they had resisted the appeal while recognising the deficiencies in the judgment in the lower court (para 32).
A parent should not be deterred from challenging decisions which impact upon the most crucial of human relationships (para 30).
The decision in this court in In re T (Care Proceedings: Costs) [2012] UKSC 36, [2012] 1 WLR 2281 was distinguishable and the courts discretion broad (para 31).
In their application for permission to appeal, the local authority made it clear that, whatever the outcome, they would not seek to recover the costs awarded and paid to the father.
They argued that the case raises matters of public interest which merit consideration by this court, but it is not intended that Mr S should suffer financial detriment as a result.
Permission to appeal was given on that basis.
The court is accordingly very grateful to Dr Bainham and the fathers legal team, who acted for him pro bono, thus enabling the case to be properly and fully argued.
In re T (Care Proceedings: Costs)
In In re T, care proceedings were brought in respect of two children who had made allegations of sexual abuse against their father and a number of men, in which it was alleged that their paternal grandparents had colluded.
The grandparents intervened in the proceedings in order to refute the allegations.
As interveners they did not qualify for the non means tested legal aid which is available to parents.
Their means were modest but above the legal aid threshold.
They therefore had to borrow to pay for their own representation.
The allegations were investigated at a split fact finding hearing, at which the grandparents were exonerated, although no criticism was made of the local authority for putting the allegations before the court.
The Supreme Court held that the trial judge had been correct not to make an order that the local authority pay the grandparents costs.
Lord Phillips, giving the judgment of the court held, at para 44, that the general practice of not awarding costs against a party, including a local authority, in the absence of reprehensible behaviour or an unreasonable stance, is one that accords with the ends of justice and which should not be subject to an exception in the case of split hearings.
It was irrelevant whether or not a party was legally aided.
If the grandparents were entitled to their costs, so too should have been the five publicly funded men who were also exonerated.
The local authority had a statutory duty to protect the children, by bringing proceedings where appropriate.
It was for the court, and not for the local authority, to decide whether or not the allegations were true.
Local authorities should not be deterred from putting such cases before the court by the prospect of having to pay the costs of those who were exonerated.
This would reduce the funds available to provide for children in need.
There was no warrant for distinguishing between hearings where fact finding was split from deciding what was best for the child and hearings where all issues were dealt with together.
There are, of course, several distinctions between that case and this.
In re T was a first instance trial, indeed that part of the care proceedings trial in which the essential facts are found, before moving on to discuss what solution will best serve the interests of the child in the light of those facts.
Costs at first instance are governed by the Family Procedure Rules 2010, Part 28.
This case concerns an appellate hearing, in which the essential facts were not in dispute, and the issue was what would be best for the child.
Costs on appeal are governed by the Civil Procedure Rules, Part 44.
In re T concerned the costs to be borne by interveners, indeed interveners whose interest was in clearing their names rather than in looking after the child.
This case concerns the costs to be borne by a parent of the child, indeed a parent who wishes to undertake the care of the child himself.
again to examine the issue of costs in childrens cases from first principles.
In order to decide whether those are material distinctions, it is necessary once
Costs in childrens cases
Under section 51 of the Senior Courts Act 1981, costs in the civil division of the Court of Appeal and in the family court are in the discretion of the court but subject to the rules of court.
Under the Civil Procedure Rules, the general rule in civil proceedings is that the unsuccessful party will be ordered to pay the costs of the successful party (CPR, rule 44.2(2)(a)).
However, this general rule does not apply to first instance proceedings about children (FPR rule 28.2(1) disapplies CPR rule 44.2(2)).
Nor does the general rule apply to proceedings in the Court of Appeal in connection with proceedings in the Family Division of the High Court or from a judgment, direction, decision or order in any court in family proceedings (CPR, rule 44.2(3)).
However, CPR 44.2(4) and (5) do apply to childrens proceedings both at first instance and on appeal: (4) In deciding what order (if any) to make about costs, the court will have regard to all the circumstances, including (a) the conduct of all the parties; (b) whether a party has succeeded on part of its case, even if that party has not been wholly successful; and (c) any admissible offer to settle made by a party which is drawn to the courts attention, and which is not an offer to which costs consequences of Part 36 apply. (5) The conduct of the parties includes (a) conduct before, as well as during, the proceedings and in particular the extent to which the parties followed . any relevant pre action protocol; (b) whether it was reasonable for a party to raise, pursue or contest a particular allegation or issue; (c) the manner in which a party has pursued or defended its case or a particular allegation or issue; and (d) whether a claimant who has succeeded in the claim, in whole or in part, exaggerated its claim.
As was pointed out in In re T, rule 44.2(4)(b) is relevant in a situation where the general rule applies but has no direct relevance where it does not (para 11).
This is not, of course, to say that success or failure is irrelevant in childrens cases: no one has suggested in this case that the successful party should have to pay the unsuccessful partys costs (although, as will be seen, there may be circumstances where this would be appropriate).
Nor does rule 44.2(4)(c) readily fit the conduct of childrens cases, save as an aspect of the general desirability of the parties co operating and negotiating to reach an agreed solution which will best serve the paramount consideration of the welfare of the child.
As such, it is part of the general conduct of the proceedings, some aspects of which are listed in rule 44.2(5).
As long ago as Gojkovic v Gojkovic (No 2) [1992] Fam 40, at 57B, the Court of Appeal observed that it was unusual to make an order for costs in childrens cases.
In Keller v Keller and Legal Aid Board [1995] 1 FLR 259, at 267 268, Neill LJ went further: In the last decade, however, it has become the general practice in proceedings relating to the custody and care and control of children to make no order as to the costs of the proceedings except in exceptional circumstances.
He did, however, go on to say that it was unnecessary and undesirable to try to limit or place into rigid categories the cases which a court might regard as suitable for such an award.
Nevertheless, the cases which might be regarded as suitable may be deduced from the reasons why the courts have adopted the no costs approach.
The classic explanation is that given by Wilson J in Sutton London Borough Council v Davis (No 2) [1994] 1 WLR 1317, at 1319: Where the debate surrounds the future of a child, the proceedings are partly inquisitorial and the aspiration is that in their outcome the child is the winner and indeed the only winner.
The court does not wish the spectre of an order for costs to discourage those with a proper interest in the welfare of the child from participating in the debate.
Nor does it wish to reduce the chance of their co operation around the future life of the child by casting one as the successful party entitled to his costs and another as the unsuccessful party obliged to pay them.
The proposition applies in its fullest form to proceedings between parents and other relations; but it also applies to proceedings to which a local authority are a party.
Thus, even when a local authoritys application for a care order is dismissed, it is unusual to order them to pay the costs of the other parties.
Whenever a court has to determine a question relating to the upbringing of a child, the welfare of the child is the courts paramount consideration: Children Act 1989, section 1(1).
This applies just as much to care proceedings brought to protect a child from harm as it does to disputes between parents or other family members about the childs future.
Although the proceedings are adversarial in form, they have many inquisitorial features.
An application cannot be withdrawn without the courts consent (FPR, rule 29.4).
The court is not bound by the cases put forward by the parties, but may adopt an alternative solution of its own.
The court is not bound by the choice of evidence put forward by the parties, but can decide for itself what evidence it wishes to hear.
The court is very often assisted by the independent investigations and reports of the family court reporter (in private law cases) or the childrens guardian (in care and adoption proceedings) and other experts.
Even in care proceedings, there are many possible outcomes available to the court.
Thus, for example, in a case such as this, the available outcomes ranged from a closed adoption with no contact (other than letterbox contact) with the birth family to the child going to live with her father with no further intervention by the local authority.
In between could be, for example, an open adoption, a special guardianship order, long term fostering under a care order with only limited contact with the birth family, medium term fostering with increasing contact with a view to restoring the child to her birth family in due course, placement with the birth family under a care order, placement with the birth family under a supervision order together with a child arrangements order, a child arrangements order or even no order at all.
It can readily be seen, therefore, why in such proceedings there are no adult winners and losers the only winner should be the child.
Furthermore, it can generally be taken for granted that each of the persons appearing before the court has a role to play in helping the court to achieve the best outcome for the child.
It would be difficult indeed for a court to decide how to secure that the child has a meaningful relationship with each parent without hearing from them both.
It would be difficult indeed for a court to decide the best way of protecting a child from the risk of harm without hearing from her parents and those whose task it is to protect her.
That is why parents are compellable witnesses in care proceedings, even when it is alleged that they have committed criminal offences.
No one should be deterred by the risk of having to pay the other sides costs from playing their part in helping the court achieve the right solution.
It can also generally be assumed that all parties to the case are motivated by concern for the childs welfare.
The parents who dispute with one another or with the local authority over their childrens future do generally love their children dearly and want the best for them as they see it.
There are of course some wicked, neglectful, selfish or merely misguided parents who are not motivated to do their best for their children, but these are not the generality of parents, even those whose children are the subject of care proceedings.
Local authorities are not motivated by love, in the way that parents are motivated by love, but they do have statutory duties to investigate and take action to protect children if there is reasonable cause to suspect them to be suffering or likely to suffer significant harm: Children Act 1989, section 47.
They will be severely criticised by press and public alike if they fail to take action when they should have done.
Another consideration is that, in most childrens cases, it is important for the parties to be able to work together in the interests of the children both during and after the proceedings.
Childrens lives do not stand still.
Their needs change and develop as they grow up.
The arrangements made to cater for those needs may also have to change.
Parents need to be able to co operate with one another after the case is over.
Unless there is to be a closed adoption they also need to co operate with the local authority and the people who are looking after their children.
The local authority need to be able to co operate with them.
Stigmatising one party as the loser and adding to that the burden of having to pay the other partys costs is likely to jeopardise the chances of their co operating in the future.
There is one final consideration.
In certain circumstances, having to pay the other sides costs, or even having to bear ones own costs, will reduce the resources available to look after this child or other children.
Thus, for example, if a mother who is bringing up the children on modest means had not only to bear her own costs but also to pay the fathers costs, when unsuccessfully resisting his application for more contact with the children, the principal sufferers might well be the children.
Nor can it be ignored that, if local authorities are faced with having to pay the parents costs as well as their own, there will be less in their budgets for looking after the children in their care, providing services for children in need, and protecting other children who are or may be at risk of harm.
On the other hand, there is one consideration which cannot be taken into account.
The automatic availability of non means tested and non merits tested public funding for parents at first instance in care proceedings has masked the issue.
It has only surfaced on appeal, as here, or for interveners, where public funding is means tested.
But the question of whether it is just to make an order for costs should as a matter of principle be determined irrespective of whether any of the parties are publicly funded.
As Baker J put it in G v E (Costs) [2010] EWHC 3385 (Fam), [2011] 1 FLR 1566, para 39.
Gone are the days when it is appropriate for a court to dismiss applications for costs on the basis that it all comes out of the same pot. (The consequences of making a costs order for or against a publicly funded litigant are a separate matter.) Thus, as Lord Phillips pointed out in In re T, at para 41, if in principle the local authority should be liable in costs to interveners against whom allegations, reasonably made, have been held to be unfounded, this liability should arise whether or not those interveners were publicly funded.
The other five men who were exonerated in that case should also have got their costs.
Parents, automatically publicly funded, who successfully resist care proceedings would also get their costs.
It might even be said that successful local authorities should get their costs against the parents (or interveners) irrespective of public funding.
All the reasons which make it inappropriate as a general rule to make costs orders in childrens cases apply with equal force in care proceedings between parents and local authorities as they do in private law proceedings between parents or other family members.
They lead to the conclusion that costs orders should only be made in unusual circumstances.
Two of them were identified by Wilson J in Sutton London Borough Council v Davis (No 2): where, for example, the conduct of a party has been reprehensible or the partys stance has been beyond the band of what is reasonable: Havering London Borough Council v S [1986] 1 FLR 489 and Gojkovic v Gojkovic [1992] Fam 40, 60C D (p 1319).
Those were also the two circumstances identified in In re T, at para 44.
Should this case be distinguished?
Two questions arise: first, is there any reason to depart from the general approach in In re T in this case; and second, are there any other circumstances, beyond the two identified in In re T, in which a costs order might be justified?
It cannot be a valid distinction that the people claiming costs in In re T were interveners wishing to clear their names rather than parents wishing to care for their children.
All the reasons why costs orders are inappropriate in childrens cases apply much more strongly to parents and local authorities than they do to such interveners.
The fact that parents are resisting the claim of the state to take their children away from them is undoubtedly relevant, but it is relevant to whether one of the exceptions should apply.
As a general proposition, I would accept Dr Bainhams argument that parents are always entitled to resist the claim of the state to remove their children from them.
They will usually be reasonable in doing so.
They should not have to pay the local authoritys costs if they lose.
But it does not follow from that that if the local authority lose, they are unreasonable in seeking to protect the child: that will all depend upon the particular circumstances of the case.
Nor in my view is it a good reason to depart from the general principle that this was an appeal rather than a first instance trial.
Once again, the fact that it is an appeal rather than a trial may be relevant to whether or not a party has behaved reasonably in relation to the litigation.
As Wall LJ pointed out in EM v SW, In re M (A Child) [2009] EWCA Civ 311, there are differences between trials and appeals.
At first instance, nobody knows what the judge is going to find (para 23), whereas on appeal the factual findings are known.
Not only that, the judges reasons are known.
Both parties have an opportunity to take stock and consider whether they should proceed to advance or resist an appeal and to negotiate on the basis of what they now know.
So it may well be that conduct which was reasonable at first instance is no longer reasonable on appeal.
But in my view that does not alter the principles to be applied: it merely alters the application of those principles to the circumstances of the case.
Secondly, however, are there circumstances other than reprehensible behaviour towards the child or unreasonable conduct of the proceedings which might justify a costs order in care proceedings? It is clear from the authorities cited above that there may be other such circumstances in private law proceedings between parents or family members.
Should care proceedings be any different?
I do not understand that Lord Phillips, giving the judgment of the court in In re T, was necessarily intending to rule out the possibility that there might be other circumstances in which an award of costs in care proceedings might be appropriate and just.
That would be to ascribe to para 44 of the judgment the force of a statutory provision.
Such a rigid rule was unnecessary to the decision in that case and cannot be treated as its ratio decidendi.
On the other hand, it was necessary to the decision in that case that local authorities should not be in any worse position than private parties when it comes to paying the other parties costs.
There is an attraction in regarding local authorities in a different light from private parties, because of their so called deep pockets.
But, as Lord Phillips observed, at para 34, Local authorities have limited funds.
Their costs in relation to care proceedings are met from their childrens services budget.
There are many other claims on this budget.
No evidence is needed, , to support the proposition that if local authorities are to become liable to pay the costs of those [whom] they properly involve in care proceedings this is going to impact on their finances and the activities to which these are directed.
The court can also take judicial notice of the fact that local authorities are financially hard pressed, While it is true that appeals are comparatively rare and their costs comparatively low compared with the costs of care proceedings generally, that is not by itself a good reason for making an exception in their case.
But nor should local authorities be in any better position than private parties to childrens proceedings.
The object of the exercise is to achieve the best outcome for the child.
If the best outcome for the child is to be brought up by her own family, there may be cases where real hardship would be caused if the family had to bear their own costs of achieving that outcome.
In other words, the welfare of the child would be put at risk if the family had to bear its own costs.
In those circumstances, just as it may be appropriate to order a richer parent who has behaved reasonably in the litigation to pay the costs of the poorer parent with whom the child is to live, it may also be appropriate to order the local authority to pay the costs of the parent with whom the child is to live, if otherwise the childs welfare would be put at risk. (It may be that this is one of the reasons why parents are automatically entitled to public funding in care cases.)
Pro bono costs
The Access to Justice Foundation (whose legal team has also acted pro bono) has helpfully intervened, principally in order to argue that the principles applicable to pro bono costs orders should be the same as those applicable in other cases.
Under section 194 of the Legal Services Act 2007, the court may make a pro bono costs order in favour of the Access to Justice Foundation in respect of legal representation which has been provided free of charge.
In making such an order the court has to have regard to whether it would have made a costs order had the pro bono represented party been represented on a fee paying basis and if so what such an order would have been (section 194(4)).
In In re E (B4/2014/0146), the Court of Appeal made a pro bono costs order against a local authority which had unsuccessfully opposed a fathers appeal in care proceedings.
In a short written ruling, they explained that they did so on the basis that this created an exception to the general position: There is a public interest in the Bar Pro Bono Unit being compensated on a reasonable basis by an award of costs where such an award is available under the legislation.
The Foundation argues that it was right to make the order but the reasoning was wrong.
The general position should be that local authorities are ordered to pay the costs of parents who successfully appeal in care proceedings.
Pro bono costs should be no exception.
However, we have decided that the general position should be that local authorities, like any other party to childrens proceedings, should not be ordered to pay the costs.
The logic of the Foundations argument is that no exception should be made for pro bono costs.
Indeed, it would be hard to reconcile such an exception with section 194(4), but the point does not arise in this case.
Application in this case
It is not suggested that the local authority have behaved in any way reprehensibly towards these children or their parents.
It is not a case like A and S (Children) v Lancashire County Council (Costs) (No 2) [2013] EWHC 851 (Fam), [2013] 2 FLR 122, where the local authoritys conduct towards the children over many years was blatantly unlawful and unreasonable and led inexorably to substantial litigation (para 22).
Indeed, the only criticism which could be levied against them was that they might have taken action to protect these children earlier than they did (see para 10 of the Court of Appeals judgment).
There is, perhaps, a faint suggestion (see para 32 of the Court of Appeals judgment) that the local authority behaved unreasonably in relation to the appeal, by resisting it despite the deficiencies in the first instance judgment.
In this case, I consider any such suggestion to be unwarranted.
It is true that Judge Karp had not gone through the pros and cons of the various possibilities in the detail expected since the judgment in In re B section But had the Court of Appeal considered that she had reached the right conclusion on the merits of the case, I have little doubt that they would have remedied this deficiency.
The crux of the matter is that they considered that there should have been an assessment of the fathers ability to care for his daughter in Norway.
It is not difficult to understand why: there were several positives in his favour and the evidence of Amelias particular needs was contentious.
But neither is it difficult to understand why the local authority maintained their stance, supported as it was by the childrens guardian as well as the independent social worker and the psychotherapist, that Amelia should be placed for adoption.
The Court of Appeal would have been surprised indeed had the local authority failed to respond to the appeal (and risked the criticism incurred by the local authority which failed to respond to application for permission to appeal in In re S (Children) Care Proceedings: fact Finding Hearing) [2014] EWCA Civ 638, [2014] 3 FCR ).
In the circumstances, it was also in my view reasonable of them to have maintained the stance that they had taken at first instance.
As to the question of whether a refusal to award costs might indirectly create hardship for the child, this would have required the Court of Appeal either to reserve the costs of the appeal until the outcome of the assessment had been known and the childs future decided or to remit the question of the appeal costs to be decided at the future first instance hearing.
At that point it would have been clear where Amelia was to live and evidence could have been filed as to the impact upon her of the father having to bear his own costs in the appeal.
It has not been suggested that that would have been an appropriate course in this case.
In these circumstances, it is unnecessary to address the alternative argument mounted by the local authority, that the costs should have been apportioned between the authority and the childrens guardian, as both were opposing the appeal, although the guardian took no part in the hearing.
We note that the Legal Aid Agency has expressed the view that they do not think that there is any lawful way that a proportion of the fathers costs can be paid by the child under his certificate.
That issue is not before us and I would prefer to make no comment.
Conclusion
For all those reasons, none of the exceptions to the general approach applicable to awards of costs in childrens cases applies in this case.
The appeal should be allowed and the costs order made in the Court of Appeal set aside (the local authority having given the assurance referred to in para 10).
| UK-Abs | The father of a young girl (called Amelia in the judgment) successfully appealed against a placement order obtained by a local authority for Amelias adoption without her fathers consent.
The Court of Appeal ordered the local authority to pay the fathers costs of the appeal.
The issue arising on this appeal is whether it was right to do so, given the principle confirmed by the Supreme Court in In re T (Care Proceedings: costs) [2012] UKSC 36 that in general local authorities should not be ordered to pay costs in care proceedings.
Amelias father married her mother in 2002 but they separated in 2007 before she was born.
Amelia lived with her mother.
Care proceedings were commenced as a result of concerns on the part of the local authority that Amelia and her other sibling and half siblings had suffered or were likely to suffer significant harm owing to a lack of proper parental care from their mother.
The father had had only limited contact with the children.
The local authority considered that he did not have the capacity to meet Amelias high level of need and, with the support of the childrens guardian allocated in the care proceedings, sought a closed adoption for her (ie without contact with her birth family).
The judge at first instance accepted the local authoritys opinion and made the placement order.
The placement order was overturned by the Court of Appeal on the basis that the judge had been wrong to make the order without further assessment of the situation of the father and child, and had not adequately articulated her reasons.
Since then further assessment has taken place and Amelia has now been placed with her father under a child arrangements order.
In bringing the appeal the father incurred legal costs assessed in the sum of 13,787.
The Court of Appeal ordered that the local authority should pay those costs because it had resisted the appeal, and in order not to deter a parent from challenging decisions which impact on the most crucial of human relationships.
It held that the principle in In re T was not applicable to appeals.
The local authority appealed to the Supreme Court in relation to the costs order only, and on the basis that whatever the outcome, it would not seek to recover the costs awarded and paid to the father.
The Supreme Court unanimously allows the appeal by the local authority and sets aside the costs order made in the Court of Appeal.
Lady Hale gives the only judgment.
In re T upheld the general practice of not awarding costs against a party, including a local authority, in childrens proceedings, in the absence of reprehensible behaviour or an unreasonable stance.
It held that local authorities should not be deterred from their statutory duty to protect children by bringing proceedings.
In re T was different from this case, in that it involved a first instance fact finding hearing rather than an appeal; and the costs of interveners who merely wished to clear their names of abuse allegations, rather than of parents who wished to care for the child themselves [13].
The question was whether these distinctions were material.
The general rule that in civil proceedings the unsuccessful party will be ordered to pay the costs of the unsuccessful party does not apply to first instance or appellate proceedings about children [15].
For many years the practice in such proceedings has been to make no order in the absence of exceptional circumstances.
The only winner should be the child and no one should be deterred by the risk of having to pay the other sides costs from playing their part in helping the court achieve the right solution [21].
It is important for the parties to be able to work together in the interests of the children during and after the proceedings, which stigmatising one party as the loser does not assist [23].
An order to pay costs may reduce the resources available to look after the child or, for a local authority, reduce the budget for the protection of other children [24].
It is irrelevant whether a party is publicly funded or not [25].
Parents are always entitled to resist the claim of the state to remove their children from them, but it does not follow that the local authority is unreasonable in seeking to protect the child if it loses [28].
On an appeal different considerations will apply when assessing whether a party has acted unreasonably but the principle is the same [29].
In re T did not rule out the possibility of other circumstances in which an award of costs in care proceedings might be appropriate [31] provided that a local authority was not put into a worse position than private parties [32].
Nor should it be put in a better position.
The object of the exercise is to achieve the best outcome for the child and there may be cases where the welfare of the child would be put at risk if a costs order is not made [33].
In this case it is not suggested that the local authority has behaved in any way reprehensibly towards Amelia or her father [35].
The suggestion that it should not have opposed the appeal because of the deficiencies in the first instance judgment is unwarranted and the Court of Appeal would have been surprised had the local authority failed to respond to the appeal [36].
None of the exceptions to the general approach to awards of costs in children cases applies in this case and the appeal (with the assurance that the local authority has given as regards the fathers costs in this case) is therefore allowed [39].
|
The Supreme Court has before it appeals by four individuals, VB, CU,CM and EN, whose extradition is requested by the respondent, the Government of Rwanda (GoR), so that they may stand trial in Rwanda for crimes allegedly committed during the civil war which took place between April and July 1994.
Memoranda of Understanding dated 8 March 2013 were made between the United Kingdom and Rwanda in respect of the four appellants and a certificate issued by the Secretary of State under section 194 of the Extradition Act 2003.
Consequently, Part 2 (contained in sections 69 et seq) of the 2003 Act applies to the relevant extradition proceedings.
The main issues are whether, in the absence of any relevant statutory power, it is open to the district judge hearing the extradition proceedings (a) to use a closed material procedure to receive evidence which the appellants wish to adduce, or (b) in the alternative in relation to some of such evidence to make an irrevocable non disclosure order providing for the disclosure of such evidence to the Crown Prosecution Service (CPS), but prohibiting its disclosure to the GoR. A subsidiary point is whether in relation to some of the evidence it would be possible to make an anonymity order, either under the Coroners and Justice Act 2009, section 87, or otherwise. 4.
The GoR has sought previously, in 2007, to obtain the extradition of the appellants.
The district judge was satisfied that there was a prima facie case of involvement in genocide and crimes against humanity, but in April 2009 the High Court discharged the appellants on the ground that the appellants faced a real risk of a flagrant denial of justice if returned to Rwanda to stand trial: VB and others v Government of Rwanda [2009] EWHC 770 (Admin).
Since 2009 there have been changes in Rwanda, including the introduction of facilities for witness protection, video conferencing and the possibility of using international judges to try cases of alleged genocide, and in the light of these changes a number of national and international courts have held that other persons wanted for trial in Rwanda would receive a fair trial there.
The appellants case is that the risks remain, at least in relation to them and some of the Rwandan based witnesses whose evidence they wish to adduce; that they themselves would as a result suffer a flagrant denial of justice, in breach of article 6 of the Human Rights Convention, or even torture or mistreatment in breach of article 3, if extradited to Rwanda; that the evidence to demonstrate the existence of such risks requires, by the very nature of the risks, either to be received in closed session or to be disclosed only to the CPS; and that witness anonymity would, at least in relation to much of such evidence, offer no solution, since the content of the evidence is such as would necessarily disclose the identity of the witness giving it.
None of this means that there is not and will not also be other evidence before the district judge, and some of it has already been called.
The extradition proceedings to date 5.
The current extradition proceedings have been proceeding before District Judge Arbuthnot.
The Government of Rwandas evidence to establish a prima facie case has been read, and the District Judge has already heard, in open court, various witnesses called by the appellants.
Among them is Ms Scarlet Nerad, co founder of Centre for Capital Assistance and founder of Community Resource Initiative.
She had investigated in Rwanda witnesses giving evidence for the GoR against CU and attested to meeting one of them, who had been tortured during the period ending in 2000 and remained too frightened of being tortured again to give evidence unless its disclosure was limited to the CPS, and to believing that others were in similar position.
The appellants also called an expert, Professor Filip Reyntjens.
Two further experts are scheduled to give evidence later in the proceedings, Dr Phil Clark to be called by the Government, who will it appears take issue with points made by Professor Reyntjens, and Professor Timothy Longman to be called by the appellants.
It is common ground that in relation to issues of extraneous circumstances (section 81), human rights (section 87) and abuse of process, it is established practice to allow extensive relaxation of the ordinary rules of evidence in extradition proceedings.
However, the closed material which the appellants wish to adduce is, they say, factual and specific evidence which would not otherwise be capable of being adduced. 6. 7.
The issues thus arising regarding use of a closed material procedure were argued before District Judge Arbuthnot.
She on 28th January 2014 gave a judgment in which she held herself bound by authority to hold that it would be unlawful to sit in private.
However, during a case management hearing in December 2013 from which she excluded the Government of Rwandas representative, those representing VB gave her a file of the proposed evidence and in January 2014 those representing CU sent her another file, not for disclosure to the Government.
The District Judge recorded in her judgment (para 5) that she had read both files, and was for the purpose of 8. this argument only prepared to accept they contain important and material evidence which is relevant to the issues I have to decide.
After concluding that the applications to rely on the material in a closed hearing must fail, she also added (para 23): I have concerns that there may be a risk of serious prejudice to the defence in making that decision but in all the circumstances I do not consider I have any choice.
For that reason with some reluctance I refuse the application.
That was a comment which she made without the Government of Rwanda having had the opportunity to make submissions on, or to explore the accuracy of, the material in question.
Unless and until the District Judge reached a conclusion on the permissibility of a closed material procedure opposite to that which she in fact reached, the right course would have been not to see or read the files.
In the course of her judgment, District Judge Arbuthnot also considered whether (if and to the extent that the substance of any of the proposed evidence could be disclosed) a witness anonymity order could be made under section 87 of the Coroners and Justice Act 2009.
She thought not, in view of the requirement under section 87(3) that, in the case of an application by a defendant, the defendant must inform the prosecutor as well as the court of the identity of the witness. 9.
The four appellants challenged the District Judges judgment by judicial review, identifying the Westminster Magistrates Court as defendant, the Government of Rwanda as first interested party and the CPS as second interested party.
By judgment dated 27 March 2014, the Administrative Court (Moses LJ and Mitting J) granted permission, but dismissed the challenge to the District Judges refusal to admit evidence that was not disclosed to the Government of Rwanda.
The Administrative Court, effectively of its own motion, raised the question whether section 87 of the Coroners and Justice 2009 applied, and in its judgment expressed the view that it would enable the appellants to apply for a witness anonymity order in respect of any evidence the substance of which they were willing to disclose.
The Court reached this conclusion on the basis that, although the appellants were defendants and the proceedings were criminal proceedings within the meaning of the 2009 Act, neither the CPS nor the Government of Rwanda was a prosecutor within the definition in that Act.
There was thus no requirement under section 87(3) to disclose the identity of the relevant witnesses to anyone save the court. 10.
On appeal to the Supreme Court, the main burden of the appellants submissions has been taken by Mr Alun Jones QC for VB and by Mr Edward Fitzgerald QC for CU.
Both endorse each others submissions.
They submit that under the previous legislative scheme the Secretary of State had a role which enabled him to decide whether extradition was appropriate in the light of material which the requesting state did not see, and that under the 2003 Act the courts must have been intended to inherit a similar role or freedom.
They submit that extradition proceedings are not classic adversarial or criminal proceedings, but sui generis.
They rely upon the established practice to relax the normal rules of evidence in relation to certain issues capable of arising in extradition proceedings (para 6 above). 11.
These submissions all contribute to the further principal submissions, that the courts should recognise in respect of extradition proceedings a third exception to the normal rule identified in Al Rawi, that absent Parliamentary authority justice should be open as between all the parties to litigation; or that, alternatively and by analogy with the position in asylum proceedings (cf W (Algeria) v Secretary of State for the Home Department [2012] UKSC 8, [2012] 2 AC 115), the courts should recognise the GoR as a special kind of party and restrict disclosure to the CPS. 12.
Mr Fitzgerald supports this last submission with the argument that, if an order for extradition were to be made on the basis of the open material alone, it would still be open to those appellants who are not United Kingdom citizens to apply for asylum, which application could be decided, both by the Secretary of State and (since there is a statutory scheme in place for use of a closed material procedure in asylum cases) by the courts, on the basis of both open and closed material.
The resulting anomaly would be compounded by the possibility that those appellants who are United Kingdom citizens would, because they could not make an asylum claim, be worse off than those who were not (although the appellants also submit that their United Kingdom status might give them corresponding protection by a different route).
The Extradition Act 2003 analysis 13.
The 2003 Act was framed to provide a clear structure for decision making.
The Secretary of States role was carefully delimited and section 70(11) now provides, by amendment made in 2013, that she is not to consider whether the extradition would be compatible with the Convention rights within the meaning of the Human Rights Act 1998.
Once an extradition request has been received and certified, and the person sought has been arrested under a provisional warrant and the appropriate judge has received the relevant documents under section 70, the extradition hearing will be fixed to commence under section 76.
At that hearing, according to section 77(1): the appropriate judge has the same powers (as nearly as may be) as a magistrates court would have if the proceedings were the summary trial of an information against the person whose extradition is requested. 14.
Assuming that the District Judge is satisfied as to certain important preliminaries, she must then proceed under section 79 to consider whether any one of five potential bars to extradition applies.
They are the rule against double jeopardy (section 80), extraneous considerations (section 81), the passage of time (section 82), hostage taking considerations (section 83) and (since 14 October 2013) forum (section 83A E).
Section 81 provides: A persons extradition to a category 2 territory is barred by reason of extraneous considerations if (and only if) it appears that (a) the request for his extradition (though purporting to be made on account of the extradition offence) is in fact made for the purpose of prosecuting or punishing him on account of his race, religion, nationality, gender, sexual orientation or political opinions, or (b) if extradited he might be prejudiced at his trial or punished, detained or restricted in his personal liberty by reason of his race, religion, nationality, gender, sexual orientation or political opinions. 15.
Assuming that none of the five bars applies, the judge must proceed under section 84 which provides: (1) If the judge is required to proceed under this section he must decide whether there is evidence which would be sufficient to make a case requiring an answer by the person if the proceedings were the summary trial of an information against him. (2) In deciding the question in subsection (1) the judge may treat a statement made by a person in a document as admissible evidence of a fact if (a) the statement is made by the person to a police officer or another person charged with the duty of investigating offences or charging offenders, and (b) direct oral evidence by the person of the fact would be admissible (3) In deciding whether to treat a statement made by a person in a document as admissible evidence of a fact, the judge must in particular have regard (a) to the nature and source of the document; (b) to whether or not, having regard to the nature and source of the document and to any other circumstances that appear to the judge to be relevant, it is likely that the document is authentic; (c) to the extent to which the statement appears to supply evidence which would not be readily available if the statement were not treated as being admissible evidence of the fact; (d) to the relevance of the evidence that the statement appears to supply to any issue likely to have to be determined by the judge in deciding the question in subsection (1); (e) to any risk that the admission or exclusion of the statement will result in unfairness to the person whose extradition is sought, having regard in particular to whether it is likely to be possible to controvert the statement if the person making it does not attend to give oral evidence in the proceedings (4) A summary in a document of a statement made by a person must be treated as a statement made by the person in the document for the purposes of subsection (2). 16.
If the judge decides under section 84(1) that sufficient evidence exists, she must then under section 87: decide whether the persons extradition would be compatible with the Convention rights within the meaning of the Human Rights Act 1998 If she does so decide, she must send the case to the Secretary of State for her decision whether the person is to be extradited, informing the person of his right to an appeal to the High Court (which will not however be heard until after the Secretary of State has made her decision).
The Secretary of States role in respect of any case so sent her is closely circumscribed by section 97, which limits it to considering whether she is prohibited from ordering the extradition sought by section 94 (death penalty), section 95 (speciality), section 96 (earlier extradition to the UK from other territory or section 96A (earlier transfer to the UK by the International Criminal Court).
If none of those sections applies, then (unless the request for extradition has been withdrawn or the person is discharged in the light of competing extradition requests or claims or on national security grounds), the Secretary of State must under section 93(4) order extradition. 17.
The specific scheme introduced by the 2003 Act is not consistent with the appellants submission that the court has simply acquired the like powers to any which the Secretary of State might have exercised prior to the Act.
The scheme involves a tight delineation of the respective roles and powers of the Secretary of State and the courts, by reference to which the present appeals must be decided.
The extradition process is now substantially judicialised.
But the previous legislation also gave courts a significant substantive role in relation to the extraneous considerations now covered by section 81of the 2003 Act: see section 6(1) of the Extradition Act 1989; prior to that, it had a similar role, as regards any request made with a view to trial or punishment for an offence of a political character: see section 3(1) of the Extradition Act 1870, considered in R v Governor of Brixton Prison, Ex p Schtraks [1964] AC 556.
Outside the express statutory scheme, the court can however consider whether an extradition request involves an abuse of process by the requesting state: R (Government of the USA) v Bow Street Magistrates Court (Tollman no. 1) [2006] EWHC 2256 (Admin), [2007] 1 WLR 1157.
None of these circumstances provides any support for the appellants submission that any wider powers previously possessed by the Secretary of State must now by implication be exercisable by the courts. 18.
The appellants submission that extradition proceedings are not conventional criminal proceedings is correct, up to a point.
They do not lead to conviction, but they are brought to obtain surrender for the purpose of trial abroad.
They are an important aspect of enforcement of the rule of law worldwide.
The jurisdiction of a magistrate in extradition proceedings is derived exclusively from statute: In re Nielsen [1984] AC 606, p 623D E, per Lord Diplock.
The 2003 Act prescribes that the district judges powers are the same as nearly as may be as those possessed by a magistrate on a summary trial and that the judges role is to decide whether there is evidence that would be sufficient to make a case requiring an answer by the person if the proceedings were the summary trial of an information against him: see sections 77(1) and 84(1) of the 2003 Act cited in paras 13 and 15 above.
The appellants submit that section 77(1) is not to be read as covering evidential matters; on their case, it deals only with other matters such as powers over witnesses and the conduct of proceedings.
The powers of a magistrates court on a summary trial and of a District Judge under the 2003 Act are however statutory, and the natural effect of section 77(1) is to provide for all aspects of their exercise, including the admission and admissibility of evidence. 19.
Both the general correctness of treating extradition proceedings as criminal proceedings, albeit of a very special kind, and the correctness of understanding section 77(1) in its natural sense as embracing evidence and procedure, are confirmed under the parallel provision in the previous legislation, the Extradition Act 1989, by R v Governor of Brixton Prison, Ex p Levin [1997] AC 741.
In that case, Lord Hoffmann, in a speech with which all other members of the House concurred, said, at pp 746 747: Finally, I think that extradition proceedings are criminal proceedings.
They are of course criminal proceedings of a very special kind, but criminal proceedings nonetheless.
Both case law and the terms of the Extradition Act 1989 point to extradition proceedings being categorised as criminal.
First, the cases.
In Amand vs Home Secretary and Minister of Defence of Royal Netherlands Government [1943] A.C. 147 this House approved the decision of the Court of Appeal in Ex parte Alice Woodhall (1888) 20 Q.B.D. 832 that the refusal of an application for habeas corpus by a person committed to prison with a view to extradition was a decision in a criminal cause or matter.
It would seem to me to follow a fortiori that the extradition proceedings themselves are criminal proceedings and in Amand's case Viscount Simon L.C. said, at p 156, that the cases demonstrated that the matter in respect of which the accused is in custody may be criminal although he is not charged with a breach of our own criminal law.
Secondly, the Extradition Act 1989.
Section 9(2) and paragraph 6(1) of Schedule 1 require that extradition proceedings should be conducted "as nearly as may be" as if they were committal proceedings before magistrates.
Committal proceedings are of course criminal proceedings and these provisions would make little sense if the metropolitan magistrate could not apply the normal rules of criminal evidence and procedure.
The suggestion of counsel in Ex parte Francis that extradition proceedings were sui generis would only make matters worse, because it would throw doubt upon whether the magistrate could apply the rules of civil evidence and procedure either. 20.
The appellants submit that contrary indication is to be found in established case law and the provisions of section 202 of the 2003 Act.
Section 202(3) providing that a document issued in a category 2 territory may be received in evidence in extradition proceedings if duly authenticated which by section 202(4) means that it purports to be signed by a judge, magistrate or officer of the territory, or to be authenticated by the oath or affirmation of a witness.
The purpose of section 202(3) is clearly to permit the use of such documents as evidence of the matters stated therein, about which oral evidence would otherwise have to be called.
Section 202(5) goes on to provide that this does not prevent a document which is not duly authenticated from being received in evidence in proceedings under the Act.
On its face, this simply extends the power to admit a document as evidence of its contents to unauthenticated documents.
But it is unnecessary on these appeals to decide finally that this is as far as it goes, since it clearly cannot be read as addressing the issues whether any form of closed material procedure is permissible, now before the Supreme Court. 21.
The parties to this appeal agree that, as a matter of established practice, the normal rules of evidence are relaxed on issues arising under the heads of extraneous considerations, human rights and abuse of process in extradition proceedings.
At the root of their agreement on this point is the decision in Schtraks.
There the House of Lords was considering the courts role under section 3(1) of the Extradition Act 1870, which prohibited surrender if the person requested prove to the satisfaction of the court before whom he is brought on habeas corpus, or to the Secretary of State, that the requisition for his surrender has in fact been made with a view to try or punish him for an offence of a political character 22.
The House reasoned that, since the Secretary of State could not have been intended to be bound by the strict rules of evidence, the court could not have been intended to be.
In Lodhi v The Governor of Brixton Prison [2001] EWHC 178 Admin, para 89, and Hilali v The Central Court of Criminal Proceedings No 5 of the National Court, Madrid [2006] EWHC 1239 Admin, the Divisional Court was concerned with an issue of extraneous circumstances arising under, respectively, section 6(1) of the 1989 Act and section 13 of the 2003 Act.
Making express reference to Schtraks v Government of Israel [1964] AC 556, it said (in paras 89 and 63 respectively) that it was, in this context, common ground . that the court is not restricted to considering evidence in the strict sense and long . established that the Court is not bound by the ordinary rules of evidence; the appellant may rely on any material in support of a submission based on section 13. 23.
The legislation has changed since Schtraks v Government of Israel [1964] AC 556, but it is unnecessary on this appeal to say anything more about the established practice on which the parties are agreed.
Whatever its admissible scope, the Supreme Court understands it to be common ground that it does not extend beyond the areas of extraneous considerations, human rights and abuse of process; in particular, it does not apply to other issues such as whether a prima facie case has been shown under section 84(1).
Under the current legislation, the better analysis may be not that the ordinary rules of evidence are suspended in the areas to which the practice is agreed to apply, but that a broad approach is taken to the nature and basis of the expert evidence that is admissible.
In any event, any relaxation in the areas of extraneous considerations, human rights and abuse of process cannot affect the normal rule that applies to a witness called to give evidence before a court, viz that his or her evidence must be given and be capable of being tested inter partes.
Any relaxation, on whatever basis, does not therefore help on the present issue whether the district judge can operate a closed material procedure without any statutory authority. 24.
Reliance was also placed on a procedure accepted by the Divisional Court in Tollman no. 1 [2007] 1 WLR 1157 (para 16 above), whereby a judge, before whom reason was shown to believe that an abuse of process had occurred, could call upon the requesting authority to provide whatever information or evidence he or she might require in order to adjudicate upon the issue so raised.
Such information and evidence should normally be made available to the defendants, because (para 90) Equality of arms requires that, in normal circumstances, the party contesting extradition should be aware of, and thus able to comment on, the material upon which the court will be basing its decision. 25.
However, the Divisional Court in Tollman no. 1 indicated that it was not open to the district judge to order the production of the material.
If the requesting government was unwilling for it to be seen by a defendant, but prepared to allow the judge to see it, then the judge could evaluate its significance.
If the judge concluded that its disclosure was in fairness required, the requesting government could be given a further chance to disclose, failing which disclosure the appropriate course would be to dismiss the extradition request as an abuse.
The Divisional Court would by implication presumably also have regarded dismissal as appropriate if the requesting authority refused to allow the material to be seen even by a judge before whom reason had been shown to believe that an abuse of process had occurred. 26.
Tollman no. 1 is of no real assistance on the issue now before the Supreme Court.
It concerns circumstances where a prima facie case of abuse of process is shown and the requesting authority cannot rebut that case without disclosing to the defendant material which it has.
In such a case, it may well be appropriate to put the requesting authority to its election to disclose such material or in effect abandon its request.
The present appeal concerns circumstances where a defendant wishes, in support of its case, to rely on material which he has, without showing such material to the requesting government.
Far from promoting the equality of arms, of which the Divisional Court spoke in Tollman no. 1, the appellants case involves departing significantly from it. 27.
At the core of the appellants case is the submission that extradition proceedings are special in a sense which justifies or calls for a further qualification of the principle of open justice, beyond any recognised in Al Rawi v Security Service [2011] UKSC 34.
In Al Rawi and, more recently, in R (British Sky Broadcasting Ltd) v Central Criminal Court [2014] UKSC 17, the courts were concerned with the question whether they could, without any statutory basis, use closed hearing procedures to enable public authorities to avoid disclosure to individual litigants of allegedly sensitive security material, including the identity of the witness providing it.
This Court declined any general power to do so, and in Al Rawi at paras 63 65, per Lord Dyson, identified only two categories of potential exception to the normal rule: (a) child welfare cases where the whole object of the proceedings is to protect and promote the best interests of the child and (b) intellectual property cases where full disclosure would undermine the whole object of the proceedings (to protect intellectual property), so that confidentiality rings are permissible, at least at the interlocutory stage. 28.
The appellants point to the underlying rationale of those cases, that a departure from the normal rule may be justified by special reasons in the interests of justice: para 63, per Lord Dyson.
In their submission, a further departure is justified in the present case by the protective nature of the bars to extradition which exist in cases of extraneous circumstances, potential human rights violations and abuse of process; and, if a closed material procedure is necessary in order to be able to demonstrate the existence of one or more of these bars, a closed material procedure must be permissible.
The appellants submit that this is reinforced by a triangulation of interests present where public interest considerations militating in favour of extradition and trial are matched by the need to protect not only the appellants but also independent witnesses from risks of persecution, human rights violations and abuse of process.
The phrase comes from Lord Woolfs speech in R (Roberts) v Parole Board [2005] UKHL45, [2005] 2 AC 738, para 48. 29.
A principal difficulty about accepting these submissions is that they assume what they set out to prove.
The appellants already have the benefit of expert evidence and such factual evidence as they are able to call without a closed material procedure.
Expert evidence customarily includes material of which there is no direct proof, and it is, as stated, common ground on this appeal that the strict rules governing the adducing of factual material will not be applied to the relevant issues.
It is inevitably only speculation that any material which the appellants might adduce in a closed material procedure would be relevant, truthful or persuasive, and the very nature of a closed material procedure would mean that this could not be tested.
The same applies to any material which might be ordered to be adduced to the CPS on the basis that it would not be further disclosed to the GoR.
The appellants are inviting the Court to create a further exception to the principle of open inter partes justice, without it being possible to say that this would be necessary or fair. 30.
The two exceptions identified in Al Rawi differ from the further exception now advocated.
In the first, the paramount object of the proceedings is not the resolution of an inter partes dispute, but the protection of a third party, the child.
In the second, the object, to protect intellectual property belonging to one party, would be frustrated if the intellectual property were disclosed.
Even then, in giving this example, Lord Dyson at para 64 made clear that its focus was on the interlocutory stages of proceedings; the trial could be expected to proceed on a fully inter partes basis, without use of the intellectual property as such in evidence. 31.
Roberts was explained in this Court in Al Rawi as turning on the existence of an express statutory power to adopt a closed material procedure: para 55, per Lord Dyson.
But, in any event, there is in the present case no triangulation of interests parallel to that identified by Lord Woolf in Roberts.
The witnesses whose evidence the appellants wish to adduce are on no basis at risk.
If a closed material procedure (or, where relevant, a limitation of disclosure of their evidence to the CPS) were ordered, they would not be at risk.
But, equally, if a closed material procedure or such a limitation is refused, the appellants will not adduce their evidence at all.
There is therefore a two sided issue between the GoR and the appellants alone, not a triangulation. 32.
As to the appellants reliance on the special nature of extradition proceedings (para 19), the public and international interest in bringing potential offenders to trial is significant.
So too of course is the public and human interest in ensuring that individuals are not surrendered to places where they will suffer risks of human rights or other abuses.
But the assessment of each of these potentially competing factors falls to be determined on an inter partes basis between, in this case, the GoR and the appellants.
It is an assessment subject to the clearly established statutory procedure in the 2003 Act, and it is one which, so far as appears from that Act, can and should be performed in the ordinary way by the adducing of evidence on the relevant issues on each side. 33.
For good measure, I note that it was also a balance struck in relation to surrender to Rwanda for trial by the High Court in VB and others v Government of Rwanda [2009] EWHC 770 (Admin) (refusing surrender), but that there have been a number of subsequent decisions concluding that fair trial was possible in Rwanda notably by the ICTR Referral Chamber on 28 June 2011 in respect of Mr Uwinkindi, the Oslo District Court on 11 July 2011 in respect of Mr Bandora, the European Court of Human Rights on 27 October 2011 in respect of Mr Ahorugeze, the ICTR Appeals Chamber upholding the Referral Chamber in respect of Mr Uwinkindi on December 2011 and the ICTR Referral Chamber on 22 February 2012 in respect of Fulgence Kayishema.
The nature of the issues and procedures involved in 34. these cases has not however been the subject of any close examination on this appeal.
In these circumstances, I see no basis on which this Court would be justified in recognising or creating in the present circumstances a closed material procedure as a new exception to the principle of open inter partes justice recognised in Al Rawi. 35.
The appellants fall back case in respect of some of the relevant material is that the district judge should be recognised as having power to limit disclosure to the CPS and to prohibit further disclosure to the GoR.
In extradition proceedings under the 2003 Act the CPS acts on behalf of a requesting state or authority, although owing duties to the court, as explained in R (Raissi) v Secretary of State for the Home Department [2008] EWCA Civ 72, [2008] QB 836.
In relation to the possibility of a non disclosure order, the appellants rely on W (Algeria) v Secretary of State for the Home Department [2012] UKSC 8, [2012] 2 AC 115.
There, the Home Secretary had given each appellant notice of the intention to deport him to Algeria on the basis that his presence in the United Kingdom was not conducive to the public good on grounds of national security.
Each asserted before the Special Immigration Appeals Commission (SIAC) that he would be likely on return to Algeria to suffer ill treatment contrary to article 3 of the Human Rights Convention.
One of them wished to adduce evidence from a source who required an absolute and unconditional guarantee of permanent confidentiality as a precondition to giving evidence.
It was common ground (para 27) that SIAC had under the Special Immigration Appeals Commission (Procedure) Rules 2003, rules 4, 39(1) and 43 power to make such an order against the Home Secretary, with the effect of precluding any disclosure of the evidence to Algeria. 36.
Lord Brown and Lord Dyson, in judgments with which the other members of this Court agreed, held that, although such orders come perilously close to offending against basic principles of open justice and although it would mean that the Home Secretary will be largely unable to investigate [the evidence] and will find it difficult, therefore, to explain or refute it (paras 16 and 17, per Lord Brown), nonetheless such an order was in the circumstances justified.
Lord Dyson noted that: 36.
Regrettably, . 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. 37.
The circumstances in W (Algeria) differ very significantly from the present.
The issue there was between the Secretary of State and Algerian nationals, who the Secretary of State was seeking to remove from the jurisdiction.
Algeria had no interest in claiming or receiving the return of W or his fellow Algerians, perhaps the contrary.
Algeria was not party to the proceedings brought by the Algerian nationals against the Secretary of State to challenge the order for their removal.
SIAC had express statutory power to make the non disclosure order sought.
In contrast, the present appeals are taking place on an inter partes basis between the appellants and the GoR, which has a real and direct interest in their pursuit and in obtaining the surrender of the appellants.
The CPS are merely representing the legal interests of the GoR.
Further, even if these factors were not by themselves conclusive, the district judge has no special statutory power which could enable her to make a non disclosure order in relation to the GoR. 38.
This brings me to two final points made by the appellants.
First, VB has since 2001 or 2002 been a United Kingdom citizen.
Relying on Halligen v Government of the USA, sub nom.
Pomiechowski v Poland [2012] UKSC 20, [2012] 1 WLR 1604, Mr Jones submits that he enjoys a common law right of residence in the United Kingdom, and that article 6 applies to the determination of extradition proceedings which engage that right.
Accepting the premise, I am unable to draw from it any conclusion that article 6 requires the district judge to discard the ordinary principles of open inter partes justice, contrary to Al Rawi and to the conclusions that I have reached up to this point. 39.
The other point, advanced forcefully by Mr Fitzgerald, relates to the other appellants who are foreign nationals.
If they are unable to adduce evidence under a closed material procedure or to obtain a non disclosure order, and extradition orders are made against them, then they will claim asylum, says Mr Fitzgerald.
On an asylum claim, the issue will be between them and the United Kingdom authorities.
They will be able under the relevant rules, in particular AIT (Procedure) Rules 2005 rules 45(1) and 45(4)(i), to invite the First Tier Tribunal to make directions relating to the conduct of the proceedings and, more particularly, to issue directions making provision to secure the relevant appellants anonymity.
The Tribunal would, if necessary, also be able under rule 54(3) to exclude the public in order to protect such appellants private lives or under rule 54(4), in exceptional circumstances and if and to the extent strictly necessary, to ensure that publicity does not prejudice the interests of justice.
Mr Fitzgerald submits that the Tribunals rules are sufficiently analogous with those of SIAC for it to be able, like SIAC, to make a non disclosure order such as was permitted in W (Algeria). (Since the present cases do not appear to engage interests of public order or national security, the further provisions of rule 54(3) addressing those interests appear irrelevant, and, for the same reason, it appears that any asylum claim by the present appellants would come before the Tribunal, rather than SIAC.) 40.
When the Convention relating to the Status of Refugees (1951) (Cmd 9171) was agreed, the answer to any such claim for asylum as Mr Fitzgerald suggests may have been conceived as lying in article 1F(b), which provides that: The provisions of this Convention shall not apply to any person with respect to whom there are serious reasons for considering that: (a) he has committed a crime against peace, a war crime, or a crime against humanity, as defined in the international instruments drawn up to make provision in respect of such crimes; (b) he has committed a serious non political crime outside the country of refuge prior to his admission to that country as a refugee; (c) that he has been guilty of acts contrary to the purposes and principles of the United Nations.2 42. 41.
Regulation 2 of the Refugee or Person in Need of International Protection (Qualification) Regulations 2006 (SI 2006/2525) (transposing into United Kingdom law Council Directive 2004/83) provides that "'refugee' means a person who falls within article 1(A) of the Geneva Convention and to whom regulation 7 does not apply".
Regulation 7(1) states that "A person is not a refugee, if he falls within the scope of article 1D, 1E or 1F of the Geneva Convention".
In R (JS (Sri Lanka)) v Secretary of State for the Home Department [2010] UKSC 15, [2011] 1 AC 184, Lord Brown recorded (para 2) that It is common ground between the parties (i) that there can only be one true interpretation of article 1F(a), an autonomous meaning to be found in international rather than domestic law; (ii) that the international instruments referred to in the article are those existing when disqualification is being considered, not merely those extant at the date of the Convention; (iii) that because of the serious consequences of exclusion for the person concerned the article must be interpreted restrictively and used cautiously; and (iv) that more than mere membership of an organisation is necessary to bring an individual within the article's disqualifying provisions. 43.
In Al Sirri v Secretary of State for the Home Department [2012] UKSC 54, [2013] 1 AC 745, the Supreme Court considered the standard of proof required to bring a case within article 1F(c) and held (para 16) The article should be interpreted restrictively and applied with caution.
There should be a high threshold defined in terms of the gravity of the act in question, the manner in which the act is organised, its international impact and long term objectives, and the implications for international peace and security.
And there should be serious reasons for considering that the person concerned bore individual responsibility for acts of that character. 44.
Since criminal proceedings against Mr Al Sirri had been dismissed on the ground that no reasonable and properly directed jury could on the evidence available convict him (Al Sirri, para 23), it is not entirely clear why it was necessary to attempt to define the relevant standard of proof in that case.
Adopting the approach in Al Sirri, article 1F(b), appearing between the two articles considered in these two authorities, covers serious non political crime which may, nevertheless, not always reach the standard of seriousness envisaged in articles 1F(a) and (c).
But it seems reasonably clear that a similar approach must apply under all three articles.
On that basis, the prima facie proof of involvement in the crimes committed during the Rwandan civil war, which the GoR seeks to adduce against these appellants, may not be sufficient to bring any of the articles in article 1F into play.
It is therefore conceivable that, if the present proceedings lead to extradition orders against all four appellants, the three appellants who are not United Kingdom nationals will be able to seek to claim asylum, and in the course of so doing before the First Tier Tribunal to seek some form of order which would have the effect of precluding disclosure to the GoR of evidence which they wish to call but cannot call if its author or contents will or may thereby become known to the GoR whereas VB as a United Kingdom citizen will not be able to do this and will be liable to immediate surrender. 45.
A number of observations may be made on this possibility.
First, it may of course be that the nature of the evidence adduced before the District Judge in the present proceedings and before the First Tier Tribunal on any asylum claim may satisfy SIAC even to the higher standard which Al Sirri indicates to be required.
Second, it is relevant to recognise the normal reason for which a court or tribunal would decide to exercise its discretion to give directions for anonymity or to exclude the public in asylum proceedings.
This is not related to the reasons for seeking such a procedure in the present case in other words, it is not to expand the nature of the evidence admissible in asylum proceedings.
Rather, it is to protect the asylum seeker him or herself, as well as others, particularly any dependants and family members in his or her home country, from persecution or other harm, which might result from knowledge of the asylum proceedings.
This is now reflected in a European Union context in article 22 of Directive 2005/85/EC on minimum standards on procedures in Member States for granting and withdrawing refugee status.
In the present case, that reason could have no application.
The GoR is well aware of the appellants position, knows where they are and is seeking their return.
It now also knows of the possibility that some of them may be eligible to make and may well make asylum claims in the United Kingdom.
Other grounds on which an anonymity or exclusion order might be sought, as contemplated in Presidential Guidance Note No 2 of 2011 issued by the President of the FTT on 14 February 2011 and revised 7 July 2011 appear equally irrelevant.
The appellants may well therefore be unable to obtain any anonymity or exclusion order.
However, the further power which was recognised in W (Algeria) was to restrain the Home Secretary from disclosing to the relevant foreign government evidence relating to risks which the asylum seeker claimed that he would face in the foreign country, which evidence he would otherwise have been unable to adduce.
Assuming the First Tier Tribunal to have a like power under its rules, as Mr Fitzgerald submits, the reasoning in W (Algeria) lends support to the appellants case that they might be able in asylum proceedings before the Tribunal, to which the GoR is not party, to adduce evidence from witnesses which they cannot adduce in the present proceedings to which the GoR is party. 46.
Third, assuming that the (on the face of it somewhat anomalous) scenario indicated in the preceding paragraphs is a possible one, and that the appellants might in fact also be able to obtain permission to obtain from the First Tier Tribunal some form of order which would prevent disclosure of material evidence to the GoR, this would be the consequence of a variety of factors: the possession by the appellants of different nationalities; different standards of proof involved in extradition and in asylum proceedings; and different statutory regimes.
It cannot in my view distort or alter the clear conclusions which I have arrived at in relation to the extradition proceedings, which are all that are currently before the Supreme Court.
Section 87 of Coroners and Justice Act 2009 47.
I add a brief word on the application of section 87 of the Coroners and Justice Act 2009, on which the Administrative Court expressed views, as set out in para 9 above.
The Divisional Court concluded that the term defendant in section 87 was wide enough to include the appellants, but that the term prosecutor was incapable of covering a requesting state.
That would appear unsustainable on any view.
However, before the Supreme Court, it was in the event common ground that section 87 has no relevant application to extradition proceedings at all. 48.
The reasons were explained by Mr James Lewis QC for the GoR as follows: Section 87 only applies where there is a defendant charged with an offence to which the proceedings relate: section 97(1).
That, on a true construction, does not embrace extradition proceedings with a view to a trial abroad. a. b.
By the same token, a foreign state requesting surrender should not be treated as prosecutor, even though extradition proceedings are criminal proceedings of a special kind. c.
The Extradition Act 2003 itself is careful to refer to the person whose surrender is requested as such, rather than to the defendant, and it makes specific provision when the concept of defendant is intended to include such person as well as when the concept of prosecutor is intended to include a requesting authority: see e g section 205(3).
One might have expected similar caution in the 2009 Act, had section 87 been intended to cover extradition proceedings. 50.
Assuming section 87 to be inapplicable, there is authority that anonymous evidence may be admissible in certain circumstances in extradition proceedings: R (Al Fawwaz) v Governor of Brixton Prison [2001] UKHL 69, [2002] 1 AC 556.
In the light of the requirement in section 84 of the Extradition Act 2003 that there should be evidence . sufficient to make a case requiring an answer if the proceedings were the summary trial of an information, that conclusion cannot be justified on a simple basis that extradition proceedings are not themselves criminal proceedings.
Equally, it is no longer possible to justify the reasoning in Al Fawwaz in so far as it endorsed the approach to anonymous evidence taken at common law in R v Taylor and Crabb [1995] Crim LR 254, prior to the Houses decision in R v Davis [2008] UKHL 36; [2008] 1 AC 1128.
But, since the enactment of the Criminal Evidence (Witness Anonymity) Act 2008 and now sections 86 97 of the Coroners and Justice Act 2009, anonymous evidence may under statutory conditions be admitted at trial, and, without going further into this aspect, in those circumstances at least the requirements of section 84 of the Extradition Act 2003 will be capable of being met.
Again, I have read and agree with Lord Hughes analysis of the law in this respect.
Conclusion 51.
For the reasons given in paras 1 to 46, I would dismiss the appellants appeals.
LORD HUGHES (with whom Lord Neuberger and Lord Reed agree) 52. (i) and I very largely agree with the conclusions set out in Lord Mances judgment and need not repeat what he so clearly sets out.
It is clear to me that the extradition court ought never to embark upon closed material procedures, hearing evidence on behalf of the person whose surrender is sought, but altogether withholding that evidence from the other party, the Requesting State, so that the latter not only cannot respond to it, but does not even known what it is to which response is called for.
I deal here only with two issues: the impact (if any) of our decision upon procedure to be adopted in any subsequent asylum or human rights claims which might be made by any of the appellants, or by people in a similar position; the separate question whether an extradition judge conducting proceedings under the Extradition Act 2003 has the power to receive evidence from a witness who is anonymous, that is to say whose identity is withheld from one or other party to the proceedings.
That is of course not the same as a closed material procedure, where evidence is received which is altogether withheld from one or other party.
A witness who is anonymous is heard by all parties.
All parties have the opportunity to agree or contradict what he says and his evidence can be tested by cross examination, albeit the extent of cross examination may be limited by his anonymity.
Subsequent immigration or human rights claims (ii) (i) 53.
The possible relevance of subsequent proceedings developed as a potential issue in the present case in the course of oral argument before this court.
Before the courts below, and in written argument for this court, the argument advanced on behalf of the persons whose surrender is sought was that immigration proceedings, and particularly asylum claims, provided an analogy, which should be adopted by extradition courts.
In asylum claims, it was correctly pointed out, an immigration judge has power to sit in private, in order to protect the confidentiality of the applicant and in particular in order to deny access by the state from whom protection is claimed to the fact that an allegation of danger of persecution is made and to any evidence which may demonstrate that danger, lest reprisals follow.
Hence, it was submitted, an extradition court should also by analogy deny a requesting state access to evidence that it would infringe the Convention rights of the person sought, in case the requesting state might use the evidence to ill treat either the person sought or others, such as witnesses.
A similar and alternative argument was advanced that an extradition court should in appropriate cases make an irrevocable non disclosure order by analogy with the procedure permitted to SIAC in exceptional circumstances by W (Algeria) v Secretary of State for the Home Department [2012] UKSC 8; (2012) 2 AC 115. 54.
However, as the oral argument proceeded, the submission made on behalf of the persons sought expanded beyond suggested powers in the extradition court found by way of analogy with immigration proceedings.
It became the more striking submission that unless the extradition court has the powers claimed (to conduct closed material procedures and to make irrevocable non disclosure orders) there would be likely to follow asylum claims by the persons sought, in which different procedures would apply.
Said Mr Fitzgerald QC, the applicants whom he represents, who have hitherto been granted leave to remain without dispute and who have never made any kind of asylum claim, might now make such a claim.
If they do, he submitted, they ought to be permitted by the Immigration Judge in the First Tier Tribunal to adduce the evidence on which they wish at present to rely before the extradition court, in order to demonstrate that they would be at risk of persecution in Rwanda.
And, he submitted, they ought to be permitted to adduce this evidence in a private hearing from which the Government of Rwanda and its representatives are excluded, and to have that evidence relied upon by the Immigration Judge in deciding the asylum claim.
Moreover, he submitted, they ought similarly to be permitted to obtain from the First Tier Tribunal an irrevocable non disclosure order preventing the Secretary of State, as the other party to the asylum appeal, from ever disclosing the evidence to Rwanda.
The consequence may well be, he submitted, that the Immigration Judge may accept the refugee status of the persons sought, in effect contrary to the findings of the extradition court. 55.
Mr Fitzgerald offered the further argument that, if this scenario were to come to pass, there would ensue an unfair distinction between, on the one hand, a person sought who was a foreign national, and thus able to apply for asylum, and, on the other, a British national who is sought.
As it happens, one of the present appellants is a British citizen. 56.
These arguments call for some consideration of the inter relation of asylum or immigration proceedings on the one hand and extradition proceedings on the other.
Is there a prospect of inconsistent findings of fact, or (worse) of inconsistent orders? The court is significantly inhibited in deciding these questions by the late appearance of the arguments, and by their resulting incomplete content.
It is likely that if the suggested scenario should come to pass, further full consideration will be essential.
It may help, however, to identify at least some signposts. 57.
The first and principal reason why an immigration judge may exercise the power to sit in private in an asylum case is to satisfy the international duty of confidentiality towards asylum claimants.
This is now well recognised, in particular in Europe by article 22 of Directive 2005/85/EC on minimum standards on procedures in Member States for granting and withdrawing refugee status, which provides: Article 22 Collection of information on individual cases For the purposes of examining individual cases, Member States shall not: (a) directly disclose information regarding individual applications for asylum, or the fact that an application has been made, to the alleged actor(s) of persecution of the applicant for asylum; (b) obtain any information from the alleged actor(s) of persecution in a manner that would result in such actor(s) being directly informed of the fact that an application has been made by the applicant in question, and would jeopardise the physical integrity of the applicant and his/her dependants, or the liberty and security of his/her family members still living in the country of origin. 58.
The purpose of this duty of confidentiality is to protect the asylum claimant and/or his family from any risk of reprisals for having made allegations against his home State.
For the reasons Lord Mance explains at paragraph 45, this can have no application where the State accused, here Rwanda, knows full details of the persons sought, and indeed has been informed in open court of the suggested possibility of asylum applications.
It follows that there would be no reason for any immigration judge to accede to an application to hear any asylum claim in private on this, the common, ground, nor on this ground to hear evidence which Rwanda is prevented from hearing. 59.
A second, distinct, possible scenario is afforded in limited circumstances by the decision in W(Algeria) v SSHD (supra).
This court there concluded that there could be circumstances in which justice required that, in order to determine whether or not deportation to a particular State would infringe the article 3 (or, it must follow, the article 2) rights of the individual concerned, a court could receive evidence on terms that the other party (the Secretary of State) is ordered not to disclose it to anyone else, including the State to which return is under consideration.
That is possible, it was held, where the evidence would otherwise be withheld for fear of reprisals.
W(Algeria) was a strong case.
The proposed State of return was known to practice torture, which would ordinarily have been a bar to return on article 3 grounds.
The evidence went to whether assurances offered by that State to the Secretary of State could be relied upon.
The judgments of both Lord Brown and Lord Dyson make it clear that the procedure contemplated was wholly exceptional, because it infringes ordinary principles of natural justice by impairing the ability of one party, the Secretary of State, to challenge and test the evidence.
They also make it clear that such a procedure could be expected to be justified only when article 3 rights, not to be the subject of torture or inhuman or degrading punishment, was in question.
If other rights were in question, the balance would be likely to fall against so unusual a procedure. 60.
There is no question of W (Algeria) authorising the receipt by an extradition judge of evidence of the kind here sought to be adduced.
The proceedings in W (Algeria) were deportation (immigration) proceedings, to which the parties were the individual and the Secretary of State, but not Algeria, the proposed State of return.
The claimant was at pains to disclaim any argument that the Secretary of State, as a party to the proceedings, should be unable to hear the evidence in question.
The order sought, and granted, was one preventing the Secretary of State from passing the evidence on, by way of enquiry or otherwise, to Algeria.
In extradition proceedings, the proposed State of return, here Rwanda, is a party. 61.
However, the exceptional procedure thus sanctioned in W (Algeria) needs to be considered in context when the relationship of asylum or deportation to extradition is in question.
The terms of the Extradition Act make it clear that extradition is subject to the non infringement of the Convention or refugee rights of the individual sought.
For Part I extraditions, to European States, section 39 provides that a European arrest warrant is not to result in extradition whilst a claim for asylum is pending.
The present case falls under Part II, via section 194.
In the context of Part II extraditions, to non European States, the process of extradition begins when the Secretary of State certifies that a valid request for an individual has been received: see section 70.
Under section 70(2)(b) and (c) the Secretary of State need not certify if either the individual has been accepted as a refugee or he has been granted leave to remain in this country on the grounds that removal to the requesting State would involve infringement of his article 2 or article 3 rights.
Ordinarily, it may well be that any person sought for serious crime would be excluded from refugee rights by article 1F(b) of the Refugee Convention, set out by Lord Mance at paragraph 40, and it seems to me to follow that the scope for a finding that there is a prima facie case justifying extradition but no serious reasons for thinking that he is guilty of such a crime is likely to be narrow.
But Convention rights, as extended by the Soering principle, may well be more extensive than refugee rights.
The Act appears to contemplate that any asylum claim will be made before any extradition proceedings, and it goes on to provide in section 70(11) that once the Secretary of State has issued the section 70 certificate all questions of human rights are for the extradition judge, who is required by section 87 to halt the sequential process provided for by the Act, and to discharge the person sought, if breach of such rights (not limited to articles 2 or 3) would be the result of extradition.
That makes it clear that the extradition process is, once the section 70 certificate is issued, an entirely judicialised one.
Once the judicial ruling for extradition has been made, the Secretary of State is bound by section 93 of the Extradition Act, to give effect to it unless specified reasons (death penalty, specialty, earlier extradition into the UK or transfer to it by the ICC) apply.
Whether there remains room for a subsequent application, outside the extradition process, for asylum, or (absent any asylum or refugee claim) for a decision by the Secretary of State (or immigration judge on appeal) that removal to the requesting State would involve infringement of article 2 or 3 rights, appears to remain unexplored.
But if there is room for such, then it would appear to follow as a possibility that a W (Algeria) non disclosure order might be open for consideration in such proceedings.
It would be a material consideration that the application was made late, and in a form which in effect mounted a collateral challenge to an earlier ruling of the extradition judge that the individual is to be extradited. (ii) Anonymity of witnesses 62.
The Divisional Court itself raised the possibility that an extradition judge could hear an anonymous witness.
Having done so, it held that such a power did exist and that it derived from sections 86 97 of the Coroners and Justice Act 2009 (the 2009 Act), or the equivalent provisions of its predecessor, the Criminal Evidence (Witness Anonymity) Act 2008 (the 2008 Act).
It described the application of those Acts to extradition as adventitious. 63.
Closer examination demonstrates that the Divisional Court was right to say that an extradition judge has power, if justice calls for it, to receive the evidence of a witness who is anonymous to one or all parties, but not to derive this power from either the 2008 or the 2009 Act. 64.
The 2008 Act was passed to give a criminal court the express power, in defined conditions, to allow a witness (by whomever called) to remain anonymous to the defendant and/or to co defendants.
The principal conditions are that such a course of action must be found to be necessary on specified grounds, which include preserving the safety of the witness, and that the court must be satisfied that the trial can nevertheless be fair.
The Act was passed against the background of growing concern about witness intimidation and the reluctance of potential witnesses to crime, for fear of reprisals, to be seen to be co operating with a police investigation.
In the years before 2008 courts hearing criminal trials in England and Wales had from time to time permitted witnesses to give evidence anonymously where satisfied that the evidence would not otherwise be given, or effectively given, owing to genuine fear, and that the defendant was not disabled from properly challenging it.
However, in R v Davis [2008] UKHL 36; (2008) 1 AC 1128 the House of Lords held that this was not permissible because at common law the rights of a defendant in a criminal case to know and confront his accuser had to prevail.
The House held that if a power was to be created to hear evidence in a criminal case from a witness who remained anonymous to a defendant, that could only be done by statute.
The 2008 Act was the immediate Parliamentary response.
It was enacted after a greatly attenuated legislative timetable, with the agreement of all major parties.
It was expressly stipulated to have a short life, so that further consideration could be given to the principle to which it gave effect.
After such further consideration, the 2009 Act re enacted its provisions in substantially the same terms.
In the present case the Divisional Court held that these provisions applied.
Its reasoning was as follows (by reference to the 2009 Act): 65. (i) the Act applies to criminal proceedings; these are defined in section 97(1) as those in a Magistrates court, Crown court or the Court of Appeal (Criminal Division) in England and Wales which are: criminal proceedings consisting of a trial or other hearing at which evidence falls to be given; (ii) extradition proceedings are a kind of criminal proceeding within that definition, and extradition was described as a form of criminal proceeding by Lord Hoffmann in R vs Governor of Brixton Prison Ex parte Levin [1997] AC 741 at 746 F G; (iii) the present appellants, whose surrender was sought by Rwanda, were defendants for the purpose of the 2009 Act because they had been charged with offences (in Rwanda); (iv) although section 87(3) requires a defendant who applies for a witness anonymity order to disclose the identity of the proposed witness to the prosecutor, as well as to the court, this presented no obstacle because that term is defined in section 97 as any person acting as prosecutor, whether an individual or a body; a requesting State making an application for extradition is not acting as a prosecutor; either it, or some other body may in due course, if extradition is granted, take up the role of prosecutor at the subsequent trial, but that stage has not yet been reached; (v) although the Crown Prosecution Service (CPS) generally conducts extradition proceedings on behalf of the Requesting State, and does so in this case, it, like the State, is not acting as a prosecutor when it does so. 66.
There is no difficulty with propositions (iv) and (v).
Extradition proceedings are not a criminal trial.
The person whose extradition is sought is not in peril in them of conviction, and his guilt or innocence will not be decided.
The issue is whether he should be surrendered to the Requesting State for the purpose of subsequent trial.
The Requesting State is not prosecuting him before the English court; it is asking the UK to surrender him.
The CPS generally acts as the advocate or agent of the Requesting State; that its principal role in England & Wales is to prosecute allegations of crime does not mean that it does not have this separate and different function in extradition proceedings.
Its role in extradition proceedings is made clear by section 190 of the Extradition Act 2003.
That amends section 3(2) of the Prosecution of Offences Act 1985, which ascribes various functions to the CPS, chief of which is to take over the conduct of all criminal proceedings (with specified exceptions).
The amendment made by section 190 of the Extradition Act inserts a new additional function, namely: (2)(ea) to have the conduct of any extradition proceedings That, however, is made subject to the specific exception that the CPS is not to do so when requested not to by the Requesting State.
This makes clear the advocacy or agency role of the CPS in extradition proceedings. [It ought to be noted that the CPS may separately fulfil a different function under section 83A and following of the Extradition Act where forum proceedings fall to be determined, but these do not affect the foregoing propositions.] 67.
The difficulty lies in propositions (i) to (iii).
There cannot be the slightest doubt that the 2008 and 2009 Acts were passed in order to deal with criminal prosecutions in England, Wales and Northern Ireland.
They were a direct response to R v Davis which itself was concerned with such prosecutions and with no other form of proceeding.
The modest extension afforded by the definition section (section 97) to other hearings at which evidence falls to be given is plainly intended to encompass the kind of ancillary application or proceeding which may attend a criminal prosecution either in advance of the trial or after it has finished.
Many possible examples might be envisaged.
They might include, in advance of trial, case management hearings at which a fear of witness intimidation falls to be considered or where rulings as to the giving of evidence are to be considered, and, after trial, hearings relating to such matters as sentencing or the making of protective orders like Sexual Offences Prevention Orders or Serious Crime Prevention Orders.
In the days when magistrates conducted committal proceedings to hear the Crown evidence and to determine whether there was a case to answer, those would no doubt have fallen within the definition, for such committal proceedings were an integral part of the prosecution process and the parties were the same as they would be at trial in the Crown Court, namely a prosecutor and the defendant.
But one cannot treat extradition proceedings as a part of a criminal prosecution in England and Wales.
Even though, in the case of some (but by no means all) Part II territories, it may be necessary for the Requesting State to establish a prima facie case, the proceedings are not a prosecution but, rather, concerned solely with the issue of surrender.
Any prosecution is yet to come; it may or may not ensue and if it does it will not be under English rules.
It is true that in Ex p Levin Lord Hoffmann, giving the sole speech in the House of Lords, described extradition proceedings as criminal proceedings for the purpose of the application of the evidential rules contained in the Police and Criminal Evidence Act 1984.
In the end, the observation was obiter, because the issue in the case was the admissibility of certain bank records and since they were held to be real evidence rather than hearsay their admissibility did not depend on that Act at all.
But Lord Hoffman did accept that the Act would apply to extradition proceedings, and indeed that so had the power of the court under section 78 to exclude prosecution evidence on the ground that it would have an unfair effect on the proceedings, until the amendment of that section to except committal proceedings.
It does not, however, follow that extradition proceedings can be equated to a criminal prosecution or that they are criminal proceedings for all purposes, still less that they are criminal proceedings for the purpose of the 2008 and 2009 68. Acts.
On the contrary, it is clear that neither proposition is correct.
That appears from any or all of the following considerations. (i) Lord Hoffmann explicitly described extradition proceedings as criminal proceedings of a very special kind (at 746F). (ii) The application to extradition proceedings of English rules of criminal evidence (including those in the Police and Criminal Evidence Act 1984) was clear in any event, then as now.
At that time the relevant provision was paragraph 7(1) of Schedule 1 to the Extradition Act 1989, which provided that the prospective defendant was to be remanded in custody for the decision of the Secretary of State upon surrender if "such evidence is produced as . would, according to the law of England and Wales, justify the committal for trial of the prisoner if the crime of which he is accused had been committed in England or Wales Now, the same result follows from section 84(1) of the Extradition Act 2003, read with section 77.
Section 84(1) requires the appropriate judge to determine whether: there is evidence which would be sufficient to make a case requiring an answer by the person if the proceedings were the summary trial of an information against him , whilst section 77 provides that he shall have the same powers as nearly as may be as he would have in summary proceedings for an offence. (iii) Lord Hoffmann recognised that even if section 78 did apply to extradition proceedings, it would do so only by way of the (then) rule that evidence was to be considered as if at English committal proceedings.
He specifically identified the special nature of extradition proceedings and held that section 78 would require to be modified in its application to them so that what fell for consideration was not any unfair effect on any subsequent trial but unfair effect on the extradition hearing itself: see 748A, where he underlined the fact that at the extradition hearing it ought ordinarily to be assumed that if the prospective defendant is surrendered local procedures in the Requesting State will ensure fairness there.
That is a clear recognition of the essential difference between extradition proceedings on the one hand and a criminal prosecution and trial on the other. (iv) Section 87 of the 2009 Act provides for applications for witness anonymity orders to be made either by the prosecutor or by the defendant.
Where the application is made on behalf of a defendant, section 87(3) requires the identity of the witness to be revealed not only to the court but to the prosecutor.
As the Divisional Court correctly held, there is no prosecutor in an extradition hearing.
The notion of criminal proceedings existing without a prosecutor is difficult enough on any view; but even if such a thing can for any purpose be imagined, it is clear that the 2009 Act, and its predecessor the 2008 Act, are confined to prosecutions, with prosecutors.
It is also doubtful that the person whose extradition is sought falls within the definition of defendant for the purposes of the 2009 Act.
Defendant is defined by section 97 in terms which are plainly appropriate to a person facing trial in England and Wales, but may not be to someone whose surrender is sought for potential trial elsewhere: (v) "the defendant", in relation to any criminal proceedings, means any person charged with an offence to which the proceedings relate (whether or not convicted) Extradition proceedings under Part II of the Extradition Act 2003 depend upon a request to the UK by the Requesting State.
For the very detailed process of the Act to begin, the Secretary of State must certify under section 70 that she has received a valid request.
A valid request is one which states, inter alia, that the person sought: is accused in the category 2 territory of the commission of an offence specified in the request.
The use of the word accused would appear to be deliberate.
The person concerned may or may not have been charged in the Requesting State, according, no doubt, among other things, to that States practice in relation to absent persons.
It is to be observed that the Extradition Act 2003 generally refers to the person who is the object of extradition proceedings as the person whose extradition is sought, rather than as the defendant, and that in certain places where it wishes to apply other statutory references to a defendant to this person, it says so expressly.
An example is section 205(3) which provides: (3) As applied by subsection (1) in relation to proceedings under this Act, section 10 of the Criminal Justice Act 1967 and section 2 of the Criminal Justice (Miscellaneous Provisions) Act (Northern Ireland) 1968 have effect as if (a) references to the defendant were to the person whose extradition is sought (or who has been extradited); (b) references to the prosecutor were to the category 1 or category 2 territory concerned; (vi) Lastly, it is by no means clear that the place of an extradition hearing is within the definition of court for the purposes of the 2009 Act.
Section 97 provides that for the purposes of a witness anonymity order: "court" means (a) in relation to England and Wales, a magistrates' court, the Crown Court or the criminal division of the Court of Appeal 69.
Those are, of course, the courts in which prosecutions in England and Wales are conducted.
Extradition hearings under the Act of 2003 are held before what that Act calls the appropriate judge in relation to Part II see section 70(9) and following.
The appropriate judge is, by section 139, a District Judge (Magistrates Courts) specially nominated by the Lord Chief Justice.
The fact that the nomination has fallen upon certain District Judges (Magistrates Courts) who ordinarily sit at Westminster Magistrates Court does not mean that they are sitting in that capacity when conducting an extradition hearing, nor that such hearing is held in a Magistrates Court.
Consistently with this, section 77 provides that in an extradition hearing, the appropriate judge: has the same powers (as nearly as may be) as a magistrates' court would have if the proceedings were the summary trial of an information against the person whose extradition is requested.
It is not, however, necessary to force extradition proceedings into the 2008 or 2009 Acts in order to justify the receipt of evidence from a witness whose anonymity is protected.
The jurisdiction to receive evidence on this basis which was discussed in R v Davis derived from the inherent powers of the court to control its own procedure.
What Davis decided was that this power did not extend, in a criminal prosecution, to hearing a witness whose identity was not disclosed to the defendant.
Statutory sanction was called for.
Statutory sanction has now been given for the paradigm case of an English criminal prosecution.
The inherent power of the court to admit such evidence in extradition proceedings remains, and can properly be exercised by analogy with the statutes.
Indeed, at the time of Davis, there was existing House of Lords authority in R (Al Fawwaz) v Governor of Brixton Prison [2001] UKHL 69, [2002] 1 AC 556 for the proposition that anonymous evidence was indeed receivable in extradition proceedings, and in Davis Lord Bingham endorsed this decision.
As Lord Mance observes at paragraph [50] this endorsement may not have given full consideration to the reliance in Al Fawwaz upon the cases in which English criminal courts had admitted anonymous evidence, such as R v Taylor and Crabb [1995] Crim LR 254, nor did it refer to the requirement that a prima facie case be adduced in extradition proceedings.
However, I agree with Lord Mance that even if these considerations weaken the authority of the endorsement of Al Fawwaz in Davis, the subsequent passage of the 2008 and 2009 Acts clearly shows that anonymous evidence may be received in English criminal cases, providing the statutory safeguards are met, and it follows that such evidence is equally admissible in extradition proceedings. 70. 71. 72.
In the present appeal, Mr Lewis QC for the Government of Rwanda conceded that in relation to some parts of an extradition hearing there could be no objection to the hearing of evidence from a witness who remained anonymous.
His concession was confined to issues arising under sections 81 (extraneous considerations) or 87 (human rights barriers to surrender) and was made on the basis that the ordinary rules of evidence do not apply on those issues.
That approach enabled him to submit that the persons whose extradition is sought in this case could not rely on witnesses on the issue of prima facie case unless their identity was disclosed to all parties.
The practice in relation to material going to section 81 or 87 issues is, however, as Lord Mance says, probably better analysed as a relaxed approach to expert evidence.
Experts are generally entitled to give evidence based upon a background corpus of knowledge.
What appears to happen on these issues, as in immigration cases, is that there is a relaxed readiness to permit experts to give evidence of opinion as to prevailing circumstances in the foreign State which is based upon information gathered from unnamed and sometimes unknown sources.
To that extent, such sources are likely to remain unknown not only to the other party, but to the court.
Any possible unreliability of such sources falls to be assessed by the court as part of its overall evaluation of the evidence.
Receipt of evidence of this kind is clearly different from hearing a witness who is present but whose identity is known to the court but not to one party.
In the present proceedings, the persons whose extradition is requested seek to adduce evidence not only of this expert variety but also from witnesses of fact who are said to be in genuine fear for the safety of themselves or their families if their identity is known to the Requesting State.
The evidence in question (which this court has, correctly, not viewed) is said to go both to the question of whether there is or is not a prima facie case and to issues arising under section 81 and/or 87.
It is difficult to see why, if witness anonymity is in principle permissible in extradition proceedings, subject to its being fair to receive it, it should be confined to section 81 or 87 issues.
In Al Fawwaz the evidence of the anonymous witnesses went to whether there was or was not a prima facie case, and was tendered on behalf of the requesting State.
True it is that section 84 of the Extradition Act means that a prima facie case must be established by evidence which could establish it if the proceedings were a summary trial, but the 2009 Act makes it clear that in a summary trial a witness may be heard anonymously if the safeguards set out in that Act are in place. 73.
An extradition judge will bear in mind that where the issue is the presence of a prima facie case, he is generally not concerned to assess the credibility of the witnesses relied upon, at least unless they are so damaged that no court of trial could properly rely on them.
Nevertheless, it is likely that any extradition judge will be more cautious in relation to the admission of anonymous evidence on the issue of prima facie case than in relation to section 81 or 87 issues, and the more cautious still where it is proffered by the requesting State.
It is clear that the overriding principle is that such evidence can be admitted only when it is fair to all parties that it should be.
It must remain an unusual exception to the general practice.
That is likely to mean that an extradition judge will apply by analogy, so far as may relevant, the same principles as are stipulated in the 2009 Act for criminal prosecutions in England and Wales.
He will need to be satisfied that there is genuine cause for anonymity, generally a justified fear for the safety of the witness or others which cannot otherwise be protected, and that justice requires that the evidence be given.
It will also be likely to mean that a crucial factor in his decision whether to admit it will be the extent of the means available to the other party to challenge it.
In considering this question he will no doubt want to consider whether the party tendering the witness has or has not provided the maximum possible information about the witness, short of identifying material, which could be deployed in challenging him.
He will ordinarily require that the court itself is given the fullest information of identity.
He will no doubt have in mind that anonymity may often weaken the weight which can be given to evidence given.
Providing, however, he makes all relevant enquiries and admits the evidence of a person who is anonymous to a party only if satisfied that the proceedings are nevertheless fair, he has the power to hear such a witness.
LORD TOULSON 74.
The form of Memorandum of Understanding (MOU) under which the present extraditions are sought begins with three recitals.
Two of them are in these terms: HAVING DUE REGARD for human rights and the rule of law; MINDFUL of the guarantees under their respective legal systems which provide an accused person with the right to a fair trial, including the right to an adjudication by an impartial tribunal established pursuant to law; 75.
The MOU seeks to achieve the objective of ensuring protection of the appellants human rights by providing in para 4(d) that extradition may be refused if it appears to the Judicial Authority that extradition would be incompatible with [Xs] human rights. 77. 76.
The Judicial Authority is defined in paragraph 1 as the judicial authority which is charged under the law of this country with the duty of considering requests for extradition.
In other words it is the Magistrates Court.
In her judgment dated 28 January 2014 on the appellants application to adopt a closed hearing procedure to enable the appellants to place before the court evidence in the absence of the Crown Prosecution Service representing the Government of Rwanda, District Judge Arbuthnot recorded that she had read for the purposes of the application folders of evidence provided by Dr Browns and Mr Ugirashebujas lawyers.
She was later provided with a folder by the lawyers acting for Mr Nteziryayo, but did not read it, and she was told that evidence on behalf of Mr Mutabaruka was in preparation. 78.
The judge said that she was prepared to accept that the files which she read contained important and material evidence which was relevant in particular to the question whether the relevant appellants would receive an article 6 compliant trial if they were extradited.
She held that she was bound by the decisions of this court in Al Rawi and the Divisional Court in B Sky B (later affirmed by this court) to refuse the applications.
But she expressed concern that there may be a risk of serious prejudice to the defence in making that decision and for that reason it was with some reluctance that she refused the application. 79.
Dr Browns solicitor has made witness statements in which he says that he has visited Rwanda with leading and junior counsel and taken statements from four witnesses, who all say that they are not willing for their identities to be revealed to the Rwandan Government for fear that they and their families would be placed in serious danger.
He states that the nature of their evidence makes them immediately identifiable to the Rwandan authorities and that any redaction that sufficiently protects their identity would make their evidence meaningless.
It is said that the most important witness is either a present or former Rwandan prosecutor or police officer, a Rwandan judicial officer or a prosecution witness.
It is said that he has given audio taped and video taped evidence to Dr Browns lawyers about the fabrication of evidence against Dr Brown by state officials. 81. 82. 80.
The court is in a cleft stick.
On the one hand, Lord Mance says (at para 29) that the appellants submission that the court should receive such evidence in a closed session assumes the truth of what they set out to prove; that it is only speculation that what they say would be relevant, truthful and persuasive; and that the very nature of a closed material procedure would mean that this could not be tested.
I think that we may take it that the material is relevant because the district judge has accepted that it is, but in any event that would not be difficult to assess.
The real problem is whether it is truthful and how that is to be assessed.
If it is truthful, then the refusal of the witnesses to allow their identity to be disclosed is not remarkable. (The English courts have experience of truthful witnesses who are too frightened to give evidence if their identity is to be revealed.
In some circumstances, statute permits the prosecution to rely on evidence of witnesses whose identity is withheld from the defence.) I do not agree that the appellants submissions assume that the evidence is truthful.
Rather, they assert that it is potentially credible and that the court should be prepared to consider it.
It is said that if the court is prepared to look at such evidence, it will encourage others to manufacture false evidence.
That is certainly a risk.
The same objection was made to allowing people accused of serious offences to give evidence on their own behalf prior to the Criminal Evidence Act 1898.
No doubt that Act has enabled some defendants to hoodwink juries by inventing false defences which the prosecution has been unable to disprove, but that is a less grave affront to justice than disallowing defendants from putting their evidence before the court on account of the attendant opportunities for abuse.
In the present case two of the appellants have obtained evidence which the district judge considers relevant and important to their case, but those witnesses are beyond the protection of the United Kingdom and the appellants are unable to put their evidence before the court unless the court is prepared to consider it without disclosure to the requesting state.
There is obvious prejudice to the requesting state if the court agrees to do so and obvious potential for abuse.
That is one side of the picture, but there is another.
Just as the evidence cannot be assumed to be truthful, so it cannot be assumed to be untruthful.
What if it is indeed the case that the prosecutions evidence has been fabricated and that those who have provided that information to the appellants lawyers are genuinely frightened to reveal their identity on understandable grounds? If the United Kingdom authorities decline to look at the evidence unless it is disclosed to the requesting state which it cannot be the appellants are likely to suffer a denial of their human rights as a result of our shutting our eyes to that evidence.
In my view that is unacceptable. 83. 84.
The evidential problem is very real, but it is not a satisfactory answer simply to apply a blindfold to the evidence.
To refuse to consider it has the same practical effect as assuming the evidence to be untrue, which cannot be assumed.
I would hold that justice, and the respect for human rights on which the MoU was expressly predicated, require that at some stage in the process the evidence should be able to be considered.
There are three ways in which this could occur. 85.
The first is for the court to make an exception to the Al Rawi principle in this case.
The exception would be based on the need to ensure that the court does not through blindness facilitate a foreseeable and potentially serious breach of human rights by ordering extradition to a foreign country, of which there is evidence that, by the very nature of the circumstances, cannot be disclosed to the requesting state.
If that approach is rejected, as it is by the majority in this case, I apprehend that it will be open to those appellants who are not British citizens to apply for asylum or humanitarian protection; and, on appeal against a refusal by the Home Secretary, they would be able to place before the immigration judge the material which the district judge was not permitted to consider, without that evidence being disclosed to the foreign state, since it would not be a party to the proceedings. 86. 87.
That avenue would not be available to the appellant who is a British citizen.
It would be manifestly unacceptable that a non British citizen should have greater means of protection of their human rights than a British citizen, and that cannot have been the intention of the government in entering into the MoU.
I anticipate that it would be open to the British appellant to ask the government to apply the MoU in a way which would involve treating him no less favourably than it would a non British citizen, on the ground that to do otherwise would be a (highly unusual) form of unjustifiable discrimination, and if necessary to bring judicial review proceedings.
In my view the first way would be the best.
Under the MoU it was intended that determination of any human rights issues should be a matter for the judicial authority.
The district judge has received and is due to hear general evidence on the subject.
If the evidence which the appellants seek to introduce is to be considered by anyone, it would be best done by the same judge, who would evaluate to the best of her ability it in the context of all the evidence before her.
The exercise would be similar to that performed by 88. immigration and asylum judges when considering asylum applications supported by evidence about alleged conduct of foreign authorities which will not have been disclosed to those authorities.
Tribunal judges are used to scrutinising such evidence in the light of other objective evidence.
It is not a perfect system but it is fair and workable. 89.
The second way would avoid the problem of disclosure of the evidence to the foreign state, because the foreign state would not be a party to the application, any more than it would be in any other asylum application.
There would be no question of withholding the evidence from the Secretary of State.
On the contrary, the evidence would form the basis of the request to the Secretary of State, against which an appeal would lie.
It would be contrary to the ordinary practice of the Secretary of State to disclose such evidence to the foreign authority, and it is difficult to imagine that there would be any question of disclosure of statements of witnesses which, if true, could place them or their families in jeopardy.
But there are disadvantages to this way of proceeding. 90.
First, to have two sets of proceedings with overlapping evidence is undesirable.
I do not see that the asylum application could be dismissed as an abuse of process, on the ground that it amounted to a collateral attack on the findings in the extradition proceedings, in circumstances where the appellants would not have been able to present all relevant evidence to the magistrates court.
The United Kingdom has an international obligation to consider an application for asylum, and I cannot see that this responsibility could be said to have been fulfilled by an extradition hearing at which the court was precluded by its own rules from hearing evidence relevant to the asylum claim. (Nor do I think, with respect, that the tribunal judge could properly draw any adverse inference about the credibility of the evidence from the lateness of the asylum application, when the applicant on legal advice had sought to deploy the evidence at what was thought to be the appropriate stage.) 91.
Secondly, there is the problem that an application for asylum or human rights protection would be open only to the appellants who are not British subjects.
Such discrimination might be overcome in the way that I have mentioned, but that would potentially involve a further set of proceedings. 92.
Thirdly, rights under the European Convention are not identical with rights under the Refugee Convention, although the overlap is such that in the present case there may well not be a practical problem. 93.
Mention has been made by Lord Mance and Lord Hughes of the possibility that any asylum claim would be excluded by article 1F(a) of the Refugee Convention relating to war criminals.
Lord Hughes suggests that the scope for a finding that there is a prima facie case for extradition. but no serious reason for applying the exclusion is likely to be narrow.
However, there is a significant difference in the standard of proof.
A prima facie case for extradition requires a much less high standard of proof than a decision that an applicants rights under the Refugee Convention are excluded by article 1F(a): compare R v Governor of Pentonville Prison Ex parte Alves [1993] AC 284,290,292 and Al Sirri v SSHD [2012] UKSC 54, [2013] 1 AC 745.
Moreover the evidence before the district judge and the tribunal judge would be different.
I do not therefore consider, with respect, that article 1F(a) is relevant to the issue which this court has to decide. 94.
The complications and delays which I foresee arising at the next stage or stages of legal proceedings, if in the circumstances of this case the district judge is not permitted to examine evidence of the kind with which we are concerned in a closed hearing, reinforce my view that the least unjust way to ensure proper protection of the appellants human rights is to make the exception to the Al Rawi principle for which they contend.
I would therefore allow these appeals.
On the separate question whether an extradition judge conducting proceedings under the Extradition Act 2003 has power to receive evidence from an anonymous witness, I agree with Lord Hughes. 95. 49.
Lord Hughes has in his judgment examined the position regarding the 2009 Act in detail and reached the conclusion that it does not apply for fuller reasons, with which I agree.
| UK-Abs | The issues in this appeal are (a) whether, in the absence of any statutory power, a District Judge in extradition proceedings has the power to admit the evidence in a closed material hearing (without disclosing it to the State requesting extradition); and alternatively (b) whether, in such proceedings, a witness anonymity order can be made under the Coroners and Justice Act 2009, s.87 [2].
The facts were that the Government of Rwanda had, under Memoranda of Understanding with the United Kingdom dated 8 March 2013, requested the extradition of the Appellants and the Intervener to stand trial in Rwanda for war crimes [1].
In the extradition proceedings before Westminster Magistrates' Court, the Appellants sought to establish that their extradition risked exposing them to a flagrantly unfair trial (contrary to Article 6 of the ECHR) and even torture or mistreatment (contrary to Article 3 of the ECHR).
Evidence on which they sought to rely came from witnesses who were unwilling to reveal their identity to the Rwandan Government and the Appellants argued that this evidence should be considered by the judge without being disclosed to the Rwandan Government or the CPS (who were acted on its behalf).
The District Judge found that she could not consider evidence in a closed hearing or make witness anonymity orders [4] [8].
The Administrative Court dismissed the challenge to the District Judges decision but commented that the Coroners and Justice Act 2009, s.87 enabled witness anonymity orders to be made in extradition proceedings [9].
On appeal to the Supreme Court, it was common ground between the parties that the Coroners and Justice Act 2009, s.87 had no relevant application to extradition proceedings [47].
The Supreme Court dismisses the appeal by a 4 1 majority (Lord Toulson dissenting), finding that: (1) The judge had no power to order a closed material hearing or otherwise limit disclosure and was right not to do so [27] and [34]. (2) The judge had no power to order disclosure to the CPS on the condition that further disclosure to the Rwandan Government was prohibited and was right not to do so [35] and [37].
(3) The judge had no power to make a witness anonymity order under s.87 of the Coroners and Justice Act 2009 [47].
Lord Mance (with whom Lord Neuberger and Lord Reed agrees) gives the lead judgment and agrees with the judgment of Lord Hughes on the admissibility of anonymous evidence in extradition proceedings.
Lord Hughes (with whom Lord Neuberger and Lord Reed also agree) agrees with Lord Mance but adds further comments.
Lord Toulson dissents, but agrees with Lord Hughes on the admissibility of anonymous evidence in extradition proceedings.
Lord Mance reasons that: (1) Section 77(1) of the Extradition Act 2003 provides that in extradition hearings the judge has the same powers (as nearly as may be) as a magistrates court would have if the proceedings were the summary trial of an information against the person whose extradition is requested [13].
That includes matters of evidence and procedure [19].
Although the parties were agreed that the normal rules of evidence should be relaxed in extradition hearings raising issues of human rights [21], the power of the court to order a closed material hearing remained limited to the exceptional circumstances recognised in Al Rawi v Security Service [2011] UKSC 34 (to protect the best interests of a child or where disclosure would undermine the whole object of the proceedings) [27] and [34].
It would not be in the interests of justice to allow further departure from the normal principle of open justice, as the relevance, truthfulness and persuasiveness of the evidence could not be tested in a closed material hearing [29]. (2) As the proceedings were, in substance, between the Appellants and the Rwandan Government, and the CPS represented the latter, there was no power to order disclosure to the CPS but prohibit disclosure to the Rwandan Government [37]. (3) The judge would not, as was common ground between the parties, have had the power to make a witness anonymity order under s.87 of the Coroners and Justice Act 2009 [47] [48].
Lord Hughes agrees with the conclusion of Lord Mance that an extradition court lacks the power to embark upon closed material hearings [53], but makes additional comments on (a) the relationship between extradition proceedings and any subsequent immigration or human rights claims [54] [62]; and (b) the power of the court to admit anonymous evidence in extradition proceedings conducted under the Extradition Act 2003, provided that the proceedings are nevertheless fair [63] [74]: Lord Toulson dissents on the basis that the District Judge had accepted that the proposed evidence was relevant [82] and that it would be wrong to assume (in effect) that the evidence was untrue merely because its veracity could not be tested in a closed material hearing [84].
He concluded that there should be an exception to the principle of open justice where, as here, not ordering a closed material hearing or not prohibiting disclosure to the State requesting extradition would facilitate a foreseeable and potentially serious breach of human rights [86] [93].
|
The mistreatment of migrant domestic workers by employers who exploit their employees vulnerable situation is clearly wrong.
The law recognises this in several ways.
Depending on the form which the mistreatment takes, it may well amount to a breach of the workers contract of employment or other employment rights.
It may also amount to a tort.
It may even amount to the offence of slavery or servitude or forced or compulsory labour under section 1 of the Modern Slavery Act 2015 or of human trafficking under section 2 of that Act.
If a person is convicted of such an offence and a confiscation order made against him, the court may also make a slavery and trafficking reparation order under section 8 of the Act, requiring him to pay compensation to the victim for any harm resulting from the offence.
But such orders can only be made after a conviction and confiscation order; and remedies under the law of contract or tort do not provide compensation for the humiliation, fear and severe distress which such mistreatment can cause.
Such a remedy could be found if the employers conduct amounts to race discrimination under the Equality Act 2010 or its predecessor the Race Relations Act 1976.
This would have the added advantage that proceedings for the statutory tort of race discrimination can be brought in an employment tribunal, at the same time as proceedings for unpaid wages and other breaches of the contract of employment and for unfair dismissal.
The issue in this case, therefore, is whether the conduct complained of amounts to discrimination on grounds of race.
In both the 1976 and 2010 Acts, at the relevant time, the definition of race also covered nationality and ethnic or national origins.
In the two cases before us, the employment tribunals both found that the reason for the employers mistreatment of their employees was their victims vulnerability owing to their precarious immigration status.
The principal question for this court, therefore, is whether discrimination because of, or on grounds of, immigration status amounts to discrimination because of, or on grounds of, nationality.
The subsidiary question is whether the employers conduct amounted to indirect discrimination against persons who shared that nationality.
Ms Taiwos case
Ms Taiwo is a Nigerian national of Yoruba and Nigerian ethnicity.
She is married and has two children but was living in poverty in Nigeria.
She entered the United Kingdom lawfully in February 2010 with a migrant domestic workers visa obtained for her by Mr and Mrs Olaigbe, her employers.
Mr Olaigbe is also a Nigerian of Yoruba ethnicity, but comes from a wealthy and influential family.
Mrs Olaigbe is a Ugandan.
They have two children (and at the time were also fostering two other children).
They had manufactured a history of Ms Taiwos previous employment with Mr Olaigbes parents so that she would qualify for a domestic workers visa.
They had also fabricated a contract of employment, which Ms Taiwo never saw, and which provided for more favourable terms of employment than Ms Taiwo had understood.
On arrival in the United Kingdom, Mr Olaigbe took her passport and kept it.
The employment tribunal found that Ms Taiwo was expected to be on duty, during most of her waking hours and was not given the rest periods required by the Working Time Regulations 1998 (SI 1998/1883).
She was not paid the minimum wage to which she was entitled under the National Minimum Wage Act 1998.
For April, May and June 2010, she was paid the sum of 200 per month which she had been promised, and there was a further payment of 300 in August.
But in October she was forced to hand over 800 to the employers.
She was not given enough to eat and suffered a dramatic loss of weight.
She was subjected to both physical and mental abuse by Mr and Mrs Olaigbe and Mr Olaigbes mother, who was living with them for some of the time.
She was slapped and spat at; she was mocked for her tribal scars and her poverty, and called a crazy woman.
She was not allowed her own personal space and shared a room with the employers two children.
The Employment Appeal Tribunal characterised her situation as systematic and callous exploitation.
Eventually, through a sympathetic worker at the childrens playgroup, she was put in touch with social services and other agencies.
These enabled her to escape in January 2011 and supported her thereafter.
In April 2011 she brought a claim in the employment tribunal.
In January 2012, the tribunal upheld her claims under the National Minimum Wage Act 1998, for unlawful deduction from wages under section 13 of the Employment Rights Act 1996, for failure to provide the rest periods required by the Working Time Regulations 1998 and for failure to provide written terms of employment under section 1 of the 1996 Act.
In February she was awarded 30,458.85 under the National Minimum Wage Regulations, 1,520 for failure to provide written particulars of her contract of employment, and 1,250 for failing to provide rest periods.
However, the employment tribunal dismissed her claims of direct and indirect race discrimination under the Equality Act 2010 (in fact some of her employment was covered by the Race Relations Act 1976, as the relevant provisions of the Equality Act 2010 only came into force on 1 October 2010, but it makes no material difference).
The tribunal found that Ms Taiwo was treated as she was because she was a vulnerable migrant worker who was reliant on the respondents for her continued employment and residence in the United Kingdom.
She had not been treated as she was because she was Nigerian.
Another migrant worker whose employment and residence in the United Kingdom was governed by immigration control and by the employment relationship would have been treated in the same way.
Mr and Mrs Olaigbe might have chosen to employ a Ugandan and there was no reason to think that a Ugandan would have been treated any more favourably than Ms Taiwo had been.
Hence there was no direct discrimination on grounds of race.
The Employment Appeal Tribunal upheld the employment tribunals conclusions on direct discrimination.
They found that the tribunal had not properly approached the claim of indirect discrimination, because it had not tried to identify the provision, criterion or practice (PCP) which put the group to which the claimant belonged at a comparative disadvantage; but no tenable PCP had been put forward.
Hence the appeal on discrimination was dismissed.
Ms Onus case
The facts of Ms Onus case are similar.
She too is Nigerian.
She entered the United Kingdom in July 2008 on a domestic workers visa obtained for her by her employers, Mr and Mrs Akwiwu.
She had previously worked for them in Nigeria, but they too had supplied false information to the United Kingdom authorities in order to obtain the visa.
Mrs Akwiwus mother later drafted a contract for her in Nigeria which provided that she would neither leave nor abscond from them within a year and that if she did she would be reported to the UK police and immigration authorities.
They had taken away her passport on arrival and did not tell her where it was kept.
She was not provided with a written statement of her terms and conditions of employment.
She was required to work, on average, for 84 hours a week, looking after the home and the couples two children, one of whom was a prematurely born baby who required special care.
She was not given the required rest periods or annual leave.
She was not paid the minimum wage.
She was threatened and abused by her employers.
She was told that she would be arrested and imprisoned if she tried to run away.
She was also told that the police in the United Kingdom were not like the Nigerian police, by which was meant that she would be arrested and put in prison for minor matters.
She was not registered with a general practitioner.
Ms Onu fled her employers home in June 2010, walking some eight miles to the home of a Jehovahs Witness whom she had met on the doorstep of the home because she had no money.
She was put in touch with a charity which assists trafficked migrant workers.
In September 2010 she brought proceedings making the same claims that Ms Taiwo made, to which she later added claims for harassment and victimisation under the Equality Act 2010.
The employment tribunal upheld the same claims as had the tribunal in Ms Taiwos case and also held that Ms Onu had been constructively and unfairly dismissed.
They further held that her employers had directly discriminated against her and had harassed her on grounds of race.
They found that the employers had treated her less favourably than they would have treated someone who was not a migrant worker.
They had treated her in the way that they did because of her status as a migrant worker which was clearly linked to her race.
At the later remedy hearing, she was awarded 11,166.16 for unfair dismissal, including the failure to provide a statement of terms and condition; 43,541.06 for unpaid wages; 1,266.72 for unpaid holiday; and 25,000 for injury to feelings and 5,000 aggravated damages.
The Employment Appeal Tribunal allowed the employers appeal in respect of the discrimination claim.
They held that no part of the employers treatment of Ms Onu was inherently bound up with her race but rather with her subordinate position and the relative economic benefits of her work in the United Kingdom compared with the poverty of her situation in Nigeria.
They also rejected a claim for indirect discrimination based on a PCP of the mistreatment of migrant domestic workers, because it was not a neutral criterion which disadvantaged some of those to whom it applied disproportionately when compared with others to whom it applied.
The Court of Appeal
The Court of Appeal heard the appeals of Ms Taiwo and Ms Onu on the discrimination issues together: [2014] EWCA Civ 279; [2014] 1 WLR 3636; [2014] ICR 571.
On the direct discrimination claim, there were two issues: the grounds issue and the nationality issue.
On the grounds issue, the court held that this was not a case in which the employers had published or applied a discriminatory criterion (an example would be that women required higher qualifications for employment than did men).
It was therefore necessary to examine the employers mental processes to discover whether the employees immigration status formed part of the reasons for treating them so badly.
It did not have to be the sole reason as long as it played a significant part.
In this case it did so.
That holding is not under appeal.
On the nationality issue, the court held that immigration status was not to be equated with nationality for the purpose of the Race Relations and Equality Acts.
There were many non British nationals working in the United Kingdom who did not share the particular dependence and vulnerability of these migrant domestic workers.
On the indirect discrimination claim, the court found that the mistreatment of migrant workers was not a PCP.
This factual situation had nothing to do with the kind of mischief which indirect discrimination is intended to address.
Ms Taiwo has permission to appeal to this court on the nationality issue.
Ms Onus case has been heard with hers as an application for permission to appeal with appeal to follow if permission is granted.
In view of the importance of the issue, permission to appeal is granted.
The court is particularly grateful to counsel for appearing for Mr and Mrs Akwiwu at very short notice, following the tragic and untimely death of Mr Jake Dutton who had represented them in the Employment Appeal Tribunal and the Court of Appeal.
We are also grateful to counsel and their instructing solicitors for appearing pro bono for both Mr and Mrs Olaigbe and Mr and Mrs Akwiwu.
Given that the Anti Trafficking and Labour Exploitation Unit is, quite properly, supporting the claims of Ms Taiwo and Ms Onu, it was particularly important that the contrary arguments were also fully presented to the court.
Direct discrimination
Section 13(1) of the Equality Act 2010 provides that A person (A) discriminates against another (B) if, because of a protected characteristic, A treats B less favourably than A treats or would treat others.
By section 4 of the Act, race is a protected characteristic.
By section 9(1) race includes (a) colour, (b) nationality, and (c) ethnic or national origins.
By section 39(2), An employer (A) must not discriminate against an employee of As (B) (a) as to Bs terms of employment, (b) in the way A affords B access, or by not affording access, to opportunities for promotion, transfer or training or for receiving any other benefit, facility or service, (c) by dismissing B, (d) by subjecting B to any other detriment.
The previous provisions of the Race Relations Act 1976 were to the same effect.
There can be no doubt that the conduct of these employers would amount to unlawful direct discrimination if it was on racial grounds (under the 1976 Act) or because of race (under the 2010 Act), which includes nationality.
These employees were treated disgracefully, in a way which employees who did not share their vulnerable immigration status would not have been treated.
As the employment tribunals found, this was because of the vulnerability associated with their immigration status.
The issue for us is a simple one: does discrimination on grounds of immigration status amount to discrimination on grounds of nationality under the 1976 and 2010 Acts? On the face of it, the two are different.
What basis is there for saying that they are the same?
Mr Robin Allen QC, who has said all that could possibly be said on behalf of the appellants, makes two basic points.
First, he argues that immigration status is a function of nationality.
It is indissociable from it.
British nationals have a right of abode here which cannot be denied.
All non British nationals are potentially subject to immigration control.
They require leave to enter and leave to remain.
These can be granted for limited periods and on limited terms.
Even those granted indefinite leave to remain may have that status withdrawn.
Secondly, he points to the flexible approach which has been adopted to the concept of nationality in other contexts.
Thus, article 14 of the European Convention on Human Rights forbids discrimination in the enjoyment of the convention rights on any ground such as national or social origin or other status.
In R (Morris) v Westminster City Council [2005] 1 WLR 865, it was held incompatible with article 14 of the European Convention on Human Rights, read with article 8, to deny a priority need for accommodation on the ground that a non British child was subject to immigration control while her British mother was not.
By section 28 of the Crime and Disorder Act 1998, an offence is racially aggravated if the offender shows at the time, or is motivated by, hostility towards members of a racial group to which the victim belongs or is assumed to belong.
By section 28(4) a racial group means a group of persons defined by reference to race, colour, nationality (including citizenship) or ethnic or national origins.
In Attorney Generals Reference (No 4 of 2004) [2005] EWCA Crim 889; [2005] 1 WLR 2810, calling a doctor an immigrant doctor was enough to establish that an assault was racially motivated: the epithets Indian and immigrant were both clearly referable to his nationality and national origins.
In R v Rogers [2007] 2 AC 62, it was held that calling people bloody foreigners, although without reference to a specific nationality, amounted to racially aggravated abuse.
Mr Allen also points out that the United Kingdom Border and Immigration Agencys Code of Practice, Prevention of Illegal Working, Guidance for Employers on the Avoidance of Unlawful Discrimination in employment practices while seeking to prevent unlawful working (2008), gives as an example of direct discrimination on racial grounds, giving an employee with limited leave to remain more degrading forms of work in comparison with employees with unlimited leave (para 3.2).
None of these examples is very helpful in deciding the issue which we have to decide.
Article 14 of the ECHR contains an open ended list of characteristics which may result in unjustified discrimination in the enjoyment of the rights protected by the Convention, ending in other status.
Foreign residence has been held to be a status for this purpose, so it is quite clear that immigration status also qualifies.
There was no need to distinguish between this and nationality in the Morris case and so the fact that it was regarded as nationality discrimination is neither here nor there.
The courts were not required to address their minds to the difference, if any, between the two, as we are here.
Similarly, when deciding whether an offence is racially aggravated for the purpose of the 1998 Act, the distinction is unlikely to be relevant.
Bloody foreigners is in any event a reference to nationality.
Attorney Generals Reference (No 4 of 2004) is closer to this case, but it is easy to justify a liberal approach to a statute which recognises that some forms of criminal behaviour are more hurtful to the victim and more damaging to society than others.
The courts had recognised this in their sentencing policies before the 1998 Act was enacted.
The Equality Act 2010, and its predecessors, are very different.
Generally speaking, the suppliers of employment, accommodation, goods and services are allowed to choose with whom they will do business.
There is freedom to contract, or to refuse to contract, with whomever one pleases.
The 2010 Act limits that freedom of contract (and also the freedom of suppliers of public services).
It does so in order to protect specified groups who have historically been discriminated against by those suppliers, shut out of access to the employment, accommodation, goods and services they supply, for irrelevant reasons which they can do nothing about.
In that context, the dividing line between which characteristics are protected and which are not protected is crucial.
Parliament could have chosen to include immigration status in the list of protected characteristics, but it did not do so.
There may or may not be good reasons for this certainly, Parliament would have had to provide specific defences to such claims, to cater for the fact that many people coming here with limited leave to remain, or entering or remaining here without any such leave at all, are not allowed to work and may be denied access to certain public services.
So the only question is whether immigration status is so closely associated with nationality that they are indissociable for this purpose.
Mr Allen is entirely correct to say that immigration status is a function of nationality.
British nationals automatically have the right of abode here.
Non British nationals (apart from Irish citizens) are subject to immigration control.
But there is a wide variety of immigration statuses.
Some non nationals enter illegally and have no status at all.
Some are given temporary admission which does not even count as leave to enter.
Some are initially given limited leave to enter but remain here without leave after that has expired.
Some continue for several years with only limited leave to enter or remain.
Some are allowed to work and some are not.
Some are given indefinite leave to remain which brings with it most of the features associated with citizenship.
In these cases, Ms Taiwo and Ms Onu had limited leave to enter on domestic workers visas.
It was the terms of those visas which made them particularly vulnerable to the mistreatment which they suffered.
At the relevant time, such visas were granted to workers who had already been working abroad for the employer, or the employers family, for at least a year; typically they would be granted for a year, though renewable; and the employee would have to seek the approval of the immigration authorities for any change of employer while here.
In practice, therefore, such workers were usually dependent upon their current employers for their continued right to live and work in this country.
The Independent Review of the Overseas Domestic Workers Visa (2015), commissioned by the Home Office, identified ten reasons for these workers particular vulnerability: their motivation and mentality is one of desperation, born of their inability to find work or earn enough to support their families in their home country (sometimes having left that country to work elsewhere before being brought to this country); they are without the safety net of friends and family and other support networks; they are often unfamiliar with the culture and language, which represents a significant barrier to wider social interaction; they often work long hours; they often do not know their legal rights; they mainly work in private homes, which are less easy to regulate; their work is often part of an informal economy, paid in cash and not declared to the tax authorities; their permission to be here depends upon their employers want or need of them; they have no recourse to public funds; and those employed by diplomats may have to combat claims of diplomatic immunity.
Those, like the claimant in Hounga v Allen [2014] 1 WLR 2889, who have come here as visitors without permission to work and stayed here illegally, are even more vulnerable.
Clearly, however, there are many non British nationals living and working here who do not share this vulnerability.
No doubt, if these employers had employed British nationals to work for them in their homes, they would not have treated them so badly.
They would probably not have been given the opportunity to do so.
But equally, if they had employed non British nationals who had the right to live and work here, they would not have treated them so badly.
The reason why these employees were treated so badly was their particular vulnerability arising, at least in part, from their particular immigration status.
As Mr Rahman pointed out, on behalf of Mr and Mrs Akwiwu, it had nothing to do with the fact that they were Nigerians.
The employers too were non nationals, but they were not vulnerable in the same way.
That, in my view, is enough to dispose of the direct discrimination claim.
But it is consistent with the approach of this court in the cases of Patmalniece v Secretary of State for Work and Pensions [2011] 1 WLR 783, which in turn applied the approach of the European Court of Justice in the cases of Schnorbus v Land Hessen (Case C 79/99) [2000] ECR I 10997 and Bressol v Gouvernement de la Communaut Franaise (Case C 73/08) [2010] 3 CMLR 559, and Preddy v Bull [2013] 1 WLR 3741.
These were cases, not about whether a particular characteristic fell within the definition of a protected characteristic in the 2010 Act, but about whether the conduct complained of amounted to direct or indirect discrimination.
There was no doubt that it was one or the other.
Patmalniece was about whether a residence requirement, which all British nationals, but not all non British nationals, could meet was directly discriminatory on grounds of nationality.
In Schnorbus, Advocate General Jacobs had said this (para 33): The discrimination is direct where the difference in treatment is based on a criterion which is either explicitly that of sex of necessarily linked to a characteristic indissociable from sex.
It is indirect where some other criterion is applied but a substantially higher proportion of one sex than of the other is in fact affected.
This concept of indissociability was taken up by Advocate General Sharpston in Bressol, where the facts were very similar to those in Patmalniece, and formulated thus (at para 56): I take there to be direct discrimination when the category of those receiving a certain advantage and the category of those suffering a correlative disadvantage coincide exactly with the respective categories of persons distinguished only by applying a prohibited classification.
In all three cases, the discrimination was held to be indirect rather than direct (the Court of Justice disagreeing with the Advocate General in Bressol).
There was not an exact correspondence between the advantaged and disadvantaged groups and the protected characteristic, as some of those distinguished by their nationality were not disadvantaged, although others were.
The same approach was adopted in Preddy v Bull, where Christian hotel keepers would deny a double bedded room to all unmarried couples, whether of opposite sexes or the same sex.
That would undoubtedly have been indirect discrimination, as same sex couples were not then able to marry and thus fulfil the criterion, whereas opposite sex couples could do so if they chose.
But the majority held that it was direct discrimination, because the hotel keepers expressly discriminated between heterosexual and non heterosexual married couples.
The couple in question were in a civil partnership, which for all legal purposes is the same as marriage.
Mr Allen argues that these cases can be distinguished, because they were cases in which an express criterion was being applied, be it nationality or heterosexuality, whereas these appeals are not concerned with such a criterion or test, but with the mental processes of the employers.
But that makes no difference.
In mental processes cases, it is still necessary to determine what criterion was in fact being adopted by the alleged discriminator whether sex, race, ethnicity or whatever and it has to be one which falls within the prohibited characteristics.
The point about this case is that the criterion in fact being adopted by these employers was not nationality but, as Mr Allen freely acknowledges, being a particular kind of migrant worker, her particular status making her vulnerable to abuse.
Indirect discrimination
Mr Allen accepts that this is not a case of indirect discrimination.
It is direct discrimination or nothing.
In my view he is wise to do so, but the fact that these cases cannot be fitted into the concept of indirect discrimination is further support for the view that the mistreatment here was not because of the employees race but for other reasons.
Indirect discrimination is defined in section 19 of the 2010 Act thus: (1) A person (A) discriminates against another (B) if A applies to B a provision, criterion or practice which is discriminatory in relation to a relevant protected characteristic of Bs. (2) For the purposes of subsection (1), a provision, criterion or practice is discriminatory in relation to a relevant protected characteristic of Bs if (a) A applies, or would apply, it to persons with whom B does not share the characteristic, it puts, or would put, persons with whom B (b) shares the characteristic at a particular disadvantage when compared with persons with whom B does not share it, (c) it puts, or would put, B at that disadvantage, and (d) A cannot show it to be a proportionate means of achieving a legitimate aim.
The concept in the 1976 Act was differently worded, but the basic principle is the same.
An employer or supplier has a rule or practice which he applies to all employees or customers, actual or would be, but which favours one group over another and cannot objectively be justified.
Requiring all employees to sport a moustache is obviously indirectly discriminatory against women.
The problem in this case is that no one can think of a provision, criterion or practice which these employers would have applied to all their employees, whether or not they had the particular immigration status of these employees.
The only PCP which anyone can think of is the mistreatment and exploitation of workers who are vulnerable because of their immigration status.
By definition, this would not be applied to workers who are not so vulnerable.
Applying it to these workers cannot therefore be indirect discrimination within the meaning of section 19 of the 2010 Act.
In disclaiming any reliance on indirect discrimination in these cases, Mr Allen urges the court not to rule out the possibility that, in other cases involving the exploitation of migrant workers, it may be possible to discern a PCP which has an indirectly discriminatory effect.
I am happy to accept that: in this context never say never is wise advice.
Conclusion
It follows that these appeals must fail.
This is not because these appellants do not deserve a remedy for all the grievous harms they have suffered.
It is because the present law, although it can redress some of those harms, cannot redress them all.
Parliament may well wish to address its mind to whether the remedy provided by section 8 of the Modern Slavery Act 2015 is too restrictive in its scope and whether an employment tribunal should have jurisdiction to grant some recompense for the ill treatment meted out to workers such as these, along with the other remedies which it does have power to grant.
| UK-Abs | The issue in these appeals is whether the mistreatment of migrant domestic workers who are vulnerable because of their precarious immigration status amounts to direct or indirect race discrimination.
The appellant in the first appeal, Ms Taiwo, is a Nigerian national who entered the United Kingdom lawfully in February 2010 to work for the respondents.
She had a migrant domestic workers visa obtained for her on the false basis that she had previously been employed by Mr Olaigbes parents in Nigeria.
Ms Taiwos passport was taken from her and she was expected to work during most of her waking hours for minimal wages.
She was starved and subject to physical and mental abuse.
She escaped and brought successful claims in the employment tribunal for the failure to pay her the minimum wage, for unlawful deductions from wages, for failure to provide rest periods and to give her written terms of employment.
She was awarded compensation in respect of these claims but her claim for race discrimination, which would have entitled her to damages for the fear and distress she suffered, was dismissed.
The tribunal found that her mistreatment was because she was a vulnerable migrant worker who was reliant on the respondents for her continued employment and residence in the UK, not because she was Nigerian.
Ms Onu, the appellant in the second appeal, suffered a similar experience.
She had worked for her employers in Nigeria and came to the UK on a domestic workers visa.
She worked on average for 84 hours a week, without the required rest periods, nor was she paid the minimum wage and she was threatened and abused by her employers.
She brought similar claims in the employment tribunal, which all succeeded including her claim for direct race discrimination.
The latter finding was reversed by the Employment Appeal Tribunal.
The Court of Appeal heard Ms Taiwo and Ms Onus appeals together and upheld the dismissal of their discrimination claims on the grounds that immigration status was not to be equated with nationality for the purpose of the Equality Act 2010.
Ms Taiwo appealed (and Ms Onu applied for permission to appeal) to the Supreme Court.
The Supreme Court unanimously grants permission to appeal to Ms Onu but dismisses both Ms Taiwo and Ms Onus appeals.
It holds that neither appellant has suffered race discrimination because the reason for their abuse by the respondents was not nationality but their vulnerability as a particular kind of migrant worker.
Lady Hale gives the only substantive judgment.
Under s 13(1) Equality Act 2010 (EA) 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.
Race is a protected characteristic and includes colour, nationality and ethnic origins [13].
There is no doubt in these cases that the appellants were treated disgracefully by their employers in a way which employees who did not share the appellants vulnerable immigration status would not have been treated.
The question is whether discrimination on grounds of immigration status amounts to discrimination on grounds of nationality [14].
Generally speaking employers are free to choose whom to employ, subject to the limits under the EA (and earlier legislation) to protect specified groups, who have historically suffered discrimination, from being shut out of access to employment for irrelevant reasons which they can do nothing about [21].
Parliament could have chosen to include immigration status in the list of protected characteristics but it did not do so [22].
Immigration status is a function of nationality in that non British nationals (other than Irish citizens) are subject to immigration control, but there is a wide variety of immigration statuses [23].
The appellants were particularly vulnerable to the abuse they suffered because of the terms of their domestic workers visas which meant they were dependent on their current employers for their continued right to live and work in the UK [24].
But there are many non British nationals living and working in the UK who do not share this vulnerability and would not have been abused in the same way.
The treatment of the appellants had nothing to do with the fact they were Nigerian and they were not the subject of direct discrimination [26].
This was not a case of indirect discrimination.
There was no provision, criterion or practice as defined in s 19 EA applied by the respondents to all their employees regardless of their immigration status [32].
The present law does not therefore offer redress for all the harm suffered by the appellants.
Parliament might wish to consider extending the remedy available under the Modern Slavery Act 2015 to give employment tribunals jurisdiction to grant compensation for ill treatment meted out to workers [34].
|
This appeal raises two important and controversial questions of commercial law.
The first is: in what circumstances will the law treat the authority of an agent as irrevocable.
The other is whether the receipt of money at a time when the recipient knows that imminent insolvency will prevent him from performing the corresponding obligation, can give rise to liability to account as a constructive trustee.
Introduction
Angoves Pty Ltd is an Australian winemaker, which for many years employed an English company called D&D Wines International Ltd as its agent and distributor in the United Kingdom.
D&D acted in both capacities.
It bought wines from Angoves in its own right and it sold wines on Angoves behalf to UK customers, generally retailers.
Both activities were governed at the relevant time by an Agency and Distribution Agreement (or ADA) dated 1 December 2011.
Under clause 34, the ADA was terminable by either side on six months notice, or, under clause 36, by notice with immediate effect in a number of events, including the appointment of an administrator or liquidator.
On 21 April 2012, D&D went into administration, and on 10 July 2012 moved into creditors voluntary liquidation.
At the commencement of the administration, there were outstanding invoices amounting altogether to A$874,928.81, representing the price of wine which D&D had sold to two UK retailers, but which the latter had not yet paid.
On 23 April 2012, Angoves gave written notice terminating the ADA and any authority of D&D to collect the price from these two customers.
The notice declared that Angoves proposed to collect the price directly from the customers and would account separately to D&D for their commission.
In due course, the liquidators objected to this course.
They claimed to be entitled to collect on the outstanding invoices, deduct commission due to D&D, and leave Angoves to prove in the winding up for the rest of the price.
The liquidators have never denied that Angoves was entitled to terminate the ADA or that their notice of 23 April 2012 had that effect.
But they contended that the relationship between D&D and Angoves in relation to the transactions covered by the invoices was that of buyer and seller, not agent and principal, and that accordingly the companys liability to Angoves at the commencement of the administration was a simple debt for goods sold and delivered.
Angoves disputed this contention.
They also argued that any moneys held by D&D for their account were held in trust for them.
By agreement between the parties, the sums paid to D&D on the invoices after the notice of termination were held by the liquidators in an escrow account pending the resolution of the dispute, and the sums paid directly to Angoves were held in their solicitors client account on the same terms.
The matter came before His Honour Judge Pelling QC, sitting as a judge of the High Court, on an application under section 112 of the Insolvency Act 1986 [2013] EWHC 215 (Ch).
He held that in the relevant respects the relationship between Angoves and D&D was that of principal and agent only, and that D&Ds authority to collect the price from customers came to an end upon service of Angoves termination notice.
In the Court of Appeal, the liquidators did not challenge the judges finding that D&D acted as agents.
Their case was that if D&D acted in the relevant respects as agents, their authority to collect the price of goods which they had sold on Angoves behalf survived the termination of the ADA because they needed it in order to recover their commission.
The Court of Appeal (Patten, Lewison and Sharp LLJJ) accepted this argument and allowed the appeal on that basis [2014] EWCA Civ 215; [2014] 2 BCLC 129; Angoves alternative case that the proceeds of the invoices were held in trust for them failed at both stages, although for different reasons.
The revocability of an agents authority
The general rule is that the authority of an agent may be revoked by the principal, even if it is agreed by their contract to be irrevocable.
The revocation is effective to terminate the agents authority, but gives rise to a claim for damages.
Powers of attorney were said by Lord Kenyon to be revocable from their nature: Walsh v Whitcomb (1797) 2 Esp 565, 566.
In Storys Law of Agency, 2nd ed (1864), p 598, at para 463, the rule was said to be so plain a doctrine of common sense and common justice that it requires no illustration or reasoning to support it.
Nonetheless, its basis has never really been in doubt.
An agent is empowered to commit his principal within the limits of his authority as if the principal had agreed personally.
This is a confidential relationship importing a duty of loyalty, and normally of undivided loyalty, on the part of the agent.
As Lord Atkinson observed, delivering the advice of the Privy Council in Frith v Frith [1906] AC 254, 261, to allow the agent to exercise his authority after it has been revoked would amount to the specific enforcement of a relationship which is by its nature not specifically enforceable.
The main exception to the general rule is the case where the agent has a relevant interest of his own in the exercise of his authority.
The exception applies if two conditions are satisfied.
First, there must be an agreement that the agents authority shall be irrevocable.
Secondly, the authority must be given to secure an interest of the agent, being either a proprietary interest (for example a power of attorney given to enable the holder of an equitable interest to perfect it) or a liability (generally in debt) owed to him personally.
In these cases, the agents authority is irrevocable while the interest subsists.
Both conditions are now reflected in section 4(1) of the Powers of Attorney Act 1971, as regards authority conferred by a power of attorney.
The first condition is perhaps self evident, but so far as authority is required, it is supplied by the decisions of the Privy Council in Esteban de Comas v Prost and Kohler (1865) 3 Moo PC NS 158 and Frith v Frith [1906] AC 254.
The second condition was established in Walsh v Whitcomb, supra, where the exception was said to apply in every case where a power of attorney is necessary to effectuate any security.
In Smart v Sandars (1848) 2 CB 895, 917 918, commonly regarded as the leading case, Wilde CJ, delivering the judgment of the Court of Common Pleas, declared that: where an agreement is entered into on a sufficient consideration, whereby an authority is given for the purpose of securing some benefit to the donee of the authority, such an authority is irrevocable.
This is what is usually meant by an authority coupled with an interest, and which is commonly said to be irrevocable.
But we think this doctrine applies only to cases where the authority is given for the purpose of being a security, or, as Lord Kenyon expresses it, as a part of the security; not to cases where the authority is given independently, and the interest of the donee of the authority arises afterwards, and incidentally only.
These cases demonstrate that an agreement that the agents authority is to be irrevocable may be inferred, but not from the mere co existence of the agency and the interest.
It is necessary that the one should be intended to support the other.
The exception thus stated follows from the logic of the rule.
Where the parties agree that the agent is to have a personal financial interest in the performance of his agency, over and above the receipt of his remuneration, his duty of loyalty is to that extent compromised.
The reason for declining to enforce his right to act for the principal therefore falls away.
The ambit of the exception for authority coupled with an interest is more narrowly defined by the editors of Bowstead and Reynolds on Agency, 20th ed (2014), para 10 007.
They say that it applies where the notion of agency is employed as a legal device for a different purpose from that of normal agency, to confer a security or other interest on the agent.
In such a case it is intended that the agent use the authority not for the benefit of his principal but for his own benefit, to achieve the objects of the arrangement.
This would appear to confine the exception to cases where the authority exists solely in order to secure the agents financial interest, and is in reality no more than the commercial equivalent of an assignment.
In such a case, the editors suggest, the law of agency is not really engaged at all, because the beneficiary of the authority is only nominally an agent.
In my opinion, this is too narrow.
It is no doubt a fair description of the simplest cases, but I do not accept that it can be a general principle of law.
At one extreme lie cases such as Walsh v Whitcomb, supra, where a power of attorney was granted solely to enable the grantee to satisfy a pre existing debt owed to the agent, or Gaussen v Morton (1830) 10 B&C 731, where an owner of land gave a power of attorney to a creditor to sell the land to satisfy the debt.
No one doubts that the exception applies in such cases.
At the opposite extreme, it does not apply where the agents only interest is a commercial interest in being able to earn his commission.
The reason is that in that case, the authority is not properly speaking a security at all: Doward, Dickson & Co v Williams & Co (1890) 6 TLR 316; Temple Legal Protection Ltd v QBE Insurance (Europe) Ltd [2009] Lloyds Rep IR 544, at para 50.
But there are situations lying between these polar positions where the relationship of principal and agent is broader than the mere collection of money to satisfy the agents debt, so that the agent may be said to act both for himself and his principal.
In Smart v Sandars, supra, for example, the agent was a grain factor and the advances said to be secured by the agents authority were made against the proceeds of sale of unsold grain.
It is clear that the agent would have succeeded but for the fact that the advances had been made after and independently of the agency agreement so that the latter could not be construed as securing them.
There is no principled reason why a true agent employed on his principals affairs should not also be regarded as having a personal interest in the exercise of his authority sufficient to make it irrevocable.
Thus although, as I have said, the agents commercial interest in continuing to act in order to earn commission is not enough to make his authority irrevocable, his interest in recovering a debt in respect of commission already earned may well be.
There is no reason to distinguish a debt arising in this way from any other debt, provided that it is sufficiently clear that the parties intended that the agents authority should secure it.
There are a number of special cases in which the authority of an agent has been held to be irrevocable on what appears to be a wider basis.
They include the irrevocable authority conferred on the promoter of a public share offering to subscribe for shares (In re Hannans Express Gold Mining and Development Co; Carmichaels Case [1896] 2 Ch 643), the irrevocable authority conferred by a bidder on an auctioneer of land to execute the memorandum of sale if it is knocked down to him (Van Praagh v Everidge [1902] 2 Ch 266, reversed on other grounds [1903] 1 Ch. 434), and the irrevocable authority conferred by a Lloyds name on his managing agent to underwrite (Daly v Lime Street Underwriting Agencies [1987] 2 FTLR 277, Society of Lloyds v Leighs [1997] CLC 759 decided on other grounds in the Court of Appeal The Times, 11 August 1997).
The result in these cases was undoubtedly convenient, but they do not lend themselves to analysis along the lines discussed above.
Nothing that I have said should therefore be taken to refer to them.
Application to the present case
At this point, it is necessary to look more closely at the terms of the ADA.
Clause 10 provided that where D&D took Angoves products as their agents for sale, the terms of any sale should be the standard terms set out at Annexure A.
These were drafted on the footing that the parties to the contract of sale were Angoves and the customer, defined as the person who acquires goods from Angove.
They provided for the purchaser to pay the price within 90 days of the bill of lading date.
D&Ds right to commission is governed by clause 21: 21.
Angove will pay to D&D commission: (a) in such amounts as shall be agreed between Angove and D&D based on the Net Selling Price of every sale of Products or Angove PBPs to a customer in D&Ds allocated sectors within the Territory arranged by D&D during the term of this Agreement (other than on its own account); and (b) on any Bulk Wine supplies made by Angove, or by any company or entity wholly owned by Angove pursuant to clause 17 during the term of this Agreement.
Clauses 20 and 22 deal with the procedure for the payment of the price: 20.
Payment for Products ordered by or on behalf of D&D must be made, whether by D&D or the customer, on or before 90 days from the date of bill of lading, or otherwise as may be agreed, by direct credit in Australian dollars into the bank account nominated from time to time by Angove. 22.
Commission due under clause 21(a) shall be paid to D&D as follows: (a) Angove will issue an invoice addressed to D&D (identifying the customer as consignee) for the relevant goods, together with a credit note for the amount of D&Ds commission on that sale; (b) D&D will be responsible for collecting payment of the amount of Angoves invoice from the customer; (c) D&D will pay the amount of Angoves invoice, less the amount of the credit note, on or before the due date in accordance with clause 23.
It is common ground that the combined effect of clauses 20 and 22(c) was to require D&D to account to Angoves within 90 days of the bill of lading date for the price of the goods sold to customers on Angoves behalf, whether or not the price had by then been received from the customers.
Finally, it is necessary to refer to clause 37, which deals with certain of the consequences of termination.
This provides, so far as relevant: 37.
Upon termination of this Agreement for any reason whatsoever: (a) each party must pay to the other all money owing up to and including the date of termination in respect of the sale of Products and Angove PBPs and/or commission thereon, without any deduction, withholding or set off for any reason whatsoever; Termination of this Agreement does not affect the accrued rights or remedies of either party.
Obligations expressed to arise or continue on or after termination of this Agreement survive its termination.
The Court of Appeal held that D&Ds authority was irrevocable because the general rule that authority can be revoked must yield to what the parties have agreed should be their respective legal rights and obligations on the termination of the agency (para 25).
Construing the ADA, they held that a continuing right to collect the price from the customer was implicit in (i) D&Ds right to deduct commission from the price before remitting it to Angoves, and (ii) D&Ds obligation to account to Angoves for the price within 90 days of the bill, whether or not it had by then been received from the customer.
This was because these features of the agreement gave rise to liabilities of Angoves to D&D, which could be set off against sale proceeds in D&Ds hands.
It will be apparent from this that the Court of Appeal applied only part of the test.
The general rule is that an agents authority is revocable even if it is agreed to be irrevocable.
It cannot therefore be enough to exclude the general rule that the authority is agreed to be irrevocable.
What has to be agreed is not just that the authority is to be irrevocable but that it is intended to secure the financial interest of the agent.
Both are questions for the construction of the agreement.
The Court of Appeal did not address the latter criterion.
of them was satisfied, for the following reasons: It is convenient to deal with both conditions together.
In my opinion, neither (1) D&D had express authority to collect from the customer under clause 22(b), and it would have been simple enough to provide in terms that it was irrevocable.
But it is not expressed to be irrevocable or to survive the termination of the agreement.
So far as the language offers any indication, it is to the opposite effect.
By virtue of the final paragraph of clause 37, authority to collect the price would survive the termination of the agreement only if it constituted an accrued right or remedy of the agent.
But it is described in clause 22(b) as a responsibility, not a right.
I would accept that for the purpose of clause 37 a provision may be expressed to survive termination if, although not spelled out in so many words, it is nevertheless a sufficiently clear implication from the express terms.
But for the following reasons I consider that no such implication is possible. (2) The first point to be made is that while D&D assume the responsibility of collecting payment from customers to whom they sell as Angoves agent, there is nothing to stop the customer from paying Angoves directly.
Under the standard terms required to be agreed with the customer the price is payable to Angove, which means Angove Pty Ltd, and includes D&D Wines International Ltd, where it acts as agent for Angove Pty Ltd. This is consistent with clause 20, which envisages that payment may be made to Angoves by D&D or directly by the customer.
This makes it, as it seems to me, difficult to regard collection from the customer as a right, as opposed to a function of D&D, and even more difficult to regard it as a security. (3) It is correct that D&Ds right to commission under clause 21 survives the termination of the agreement, because it accrues unconditionally when the sale is made, therefore before termination.
But the question is whether the right to deduct it from the price under clause 22(c) is a mere procedural mechanism or a security.
It is not the only way of recovering it.
If the price is paid directly by the customer to Angoves, the commission is payable by Angoves directly.
In that event D&D would lose the ability to set off the commission against any sale proceeds in their hands.
But the irrevocability of D&Ds authority cannot be inferred from the mere fact that D&D would to some extent and in some circumstances benefit if it was so. (4) Much the same point may be made about D&Ds obligation under clauses 20 and 22(c) to account to Angoves for the price within 90 days of the bill of lading date.
This was a right of Angoves.
It accrued when the goods were shipped, albeit that payment would not be due until later.
It follows, as the Court of Appeal held, that in relation to goods shipped before the termination of the ADA it survived that event, just as it would have done if D&D had bought the goods in their own right.
Clause 20 applies in both cases.
It does not, however, follow that D&D had the continuing authority of Angoves to collect the price from the customer.
Once they had paid the price to Angoves, they were entitled at common law to collect it from the customer on the ground that they had compulsorily discharged the customers liability for the price: Moule v Garrett (1872) LR 7 Ex 101; Ibrahim v Barclays Bank Plc [2013] Ch 400.
The source of this right is the law of unjust enrichment.
It is not the authority of Angoves, who have no further standing in the matter once they have been paid. (5) It is inherently improbable that the parties should have intended the authority to be irrevocable.
They had expressly envisaged the possibility of insolvency and provided for a mutual right of termination in that event.
For an exporter in particular, there are particular problems associated with financial dealings with an insolvent agent for sale, which Angoves clearly wished to avoid.
If the agents authority to collect money from third parties survives termination the effect would be to secure D&Ds right to 5% commission in the event of the insolvency of Angoves, but at far greater cost to Angoves in the event of the insolvency of D&D. They would have to prove as unsecured creditors in the liquidation for the remaining 95%.
I conclude that Angoves notice of 23 April 2012 was immediately effective
to terminate D&Ds authority to collect on the outstanding invoices.
This means that it is strictly speaking unnecessary to deal with the second point, namely whether the funds paid by customers to D&D since the commencement of the administration are held in trust for Angoves.
But since the point is of some general importance and has been fully argued before us, I think it right to deal with it.
I do so on the assumption that (contrary to the conclusion that I have reached) Angoves notice of termination was not effective to terminate D&Ds authority to collect on the invoices.
An agent has a duty to account to his principal for money received on his behalf.
It is, however, well established that the duty does not necessarily give rise to a trust of the money in the agents hands.
That depends on the intentions of the parties derived from the contract, or in some cases from their conduct.
As a broad generalisation, the relations between principal and agent must be such that the agent was not at liberty to treat as part of his general assets money for which he was accountable to his principal.
This will usually, but not invariably, involve segregating it from his own money.
The editors of Bowstead and Reynolds on Agency, 20th ed (2014), 219, para 6 041, put the matter in this way: the present trend seems to be to approach the matter more functionally and to ask whether the trust relationship is appropriate to the commercial relationship in which the parties find themselves; whether it was appropriate that money or property should be, and whether it was, held separately, or whether it was contemplated that the agent should use the money, property or proceeds of the property as part of his normal cash flow in such a way that the relationship of debtor and creditor is more appropriate.
The judge held that in principle any liability of D&D to account for money collected from customers under the ADA gave rise to a purely personal liability sounding in debt, and not to a proprietary claim; whereas money collected outside the ADA, after their authority had been terminated, would be held in trust for Angoves.
However, he concluded that none of this mattered because the proceeds of the invoices fell to be dealt with in accordance with the escrow arrangements.
There is no longer any issue on these points.
In the Court of Appeal matters took a different turn.
Before the hearing of the appeal the court wrote to the parties drawing their attention to a passage from the 18th edition of Lewin on Trusts (2006), which suggested that the proceeds of the invoices might be held on a constructive trust for Angoves even if there was a continuing authority to collect it.
In the 19th ed (2015), the corresponding passage reads: Unconscionable assertion of title to money payments by agents Money received by an agent, though not held on an express trust for his principal, nor on a Quistclose trust, may be held on a constructive trust for his principal on the ground that it would be unconscionable for the agent to assert a title to the money having regard to the circumstances of the agent at the time of receipt.
Such a constructive trust has been held to arise where the agent receives money from his principal for application by the agent under a contract which the agent will be unable to perform because of his pending insolvency, or where the agent receives money from a third party for onward transmission to his principal which he is unable to do in view of his insolvency, even though the contract with the principal negatives an express trust.
The authorities cited for these propositions are the decisions of Bingham J in Neste Oy v Lloyds Bank Plc [1983] 2 Lloyds Rep 658 and Nicholas Warren QC, sitting as a deputy High Court Judge in In re Japan Leasing Europe Plc [1999] BPIR 911.
Neste Oy v Lloyds Bank Plc concerned the right of the bank to combine the accounts of an insolvent shipping agent called Peckston Shipping Ltd (or PSL).
PSL settled on behalf of their shipowner clients bills payable to harbour authorities, pilots, fuel merchants, and other providers of goods and services.
The shipowners sometimes put them in funds in advance and sometimes reimbursed them in arrears.
The plaintiff shipowners claimed that the unspent balance of six payments made by them to a general account of PSL were held for them in trust.
Their primary case was that the payments were subject to an implied trust to pay the money to the suppliers.
This arose either by virtue of the agency relationship or as a special purpose (or Quistclose) trust: see Barclays Bank Ltd v Quistclose Investments Ltd [1970] AC 567.
Bingham J rejected this, but held that there was a constructive trust of the sixth payment, which had been received after the directors of PSL had concluded that their company was insolvent.
The judge took as his starting point a quotation from Storys Commentaries on Equity Jurisprudence, 2nd ed (1839), vol 2, para 1255, which had been cited by Goulding J in Chase Manhattan Bank NA v Israel British Bank (London) Ltd [1981] Ch 105, 117 118 as being in accord with the general principles of equity as applied in England: the receiving of money which consistently with conscience cannot be retained is, in equity, sufficient to raise a trust in favour of the party for whom or on whose account it was received.
This is the governing principle in all such cases.
And therefore, whenever any controversy arises, the true question is, not whether money has been received by a party of which he could not have compelled the payment, but whether he can now, with a safe conscience, ex aequo et bono, retain it.
Applying this statement to the facts before him, he held, at p 666: Given the situation of PSL when the last payment was received, any reasonable and honest directors of that company (or the actual directors had they known of it) would, I feel sure, have arranged for the repayment of that sum to the plaintiffs without hesitation or delay.
It would have seemed little short of sharp practice for PSL to take any benefit from the payment, and it would have seemed contrary to any ordinary notion of fairness that the general body of creditors should profit from the accident of a payment made at a time when there was bound to be a total failure of consideration.
Of course it is true that insolvency always causes loss and perfect fairness is unattainable.
The bank, and other creditors, have their legitimate claims.
It nonetheless seems to me that at the time of its receipt PSL could not in good conscience retain this payment and that accordingly a constructive trust is to be inferred.
In re Japan Leasing Europe Plc [1999] BPIR 911 concerned what was in effect a hire purchase agreement for an aircraft between four leasing companies and Olympic Airways.
The contract documentation provided for the payment of the price in instalments to designated accounts in various currencies of one of the lessors, Japan Leasing.
Japan Leasing was to receive the money on behalf of itself and the other three lessors.
Japan Leasing went into administration, and a month later received an instalment into the designated accounts.
The issue was whether the money was held in trust to pay their shares to the three other lessors.
The deputy judge rejected the primary argument of the three solvent lessors that there was an express trust, but held that the last instalment was held on a constructive trust for the other lessors.
The judge referred to an observation of the editors of Bowstead and Reynolds (currently the 20th ed (2014), at p 219) immediately after the passage which I have quoted above: a central question, really one of policy, is whether the rights of the principal are sufficiently strong and differentiable from other claims, for him to be given priority in respect of them in the agents bankruptcy.
This had been quoted with apparent approval by Lord Goff of Chieveley in Lord Napier and Ettrick v Hunter [1993] AC 713, 744, although it was not the ground on which he decided that case.
The deputy judge then referred, at pp 922 923, to Bingham Js decision in Neste Oy.
He was invited to distinguish it on the ground that in Neste Oy the agent had no contractual right to the sixth payment.
The money had been destined for the payment of service providers who were not beneficiaries of the trust.
The only consideration which the agent gave was its performance of its general obligations as a shipping agent, and that was the consideration for its charges, not for the sixth payment.
Japan Leasing, by comparison, was contractually entitled to receive the money.
Although it was accountable for most of it to the other three lessors, it had given consideration for its share of the instalments.
The deputy judge rejected this distinction because it was irrelevant to Bingham Js reasoning: The constructive trust is imposed because it would be unconscionable for the company, as agent, to receive money as agent knowing that it could not account for it to its principal.
In this context, the passage from Bowstead quoted in Napier (see above) is relevant and in my judgment the only answer which could be given to the question there posed is that the rights of the vendors are sufficiently strong, and differentiable from other claims, for the vendors to be entitled to a prior position in respect of them on the companys insolvency (whether the question arises in an administration, a voluntary arrangement or a liquidation).
The joint administrators have not, of course, acted unconscionably: they have, quite properly, brought the matter before the court.
But it would, in my judgment, be unconscionable for them to continue to assert any claim to the moneys.
The distinction which Nicholas Warren QC rejected was, however, accepted by the Court of Appeal in the present case.
They justified the result in Neste Oy on the ground that the payments to PSL were essentially gratuitous, and that the treatment of the sixth payment as part of the insolvent estate would have been a real windfall for the creditors.
The position in Japan Leasing, they thought, was different, for the reason unsuccessfully submitted to Nicholas Warren QC.
The Court of Appeal therefore doubted whether the decision was right.
On the footing that D&D had a contractual right to collect the proceeds of the invoices in order to recover their commission on the sales, they thought that it could not have been unconscionable for D&D to retain the money and that there was no constructive trust.
I agree with the Court of Appeal that there was no constructive trust in this case.
But this conclusion does not in my view depend on whether D&D gave consideration for the money.
There are, I think, more fundamental objections to the constructive trust proposed by Angoves.
At the time when the money was paid by the customers to D&D it was not impressed with any trust in favour of Angoves.
If, therefore, a constructive trust came into being, it did so for the first time upon its reaching the hands of the payee.
The money would thereafter be traceable for as long as it remained identifiable in the hands of any third party other than a bona fide purchaser for value without notice.
It would not form part of the insolvent estate, thereby conferring priority on Angoves over other creditors, including many whose position would otherwise be no different from theirs.
This is elementary, and fundamental.
The statutory rules for the distribution of insolvent estates represent an important public policy designed to achieve a pro rata distribution of the companys estate between its creditors.
For that purpose it is necessary to assess claims as at a fixed and common point of time, namely when the company went into liquidation.
The arbitrary character of any cut off date is to some extent mitigated by statutory provisions for adjusting prior transactions prejudicial to creditors, such as preferences and transactions at an undervalue, and imposing liabilities for fraudulent or wrongful trading, but these provisions operate in their current form to restore the insolvent estate for the benefit of creditors as a whole.
It is inherent in the statutory scheme of distribution in an insolvency that apparently arbitrary results may follow from the adventitious timing of the commencement of the liquidation, especially in the case of deferred obligations.
In principle, an advance payment to a company made before the commencement of the liquidation for an obligation performable afterwards will form part of the companys estate, notwithstanding that its supervening insolvency means that the obligation will not be performed, at any rate in specie.
The payer must prove in the liquidation for damages for the breach of contract.
Likewise, a contractor providing goods or services on credit will have to prove in the liquidation for the price if the other party becomes insolvent before paying.
The rule is the same for money received for his principals account by an agent who becomes insolvent before accounting for it, unless (contrary to the unchallenged finding of the judge in this case) the relations between the parties were such as to make the agent an express trustee of money in his hands.
The money will form part of the agents insolvent estate, and the principal must prove in the liquidation.
In the nature of things, these consequences involve a detriment for the payer, attributable to the timing of the companys insolvency; and a windfall for the general creditors, since the estate available for distribution will be increased by the payment without being reduced by the cost of performance.
As Professor Goode has remarked, It is when [scholars] seek to argue for a proprietary right when there is no proprietary base that the line is crossed between what is fair and what is not, for it is the defendants unsecured creditors who are then at risk.
If the court wishes to show its disapproval of the defendants conduct by making a personal restitutionary order, no harm is done.
If the defendant is not in bankruptcy the order will be complied with and enforced for the plaintiffs benefit, if the defendant does become bankrupt before then, the plaintiff is properly required to compete with other unsecured creditors.
To accord the plaintiff a proprietary right to the benefit obtained by the defendant, and to any profits or gains resulting from it, at the expense of the defendants unsecured bankruptcy creditors seems completely wrong, both in principle and in policy, because the wrong done to the plaintiff by the defendants improper receipt is no different in kind from that done to creditors who have supplied goods and services without receiving the bargained for payment: Goode, Ownership and Obligation in Commercial Transactions (1987) 103 LQR 433, 444.
What in effect Bingham J decided in Neste Oy was that the position was different where at the time of the receipt of the money the payee knew that there was bound to be a total failure of consideration.
In that event, he would have not just a personal but a proprietary restitutionary claim for the money.
English law is generally averse to the discretionary adjustment of property rights, and has not recognised the remedial constructive trust favoured in some other jurisdictions, notably the United States and Canada.
It has recognised only the institutional constructive trust: Westdeutsche Landesbank Girozentrale v Islington London Borough Council [1996] AC 669, 714 715 (Lord Browne Wilkinson), FHR European Ventures LLP v Cedar Capital Partners LLC [2015] AC 250, at para 47.
In the former case, the difference was explained by Lord Browne Wilkinson in the following terms: Under an institutional constructive trust, the trust arises by operation of law as from the date of the circumstances which give rise to it: the function of the court is merely to declare that such trust has arisen in the past.
The consequences that flow from such trust having arisen (including the possibly unfair consequences to third parties who in the interim have received the trust property) are also determined by rules of law, not under a discretion.
A remedial constructive trust, as I understand it, is different.
It is a judicial remedy giving rise to an enforceable equitable obligation: the extent to which it operates retrospectively to the prejudice of third parties lies in the discretion of the court.
Bingham Js point of departure in Neste Oy was that the recipient of money may be liable to account for it as a constructive trustee if he cannot in good conscience assert his own beneficial interest in the money as against some other person of whose rights he is aware.
As a general proposition this is plainly right.
But it is not a sufficient statement of the test, because it begs the question what good conscience requires.
Property rights are fixed and ascertainable rights.
Whether they exist in a given case depends on settled principles, even in equity.
Good conscience therefore involves more than a judgment of the relative moral merits of the parties.
For that reason it seems to me, with respect, that Bingham Js observation in Neste Oy that any reasonable and honest director would have returned the sixth payment upon its receipt begs the essential question whether he should have returned it.
It cannot be a sufficient answer to that question to say that it would be contrary to any ordinary notion of fairness for the general creditors to benefit by the payment.
Reasoning of this kind might be relevant to the existence of a remedial constructive trust, but not an institutional one.
The observation of the editors of Bowstead and Reynolds and of Nicholas Warren QC in Japan Leasing that a proprietary claim should be recognised whenever the claim is sufficiently strong and differentiable from other claims to warrant giving it priority over other claims in an insolvency, seems to me to be open to the same objection.
In English law, one of the essential requisites for a trust of whatever kind is that there must be identifiable trust property (or its traceable proceeds) in the hands of the recipient which are not available to him as part of his general assets: see Westdeutsche Landesbank Girozentrale v Islington London Borough Council [1996] AC 669, 705.
The only true exception to this (which did not arise in Neste Oy) is the case of a person liable to account as a constructive trustee on the ground of his dishonest assistance in a breach of trust.
The difficulty about the decision in Neste Oy concerning the sixth payment is that Bingham J had rejected the argument that the agency relationship between the shipowners and PSL was such as to impose the status of a trustee on the agents, and had declined to find that the payments were subject to a special purpose trust.
He had rejected these submissions mainly because the agent was not expected to keep the funds remitted to it by the shipowners separate from its own, but was entitled to treat them as part of its general assets: see pp 664 665.
It follows that in paying money to PSL the shipowners intended to part with any interest in the money, subject only to a purely personal obligation of PSL to account to them for what they had done with it and to repay any balance due as a debt.
The judge made a similar finding in the present case.
The exact circumstances in which a restitutionary proprietary claim may exist is a controversial question which has given rise to a considerable body of judicial comment and academic literature.
For present purposes it is enough to point out that where money is paid with the intention of transferring the entire beneficial interest to the payee, the least that must be shown in order to establish a constructive trust is (i) that that intention was vitiated, for example because the money was paid as a result of a fundamental mistake or pursuant to a contract which has been rescinded, or (ii) that irrespective of the intentions of the payer, in the eyes of equity the money has come into the wrong hands, as where it represents the fruits of a fraud, theft or breach of trust or fiduciary duty against a third party.
One or other of these is a necessary condition, although it may not be a sufficient one.
Neither of them was satisfied in Neste Oy.
In particular, the prospect of a total failure of consideration, however inevitable, is not a circumstance which could have vitiated the intention of the shipowner to part with its entire interest in the money.
The right to the restitution of money paid on a consideration which has wholly failed is simply a process of contractual readjustment, giving rise like the contract itself to purely personal obligations.
If an actual total failure of consideration does not give rise to a proprietary restitutionary right, I do not see how a prospective one can do so.
In my view, the decision in Neste Oy cannot be justified, at any rate on the ground on which it was decided.
Japan Leasing was in my view wrongly decided, not just for that reason, but for the reason given by the Court of Appeal, namely that the recipient having a contractual right to the money, it could not be unconscionable for them to receive it into their account.
Mistake was not argued in Neste Oy.
Bingham J had refused to allow the shipowners to rely on it because they took the point too late.
But it has subsequently been suggested that since the shipowners presumably paid the money in the belief that PSL was in a position to disburse it to the service providers, mistake would have been a better basis for the decision: In re Farepak Food and Gifts Ltd [2008] BCC 22, at paras 39 40 (Mann J).
Whether that is correct is not a question which arises on this appeal.
The money was paid to D&D by the customers, not by Angoves.
They no doubt paid it in the belief that D&D was authorised to collect it, or at least that payment to them would discharge their liability for the price.
The question of trust arises on the hypothesis that D&D was authorised to collect the proceeds of the invoices, and on that hypothesis their belief was not mistaken.
Conclusion
I would allow the appeal and declare that the fund representing the proceeds of the invoices is payable to Angoves.
| UK-Abs | This appeal concerns two questions.
The first is, in what circumstances will the law treat the authority of an agent as irrevocable? The second is whether the receipt of money at a time when the recipient knows that imminent insolvency will prevent him from performing a corresponding obligation, can give rise to liability to account as a constructive trustee.
Angoves PTY is an Australian winemaker, which employed an English company, D&D Wines International Ltd, as its agent and distributor in the UK.
D&D bought wines from Angoves, and also sold wines on Angoves behalf to UK retailers.
That relationship was governed by an Agency and Distribution Agreement (ADA), which was terminable by either side on six months notice, or immediately on the appointment of an administrator or liquidator.
D&D entered into administration on 21 April 2012, and into creditors voluntary liquidation on 10 July 2012.
There were outstanding invoices in the amount of A$874,928.81, which represented the price of wine that D&D had sold to two UK retailers who had not yet paid.
Angoves lawfully terminated the ADA and purported to terminate D&Ds authority to collect the price from those two retailers by written notice on 23 April 2012.
The termination notice declared that Angoves proposed to collect the price directly from the customers and would account separately to D&D for their commission.
The liquidators of D&D objected to this.
They said that they were entitled to collect on the outstanding invoices, deduct the commission due to D&D, and leave Angoves to prove in the winding up for the rest of the price.
They argued that D&Ds authority as agent to collect the price of the goods was irrevocable, because they needed it to recover their commission.
Angoves disputed this.
They argued in the alternative that the moneys held by D&D were held on constructive trust for them.
The judge held that D&Ds authority to collect the price from the customers ended on service of Angoves termination notice.
The Court of Appeal allowed the liquidators appeal, holding that D&Ds authority survived the termination notice.
The argument that D&D held the proceeds of the invoices on trust for Angoves failed both at first instance and on appeal.
The Supreme Court unanimously allows Angoves appeal on the first question.
D&Ds agency was revoked by Angoves termination notice, but the moneys were not held on constructive trust for Angoves.
Lord Sumption gives the judgment, with which the other Justices agree.
The authority of an agent is inherently terminable, even where it is agreed to be irrevocable, unless it is coupled with a relevant interest of the agent.
This requires, in addition to an agreement that the agents authority is to be irrevocable, that the authority is given to secure a subsisting proprietary interest or personal liability of the agent.
The mere existence of such an interest will not generally be enough to make the authority irrevocable [7].
Neither of those conditions is satisfied on the facts of this case.
D&Ds authority was not expressed to be irrevocable in the agency agreement, and there is no implication to that effect.
Because there was nothing in the agreement to stop customers paying Angoves directly, collection of commission could not sensibly be regarded as a right or security of D&D. Deduction from the price paid by customers was not the only way that D&D could recover its commission: customers could pay Angoves directly, who would then pay it to D&D [16].
Turning to the second question, the argument was that where money was paid for a consideration which the payee knew at the time of receipt was bound to fail because of his imminent insolvency, that fact alone was enough to give rise to a constructive trust of the money in the payees hands.
This argument is rejected.
The price was paid to D&D by the customers absolutely, in discharge of their contractual liability.
The judge had held that the agency relationship did not itself give rise to a trust of money in D&Ds hands which they had collected from customers, and that the agency relationship between D&D and Angoves was in the relevant respects one of debtor and creditor.
In these circumstances the mere fact that it was received at a time when D&Ds personal liability to account to Angoves would not be performed could make no difference to the basis on which they held the money.
It did not become unconscionable for them to retain it simply because the statutory insolvency regime intervened to require it to be shared pari passu with other creditors (Neste Oy v Lloyds Bank Plc [1983] 2 Lloyds Rep 658 and In re Japan Leasing Europe Plc [1999] BPIR 911 overruled) [31].
|
The issue raised on this appeal concerns the extent to which the jurisdiction of the First tier Tribunal to make an order for costs is fettered by the provisions of the Rules regulating the procedure of the Tribunal.
Although the Rules in question govern the procedure of the Tax and Chancery Chamber, we were told that our conclusion will apply to the other Chambers of the First tier Tribunal (FTT).
Subsections (1) and (2) of section 29 of the Tribunals, Courts and Enforcement Act 2007 provide that the costs of and incidental to any proceedings in the FTT shall be in the discretion of the Tribunal in which the proceedings take place, and that the Tribunal has full power to make orders for costs.
However, subsection (3) of the same section stipulates that the preceding two subsections have effect subject to Tribunal Procedure Rules.
The Rules
The Rules which governed the instant proceedings are the Tribunal Procedure (First tier Tribunal) (Tax Chamber) Rules 2009 (SI 2009/273) (L1) (the Rules).
Rule 2 describes the overriding objective of the Rules as being to enable the FTT to deal with cases fairly and justly, which includes dealing with cases proportionately.
Rule 5 is headed Case management powers and it is in these terms: (1) Subject to the provisions of the 2007 Act and any other enactment, the Tribunal may regulate its own procedure. (2) The Tribunal may give a direction in relation to the conduct or disposal of proceedings at any time, including a direction amending, suspending or setting aside an earlier direction. (3) In particular, and without restricting the general powers in paragraphs (1) and (2), the Tribunal may by direction (i) require a party to produce a bundle for a hearing In addition to sub paragraph (i), rule 5(3) has eleven other sub paragraphs, which include powers to (a) extend or shorten time for complying with the Rules, (c) permit or require an amendment, (f) hold a case management hearing, (h) adjourn a hearing, and (k) transfer proceedings to another tribunal.
Rule 10 is headed Orders for costs.
Rule 10(1) is somewhat convoluted, and it is in these terms: The Tribunal may only make an order in respect of costs (or, in Scotland, expenses) (a) under section 29(4) of the 2007 Act (wasted costs) ; (b) if the Tribunal considers that a party or their representative has acted unreasonably in bringing, defending or conducting the proceedings; (c) if the proceedings have been allocated as a (i) Complex case under Rule 23 (allocation of cases to categories); and (ii) the taxpayer (or, where more than one party is a taxpayer, one of them) has not sent or delivered a written request to the Tribunal, within 28 days of receiving notice that the case had been allocated as a Complex case, that the proceedings be excluded from potential
liability for costs or expenses under this sub paragraph
With one exception, it would therefore appear that, at least under rule 10(1), the FTT can only make two types of costs order.
The first is a wasted costs order under sub para (a), and the other is an order for costs where a party has behaved unreasonably under sub para (b).
The one exception is under sub para (c), which envisages that there will be no such limitation on the FTTs jurisdiction to award costs if two conditions are satisfied namely (i) the proceedings are a Complex case under Rule 23, and (ii) the taxpayer has not served a request (within the requisite 28 day period) that there should be no potential liability under rule 10(1)(c).
Rule 10(3) sets out how an application for costs under rule 10(1) is to be initiated.
Rule 10(4) provides that such an application must be made within 28 days of the FTTs decision disposing of the proceedings.
Rule 10(5) forbids the FTT from making an order for costs under rule 10(1) without first giving notice to the potential payer and enabling him to make representations.
Rule 10(6) sets out three different ways in which costs under rule 10(1) can be assessed (summary assessment, agreement and normal assessment).
Rule 10(7) provides that the sum so assessed can be recovered through proceedings in the County Court or the Costs Office of the High Court.
The only other reference to recovery of costs or expenses to which we were taken to in the Rules is in Rule 16, which is concerned with Summoning or citation of witnesses and orders to answer questions or produce documents.
Rule 16(2)(b) provides that a summons issued by the Tribunal requiring a person to attend proceedings (other than a party to the proceedings) must make provision for the persons necessary expenses of attendance to be paid, and state who is to pay them.
The facts
Eclipse Film Partners No 35 LLP (Eclipse) filed a tax return in respect of the period which ended on 5 April 2007.
The Revenue issued a closure notice determining that Eclipse did not carry on a trade or business, which, if correct, would have had severely adverse tax consequences for Eclipse.
Accordingly, Eclipse appealed to the FTT against the closure notice.
The appeal was allocated as a Complex case under Rule 23, and, within the 28 day period specified therein, Eclipse served a request under rule 10(3), that the proceedings be excluded from potential liability for costs or expenses under rule 10(1)(c).
Thereafter, Eclipse and the Revenue agreed directions for the procedure leading up to the hearing.
The FTT duly made those directions, which included in para 13 a direction that the parties should try and agree an appropriate bundle of documents, which should be prepared by Eclipse, who were to serve three copies on the Revenue and three copies on the FTT.
Paragraph 13 of the agreed Directions also provided that, if the parties were unable to agree the Bundle, each party was to prepare its own bundle of documents and serve three copies on the other party and on the FTT.
The parties were unable to agree a Bundle, and there was a hearing before the FTT, at which, among other issues, that problem was discussed.
The upshot of the hearing so far as this problem was concerned was an oral direction by the FTT that Eclipse prepare the Bundle, and that the costs should be shared.
Eclipses solicitors accordingly prepared the Bundle, which was very extensive indeed (the total for the parties ran to over 700 lever arch files), and its size was in part attributable to requests by the Revenue for the inclusion of documents of what some might think were of marginal relevance.
In due course, the hearing took place, and, after some fourteen days of evidence and argument, the FTT gave a reserved decision dismissing Eclipses appeal on the substantive issue of the validity of the closure notice [2012] UKFTT 270 (TC). (That decision was subsequently affirmed by the Upper Tribunal, [2014] BTC 503, whose decision was in turn upheld by the Court of Appeal, [2015] BTC 10, and we refused Eclipse permission to appeal to the Supreme Court on 13 April 2016).
Following the hearing before the FTT, Eclipses agents sent the Revenue invoices for a total of 108,395.48 (inclusive of VAT), representing half the cost to Eclipse of preparing the Bundles.
After some discussion between the parties, and after the FTT had given its decision, the Revenue applied to the FTT to set aside the oral direction that the parties should share the costs of preparing the Bundles (the Order), on the ground that the FTT had no jurisdiction to give such a direction, in the light of Rule 10.
The FTT held that it had had such jurisdiction and therefore dismissed the Revenues application.
The Revenue appealed, and the Upper Tribunal took a different view, and held that the Order was made without jurisdiction, and consequently set it aside [2013] UKUT 1041 (TCC).
Eclipses appeal to the Court of Appeal failed [2014] EWCA Civ 184.
Eclipse now appeals to this court.
Discussion
The reasoning of the Court of Appeal and the Upper Tribunal, which is reflected in the Revenues argument before us, is very simple, and it is as follows.
This was a Complex case under Rule 23, and therefore the FTT would have had a broad jurisdiction as to costs if no request (Request) under rule 10(1)(c)(ii) had been served, but, as such a Request was served by Eclipse, the effect of rule 10(1)(c) is that the FTT could only make an order for costs if, and to the extent that, rule 10(1)(a) (wasted costs) and/or rule 10(1)(b) (unreasonable behaviour) could be invoked, and neither of those provisions applied here.
Two arguments are advanced on behalf of Eclipse to counter this analysis.
As an initial point, it is said that the Order was not really an order for the payment of costs; it was on analysis an order for the sharing of costs.
The flaw in that argument is that it assumes that the sharing of costs cannot involve the payment of costs.
On the facts of this case, even though the result of the payment of half Eclipses expenses in preparing the Bundles could fairly be described as the Revenue sharing those costs, it would also undoubtedly involve the Revenue paying costs, in the sense that they would be reimbursing Eclipse half the expenses which it had incurred in having the Bundles prepared.
What the Order plainly envisaged was (i) Eclipse incurring the expense of the preparation of the Bundles and (ii) then recovering half the expense from the Revenue.
Step (ii) is plainly an order, albeit a partially proleptic order, for the recovery of costs.
The second, and main, argument advanced on behalf of Eclipse is that it is inherent in rule 5(3) that the orders that the FTT makes thereunder can include terms as to costs.
For instance, it is said that it would be unrealistic to suggest that the FTT might grant permission to one party to amend its case under rule 5(3)(c) or to have an adjournment under rule 5(3)(h), without being able to do so on terms as to costs which compensate the other party for any prejudice suffered as a result.
Despite its initial attraction, I do not find that argument convincing, for a number of reasons.
First, Eclipses interpretation of rule 5(3) robs rule 10(1) of much of its force.
The purpose of rule 10(1) is to shut out the FTT from making cost shifting orders in all ordinary cases save in those where a party or a partys legal advisers have behaved unreasonably or worse, and even in Complex cases the taxpayer can opt to avoid cost shifting.
While this would prevent a taxpayer from recovering costs from the Revenue, its principal purpose is no doubt to protect a taxpayer from a costs exposure which goes beyond having to pay his own lawyers.
Warren J said in Atlantic Electronics Ltd v Revenue and Customs Comrs [2012] STC 931, para 8, that the policy that in cases other than Complex cases the inability to recover costs is not seen as likely to lead to a denial of access to justice but that in Complex cases, the choice of the taxpayer is to prevail.
The only quarrel I have with that is that it seems to me that in non Complex cases, the normal inability of either the taxpayer or the Revenue to recover costs is positively intended to improve access to justice in the majority of such cases.
The logic of Eclipses argument means that every time that the FTT makes a direction, not merely under one of the subparagraphs of rule 5(3), but under the more general powers contained in rule 5(2), it can attach an order for costs, even where neither the party against whom the order is made, nor its legal advisers, have behaved unreasonably.
While this would not, of course, mean that the FTT could deal with costs as if there was no fetter on its powers, it would very significantly cut down the effectiveness of the no costs shifting scheme in rule 10(1).
Secondly, Eclipses argument is inconsistent with rules 10(3) to 10(7).
As explained in para 7 above, those paragraphs contain rules as to how any costs awarded by the FTT pursuant to rule 10(1) are to be assessed and recovered.
If there is a power to award costs under Rule 5, as Eclipse effectively argues, there would appear to be a lacuna in the Rules, because there are no such provisions governing the assessment and recovery of such costs.
I appreciate that this argument has limited force in relation to paras 10(3) to 10(5), as the paying party would normally (but not always) be expected to have the opportunity to make submissions about costs at the hearing at which such costs could, on Eclipses case, be awarded.
However, that point does not, I think, apply to rules 10(6) and 10(7).
Thirdly, rejecting Eclipses case does not mean that the FTT cannot give permission to amend, or grant an adjournment, on terms as to costs.
If, for instance, a party wishes to amend its case or be granted an adjournment, there is nothing in the Rules which would prevent the FTT from deciding that it will only give permission to amend, or grant the adjournment, on terms that that party pays the other partys costs wasted or incurred as a result of the proposed amendment or adjournment.
However, that is not what happened in this case.
Fourthly, while of very slender force, there is rule 16(2)(b), which enables, indeed requires, the FTT to provide for the costs of a witness, who is required to attend a hearing, to be paid for by one or other party.
It was suggested on behalf of Eclipse that it showed that rule 10(1) did not amount to an absolute code.
To my mind, if anything, rule 16(2)(b) supports the Revenues case: it shows that, where the Rules intend to enable or require the FTT to render a party liable for costs, they say so.
Some supplementary points
Four other points should be mentioned.
First, I have only referred to the basic facts of this case.
Although Moses LJ, who gave the only reasoned judgment in the Court of Appeal thought otherwise (see paras 19 22 of his judgment), I agree with Mr Maugham QC, for Eclipse, that, in connection with the point at issue, it is inappropriate to consider the detailed facts of this case relating to the preparation of the Bundle and which led to the making of the Order.
This case raises an issue of principle, which turns on the interpretation of the Rules.
Secondly, there was some suggestion that, given that they relate to the procedure of a tribunal rather than a court, the Rules should be interpreted on a somewhat looser basis than Rules of court.
I accept that the procedure of the tribunals is intended to be less formal and more flexible than that of the traditional courts.
While that consideration can, indeed should, properly be taken into account when interpreting the Rules, I do not believe that it justifies a different result.
Indeed, if anything, it is a point which supports the conclusion I have reached, based as it is on the fact that the Rules point strongly against costs shifting in the tribunal, whereas costs shifting in litigation in traditional courts is still the norm.
Thirdly, the fact that things could have been arranged so as to achieve the same result as the Order is irrelevant to the outcome of this appeal.
As Moses LJ pointed out in para 22 of his judgment, the FTT could have ordered both parties to prepare the Bundles jointly, in which case there would have been a powerful argument for saying that Eclipse could have recovered the 108,395.48 which they now claim, simply on the basis of a contribution between two jointly liable parties.
But that is not what happened here: Eclipse were liable for the preparation of the Bundles, and it is not sensibly possible to characterise the Order as having any effect other than requiring the Revenue to pay some of Eclipses costs, an order which was precluded by rule 10(1).
Finally, it is perhaps worth recording that, during the hearing of this appeal, Lord Toulson mentioned the possibility of Eclipse having a claim against the Revenue for 108,395.48 based on restitution, in the same way that a restitutionary claim may be made where services are performed under a contract which is for some reason unenforceable or void.
That argument could not be pursued before us, and therefore I should say no more about it.
Conclusion
In the event, for the reasons given in paras 17 to 21 above, I would dismiss this appeal.
| UK-Abs | Eclipse Film Partners No 35 LLP (Eclipse) filed a tax return in respect of the period which ended on 5 April 2007.
HM Revenue & Customs (the Revenue) issued a closure notice determining that Eclipse did not carry on a trade or business.
If correct, this would have severely adverse tax consequences for Eclipse.
Eclipse appealed to the First tier Tribunal (Tax Chamber) (FTT) against the closure notice.
The appeal was allocated as a Complex case under Rule 23 of the Tribunal Procedure (First Tier) (Tax Chamber) Rules 2009 and, within the 28 day period specified in Rule 23, Eclipse served a request under Rule 10(3), that the proceedings be excluded from potential liability for costs or expenses under Rule 10(1)(c).
Eclipse and the Revenue agreed, and the FTT duly made, directions for the procedure leading up to the hearing of that appeal.
The directions included, at paragraph 13, a direction that provided that: (i) the parties should try and agree an appropriate bundle of documents, which should be prepared by Eclipse, who were to serve three copies on the Revenue and three copies on the FTT; and (ii) if the parties were unable to agree the Bundle, each party was to prepare its own bundle of documents and serve three copies on the other party and on the FTT.
As the parties were unable to agree a bundle, the FTT gave an oral direction that Eclipse prepare the bundle and that the costs be shared (the Order).
Eclipse then prepared the bundle, which ran to over 700 lever arch files, in part due to the requests by the Revenue for the inclusion of documents.
The FTT subsequently dismissed Eclipses appeal on the substantive tax issue.
That decision was affirmed by the Upper Tribunal (the UT) on appeal, whose decision was in turn upheld by the Court of Appeal.
Eclipse was refused permission to appeal to the Supreme Court on 13 April 2016.
Following the hearing before the FTT, Eclipses agents sent the Revenue invoices for 108,395.48 representing half the cost of preparing the bundle.
The Revenue applied to the FTT to set aside the Order on the ground that the FTT had no jurisdiction to give such a direction.
The FTT dismissed the Revenues application.
The Revenue appealed and the UT held that the Order was made without jurisdiction and set it aside.
Eclipses appeal to the Court of Appeal on this point was dismissed.
Eclipse now appeals to the Supreme Court.
The Supreme Court unanimously dismisses Eclipses appeal.
Lord Neuberger gives the only judgment, with which the other Justices agree.
Section 29 of the Tribunals, Courts and Enforcement Act 2007 provides that the costs of proceedings in the FTT shall be in the discretion of the FTT, and that the FTT has power to make orders for costs, subject to the Tribunal Procedure Rules [2].
The rules which governed the instant proceedings are the Tribunal Procedure (First Tier) (Tax Chamber) Rules 2009 (SI 2009/273) (L1) (the Rules) [3].
Rule 5 deals with the FTTs case management powers.
Rule 5(3)(i) provides that the FTT may, inter alia, by direction require a party to produce a bundle for a hearing.
Rule 10 is headed Orders for costs.
With one exception, the FTT can only make two types of costs order under Rule 10(1): a wasted costs order under 10(1)(a), and an order for costs where a party has behaved unreasonably under 10(1)(b).
The exception is under 10(1)(c), which provides that there will be no such limitation on the FTTs jurisdiction to award costs if two conditions are satisfied: (i) that the proceedings are a Complex case under Rule 23, and (ii) that the taxpayer has not served a request, within the requisite 28 day period, that there should be no potential liability under Rule 10(1)(c) [6].
The reasoning of the Court of Appeal and the Upper Tribunal, which is reflected in the Revenues arguments before the Court, is that the FTT would have had a broad jurisdiction as to costs if no request under Rule 10(1)(c)(ii) had been served.
However, because such a request was served by Eclipse, the FTT could only make an order for costs if Rules 10(1)(a) or Rule 10(1)(b) could be invoked.
Neither of those provisions applied in the present case [14].
Eclipse raised two arguments in response.
First, it submitted that the Order was not an order for payment of costs, but an order for the sharing of costs.
The Court rejects that argument.
The Order would undoubtedly involve the Revenue paying costs in the sense that they would be reimbursing Eclipse half the expenses it had incurred in preparing the bundles [15].
The second argument is that it is inherent in Rule 5(3) that the orders that the FTT makes under that provision can include terms as to costs [16].
The Court rejects that argument for a number of reasons [16].
First, Eclipses interpretation of Rule 5(3) robs Rule 10(1) of much of its force [17 18].
Secondly, Eclipses argument is inconsistent with Rules 10(3) to 10(7), which contain rules as to how any costs awarded by the FTT pursuant to Rule 10(1) are to be assessed and recovered.
If there is a power to award costs under Rule 5, there would be a lacuna in the Rules because there are no such provisions governing the assessment and recovery of costs in respect of Rule 5 [19].
Thirdly, rejecting Eclipses case does not mean that the FTT cannot give permission to amend, or grant an adjournment, on terms as to costs [20].
Fourthly, there is Rule 16(2)(b), which requires the FTT to provide for the costs of a witness required to attend a hearing to be paid for one or other party.
This shows that, where the Rules intend to enable or require the FTT to render a party liable for costs, they say so [21].
|
These appeals concern the impact of a cap on housing benefit (HB), in cases of deemed under occupation of social sector housing, on those with disabilities and on women living in sanctuary scheme accommodation.
The cap was imposed by Regulation B13 of the Housing Benefit Regulations 2006 (SI 2006/213) (Reg B13).
Reg B13 was introduced with effect from 1 April 2013, by way of amendment of the 2006 Regulations by the Housing Benefit (Amendment) Regulations 2012 (SI 2012/3040), as further amended by the Housing Benefit (Amendment) Regulations 2013 (SI 2013/665).
It was a politically controversial matter, described as either a bedroom tax or removal of the spare room subsidy according to political viewpoint.
Its merits are not a matter for the court, nor is there any challenge to the legality of the cap as it applies in general.
The issues before the court are narrower.
The appeals are from two judgments of the Court of Appeal, differently constituted, in judicial review proceedings.
The claimants either have disabilities, or live with dependent family members who have disabilities, or live in what are known as sanctuary scheme homes (accommodation specially adapted to provide protection for women at severe risk of domestic violence).
They are all tenants of registered social landlords and they all receive or received HB.
They challenge the validity of Reg B13, as it applies to them, on equality grounds.
More specifically, they contend that there has been a violation of their rights under article 14 of the European Convention on Human Rights (ECHR), taken with article 8 and/or article 1 of the First Protocol (A1P1) and in As case that there has been a breach by the Secretary of State of the Public Sector Equality Duty (PSED) under the Equality Act 2010.
They are supported in their challenges by the Equality and Human Rights Commission (EHRC), which was given permission to intervene.
In the first set of proceedings, issued by MA and others, some of the claims (including MAs claim) were resolved.
When the case reached the Court of Appeal the claims remaining in issue were those of Jacqueline Carmichael, Richard Rourke, Mervyn Drage, JD and James Daly.
Their claims were rejected by the Divisional Court (Laws LJ and Cranston J) [2013] EWHC 2213 (QB); [2013] PTSR 1521, and the Court of Appeal (Lord Dyson MR, Longmore and Ryder LJJ) [2014] EWCA Civ 13; [2014] PTSR 584.
The other appeal arises from proceedings brought separately by A and the Rutherford family.
Their claims were dismissed at first instance by different judges, but their appeals were heard together, and both succeeded in the Court of Appeal (Lord Thomas of Cwmgiedd CJ and Tomlinson and Vos LJJ) [2016] EWCA Civ 29.
A, who is in a sanctuary scheme, succeeded under article 14 on the ground of sex discrimination, but failed in her claim under the Equality Act.
The Rutherfords succeeded under article 14 on the ground of disability discrimination.
The Secretary of State is the respondent in the MA case and is the appellant in relation to A and the Rutherfords. (In the case of A, there is a cross appeal against the rejection of her Equality Act claim.) The key facts relating to the individual claimants are summarised in appendix 1 to this judgment.
Housing benefit and Regulation B13
HB is a means tested benefit provided under section 130 of the Social Security Contributions and Benefits Act 1992 and subordinate regulations. (It is due to be replaced eventually by Universal Credit, which is in the process of being rolled out across parts of the United Kingdom.) Its purpose is to help claimants with their rental costs.
There is a prescribed mechanism for determining in each case the appropriate maximum housing benefit (AMHB).
Section 130A of the 1992 Act, as inserted by section 30(2) of the Welfare Reform Act 2007 and amended by section 69(3) of the Welfare Reform Act 2012, allows regulations to provide for the amount of the claimants rental liability to be taken into account in calculating the AMHB to be less than the actual liability.
The AMHB is calculated by reference to the eligible rent.
Reg B13 provides for adjustment of the eligible rent and AMHB in the area of social sector housing.
The relevant parts are as follows: (1) The maximum rent (social sector) is determined in accordance with paras (2) to (4). (2) The relevant authority must determine a limited rent by (a) determining the amount that the claimants eligible rent would be in accordance with regulation 12B(2) (b) where the number of bedrooms in the dwelling exceeds the number of bedrooms to which the claimant is entitled in accordance with paras (5) to (7), reducing that amount by the appropriate percentage set out in para (3); (3) The appropriate percentage is (a) 14% where the number of bedrooms in the dwelling exceeds by one the number of bedrooms to which the claimant is entitled; and (b) 25% where the number of bedrooms in the dwelling exceeds by two or more the number of bedrooms to which the claimant is entitled. (4) Where it appears to the relevant authority that in the particular circumstances of any case the limited rent is greater than it is reasonable to meet by way of housing benefit, the maximum rent (social sector) shall be such lesser sum as appears to that authority to be an appropriate rent in that particular case. (5) The claimant is entitled to one bedroom for each of the following categories of person whom the relevant authority is satisfied occupies the claimants dwelling as their home (and each person shall come within the first category only which is applicable) (a) Act); (b) (ba) a child who cannot share a bedroom; (c) (d) (e) two children of the same sex; two children who are less than ten years old; a child a couple (within the meaning of Part 7 of the a person who is not a child; (6) The claimant is entitled to one additional bedroom in any case where (9) a relevant person is a person who requires (a) overnight care; or (b) a relevant person is a qualifying parent or carer.
In this regulation relevant person means the claimant; (a) the claimants partner; (b) a person (P) other than the claimant or the (c) claimants partner who is jointly liable with the claimant or the claimants partner (or both) to make payments in respect of the dwelling occupied as the claimants home; (d) Ps partner.
A person who requires overnight care is defined in Reg 2(1) in terms which have the effect of not including any child.
HB is payable at a reduced rate to claimants with an income above the applicable amount: Social Security Contributions and Benefits Act 1992, section 130(1).
Regulations determine the applicable amount and what income is to be taken into account.
The applicable amount is set at a level which is intended to cover a claimants basic living needs other than rent.
Discretionary Housing Payments
There is also a statutory scheme for enabling Discretionary Housing Payments (DHPs) to be made to persons who are entitled to HB and/or council tax benefit: Child Support, Pensions and Social Security Act 2000, section 69.
As the title indicates, such payments are discretionary.
The scheme is funded by central government and administered by local authorities.
By the terms of the Discretionary Financial Assistance Regulations (SI 2001/1167), made under section 69 of the 2000 Act, an award may be made for such period as the authority considers appropriate in the particular circumstances of the case, and the authority is required to give reasons for its decision.
There is no statutory right of appeal, but such decisions are in principle subject to judicial review.
The practice is for the Department of Work and Pensions to make an annual DHP grant to local authorities in respect of their anticipated expenditure.
Equality rights
Two sets of equality rights are in issue: a) under article 14 of the ECHR, taken together with article 8 and/or A1P1, and b) under the Equality Act 2010.
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.
The claimants other than A contend that Reg B13 operates so as to cause unlawful disability discrimination.
It is common ground that disability falls within other status.
A contends that Reg B13 operates so as to cause unlawful sex discrimination.
Article 8 protects private and family life.
A1P1 protects rights in respect of property and possessions, and it is common ground that HB falls within its scope.
Section 149 of the Equality Act is headed Public Sector Equality Duty.
It provides in part: (1) A public authority must, in the exercise of its functions, have due regard to the need to eliminate discrimination ; (a) (b) advance equality of opportunity between persons who share a relevant protected characteristic and persons who do not share it; (c) (3) Having due regard to the need to advance equality of opportunity between persons who share a relevant protected characteristic and persons who do not share it involves having due regard, in particular, to the need to remove or minimise disadvantages suffered by persons (a) who share a relevant protected characteristic that are connected to that characteristic; (b) take steps to meet the needs of persons who share a relevant protected characteristic that are different from the needs of persons who do not share it;
Disability and sex are among the protected characteristics set out in section 149(7) of the Equality Act.
Evolution of Regulation B13
The evolution of Reg B13 is described in detail in the judgments given in the case of MA and others by the Divisional Court (paras 20 to 33) and the Court of Appeal (paras 15 to 36).
Paragraphs 20 to 33 of the judgment of Laws LJ in the Divisional Court are reproduced at appendix 2 to this judgment.
In summary, as part of its policy for curbing public expenditure the government aimed to ensure that social sector tenants of working age who were occupying premises with more bedrooms than they required should, wherever possible, move into smaller accommodation.
It was recognised at an early stage that a policy based purely on numbers of rooms and occupants would cause problems for some with disabilities, and there was a debate within government and Parliament about how such problems should be addressed.
The government initially decided that, rather than creating general exceptions for persons with disabilities (or certain categories of persons with disabilities), their needs should be met as necessary through a scheme of discretionary housing payments based on individual assessments.
Regulation B13 as first introduced by SI 2012/3040 did not include para 6 (The claimant is entitled to one additional bedroom in any case where (a) the claimant or the claimants partner is (or each of them is) a person who requires overnight care; or (b) the claimant or the claimants partner is (or each of them is) a qualifying parent or carer.) This para was added by SI 2013/665.
The EHRC correctly pointed out in its written case, para 8, that there has been a change in the structure of the under occupation criteria now contained in Reg B13.
When under occupation criteria were first introduced, the provision for determining the number of bedrooms required by a household depended entirely on the number of occupants, their ages and sexes, and whether any of them were a couple.
Para 6 contains provision for some disability related need.
The result is a composite provision, structured on the basis of a non disabled norm but with provision for certain classes of disability related need.
Parts of Reg B13 in its current form owe their origin to the decision of the Court of Appeal in Burnip v Birmingham City Council [2012] EWCA Civ 629; [2013] PTSR 117.
This arose from a provision in Reg 13D(3) of the Housing Benefit Regulations 2006 (introduced by regulation 7 of the Housing Benefit (Local Housing Allowance and Information Sharing) Amendment Regulations 2007 (SI 2007/2868) and amended by regulation 2(6) of the Housing Benefit (Amendment) Regulations 2010 (SI 2010/2835) which came into force on 1 April 2011), in similar terms to Reg B13(5).
The court heard appeals in three cases.
In Burnip and a second case the claimants were adults with disabilities who required the presence of a carer throughout the night.
By the time that the matter reached the Court of Appeal, there had been a legislative amendment which met those cases (by allowing an additional bedroom where the claimant or claimants partner required overnight care).
The third case, Gorry v Wiltshire County Council, concerned a family including two children of the same sex who suffered from severe disabilities which made it inappropriate for them to share a bedroom.
The court held that in each case there had been discrimination under article 14, because Reg B13 had a disparate adverse impact on persons with disabilities, and that the discrimination had not been justified.
The court recognised that DHPs had a valuable role to play but it did not consider that they provided an adequate response to the problem in the types of case with which the court was concerned.
The reasons for the courts decision that the discrimination was not justified were given by Henderson J, with whom Maurice Kay LJ (para 23) and Hooper LJ (para 25) agreed.
Henderson J emphasised (para 64) that he was not suggesting a general exception from the normal bedroom test for disabled people of all kinds.
The exception, he said, was sought only for a very limited category of claimants, namely those whose disability was so severe that an extra bedroom was needed for a carer to sleep in, or in cases like that of Mr Gorry where separate bedrooms were needed for children who, in the absence of disability, could reasonably be expected to share a room.
He observed that such cases were by their nature likely to be relatively few in number, easy to recognise, not open to abuse and unlikely to undergo change or need regular monitoring.
He added that the fact that Parliament had now legislated for cases like that of Mr Burnip could be viewed as recognition by Parliament of the justice of such claims.
Ten months later, Reg B13 was amended to insert para (5)(ba), which covered Mr Gorrys case.
In reaching this conclusion the court applied the test whether the Secretary of
Judgments under review
In the MA proceedings the Court of Appeal accepted that Reg B13 had a discriminatory effect on some people with disabilities, but it held that the discrimination was justified, primarily because the Secretary of State was entitled to take the view that it was not practicable to exempt an imprecise class of persons to whom the bedroom criteria would not apply because they needed extra bedroom space by reason of disability.
The DHP scheme had the benefit of flexibility and was also appropriate because the nature of a persons disability and disability related needs may change over time.
States policy was manifestly without reasonable foundation.
The court rejected the argument that the case of Mrs Carmichael, who needed to sleep in a separate room from her husband on account of her disability, was materially indistinguishable from the Gorry situation of children who were unable to sleep in the same room, which had now been catered for by the new provision contained in Reg B13(5)(ba).
The court held that the Secretary of State was entitled to provide greater protection for a child than an adult because the best interests of a child are a primary consideration, citing R (JS) v Secretary of State for Work and Pensions (Child Poverty Action Group intervening) [2013] EWHC 3350, paras 42 to 46 (Elias LJ).
The court also rejected the allegation of a breach of the PSED.
It emphasised (para 83) that the principal question in relation to the PSED is not whether the decision (or outcome) is justifiable, but whether, in the process leading to the making of the decision, the decision maker had due regard to the relevant considerations, citing the review of the case law by McCombe LJ in R (Bracking) v Secretary of State for Work and Pensions [2013] EWCA Civ 1345, [2014] EqLR 60, para 26.
It upheld the finding of the Divisional Court that the effects of the HB cap were properly considered.
In the proceedings relating to A and the Rutherford family, the Court of Appeal held that the situation of the Rutherford family, who included a child with disabilities requiring an overnight carer on certain days of the week, was indistinguishable from that of an adult with disabilities requiring an overnight carer, to which the decision in Burnip and Reg B13(6) applied.
As explained at para 7, a child who requires overnight care does not come within the statutory definition of a person who requires overnight care.
The court held that the reasoning in Burnip applied also in the case of A, a female victim of domestic violence living in accommodation adapted under a sanctuary scheme, because the category of persons in such schemes was limited to a relatively small number of victims (albeit growing), who were easy to identify, not liable to abuse the scheme, unlikely to undergo change and not in need of regular monitoring.
The court therefore held that there had been a breach of article 14 in both cases.
As to the PSED, the court held that the Secretary of State had properly considered the questions of disability based discrimination and gender based discrimination.
Did the courts apply the right test?
The primary contention of the claimants in MA is that the Divisional Court and the Court of Appeal applied the wrong test in asking themselves whether the discriminatory treatment about which the claimants complained was manifestly without reasonable foundation.
In a case involving disability discrimination, weighty reasons for justification were required.
It was wrong, they submitted, to see the case as one involving a matter of general economic or social policy, to which the manifestly without reasonable foundation test was appropriate.
No objection was being raised to the general policy of Reg B13.
The objection was to the application of the policy in a way which unjustifiably discriminated against a group of people with disabilities.
The Divisional Court and the Court of Appeal based their approach on the judgment of Lady Hale, with which the other members of the court agreed, in Humphreys v Revenue and Customs Comrs [2012] 1 WLR 1545.
It is necessary to set out the relevant passage at some length: 15.
The proper approach to justification in cases involving discrimination in state benefits is to be found in the Grand Chambers decision in Stec v United Kingdom (2006) 43 EHRR 1017.
The benefits in question were additional benefits for people who had to stop work because of injury at work or occupational disease.
They were entitled to an earnings related benefit known as reduced earnings allowance.
But on reaching the state pension age, they either continued to receive reduced earnings allowance at a frozen rate or received instead a retirement allowance which reflected their reduced pension entitlement rather than reduced earnings.
Women suffered this reduction in benefits earlier than men because they reached state pension age at 60 whereas men reached it at 65. 16.
The court repeated the well known general principle that A difference of treatment is, however, discriminatory if it has no objective and reasonable justification; in other words, if it does not pursue a legitimate aim or if there is not a reasonable relationship of proportionality between the means employed and the aim sought to be realised. (para 51) However, it explained the margin of appreciation enjoyed by the contracting states in this context, at para 52: The scope of this margin will vary according to the circumstances, the subject matter and the background.
As a general rule, very weighty reasons would have to be put forward before the court could regard a difference in treatment based exclusively on the ground of sex as compatible with the Convention.
On the other hand, a wide margin is usually allowed to the state under the Convention when it comes to general measures of economic or social strategy.
Because of their direct knowledge of their society and its needs, the national authorities are in principle better placed than the international judge to appreciate what is in the public interest on social or economic grounds, and the court will generally respect the legislatures policy choice unless it is manifestly without reasonable foundation. 17.
The phrase manifestly without reasonable foundation dates back to James v United Kingdom (1986) 8 EHRR 123, para 46, which concerned the compatibility of leasehold enfranchisement with article 1 of the First Protocol.
In the Stec case 43 EHRR 1017, the court clearly applied this test to the states decisions as to when and how to correct the inequality in the state pension ages, which had originally been introduced to correct the disadvantaged position of women.
Similarly, the decision to link eligibility for reduced earnings allowance to the pension system was reasonably and objectively justified, given that this benefit is intended to compensate for reduced earning capacity during a persons working life: para 66.
The Grand Chamber applied the Stec test again to social security benefits in Carson v United Kingdom (2010) 51 EHRR 369, para 61, albeit in the context of discrimination on grounds of country of residence and age rather than sex. 18.
The same test was applied by Lord Neuberger of Abbotsbury (with whom Lord Hope of Craighead, Lord Walker of Gestingthorpe and Lord Rodger of Earlsferry agreed) in R (RJM) v Secretary of State for Work and Pensions [2009] AC 311, which concerned the denial of income support disability premium to rough sleepers.
Having quoted para 52 of the Stec case 43 EHRR 1017 he observed, at para 56, that this was an area where the court should be very slow to substitute its view for that of the executive, especially as the discrimination is not on one of the express, or primary grounds.
He went on to say that it was not possible to characterise the views taken by the executive as unreasonable.
He concluded, at para 57: The fact that there are grounds for criticising, or disagreeing with, these views does not mean that they must be rejected.
Equally, the fact that the line may have been drawn imperfectly does not mean that the policy cannot be justified.
Of course, there will come a point where the justification for a policy is so weak, or the line has been drawn in such an arbitrary position, that, even with the broad margin of appreciation accorded to the state, the court will conclude that the policy is unjustifiable. 19.
Their Lordships all stressed that this was not a case of discrimination on one of the core or listed grounds and that this might make a difference.
In R (Carson) v Secretary of State for Work and Pensions [2006] 1 AC 173, both Lord Hoffmann and Lord Walker drew a distinction between discrimination on grounds such as race and sex (sometimes referred to as suspect) and discrimination on grounds such as place of residence and age, with which that case was concerned.
But that was before the Grand Chambers decision in the Stec case 43 EHRR 1017.
It seems clear from Stec, however, that the normally strict test for justification of sex discrimination in the enjoyment of the Convention rights gives way to the manifestly without reasonable foundation test in the context of state benefits.
The same principles were applied to the sex discrimination involved in denying widows pensions to men in Runkee v United Kingdom [2007] 2 FCR 178, para 36.
If they apply to the direct sex discrimination involved in the Stec and Runkee cases, they must, as the Court of Appeal observed, at para 50, apply a fortiori to the indirect sex discrimination with which we are concerned.
Lady Hale added (para 22) that the fact the test is less stringent than the weighty reasons normally required to justify sex discrimination did not mean that the justifications put forward should escape careful scrutiny.
On analysis the discrimination may be found to lack a reasonable basis.
What Lady Hale said in the context of sex discrimination applies equally to disability discrimination, as Lord Dyson MR rightly held in the present case (para 59).
Lord Dyson also emphasised that the fact that the court should apply the manifestly without reasonable foundation test, and should exercise considerable caution before interfering with the scheme approved by Parliament, did not lessen the need for careful scrutiny of the reasons advanced by the Secretary of State in justification of the scheme (para 60).
In the present case counsel for the claimants pointed out that in Humphreys the unsuccessful appellant did not argue for anything other than the test established in the Stec and RJM cases (para 20).
It is therefore necessary to ask whether there is good reason to depart from what Lady Hale said in that case.
The fundamental reason for applying the manifestly without reasonable foundation test in cases about inequality in welfare systems was given by the Grand Chamber in Stec (para 52).
Choices about welfare systems involve policy decisions on economic and social matters which are pre eminently matters for national authorities.
The claimants seek to counter that point by arguing that this case involves no challenge to a decision of that kind.
They have no quarrel with the policy of Reg B13.
Their complaint is at a lower level and involves no question of economic or social judgment.
Their complaint is simply that the manner of implementation of the policy discriminates against a vulnerable group, and that it is right to require weighty reasons to justify the discrimination rather than the broader policy itself.
Rejecting that argument, Lord Dyson MR said (paras 54 to 55) that although the precise detail and scope of the Regulations may not be matters of high policy in themselves, they formed an integral part of a high policy decision and could not be dismissed as technical detail; that the law in this area would suffer from undesirable uncertainty if the test were to vary according to whether the challenge were to high level policy or lower level policy; and that there was no hint of such a distinction in the European or domestic case law.
It was argued before this court that the rationale for the approach in Humphreys does not apply in the present case.
In Humphreys the challenge was to a rule of the Child Tax Credit Regulations 2002 (SI 2002/2007) that there should be a single payment of child tax credit (CTC) for any child, and that it should be made to the parent with the main responsibility for the child.
The revenue accepted that the scheme was indirectly discriminatory against men, but the court found that there was objective justification.
The purpose of CTC was to help with meeting the needs of the household with primary responsibility for the childs care.
A choice had to be made whether, and if so how, the CTC should be split where parents had separated.
The fact that men were less likely to receive CTC than women was not related to their gender in such a way as to show a lack of equal respect.
It reflected the fact that men were more likely to be non resident parents, and therefore less likely to need the CTC.
The decision that there should be a single payment of CTC in respect of any child was a necessary part of achieving the governments economic and social policy.
By contrast, it was said that Reg B13 bears unequally on those with disabilities because of their need in many cases for larger accommodation and it is not necessary for it to do so.
I will come on to consider the group of people who have a particular medical need for an additional bedroom, but the argument which I am presently considering goes too far.
The claimants objections to Reg B13 relate to their social as well as medical needs.
The broad question which faced the Secretary of State in relation to Reg B13 and its potential impact on those with disabilities was whether to try to deal comprehensively with all problems of those who have any kind of disability (including social needs not dissimilar to those of other groups) within the precise rules of the regulation, or whether to accommodate them by a linked system of discretionary benefits.
This is in my view a clear example of a question of economic and social policy, integral to the structure of the welfare benefit scheme, and it would not be appropriate to depart from the courts normal approach.
Otherwise, it would be too easy for a skilled lawyer to circumvent the general rule by couching the discrimination complaint in terms of an attack on matters of detail.
I accept that examples can be found of state benefit cases where European courts have spoken of a need for weighty reasons to justify discrimination.
The decision of the Grand Chamber in Andrejeva v Latvia (2009) 51 EHRR 28 is one such example.
Latvian state pension rules discriminated against the applicant on grounds of her nationality.
The Strasbourg court said that while a wide margin of appreciation is usually allowed to the state under the Convention when it comes to measures of economic or social strategy, in a case where nationality was the sole criterion for differential treatment very weighty reasons would have to be put forward to justify it.
In that case there was, on the face of it, no reasonable foundation for such discrimination, and in those circumstances it was for the state to produce a good reason to justify it.
In the language of Lady Hale in Humphreys, on careful scrutiny the discrimination had no reasonable justification.
Other examples cited in argument included Zeman v Austria (Application No 23960/02, 29 June 2006); Luczak v Poland (Application No 77782/01, 27 November 2007), Markin v Russia (2002) 56 EHRR 8 and Vrountou v Cyprus (App No 33631/06, 13 October 2015).
None of them contain a statement of general principle inconsistent with Humphreys.
I would affirm what was said in Humphreys in the passage cited above.
It follows that in this case the courts have applied the correct test.
The next question is whether they misapplied it.
Has the test been misapplied?
As a fall back to their argument that the wrong test has been applied, the claimants in MA contend that the courts below failed to give the Reg B13 scheme sufficiently careful scrutiny and that, as a matter of principle, the availability of DHPs could not justify a reduction in the HB to which persons suffering from disabilities would be entitled but for Reg B13.
The impact of Reg B13 on those with disabilities was considered by the government and Parliament in depth.
This is apparent from Laws LJs resume of the evolution of the policy (appendix 2).
The reasons for the decision not to apply a general exemption from Reg B13 for those suffering from disabilities, but instead to make good the shortfall in cases where it would be inappropriate to expect someone with a disability to move house (or make good the shortfall by other means such as taking a lodger), were also explained in witness statements by Beverley Walsh, a senior civil servant in the Department of Work and Pensions.
The essential point she made was that the impact of Reg B13 on those with disabilities was not uniform, but depended to a large degree on the nature and extent of their disabilities, as well as on their personal and social circumstances (such as whether they relied heavily on a local support network and whether suitable alternative accommodation was available, particularly if their present accommodation had been adapted to meet their individual needs).
Some with disabilities would be significantly affected by the cap based on bedroom criteria; others would be no more affected than someone without disability.
In MA the Divisional Court and the Court of Appeal concluded after careful scrutiny that the Secretary of States decision to structure the scheme as he did was reasonable.
In general terms I agree.
There was certainly a reasonable foundation for the Secretary of States decision not to create a blanket exception for anyone suffering from a disability within the meaning of the Equality Act (which covers anyone who has a physical or mental impairment that has a more than minimal long term effect on the ability to do normal daily activities) and to regard a DHP scheme as more appropriate than an exhaustive set of bright line rules to cover every contingency.
However, that is not the end of the matter, for there are some people who suffer from disabilities such that they have a transparent medical need for an additional bedroom.
Burnip and Gorry were in that category.
Even before the decision in those cases there had been an amendment of the Regulations to include one additional bedroom in any case where the claimant or the claimants partner is a person who requires overnight care (or in any case where both of them are).
Burnip was such a case.
Gorry was a case where children required separate bedrooms for disability reasons.
In those cases, which were rightly identified by the Court of Appeal as ones where the individuals medical condition was easy to recognise and gave rise to the need for a separate bedroom, there was no reasonable cause to apply the same cap on HB as if the bedrooms were truly under occupied. (Henderson J said that such cases were likely to be few, but I do not see that as a significant factor in itself.)
That brings me to the cases of Jacqueline Carmichael and the Rutherford family.
They are counterparts to Gorry and Burnip respectively.
Mrs Carmichael cannot share a bedroom with her husband because of her disabilities.
Her position is directly comparable to that of the Gorry children, who could not share a bedroom because of their disabilities.
But Mrs Carmichael is caught by Reg B13 because para (5)(ba), which was introduced to meet the Gorry situation is confined to a child who cannot share a bedroom.
The Rutherfords need a regular overnight carer for their grandson who has severe disabilities.
Their position is comparable to that of Mr Burnip, who needed an overnight carer.
But the Rutherfords are caught by Reg B13 because para (6)(a), which covers the Burnip situation, does not extend to a child who requires overnight care.
There is no reasonable justification for these differences.
The Court of Appeal in MA was persuaded (para 79) that there was an objective reasonable justification for treating Mrs Carmichael less favourably than a child in like circumstances, because the best interests of children are a primary consideration.
I can see that there may be some respects in which differential treatment of children and adults regarding the occupation of bedrooms may have a sensible explanation.
Expecting children to share a bedroom is not the same as expecting adults to do so.
But I cannot, with respect, see a sensible reason for distinguishing between adult partners who cannot share a bedroom because of disability and children who cannot do so because of disability.
And the same applies also to distinguishing between adults and children in need of an overnight carer.
There is also an ironic and inexplicable inconsistency in the Secretary of States approach in the Carmichael and Rutherford cases which Lord Thomas CJ exposed in the latter at para 73: He [the Secretary of State] justified the distinction between making provision for a bedroom for disabled children but not for disabled adults by reference to the best interests of the child and explained the different treatment on that basis.
On that basis, it seems to us very difficult to justify the treatment within the same regulation of carers for disabled children and disabled adults, where precisely the opposite result is achieved; provision for the carers of disabled adults but not for the carers of disabled children.
Lord Thomas CJ added that the court accepted that DHPs were intended to provide the same sum of money, but it was not persuaded that this justified the different treatment of children and adults in respect of the same essential need within the same regulation.
I agree.
I would therefore dismiss the Secretary of States appeal in the Rutherford case, but I would allow Mrs Carmichaels appeal and would hold that in her case there has been a violation of article 14, taken with article 8. (In these circumstances A1P1 adds nothing and does not require further consideration.)
The other claimants in MA are James Daly, Mervyn Drage, JD and Richard Rourke.
Mr Daly occupies a two bedroom property.
His severely disabled son, Rian, stays with him regularly, but he is not within the list of those who qualify for a bedroom under Reg B13(5) because he spends less than half his time with his father.
This has nothing to do with the fact of his disability.
Mr Daly may have a powerful case for a DHP award, so that he can continue to pay his rent from state benefits for Rians sake, but I accept the Secretary of States argument that he has no proper basis for challenging the HB and DHP structure on equality grounds.
Mr Drage is the sole occupier of a three bedroom flat, which is full of accumulated papers.
He suffers from an obsessive compulsive disorder.
His hoarding of papers is no doubt connected to his mental illness, but that is very far from showing that he has a need for three bedrooms.
It is not unreasonable for his claim for benefit to cover his full rent to be considered on an individual basis under the DHP scheme.
JD lives with his adult daughter, AD, who is severely disabled, in a specially constructed three bedroom property.
They have no objective need for that number of bedrooms.
Because the property has been specially designed to meet her complex needs, there may be strong reasons for JD to receive state benefits to cover the full rent, but again it is not unreasonable for that to be considered under the DHP scheme.
Richard Rourke and his step daughter live in a three bedroom property.
One of the bedrooms is used for the storage of equipment.
It is another example of a case where it is not unreasonable for Mr Rourkes claim for benefit sufficient to cover the whole of the rent to be considered on an individual basis under the DHP scheme.
I would therefore dismiss the claims of the MA claimants, other than Mrs Carmichael, that they have suffered unlawful disability discrimination.
Sanctuary schemes
A and her son live in a three bedroom house.
A has said in a witness statement that when she moved there she only needed a two bedroom property, but that there was a shortage of two bedroom properties and she accepted the offer of a three bedroom property.
This was prior to the events giving rise to her need for protection under the sanctuary scheme, which led to its adaptation to provide a high level of security, but the adaptations did not involve using the third bedroom.
There is no objective need for her to have three bedrooms, one of which is unoccupied, but she is understandably loath to move (even if suitable alternative accommodation could be found and made appropriately secure), because she has lived in her present property for many years, she knows her neighbours well and she feels safe where she is.
Those are powerful reasons, but they have nothing to do with the number of bedrooms.
Many other people may have very strong reasons for continuing to live in a larger property than they currently need in terms of size.
The Court of Appeal said in As case that while it had great sympathy with the Secretary of States arguments for saying that it fell into the broad class for which DHPs were appropriate, Burnip obliged the court to hold otherwise (paras 54 to 55).
Like Burnip, A fell into an easily recognisable class few in number.
I have already said that I do not see the likely number of people affected as a critical factor in itself (para 42).
To favour those in a small group with strong societal reasons for staying in a bigger property than they need over those in a larger group with equally strong or possibly stronger reasons would be truly irrational.
The distinction between Burnip and A is that in Burnip there was a transparent medical need for an additional bedroom, whereas A has no need for a three bedroom property.
As case for staying where she is, strong as that case would appear to be, has nothing to do with the size of the property; Mr Burnips case had everything to do with the size of the property and its ability to accommodate a carer.
Notwithstanding my considerable sympathy for A and other women in her predicament, I would allow the Secretary of States appeal in As case.
I add that for as long as A, and others in a similar situation, are in need of the protection of sanctuary scheme housing, they must of course receive it; but that does not require the court to hold that A has a valid claim against the Secretary of State for unlawful sex discrimination.
Lady Hale has reached a different conclusion.
She considers that Reg 13B operates so as to discriminate against women such as A who are victims of gender based violence, in breach of their rights under article 14 taken with article 8 of the ECHR.
Lady Hales starting point is that while A has no need for more bedroom space than is allowed for under Reg B13(5), she has a different type of need, that is, a need to stay where she is because it has been adapted as part of a scheme to provide her with a safe haven.
Lady Hale says that her case cannot be equated with other people who may have a compelling case for staying where they are, because even if such people have a status for the purpose of article 14, their cases would need individual evaluation (para 78).
I agree that not everybody who could make out a strong case for remaining where they are could necessarily be fitted into a relevant status.
An everyday example would be a person who lives close to and is the primary carer for an elderly parent, who is dependent on that person for being able to continue to live in the elderly parents own home.
Whether the parent would be able to bring himself or herself within articles 8 and 14 in such circumstances would be debatable.
But the carer may be able to show a powerful case that there is a need for her to live where she does, even if she happens to have a spare bedroom; and that, leaving aside humanitarian considerations, the cost of state care for the parent would be likely far to exceed any saving by reducing the carers HB.
I agree also with Lady Hale about the need for individual evaluation, and it was this consideration which primarily led the Secretary of State to decide that cases of need for reasons unconnected with the size of the property should be dealt with through the DHP scheme.
Take also the case of JD and AD (referred to in para 53).
Just as in As case, their property has been specially adapted to provide AD with an environment where she can live in safety.
Lady Hales observation (in para 76) that because of its special character, it will be difficult (if not impossible) for her to move elsewhere and would certainly put the State to further expense may equally be said of AD, but the court is unanimous that it is not unreasonable for JD and ADs need for housing benefit to be considered under the DHP scheme, notwithstanding the differences between HB and DHP to which Lady Hale has referred in para 77 ADs disabilities are at the severe end of the spectrum, but there can be degrees of disability, and the alterations to a property to accommodate the persons needs may be on a larger or smaller scale.
These are matters which the Secretary of State may legitimately say require individual evaluation.
Such examples could be multiplied, but the point remains the same.
It was recognised from the time that Reg B13 was mooted that there will be some people who have a very powerful case for remaining where they are, on grounds of need unrelated to the size of the property.
For reasons explained in the evidence (to which I have referred in para 40), it was decided not to try to deal with cases of personal need unrelated to the size of the property by general exemptions for particular categories but to take account of them through DHPs.
Lady Hale has observed that it has not been demonstrated that there would be insuperable practical difficulties in drafting an exemption from Reg B13 for victims of gender based violence who are in a sanctuary scheme and who need for that reason to stay where they are.
In her witness statement on behalf of the Secretary of State in As case, Ms Walsh drew an analogy between adaptations made to properties for persons with disabilities and adaptations made under sanctuary schemes.
She made the point that the type of adaptations made and their cost is likely to vary from case to case, and by implication that they may be more easy or less easy to replicate.
These factors would be relevant in considering the strength of the case for saying that the person concerned needs to stay where they are.
A herself has emphasised that she regards the support of neighbours and family as critical, and that may well be so.
But that is a personal factor which may not necessarily apply, or apply to the same degree, to other victims of domestic violence.
It is also a factor which may apply as strongly to the elderly or persons with disabilities.
So while I agree that there would have been no insuperable practical difficulty in drafting an exemption from the size criteria for victims of gender violence who are in a sanctuary scheme and who need for that reason to stay where they are, deciding whether they really needed to stay in that particular property would at least in some cases require some form of evaluation.
I leave aside the question debated in the evidence about whether some people in a sanctuary scheme might safely be able to make use of a spare room by taking in someone else such as a family member.
Likewise I do not suppose that there would be insuperable practical difficulties in drafting exemptions to meet other categories of people who may justifiably claim to have a need to remain where they are for reasons unconnected with the size of the accommodation, but this would again require an evaluative process.
Lady Hale considers that there is a further point of distinction between As case and ADs case in that the state has a positive duty to provide effective protection to victims of gender based violence.
I do not think it necessary for present purposes to go into a comparative analysis of the duty of the state to A and AD, because I do not see that the duty to victims of gender based violence mandates the means by which such protection is provided.
A has not established that the adoption of Reg B13 has deprived her, or is likely to deprive her, of a safe haven.
Ultimately, whether the Secretary of State could practicably have adopted a different approach is surely not the test.
I have understood the court to be unanimous that the test is that laid down in Humphreys, to which I have referred.
Applying that test, and recognising the need for careful scrutiny, I do not consider that the approach taken by the Secretary of State was manifestly without reasonable foundation.
Public Sector Equality Duty
As Lord Dyson MR said, the PSED is a duty on the part of a public authority to follow a form of due process, that is, an obligation to have due regard to the need to eliminate discrimination, and advance equality of opportunity, between those with and without a relevant protected characteristic. (See para 24 above.)
In relation to those with disabilities, the Divisional Court and the Court of Appeal in the MA case reached the concurrent conclusion on the evidence that the Secretary of State had fulfilled the duty.
Lord Dyson MR, at para 91, accepted that it was not sufficient for a decision maker to have a vague awareness of his legal duties.
Rather, he must have a focused awareness of the duties under section 149 of the Equality Act and, in a disability case, their potential impact on people with disabilities.
On the history of events (see appendix 1) and the evidence, especially of Beverley Walsh, the courts were well entitled to reach the conclusion that they did.
In relation to sex discrimination, in June 2012 the Department of Work and Pensions published an updated Equality Impact Assessment which considered the impact on those likely to be affected and their distribution, including by gender.
It did not address the group of those within sanctuary schemes.
The Court of Appeal concluded in As case at para 59: It is clear that the Secretary of State did address the question of gender based discrimination.
Those within the sanctuary schemes who would be adversely affected by Regulation B13 were in fact few in number.
It was not in the circumstances a breach of the PSED to fail to identify in the Equality Impact Assessment this very small group of those within the sanctuary schemes who had a need for an extra room; this was a very tiny and specific group.
I agree but I would make a further and more fundamental point.
As As case illustrates, there is no automatic correlation between being in a sanctuary scheme and having a need for an extra bedroom.
The reason that A has three bedrooms is not that she needs three bedrooms, but that no two bedroom properties were available when she first moved there.
As I have said (at paras 56 to 58) her reasons for wanting to stay where she is are strong but unrelated to the size of the property.
The fact that people may have strong personal or social reasons for wanting to stay in their property for reasons unrelated to the number of bedrooms (of which A is one example in her particular circumstances) was recognised and was planned to be taken account of through DHPs.
Lady Hale takes a different view on this issue, as she does on the issue of discrimination under articles 8 and 14 of the ECHR, but no useful purpose would be served by going back over the ground which separates us.
I would therefore dismiss As cross appeal under the Equality Act.
Appendix 1: Factual Summaries Cases concerning adults with disabilities 1.
Mrs Carmichael lives with her husband in a two bedroom flat.
She has spina bifida, hydrocephalus, double incontinence, inability to weight bear and recurring pressure sores.
Her husband is her full time carer.
She needs a special bed with an electronic mattress.
She also needs a wheelchair beside the bed.
Her husband cannot share the same bed, and there needs to be adequate space for her husband and nurses to attend to her needs.
There is not enough space for him to have a separate bed in the same room.
Their rent was previously met in full by HB, but this was reduced by 14% under Reg B13.
The shortfall is presently covered by an award of DHP. 2.
Richard Rourke is a widower and lives with his step daughter in a three bedroom bungalow.
Both have disabilities.
They each occupy one bedroom and the third is used to store equipment.
His rent was met in full by HB, but this was reduced by 25% under Reg B13 on the basis that he is under occupying two bedrooms. (The fact that one bedroom is occupied on a part time basis by his stepdaughter appears to have been overlooked, but that is not the basis of his legal challenge in these proceedings.) 3.
Mervyn Drage lives on his own in a three bedroom flat.
He has significant mental health problems including obsessive compulsive disorder.
He does not sleep in any of his bedrooms, which are all full of papers that he has accumulated.
His rent used to be met in full by HB, but this was reduced by 25% under Reg B13. 4.
JD lives with her adult daughter, AD, in a specially constructed three bedroom property.
AD has cerebral palsy with quadriplegia, learning difficulties, double incontinence and she is registered blind.
She requires 24 hour care and support.
JD provides full time care for her.
The rent was met by a combination of HB and other statutory benefits.
The HB was reduced by 14% under Reg B13.
The shortfall is presently covered by an award of DHP.
Cases concerning children with disabilities 5.
James Daly is the father of Rian, a child who has severe disabilities.
Rian is a full time wheel chair user and has other health problems including incontinence.
He requires help with all aspects of daily living.
Rians parents are separated and they share his care.
Rian stays with his father every weekend, at least one day during the week and for part of school holidays.
Mr Daly occupies a two bedroom property.
His rent used to be met in full by HB.
This was reduced by 14% under Reg B13. 6.
Susan Rutherford is the grandmother of a teenage boy, Warren, who suffers from profound mental and physical disability.
He requires 24 hour care by two people.
He has been looked after by his grandmother since he was a few months old.
She has been helped by her husband, Paul, since their marriage some years ago.
They live in a three bedroom house adapted for their accommodation.
Respite care is provided by carers who stay overnight two nights a week.
Without that help Warrens grandparents would not be able to cope and he would have to go into a care home.
The rent for the property used to be met in full by HB, but this was reduced by 14% under Reg B13.
Sanctuary scheme accommodation 7.
A lives in a three bedroom house with her son, who was conceived by her as a result of rape by a man with whom she had been in a relationship for a brief period.
He has been exceptionally violent towards her and made threats regarded by the police as serious.
Under a sanctuary scheme her property has been adapted to provide a high level of security and she receives on going security monitoring.
Her rent used to be met in full by HB, but this was reduced by 14% under Reg B13.
The shortfall is covered by an award of DHP.
R (MA and others) v Secretary of State for Work and Pensions Appendix 2: Extract from the Judgment of Laws LJ [2013] PTSR 1521, paras 20 33 EVOLUTION OF THE POLICY 20.
The proposed bedroom criteria measure was announced by the government in the 22 June 2010 budget: 2010 Budget Responsibility, freedom, fairness: a five year plan to re build the economy (HC 61).
It is plain from the published budget statement that this and other welfare reforms were part and parcel of the Governments deficit reduction strategy, though other justifications, in terms of enterprise and fairness, were also claimed (reforming the welfare system to reward work para 1.31; tackle welfare dependency and unaffordable spending para 1.92).
Against that general background I may turn to the evidence concerning the manner and extent of the consideration given by the Government, as the prospective policy was elaborated over time, to the needs of the disabled. (1) OFFICIALS ADVICE 21.
In a submission to the Minister for Welfare Reform of 20 August 2010 it was acknowledged that [there] are likely to be a number of social sector tenants who cannot be found suitable alternative social sector accommodation of the right size, and specific reference is made to those caring full time for a disabled person .
On 21 January 2011 officials recorded the ministers agreement that any exemptions eg because the claimant is unable to work due to a disability, should be contingent on their landlord being unable to offer any suitable sized accommodation, and the minister was asked to consider other groups as possible candidates for exemption.
By 12 August 2011 it was being said there was a strong case for exempting disabled claimants where significant adaptations have been made to their properties.
It was suggested that the minister announce a 20m per annum increased DHP package for . 2013/14 and 2014/15, funded by an increase in the planned reduction rates from 23% to 25%.
At paras 6 15 of the officials paper of 12 August 2011 there is a detailed discussion of the background and the options available see also Annex A to the paper.
It includes the statement, at para 9, that [there] is a strong case for an exemption from the size criteria measure for disabled people living in adapted accommodation or properties that have been specially suited to their needs.
In Annex A the officials canvassed arguments for their recommendation of an increase to the DHP pot (DHPs are payable, as Henderson J observed in Burnips case [2013] PTSR 117, para 46, from a capped fund). 22.
From August 2011 onwards there was a consistent view within government that the most workable solution to the difficulties for the disabled arising from the impact of the bedroom criteria was an increase in what could be made available through DHPs.
In response to the paper of 12 August 2011, the minister had asked for more information on the likely reaction of the Treasury and the lobby (a shorthand for various interested groups).
In a paper of 2 September 2011 officials note that the lobby had singled out those living in significantly adapted accommodation as a group which should be exempted.
They indicate (para 4) that they have given consideration to the possibility of exempting this group and other hard cases, and state: trying to define significantly adapted accommodation for exemption purposes would not be workable.
Such an exemption would be difficult and expensive to deliver effectively, especially within universal credit.
It would either be too broad brush or leave out many other, equally deserving cases.
We therefore recommend in our submission of 12 August increasing the DHP pot by 20m in 2013/14 and 2014/15.
This approach would enable local authorities to make decisions at a local level about which cases should be prioritised for financial help to meet any shortfall caused by this measure.
The officials note, however, at para 7: A DHP approach is likely to attract criticism for lacking the certainty . that only an exemption would appear to be able to offer in these cases . this approach may produce inconsistencies in the way individual cases are treated across different parts of the country.
At para 8 the officials refer to a survey carried out by them, to which 56 local authorities and housing associations had responded, and which (together with meetings with various stakeholders) is helping to inform our approach to implementation as well as highlighting the pressure points most likely to be raised in the Lords Committee stages of the Welfare Reform Bill.
They set out ten key bullet points from the survey.
Three of them were: For those providers questioned there appears to be a shortage of both one bed homes and much larger four+ homes.
The majority of providers allocate homes to underoccupying households to a certain extent.
It is more common in smaller two bed homes than bigger homes.
Most authorities allocate to underoccupiers most commonly for disabled needs and due to lack of suitable stock. 23.
On 29 September 2011 officials informed the minister that the Treasury declined to agree the proposed means of funding the suggested DHP package, and accordingly suggested a revised approach: that the HB reduction rates be revised upwards, to 14% and 25% for one and two excess bedrooms respectively, and [that] we use the increased level of savings to provide a 25m DHP package to mitigate the impact of this measure in a targeted way.
In the same document they report amendments received from two members of the House of Lords which proposed six categories of case for exemption from the reductions.
The officials set out arguments against these proposals, of which the first was affordability (most of these would significantly erode savings).
Then, at para 16 this appears: DHPs provide a targeted means of mitigating the impact of this measure from a limited funding pot.
It is also in line with a localised approach which will allow local authorities to take into account the circumstances of individual households.
More detail is given in the Annex to the submission of 29 September 2011.
Thus: 18.
Although the discretionary nature of DHPs can run the risk of uncertainty for individuals, it does have a number of advantages: It would enable LAs to provide additional help to claimants based upon a local level decision about need.
It would deliver mitigation in a targeted way that ensures limited funds are not wasted on cases where the shortfall can be met by the individual .
We will also allocate this money to local authorities in a way that broadly reflects need in relation to the impact of this measure.
At para 20 of the Annex the officials state: Based on average weekly losses from the size criteria, 25m annual funding [sc the proposed DHP package] would be sufficient to remove approx 35,000 claimants from the impacts of the social sector size criteria.
At para 21: We will monitor demand for DHPs in relation to this measure and how they are being used by local authorities. (2) CHILDRENS COMMISSIONERS PAPER 24.
In January 2012 the Childrens Commissioner (established by the Children Act 2004) published a Child Rights Impact Assessment of the Welfare Reform Bill.
I should refer briefly to this given Ms Markus submissions on section 149 of the [Equality Act 2010] and the PSED.
In section 2 the commissioner opines that the proposed reductions in HB in the public sector will have deleterious effects on children: Such penalties are likely to have a particular impact on disabled children, where spare rooms may be needed for equipment storage and/or overnight carers, unless they are excluded from the Bill.
We understand that the DWPs intention is to make provision for overnight carers where this is required; however, the [equality impact assessment] says that there will be provision for a bedroom for overnight carers for the claimant or their partner, but does not mention carers for children.
Children waiting for an adoptive family . will also be affected, as will children whose care is shared by separated parents [Other examples are given]. (3) EQUALITY IMPACT ASSESSMENT AND THE JULY AND AUGUST 2012 CIRCULARS 25.
In June 2012 the Department for Work and Pensions (DWP) published an updated equality impact assessment on the proposed size criteria for HB.
Para 9 refers to the proposal, as it had become, to add 30m per year to the DHP fund from 2013 14, stating that it was expected to mitigate some of the impacts of the measure, in particular the effects on disabled people and those with foster caring responsibilities.
Paras 20 21 describe the departments ongoing discussions with stakeholders.
Paras 22 et seq offer a breakdown of the numbers of HB claimants thought likely to be affected (660,000 altogether), the distribution of losses among them (from 5 to 25 and over per week), the numbers who might float off HB altogether, tenure types (as between local authority and housing association tenants), regional distribution of those affected, and distribution by reference to family circumstances and gender.
There is specific reference to disabled persons, who are accepted, at para 42, as more likely to be affected by the introduction of size criteria, and there is a prediction, at paras 43 44, that 56% 63% of those affected will be disabled, depending on the sense attributed to disability.
Para 59 describes the departments plans for monitoring and evaluation of the policys effects. 26.
In July 2012 Circular HB/CTB A4/2012 was issued to local authorities.
The background to the 2012 Regulations is explained, and the effect of the changes summarised.
Para 9 reacts to the judgments in Burnips case [2013] PTSR 117, which it will be recalled had been handed down on 15 May 2012.
The circumstances of the first two claimants, who needed the presence of carers throughout the night, are dealt with in the Regulations (the closing words of Regulation 13D(3), identical as I have said to B13(5) for those renting in the public sector).
The circular concentrated on the third case in the appeal from Burnips case, that of Mr Gorry: 9.
Due [sic] to [the decision in Burnips case] those whose children are said to be unable to share a bedroom because of severe disabilities will be able to claim [HB] for an extra room from the date of the judgment, 15 May 2012.
However it will remain for local authorities to assess the individual circumstances of the claimant and their family and decide whether their disabilities are genuinely such that it is inappropriate for the children to be expected to share a room.
This will involve considering not only the nature and severity of the disability but also the nature and frequency of care required during the night, and the extent and regularity of the disturbance to the sleep of the child who would normally be required to share the bedroom.
This will come down to a matter of judgment on the facts.
DHPs are addressed later in the circular.
At that stage the extra 30m was aimed specifically at two groups: Disabled people living in accommodation that has been substantially adapted to their needs, . [and] Foster carers including those between foster placements (para 52).
This follows: 54.
There are many reasons, as well as those mentioned in para 52, why it may not be appropriate for someone with a disability to either move house or make up any shortfall in rent themselves.
A good example of this may be an individual or family who rely heavily on a local support network.
In circumstances such as these it may be appropriate to use the DHP fund to make up the shortfall in their rent.
Then after describing various means by which affected persons might be able to make up the shortfall caused by the reduction in their HB, this appears: 67.
For those claimants who cannot cover a reduction in [HB] from their own resources and who have a compelling case for remaining in their current accommodation, there is the DHP fund . 27.
On 1 August 2012 Circular HB/CTB A6/2012 was issued.
It was specifically concerned with the Burnip case: more particularly with facts such as those of Mr Gorrys appeal.
It indicated, at para 2, that the DWP had sought permission to appeal the decision to the Supreme Court.
The advice given in para 9 of Circular HB/CTB A4/2012 was replicated in para 8.
Para 7 also had this: When a claimant says that their children cannot share a bedroom, [local authorities] should expect to be provided with sufficient medical evidence to satisfy themselves that these factors [sc claimed severe disability] are sufficiently weighty in the individual case to make it inappropriate for the children to share a bedroom on a continual basis.
Only in such circumstances will they be justified in making an exception to the normal application of the size criteria and granting HB on the basis of an additional bedroom. (4) CIRCULAR HB/CTB U2/2013 28.
Circular HB/CTB U2/2013was issued on 12 March 2013.
As I have foreshadowed it is material to the third ground of challenge (the deployment of guidance to prescribe the means of calculating the appropriate maximum HB).
It indicated, at para 5, that the Secretary of State did not propose to pursue the appeal (or prospective appeal) in Burnips case [2013] PTSR 117.
This follows: 6.
This means that from the date of the Court of Appeal judgment on 15 May 2012, local authorities (LAs) should allow an extra bedroom for children who are unable to share because of their severe disabilities following the guidelines as set out in paras 7 to 10 below. 7.
When a claimant says that their children are unable to share a bedroom, it will be for LAs to satisfy themselves that this is the case, for example, a claim is likely to be supported by medical evidence and many children are likely to be in receipt of disability living allowance (DLA) for their medical condition.
In addition LAs must consider not only the nature and severity of the disability, but also the nature and frequency of care required during the night, and the extent and regularity of the disturbance to the sleep of the child who would normally be required to share the bedroom.
In all cases this will come down to a matter of judgement on facts of each individual case. 8.
It should be noted that the judgment does not provide for an extra bedroom in other circumstances, for example, where the claimant is one of a couple who is unable to share a bedroom or where an extra room is required for equipment connected with their disability. (5) THE DHP GUIDANCE MANUAL, APRIL 2013 29.
This document of April 2013 (the Discretionary Housing Payments Guidance Manual) (the DHP Guidance Manual) contains very full guidance as to the use of DHPs.
It reminds authorities, at para 1.10, that their DHP funds are cash limited.
It reviews the whole scheme.
It canvasses the possibility of allowing applications in advance from persons affected by the HB, at paras 4.5 6, and making an award not limited in time to a disabled claimant likewise affected, at para 5.3.
A Good Practice Guide is included in the DHP Guidance Manual.
It contains a substantial discussion of the HB.
It states: 1.10 The Government has provided additional funding towards DHPs following the introduction of the benefit cap.
This additional funding is intended to support those claimants affected by the benefit cap who, as a result of a number of complex challenges, cannot immediately move into work or more affordable accommodation. in living Specific types of case are then enumerated, at para 1.11, and carefully discussed, and worked examples are given.
I should note these passages: 2.5 For claimants specially adapted accommodation, it will sometimes be more cost effective for them to remain in their current accommodation rather than moving them into accommodation which needs to be adapted.
We therefore recommend that local authorities identify people who fall into this group and invite a claim for DHPs. 2.7 The allocation of the additional funding for disabled people broadly reflects the impact of this measure and the additional funding needed to support this group.
However, due to the discretionary nature of the scheme, LAs should not specifically exclude any group affected by the removal of the spare room subsidy or any other welfare reform.
It is important that LAs are flexible in their decision making.
Other types of case discussed include adopters (paras 2.9 11) and foster carers, in particular (para 2.13) carers for two or more unrelated foster children. 30.
At paras 5.4 5.5 the Good Practice Guide poses a series of practical questions under two heads, The households medical circumstances, health or support needs and Other circumstances.
The bullet points under the latter head (13 in number) demonstrate a series of different cases, none of them necessarily involving disability, in which the claimant may encounter particular difficulty or hardship in seeking alternative accommodation in response to the reduction in his/her HB which the local authority may think it right to consider in deciding whether to make an award of DHP.
I will just set out the first two instances: Is the claimant fleeing domestic violence? This may mean they need safe accommodation on an emergency basis so the concept of having time to shop around for a reasonably priced property is not appropriate.
Does the household have to live in a particular area because the community gives them support or helps them contribute to the district? (6) STATEMENTS IN PARLIAMENT 31.
I turn next to the parliamentary debates on the 2012 Regulations.
It will be recalled that the Regulations were subject to the affirmative resolution procedure.
On 15 October 2012 in the House of Lords the Parliamentary Under Secretary of State, Lord Freud, referred to the 30m addition to the DHP fund for 2013 14, of which 5m was to be earmarked for foster carers.
Concern was expressed in the debate as to the dramatic consequences that these regulations will have for disabled people.
Lord Freud stated (Hansard (HL Debates) 15 October 2012, col GC485): As noble Lords will remember, the 30m is divided so that 25m is to cover people with significant adaptations.
We estimate that there are around 35,000 claimants, particularly wheelchair users, who have accommodation adapted to their needs .
The core question, raised by [Lord McKenzie and Lady Hollis] was whether there is suitable accommodation.
I know it is a concern.
Clearly, it varies across the country.
This is not about making people move into it.
Many will prefer to stay.
What will happen in practice is that there will be a very varied effect on individuals.
One can tier up the problems and end up with someone in a very difficult position.
We had some examples today.
This is exactly where we would expect the DHP to come into effect.
A lot of people will decide that they will have enough money or that they will be able to take in a lodger or take extra work.
Those are the kind of decisions that we expect to happen in the marketplace.
There will, of course, be a residue of bigger problems. 32.
In the House of Commons on 16 October 2012 the minister, Mr Webb, answered a question about what the position would be where a disabled or elderly tenant had had adaptations made to his accommodation.
He said: We looked at whether we could simply exclude any house that had had any adaptation done to it.
It quickly became apparent that there is a spectrum of adaptations .
Trying to define in legislation that this or that type of adaptation was or was not exempt was very complex.
Rather than having a blanket exemption for a ramp or a stair rail, we have allocated money to local authorities [sc the 30m DHP], which broadly matches what we think would be the cost of protecting people in the circumstances that the Hon gentleman had described . 33.
At Prime Ministers Questions on 7 March 2013 the Prime Minister stated that people with severely disabled children are exempt [from the bedroom criteria]: Hansard (HC Debates) 6 March 2013, col 949.
On 12 March 2013 the Secretary of State, in a written ministerial statement, referred to the DHP Guidance to be issued the following month (and which I have described above) and indicated that he would closely monitor and adjust the implementation of the policy . to ensure that the needs of these groups [ priority groups other than foster carers and armed forces personnel] are effectively addressed in the longer term: Hansard (HC Debates) 12 March 2013, col 10WS.
LADY HALE: (dissenting in the A case) (with whom Lord Carnwath agrees)
It is perhaps unfortunate that two very different sorts of case, raising very different issues about the removal of the spare room subsidy, should have been dealt with together.
As Lord Toulson has demonstrated, the disability cases are about whether people need extra space because of their disability.
The link between the number of bedrooms for which housing benefit is paid and their needs is direct and obvious.
The regulation denies them the benefit they need to pay for the amount of space they need.
The case of A, and others like her in sanctuary schemes, is different.
Her need is not for space but to stay where she is.
The effect of the regulation is to deny her the benefit she needs in order to stay in the accommodation she needs.
In my view this is unjustified discrimination against her on grounds of her sex.
But the reasons are quite different from the reasons in the disability cases.
It has been recognised for a long time, both nationally and internationally, that the State has a positive obligation to provide effective protection for vulnerable people against ill treatment and abuse, not only from agents of the State but also from private individuals.
The aim of such protection is effective deterrence: prevention of the abuse taking place at all is a far more effective remedy than punishment or compensation after the event.
Several of the Convention rights may be violated by the failure to provide effective protection.
Thus, in the well known case of X and Y v The Netherlands (1985) 8 EHRR 235, the failure of the authorities to provide the protection of the criminal law for a mentally disabled young woman against sexual abuse was a violation of the right to respect for private life under article 8.
In Z v United Kingdom (2001) 34 EHRR 3, the failure to provide the protection of the child care system for a family of children against prolonged neglect by their parents was a violation of their right not to be subjected to ill treatment under article 3.
In Opuz v Turkey (2009) 50 EHRR 28, the failure to provide the protection of the criminal law or a safe haven scheme for a wife against repeated violent attacks by her husband was a violation of her rights under article 3.
Significantly, in Opuz v Turkey, the court also recognised that this failure was a breach of article 14, the right to the equal enjoyment of the Convention rights, because gender based violence such as this has been internationally recognised as a form of discrimination against women.
The court quoted, among other things, article 1 of the Convention on the Elimination of All Forms of Discrimination against Women (CEDAW) which defines discrimination as: [A]ny distinction, exclusion or restriction made on the basis of sex which has the effect or purpose of impairing or nullifying the recognition, enjoyment or exercise by women, irrespective of their marital status, on a basis of equality of men and women, of human rights and fundamental freedoms in the political, economic, social, cultural, civil or any other field.
Obviously, to deny women protection against gender based violence, such that they cannot live an equal life with men, is discrimination against them in the enjoyment of their fundamental rights.
As the United Nations Commission on Human Rights put it, in resolution 2003/45: [A]ll forms of violence against women occur within the context of de iure and de facto discrimination against women and the lower status accorded to women in society and are exacerbated by the obstacles women often face in seeking remedies from the state.
It is greatly to the credit of the United Kingdom that domestic law began to develop more effective remedies against gender based violence in the 1970s, following the recognition of the problem in the Report of the House of Commons Select Committee on Violence in Marriage (1974 75) HC 553.
It was widely recognised that the criminal law is often an ineffective remedy.
The shocking facts of Ms As case, not unlike the shocking facts of Opuz v Turkey, but with a far more robust response from the criminal justice system, show all too clearly that there is a class of dangerous and determined abusers who will not be put off by the criminal law, however effectively it is deployed.
Parliaments of all political persuasions have recognised that what is needed are, firstly, ways of getting the abuser out of the home, beginning with the Domestic Violence and Matrimonial Proceedings Act 1976 and now contained in Part IV of the Family Law Act 1996, together with the Domestic Violence, Crime and Victims Act 2004, and secondly, ways of getting alternative accommodation for the victim, beginning with the Housing (Homeless Persons) Act 1977 and now contained in Part VII of the Housing Act 1996.
Sanctuary schemes are a further development.
They recognise the positive obligation of the State to provide a safe haven for a comparatively small number of victims who are at risk of really serious violence.
The state has provided Ms A with such a safe haven.
It allocated her a three bedroom house when she did not need one.
That was not her choice.
It later fortified that house and put in place a detailed plan to keep her and her son safe.
Reducing her housing benefit by reference to the number of bedrooms puts at risk her ability to stay there.
Because of its special character, it will be difficult if not impossible for her to move elsewhere and that would certainly put the State to yet further expense.
Given these very special circumstances, I am tempted to regard this as an interference with her and her sons right to respect for their home.
But in any event, denying her the benefit she needs in order to be able to stay there is discrimination in the sense described in Thlimmenos v Greece (2000) 31 EHRR 154: treating her like any other single parent with one child when in fact she ought to be treated differently.
Indeed, the appellant does not seriously dispute that Ms A needs to stay where she is.
The Secretary of State accepts that she needs to stay in a sanctuary scheme and probably in this very house.
The justification suggested for the interference, or the discrimination, is the availability of discretionary housing payments to make up the shortfall in her rent.
But if the discretionary housing payment scheme is not good enough to justify the discrimination against the Rutherford and Carmichael households, it is not good enough to justify the discrimination against Ms As household either.
Its deficiencies were acknowledged in the Court of Appeals decision in Burnip v Birmingham City Council [2012] EWCA Civ 629; [2013] PTSR 117, para 46.
They are well summed up by Mr Drabble QC on behalf of the Rutherford and Carmichael families: it is discretionary, cash limited and produces less certainty; it has a stricter means test; it offers different and less attractive routes of judicial challenge; it can be onerous to make applications; and it encourages short term, temporary and conditional awards.
For a woman in a sanctuary scheme to have to endure all those difficulties and uncertainties on top of the constant fear and anxiety in which she lives cannot be justified.
This is not a question of the allocation of scarce public resources: it is rightly acknowledged that public resources will have to meet this need one way or another.
Obviously, her circumstances may change, just as the size of any household, and the age and sex of its members may change.
The housing benefit scheme already caters for such changes.
It could cater for a relevant change in her circumstances.
Nor has it been demonstrated that there are insuperable practical difficulties in the way of drafting an exception to the size criteria in regulation B13 to cater for victims of gender based violence who are in sanctuary schemes and need for that reason to stay where they are.
Such cases cannot be equated with other people who would prefer to stay where they are, even if they have quite a compelling case for doing so, such as carers for older people who need to stay near their support networks or even disabled people living in specially adapted accommodation, like JD and AD.
In the first example, it is not clear that this group would constitute a status for article 14 purposes.
But even if it did, their needs will require individual evaluation, perhaps in the context of a social care needs assessment, before it is clear that staying where they are is the right or only solution.
Such an evaluation can only take place in the context of the discretionary housing payment scheme, despite its disadvantages.
But if the need is clearly established, then it would be irrational to refuse to meet it.
In the second example, the disability is indeed a status for article 14 purposes, and I have found the case of JD and AD an extremely difficult one and have been tempted to dissent in their case too.
But the distinction between them and the victims of the sex discrimination entailed in gender based violence, is that the state has a positive obligation to provide effective protection against gender based violence and for this small group of victims this is the only way to make that protection effective.
I would reach this conclusion without consideration of the public sector equality duty.
However, I cannot accept that it was properly complied with in this case.
The Secretary of State was required to have due regard to the need to (a) eliminate discrimination, harassment, victimisation and any other conduct that is prohibited by or under this Act; (b) advance equality of opportunity between persons who share a relevant protected characteristic and persons who do not share it (Equality Act 2010, section 149(1)).
Advancing equality of opportunity involves having due regard, in particular, to the need to (a) remove or minimise disadvantages suffered by persons who share a relevant protected characteristic that are connected to that characteristic; (b) take steps to meet the needs of persons who share a relevant protected characteristic that are different from the needs of persons who do not share it; (section 149(3)).
The Equality Impact Statement prepared in June 2012 addressed the impact on gender in three paragraphs, noting that more women than men would be affected by the size criteria, because there are more female than male housing benefit claimants, but concluding that there was no differential impact by gender.
There was nothing about women who are victims of gender based violence or those within sanctuary schemes.
The Court of Appeal concluded that because there would be very few in sanctuary schemes who would be adversely affected by regulation B13, it was not a breach of the public sector equality duty to fail to identify them (para 59).
Although gender based violence is recognised by the European Court of Human Rights and elsewhere as a form of discrimination against women, it is perhaps unlikely to be a form of discrimination prohibited by the 2010 Act, which I take to be the scope of section 149(1)(a) of that Act.
But it is undoubtedly a disadvantage suffered by people, namely women, who share a relevant protected characteristic within the meaning of section 149(3)(a) and produces needs that are different from those of people who do not share it within the meaning of section 149(3)(b).
This brings it within the need to enhance equality of opportunity to which due regard is to be had under section 149(1)(b).
In my view, therefore, the public sector equality duty requires public authorities at least to consider the impact of their decisions and actions on the victims of gender based violence.
This is not much to ask.
People in sanctuary schemes may be small in number but victims of gender based violence are many.
Public authorities should take their needs into account when developing their policies.
They are likely to make better decisions as a result.
And they will be able to explain them better.
I would therefore dismiss the appeal of the Secretary of State in Ms As case and allow her cross appeal.
I agree with Lord Toulsons judgment on the disability cases.
| UK-Abs | These cases relate to the cap on housing benefit introduced by the Secretary of State under Regulation B13 of the Housing Benefit Regulations 2006 (SI 2006/2013) (Reg B13), often described as the removal of the spare room subsidy or the bedroom tax.
The cap is determined according to a number of factors, including whether the number of bedrooms in the home exceeds the number the claimant is entitled to.
The number of bedrooms a claimant is entitled to depends on the number of occupants, their ages and sexes and whether any are a couple.
A claimant is entitled to an additional bedroom in some specific situations relating to disability need.
There is also a statutory scheme for enabling Discretionary Housing Payments (DHPs) to be made to individuals entitled to housing benefit who may require an extra room.
As the title indicates, these are discretionary.
The claimants in these appeals all live in social sector housing where the number of bedrooms exceeds the number to which they are entitled to under Reg B13.
Their housing benefit has been capped accordingly.
They are challenging the validity of Reg B13 as it applies to their individual circumstances on the basis that it violates their right to non discrimination under article 14 of the European Convention on Human Rights (ECHR), in conjunction with their right to family life under article 8 and/or property under article 1 of the First Protocol (there is no dispute that housing benefit falls within the scope of these latter articles).
They also contend there has been a breach by the Secretary of State of the Public Sector Equality Duty (PSED) under the Equality Act 2010 (the Equality Act), which obliges public authorities to have due regard to the need to eliminate discrimination and advance equality of opportunity between persons who share protected characteristics and those that do not.
Mrs Carmichael, Mr Rourke, Mr Drage, JD and Mr Daly (the MA claimants), all either have disabilities or live with family members who have disabilities (see Appendix 1 for details of the claimants factual circumstances).
Their cases were heard together in the Court of Appeal which accepted that Reg B13 had a discriminatory effect on some people with disabilities, but held that the discrimination was justified.
The MA claimants needs could be met as necessary though the DHP scheme based on individual assessments.
The Court also found that there had been no breach of the PSED.
The MA claimants challenge these decisions.
The Rutherford family and A had their cases heard together in the Court of Appeal (differently constituted).
The Rutherfords succeeded in their claim on the ground of disability discrimination.
A lives in a sanctuary scheme house (accommodation specially adapted to provide protection for women under severe risk of domestic violence); her claim succeeded on the grounds of sex discrimination.
Both A and the Rutherfords Equality Act claims were rejected.
The Secretary of State appeals the Court of Appeals decision to allow the Rutherfords and As discrimination claims.
A cross appeals the rejection of her Equality Act claim.
In respect of the MA claimants discrimination claims, the Supreme Court unanimously allows the appeal of Mrs Carmichael and dismisses the other claimants appeals.
The MA claimants appeals under the Equality Act are unanimously dismissed.
The Secretary of States appeal in respect of the Rutherford family is unanimously dismissed.
The Secretary of States appeal in respect of A is allowed, and As cross appeal is dismissed, by a majority of 5 to 2.
Lord Toulson gives the lead judgment.
Lady Hale gives a dissenting judgment in relation to A in respect of both the Secretary of States appeal and As cross appeal, with which Lord Carnwath agrees.
The normal test in cases involving questions of economic and social policy is whether the discrimination is manifestly without reasonable foundation.
The question of how to deal with the impact of Reg B13 on individuals with disabilities is a clear example of a question of economic and social policy; the housing benefit cap scheme is integral to the structure of the welfare benefit scheme.
The Court of Appeal was therefore correct to apply this test [28 38].
In respect of the application of the test, the Court of Appeal was correct that the Secretary of States decision to structure the housing benefit cap scheme as he did was reasonable [40 41].
However, some people with disabilities have a transparent medical need for an additional bedroom.
Reg B13 recognises this and entitles claimants to an additional bedroom in the case of children (but not adults) who cannot share a bedroom because of their disabilities or adults (but not children) in need of an overnight carer [42].
Mrs Carmichael, is an adult who cannot share a room with her husband due to her disabilities.
The Rutherfords require a regular overnight carer for their grandson with severe disabilities.
There appears to be no reason to distinguish between adult partners who cannot share a bedroom because of disability and children who cannot do so because of disability; or between adults and children in need of an overnight carer.
The decisions in relation to Mrs Carmichael and the Rutherfords were therefore manifestly without reason [46 49].
In relation to the other MA claimants, their need for an additional bedroom is not connected, or not directly connected, to their/their family members disability.
Therefore, whilst there may be good reasons for them to receive state benefits to cover the full rent, it is not unreasonable for their claims to be considered on an individual basis under the DHP scheme [51 54].
A, has a strong case for staying in her current house; it has been adapted under the sanctuary scheme and she feels safe where she is [58].
However, there is no automatic correlation between being in a sanctuary scheme and requiring an extra bedroom: the reason that A currently has an additional bedroom is that no two bedroom properties were available when she moved.
The Court has considerable sympathy for A as she has strong social and personal reasons for staying, however, these are unrelated to the property size.
The fact that people may have strong reasons unrelated to the number of bedrooms, for wanting to stay in their property is taken account of through the DHPs.
It therefore does not follow that A has a valid claim for unlawful sex discrimination [59 64].
Although the state has a positive duty to provide effective protection to victims of gender based violence the means by which such protection is provided is not mandated and A has not established that Reg B13 will deprive her of a safe haven [65].
The PSED is a duty on the part of a public authority to follow a form of due process [67].
On the history of events and the evidence, the Secretary of State properly considered the potential impact of the housing benefit cap scheme on individuals with disabilities [68].
Although the Secretary of State did not specifically consider the impact of Reg B13 on those within sanctuary schemes, he did address the question of gender discrimination [69 70].
The MA claimants appeal, and As cross appeal, under the Equality Act, are therefore dismissed [71].
Lady Hale, with whom Lord Carnwath agrees, would have dismissed the Secretary of States appeal in respect of A.
The state has a positive obligation to provide effective protection for victims of domestic violence [73].
A failure to do so constitutes discrimination as it has been internationally recognised that gender based violence is a form of discrimination against women [74].
Sanctuary schemes provide such protection [75].
As reduction in housing benefit puts at risk her ability to stay there and therefore constitutes discrimination [76].
DHPs are not good enough to justify this discrimination; it is not acceptable for A to endure the additional difficulties and uncertainties involved in obtaining them [77].
Lady Hale would also have allowed As cross appeal.
The PSED was not properly complied with as there was no assessment of the impact of Reg B13 on victims of gender based violence; a disadvantage suffered by women who share a protected characteristic [79 80].
|
This is an appeal brought by HM Attorney General against the decision of the Court of Appeal quashing a certificate which he issued on 16 October 2012 pursuant to section 53(2) of the Freedom of Information Act 2000 (the FOIA 2000) and regulation 18(6) of the Environmental Information Regulations 2004 (EIR 2004).
The underlying question in this appeal is whether communications passing between HRH The Prince of Wales and ministers in various government departments (the Departments) between September 2004 and March 2005 (which I shall call the letters) should be disclosed pursuant to a request made by Rob Evans, a journalist who works on the Guardian newspaper.
The effect of the Attorney Generals certificate (the Certificate) would be to prevent such disclosure, but the effect of the Court of Appeals decision would be to permit such disclosure.
It is worth explaining at the outset of this judgment that, if valid, the effect of the Certificate would be to override a decision of the Upper Tribunal, which is a judicial body and which has the same status as the High Court.
The first argument raised by Mr Evans is that the statutory provision giving the Attorney General, a member of the executive, the power to overrule a judicial decision should, as a matter of constitutional principle, be interpreted restrictively, and that the Certificate is therefore invalid.
His second argument is that, at least so far as the Certificate applies to environmental information, it is invalid, as the provisions of an EU Directive prevent a decision of a judicial tribunal ordering disclosure of such information being overridden by a member of the executive.
The background facts and law
The procedural history in summary
The procedural history is unusual, but it can be briefly summarised.
Mr Evans requested disclosure of the letters from the Departments, pursuant to both the FOIA 2000 and the EIR 2004, in April 2005.
After initially refusing to state whether or not they had any of the letters, the Departments in due course admitted that they did, but refused to disclose them on the ground that they considered the letters were exempt from disclosure under sections 37, 40 to and/or 41 of the FOIA 2000 and the equivalent provisions of the EIR 2004. the Information Commissioner (the Mr Evans complained Commissioner), who upheld the Departments refusal in reasoned determinations promulgated in December 2009.
Mr Evans then appealed to the tribunal, and the matter was transferred to the Upper Tribunal (Walker J, UT Judge Angel and Ms Cosgrave) (the UT), who conducted a full hearing, with six days of evidence and argument.
The UT issued their determination on 18 September 2012, and it was to the effect that many of the letters, which they referred to as advocacy correspondence, should be disclosed [2012] UKUT 313 (AAC).
The Departments did not appeal against this determination.
However, on 16 October 2012, the Attorney General issued the Certificate stating that he had, on reasonable grounds, formed the opinion that the Departments had been entitled to refuse disclosure of the letters, and set out his reasoning.
Mr Evans then issued proceedings to quash the Certificate, on two grounds, namely (i) the reasons given by the Attorney General were not capable of constituting reasonable grounds within the meaning of section 53(2) of the FOIA 2000, and/or (ii) because the advocacy correspondence was concerned with environmental issues, the Certificate was incompatible with Council Directive 2003/4/EC (the 2003 Directive) and/or article 47 of the EU Charter of Fundamental Rights (the EU Charter).
The Divisional Court (Lord Judge CJ, Davis LJ and Globe J) dismissed his claim [2013] EWHC 1960 (Admin), [2014] QB 855.
However, the Court of Appeal (Lord Dyson MR and Richards and Pitchford LJJ) allowed his appeal on both grounds ([2014] EWCA Civ 254; [2014] QB 855), and, unusually but rightly, gave the Attorney General permission to appeal to this court.
The position in practice is as follows.
If the Attorney Generals appeal to this court fails on the first ground, then all the advocacy correspondence would have to be disclosed, and the second ground would be moot.
If the Attorney Generals appeal on the first and second grounds both succeed, then the Certificate would stand and none of the advocacy correspondence would have to be disclosed.
If the Attorney Generals appeal succeeds on the first ground but fails on the second ground, then to the extent that the advocacy correspondence contains environmental information, it would have to be disclosed, but there is a dispute as to whether that would also apply to the other information in the advocacy correspondence (the non environmental information).
There is also an argument as to the extent to which the advocacy correspondence contains environmental information, but that is not before us, and therefore the meaning of environmental information does not have to be considered on this appeal.
Before explaining the legislative and procedural background and then turning to the issues, it is, I think, right to mention that the points which this court has to decide involve determining issues of legal principle.
Accordingly, like the Divisional Court and the Court of Appeal, we have not seen the letters, and our only knowledge of their contents is based on what the Commissioner and the UT considered it appropriate to reveal in their reasoned determinations (as I have called them in order to avoid any confusion with a decision notice, which is a defined term in the FOIA 2000, as explained below).
Unlike us, they had the function of deciding whether the letters should be disclosed on the merits, ie in the light of all the relevant facts and competing public interests for and against disclosure, and that required them to consider the content of the letters.
The Freedom of Information Act 2000 Part I of the FOIA 2000 is concerned with Access to Information Held by Public Authorities.
Section 1(1) states that:
Any person making a request for information to a public authority is entitled (a) to be informed in writing by the public authority whether it holds information of the description specified in the request, and (b) if that is the case, to have that information communicated to him.
Section 2 explains that this right is subject to the exemptions set out in Part II, and that some of the exemptions are absolute, which is self explanatory, while others are qualified, which means that they are subject to the test that in all the circumstances of the case, the public interest in maintaining the exemption outweighs the public interest in disclosing the information.
Sections 3 7 are concerned with identifying what is a public authority, and sections 8 17 deal with the procedures (including time limits and fees) for making and answering requests for information.
Section 17(1) requires any notice of refusal to specify both the exemption relied on, and (if that would not otherwise be apparent) why the exemption applies.
Section 18 creates the post of Information Commissioner.
As stated in section 2, Part II deals with Exempt Information.
Sections 37, 40 and 41 are directly in point for present purposes.
Section 37 provides for an exemption in relation to communications with the Sovereign, other members of the Royal Family or the Royal Household.
Until January 2011, this was a qualified exemption, but, as a result of an amendment to the FOIA 2000 by section 46 of, and Schedule 7 to, the Constitutional Reform and Governance Act 2010, the exemption in section 37 is now absolute in relation to communications with the Sovereign, the heir to the throne, and the next in line.
It is common ground that the original, qualified, version of section 37 is applicable in the present case.
Section 40 of the FOIA 2000 (section 40) contains an absolute exemption in relation to personal information, subject to the data protection principles set out in the Data Protection Act 1998.
Section 41 of the FOIA 2000 (section 41) exempts information which, if disclosed, would constitute an actionable breach of confidence.
Although that is an absolute exemption, public interest in disclosure is normally a defence to a claim for breach of confidence, and it appears to be accepted that it could, in principle, operate as an effective answer to reliance on section 41.
It is also right to refer to section 35(1), which exempts [i]nformation held by a government department if it relates to certain issues, and they include (a) the formulation or development of government policy or (b) Ministerial communications, which, by section 35(5) would extend to any communications between Ministers of the Crown.
Part III of the FOIA 2000 deals with the General Functions of Lord Chancellor and Information Commissioner.
The Commissioners general functions are set out in section 47, and they include promoting, disseminating, teaching, and assessing good practice in connection with the provision of information to the public by public authorities.
Part IV of the FOIA 2000 is concerned with Enforcement.
It starts with section 50 (section 50), which provides that an applicant, ie a person who has made an application for information under section 1(1), may apply to the Commissioner for a determination whether a request for information made to a public authority has been dealt with in accordance with the requirements of Part I.
If that happens, then, by virtue of section 51, the Commissioner can require the public authority to provide him with information by serving an information notice on it.
Once the Commissioner has considered a section 50 application and concluded that a public authority has wrongly failed (i) to confirm or deny that it has information as required by section 1(1)(a), (ii) to communicate information, as required by section 1(1)(b), or (iii) to comply with another obligation under Part I of the FOIA
2000, section 50(4) requires him to issue a decision notice specifying what
the authority must do to rectify the failure.
Section 50 is stated by subsection (7) to be subject to section 53.
In addition to that specific power, section 52 states that, if the Commissioner is satisfied that a public authority has failed to comply with any obligation under Part I of the FOIA 2000, he can serve it with an enforcement notice requiring it to comply.
Under subsection (1) of section 57 (section 57), either the applicant or the public authority can appeal to the tribunal against a decision notice, and a public authority is given the right to appeal against an information notice or enforcement notice under section 57(2).
Subsection (1) of section 58 (section 58) provides that, if, on an appeal under section 57, the tribunal considers (a) that the notice against which the appeal is brought is not in accordance with the law or (b) to the extent that the notice involved an exercise of discretion by the Commissioner, that he ought to have exercised his discretion differently, they shall allow the appeal or substitute such other notice as could have been served by the Commissioner.
Section 58(2) specifically provides that, on such an appeal, the tribunal may review any finding of fact on which the notice in question was based.
Such appeals are usually heard by the First tier Tribunal with a right of appeal to the Upper Tribunal, but only where there is claimed to be an error of law in the determination of the First tier Tribunal see section 11 of the Tribunals, Courts and Enforcement Act 2007.
However, an appeal from the Commissioner under section 57 can be referred direct to the Upper Tribunal, as happened in this case.
The Upper Tribunal is an independent court, which is both an expert tribunal and a superior court of record, effectively with the same status as the High Court of Justice see section 3(5) of the 2007 Act.
In general, there is a right of appeal on a point of law, subject to permission, from the Upper Tribunal to the Court of Appeal see section 13 of the 2007 Act.
Section 53 of the FOIA 2000 (section 53) is of central relevance to the first issue on this appeal.
It confers a power on an accountable person to override a decision notice or an enforcement notice served under the FOIA 2000 on, inter alia, any government department.
Section 53(2) provides that such a notice: shall cease to have effect if, not later than the twentieth working day following the effective date, the accountable person in relation to that authority gives the Commissioner a certificate signed by him stating that he has on reasonable grounds formed the opinion that, in respect of the request or requests concerned, there was no failure [to comply with section l(l)(a) or (b)].
The effective date is defined in section 53(4) as the day on which (a) the notice was given to a public authority or (b) an appeal under section 57 is determined or withdrawn.
The accountable person is defined in section 53(8), and, for present purposes, it is a Cabinet Minister or the Attorney General.
Under section 53(6), the reasonable grounds have to be communicated to the applicant, not necessarily at the same time as the certificate, but as soon as reasonably practicable, and the communication does not have to include exempt information section 53(7).
Any section 53 notice has to be laid before Parliament as soon as practicable [after it is issued], by virtue of section 53(3).
Two points are worth making about the section 53 power to certify (or veto, as it is sometimes referred to).
Both points are mentioned in the Ministry of Justices publication Statement of HMG Policy: Use of the executive override under the [FOIA 2000] in relation to ministerial communications.
Although the Statement of HMG Policy is therefore concerned with the section 35 exemption rather than the section 37 exemption (see paras 10 and 11 above), it is of relevance in relation to the Certificate in the present case.
First, as was acknowledged in the Certificate, the Governments view is that the veto should only be used in exceptional circumstances and only following a collective decision of the Cabinet.
This reflects a ministerial assurance given to the House of Commons during the passage of the Bill which became the FOIA 2000.
Secondly, it is appropriate to identify the reason for the inclusion of the Attorney General in section 53(8), and indeed the reason that the Certificate was issued by the Attorney General in this case.
Normally, a section 53 certificate would be issued by the Secretary of State for the relevant Department.
However, where (as here) the information concerned is contained in documents which were created or sent under a previous administration, there is a well established convention that on papers of a previous administration only the Attorney General will have access to the information being considered (to quote from the Statement of HMG Policy).
So in this case, before he issued the Certificate, the Attorney General saw the letters and discussed them with those who were the relevant ministers at the time.
Council Directive 2003/4/EC
According to recital (5), the purpose of the 2003 Directive is to provide public access to environmental information and to ensure that provisions of Community law are consistent with the UN Convention on Access to Information, Public Participation in Decision Making and Access to Justice in Environmental Matters (the Aarhus Convention).
The Aarhus Convention, through article 4(1), requires each signatory state to ensure that public authorities are obliged to comply with any request for environmental information by mak[ing] such information available to the public, within the framework of national legislation.
Article 9(1) of the Aarhus Convention requires that a person who considers that a request has not been dealt with in accordance with article 4 should be able to invoke a review procedure before a court of law or other independent and impartial body, and that [f]inal decisions of that body should be binding on the public authority holding the information.
Article 3 of the 2003 Directive provides that member states shall ensure that public authorities are required to make available environmental information held by them.
Article 3.1 is in these terms: Member States shall ensure that public authorities are required, in accordance with the provisions of this Directive, to make available environmental information held by or for them to any applicant at his request and without his having to state an interest.
Article 4 provides that member states may provide for a request to be refused in specified cases.
It states that the grounds for refusal shall be interpreted in a restrictive way, taking into account for the particular case the public interest served by disclosure.
In every particular case, the public interest served by disclosure shall be weighed against the interest served by the refusal.
Article 5 is concerned with charges.
Article 6 of the 2003 Directive (article 6) is of central importance to the second issue on this appeal.
So far as material, it provides: 1.
Member States shall ensure that any applicant who considers that his request for information has been ignored, wrongfully refused (whether in full or in part), inadequately answered or otherwise not dealt with in accordance with the provisions of articles 3, 4 or 5, has access to a procedure in which the acts or omissions of the public authority concerned can be reconsidered by that or another public authority or reviewed administratively by an independent and impartial body established by law . 2.
In addition to the review procedure referred to in paragraph 1, Member States shall ensure that an applicant has access to a review procedure before a court of law or another independent and impartial body established by law, in which the acts or omissions of the public authority concerned can be reviewed and whose decisions may become final . 3.
Final decisions under paragraph 2 shall be binding on the public authority holding the information.
Reasons shall be stated in writing, at least where access is refused under this Article.
The Environmental Information Regulations 2004 (SI 2004/3391)
The EIR 2004 are intended to give effect to the United Kingdoms obligation to implement the 2003 Directive.
Regulation 5 of the EIR 2004 provides that a public authority that holds environmental information shall make it available on request.
Regulations 12 and 13 of the EIR 2004 contain exceptions to this general duty which correspond with article 4 of the Directive, and which for present purposes can be treated as closely mirroring the exceptions in sections 37, 40 and 41.
Regulation 18 of the EIR 2004 provides that, with certain modifications, including enforcement and appeals, the provisions of the FOIA 2000 shall apply for the purposes of the EIR 2004.
In particular, regulation 18(6) provides that section 53 applies to a decision notice or enforcement notice served under Part IV of the FOIA as applied to the EIR 2004 on any of the public authorities referred to in section 53(1)(a).
Regulation 18 also provides that in section 53(7) for the reference to exempt information there should be substituted a reference to information which may be refused under these Regulations.
The EU Charter
Turning now to the EU Charter, article 47 provides: Everyone whose rights and freedoms guaranteed by the law of the Union are violated has the right to an effective remedy before a tribunal in compliance with the conditions laid down in this article.
Everyone is entitled to a fair and public hearing within a reasonable time by an independent and impartial tribunal previously established by law .
Article 52(3) provides: 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.
The determination of the Commissioner
The proceedings before the Commissioner were protracted, and, after exchanges of written submissions and evidence, he issued his determinations in December 2009.
The determination concerning the letters held by the Cabinet Office ran to 192 paragraphs plus annexes, and Davis LJ in the Divisional Court rightly described it as thorough and carefully reasoned.
As an initial point, the Commissioner decided that some of the contents of the letters constituted environmental information within the meaning of the 2003 Directive and the EIR 2004 (and, as explained above, that is not in dispute).
He next addressed the arguments as to whether or not he should direct the Departments to disclose any or all of the letters under the FOIA 2000.
He first decided that, in so far as the letters included confidential information, disclosure should not be ordered because a public interest defence would, in his view, not be available if the confidential information was published.
In considering this aspect, he effectively took sections 40 and 41 together, and reached his conclusion partly because of the weighty public interest in maintaining confidences, and partly because of the specific arguments relevant in this case in relation to the Prince of Wales, which he went on to consider in relation to the section 37 exemption.
The Commissioner then turned to the arguments relating to section 37, and said at para 129 that he considered that there were four reasons justifying non disclosure, namely (i) protecting the tripartite convention, namely the ability of the Sovereign to exercise her right to consult, to encourage and to warn her Government, (ii) protecting the education convention that the Heir to the Throne should be instructed in the business of government in preparation for when he is King, (iii) preserving the political neutrality of the Royal Family, and (iv) protecting the privacy and dignity of the Royal Family.
He noted that the Prince of Wales had approved the release of some communications with Government Ministers already.
The Commissioner concluded that the four factors which he had identified in para 129 meant that, under the FOIA 2000, in so far as the information falls within the scope of the [education] convention the public interest in maintaining the exemption is very strong and justified non disclosure.
However, in so far as any information fell outside the [education] convention, the position was, he said, more finely balanced, but, even there the public interest favours maintaining the exemption.
Finally, he held that the same conclusion applied to the environmental information essentially for the same reasons as he had given in relation to the FOIA 2000.
The determination of the Upper Tribunal
Mr Evans exercised his right to appeal under section 57, and his appeal was referred to the Upper Tribunal, which heard the appeal over six days.
Again, the proceedings were rather protracted.
The issues were the same as before the Commissioner, but there was substantially more evidence, and much of it was subject to cross examination.
The UTs determination ran to 65 pages and 251 paragraphs, and there were appended to it substantial annexes (both open and closed).
Open Annex 3 ran to 109 pages and 297 paragraphs.
As Lord Dyson said in the Court of Appeal, the determination is a most impressive piece of work.
The UT decided that Mr Evans was entitled to disclosure of the advocacy correspondence, which, as they explained, meant correspondence in which The Prince of Wales advocated certain causes which were of particular interest to him.
These included causes which related to the environment.
The UT said this near the start of their determination: 4.
For reasons which we explain below, we conclude that under relevant legislative provisions Mr Evans will, in the circumstances of the present case, generally be entitled to disclosure of advocacy correspondence falling within his requests.
The essential reason is that it will generally be in the overall public interest for there to be transparency as to how and when Prince Charles seeks to influence government.
The Departments have urged that it is important that Prince Charles should not be inhibited in encouraging or warning government as to what to do.
We have not found it necessary to make a value judgment as to the desirability of Prince Charles encouraging or warning government as to what to do, for even assuming this to have the value claimed by the Departments we do not think the adverse consequences of disclosure will be as great as the Departments fear.
In broad terms our ruling is that although there are cogent arguments for non disclosure, the public interest benefits of disclosure of advocacy correspondence falling within Mr Evans's requests will generally outweigh the public interest benefits of non disclosure. 5.
It is important to understand the limits of this ruling.
It does not entitle Mr Evans to disclosure of purely social or personal correspondence passing between Prince Charles and government ministers.
It does not entitle Mr Evans to correspondence within the established constitutional convention that the heir to the throne is to be instructed in the business of government.
Nor does it involve ruling on matters which do not arise in the present case.
Thus, for example, it is conceivable that there may be correspondence which, although outside the established constitutional convention, can properly be described as preparation for kingship.
Or it may be that correspondence concerns an aspect of policy which is fresh and time needs to be allowed for a protected space before disclosure would be in the public interest.
While they do not in our view arise in the present case it is possible that for these or other reasons correspondence sought in other cases may arguably not be disclosable.
The UT then proceeded to explain why they had reached this conclusion.
They considered in some considerable detail the evidence and arguments relating to the effect and relevance of the three constitutional conventions, the cardinal convention (whereby the monarch is normally expected to act in accordance with ministerial advice), the tripartite convention and the education convention.
They pointed out that the Prince of Wales had strongly held views on a number of matters, including politically controversial issues and proposed legislation, that his communication of those views to government ministers was well known (not least because he, ministers and others had mentioned this publicly), that he had a self perceived role which was representational and involved expressing views in danger of not being heard, that some of the letters had been published, and that a high degree of publicity had not stopped his education about government or his correspondence with ministers.
They then referred to the expert evidence on the three constitutional conventions.
Contrary to the view of the Commissioner, they considered that, in the light of the expert evidence and argument, the education convention did not extend to charitable or personal matters.
The UT then summarised the competing arguments in para 123 as follows (ignoring some numbering): Factors in favour of disclosure Governmental accountability and transparency; The increased understanding of the interaction between government and monarchy; A public understanding of the influence, if any, of Prince Charles on matters of public policy; A particular significance in the light of media stories focusing on Prince Charles's alleged inappropriate interference/lobbying; Furthering the public debate regarding the constitutional role of the monarchy and, in particular, the heir to the throne; and Informing the broader debate surrounding constitutional reform.
Factors against disclosure Potential to undermine the operation of the education convention; An inherent and weighty public interest in the maintenance of confidences; Potential to undermine Prince Charles's perceived political neutrality; Interference with Prince Charles's right to respect for private life under article 8; and A resultant chilling effect on the frankness of communication between Prince Charles and government ministers.
The UT recorded that the parties differed as to the weight to be accorded to these factors, and then went on to discuss them in some detail.
They observed that the Commissioner had given insufficient weight to the public interest, and had overestimated the extent to which disclosure would undermine the [education] convention.
The UT expressed the view that the education convention would actually be assisted by recognition that advocacy communications will generally be disclosable if requested.
The UT then carefully assessed and weighed the various factors which they had identified in para 123, and reached the conclusion that the advocacy correspondence should be disclosed.
In very summary terms, the UTs conclusion was that, in relation to section 37 the public interest outweighed the argument for the exemption, in relation to section 40 this meant that para 6(1) of Schedule 2 to the Data Protection Act applied, and in relation to section 41 the public interest prevented the disclosure being a breach of confidence.
Further details of the UTs reasoning is set out in Lord Mances judgment.
In the course of the discussion the UT considered the date at which the position must be tested, and discussed this at paras 46 63 of their determination.
At para 58, they stated that the reference date cannot be later than 28 February 2006, which was the latest date by which any of the Departments ought to have concluded their internal review of the decision to refuse Mr Evanss request.
However, the UT added that later occurring matters could be taken into account if they cast light on the circumstances at the reference date.
The Attorney Generals certificate
A few weeks later, the Attorney General issued the Certificate stating that he had on reasonable grounds formed the opinion that the Departments had been entitled to refuse the requests for disclosure.
The effect of the Certificate was that any decision notice of the UT requiring the Departments to disclose the advocacy correspondence ceased to have effect.
As the Court of Appeal pointed out, it may be that the Attorney General issued the Certificate prematurely (unsurprisingly in the light of the strict time limit in section 53(2)), because the UT had not formally issued a decision notice, although they had published their final determination.
However, nothing hangs on that.
The Certificate summarised the background and then, over more than five pages, explained why the Attorney General had decided to exercise his power under section 53(2).
After accurately encapsulating the UTs reasoning and conclusions, he set out the arguments for and against disclosure as he saw them.
Against disclosure, he thought, was the important basis for the section 37 exemption, namely the three constitutional conventions and their particular significance in the context of the letters.
The Attorney General explained that it was important that the Prince of Wales should be able to engage in correspondence and engage in dialogue with Ministers about matters falling within the business of their departments as such correspondence and dialogue will assist him in fulfilling his duties under the tripartite convention as King.
He went on to explain that [d]iscussing matters of policy with Ministers, and urging views upon them, falls within the ambit of advising or warning about the Governments actions.
He then said that if such correspondence is to take place at all, it must be under conditions of confidentiality.
He added that the advocacy correspondence deserved protection from disclosure given that it was clearly conducted on a confidential basis.
The Attorney General thought that the recent nature of the letters, and the fact that they revealed deeply held personal views which were often particularly frank, but not at all improper, militated against disclosure.
He then turned to the argument for disclosure, which included governmental accountability and transparency, improving public understanding of government, and furthering public debate about the role of the monarch and the heir to the throne.
However, he made it clear that, while these were good generic arguments, they could only succeed in the present instance at the expense of the strong public interest arguments against disclosure, and that he disagreed with the UTs view that the Prince of Wales was in no different position from any other lobbyist.
The Attorney General then said that in his view the public interests in non disclosure of the disputed information in this case substantially outweigh the public interests in its disclosure.
He then went on to say that the same conclusion applied to the environmental information as well as to the non environmental information.
He also took the view that there would be a breach of the Prince of Waless data protection rights if the advocacy correspondence was made public.
The Attorney General then acknowledged that the section 53 power should be exercised only in exceptional cases, but said that he was satisfied that this is such an exceptional case, for reasons which he summarised as being the following: The fact that the information in question consisted of private and confidential letters between The Prince of Wales and Ministers.
The fact that the request in this case was for recent correspondence.
The fact that the letters in this case formed part of The Prince of Waless preparation for kingship.
The potential damage that disclosure would do to the principle of The Prince of Waless political neutrality, which could seriously undermine the Princes ability to fulfil his duties when he becomes King.
The ability of the Monarch to engage with the Government of the day whatever its political colour, and maintain political neutrality as a cornerstone of the UKs constitutional framework.
Further details of the contents of the Certificate are set out in Lord Mances judgment.
The instant judicial review proceedings
Mr Evans sought judicial review of the Certificate, arguing that it was invalid on two grounds.
First, in domestic law, he contended that section 53 did not permit a certificate to be issued simply because, on the same facts and arguments, the accountable person took a different view of the public interest from the Upper Tribunal when it came to the issue of disclosure.
Secondly, in EU law, because the advocacy correspondence included environmental information, he contended that, once the UT had issued its determination, it was contrary to the provisions of article 6, supported by the EU Charter, for anyone, especially a member of the executive, to overrule that determination.
The Divisional Court rejected both lines of argument in a judgment given by Davis LJ, with which Lord Judge CJ (who delivered a short concurring judgment) and Globe J agreed.
They held that reasonable grounds in section 53(2) simply meant grounds which, when viewed on their own, were cogent, and there was no reason to constrain the expression to exclude the accountable person from forming his own view simply because it differed from that of a court or tribunal.
As to the EU law argument, the Divisional Court rejected the contention that invoking section 53 fell foul of the 2003 Directive or the EU Charter in a case where a court or tribunal had ruled that the information concerned should be disclosed.
Mr Evans appealed to the Court of Appeal, and in a judgment given by Lord Dyson MR (with which Richards and Pitchford LJJ agreed) they allowed his appeal on both points.
They also gave the Attorney General permission to appeal to this court.
I turn then to the two arguments which are said on behalf of Mr Evans, and were held by the Court of Appeal, to undermine the Certificate.
The Certificates validity under the FOIA 2000
Validity under the FOIA 2000: introductory
The argument for the Attorney General under the FOIA 2000 proceeds as follows.
First, section 53 clearly envisages that an accountable person, ie the Attorney General or a Cabinet Minister, can override a decision notice ordering disclosure; secondly, it is clear, especially in the light of section 53(4)(b) (referring as it does to the power being exercised after any appeal has been determined) and section 58(1) (which enables the tribunal to confirm or issue a decision notice), that the power can be exercised even after a tribunal or any court has ordered disclosure; and, thirdly, while reasonable grounds for the certificate have to be given, it cannot be said that the Attorney Generals grounds were unreasonable in this case, as (a) they reflected the views of the Commissioner, and (b) the UT acknowledged that there were cogent arguments for non disclosure.
The only point of dispute to which this argument gives rise is at the third stage.
Ms Rose QC, on behalf of Mr Evans, contends that, construed in its context (as of course it must be) the expression reasonable grounds does not permit the accountable person to issue a certificate simply because, on the basis of the same facts and issues as were before a judicial tribunal (particularly a court of record), he takes a different view from that which was taken by the UT in its determination.
On this basis, she contends, once a judicial tribunal, or at any rate a court of record, has ruled on the question, there has to be something more than a mere different assessment on the part of the accountable person of where the balance falls before a certificate can be justified.
Validity under the FOIA 2000: the constitutional aspect
When one considers the implications of section 53(2) in the context of a situation where a court, or indeed any judicial tribunal, has determined that information should be released, it is at once apparent that this argument has considerable force.
A statutory provision which entitles a member of the executive (whether a Government Minister or the Attorney General) to overrule a decision of the judiciary merely because he does not agree with it would not merely be unique in the laws of the United Kingdom.
It would cut across two constitutional principles which are also fundamental components of the rule of law.
First, subject to being overruled by a higher court or (given Parliamentary supremacy) a statute, it is a basic principle that a decision of a court is binding as between the parties, and cannot be ignored or set aside by anyone, including (indeed it may fairly be said, least of all) the executive.
Secondly, it is also fundamental to the rule of law that decisions and actions of the executive are, subject to necessary well established exceptions (such as declarations of war), and jealously scrutinised statutory exceptions, reviewable by the court at the suit of an interested citizen.
Section 53, as interpreted by the Attorney Generals argument in this case, flouts the first principle and stands the second principle on its head.
It involves saying that a final decision of a court can be set aside by a member of the executive (normally the minister in charge of the very department against whom the decision has been given) because he does not agree with it.
And the fact that
the member of the executive can put forward cogent and/or strongly held
reasons for disagreeing with the court is, in this context, nothing to the point: many court decisions are on points of controversy where opinions (even individual judicial opinions) may reasonably differ, but that does not affect the applicability of these principles.
In M v Home Office [1994] 1 AC 377, 395, Lord Templeman in characteristically colourful language criticised the proposition that the executive obey the law as a matter of grace and not as a matter of necessity [as] a proposition which would reverse the result of the Civil War.
The proposition that a member of the executive can actually overrule a decision of the judiciary because he does not agree with that decision is equally remarkable, even if one allows for the fact that the executives overruling can be judicially reviewed.
Indeed, the notion of judicial review in such circumstances is a little quaint, as it can be said with some force that the rule of law would require a judge, almost as a matter of course, to quash the executive decision.
The constitutional importance of the principle that a decision of the executive should be reviewable by the judiciary lay behind the majority judgments in the famous case, Anisminic Ltd v Foreign Compensation Commission [1969] 2 AC 147, where the House of Lords held that a statutory provision, which provided that any determination by the commission in question shall not be called in question in any court of law, did not prevent the court from deciding whether a purported decision of the commission was a nullity, on the ground that the commission had misconstrued a provision defining their jurisdiction.
Lord Reid said at p 170D that if it had been intended to prevent any inquiry [in all circumstances] I would have expected to find something much more specific than the bald statement that a determination shall not be called in question in any court of law.
And see per Lord Diplock in In re Racal Communications Ltd [1981] AC 374, 383, where he held that there is a presumption that Parliament did not intend an administrative body to be the final arbiter on questions of law.
This is scarcely a recent development.
In R v Cheltenham Commissioners (1841) 1 QB 467, a statute provided that any decision of the Quarter Sessions as to the levying of certain rates was to be final, binding, and conclusive to all intents and purposes whatsoever, and that no order made in that connection shall be removed or removable by certiorari, or any other writ or process whatsoever, ; any law or statute to the contrary thereof in anywise notwithstanding.
Despite this, Lord Denman CJ robustly stated at p 474 that [T]he clause which takes away the certiorari does not preclude our exercising a superintendence over the proceedings, so far as to see that what is done shall be in pursuance of the statute.
The statute cannot affect our right and duty to see justice executed; and, here, I am clearly of opinion that justice has not been executed.
The importance of the right of citizens to seek judicial review of actions and decisions of the executive, and its consequences in terms of statutory interpretation, was concisely explained by Lady Hale in Jackson v Her Majesty's Attorney General [2005] UKHL 56, [2006] 1 AC 262, para 159.
She said that [t]he courts will, of course, decline to hold that Parliament has interfered with fundamental rights unless it has made its intentions crystal clear.
The same point had been made, albeit in more general terms, by Lord Hoffmann in R v Secretary of State for the Home Department, Ex p Simms [2000] 2 AC 115, 131E F, where he said: [T]he 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.
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
At least equally in point is the proposition set out by Lord Reed in AXA General Insurance Ltd v HM Advocate [2011] UKSC 46, [2012] 1 AC 868, para 152, that: 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.
In support of this proposition, Lord Reed cited two passages from the decision of the House of Lords in R v Secretary of State for the Home Department, Ex p Pierson [1998] AC 539.
At p 575, Lord Browne Wilkinson said that 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 legal rights of the citizen or 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.
To much the same effect, Lord Steyn said at p 591 that [u]nless there is the clearest provision to the contrary, Parliament must be presumed not to legislate contrary to the rule of law.
Accordingly, if section 53 is to have the remarkable effect argued for by Mr Eadie QC for the Attorney General, it must be crystal clear from the wording of the FOIA 2000, and cannot be justified merely by general or ambiguous words.
In my view, section 53 falls far short of being crystal clear in saying that a member of the executive can override the decision of a court because he disagrees with it.
The only reference to a court or tribunal in the section is in subsection (4)(b) which provides that the time for issuing a certificate is to be effectively extended where an appeal is brought under section 57.
It is accepted in these proceedings that that provision, coupled with the way that the tribunals powers are expressed in sections 57 and 58, has the effect of extending the power to issue a section 53 certificate to a decision notice issued or confirmed by a tribunal or confirmed by an appellate court or tribunal.
But that is a very long way away indeed from making it crystal clear that that power can be implemented so as to enable a member of the executive effectively to reverse, or overrule, a decision of a court or a judicial tribunal, simply because he does not agree with it.
All this militates very strongly in favour of the view that where, as here, a court has conducted a full open hearing into the question of whether, in the light of certain facts and competing arguments, the public interest favours disclosure of certain information and has concluded for reasons given in a judgment that it does, section 53 cannot be invoked effectively to overrule that judgment merely because a member of the executive, considering the same facts and arguments, takes a different view.
Validity under the FOIA 2000: previous authority 61.
63. 62. 64.
Secretary of State] has reached his own view on rational grounds, and that he must have a reason (other than simply a preference for his own view) for rejecting a finding which the ombudsman has made after an investigation under [statutory] powers.
It seems to me that this involved setting a somewhat lower threshold for departing from the earlier decision than Powergen or Danaei.
In Bradley, as in this case, the two decisions were provided for in the same statute as part of an overall procedure, whereas in Powergen the two decisions arose under different statutory codes relating, respectively, to planning law and highways law.
Danaei was something of a hybrid, as the two decisions were made under different statutes (the Asylum and Immigration Appeals Act 1993 and the Immigration Act 1971), but they were both part of the overall statutory asylum and immigration code, although not part of the same overall procedure.
As in Bradley, it seems to me to follow from the fact that the two decisions in this case are provided for in the same statute and as part of a single procedure, that the second decision maker, the accountable person, cannot always be obliged to follow the view of the first decision maker, the Commissioner (or, on an appeal, the tribunal or the courts): otherwise there would be no point in providing for a second decision.
However, that does not ultimately assist on the issue between the parties, namely the circumstances in which the accountable person is allowed to refuse to follow the earlier decision. 65.
As to that aspect, Mr Evanss case here is, at least in principle, significantly stronger than that of the successful applicant in the three Court of Appeal cases.
The first decision (the equivalent of the Upper Tribunals decision in this case) was reached after a hearing in Powergen and in Danaei and after a full investigation in Bradley.
However, in none of those three cases was there a hearing before a judicial body, as in the present case.
Even the inspector in Powergen and the adjudicator in Danaei were not judicial entities (as an immigration adjudicator was not at that time a member of the judiciary).
Additionally, unlike the applicant in Powergen and in Danaei, Mr Evans had no opportunity to make submissions to the second decision maker.
I am unimpressed by the point that the accountable person under section 53 is in a stronger position than the Secretary of State in Bradley, because he has express statutory power to disagree with a certificate: it was inherent in the statutory provisions, indeed it was essential to the reasoning of the Court of Appeal, in Bradley that the Secretary of State could disagree with the decision of the ombudsman.
Validity under the FOIA 2000: provisional view 66.
Such comparisons with other cases can, however, only be of limited assistance: what is of more importance is to seek to identify the relevant principles.
In Bradley at para 70, Sir John Chadwick did just that and suggested that there were five applicable propositions.
At least for present purposes, I would reformulate and encapsulate those propositions in the following two sentences.
In order to decide the extent to which a decision maker is bound by a conclusion reached by an adjudicative tribunal in a related context, regard must be had to the circumstances in which, and the statutory scheme within which, (i) the adjudicative tribunal reached its conclusion, and (ii) the decision maker is carrying out his function.
In particular, the court will have regard to the nature of the conclusion, the status of the tribunal and the decision maker, the procedure by which the tribunal and decision maker each reach their respective conclusions (eg, at the extremes, (i) adversarial, in public, with oral argument and testimony and cross examination, or (ii) investigatory, in private and purely on the documents, with no submissions), and the role of the tribunal and the decision maker within the statutory scheme. 67.
Although Sir John expressed his propositions so as to apply to findings of fact, it seems to me that they must apply just as much to opinions or balancing exercises.
The issue is much the same on an appeal or review, namely whether the tribunal was entitled to find a particular fact or to make a particular assessment.
Anyway, it is clear from Powergen that an assessment as to whether an access onto a highway would be safe fell within the scope of his propositions.
Indeed, the ombudsmans decision in Bradley itself seems to me to have involved issues as to which she had to make assessments or judgements, such as whether the department concerned should have done more and whether some failures amounted to maladministration see at para 27 of Sir Johns judgment.
In these circumstances, it appears to me that there is a very strong case for saying that the accountable person cannot justify issuing a section 53 certificate simply on the ground that, having considered the issue with the benefit of the same facts and arguments as the Upper Tribunal, he has reached a different conclusion from that of the Upper Tribunal on a section 57 appeal.
I would summarise my reasons as follows. 68. 69.
First, and most importantly, the two fundamental principles identified in para 52 above.
Secondly, (i) the fact that the earlier conclusion was reached by a tribunal (a) whose decision could be appealed by the departments, (b) which had particular relevant expertise and experience, (c) which conducted a full hearing with witnesses who could be cross examined, (d) which sat in public, and had full adversarial argument, and (e) whose members produced a closely reasoned decision, coupled with (ii) the fact that the later conclusion was reached by an individual who, while personally and ex officio deserving of the highest respect, (a) consulted people who had been involved on at least one side of the correspondence whose disclosure was sought, (b) received no argument on behalf of the person seeking disclosure, (c) received no fresh facts or evidence, and (d) simply took a different view from the tribunal. 70.
However, before one can fairly conclude that a section 53 certificate cannot be issued to override a decision of a court simply because the accountable person disagrees with the conclusion reached by the court on a section 57 appeal, it is necessary to address two questions.
First and most obviously, if this constraint applies to the issue of a section 53 certificate after a determination by the Upper Tribunal, in what circumstances could such a certificate be issued once the Upper Tribunal (or an appellate court) has issued or approved a decision notice? Secondly, does the same constraint apply when there has been no appeal from the Commissioner, and, if so, how does the power to issue a certificate under section 53 interrelate with the right of appeal under section 57? Validity under the FOIA 2000: implications of provisional view If section 53 does not entitle an accountable person to issue a certificate simply on the ground that he disagrees with the determination of a court to uphold, or issue, a decision notice, then, given that it is agreed that section 53 can be invoked once a court has reached such a determination, the question arises: on what grounds can it be issued in such circumstances? The specific examples mentioned by the Court of Appeal in answer to this question may be found in para 38 of Lord Dysons judgment, and they are a material change of circumstances since the tribunal decision or that the decision of the tribunal was demonstrably flawed in fact or in law (cf what Simon Brown LJ said in Danaei, quoted in para 62 above). 71. 72.
As to the first example, the likelihood of a material change in circumstances at first sight seems almost vanishingly slight, given the very short period of 20 days for the issue of the certificate under section 53(2).
However, the position is rather more subtle than that point suggests.
It is common ground, in the light of the language of sections 50(1), 50(4) and 58(1), which all focus on the correctness of the original refusal by the public authority, that the Commissioner, and, on any appeal, any tribunal or court, have to assess the correctness of the public authoritys refusal to disclose as at the date of that refusal.
The same is true of the accountable person considering the issue of a certificate under section 53(2). 73.
However, although the question whether to uphold or overturn (under section 50 or sections 57 and 58) a refusal by a public authority must be determined as at the date of the original refusal, facts and matters and even grounds of exemption may, subject to the control of the Commissioner or the tribunal, be admissible even though they were not in the mind of the individual responsible for the refusal or communicated at the time of the refusal to disclose (i) if they existed at the date of the refusal, or (ii) if they did not exist at that date, but only in so far as they throw light on the grounds now given for refusal see Coppel on Information Rights 4th ed (2014), paras 28 022 and 28 024, and Department for The Environment, Food and Rural Affairs v Information Comr (Birkett) [2011] EWCA Civ 1606, [2012] PTSR 1299.
Although Birkett was a decision on the 2003 Directive and EIR 2004, it seems clear that the reasoning of Sullivan LJ (summarised at para 21 of the decision) applies with equal force to the procedures under sections 50, 57 and 58.
Given the language of section 53(2), when compared with that of section 50(4) and section 58(1), it seems to me that it must also apply to the accountable person when issuing a section 53 certificate. 74.
Therefore, before the Commissioner on a section 50 application, or before the tribunal on a section 57 appeal, it would often be open to the parties (as they did in this case) to rely on factual evidence, expert evidence, or assessments of possible risks, or even exemptions, which may not have been known to, or in the mind of, the person who was responsible for the original decision to refuse the section 1 request.
However, it would not be open to the parties, or at least not nearly so easily open to them, to rely on such matters on an appeal from the First tier Tribunal to the Upper Tribunal or from the Upper Tribunal to the Court of Appeal, which can only be brought on a point of law (see para 16 above). 75.
As already mentioned, at first sight, it would appear to be very unlikely that relevant new evidence or grounds, which would not have been available before the Commissioner on a section 50 application or before the First tier Tribunal on a normal section 57 appeal, would be available to an accountable person considering issuing a section 53 certificate, given that it has to be issued within twenty days.
However, it is by no means impossible that new evidence or grounds could come to the accountable persons attention after the submissions to, but before the determination of, the Commissioner or the tribunal.
Or it could happen that the accountable person might rely on evidence or grounds which were excluded by the Commissioner or the tribunal.
Of more direct relevance to the point at issue, however, is the fact that the possibility of new evidence or grounds coming to the attention of the accountable person would be decidedly less unlikely in a case where there was an appeal to the Upper Tribunal or the Court of Appeal.
That is because new evidence and grounds could not, or at least could much less easily, be put before the Upper Tribunal or the Court of Appeal on an appeal, and therefore there would anyway be no question of the facts or evidence only having to come to light during the twenty day window. 76.
Lord Dysons second example also looks questionable at first sight, in the light of the available appeal process described in paras 15 16 above.
One would have thought that if a tribunal or court gives a demonstrably flawed determination to issue a decision notice directing a government department to give disclosure, then (unless, I suppose, the determination concerned is that of the Supreme Court), if the department wished to challenge the decision notice, it should be expected to appeal against it, rather than resorting to a section 53 certificate. 77.
However, the position is not quite as simple as that.
As just mentioned, it is only possible to appeal against a determination of the First tier Tribunal to the extent that it has gone wrong in law.
Further, not only is that true of an appeal from the Upper Tribunal, but such an appeal would normally be a second appeal, which is generally only permitted on an important point of law or practice.
There is therefore a real possibility that there could be facts or matters which come to light at some point and indicate that there have been serious flaws in the determination of the First tier Tribunal or the Upper Tribunal which could not be the subject matter of an appeal and could not be brought before a higher tribunal or court, but which could be taken into account by the accountable person when considering whether to issue a section 53 certificate. 78.
Accordingly, I agree with Lord Dyson as to two types of circumstances in which a section 53 certificate could be issued even after a decision notice had been issued or confirmed by a judicial tribunal or court on an appeal.
The totality of applications under section 1 of the FOIA 2000 could potentially lead to such a myriad of possibilities that it is far from impossible that other circumstances could arise.
It therefore appears to me that, if Mr Evanss case is correct, section 53 would have some potential function where a court or judicial tribunal had determined or confirmed that disclosure should be given, but it would be likely to be on few occasions and on limited grounds. 79.
The second question is whether the same degree of constraint applies to a section 53 certificate if it had been the Commissioners determination, rather than the Upper Tribunals determination, which required disclosure, and there had been no appeal.
Ms Rose contends that the answer is that the constraints on invoking section 53 would be significantly less.
In the first place, neither of the fundamental constitutional principles referred to in para 52 above would apply because the Commissioner is part of the executive not the judiciary.
Secondly, the Commissioner does not hold public hearings with cross examination and oral argument.
However, the Commissioner is an expert who gives reasoned and appealable decisions, and he often receives detailed evidence and arguments.
As I understood it, Ms Roses contention was that the accountable person could issue a section 53 certificate following a decision notice issued by the Commissioner, even though there was no new evidence or grounds, provided that the accountable person gave cogent reasons for disagreeing with the Commissioner. 80.
That raises a point of some difficulty: in a case where the Commissioner has determined that disclosure should have been given and issues a decision notice, it could plainly be argued, as a matter of statutory interpretation, that the executive would be free to choose between appealing under section 57 and issuing a section 53 certificate.
There must, however, be a powerful case for saying that it would at least often be a misuse of the section 53 power to issue a certificate on certain grounds when it would be possible to appeal to the tribunal under section 57 on the same grounds.
That is an issue which was hardly addressed in argument, and it does not need to be resolved for the purpose of determining this appeal, but it was raised by the intervener and it is worth briefly discussing.
If the constraint on issuing a certificate under section 53 after a determination of the Commissioner is the same as I have suggested in para 68 above after a determination of the Upper Tribunal, then it would be difficult to envisage circumstances in which a certificate could be issued after a determination of the Commissioner (given what is said in paras 71 78 above), particularly if a further restriction existed because of the right to appeal (see paras 79 80 above). 81. 82.
On the other hand, if the constraint is less, so that a certificate could be issued if the accountable person does not agree with the Commissioner for cogently argued reasons but without any new material, then there would be an arguable anomaly.
This is because, if the applicants section 50 application to the Commissioner succeeded, the executive would find it much easier to issue a defensible section 53 certificate than if the executive succeeded before the Commissioner, and the applicant then won on appeal to the tribunal (as in this case). 83.
Accordingly, if the constraint on the issue of a section 53 certificate after a determination of the tribunal is as provisionally concluded in para 68 above, the position in relation to the issue of a section 53 certificate after a determination of the Commissioner would not be entirely satisfactory irrespective of whether the constraint is the same or less than after a determination of the Upper Tribunal.
As at present advised, I am inclined to the view that (i) Ms Rose is right in her suggestion that the constraint on the issue of a section 53 certificate after a decision of the Commissioner is less (and that it is similar to that envisaged by Sir John Chadwick in Bradley), but (ii) there would be some further restriction in that the executive should normally be expected to appeal an adverse determination of the Commissioner rather than issuing a section 53 certificate.
However, as already explained, that is not something which needs to be conclusively determined in these proceedings. 85. 84.
While it is unnecessary to decide that issue for present purposes, it highlights an important point for present purposes, namely that the co existence of the two potentially parallel courses of certifying under section 53 and appealing under section 57 (and thereafter under sections 11 and 13 of the 2007 Act) gives rise to difficulties, however we resolve the issue raised by this appeal, namely the extent of the grounds upon which a section 53 certificate can override the decision of a judicial tribunal.
I have not so far addressed the question of the issue of a section 53 certificate after a determination of the First tier Tribunal, which is not a court of record.
Although Ms Rose placed weight on the fact that the Upper Tribunal is a court of record, I consider that this is not really in point.
The essential point is that, as explained in para 16 above, the Upper Tribunal has been specifically designated by Parliament as part of the judiciary by section 3(5) of the 2007 Act, and therefore the constitutional issue, which is so central to her argument, applies.
There is no equivalent provision to section 3(5) in relation to the First tier Tribunal.
However, at least as at present advised, it appears to me that the effect of the 2007 Act is that such tribunals are part of the judiciary.
Accordingly, I am currently of the view that the limitation on the grounds upon which a section 53 certificate can be issued following a decision of the First tier Tribunal are the same as following a decision of the Upper Tribunal.
Validity under the FOIA 2000: conclusion In these circumstances, I agree with the Court of Appeal, rather than the Divisional Court, on this difficult first issue.
I accept that this conclusion results in (i) section 53 having a very narrow range of potential application (paras 71 79 above) and (ii) the position of the exercise of the section 53 power being somewhat unsatisfactory following a determination of the 86.
Commissioner (see paras 80 83 above).
As to point (i), it was always envisaged that section 53 would be rarely invoked (see paras 19 and 20 above), and the fact that it may well have an even narrower range of application than the executive seems to have assumed is not a particularly forceful point.
As to point (ii), the same argument applies, and in addition there is the significant fact that the co existence of the two rights available to the executive under section 53 and section 57 gives rise to problems on any view (see para 84 above). 87.
Accordingly, I am unpersuaded that these two points are sufficient to overcome the argument raised by Mr Evans, namely that, if it is necessary to give section 53 a significantly narrower application than it might otherwise have had, in order to respect the two fundamental constitutional principles identified in para 52 above, bolstered by the other factors summarised in para 69 above, then the section must be accorded that narrow effect.
I would therefore accept that argument, provided that the section can fairly be given that narrower meaning as a matter of language. 88.
Turning then to the language of section 53, it is obviously true that the expression reasonable grounds could, as a matter of ordinary English, have the meaning and effect adopted by the Divisional Court (as described in para 47 above).
However, like any other expression, its meaning is highly dependent on its context.
As Lord Dyson said in the Court of Appeal at para 37, in the context of section 53 the appropriate question is whether it would be reasonable for the accountable person to make a decision contrary to an earlier decision on precisely the same point.
In the present context, I agree with him that it is not reasonable for an accountable person to issue a section 53 certificate simply because, on the same facts and admittedly reasonably, he takes a different view from that adopted by a court of record after a full public oral hearing.
I would add that the 2000 Act was passed after the Powergen and Danaei cases had been decided, and they both precluded executive decisions which conflicted with earlier decision of tribunals which were not even part of the judiciary.
So it is not as if the grounds for this conclusion could have been unforeseen by Parliament.
It is also fair to add that this conclusion could be said to cut across the two fundamental constitutional principles identified in para 52 above, in the sense that it would permit a member of the executive to override a judicial determination in some circumstances.
However, section 53 has to be given some meaning in relation to a case where a court has issued or upheld a decision notice.
It seems to me that the meaning I have adopted respects the two principles while giving effect to section 53, in that it limits the ambit of the section to cases which involve matters which were not before the tribunal or court which issued or upheld the notice, and will therefore not enable a 89. member of the executive to overrule a judicial decision simply because he disagrees with it.
The different views expressed in other judgments 90.
Before leaving this first aspect of the appeal, I ought to address the different conclusions reached by Lord Wilson and Lord Hughes, and the different approach adopted by Lord Mance.
I place considerably greater reliance than they do on the implication of the constitutional principles discussed in paras 51 59 and 69 above.
As I have sought to explain, there is no clear or specific suggestion anywhere in the FOIA 2000 that it is intended that a section 53 certificate should enable a member of the executive to override a judicial decision.
Accordingly, it seems to me that this is a case where it has not been made crystal clear that fundamental constitutional principles are intended to be disapplied, and where Parliament has not confront[ed] what it is [alleged to have been] doing, but has used general or ambiguous words.
The problems which can be said to arise from the interpretation I favour, and which are discussed in paras 71 84 above and in paras 124, 154 155 and 168 178 all ultimately concern the practical consequences of the interpretation, and, quite apart from the fact that some of those problems arise in any event, they are simply not commensurate with the fundamental constitutional issues which seem to me to be so centrally in point.
In his trenchant judgment, Lord Wilson suggests that, because I accept that the Attorney Generals grounds, as expressed in his section 53 certificate, appear reasonable, there are difficulties in concluding that he did not have reasonable grounds within the meaning of section 53.
As I have sought to explain in para 88 above, the meaning of reasonable grounds in section 53 is, inevitably, contextual, and, because of the factors summarised in para 69 above, it appears to me that grounds are not reasonable if they simply involve disagreeing with the conclusions of a court or judicial tribunal on the same material as was before it, however rational those grounds might otherwise appear to be if viewed on their own.
In that, Lord Mance and I are in accord.
Thus, as Lord Mance says, on any view, reasonable grounds in section 53(2) must require a higher hurdle than mere rationality. 91. 92.
Lord Wilson identifies two further factors which I ought to mention.
First, he refers to the fact that earlier versions of the Bill which became the FOIA 2000 conferred a power on the Commissioner to recommend, rather than to order, public authorities to disclose documents.
Even if earlier versions of the Bill are admissible in relation to the present issue, the conclusions which can be drawn from the drafting history explained by Lord Wilson in his para 171 are, in my view, at best equivocal.
As for Lord Hoffmanns observation which Lord Wilson cites in his para 172, it is common ground that what the general interest requires in relation to freedom of information has been decided by a democratically elected bod[y], namely by Parliament when enacting the FOIA 2000.
The issue in this case is what the FOIA 2000 means, and it is for the courts to interpret an enactment, and, when doing so, they should bear in mind established constitutional principles.
For the reasons which I have given, it appears to me that those principles lead to the conclusion that Mr Evanss submission is correct. 93.
Lord Mances analysis has undoubted attractions, and I suspect that, as may be suggested by the fact that he and I reach the same conclusion in this case, his approach will normally yield the same outcome as mine.
We have very similar views in practice as to the ability of the accountable person to differ from a tribunal decision on an issue of fact and law, and in reality it will, I think, normally be very hard for an accountable person to justify differing from a tribunal decision on the balancing exercise on Lord Mances analysis.
However, quite apart from the fundamental point made in para 89 above, I have some difficulties with that analysis. 94.
Thus, as I think is apparent from the very full and detailed reasoning of the UT in this case, twenty days is an unrealistically short period to impose for a section 53 certificate if such high standards of analysis and justification are to be imposed on an accountable person.
It would be tantamount to requiring a judge to produce a decision in a complex case in three weeks and, unlike senior Ministers or the Attorney General, judges are used to producing reasoned judgments, can ruthlessly prioritise judgment writing over all other commitments if they have to do so, and do not have to, indeed should normally not, consult others when producing a judgment. (It is true that the grounds under section 53 can be given after the certificate, but, unless and until the accountable person has worked out the grounds, he or she will not be able to issue a certificate).
I also do not quite see where, on Lord Mances analysis, the boundary lies between reasoning which satisfies, and reasoning which does not satisfy, the requirement for the clearest possible justification before the accountable person is to be entitled to disagree with the tribunal on an issue of fact.
For instance, in this case, the UT and the Attorney General had different views on the extent of aspects of the tripartite convention, the likelihood of the correspondence continuing, and the public perception of the correspondence.
If the Attorney General was permitted to disagree with the tribunal on such issues in the absence of any new material, then I would have thought that he should be entitled simply to say so in the way that he did, namely because he had clearly thought about the issues and simply took a different, and inherently rational, view of the evidence and arguments. 95. 96.
Further, if the Attorney General was more or less bound by the findings of fact and law made by the tribunal because it heard full evidence and arguments, I find it a little difficult to understand why that should not also apply to the tribunals conclusion as to the weight to be attributed to the competing interests.
For instance, both the extent of the constitutional conventions and the balancing exercise are matters of opinion, judgment and experience, on which any conclusion is inevitably influenced by evidence and argument. 97.
To say that the tribunal is the arbiter of the facts appears to me to involve implying a restriction into section 53 for which there is no principled justification.
I accept that, if a tribunals decision were challenged on an appeal, its finding as to the conventions would probably be treated as one of fact, and its resolution of the balancing exercise would not.
However, I do not consider it to be appropriate to treat the accountable person like an appellate court.
Not only is he not performing a judicial or an appellate function, but, whatever else may be in dispute, it is common ground that he can certify if fresh material emerges, and that he is entitled, indeed could be expected, to obtain evidence and views from people who did not give evidence to the tribunal.
The effect of the 2003 Directive on the Certificate 98.
In the light of my conclusion on this first issue, it is not strictly necessary to consider the second issue, namely the effect of the 2003 Directive, but the point is of importance and has been fully argued, so I will deal with it.
The 2003 Directive: environmental information covered by the Certificate 99.
As explained above, the advocacy correspondence includes environmental information.
In those circumstances, it is argued on behalf of Mr Evans that, quite apart from the effect of the FOIA 2000, the Certificate is ineffective, either in relation to the environmental information or generally in relation to the advocacy correspondence, in the light of article 6. 100.
Article 6.1 requires that, following a refusal by a public authority of a request for environmental information, the applicant has access to a procedure in which the [refusal] can be reconsidered by that or another public authority or reviewed administratively.
That requirement is plainly satisfied by the incorporation of section 50 into the EIR 2004: a reconsideration or an administrative review is carried out by the Information Commissioner.
Article 6.2 requires that [i]n addition, the applicant must have access to a review procedure before a court of law or [similar] body] in which the [refusal] can be reviewed and whose decisions may become final.
There is no doubt but that this requirement is satisfied to the extent that the tribunal is a court of law or [similar] body which can properly review the refusal.
But, if and insofar as its decision can be effectively overridden by the executive under section 53, runs the argument, there would be a plain breach of the requirement that the outcome of that review become[s] final.
And the importance of that requirement is, of course, underlined by the first sentence of article 6.3, [f]inal decisions under paragraph 2 shall be binding on the public authority holding the information. 101.
The argument advanced by the Attorney General to meet this point is that article 6 is satisfied because a certificate under section 53 can be the subject of judicial review (as these very proceedings demonstrate), and that therefore, although the issue of a section 53 certificate can result in a more etiolated process (particularly when, as here, it is issued after the matter has gone to the tribunal), the basic requirements of article 6 are satisfied.
In effect, this argument suggests, the worst that can be said about the position in the present case is that it involves two procedures, the first involving a decision by the authority, followed by an article 6.1 review (by the Commissioner) and then an article 6.2 review (by the tribunal), which is in turn followed by a fresh article 6.1 review (by the Attorney General) and then a fresh article 6.2 review (by the Divisional Court). 102.
In my view, the Attorney Generals argument should be rejected, essentially for the reasons advanced by Mr Pitt Payne QC for the Information Commissioner and by Ms Rose.
The structure of article 6 is that, where the executive has refused a disclosure request and the applicant wishes to pursue the matter, (i) the executive must reconsider its refusal (article 6.1), (ii) if it maintains the refusal, the applicant must be accorded recourse to the judiciary (article 6.2), and, if he takes that up, (iii) the decision of the judiciary is to be final (article 6.2) and binding on the executive (article 6.3). 103.
Accordingly, in this case, once the right of appeal against the Commissioners determination had been exercised by Mr Evanss appeal to the Upper Tribunal, and that tribunal had made its determination requiring disclosure, it seems to me very difficult to argue against the proposition that the closing words of article 6.2 and the opening sentence of article 6.3 applied.
In the light of those provisions, there is in my judgment simply no room for the executive to have another attempt at preventing disclosure.
In other words, it is inconsistent with the provisions of article 6 for there to be a right in the executive to override the judicial decision provided for in article 6.2. (It also appears to me to be inappropriate for there to be an additional procedural hurdle given that it would inevitably increase the delay and potentially increase the expense for any applicant seeking environmental information.) 104.
Having said that, it is appropriate to consider the contention that the inclusion of the section 53 power could nonetheless be justified under the 2003 Directive in the light of article 4.
I would reject that contention.
I consider that it is clear from the structure and wording of the Directive that article 6 is intended to provide a means of challenging a public authority which seeks to rely on article 4 to refuse information: article 4 cannot be invoked after the article 6 procedure has been gone through.
I therefore consider that, in so far as it is sought to be invoked in relation to environmental information, the Certificate does fall foul of article 6. 105.
Even if this objection to the incorporation of section 53 into the EIR 2004 procedure were not good, and there was nothing objectionable in the executive having another attempt at preventing disclosure, I still would reject the Attorney Generals argument.
As Mr Eadie QC sensibly accepts, if the argument is to succeed, the section 53 procedure would have to comply with article 6.
In my view, there are two problems in that connection.
The first is that there would be a failure to comply with the requirement in article 6.1 that there be provision for a review, either by the Attorney General or by another arm of the executive, of the decision to issue the certificate.
But there is no such provision in the EIR 2004 or the FOIA 2000.
Secondly, there would have to be provision for a judicial review sufficient to satisfy articles 6.2 and 6.3.
In that connection, Mr Eadie contends that the fact that a section 53 certificate can be challenged by a domestic judicial review satisfies the requirements of articles 6.2 and 6.3, as the courts decision on a judicial review is final and binding on the public authority concerned.
A domestic judicial review does not normally involve reconsideration of the competing arguments or merits.
However, it seems to me clear that article 6.2, with its stipulation that the court should be able to review the acts and omissions of the public authority concerned, requires a full merits review.
Even assuming in the Attorney Generals favour that, on a domestic judicial review, the court could, unusually, consider the merits, it gets him nowhere at least in a case such as this, where a tribunal has ruled that the information should be disclosed and the certificate is merely based on the fact that he disagrees with the final decision of the Upper Tribunal.
In such a case, a court would be bound to conclude that the certificate was not soundly based as a court of record had already decided that very point as between the applicant and the public authority concerned. 106.
The Attorney General relies on article 288 of TFEU, which leave[s] to the national authorities the choice of form and methods to give effect to EU Directives, which is reflected in the Court of Justices statement that it is for the law of each member state to designate the courts and tribunals having jurisdiction and to lay down the detailed procedural rules governing actions for safeguarding rights which individuals derive from [EU] law Case C 286/06 Impact v Minister for Agriculture and Food [2008] ECR I 2483, para 44.
It appears to me that, just as on the first point relating to the FOIA 2000, the issue raised by Mr Evans on the 2003 Directive is not one of form and methods or detailed procedural rules; it is a point of principle. 107.
In these circumstances, it is unnecessary to consider whether, as the Court of Appeal thought, the provisions of the European Charter provide another, or reinforcing, reason for the conclusion that the Certificate is unlawful in so far as it relates to environmental information, and I prefer to leave that issue open in this Court. 108.
Accordingly, for these reasons and for those given by Lord Mance in paras 147 149, I would hold that, by virtue of the requirements of article 6, the Certificate would in any event have been invalid in so far as it related to environmental information contained in the advocacy correspondence.
If I had decided that the Certificate was valid under the FOIA 2000, that conclusion would have led to a difficult further question, namely whether the effect of the 2003 Directive would have invalidated the Certificate only in so far as it related to the correspondence concerned with environmental information or whether it would have invalidated the Certificate generally.
The 2003 Directive: the effect of non compliance 109.
At first sight, it might appear that the effect of the 2003 Directive should be limited to environmental information, and accordingly that it would have served to invalidate the certificate only in so far as it applied to environmental information in the advocacy correspondence.
However, the argument advanced on behalf of Mr Evans is that, as a result of the fact that it fell foul of the 2003 Directive, the Certificate is, in effect, tainted by an error of law which would invalidate it generally and not merely in respect of environmental information. 110.
The Court of Appeal accepted that argument.
At para 78, Lord Dyson first pointed out that the Attorney General had considered the non environmental information and the environmental information separately (in paras 18 and 19 of the Certificate), and had come to the conclusion that each of the two classes of information was to be exempt from disclosure for the same reasons.
However, Lord Dyson went on to say, the Attorney General did not explicitly address the question of how the competing public interests should be weighed in relation to the non environmental information if it was necessary to disclose the environmental information in any event (emphasis in the original).
Lord Dyson pointed out that, if the environmental information had to be released, it is likely that the argument in favour of maintaining confidentiality in relation to at least some of the non environmental information would have been weaker.
Given that the Attorney General did not address the question whether he should certify in respect of the non environmental information if the environmental information had to be released and that he could have done so, it could not be assumed that he would have certified in respect of the non environmental information if the environmental information had to be disclosed. 111.
There is obviously great force in the Court of Appeals view.
However, on this point, I have reached the same conclusion as the Divisional Court, namely that, reading the whole of the Attorney Generals reasoning in the Certificate, it is obvious that he would have granted a section 53 certificate in respect of the non environmental information, even if the environmental information had to be disclosed. 112.
I agree with Lord Dyson that it is not possible to infer this view from any specific words, phrases, or conclusions in the Certificate.
However, it is clear from the Certificate, in my view at any rate, that the Attorney General was firmly of the view that none of the letters from the Prince of Wales to Ministers should be disclosed.
Apart from the overall tenor of the Attorney Generals reasoning, two specific points strike me as significant.
First, he clearly took the view that disclosure against the will of the Prince of any letter was objectionable.
Secondly, he was wholly unimpressed with the argument that disclosure of the advocacy letters should be ordered because the contents of some of the letters had been made public.
The 2003 Directive: conclusions as to its effect 113.
Accordingly, if (contrary to my conclusion expressed in paras 86 89 above), the Certificate had been valid so far as the FOIA 2000 was concerned, I would have concluded that the effect of the 2003 Directive was to invalidate the Certificate in relation to the environmental information, but not in relation to the non environmental information, in the advocacy correspondence.
Conclusions 114.
For these reasons, which, with the minor exception of paras 109 112 above, largely accord with those in the judgment of Lord Dyson in the Court of Appeal, I would dismiss this appeal. 115.
It is, I think, worth mentioning that the same fundamental composite principle lies behind the reason for dismissing this appeal on each of the two grounds which are raised.
That principle is that a decision of a judicial body should be final and binding and should not be capable of being overturned by a member of the executive.
On the second ground, which involves EU law, the position is relatively straightforward, at least as I see it: the relevant legislative instrument, the 2003 Directive, expressly gives effect to that fundamental principle through the closing words of article 6.2 and the opening sentence of article 6.3.
On the first ground, which involves domestic law, the position is more nuanced: the relevant legislative instrument, the FOIA 2000, through section 53, expressly enables the executive to overrule a judicial decision, but only on reasonable grounds, and the common law ensures that those grounds are limited so as not to undermine the fundamental principle, or at least to minimise any encroachment onto it.
LORD MANCE: (with whom Lady Hale agrees) Introduction 116.
This is an application for judicial review of a certificate issued by the Attorney General under section 53 of the Freedom of Information Act 2000 (FOIA) to prevent disclosure of written communications passing between the Prince of Wales and various Government Departments during the period 1 September 2004 to 1 April 2005.
Disclosure of these communications has been requested by Mr Rob Evans, a journalist with The Guardian. 117.
The Departments refusal of disclosure was upheld by the Information Commissioner.
Mr Evanss appeal was transferred to the Upper Tribunal, where the Information Commissioner was the respondent and the various Departments were interested parties.
The Information Commissioner now no longer resists disclosure, so I can in what follows simply refer to the Departments as the party resisting.
The Upper Tribunal (Walker J, Upper Tribunal Judge John Angel and Ms Suzanne Cosgrave) heard extensive evidence and on 18 September 2012 allowed Mr Evanss appeal by a decision with reasons extending to 251 paragraphs, with open annexes extending to a further 297 paragraphs. 118.
The Attorney General on 16 October 2012 issued his certificate stating that as an accountable person under section 53(8) of FOIA: I have on reasonable grounds formed the opinion that, in respect of the requests concerned, there was no failure to comply with section 1(1)(b) of the Act or regulation 5(1) of the Environmental Information Regulations 2004.
Where such a certificate is issued, any decision notice ceases under section 53(2) to have any effect.
Mr Evans challenges the legitimacy of that certificate. 119.
The Divisional Court (Lord Judge CJ, Davis LJ and Globe J) dismissed the challenge.
The Court of Appeal (Lord Dyson MR and Richards and Pitchford LJJ) allowed Mr Evans appeal.
The Attorney General now appeals against that decision by permission of the Court of Appeal. 120.
The background circumstances and law have been set out in the judgment of Lord Neuberger, which I have had the benefit of being able to read before preparing this judgment, and I need not repeat them.
I have also had the benefit of reading Lord Wilsons and Lord Hughess judgments. 121.
Section 1(1)(b) of FOIA gives a person making a request to a public authority a general right to have communicated information held by that authority, subject to exemptions introduced by section 2.
Regulation 5(1) of the Environmental Information Regulations 2004 contains a specific right in respect of environmental information, intended to implement the requirements of Parliament and Council Directive 2003/4/EC on public access to environmental information.
The provisions of FOIA apply to this specific right with some modifications, by virtue of regulation 18.
Both rights are expressly made subject to section 53, set out by Lord Neuberger in para 17.
In the case of environmental information, this is by virtue of regulation 18(6).
Under section 53(2) a certificate may be served (as this one was) not later than 20 working days following either a decision notice or enforcement notice given by the Information Commissioner or the determination or withdrawal of an appeal.
The issues 122.
The following issues arise: (i) whether the Attorney Generals statement that he had on reasonable grounds formed the opinion that there was no failure to comply with section 1(1)(b) or regulation 5(1) was one which he was entitled to make, having regard in particular to the decision and reasoning of the Upper Tribunal, and (ii) whether, in any event, regulation 18(6) complies with article 6 of Parliament and Council Directive 2003/4/EC; if it does not, then it is common ground that regulation 18(6) is invalid, and in that case a subsidiary issue arises: (iii) whether the certificate can stand even in relation to the non environmental information which it covers.
The first issue the test for issue of a certificate 123.
On the first issue, there is a significant difference of principle between Lord Neuberger and Lord Wilson.
Lord Neuberger highlights the incongruity of a minister or officer of the executive, however distinguished, overriding a judicial decision.
The incongruity is if anything more marked in the case of a court of record like the Upper Tribunal.
This leads him to confine the operation of section 53 to marginal circumstances which could only rarely arise.
But Lord Neuberger also notes that further incongruity could arise if a certificate were more readily capable of being issued at the earlier stage of a non judicial decision by the Information Commissioner.
Unless the operation of section 53 were in this case also confined, the scope for issuing a certificate would vary according to whether the Information Commissioners decision notice was for or against disclosure.
Nonetheless, Lord Neuberger considers, provisionally, that the scope is not as confined in this case as after a tribunal decision, but that the existence of a right of appeal, on both law and fact, against an Information Commissioners decision, would serve as some form of constraint. 124.
Lord Neuberger himself recognises, and Lord Wilson elaborates, some of the problems which this construction faces.
I can myself subscribe generally to the views expressed by Lord Wilson in paras 171, 172 and 174 to 179 of his judgment.
I consider that section 53 must have been intended by Parliament to have, and can and should be read as having, a wider potential effect than that which Lord Neuberger has attributed to it. 125.
Lord Wilson expresses this effect as being to enable the Attorney General to arrive at a different evaluation of the public interests.
He takes the view that the fact that the statutory override is expressly conferred by FOIA distinguishes this scheme from those under consideration in the three authorities.
I note, however, that, under the ombudsman scheme considered in R (Bradley) v Secretary of State for Work and Pensions [2008] EWCA Civ 36, [2009] QB 114, the Court of Appeal held that the ombudsmans findings of maladministration were not as a matter of law binding on the minister.
Nevertheless, the Court of Appeal was, in Sir John Chadwicks words at para 91: not persuaded that the Secretary of State was entitled to reject the ombudsmans finding merely because he preferred another view which could not be characterised as irrational. [I]t is not enough that the Secretary of State has reached his own view on rational grounds. [H]e must have a reason (other than simply a preference for his own view) for rejecting a finding which the ombudsman has made after an investigation under the powers conferred by the Act. 126.
To that extent therefore, the decision indicates that there can be constraints on executive departure from the considered findings of even a non judicial body established to investigate and make recommendations.
But, as Lord Neuberger observes, the reasoning in Bradley appears to set a somewhat lower threshold for departing from the earlier decision than the Court of Appeal thought appropriate in the different circumstances under consideration in R v Warwickshire County Council, Ex p Powergen plc (1997) 96 LGR 617 and R v Secretary of State for the Home Department, Ex p Danaei [1998] INLR 124. 127.
In Bradley, the differences between acting rationally or irrationally, simply preferring ones own view and having a reason for rejecting a finding were not further examined in the judgments, and the Court of Appeal in its actual decision appears to have contented itself with examining whether the Secretary of State did or did not act rationally: see paras 95 96 and 125. 128.
Ultimately, the test applicable in relation to the first issue must be context specific, in the sense that it must depend upon the particular legislation under consideration, here the FOIA and the Regulations, and upon the basis on which the Attorney General was departing from the decision notice or appeal decision.
Mr James Eadie QC submits that the Attorney General could, instead of appealing, even take a different view from the Information Commissioner or Tribunal on a question of law, but accepts that, in that event, the correctness of his view of the law could be tested by judicial review.
As to findings or evaluations of fact, he accepted at one point that something more than mere rationality was required under section 53 if the Attorney General was to depart from a finding or evaluation of facts.
He went on to explain that the Court must apply an objective standard, by asking whether the certificate expressed a view that was a reasonable view for the Attorney General to hold.
A different view about or evaluation of the public interest was, in his submission, exactly what section 53 was intended to permit.
Ultimately, therefore, it appears that Mr Eadie was contending for a test close, if not exactly equivalent, to rationality on the part of the Attorney General. 129.
On any view, the Attorney General must under the express language of section 53(2) be able to assert that he has reasonable grounds for considering that disclosure was not due under the provisions of FOIA.
That is, I consider, a higher hurdle than mere rationality would be.
Under section 53(6) he must also express his reasons for this opinion, unless, under section 53(7) this would involve disclosure of exempt information.
On judicial review, the reasonable grounds on which the Attorney General relies must be capable of scrutiny. (The only doubt, discussed by Lord Wilson in para 181, is whether the court can consider in a closed material procedure any of the material of which disclosure is sought, in the same way that the Upper Tribunal was able to.
That doubt does not require resolution on this appeal.) 130.
When the court scrutinises the grounds relied upon for a certificate, it must do so necessarily against the background of the relevant circumstances and in the light of the decision at which the certificate is aimed.
Disagreement with findings about such circumstances or with rulings of law made by the tribunal in a fully reasoned decision is one thing.
It would, in my view, require the clearest possible justification, which might I accept only be possible to show in the sort of unusual situation in which Lord Neuberger contemplates that a certificate may validly be given.
This is particularly so, when the Upper Tribunal heard evidence, called and cross examined in public, as well as submissions on both sides.
In contrast, the Attorney General, with all due respect to his public role, did not.
He consulted in private, took into account the views of Cabinet, former Ministers and the Information Commissioner and formed his own view without inter partes representations.
But disagreement about the relative weight to be attributed to competing interests found by the tribunal is a different matter, and I would agree with Lord Wilson that the weighing of such interests is a matter which the statute contemplates and which a certificate could properly address, by properly explained and solid reasons. 131.
Lord Neuberger suggests (para 94) that the statute cannot contemplate such an exercise, because it would require more than the 20 days allowed by the statute for the issue of a certificate.
I do not think that follows.
The discussion below shows that the Attorney General did not undertake the weighing of interests which the statute contemplates, that is, normally at least, against the background and law established by the tribunals decision.
On the contrary, he was undertaking his own redetermination of the relevant background circumstances.
Neither on my analysis nor on Lord Neubergers was he entitled to do that.
In short, the fact that it takes some elaboration to show that the Attorney General was proceeding on the wrong basis does not indicate the time the Attorney General would have required to address the matter on an appropriate basis.
The first issue application of the test 132.
Applying the test identified in para 131 to the present case, it is necessary to look closely at the Attorney Generals certificate in the light of the Upper Tribunals findings and conclusions.
In my view, his certificate was based essentially on differences in his account of the relevant circumstances, including the constitutional conventions, by reference to which the relevant issues of public interest fell to be evaluated.
Central to the Attorney Generals disagreement with the Upper Tribunal was his view that the advocacy correspondence in which the Prince of Wales engaged was part of his preparation for kingship, or part of an education or apprenticeship convention, as the Departments put it before the Upper Tribunal.
The disagreement is apparent from the following paragraphs of the certificate: 7.
In the United Kingdom, that constitutional balance is preserved by the constitutional convention that the Monarch acts on, and uses prerogative powers consistently with, Ministerial advice ("the cardinal convention").
The corollary to the cardinal convention is the convention that the Monarch has the right, and indeed the duty, to be consulted, to encourage, and to warn the government (the "tripartite convention").
The tripartite convention ensures that a measure of influence is retained for the Monarch within the constitution.
The tripartite convention is most obviously, though not solely, expressed through the Prime Minister's weekly audience with the Monarch. 8.
In order to prepare for the exercise of the tripartite convention, the heir to the Throne has the right to be instructed in the business of government: a right described by the Tribunal in this case as the "education convention".
The Tribunal in this case accepted the importance of the education convention; and accepted that it carried with it a duty of confidentiality.
However, the Tribunal concluded both that "advocacy correspondence" was outside the education convention; and that such correspondence formed no part of The Prince of Wales' preparations for kingship, because it was not undertaken as part of preparation for kingship, and was not the type of activity in which the Monarch would engage. 9.
In my view, it is of very considerable practical benefit to The Prince of Wales' preparations for kingship that he should engage in correspondence and engage in dialogue with Ministers about matters falling within the business of their departments, because such correspondence and dialogue will assist him in fulfilling his duties under the tripartite convention as King.
Discussing matters of policy with Ministers, and urging views upon them, falls within the ambit of "advising" or "warning" about the Government's actions.
It thus entails actions which would (if done by the Monarch) fall squarely within the tripartite convention.
I therefore respectfully disagree with the Tribunal's conclusion that "advocacy correspondence" forms no part of The Prince of Wales' preparations for kingship.
I consider that such correspondence enables The Prince of Wales better to understand the business of government; strengthens his relations with ministers; and enables him to make points which he would have a right (and indeed arguably a duty) to make as Monarch.
It is inherent in such exchanges that one person may express views and urge them upon another.
I therefore consider that, whether or not it falls within the strict definition of the education convention, advocacy correspondence is an important means whereby The Prince of Wales prepares for kingship.
It serves the very same underlying and important public interests which the education convention reflects. 10.
If such correspondence is to take place at all, it must be under conditions of confidentiality.
Without such confidentiality, both The Prince of Wales and Ministers will feel seriously inhibited from exchanging views candidly and frankly, and this would damage The Prince of Wales' preparation for kingship.
Indeed, it is difficult to see how the exchange of views in correspondence could continue at all without confidentiality.
Also, The Prince of Wales is party political neutral.
Moreover, it is highly important that he is not considered by the public to favour one political party or another.
This risk will arise if, through these letters, The Prince of Wales was viewed by others as disagreeing with government policy.
Any such perception would be seriously damaging to his role as future Monarch, because if he forfeits his position of political neutrality as heir to the Throne, he cannot easily recover it when he is King.
Thus in this context, confidentiality serves and promotes important public interests. 11.
I also consider that the disclosure of advocacy correspondence engages the important freestanding interest in the preservation of confidences.
Both The Prince of Wales, and Ministers, correspond on the basis that their exchanges are strictly confidential.
Furthermore, I consider that the public interest in maintaining confidentiality will be buttressed where The Prince of Wales's letters reflect his and deeply held views and convictions, given under impress of confidentiality. 12.
In my view, these are important public interests in non disclosure, which will generally apply to advocacy correspondence between The Prince of Wales and Ministers.
Of course, I recognise that each case must be decided on its own particular facts, so I have gone on to examine how those public interests apply in this case.
I take the view that they apply with particular force, in circumstances where: (1) The requests were made in April 2005.
Thus, at the time when the requests fell to be responded to, the correspondence was very recent; and it is still relatively recent. (2) Much of the correspondence does indeed reflect The Prince of Wales' most deeply held personal views and beliefs. (3) The letters in this case are in many cases particularly frank.
They also contain remarks about public affairs which would in my view, if revealed, have had a material effect upon the willingness of the government to engage in correspondence with The Prince of Wales, and would potentially have undermined his position of political neutrality. (4) There is nothing improper in the nature or content of the letters.
The public interests in disclosure 13.
I recognise, and take account of, the public interests in disclosure identified in the Upper Tribunal's judgment, namely governmental accountability and transparency; the increased understanding of the interaction between government and Monarchy; a public understanding of the influence, if any, of The Prince of Wales on matters of public policy; an interest in disclosure in light of media stories focusing on The Prince of Wales' alleged inappropriate interference, or lobbying; furthering the public debate regarding the constitutional role of the Monarchy, and in particular the heir to the Throne; and informing broader debate surrounding constitutional reform. 14.
In my view, the factors in favour of disclosure identified by the Tribunal in this case are good generic arguments for disclosure of the information.
However, if they were decisive in the present case it would have to be at the expense of the strong public interest arguments against disclosure, centred upon The Prince of Wales' preparation for kingship and the importance of not undermining his future role as Sovereign. 15.
I also consider that the very high public interest that the Tribunal identified in the public knowing what The Prince of Wales said to Ministers was at least in part dependent upon the Tribunal's assumption that The Prince of Wales was in no different position from any other lobbyist, when making representations to Ministers, save that he did so from a position where his representations would be accorded special weight.
I do not consider that The Prince of Wales's correspondence is properly viewed in that light, in circumstances where it is part of his preparation for kingship.
I take the view that the correspondence has a constitutional function, which makes any analogy between it and correspondence between a private individual and a Minister inapposite. 133.
The Attorney Generals approach in paras 7 to 10 of the certificate is, as stated, in sharp disagreement with the Upper Tribunals findings and conclusions.
These findings and conclusions were based on extensive evidence and analysis of the role of the Monarch in this country, the skills and disciplines attaching to that role, the preparation regarded as necessary to understand, possess and exercise them and the relevant convention.
The Upper Tribunal was at great pains to consider in this connection the significance and relevance of the advocacy correspondence, both that which has been published and that which the tribunal saw in closed session.
It summarised three problems which had been identified by counsel for Mr Evans in relation to the Departments evidence and case, as follows: (2) Professor Brazier [called by the Departments] accepted that under his thesis communications fell within the convention because they were a rehearsal for kingship, but was not able to point to anything evidencing a recognition by Prince Charles that there was a rehearsal mode or that he was acting within this rehearsal mode.
There was powerful evidence that Prince Charles did not regard himself as acting in rehearsal mode.
The biography made no suggestion of it.
Indeed, the 1995 article characterised the correspondence in question as advocacy 'for real' under a radical parallel with the sovereign's tripartite convention.
The Clarence House website described Prince Charles 'Promoting and Protecting' through publicly aired views and private correspondence, including with ministers.
Sir Stephen Lamport [also called by the Departments] was emphatic that the descriptions "rehearsal" and "training" were inapt.
On the contrary, Prince Charles believed that his contact with government could be used for the wider public benefit.
The only thing which distinguished Prince Charles's role from the sovereign's, on Sir Stephen's evidence, was that the government did not feel they had to treat his advice as they would treat the Queen's.
The memorandum by Sir Michael Peat showed that as regards Prince Charles's current actions (a) he understands the constitutional functions that the sovereign has (and he would have), and (b) that is decidedly not the character of his actions, indeed ( c) he would change as sovereign and stop intervening in the way that he does.
That explanation was inconsistent with Sir Stephen Lamport's and Sir Alex's [Sir Alex Allan, called for the Departments] metaphor of the "apprentice stonemason". (4) It is a fundamental condition of the exercise by the sovereign of the tripartite convention that the sovereign does not express views in public on matters of public policy.
If Prince Charles is to be taken as being in 'rehearsal' mode, why would he so obviously act incompatibly with the necessary discipline accompanying the role he is supposedly rehearsing? Put another way, the absence of a perceived obligation of (rehearsed) silence in public on the public policy undermines the idea of a perceived right of (rehearsed) encouragement and warning in private. (6) Professor Brazier's thesis was not able to identify any distinction between what Prince Charles is doing, nor what the government is doing, which is different because this is supposedly 'rehearsal' mode.
On the contrary, it is precisely the same course of conduct of both parties which led to the Brazier 1995 suggestion of Prince Charles having the right to seek to urge and persuade.
If the true analysis is that Prince Charles has no such right, but merely a right to rehearse, there would need to be a difference between the two.
But none has been identified, merely the fact that this is the heir and not the monarch. 134.
The Upper Tribunal concluded that these problems had remained unanswered.
It thought it plain that the advocacy correspondence was not prompted by a desire to become more familiar with the business of government and was not addressing what his role would be as king.
Rather it was prompted by a strong belief that certain action on the part of government was needed.
Further, in expressing that belief, Prince Charles was acting in a manner which was incompatible with his future role as king and in which he recognised that he would have to cease acting when he became king.
That conclusion was expressed by the Upper Tribunal in the following passages: 99.
Problems (2), (4) and (6) are interlinked.
It seems to us that they are much more substantial.
First, the submissions for the Commissioner and the departments never distinctly grappled with the point that Prince Charles himself has recognised that as sovereign, "he must stop intervening in the way that he does." Mr Swift acknowledged that Prince Charles does not deal with government in "rehearsal mode".
His suggested answer was that (1) instruction gives rise to debate, encouraged by ministers; (2) the convention takes the form of a debate or conversation, not a lecture; (3) Prince Charles can only learn how to debate and question issues of policy by actually debating and questioning issues of policy, not by pretending to do so; and (4) preparation for kingship over a period of four decades will involve forming a relationship with ministers in which matters of substance are discussed.
However, in the public examples that we have seen, the plain facts are that what Prince Charles is doing is not prompted by a desire to become more familiar with the business of government, and simply is not addressing what his role would be as king.
We cannot accept Mr Swift's contention that when Prince Charles discusses matters "for real" with ministers, both he and ministers appreciate that this is in the context of his preparation for kingship.
The examples we have identified in our chronology of events at Open Annex 2 do not involve any assumption that Prince Charles has the rights of the monarch, but they all have as their context Prince Charles's strong belief that certain action on the part of government is needed.
On analysis, as it seems to us, neither Sir Alex nor Sir Stephen was able to justify an assertion that either side saw these exchanges as part of preparation for kingship. 135.
The Upper Tribunal also held that the Departments were advancing a novel case regarding the scope of the education convention.
It was a new approach which Professor Brazier had first advanced in his witness statement, without recognising how far it departed from what Professor Brazier had written in an article in 1995.
He had then simply advocated the recognition of a new constitutional convention enabling the Prince of Wales to obtain information from ministers, to comment on their policies and to urge other policies on them.
The new approach asserted in the witness statement was to the effect that there already existed a convention attaching to every piece of correspondence, including Prince Charles and ministers.
The new approach had in effect been created by Prince Charles own conduct, since it had no precedent.
The new approach appears very close, if it is not identical, to that taken by the Attorney General in his certificate.
The Upper Tribunal rejected it categorically in the following passages: 103.
In our view the new approach as advanced by Professor Brazier in his witness statement would involve a massive extension of the education convention.
The new approach seemed to involve a proposition that whenever Prince Charles interacted with government this helped to prepare him to be king and was therefore part of the education convention.
The logical consequence of this proposition would be that the education convention extended both to advocacy correspondence and to correspondence on charitable or social matters without any advocacy element.
As noted in section G of OA3, however, in cross examination Professor Brazier resiled from his earlier stance in relation to charitable and social matters.
What happened was that Mr Pitt Payne put to him the difficulty that correspondence on charitable matters might be written by any other member of the royal family: it was not done as part of preparation to be king.
In the course of cross examination Professor Brazier gave consideration to this difficulty both in relation to charitable matters and in relation to social matters.
In the light of that consideration, he very fairly acknowledged that subject to there being no advocacy element the Commissioner was right to say that the education convention did not cover correspondence on charitable and social matters.
In that regard he accepted that he may have conflated two different things which should not have been conflated: the scope of the convention on the one hand and the obligation of confidence on the other. 104.
Thus the analysis of the expert witness for the Departments changed during the course of oral evidence.
He was confronted with difficulties facing any proposition that whenever Prince Charles interacted with government this helped to prepare him to be king and was therefore part of the education convention.
His recognition of those difficulties led him to accept the Commissioner's narrower view that the scope of the education convention did not extend to charitable or social matters.
Inevitably, as it seems to us, he was thereby accepting that merely incidental help in preparation for kingship at least in charitable and social contexts will not suffice.
What we find illuminating is that the question which led Professor Brazier to change his mind did not merely point out that other members of the royal family might write on charitable matters.
There was an additional element to the question which made that such correspondence was not written "as part of preparation to be king".
To our mind, for the reasons developed by Mr Fordham in cross examination of Professor Brazier, that crucial point applies equally to advocacy correspondence. 105.
The massive extension of the convention advanced by the Departments, and the less massive extension identified by the Commissioner, would both have to meet the second element of the Jennings test.
In the context of the education convention this would require that both sides considered that as part of Prince Charles's preparation to be king they were bound to permit correspondence with government in the manner contemplated by the extension.
Professor Brazier's witness statement relied on both sides exchanging correspondence on the crucial point the explicit or implicit assumption that all of it would remain confidential.
As noted above, however, in oral evidence he accepted that it was wrong to conflate confidentiality and the scope of the convention.
The submissions for Mr Evans accepted that the traditional education convention involved informing Prince Charles about governmental matters and responding to queries from him about that information.
The evidence before us, as examined in open session, demonstrates that interaction between Prince Charles and government went far beyond this, but not "as part of preparation to be king".
Published advocacy correspondence shows Prince Charles using his access to government ministers, and no doubt considering himself entitled to use that access, in order to set up and drive forward charities and to promote views but not as part of his preparation for kingship.
Ministers responded, and no doubt felt themselves obliged to respond, but again not as part of Prince Charles's preparation for kingship.
Indeed Prince Charles himself accepts, and government acknowledges, that his role as king would be very different.
The inevitable conclusion is that while correspondence going beyond the traditional education convention may well be confidential, and is not (despite Professor Tomkins's concerns) said by Mr Evans in these proceedings to be unconstitutional, it does not have the special status of correspondence falling within a constitutional convention. 106.
There is another element in the Jennings test which leads to the same conclusion.
It is the third element: there must be good reason for the suggested extension.
The good reason advanced by Professor Brazier for such a massive extension was difficult to pin down.
At times it appeared to be simply that both sides regarded their discussions as confidential something which he later accepted was not determinative of the scope of the convention.
At other times it appeared to be that whenever Prince Charles interacted with government this helped to prepare him to be king but he has accepted that, at least in the charitable and social context, merely incidental help does not suffice.
In our view, however, there is an overwhelming difficulty in suggesting that there is good reason for regarding advocacy correspondence by Prince Charles as falling within a constitutional convention.
It is a difficulty that was recognised in Professor Brazier's answer cited earlier: it is the constitutional role of the monarch, not the heir to the throne, to encourage or warn government.
Accordingly it is fundamental that advocacy by Prince Charles cannot have constitutional status.
Professor Brazier sought to escape this difficulty by saying that under his extension to the education convention there was no obligation on government to consider what Prince Charles said.
This in our view offers no escape: the communication of encouragement or warning to government has constitutional status only when done by the monarch.
Even if ministers (despite every appearance of thinking the contrary) are under no obligation to consider what is said, they have received it and it is open to them to take account of it.
It would be inconsistent with the tripartite convention to afford constitutional status to the communication by Prince Charles, rather than the Queen, of encouragement or warning which ministers might then take account of. 136.
The Upper Tribunal at a later point addressed a case made to the effect that the mere interchange with ministers might have value as preparation for kingship, because of the understanding it might bring about how government functions and the experience it might bring of dealing and developing relationships with ministers.
It said this: 174.
The "to and fro" between Prince Charles and government involved in advocacy communications may carry an incidental benefit of increasing Prince Charles's knowledge of how government works, but unless there is some additional element they cannot properly be described as preparation for kingship. 137.
In contrast, the Attorney General issued his certificate on the basis that the advocacy correspondence in which the Prince of Wales engaged entailed actions which would (if done by the Monarch) fall squarely within the tripartite convention, which were of very considerable practical benefit to, or an important means in connection with, his preparations for kingship and which therefore formed part of such preparation.
The certificate does not engage with, or begin to answer, the problems about this apparently wholesale acceptance of Professor Braziers thesis about the emergence of a new or highly expanded constitutional convention, which the Upper Tribunal had so forthrightly and on its face cogently rejected.
It does not even address the problem that the Prince of Wales himself had accepted that advocacy communications of the sort under consideration would be incompatible with his role as king and are actions which he would have to cease undertaking.
It does not address the fact that advocacy correspondence of the kind under discussion has no precedent, is not undertaken as part of and is not necessary as part of any preparation for kingship. 138.
The Attorney Generals further reasoning in para 10 of his certificate is that confidentiality is needed, if such correspondence, and thereby the Princes preparation for kingship, is to continue.
As quoted above, para 10 states: Without such confidentiality, both The Prince of Wales and Ministers will feel seriously inhibited from exchanging views candidly and frankly, and this would damage The Prince of Wales' preparation for kingship.
Indeed, it is difficult to see how the exchange of views in correspondence could continue at all without confidentiality. 139.
That reasoning depends in part on the view, already considered, that the correspondence is an aspect of preparation for kingship.
But it also contains the assertion that it is difficult to see how [such correspondence] could continue at all.
This is then repeated in para 12(3) of the certificate.
But no basis for such an assertion is stated, and it is contrary to the clear and reasoned findings of the Upper Tribunal on the point.
In para 196 the Upper Tribunal found that: there is good reason to think that Prince Charles will not, as a result of liability to disclosure, cease to make points to government that in his view need to be made.
The chronology forcefully suggests that these are things that he feels strongly cannot be left unsaid: see for example OA2 at paras 35, 37, 43(4), 61, 62 and 97.
Moreover, he has not been dissuaded by publicity in the past: we consider that the high degree of publicity afforded to Prince Charles's dealings with government in the past has not prevented his being educated in the ways and workings of government, nor has it deterred him from corresponding frankly with ministers. 140.
The certificate continues: Also, The Prince of Wales is party political neutral Moreover, it is highly important that he is not considered by the public to favour one political party or another.
This risk will arise if, through these letters, The Prince of Wales was viewed by others as disagreeing with government policy.
This reasoning also fails to address or meet the Upper Tribunals conclusions, based on the evidence before it.
The Upper Tribunal pointed out that it was and is well known that Prince Charles advocates causes which may in a broad sense be described as political, but that, at the same time, he avoids party political arguments, code words or personalities in a manner which The Times had as long ago as 25 October 1985 commended in an editorial.
The Attorney Generals certificate does not suggest the contrary.
It appears, by inference, to be concerned about public misperception, or possibly misrepresentation.
But both The Times then and the Upper Tribunal in its decision robustly dismissed the risk of public misperception as not being real or persuasive. 141.
More specifically, the Upper Tribunal found, in relation to the suggestion that the Prince might, as a result of disclosure, be viewed as politically partisan, that: 176. [T]he concern was a concern about perception, and "political" was used in a narrow sense of "party political".
The concern that was advanced by the Commissioner and the Departments was that disclosure of the disputed information might lead the public to think that Prince Charles favoured one political party over another.
The Departments were at pains to stress that Prince Charles was not politically partisan, and the Commissioner made it clear that he did not suggest this.
The concern is thus about misperception. 182.
The word "political" can be used in a broad sense, connoting an activity relating to policy.
It is apparent from Prince Charles's public advocacy, from the revelations in the biography about his private advocacy, from purported revelations elsewhere about his private advocacy, and from public criticism of his advocacy activities . that in this broad sense of "political" Prince Charles's activities are not neutral and in a number of respects have been controversial.
It was common ground in the present case that despite all this, and despite views he has advocated often being later adopted to a greater or lesser extent by politicians or government, Prince Charles had succeeded in not being perceived as party political.
There is a risk that a view publicly advocated by him at a time when it did not divide political parties may do so in the future, but that is a risk that he has been prepared to run. 183.
As we explain below, it does not follow that failure by members of the public to distinguish between views on party political issues and views on wider matters of policy involves "unfair criticism" or even if it were "unfair", that Prince Charles or the royal family generally needs to be protected from it. 184.
It follows from this reasoning that we do not accept the broad general proposition advanced by the Commissioner on this aspect.
It is true that a decision to abstain from making certain kinds of statement in public may be rendered ineffective if private correspondence were disclosed.
This has to be seen, however, in the context of advocacy correspondence.
In that context the Commissioner's submission effectively becomes that while Prince Charles desires to be known publicly as an advocate on some issues, nevertheless there is a public interest in not revealing his advocacy on issues where he does not wish his stance to be known publicly.
There may be special cases for example, particular circumstances where, in order to achieve some public good, there is an initial period where secrecy is necessary to avoid tipping off wrongdoers.
In the absence of this, or some other special circumstance, we do not accept that a desire that the public should not know of his advocacy on a particular issue of itself gives rise to a public interest in non disclosure. 187.
For reasons explained in our conditionally suspended annex, we can say that in the disputed information consistently with what in 1985 he described as his own practice Prince Charles avoids "party arguments'', "party code words" and "personalities".
If it were possible to identify in the disputed information anything on a topic which attracted party political controversy either at the time it was written or now, just as The Times in 1985 thought the public interest permitted public statements on such a topic, we consider that in the 21st century "our language is not so deformed and our politics are not so penetrating" as to make it in the public interest not to disclose advocacy communications on such topics. 188.
There is, as it seems to us, a short answer to all the various ways in which the Departments have sought to rely on dangers of "misperception" on the part of the public.
It is this: the essence of our democracy is that criticism within the law is the right of all, no matter how wrongheaded those on high may consider the criticism to be. 142.
The Attorney Generals certificate does not engage with or give any real answer to this closely reasoned analysis and its clear rebuttal of any suggestion that a risk of misperception could justify withholding of disclosure.
Sufficient is already known publicly about the Prince of Wales actions and communications some of it as a result of authorised disclosure to make the suggested risk of misperception remote, and the Upper Tribunal evidently saw nothing to suggest any greater risk in any closed material.
It also took the robust view, which again the certificate does not address, that public discourse is not so deformed that public figures cannot express important and potentially influential views without sounding politically partisan or that secrecy should, in effect, outweigh transparency for fear of misperception. 143.
Another factor highlighted in connection with the Attorney Generals evaluation of the public interest is that much of the correspondence does indeed reflect The Prince of Wales most deeply held personal views and beliefs (paras 11 and 12(2) of the certificate).
But it is unclear why this is an argument against disclosure of communications by a public figure intended to influence public action.
Further, as the Upper Tribunal found Prince Charless self perceived role has been described on his behalf as representational, "drawing attention to issues on behalf of us all" and "representing views in danger of not being heard".
We find this assertion to be established by the evidence.
Where a public figure makes representations on behalf of the public or on behalf of those whose voice might not otherwise be heard, it is not unlikely that he or she will do this out of personal conviction.
It would seem strange if that were a reason for withholding knowledge about the representations from those in whose interests they were made. 144.
The Attorney General also identified as a reason why the public interest pointed towards disclosure that 12(4) There is nothing improper in the nature or content of the letters.
That reinforces the point that misperception is an unreal fear.
But it does not address the reason why disclosure is sought.
The Upper Tribunal in paras 4 and 144 160 identified a very strong interest in disclosure in the interests of transparency, so that the influence which such communications has or may have on public decisions may be appreciated, and potentially also of course countered.
I would myself also regard this as clear. 145.
It follows from all the above that the Attorney Generals certificate proceeded on the basis of findings which differed, radically, from those made by the Upper Tribunal, and in my view it did so without any real or adequate explanation.
The Upper Tribunals findings and conclusions were very clearly and fully explained.
I do not consider that it was open to the Attorney General to issue a certificate under section 53 on the basis of opposite or radically differing conclusions about the factual position and the constitutional conventions without, at the lowest, explaining why the tribunal was wrong to make the findings and proceed on the basis it did.
As it is, the certificate asserted the existence of a tripartite convention wide enough to cover the Prince of Waless advocacy communications; it asserted in particular that they fell within the preparation for kingship convention, would be of very considerable practical benefit and were an important means of preparation; it further asserted that publication would cause them to cease or would cause misperception, and that the fact that the communications, made in a representational capacity, involved deeply held personal views and belief was a reason for non disclosure.
These assertions were in very direct contradiction with the Upper Tribunals findings, without any substantial or sustainable basis being given for the disagreement.
In my view and in the light of all that I have set out, the certificate cannot be regarded as satisfying the test identified in para 129 above.
The disagreement with the Upper Tribunals detailed findings and conclusions reflected in the certificate has not therefore been justified on reasonable grounds.
I therefore consider that the Court of Appeal was right to set aside the certificate, and that the appeal should be dismissed on this ground. 146.
The Attorney General sought in their written case to allege that the Upper Tribunal made a number of errors of law in the course of its decision.
But no such errors featured as any part of the Attorney Generals reasoning in his certificate or indeed in the application made and granted for permission to appeal to this court and I did not understand that any or at any rate great reliance was placed on them in oral submissions before the Supreme Court.
In any event, I do not consider that it was or should now be open to the Attorney General to rely on them, in the absence of any exceptional circumstances, bearing in mind that the scheme of section 53 is to require a certificate within 20 working days, accompanied either then or as soon as reasonably practicable thereafter by information about the makers actual reasons for the decision, with the certificate then being laid before each House of Parliament.
The second and third issues environmental information 147.
I can deal with the second and third issues identified in para 123 above very briefly.
I agree with Lord Neubergers remarks and conclusions on both of them.
I have no doubt that, if it had been correct to reach an opposite conclusion to that which I have reached under the general provisions of FOIA, then such of the communications as constitute environmental information would still fall to be disclosed under the 2004 Regulations.
The power to override a decision of the Upper Tribunal provided by regulation 18(6), read with section 53 of FOIA, is in my opinion clearly irreconcilable with the provisions of article 6 of Parliament and Council Directive 2003/4/EC, set out by Lord Neuberger in para 25; and it is common ground that, in that event, regulation 18(6) must be treated as invalid. 148.
Lord Wilson argues that the words of article 6(2) of the Directive are wide enough to cover not simply a situation where there is a right of appeal, but also a situation in which the Upper Tribunals decision may be set aside by executive decision, with the executive decision being then capable itself of being judicially reviewed.
If the judicial review succeeds, the tribunal decision will become final.
If it fails, it will never become final.
But Lord Wilson has already accepted, and I agree, that the executive decision permitted by section 53(2) can legitimately involve a different evaluation of the weight of competing interests from that which the court of law or independent and impartial body established by law, contemplated by article 6(2), has taken.
On that basis the scope for judicial review is narrowed.
It cannot involve a full merits review.
It must be a limited review, as indicated in para 131 above.
Accordingly, what becomes final in the event of judicial review failing, is not a decision on the merits that the Upper Tribunals decision is wrong.
It is the conclusion that there is nothing wrong with the ministers or Attorney Generals decision to override the Upper Tribunals decision.
That cannot be consistent with the evident intention of article 6(2) to provide means of recourse to a court or similarly independent and impartial system, which will decide, one way or the other, on the merits. 149.
That regulation 18(6) read with section 53(2) can be incompatible with the Directive is shown by supposing a case where a section 53 certificate was issued after a decision notice issued by the Information Commissioner, without any appeal.
There would then be no decision under article 6(2) of any court of law or independent and impartial body established by law.
Even if the section 53 certificate were then judicially reviewed, the outcome of the judicial review would once again not be a decision on the merits of the disclosure or non disclosure, as contemplated by article 6(2), but a decision on the issue whether there was anything wrong with the override reached by applying the different test identified in para 131 above.
It does not of course follow axiomatically that regulation 18(6) is incompatible in the present context of a certificate issued following an Upper Tribunal decision, but in my view it is also in this context for the reasons given in paras 147 and 148 as well as those given by Lord Neuberger.
Conclusion 150.
For these reasons, I conclude that (i) the communications requested are not excepted from any duty of disclosure to Mr Evans under section 53 of FOIA; (ii) even if they had not been, such of them as constitute environmental information would have been and are disclosable under regulation 18(6) of the Environmental Information Regulations 2004, although in that case (iii) the remainder would not then have been disclosable. 151.
It follows that the Attorney Generals appeal should be dismissed.
LORD HUGHES: (dissenting in part) 152.
It is neither necessary nor helpful for this judgment to traverse the background or facts of this appeal, which are clearly set out in the judgment of Lord Neuberger. 153.
My conclusions can be summarised as follows: (i) Section 53(2) of the Freedom of Information Act 2000 can mean nothing other than that the accountable person (here the Attorney General) is given the statutory power to override the decision of the Information Commissioner, and/or of a court after appeal from the Commissioner, if he disagrees with it on reasonable grounds; this must include the power to disagree with the evaluation of where the balance of public interest lies. (ii) The exercise of such power is subject to judicial review if the Attorney General has acted unlawfully; if he has materially misdirected himself that would justify the court setting aside his certificate; on the facts of this case he has not done so. (iii) Insofar as the certificate relates to environmental information the power is inconsistent with the provisions of the 2004 Regulations and article 6 of Parliament and Council Directive 2003/4/EC. (iv) For the reasons explained by Lord Neuberger, the certificate in this case would clearly have been issued whether or not the environmental information was within it. (v) Accordingly for my part I would allow the Attorney Generals appeal except insofar as it relates to environmental information.
Differing on the balance of public interest: the meaning of section 53(2) 154.
The rule of law is of the first importance.
But it is an integral part of the rule of law that courts give effect to Parliamentary intention.
The rule of law is not the same as a rule that courts must always prevail, no matter what the statute says.
I agree of course that in general the acts of the executive are, with limited exceptions, reviewable by courts, rather than vice versa.
I agree that Parliament will not be taken to have empowered a member of the executive to override a decision of a court unless it has made such an intention explicit.
I agree that courts are entitled to act on the basis that only the clearest language will do this.
In my view, however, Parliament has plainly shown such an intention in the present instance. 155.
In the end this issue does not admit of much elaboration; it seems to me to be a matter of the plain words of the statute.
The alternative postulated is simply too highly strained a construction of the section.
Section 53(2) could, no doubt, have said that a certificate could be issued only if fresh material came to light after the decision of the Commissioner or the First tier Tribunal, but it did not.
Likewise, it could have said that a certificate could be issued if the decision of the Commissioner or court could be shown to be demonstrably flawed in law or fact, but it did not.
If Parliament had wished to limit the power to issue a certificate to these two situations that is undoubtedly what the subsection would have said.
If anyone had suggested at the time of the passage of the bill which became the Act that either of these things was what was meant, it seems to me that that suggestion would have received a decisive and negative response.
The second possibility is, moreover, one which would afford clear grounds for appeal, so that a certificate would not be necessary.
Even if it were a second appeal, a demonstrably flawed decision upon a topic of public significance would be one for which there would nearly always be a compelling reason for leave to appeal to be given. 156.
In the end, the very fact that it is necessary to postulate so vestigial an extent for a generally expressed power if it is to be given any content at all is a potent demonstration that it does indeed mean what it says.
The reality is that the section 53(2) provision for exceptional executive override was the Parliamentary price of moving from an advisory power for the Commissioner (and thus for the court on appeal) to an enforceable decision. 157.
The three decisions of R v Warwickshire County Council, Ex p Powergen (1997) 96 LGR 617, R v Secretary of State for the Home Department, Ex p Danaei [1998] INLR 124 and R (Bradley) v Secretary of State for Work and Pensions (Attorney General intervening) [2009] QB 114 are altogether too slender a foundation to support the contrary argument.
The first two do not support the proposition that Parliament, knowing of them, legislated with the intention of not providing the accountable person with a power to differ from the court except in the two very restricted circumstances suggested and considered above.
And in none of these cases was there an explicit statutory power to disagree with a previous decision. 158.
Powergen and Ex p Danaei were decided on the basis that the second decisions were, given the earlier findings of the planning inspector and the immigration adjudicator, Wednesbury unreasonable, ie irrational.
In the former, Simon Brown LJ pointed out that if the Authoritys argument were correct, it would be exercising what effectively amounts to a veto of the planning inspectors decision; that, he held, cannot be right (at 625f).
The present, however, is a case of a veto explicitly conferred by statute in limited circumstances.
If such a provision had been present in these two cases, the outcome would, as it seems to me, inevitably have been different. 159.
Bradley is a somewhat stronger case for Mr Evans because at para 91 Sir John Chadwick articulated the proposition that it was not enough for the Secretary of State to reach his own view on rational grounds, but rather that his decision to reject the contrary view of the Parliamentary Commissioner had itself not to be irrational.
There the statute gave the Commissioner the power to report and the court held that her report was not binding on the Secretary of State, but the statute was entirely silent about his position when responding publicly to such report.
So this was again a case in which there was no explicit statutory power to disagree, as there is here.
Moreover, as Lord Mance says, the (to my mind elusive) distinction articulated by Sir John Chadwick did not fall to be explored.
On the facts of the case the Secretary of States conclusions, where they differed from the Commissioners, were held to fail the straightforward Wednesbury test: see paras 95 and 108, and contrast those conclusions which were upheld as rational in paras 105 106 and 125.
It is a long step from this case to the proposition here relied upon, namely that Parliament must have meant section 53(2) to be construed, despite its apparently clear wording, in the restricted sense contended for. 160.
It follows that the Attorney General was entitled to differ from the Upper Tribunal on where the balance of public interest lay.
This was the principal purpose of section 53(2).
His decision must be rational, but in this case it is not seriously suggested that it was not, and it is to be noted that it was shared by the Commissioner.
Indeed, the law has now been changed so as to provide unqualified exemption from disclosure for communications with the monarch, the heir or the second in line to the throne, but not for those with other members of the Royal Family.
Judicial Review 161.
Assuming this, I agree that the Attorney Generals certificate remains subject to judicial review.
If it errs in law, that error can be corrected by the court and if necessary the certificate struck down.
As to conclusions of fact, it seems to me that the position is not complex.
Section 53(2) allows the issuer of a certificate to take a different view of the facts from the Commissioner or court so long as the conclusion reached is a rational one.
It might not be rational if (inter alia) the certifier materially misdirected himself. 162.
I agree also that the certifier must state his reasons for his differing conclusion.
That does not, as it seems to me, require him to address the judgment of the court with the same particularity as the court afforded the case.
In the present case, it was not necessary for the Attorney General to match the remarkable detail of the Upper Tribunals judgment.
Providing he has explained in general terms where he differs and why, so that his reasoning can be understood, the requirements of the section are, I think, met.
Has he done so without self misdirection or error of law? 163.
Lord Mances concern is that he has in effect misdirected himself as to the facts in relation to the constitutional conventions because, in summary, he has ignored the finding that the Prince was not, in the correspondence under consideration, acting in rehearsal mode, but rather accepted that his future role as monarch would require a different approach. 164.
I agree that a conclusion that correspondence of the kind described would, if undertaken by the monarch, fall squarely within the tripartite convention might arguably be wrong.
But I do not think that this is what the Attorney was saying: what he said falls squarely within the convention is Discussing matters of policy with Ministers, and urging views upon them within the ambit of advising or warning, and on a basis of mutual confidence.
As I read the Attorneys reasons, he did not misunderstand or ignore the accepted fact that this correspondence was not conducted in rehearsal mode.
At para 8 he expressly addressed the Upper Tribunals conclusions that (a) the correspondence was not undertaken as part of preparation for kingship and (b) that it was not the type of activity in which the monarch would engage.
Having done so, he stated at para 9 his conclusion that whether or not it falls within the strict definition of the education convention (emphasis supplied) it served the purpose of familiarising the heir with the practical workings of government, enabled him better to understand it, and strengthened his relationships with ministers.
In this way, so the Attorney concluded, it helped prepare the heir for the (differently managed) function of King.
He added that the correspondence had been undertaken on an explicitly confidential basis on both sides.
It does not seem to me that that involves any flawed self misdirection; the conclusion was one which was properly open to the Attorney General. 165.
Similarly, it does not seem to me that the Attorney was irrational in taking a different view from the tribunal of the potential damage to a constitutional monarchy of misunderstanding, misperception, or for that matter misrepresentation, as to the heirs political neutrality; that seems to me to be a matter of judgment of the possible reaction of sections of the public on which an experienced politician is at least as entitled to a view as a court. 166.
Accordingly it seems to me that the Attorney General gave sufficient rational reasons for his conclusion that the public interest lay in non disclosure.
Environmental information 167.
To the extent that the correspondence concerned environmental information, I agree, for the reasons given by Lord Neuberger, that a certificate under section 53(2) is ineffective.
I also agree, for the reasons which he gives, that this does not render the certificate as a whole unlawful.
LORD WILSON: (dissenting) 168.
I would have allowed the appeal.
How tempting it must have been for the Court of Appeal (indeed how tempting it has proved even for the majority in this court) to seek to maintain the supremacy of the astonishingly detailed, and inevitably unappealed, decision of the Upper Tribunal in favour of disclosure of the Princes correspondence! But the Court of Appeal ought (as, with respect, ought this court) to have resisted the temptation.
For, in reaching its decision, the Court of Appeal did not in my view interpret section 53 of FOIA.
It re wrote it.
It invoked precious constitutional principles but among the most precious is that of parliamentary sovereignty, emblematic of our democracy. 169.
With the fairness and courage characteristic of him, Lord Neuberger, at para 88 above, defines the basis of the Court of Appeals decision, with which he agrees, as follows: it is not reasonable for an accountable person to issue a section 53 certificate simply because, on the same facts and admittedly reasonably, he takes a different view from that adopted by a court of record after a full public oral hearing.
By his terminology, Lord Neuberger squarely confronts the paradox within his definition. 170.
It is helpful to notice the circumstances in which section 53 came to be included in FOIA.
The version of the Bill printed on 10 February 2000 included nothing analogous to it.
But under that version the applicant had no right to disclosure of such information as was subject to qualified exemptions.
Clause 13(4) of it merely conferred a discretion on the public authority to disclose such information and clause 13(5) required that, in exercising the discretion, it should have regard to the desirability of disclosing it wherever the public interest in doing so outweighed the public interest in not doing so.
In the event that disclosure was refused, clause 48 empowered the Commissioner only to recommend that it be given.
He could not overrule the authority by ordering disclosure.
At the Commons Report stage, however, the text of the Bill came, instead, to impose enforceable obligations on public authorities to disclose such information as was subject to qualified exemptions unless (reversing the weighting originally canvassed) the public interest in maintaining the exemption outweighed the public interest in disclosing the information.
But, if the discretion of public authorities in this respect was to be eliminated, there needed, so Parliament decided, to be a closely circumscribed power of public authorities at the highest level to override the evaluation of public interests by the Commissioner or by tribunals or courts in ensuing appeals.
This was clause 52 of the text of the Bill printed on 6 April 2000 and it became section 53 of FOIA.
It is a central feature of the Act.
Section 25 of the Irish Freedom of Information Act 1997 had provided for an executive override in somewhat analogous circumstances. 171.
A power of executive override of determinations of the Commissioner, or of tribunals or courts in ensuing appeals, on issues of law would have been an unlawful encroachment upon the principle of separation of powers: see the classic judgment of Sir Edward Coke, Chief Justice, in Prohibitions del Roy [1607] EWHC KB J23, 77 ER 1342, upon the claim of King James 1 to determine issues of law.
But issues relating to the evaluation of public interests are entirely different.
In the words of Lord Hoffmann in R (Alconbury Developments Ltd) v Secretary of State for the Environment, Transport and the Regions [2001] UKHL 23, [2003] 2 AC 295, at para 69, the principle is that in a democratic country, decisions as to what the general interest requires are made by democratically elected bodies or persons accountable to them.
This was the principle reflected in the first version of the Bill.
In the later version Parliament sanctioned departure from it but, in enacting section 53, it no doubt continued to have in mind that the evaluation of public interests was not an exercise in relation to which the Commissioner, the tribunals and the courts, could claim any monopoly of expertise.
With respect to Lord Neuberger, I cannot agree with his observation at para 96 above that in this context it is hard to differentiate between the findings of fact and conclusions of law traditionally reached by tribunals and courts, on the one hand, and their occasional excursions into evaluating the potency of rival public interests on the other. 172.
At the same time, however, Parliament recognised the potential inherent in the proposed override for executive encroachment upon the rule of law.
Insofar as this was a unique power, it had therefore to be circumscribed by a unique array of safeguards.
Of these, there are eight, which follow. (a) The power applies only to a decision notice served on a government department (now extended to the Welsh Assembly Government): subsection (1)(a). (b) The notice must relate to a failure to comply with section 1(1)(b) (in other words to make disclosure) in respect of exempt information: subsection (1)(b)(ii).
This safeguard is of particular significance: whether the information is exempt is a question of law, to be determined in the usual way, namely by the Commissioner or in an ensuing appeal.
It is not enough that the executive considers the information to be exempt.
If the information is exempt and the notice relates to a failure to comply with subsection (1)(b), the notice can mean only one thing, namely that the exemption is qualified and that the evaluation of the Commissioner, tribunal or court is that the public interest in maintaining it does not outweigh the public interest in disclosure.
This, then, crucially identifies the scope of the override: it is the evaluation of public interests. (c) The certificate is required to state that the certifier, namely the accountable person, has on reasonable grounds formed the opinion that there was no failure falling within subsection (1)(b), ie the opinion that the public interest in maintaining the exemption does outweigh the public interest in disclosure: subsection (2). (d) By subsection (8), the accountable person is required, in relation to a government department in England to be not just a government minister but a Cabinet minister or to be the Attorney General; in relation to Northern Ireland to be the First and deputy First Ministers acting jointly; and in relation to Wales to be the First Minister.
Thus the power is exercisable only at the highest level.
In relation to England, the convention, announced in Parliament during the passage of the Bill and honoured in the present case, is for the Cabinet minister or Attorney General to consult the Cabinet collectively before signing the certificate. (e) The accountable person must give the certificate to the Commissioner not later than 20 days following service on the department of the decision notice or following the determination of any appeal against it or of any further appeal arising out of it: subsections (2) and (4). (f) As soon as practicable after giving the certificate the accountable person must lay a copy of it before each House of Parliament or, in Northern Ireland and Wales, before the respective Assemblies: subsection (3).
Thus there is the facility for almost immediate democratic scrutiny of the use of the override. (h) (g) Also as soon as practicable the accountable person must inform the applicant of the reasons for his opinion save to the extent that to do so would involve disclosure of the information: subsections (6) and (7).
It is inherent in the procedure that the applicant can challenge the lawfulness of the certificate in proceedings for judicial review.
It is crucial to the compatibility of section 53 with the rule of law that the courts should thereby retain the right to utter the last word on the issue of disclosure: see the Alconbury Developments case, cited at para 171 above, para 73 (Lord Hoffmann). 173.
The Court of Appeal decided and today, three members of this court agree that, at any rate where the decision notice is the product of an appeal to the Upper Tribunal (or beyond but in what follows I will, for convenience, put that alternative aside), Parliament must have intended its phrase reasonable grounds to carry a restricted meaning.
Although the Court of Appeal left the point open, Lord Neuberger accepts in my view inevitably, as I will explain in para 181 below, that the Attorney General did have, at any rate, reasonable grounds for forming his opinion that the correct evaluation of public interests lay in favour of maintaining the exemption.
But, so the argument for Mr Evans runs, while a certificate on such grounds might qualify as a lawful override under section 53 of a decision notice served by the Commissioner (para 83 above), it cannot qualify as a lawful override of a decision notice upheld or substituted by the Upper Tribunal or even, probably, by the First tier Tribunal (para 85 above). 174.
Then, however, the argument has to address the question: so what might constitute reasonable grounds for the accountable person to form the opinion that, contrary to the effect of such a decision notice, there was no failure of disclosure? The Court of Appeal offered two examples. 175.
The first example was where there had been a material change of circumstances since the determination of the Upper Tribunal.
In light of the obligation of the accountable person to give his certificate within 20 days, the first point seemed unpromising.
Now, however, it is expanded and said to be strengthened.
It is accepted that in the present case the Upper Tribunal was, as a result of reference from the First tier Tribunal, hearing an appeal against the Commissioners decision notice and that therefore there was scope for the government departments to put evidence before the tribunal that was not before the Commissioner, as indeed they did.
But, according to the argument at paras 74 and 75 above, contrast the case in which the Upper Tribunal hears an appeal from the First tier Tribunal: such an appeal is limited to a point of law and so the departments would be unlikely to achieve admission of further evidence.
In such a case, therefore, a material change of circumstances founding the reasonable opinion might have arisen at any time following the determination of the First tier Tribunal. 176.
The second example was where the decision of the Upper Tribunal was demonstrably flawed in fact or law.
In the light of the ability of the public authority to appeal to the Court of Appeal on a point of law (which would include challenge to an irrational finding of fact), the second point also seemed unpromising.
Now, however, it too is expanded and said to be strengthened.
The argument at para 77 above is that the Court of Appeal might hold that the public authority failed to satisfy the criteria for permission for a second appeal in that its proposed appeal did not raise an important point of principle and that, notwithstanding the demonstrable flaw, there was no other compelling reason for it to be heard. 177.
Such are indeed valiant attempts to confer some substance upon the two examples given by the Court of Appeal.
Do they succeed? They strike me, at least, as far fetched and as thus serving only to illumine the deficiency of the Court of Appeals analysis of section 53.
Its effect is that, for all practical purposes, no certificate can be given under section 53 by way of override of a decision notice upheld or substituted by the Upper Tribunal or, probably, by the First tier Tribunal.
In other words, namely in those of Ms Rose, it will almost never be reasonable for an accountable person to disagree with the decision of a court in favour of disclosure.
The trouble is that, as is agreed, Parliament made clear, by subsection (4)(b), that such a certificate could be given in such circumstances. 178.
It is worthwhile to note that, on the first day of the hearing in this court, Mr Eadie stated that he would probably concede that, for so long as it remained open to a government department to challenge an evaluation of public interests by way of appeal, it would be wrong for a certificate to be given instead under section 53.
On the second day, however, no doubt on instructions, Mr Eadie made clear that the foreshadowed concession would not be forthcoming.
In proceedings for judicial review of the lawfulness of any future certificate, it may prove important to consider the impact of a facility to appeal upon the existence or otherwise of reasonable grounds.
In this regard I agree with Lord Neubergers remarks at para 80 above.
But no such consideration arises in the present case.
What is clear, and in my view significant, is that the disagreement of the government with the evaluation of public interests by the Upper Tribunal under section 2(2)(b) could not have amounted to a point of law upon which it might have appealed to the Court of Appeal.
There was only one course open to it and then only if it had reasonable grounds for disagreement: it was to give a certificate under section 53.
In my view, therefore, the circumstances of the case constituted a paradigm example of the area of the sections lawful use. 179.
Ms Rose cites three decisions of the Court of Appeal in support of the proposition that it is not open to the accountable person to give a certificate under section 53, or (to put it another way) that he could have no reasonable grounds for forming the requisite opinion, in circumstances in which a court has made an evaluation of public interests with which he disagrees.
I am grateful for Lord Neubergers full analysis of the three decisions at paras 60 to 65 above.
With respect, however, I do not share his view of the light which they cast on the present issue.
They were to the effect that a highway authority could not continue to maintain that the developers plans for access would be unsafe in the face of a contrary conclusion by a planning inspector (the Powergen case, cited at para 61 above); that in the absence of special reasons the Secretary of State for the Home Department could not continue to reject the applicants claim that he had committed adultery in Iran in the face of an adjudicators finding that he had done so (the Danaei case, cited at para 62 above); and that a ministers rejection of the Parliamentary Ombudsmans conclusion that his department had been guilty of maladministration was unlawful if it was irrational (the Bradley case, cited at para 63 above).
All three decisions are uncontroversial.
In none of them, however, did statute expressly confer a power of override on the public authority.
I, for my part, cannot subscribe to the suggestion in para 88 above that, with its deemed knowledge of the decisions in the Powergen and Danaei cases, Parliament might have concluded in 2000 that, even were it to enact what became section 53, the law established by those decisions would apply so as to deprive the section of effect in relation to the evaluation of public interests made by courts and tribunals. 180.
If, as I consider, section 53 did in principle entitle the Attorney General to override the evaluation of public interests which underlay the Upper Tribunals substituted decision notice, the question for the Divisional Court on judicial review was whether the grounds which formed his opinion were reasonable.
The 27 pieces of advocacy correspondence are not before the court.
In the proceedings for judicial review no application was made for the court to consider them in the way in which the Upper Tribunal had considered them, namely pursuant to a closed material procedure.
It is clear that, had the Attorney General made any such application, Mr Evans would have responded that, in the absence of statutory authority, the High Court has no jurisdiction to adopt such a procedure; and that the Attorney General would have countered that, where the very purpose of the proceedings is to obtain disclosure of information, the High Court has an inherent power to consider the information pursuant to such a procedure if justice so demands.
It is an important issue, requiring attention to be given in particular to the breadth of this courts decision in Al Rawi v Security Service (JUSTICE intervening) [2011] UKSC 34, [2012] 1 AC 531.
But, in that no such application was made, the issue must await resolution in other proceedings. 181.
Sight of the correspondence would have made it easier for the Divisional Court to determine whether the Attorney Generals grounds were reasonable.
But its task was by no means impossible and I consider that it reached the correct conclusion.
Having studied the disputed correspondence, the Upper Tribunal had conceded, at the outset of its determination, that there were cogent arguments for non disclosure and indeed the Commissioner, for his part, had persuaded himself that they outweighed those in favour of disclosure.
So it would have been surprising for the Divisional Court to have concluded that the Attorney General had no reasonable grounds for his opinion.
It is true that, once the Upper Tribunals determination was disseminated, the Attorney Generals opinion would be reasonable only if, in his statement of reasons, he demonstrated engagement with its reasoning.
But he did so.
He began his analysis with a summary of the conclusions of the Upper Tribunal and later, at para 13 (set out in para 132 of Lord Mances judgment) summarised the six main aspects of the public interest in disclosure which it had identified.
In para 14 he described them as good generic arguments for disclosure but explained that in his view they were substantially outweighed by public interest considerations militating against disclosure which were centred upon The Prince of Wales preparation for Kingship and the importance of not undermining his future role as Sovereign.
Earlier in his statement the Attorney General had explained each of these two aspects in some detail.
The Upper Tribunal had recognised the existence of a tripartite convention under which, on a confidential basis, the Sovereign has a right to be consulted by government, to encourage it and to warn it; so preparation of the Prince for Kingship was, among other things, preparation for his exercise of rights under the tripartite convention.
Confidential dialogue with Ministers was therefore, so the Attorney General asserted at para 9, an important aspect of the preparation of the Prince for Kingship in that it enabled him better to understand the business of government, by which no doubt the Attorney General intended to include the value for the public, as well as for the Prince, in his coming to understand such political difficulties as may have surrounded some of his enthusiasms.
The second aspect of public interest to which, at para 10, the Attorney General referred was cast on the undeniable importance that the Sovereign should be neutral as between political parties.
There was no doubt that the Prince was neutral in that sense but, so the Attorney General asserted, there was a risk that disclosure might engender a contrary perception which would be difficult to dispel and which therefore might seriously compromise his future role as monarch. 182.
In paras 130 and 131 of his judgment Lord Mance accepts that section 53 of FOIA entitled the Attorney General to disagree with the Upper Tribunals evaluation of public interests provided that his reasons were solid and properly explained and provided, in particular, that he did so against the background of fact and law established by the tribunal.
Lord Mance considers, however, that instead the Attorney General undertook a re determination of the relevant factual background.
Lord Mance contends that the ensuing paragraphs of his judgment so demonstrate.
But (I ask, with respect) do they so demonstrate? I suggest that most readers of the extensive quotations from the tribunal's judgment and the Attorney Generals certificate set out in paras 132 144 of Lord Mances judgment will conclude as follows: (a) There was a surprising concentration in the evidence before the tribunal and in its judgment on the theoretical ambit of constitutional conventions, in particular of the so called education convention. (b) To determine whether a particular piece of correspondence fell within the ambit of the education convention or some other convention was not to determine the central question, which was whether the public interest in not disclosing it outweighed the public interest in disclosing it. (c) Preparation for Kingship was, as I have explained, the first of the two central grounds for the Attorney Generals conclusion that the balance of public interests lay against disclosure.
In that respect it was reasonable for him to state, in para 9 of the certificate: I therefore consider that, whether or not it falls within the strict definition of the education convention, advocacy correspondence is an important means whereby the Prince of Wales prepares for Kingship.
It serves the very same underlying and important public interests which the education convention reflects. (d) In stating that the correspondence formed part of the Princes preparation for Kingship and that it did not matter whether it fell outside the education convention and thus lacked what, at para 106, the tribunal described as constitutional status, the Attorney General disagreed with the tribunal not on a question of fact but in its approach to the evaluation of the rival public interests. (e) The Attorney Generals certificate discloses no disagreement with the tribunal upon any issue of fact in any ordinary sense of that word. 183.
Without in any way agreeing with the Attorney General that the public interest in maintaining the exemption did outweigh the public interest in disclosure, the Divisional Court was in my view right to conclude that there were reasonable grounds for him to hold that opinion. 184.
Insofar as the correspondence includes environmental information, the Attorney Generals certificate under section 53 was unlawful if it fell foul of the requirements for access to justice in article 6 of the European Directive 2003/4/EC (the Directive).
As Lord Neuberger explains in para 100 above, paragraph 1 of the article entitled Mr Evans to demand reconsideration of the departments refusal of disclosure by an independent body established by law (the paragraph 1 requirement) and, in the event of his continued dissatisfaction, paragraph 2 entitled him to access to a review procedure before a court of law whose decisions may become final (the paragraph 2 requirement).
In the interests of maximum clarity paragraph 3 added that, once the decisions were final, they should be binding. 185.
The fifth recital to the Directive explains that its purpose was to make EU law consistent with the Aarhus Convention dated 25 June 1998 (the Convention), the subjects of which, in the words of its title, were access to information, public participation in decision making and access to justice in environmental matters.
So access to justice was the third pillar of the Convention and was the subject of detailed provision in its article 9, paragraph 1 of which was the subject of efficient transposition into article 6 of the Directive.
But article 6 should not be subject to the intricate analysis apt to a domestic statute.
It required the provision to Mr Evans of a right to invoke two robust, independent inquiries into whether the refusal to give him the environmental information was in accordance with the Directive.
But, while they are obliged to achieve the result envisaged by a directive, and in particular to provide effective judicial protection for an individuals exercise of such rights as it confers, member states have the freedom to choose the ways and means of ensuring that a directive is implemented: paras 40 to 47 of the judgment of the Grand Chamber of the ECJ in the Impact case, cited at para 106 above. 186.
It is agreed that the facility to apply to the Commissioner satisfies the paragraph 1 requirement and that the facility to appeal onwards to the First tier Tribunal (or, by reference, to the Upper Tribunal) satisfies the para 2 requirement.
The issue is whether and if so how, the facility for the giving of a section 53 certificate and for attendant judicial review can be accommodated within the structure of the two requirements or either of them. 187.
The Attorney General seeks a ruling that the facility for judicial review of a section 53 certificate satisfies the paragraph 2 requirement for a review procedure before a court of law.
He may in part be motivated to do so by his wish to preserve the facility for a certificate to be given following a decision notice served by the Commissioner and prior to any appeal.
If in such circumstances the paragraph 2 requirement is to be satisfied, it can be satisfied only by the facility for the applicant to seek judicial review of the section 53 certificate.
At all events the Attorney General cites the decision of the Court of Appeal in T Mobile (UK) Ltd v Office of Communications [2008] EWCA Civ 1373, [2009] 1 WLR 1565, in which an article of an EU directive required provision of an effective appeal mechanism in which the merits of the case are duly taken into account.
Although ultimately there was no argument to the contrary, Jacob LJ concluded, at para 19, that the jurisdiction to conduct a judicial review was flexible enough to accommodate whatever standard the article required; and in paras 20 to 29 he convincingly set out the grounds of his conclusion.
Nevertheless it remains difficult to shoe horn the facility for judicial review into the requisite review procedure.
However intense the judicial scrutiny, the focus of the judicial review can only be upon whether the accountable person had formed his opinion on reasonable grounds; but I agree with the Court of Appeal that paragraph 2 requires that the focus of the review procedure should be upon whether refusal of the information was in accordance with the Directive.
Grave doubts about whether, in the case of environmental information, judicial review can satisfy the paragraph 2 requirement should lead an accountable person to be even more cautious before deciding to give a certificate under section 53 in relation to a decision notice served by the Commissioner rather than to appeal against it to the First tier Tribunal. 188.
In the present case, by contrast, satisfaction with the paragraph 2 requirement has been achieved by the appeal to the Upper Tribunal and the question is whether the giving of the certificate and the attendant judicial review somehow operate so as to set it at naught.
I consider that the answer is to be located in words in paragraph 2 which Davis LJ highlighted in para 135 of his judgment in the Divisional Court, namely that the outcome of the review may become final.
I am doubtful about the legitimacy of Lord Neubergers interpretation, expressed in para 100 above, that these words give rise to a requirement that the outcome become[s] final.
Article 9.1 of the Convention also refers to final decisions but sheds no light on this issue.
In my view the drafters of article 6 of the Directive rightly recognised that the decision made upon the paragraph 2 review might or might not become final and that this might depend on the outcome of some further procedure.
I believe that they had in mind, in particular, that a public authority might win an appeal against the decision made upon the paragraph 2 review.
In England and Wales a successful appeal by a public authority to the Court of Appeal on a point of law against a decision notice upheld or substituted by the Upper Tribunal would mean that the latters decision had proved not to be final.
But no one could deny that, in that event, the applicant had nevertheless been afforded his right of access to review under paragraph 2.
The present case exemplifies the adoption of a different procedure before it could be seen whether the decision made upon the paragraph 2 review would become final: for the procedure took the form not of an appeal but of the giving of a certificate under section 53 attended by a judicial review.
Had the result of the judicial review been to quash the certificate, the decision made upon the paragraph 2 review would indeed have become final.
But since, correctly in my view, the Divisional Court declined to quash the certificate, the decision made upon the paragraph 2 review did not become final.
As in the case of an appeal against the decision made upon the paragraph 2 review, the ultimate arbiter of whether the Upper Tribunals decision should become final has been a court of law.
On any sensible reading of paragraph 2, that feature must be crucial but, granted its existence in the present case and notwithstanding the specific focus of the judicial review, I conclude that there has been no breach of the paragraph 2 requirement. 189.
Article 47 of the Charter of Fundamental Rights of the European Union (the Charter) provides that everyone whose rights guaranteed by the law of the Union are violated has the right to an effective remedy, including to a fair and public hearing by an independent tribunal established by law.
By the Directive, the law of the Union guarantees to Mr Evans qualified rights to the disclosure of environmental information.
He contends that, insofar as it addressed such information, the Attorney Generals certificate violated his rights under article 47; and, in reliance on article 52.3 of the Charter which ascribes to his rights under article 47 the meaning and scope of corresponding rights under article 6 of the European Convention on Human Rights, he contends that the giving of the certificate under section 53 infringed his rights to legal certainty and to equality of arms.
If, for the reasons which I have explained, the giving of the certificate, when taken together with its attendant judicial review, does not violate the detailed requirements for access to justice in article 6 of the Directive, 1 do not accept that it might nevertheless infringe the right of Mr Evans to an effective remedy under article 47 of the Charter.
No one would welcome the further protraction of a dissenting judgment by enlargement upon this straightforward conclusion.
There are three previous decisions of the Court of Appeal which bear on the question whether Parliament can have intended a member of the executive to be able freely to consider, or reconsider, for himself the very issues, on the same facts, which had been determined by another person or a tribunal.
I agree with Lord Wilson that (quite apart from the fact that they are not binding on us) none of these decisions, or the reasoning which they contain, would be directly determinative of the instant appeal.
However, they cast some light on the appropriate approach to be adopted in a case where two separate bodies are called on by statute to determine the same issue.
In R v Warwickshire County Council, Ex p Powergen plc (1997) 96 LGR 617, it was held that a county council, as highway authority, was precluded from refusing to agree to access works to a proposed development on the ground that the access was unsafe, because that was a ground which a planning inspector, after a full enquiry, held that the district council (adopting the view of the county council) had not made out as a reason for refusing planning permission for the development.
Simon Brown LJ stated at p 626 that because of its independence and because of the process by which it is arrived at, the inspectors conclusion had become the only properly tenable view on the issue of road safety.
In R v Secretary of State for the Home Department, Ex p Danaei [1998] INLR 124, an immigration adjudicator, after a hearing, had rejected the applicants asylum appeal, but accepted that he had left Iran because he had had an adulterous relationship; it was held that the applicants subsequent application for special leave to remain could not be rejected by the Home Secretary on the ground that he did not accept that the applicant had had such a relationship.
Simon Brown LJ suggested that, unless the adjudicators conclusion was demonstrably flawed or fresh material has since become available, the Home Secretary had to accept the adjudicators finding.
In R (Bradley) v Secretary of State for Work and Pensions (Attorney General intervening) [2009] QB 114, the Secretary of State was held to have wrongly rejected findings of maladministration made by the ombudsman.
The ombudsmans investigation had been carried out in private, as required by the relevant legislation, and she had adopted a full, albeit not adversarial, written procedure.
Sir John Chadwick said at para 51 that the Secretary of State was not bound to follow the ombudsmans view, but that his decision to reject the ombudsmans findings in favour of his own view must not be irrational having regard to the legislative intention which underlies the [relevant] Act.
At para 91, Sir John said that it was not enough that [the
| UK-Abs | The Freedom of Information Act 2000 (FOIA 2000) enables members of the public to see documents held by many public bodies, subject to certain exemptions; the Environmental Information Regulations 2004 (EIR 2004) enables members of the public to see documents containing environmental information, again subject to certain exemptions.
In April 2005, Mr Evans, a journalist who works for the Guardian newspaper, requested disclosure of communications passing between various government departments and HRH the Prince of Wales (the letters).
The requests were made under both FOIA 2000 and EIR 2004.
The Departments refused to disclose the letters on the ground that they considered the letters were exempt.
Mr Evans complained to the Information Commissioner, who upheld the Departments refusal.
Mr Evans then appealed to the Information Tribunal, and the matter was transferred to the Upper Tribunal.
The Upper Tribunal conducted a full hearing with six days of evidence and argument.
In its determination issued 18 September 2012, the Upper Tribunal decided that many of the letters (referred to as advocacy correspondence) should be disclosed.
The Departments did not appeal this decision, but on 16 October 2012 the Attorney General issued a certificate under section 53(2) FOIA 2000 and regulation 18(6) EIR 2004 stating that he had, on reasonable grounds, formed the opinion that the Departments had been entitled to refuse disclosure of the letters, and set out his reasoning.
If this Certificate is valid, its effect would be to override a decision of the Upper Tribunal, a judicial body which has the same status as the High Court.
Mr Evans issued proceedings to quash the Certificate on the grounds (1) that the reasons given by the Attorney General were not capable of constituting reasonable grounds and/or (2) in so far as the advocacy correspondence was concerned with environmental issues, the Certificate was incompatible with Council Directive 2003/4/EC (the 2003 Directive).
The Divisional Court dismissed his claim.
However, the Court of Appeal allowed his appeal on both grounds.
The Attorney General appealed to the Supreme Court.
The issue before the Supreme Court was therefore whether the Certificate is valid, and in particular (i) whether the Attorney General was entitled to issue a certificate under section 53 FOIA 2000 that he had on reasonable grounds formed the opinion that the Departments had been entitled to refuse disclosure; (ii)(a) whether, in any event, regulation 18(6) EIR 2004 complies with the relevant provisions of EU law; and (b) if it does not, whether the Certificate can stand even in relation to the non environmental information.
It should be noted that the Supreme Court has not seen the advocacy correspondence, and did not need to do so in order to determine the points of law set out above.
The Supreme Court dismisses the Attorney Generals appeal.
By a majority of 5:2 the Court considers that the Attorney General was not entitled to issue a certificate under section 53 FOIA 2000 in the manner that he did and therefore that the Certificate was invalid.
By a majority of 6:1 the Court holds that reg.18(6) is incompatible with the 2003 Directive and must be treated as invalid, and therefore that
the Certificate would in any event have been invalid insofar as it related to environmental information.
The appeal based on FOIA 2000 Lord Neuberger (with whom Lord Kerr and Lord Reed agree) concludes that section 53 FOIA 2000 does not permit the Attorney General to override a decision of a judicial tribunal or court by issuing a certificate merely because he, a member of the executive, considering the same facts and arguments, takes a different view from that taken by the tribunal or court.
This would be unique in the laws of the United Kingdom and would cut across two constitutional principles which are fundamental components of the rule of law, namely that a decision of a court is binding between the parties and cannot be set aside, and that decisions and actions of the executive are reviewable by the courts, and not vice versa [52].
Clear words must be used if the statute is to have that effect, and section 53 is a very long way from being clear enough [58 59].
Lord Mance (with whom Lady Hale agrees) considers that it would be open to the Attorney General to issue a certificate under section 53 if he disagrees with the decision of the Upper Tribunal.
However, disagreement with findings of fact or rulings of law in a fully reasoned decision would require the clearest possible justification (and may only be possible in the circumstances suggested by Lord Neuberger at [71 79]), while disagreement as to the weight to be attached to competing public interests would require properly explained and solid reasons [130 131].
In this case the Attorney General impermissibly undertook his own redetermination of the relevant factual background, including certain constitutional conventions on which the Upper Tribunal had heard detailed evidence, which he was not entitled to do.
The Attorney Generals certificate does not engage with the closely reasoned analysis of the Upper Tribunal [142].
The Certificate proceeded on the basis of findings which differed radically from those made by the Upper Tribunal without real or adequate explanation, and cannot be regarded as satisfying the test for issue of a certificate [145].
Lord Wilson and Lord Hughes each give judgments dissenting on this issue.
They each consider that the Attorney General was entitled to issue the certificate under section 53 on the ground that he did.
Environmental information under the 2003 Directive Lord Neuberger and Lord Mance (with whom Lady Hale, Lord Kerr, Lord Reed and Lord Hughes agree) point out that article 6.1 requires that, following a refusal by a public authority of a request for environmental information, the refusal must be reconsidered or reviewed administratively, article 6.2 requires that thereafter the applicant has access to a review procedure before a court of law or [similar] body] whose decisions may become final, and article 6.3 requires that [f]inal decisions under paragraph 2 shall be binding on the public authority holding the information [100].
In light of these provisions, they consider that it would be impermissible for the executive to have another attempt at preventing disclosure, and therefore regulation 18(6) EAIA 2004 is incompatible with article 6 of the 2003 Directive [103].
However, this conclusion would only apply to the environmental information [111].
Lord Wilson dissenting on this point, would have held that the issue of a section 53 certificate in respect of environmental information whose disclosure was ordered by a court or judicial tribunal was not incompatible with the provisions of the 2003 Directive.
|
This appeal concerns the compatibility with EU law of regulations 21 and 24 of the Immigration (European Economic Area) Regulations 2006 (SI 2006/1003) (EEA Regulations 2006) and the legality at common law of the appellants administrative detention from 3 April until 6 June 2012 and of bail restrictions thereafter until 2 January 2013.
The regulations were designed to give effect to the Citizens Directive 2004/58/EC of 29 April 2004 on the right of citizens of the Union and their family members to move and reside freely within the territory of the member states (hereinafter the Directive).
The appellant appeals, with permission granted by the Supreme Court, against an order of the Court of Appeal (Moore Bick, Briggs and Christopher Clarke LJJ) of 10 December 2013 [2014] 1 WLR 3313.
In a judgment given by Moore Bick LJ, with whom the other members of the court agreed, the Court of Appeal dismissed the appellants appeal against the amended order of Eder J made in the Administrative Court on 24 June 2013.
In a judgment handed down on 15 March 2013; [2013] EWHC 567 (Admin), Eder J refused part of the appellants claim for judicial review challenging his administrative detention by the respondent (SSHD).
The SSHD sought to justify the appellants detention under regulations 19 and 24 of the EEA Regulations 2006 (as amended), which provide, so far as material, as follows: 19.
Exclusion and removal from the United Kingdom (3) Subject to paragraphs (4) and (5), an EEA national who has entered the United Kingdom or the family member of such a national who has entered the United Kingdom may be removed if (a) to reside under these Regulations; or that person does not have or ceases to have a right (b) the Secretary of State has decided that the persons removal is justified on grounds of public policy, public security or public health in accordance with regulation 21. 24.
Person subject to removal (1) If there are reasonable grounds for suspecting that a person is someone who may be removed from the United Kingdom under regulation 19(3)(b), that person may be detained under the authority of an immigration officer pending a decision whether or not to remove the person under that regulation, . (3) Where a decision is taken to remove a person under regulation 19(3)(b), the person is to be treated as if he were a person to whom section 3(5)(a) of the 1971 Act (liability to deportation) applied and section 5 of that Act (procedure for deportation) and Schedule 3 to that Act (supplementary provision as to deportation) are to apply accordingly.
Regulation 21, which is designed to give effect to articles 27 and 28 of the Directive, is referred to in paras 34 and 35 below.
Issues in this appeal
In the agreed statement of facts and issues the parties agreed that the appeal raises the following issues. (1) Does the detention power under regulation 24(1) of the EEA Regulations 2006 discriminate without lawful justification against EEA nationals and their family members? (2) Is the power in regulation 24(1) to detain before the making of a decision to deport disproportionate? (3) In particular, does the absence of a time limit render such detention unlawful under EU law? (4) Does regulation 24(1) unlawfully restrict the rights of EEA nationals and their family members by contrast to those enjoyed before the coming into force of the Citizens Directive which the EEA Regulations 2006 purport to implement? (5) Do regulations 21 and 24 of the EEA Regulations 2006 fail accurately to transpose the safeguards of articles 27 and/or 28 of the Citizens Directive? (6) Were the appellants administrative detention from 3 April until 6 June 2012 and the bail restrictions imposed upon him until 2 January 2013 unlawful by reason of the matters raised in questions (1) to (5) above?
The facts
The facts are not in dispute and can largely be taken from the agreed statement of facts and issues.
The appellant is an Algerian national born on 21 August 1968 who arrived in the United Kingdom in March 1996, gaining entry using a false French identity card.
On 4 March 1996 he applied for asylum, which was refused.
He appealed.
On 25 February 1997 he married a French national who was a worker in the UK and on 5 February 1998 he was granted a five year residence permit as the family member of an EEA national.
The permit was renewed until 14 April 2004.
The appellant and his wife had two children who were born on 30 June 1997 and 23 October 1998 respectively.
He withdrew his asylum appeal on 9 February 1999.
In or about 2001, the appellants wife became depressed with psychotic symptoms and became involuntarily unemployed.
The appellant, who worked as a barber, began abusing alcohol, heroin and crack cocaine.
The two children were taken into care.
The couple became estranged before the birth of their third child in July 2004.
The appellants wife returned to France with the youngest child in late 2005.
The two older children were transferred to care in France by an order of the Family Court dated 31 January 2006.
The appellant acquired a right of permanent residence in the UK under EU law.
Article 16(2) of the Directive establishes a right of permanent residence for family members legally residing with an EEA national in a host member state for a continuous period of five years.
That entitlement was transposed in regulation 15(1)(b) of the EEA Regulations 2006.
The appellant had fulfilled that condition by 5 February 2003.
By the end of January 2012, the appellant had been subject to 28 criminal convictions for 48 offences.
His longest custodial sentence was imposed in 2008 when he was sentenced to 23 months imprisonment for three offences of theft, possession of controlled drugs and affray and possession of a bladed article.
His other custodial sentences have been imposed for acquisitive offences (theft and handling stolen goods) and offences of personal drug possession, namely possession of a class A drug (crack cocaine) and possession of a Class B drug (cannabis resin).
He also received non custodial sentences for motor vehicle offences, failure to surrender to bail, failure to comply with community punishments, being drunk and disorderly and further acquisitive and drug possession offences.
A full list of the appellants convictions until and including the index offence (which gave rise to the period of detention under challenge) was agreed between the parties as an addendum to the agreed facts and issues.
The list is attached to this judgment.
It can be seen that the appellant was guilty of a series of offences.
The First tier Tribunal, Immigration and Asylum Chamber (the FtT IAC) subsequently described his offending in this way: 16.
We have studied the record of the appellants offences with care.
Whatever the future may hold, no one can gainsay the appellants past propensity to re offend.
However, the appellants convictions are, almost without exception, for petty opportunistic thefts or possession of drugs.
None discloses any violence, nor is it suggested that the appellant has ever dealt in drugs.
When sentencing the appellant to 8 months imprisonment on 20 November 2006, the Recorder described the appellant as a pest, a nuisance.
He went on to note that the offences were petty thefts and that the appellant to his credit had not sought to use violence or hide anything.
The Recorders characterisation of the appellant as a pest was endorsed in the AITs November 2008 determination. 17.
We have looked with particular care at the apparently most serious convictions on 15 December 2008, when the offences included affray and possession of a blade in a public place.
The appellant was sentenced to 23 months imprisonment, the longest term by a considerable margin.
As to the affray, the appellant states that he was drunk at the time of the incident and got into an argument.
The sharp object was a razor blade that he carried with him because at the time he was self harming.
We note that the psychiatric reports of Professor Kantona to which we return below contain some confirmation of the appellants self harming claim.
There remains no evidence that the appellant has ever used violence in the course of his offences, or that he was carrying the blade with any intention of using it on a third party. 18.
We do not consider that the offences for which the appellant was convicted on 15 December 2008 or any other of the offences set out in the record are of a gravity such as to alter the overall character of the appellants record of offences as a petty criminal committing mainly theft offences to fund his drug use.
On 8 January 2007 the SSHD made the decision to deport the appellant in the light of his convictions to date.
He appealed against that decision.
On 23 July 2007, the Asylum and Immigration Tribunal (AIT) found that the appellant had established a right of permanent residence in the UK under EU law and allowed the appellants appeal on EU law grounds but applied the incorrect legal test.
The matter was remitted and on 3 November 2008 the AIT again found that the appellant had acquired a right of permanent residence in the United Kingdom and again allowed his appeal.
It held that the serious grounds of public policy or public security threshold for expulsion of permanent residents in article 28(2) of the Directive and regulation 21(3) of the EEA Regulations 2006 was not met.
The SSHD was granted permission by the AIT to appeal to the Court of Appeal but withdrew her appeal by a consent order sealed on 11 April 2012.
As the addendum shows, the appellant continued to offend after the AIT allowed his appeal on 3 November 2008.
On 25 January 2012, the appellant was convicted of theft for which he was sentenced to a further term of 20 weeks imprisonment, with a release date of 3 April 2012.
This conviction gave rise to further deportation proceedings against the appellant and to the administrative detention under challenge in this appeal.
While the appellant was serving his custodial sentence, on 27 March 2012 the SSHD issued internally a notice purporting to authorise the appellants detention under Schedule 3 of the Immigration Act 1971.
The detention authority stated (it is agreed erroneously) that the SSHD had decided to make a deportation order against the appellant under section 5(1) of the Immigration Act 1971.
On 3 April 2012, the appellant completed his criminal custodial term but (as stated above) was administratively detained.
On the same date, he was served with three documents from the UK Border Agency.
The first document, dated 29 March 2012, was a letter which invited the appellant to make representations as to why he should not be deported and stated that he had 20 working days to respond.
The second, dated 3 April 2012, was a notice of Decision to make a Deportation Order under the EEA Regulations 2006.
The decision was said to be made on grounds that he would pose a genuine, present and sufficiently serious threat to the interests of public policy if he were allowed to remain in the United Kingdom but gave no other reasons.
The third document was a letter dated 29 March 2012 which informed the appellant that he was being detained under Schedule 3 of the Immigration Act 1971 pending his removal.
The reasons for detention letter made no reference to the Directive or the EEA Regulations 2006.
On 12 April 2012 the appellants solicitors sent a pre action protocol letter stating that the decision to deport was procedurally unfair since it had been made before the appellant had time to make representations and was in breach of the mandatory safeguards contained in regulation 21(6) of the EEA Regulations, which required the SSHD to take specific considerations into account before making a relevant decision.
The letter also drew the SSHDs attention to the earlier findings of the AIT that the appellants deportation would be in breach of EU law.
A reply on behalf of the SSHD dated 13 April 2012 said that the SSHD considered that the appellant posed a risk of harm to the general public and that his deportation was proportionate and justified.
On 20 April 2012, the SSHD provided reasons for deportation which acknowledged that the appellant had acquired a right of permanent residence in the UK and could only be deported on serious grounds of public policy or public security but asserted that this threshold was met.
The letter set out an account of the appellants offending and an assessment of the threat posed by him.
On 11 May 2012, in her acknowledgment of service in these proceedings the SSHD withdrew her decision to deport the appellant dated 3 April 2012 and stated that she would notify the [appellant] of any decision to deport following consideration of any representations received.
The letter further said that the [appellant]s extensive criminal convictions give the SSHD reasonable grounds for believing that he may be someone who may be removed from the United Kingdom under regulation 19(3) so that in her view the appellants detention remained lawful.
There have been two relevant periods when the appellant was on bail.
The appellant was first granted bail on 31 May 2012 by the FtT IAC subject to a reporting restriction and an electronic curfew and was released from detention on 6 June 2012.
It was subsequently conceded by the SSHD in these proceedings that the appellants detention from 3 April 2012 until 6 September 2012 was to be regarded as pursuant to regulation 24(1) of the EEA Regulations 2006, since there had been no valid decision to deport him in that period.
As to the second period of bail, on 7 September 2012 the SSHD issued a further decision to deport him under the EEA Regulations 2006.
That decision was accompanied by reasons and referred to the factors listed in regulation 21(6) of the EEA Regulations 2006 (quoted below).
The SSHD again acknowledged that the appellant had acquired a right of permanent residence in the UK.
The appellants appeal against the decision of 7 September 2012 was allowed by the IAT in a determination promulgated on 2 January 2013 on the ground that, as a permanent resident, his deportation would breach EU law since the threshold for the expulsion of a permanent resident was not met.
The SSHD did not seek to challenge that decision.
These proceedings
On 27 April 2012 the appellant issued the claim for judicial review which gives rise to this appeal.
On 16 May 2012, the appellant was granted limited permission on the papers to apply for judicial review by James Dingemans QC, sitting as a Deputy High Court Judge.
The appellant sought permission to enlarge his grounds and the matter was dealt with at a rolled up hearing before Eder J (the judge) on 6 and 7 March 2013.
He recorded two concessions made on behalf of the SSHD.
The first was that the decision to deport the appellant dated 3 April 2012 was to be regarded as null and void ab initio at least so far as it constituted a decision or notice to remove or deport.
It followed that it was common ground that the appellant was in effect to be regarded as having been detained from 3 April 2012, not pursuant to regulation 24(3) of the EEA Regulations 2006 but rather pursuant to regulation 24(1).
The second related to the second period of bail after the second decision to deport, which was on 7 September 2012.
The judge said at para 15 of his judgment that, at least until 2 January 2013, the appellant was to be regarded as detained on bail under regulation 24(3).
I note in passing that it is not accepted on behalf of the SSHD that the expression detained on bail was used on her behalf.
It was also accepted by the appellants then counsel that he could not, and did not, challenge the detention decisions on grounds of Wednesbury unreasonableness or irrationality: see Associated Provincial Picture Houses Ltd v Wednesbury Corpn [1948] 1 KB 223.
Nor did the appellants counsel below seek to argue that the Secretary of State had acted contrary to the principle of proportionality.
Moreover, it was agreed at the hearing before the judge that questions concerning the lawfulness of any remaining restrictions on the appellants liberty after 2 January 2013 should be adjourned with liberty to apply.
For present purposes the issues are accordingly limited to the detention of the appellant for about two months from 3 April to 6 June 2012 and the restraint upon his liberty while on bail for just under seven months until 2 January 2013.
As stated above, the application for judicial review failed before the judge and the Court of Appeal dismissed his appeal.
One of the ironies of this appeal is that the Court of Appeal dismissed some of the appellants submissions on the basis that they had not been raised at first instance, whereas the appellant, who has the benefit of fresh counsel, now raises a number of issues which were not before the Court of Appeal.
However, he does so without objection on behalf of the SSHD.
The court will accordingly consider the particular questions raised by the parties and set out in para 4 above.
Before doing so, it is appropriate to set out the relevant legal framework.
A striking feature of the appellants case is that it does not for the most part focus on his particular circumstances.
It is put at the highest level of abstraction.
The appellant contends that the impugned legislation is invalid and must be disapplied in each and every case and in all circumstances.
The critical provisions are regulation 24(1) and (3) of the EEA Regulations 2006, which must of course be construed in their context.
The legal framework
The legal framework is not in dispute.
There are UK immigration controls relating to (a) entry, (b) restrictions on removal and (c) detention, although this appeal is directly concerned only with detention.
At each point there are important differences between the rules which apply to those exercising rights of free movement derived from laws applying to the European Economic Area, which I will call EU law rights, namely EEA nationals and their family members, and those who are not exercising such rights.
As to controls on entry, for a non British citizen not exercising EU law rights, the regime which confers leave to enter and remain in the United Kingdom is governed by the Immigration Act 1971.
By section 3(1) of that Act, people who are not British citizens and do not fall within defined exceptions are not permitted to enter the UK other than with specific permission, or leave, to do so.
Leave to remain may be granted for either indefinite or limited periods and may be subject to conditions, such as (amongst other things) restrictions on employment.
These rules are subject to specific exceptions, although the general position is that a form of permission is required to enter and remain in the UK.
Those who require leave to enter or remain in the UK are subject to immigration control.
The process of the granting of leave to enter or remain to those subject to immigration control involves consideration of whether the presence of the individual in question would be conducive to the public good.
Those with previous criminal convictions, or in relation to whom there are other grounds to conclude that their presence will not be conducive to the public good, may be subject to immigration controls preventing their entry.
By contrast, those exercising EU law rights are not subject to the above regime.
They enjoy extensive additional rights, no doubt as a means of promoting the internal market, including the market for labour, as given effect in UK law.
By section 7(1) of the Immigration Act 1988, people with directly effective EU rights to enter or remain in the UK, or who enjoy such rights by virtue of any provision made under section 2(2) of the European Communities Act 1972, do not require leave to enter or remain.
Critical to the construction of the EEA Regulations 2006, including of course regulation 24(1), is the true meaning and effect of the Directive, which consolidates and extends the rights granted by pre existing secondary legislation and reflects established CJEU case law.
Further, it applies to all of the countries in the EEA.
It appears to me that the recitals are of some assistance.
Moore Bick LJ drew attention (at para 6) to the following recitals: Whereas (1) Citizenship of the Union confers on every citizen of the Union a primary and individual right to move and reside freely within the territory of the member states . (2) The free movement of persons constitutes one of the fundamental freedoms of the internal market . (5) The right of all Union citizens to move and reside freely within the territory of the member states should, . be also granted to their family members, irrespective of nationality . (20) In accordance with the prohibition of discrimination on grounds of nationality, all Union citizens and their family members residing in a member state on the basis of this Directive should enjoy, in that member state, equal treatment with nationals in areas covered by the Treaty .
Article 1 explains that the Directive lays down the conditions governing the exercise of the right of free movement and residence by Union citizens and their family members, the right of permanent residence and the limits placed on the rights set out above, on grounds of public policy, public security or public health.
Article 2 defines Union citizen as any person having the nationality of a member state, and defines family member to include a spouse.
Article 3 makes clear that the beneficiaries of the Directive are Union citizens who move to or reside in a member state other than that of which they are a national, and to their family members.
Accordingly, it does not apply to a wholly internal situation, which arises where an EU national has not moved between member states.
The class of persons who are able to exercise EU law rights extends not only to nationals of EEA member states who exercise rights of free movement, but also to certain third country family members who are nationals of non EEA states.
The residence rights conferred by EU law on third country family members are nevertheless personal rights.
Article 13 of the Directive makes clear that rights of residence of a spouse may survive divorce in certain circumstances.
In short, so far as leave to enter and remain are concerned, those exercising EU rights have much greater rights than those not exercising such rights but are subject to immigration control.
The same is true so far as restrictions on removal and deportation are concerned.
For example, a person subject to immigration control who has leave to remain may be liable to deportation or removal under a number of statutory provisions, namely sections 3(5)(a), 3(5)(b) and 3(6) of the Immigration Act 1971 and section 32 of the UK Borders Act 2007.
There are differences between deportation and removal but it is not necessary to discuss those differences here.
A person who is not a British citizen (and not exercising EU law rights) is liable to deportation under the Immigration Act 1971 where (a) the SSHD determines that his or her deportation is conducive to the public good: section 3(5)(a); or (b) another person to whose family he belongs is or has been ordered to be deported: section 3(5)(b); or (c) after attaining the age of 17 he has been convicted of an offence punishable by imprisonment and on his conviction the judge recommended deportation: section 3(6).
The power to make deportation orders is contained in section 5 of the 1971 Act.
In addition to those powers of deportation, the UK Borders Act 2007 introduced automatic deportation for certain foreign criminals.
Section 32(5) of that Act provides that the Secretary of State must make a deportation order in respect of a foreign criminal.
The regime of automatic deportation is, however, subject to certain exceptions set out in section 33 of the 2007 Act including, inter alia, where removal of the foreign criminal would breach that persons rights under EU Treaties (section 33(4)) and where deportation would breach a persons Convention rights or the UKs obligations under the Refugee Convention (section 33(2)).
Detention pending a decision whether or not to deport
I turn to detention pending a decision whether or not to deport.
In summary, it is a familiar feature of the system of immigration controls that the power of detention can be used in a variety of situations prior to the making of a decision to deport or remove.
These include the following: (1) the 1971 Act, Schedule 2, paragraph 16(2), where there are reasonable grounds to suspect a person is someone in respect of whom removal directions may be given, including inter alia under section 10 of the Immigration and Asylum Act 1999; (2) the 1971 Act, Schedule 3, paragraph 2, pending the making of a deportation order following a court recommendation; (3) under the 2007 Act, detention pending a decision as to whether a person is liable to automatic removal; and (4) under regulation 24(1) of the EEA Regulations 2006.
It is correctly accepted on behalf of the SSHD that, in contrast to the position described above, those exercising EU rights do not require leave to enter or remain and have the benefit of powerful protections against their expulsion from the UK.
The ability of member states to restrict the Treaty rights described above is limited by Chapter VI of the Directive, which is entitled RESTRICTIONS ON THE RIGHT OF ENTRY AND THE RIGHT OF RESIDENCE ON GROUNDS OF PUBLIC POLICY, PUBLIC SECURITY OR PUBLIC HEALTH and comprises articles 27 to 33.
For present purposes articles 27 and 28 are of particular significance and provide, so far as relevant, as follows: Article 27 General principles 1.
Subject to the provisions of this Chapter, member states may restrict the freedom of movement and residence of Union citizens and their family members, irrespective of nationality, on grounds of public policy, public security or public health.
These grounds shall not be invoked to serve economic ends. 2.
Measures taken on grounds of public policy or public security shall comply with the principle of proportionality and shall be based exclusively on the personal conduct of the individual concerned.
Previous criminal convictions shall not in themselves constitute grounds for taking such measures.
The personal conduct of the individual concerned must represent a genuine, present and sufficiently serious threat affecting one of the fundamental interests of society.
Justifications that are isolated from the particulars of the case or that rely on considerations of general prevention shall not be accepted.
Article 28 Protection against expulsion 1.
Before taking an expulsion decision on grounds of public policy or public security, the host member state shall take account of considerations such as how long the individual concerned has resided on its territory, his/her age, state of health, family and economic situation, social and cultural integration into the host member state and the extent of his/her links with the country of origin.
It is clear that EEA residents who fall within the scope of the Directive enjoy powerful rights of residence far beyond those afforded by domestic law.
As appears above, the Directive applies three different escalating threshold tests for restriction on rights of free movement as follows.
In the case of a person such as the appellant with the right of permanent residence, an expulsion decision must be based on serious grounds of public policy or public security: article 28(2).
Article 24, which is entitled Equal Treatment, provides so far as relevant: 1. all Union citizens residing on the basis of this Directive in the territory of the host member state shall enjoy equal treatment with the nationals of that member state within the scope of the Treaty.
The benefit of this right shall be extended to family members who are not nationals of a member state and who have the right of residence or permanent residence.
As already noted the Directive has been implemented into domestic law by the EEA Regulations 2006.
The Regulations extend to the EEA rather than just the EU because the Directive applies throughout the EEA.
They include the following.
Regulation 2 contains definitions, including the definition of EEA decision as meaning a decision under these Regulations that concerns (a) a persons entitlement to be admitted to the United Kingdom (c) a persons removal from the United Kingdom.
Regulation 7(1)(a) provides that a spouse or his civil partner shall be treated as a family member.
Regulations 11 to 15B provide for rights of admission and residence which implement the relevant provisions of the Directive.
As noted in para 3 above, regulation 19(3)(b) provides for the removal of an EEA national or the family member of an EEA national where the Secretary of State has decided that the persons removal is justified on grounds of public policy, public security or public health in accordance with regulation 21.
Regulation 21 is designed to give effect to articles 27 and 28 of the Directive.
It applies to relevant decisions, meaning an EEA decision taken on the grounds of public policy, public security or public health.
It provides that such a decision to remove inter alia (2) may not be taken to serve economic ends, and (3) may not be taken in respect of a person with a permanent right of residence under regulation 15 except on serious grounds of public policy or public security.
Regulations 21(5) and (6) provide: (5) Where a relevant decision is taken on grounds of public policy or public security it shall, in addition to complying with the preceding paragraphs of this regulation, be taken in accordance with the following principles the decision must be based exclusively on the the decision must comply with the principle of (a) proportionality; (b) personal conduct of the person concerned; (c) the personal conduct of the person concerned must represent a genuine, present and sufficiently serious threat affecting one of the fundamental interests of society; (d) matters isolated from the particulars of the case or which relate to considerations of general prevention do not justify the decision; (e) in themselves justify the decision. a persons previous criminal convictions do not (6) Before taking a relevant decision on the grounds of public policy or public security in relation to a person who is resident in the United Kingdom the decision maker must take account of considerations such as the age, state of health, family and economic situation of the person, the persons length of residence in the United Kingdom, the persons social and cultural integration into the United Kingdom and the extent of the persons links with his country of origin.
In summary, an EEA national who has entered the United Kingdom or the family member of such a national, exercising free movement rights, may be removed if certain limited circumstances apply, and under circumscribed conditions.
Broadly, removal may only occur where: (1) There are grounds of public policy, public security or public health: article 27(1) of the Directive and regulation 19(3)(b).
In the case of a person with a permanent right to reside under regulation 15, there must be serious grounds of public policy or public security: article 28(2) and regulation 21(3).
If the EEA national has resided in the United Kingdom for a continuous period of at least ten years there must be imperative grounds of public security: article 28(3)(a) and regulation 21(4)(a).
For an EEA national under 18 there must be imperative grounds of public security and expulsion must be necessary for the best interests of the child, as provided for in the United Nations Convention on the Rights of the Child: article 28(3)(b) and regulation 21(4)(b). (2) But a decision to remove taken on public policy or public security grounds must also be a proportionate response and taken exclusively on the basis of the individuals personal conduct, which must itself represent a genuine, present and sufficiently serious threat affecting one of the fundamental interests of society.
It cannot be based on matters isolated from the case, considerations of general prevention or prior convictions (see, generally, article 27(2) and regulation 21(5)(a e)). (3) Decisions on grounds of public policy or public security further require consideration of a set of specific factors, including age, state of health, family and economic situation, length of residence and social and cultural integration in the UK and links to the country of origin: article 28 and regulation 21(6).
It is to be noted that, as originally drafted, regulation 24(1) referred to regulation 19(3) without the restriction to paragraph (b) of that provision.
The regulation was amended with effect from 16 July 2012 to its present form which refers only to cases in which regulation 19(3)(b) is satisfied.
Although that change took place during the period of detention with which the appeal is concerned, it is not suggested that it is material to any of the issues in the appeal.
Discussion of issues
The agreed issues are set out at para 4 above.
Although there is considerable overlap between some of them, it seems to me to be sensible to consider them separately. (1) Does the detention power under regulation 24(1) discriminate without lawful justification against EEA nationals and their family members?
Before the Court of Appeal it was argued that this question should be answered in the affirmative on the basis that the power under regulation 24(1) to detain is contrary to article 18 of the TFEU, which provides: Within the scope of application of the Treaties, and without prejudice to any special provisions contained therein, any discrimination on grounds of nationality shall be prohibited.
Reliance is placed upon a statement by CWA Timmermans in Kapteyn Verloren Van Themaat, The Law of the European Union and European Communities, Kluwer Law International, 4th ed (2008), para 6.5.1 at p 158, where he described article 18 as The most fundamental expression of the principle of equality in relation to the functioning of the Common Market.
Both the judge and the Court of Appeal rejected this submission.
The Court of Appeal put it thus in para 28: Equality of treatment among EU nationals is one of the cornerstones of the European Union but [article 18 TFEU] is not concerned with the way in which member states treat nationals of other countries who reside within their territories, provided that they do not undermine the laws of the Union.
Consistently with the purpose of the Treaty, which is to establish the fundamental legal architecture of the Union, article 18 TFEU is concerned only with the way in which citizens of the Union are treated in member states other than those of which they are themselves nationals.
The argument therefore falls down at the first hurdle.
It was correctly conceded on behalf of the appellant that the Court of Appeal was right to hold that article 18 is concerned only with the way in which citizens of the Union are treated in member states other than those of which they are nationals.
This can be seen in the decision of the CJEU in Vatsouras and Koupstantze v Arbeitsgemeinschaft (AGRE) Nrnberg (Joined Cases C 22/08 and C 23/08) [2009] ECR I 4585, where two Greek nationals complained that they were not permitted access to certain social assistance benefits which were granted to illegal immigrants.
The CJEU explained that the referring Court was essentially asking whether article 12 EC [now article 18 TFEU] precluded national rules which excluded nationals of member states from receipt of social assistance benefits in cases where those benefits were granted to nationals of non member states.
The court rejected the complaint in these terms: 52. [Article 18 TFEU] concerns situations coming within the scope of Community law in which a national of one member state suffers discriminatory treatment in relation to nationals of another member state solely on the basis of his nationality and is not intended to apply to cases of a possible difference in treatment between nationals of member states and nationals of non member countries. 53.
The answer to the third question, therefore, must be that [article 18 TFEU] does not preclude national rules which exclude nationals of member states of the European Union from receipt of social assistance benefits which are granted to nationals of non member countries.
As observed in argument on behalf of the SSHD, in Vatsouras, Advocate General Ruiz Jarabo Colomer formulated the same point at a higher level of abstraction: 66.
In relation to the third question, Community law does not provide rules for resolving issues of difference in treatment between Community citizens and citizens of non member countries who are subject to the law of the host member state. [article 18 TFEU] seeks to eliminate discrimination between Community citizens and nationals of the host member state but does not offer guidelines for eliminating the discrimination complained of by the referring court.
In so far as it was suggested that Vatsouras can be confined to its own facts and to consideration of articles 12 and 39 EC and article 24 of the Directive, and did not purport to set out general principles of equality under article 18 TFEU, it is my opinion, in agreement with the judge and the Court of Appeal, that Vatsouras was indeed setting out general principles.
Further, in Martinez Sala v Freistaat Bayern (Case C 85/96) [1998] ECR I 2691, para 62, the CJEU said: Article 8(2) of the Treaty [now article 20(2) TFEU] attaches to the status of citizen of the Union the rights and duties laid down by the Treaty, including the right, laid down in article 6 of the Treaty [now article 18 TFEU], not to suffer discrimination on grounds of nationality within the scope of application ratione materiae of the Treaty.
Finally, in Edward and Lane on European Union Law (2013), para 8.02, Professor Sir David Edward QC, former UK judge at the European Court of Justice, writing extra judicially, observed: Discrimination against third country nationals is not prohibited.
It is presumed, and indeed expected, that they will be treated differently.
Such discrimination is simply a function of the limited scope of the EU legal order.
It is not legitimate to draw a comparison between those exercising EU rights and other third country nationals for the purposes of EU discrimination law.
Thus, in R (Bhavyesh) v Secretary of State for the Home Department [2012] EWHC 2789 (Admin) Blake J held at para 27 that members of such a class are the beneficiaries of a special legal regime, in a different position from either aliens or generally, or British citizens who fall altogether outside the scope of EU law.
They are thus incapable of being a comparator class, or a group who are analogously situated with the claimants.
It is submitted on behalf of the SSHD that this analysis is fatal to the appellants discrimination case.
I agree.
It follows to my mind that the other points made on behalf of the appellant under this head do not assist his case.
They all fall foul of the principle in Vatsouras that those concerned are subject to a different legal order.
It may be noted that the European Court of Human Rights has approached the problem in a similar way.
In Moustaquim v Belgium (1991) 13 EHRR 802 the claimant was a Moroccan national who had resided in Belgium for most of his life.
On committing criminal offences the Belgian government decided to deport him to Morocco.
He claimed that he was the victim of discrimination on grounds of nationality (contrary to article 14 taken together with article 8 ECHR) because two categories of persons could not be deported in the same circumstances: those with Belgian nationality and those who were citizens of another member state of the European Community.
The ECtHR rejected this challenge.
Paragraph 49 included the following: the court would reiterate that article 14 safeguards individuals placed in similar situations from any discriminatory differences of treatment in the enjoyment of the rights and freedoms recognised in the Convention.
In the instant case the applicant cannot be compared to Belgian juvenile delinquents.
The latter have a right of abode in their own country and cannot be expelled from it As for the preferential treatment given to nationals of the other member states of the Communities, there is objective and reasonable justification for it as Belgium belongs, together with those states, to a special legal order.
See also, to the same effect, Ponomaryov v Bulgaria (2011) 59 EHRR 20, where the applicants complained they were required to pay school fees as a result of their Kazakh nationality and immigration status.
At para 54 the ECtHR said: [A state] may also, in certain circumstances, justifiably differentiate between different categories of aliens residing in its territory.
For instance, the preferential treatment of nationals of member states of the European Union some of whom were exempted from school fees when Bulgaria acceded to the Union may be said to be based on an objective and reasonable justification because the Union forms a special legal order, which has, moreover, established its own citizenship.
Here too the ECtHR regarded such differences as objectively justified by the existence of a special legal order rather than treating such a comparator as impermissible.
It was submitted on behalf of the SSHD that it is artificial to isolate regulation 24(1) and complain as to the lack of precisely analogous powers under the non EEA regime.
That submission was accepted by both the judge and the Court of Appeal.
The judge held at para 52 that whilst there was no power to detain pending a decision to remove/deport this does not necessarily mean that there is any relevant disadvantage to EEA nationals or their family members.
He noted that EEA nationals and their families benefit from extended rights which non EEA nationals do not benefit from and that there is a lower threshold test for deportation conducive to the public good which applies to non EEA nationals.
He said at paras 53 and 54: 53.
As to the former a non British citizen is liable to deportation if the SSHD deems his deportation to be conducive to the public good.
In my judgment this is indeed a lower threshold test than that which exists with regard to the power of the SSHD to remove pursuant to regulation 19(3)(b).
In particular, the latter is limited to the grounds of public policy, public security or public health in accordance with Regulation 21.
Again, [the appellants] comparison exercise ignores this additional important aspect and for that reason as well is, in my judgment, fundamentally flawed. 54.
Given these differences I do not consider that there is any proper basis for comparing the different circumstances which exist to deport/remove under each applicable regime.
As to this part of the appellants argument, Moore Bick LJ said at the end of para 28 that article 18 TFEU is not concerned with the way in which member states treat nationals of other countries who reside in their territories.
He added at para 29: 29.
However, the difficulties do not end there.
In seeking to compare the position of EEA nationals with that of nationals of other countries [the appellant] sought to focus exclusively on the Secretary of States power of detention, but that is to view the matter too narrowly.
As the judge pointed out, the provision for detention in each case forms part of a wider regime dealing with removal.
Unlike nationals of other countries, nationals of the EEA are entitled to reside in this country and enjoy the protection from removal afforded by the Treaty and the Directive.
They are subject to a different legal regime which cannot be directly compared to that which applies to other foreign nationals, who can be deported if the Secretary of State deems their removal to be conducive to the public good: see section 3(5)(a) of the 1971 Act.
For both these reasons I agree with the judge that [the appellants] argument is fundamentally flawed and that there is no substance in this ground of appeal.
I agree with the reasoning of both the judge and Moore Bick LJ.
In this court Mr Saini QC for the appellant has put his case rather differently.
He argues that two forms of discrimination arise which require justification, and to which the Vatsouras principle has no application.
The first is discrimination between EU nationals or their spouses and third country nationals, on grounds of their status as beneficiaries of the Directive, contrary to article 21(1) of the EU Charter of Fundamental Rights.
The second is discrimination on grounds of nationality, contrary to article 18 TFEU, between British nationals and EU nationals, both of whom have third country spouses.
The first argument in my view adds nothing to the discussion under TFEU article 18.
Article 21 of the Charter cannot be relied on to extend the rights otherwise provided under European law.
As the CJEU said in NS v Secretary of State (Case C 411/10) at para 119: the Charter reaffirms the rights, freedoms, and principles recognised in the Union and makes those rights more visible, but does not create new rights or principles.
Furthermore, as has been seen above, article 24(1) contains a specific application of the principle of non discrimination on grounds of nationality contained in article 18 TFEU.
It makes clear that the relevant comparators for the purposes of the Directive are the nationals of the host member state but does not include and is not concerned with discrimination as regards third country nationals who fall entirely outside the scope of EU law.
The second argument appears to be new.
The following comparison is relied on: i) A French woman exercising Treaty rights in the UK is married to an Algerian man.
Her husband is sentenced to less than 12 months imprisonment for a criminal offence.
Her husband is liable to be detained under regulation 24(1). ii) A British woman resident in the UK is married to an Algerian man.
Her husband is sentenced to less than 12 months imprisonment for a criminal offence.
Her husband is not liable to be detained before a decision to deport.
At first sight this comparison does not appear to assist an argument that the appellant has been discriminated against in the enjoyment of his EEA law rights.
In each limb of the comparator the situation of the third country national is the same.
The argument is that the spouse of the third country national has been the subject of discrimination.
But here the appellants wife has not brought a claim and is not before the court.
As stated in para 5 above, she returned to France in late 2005 with her third child and the two older children joined her in 2006.
So the couple have been separated for ten years.
There is nothing to suggest that she has suffered any discrimination because of the appellants detention.
However, Mr Saini submits that, contrary to the requirement to treat an EU national equally to a British national, the French wife exercising Treaty rights has been adversely affected.
Her husband was liable to be detained, whereas the British wifes husband was not.
When considering whether regulation 24(1) is discriminatory, it is legitimate to consider the EU spouse, regardless of whether she has brought a claim herself.
This is because any adverse effects on third country spouses interfere with the EU nationals own free movement rights.
Mr Saini supports his argument by reference to the decision of the CJEU in R v Immigration Appeal Tribunal, Ex p Secretary of State for the Home Department (Case C 370/90) [1992] 3 All ER 798.
Mr Singh was the Indian husband of a British woman.
They had married in the UK in 1982, and lived in Germany from 1983 1985 where they were employed.
They returned to the UK to open a business in 1985.
A decree nisi of divorce was pronounced in 1987.
Mr Singh remained in the UK without leave from 1988.
A deportation order was made against Mr Singh, which he appealed, asserting a Community law right to reside in the UK.
The decree absolute was pronounced in 1989.
The court held that the fact that the marriage was dissolved by the decree absolute was irrelevant to the issue raised by the question before the court which concerned the basis of his right of residence in the period before the decree (para 12).
Mr Saini relies in particular on the following passage of the judgment, at para 19: A national of a member state might be deterred from leaving his country of origin in order to pursue an activity as an employed or self employed person as envisaged by the Treaty in the territory of another member state if, on returning to the member state of which he is a national in order to pursue an activity there as an employed or self employed person, the conditions of his entry and residence were not at least equivalent to those which he would enjoy under the Treaty or secondary law in the territory of another member state.
The court rejected the submission that her rights turned on domestic law.
The case was concerned with free movement under Community law.
As the court said, at para 23: These rights cannot be fully effective if such a person may be deterred from exercising them by obstacles raised in his or her country of origin to the entry and residence of his or her spouse.
Thus, submits Mr Saini, Mr Singh was able to rely on the fact that the free movement rights of his EEA spouse might be affected hypothetically by restrictions placed on his own movements, and to continue to do so even after any connection had ceased.
It is unfortunate that this authority, described by Mr Saini as seminal, was not referred to in the courts below or even in his own 50 page case for this appeal.
It seems to have emerged for the first time in a note accompanying a set of supplementary authorities submitted shortly before the hearing.
For this reason, no doubt, it was not addressed in the respondents case, or in any detail in oral argument.
Had it been necessary to reach a conclusion on the scope and implications of that decision, the court might have required further submissions including submissions on the possibility of a reference.
However, I am satisfied that the decision has no direct bearing on this case.
In the first place, the court made clear that its reasoning was addressed to Mr Singhs position before the divorce was finalised.
It seems doubtful that it was intended to apply to a case where, as here, any practical link between the spouses came to an end eight years before the relevant actions of the Secretary of State.
Any effect on the rights of Mr Nouazlis spouse would surely be truly hypothetical because she was unlikely ever to exercise her rights and thus unlikely ever to be deterred from exercising them.
It is important in any event to bear in mind that we are concerned not with the removal of the appellant, but merely with his temporary detention or subjection to bail conditions for a few months, first pending a decision by the Secretary of State, and then pending his successful appeal.
Whether in other circumstances any relevant discrimination might arise as a result of mere detention pending a decision to remove will also be a fact sensitive matter.
It cannot be a reason for holding, as Mr Saini would submit, that regulation 24(1) is invalid in each and every case.
At most, such a claim could justify the disapplication of the offending measure in a particular case.
On the facts of the present case I can see no conceivable basis for holding that any actual or hypothetical rights of the appellants former spouse have been affected by the appellants detention for a few months in 2012, still less by the imposition of bail conditions.
In the light of these conclusions it is not necessary to consider whether regulation 24(1) can be objectively justified.
I would answer the question raised by issue (1) in para 4 above, by holding that regulation 24(1) does not discriminate without lawful justification against EEA nationals and their family members.
Is the power in regulation 24(1) before making a decision to deport (2) disproportionate?
So far as I am aware it is not in dispute that regulation 24(1) must be applied proportionately.
In these circumstances, so long as it is so applied, I do not see how it can be said that the regulation is itself disproportionate.
It is not said in this appeal that it was applied disproportionately on the facts.
This question must therefore be answered in the negative, subject to the answer to question (3).
In particular, does the absence of a time limit render such detention (3) unlawful under EU law?
It is submitted on behalf of the appellant that this question should be answered in the affirmative.
In particular it is submitted that it is inconsistent with the general EU law provisions of legal certainty and proportionality to permit executive detention of those exercising free movement rights when such incarceration is subject neither to specified time limits nor to initial or further mandatory judicial oversight.
It is submitted that the ECtHR has found mandatory detention time limits to be a necessary component of the quality of law for the purposes of justifying deprivation of liberty under article 5(1)(f) ECHR, which provides: 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 to (f) prevent his effecting an unauthorised entry into the country or of a person against whom action is being taken with a view to deportation or extradition.
The SSHD relies upon the well known principles originally propounded by Woolf J in R v Governor of Durham Prison, Ex p Hardial Singh [1984] 1 WLR 704.
In R (I) v Secretary of State for the Home Department [2002] EWCA Civ 888, Dyson LJ noted at para 46 that the principles were approved by Lord Browne Wilkinson in the House of Lords in Tan Te Lam v Superintendent of Tai A Chau Detention Centre [1997] AC 97, 111A D. Dyson LJ identified the following four principles as emerging from Hardial Singh: (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 that reasonable period, he should not seek to exercise the power of detention; (iv) The Secretary of State should act with the reasonable diligence and expedition to effect removal.
In R (WL (Congo)) v Secretary of State for the Home Department [2012] 1 AC 245, para 171, those principles were was endorsed by Lord Hope of Craighead, for the majority.
Those principles have been applied by the courts on many occasions.
I would accept the submission made on behalf of the SSHD that they were intended to impose limitations on the powers of immigration detention: R (Francis) v Secretary of State for the Home Department [2015] 1 WLR 567, para 45.
The principles have been applied to the following: mandatory detention pending deportation: Francis; detention pending administrative removal: R (FM) v Secretary of State for the Home Department [2011] EWCA Civ 807, para 25; detention pending examination of immigration status: R (Saadi) v Secretary of State for the Home Department [2002] 1 WLR 3131, para 26; and detention pending a decision on whether one of the exceptions to automatic deportation applies: R (Rashid Hussein) v Secretary of State for the Home Department [2009] EWHC 2492 (Admin), para 44 and R (Saleh (Sudan)) v Secretary of State for the Home Department [2013] EWCA Civ 1378, para 16.
It is clear that the approach taken in Hardial Singh requires both the SSHD and the courts to take a fact sensitive approach to the length of detention.
Thus in Fardous v Secretary of State for the Home Department [2015] EWCA Civ 931, paras 37 41, Lord Thomas CJ deprecated the use of tariffs or yardsticks.
He said between paras 37 and 41: 37.
The Secretary of State acting through his officials has to determine whether the period of detention is reasonable when deciding whether or not to continue the detention, subject to the right of any detainee to apply for bail.
It is a judgment which has to be made on the evidence and in the circumstances as appear to the officials in each case. 38.
There is no period of time which is considered long or short.
There is no fixed period where particular factors may require special reasons to make continued detention reasonable. 39.
McFarlane LJ said in R (JS) Sudan) v Secretary of State for the Home Department [2013] EWCA Civ 1378 at 50 51 that fixing a temporal yardstick might cause the courts to accept periods of detention that could not be justified on the facts of a particular cases.
In R (NAB) v Secretary of State for the Home Department [2010] EWHC 3137 (Admin) Irwin J made clear at paras 77 80 that a tariff would be repugnant and wrong 41.
Each deprivation of liberty pending deportation requires proper scrutiny of all the facts by the Secretary of State in accordance with the Hardial Singh principles.
Those principles are the sole guidelines.
The courts have recognised that there are sound policy reasons for a flexible and fact sensitive approach.
I find nothing in the judgments of the ECtHR which undermines the Hardial Singh approach to the duration of detention.
In this regard our attention was drawn to R (Kambadzi) v Secretary of State for the Home Department [2011] 1 WLR 1299, para 94, where Lord Kerr observed that Hardial Singh principles are more favourable to detainees than Strasbourg requires.
We were also referred to the leading case of Chahal v United Kingdom (1996) 23 EHRR 413, where the Grand Chamber considered a lengthy period of detention prior to deportation.
The court said at para 113: any deprivation of liberty under article 5 para (1)(f) will be justified only for as long as deportation proceedings are in progress.
If such proceedings are not prosecuted with reasonable diligence, the detention will cease to be permissible under article 5 para (1)(f).
As counsel observed on behalf of the SSHD, that is evidently a fact sensitive question, just as it is in English law.
The court in Chahal held that article 5(1)(f) was satisfied on the facts.
It did not suggest that the lack of a specified time limit rendered the detention unlawful.
The Grand Chamber revisited Chahal in Saadi v United Kingdom (2008) 47 EHRR 17 and made an explicit link between the notion of arbitrariness and the duration of detention (para 74): To avoid being branded as arbitrary the length of the detention should not exceed that reasonably required for the purpose pursued.
In R (Kambadzi) v Secretary of State for the Home Department [2011] 1 WLR 1299, para 76, Baroness Hale described this as an endorsement of Hardial Singh principles, and noted that the ECtHR had not yet imposed a requirement for regular reviews.
There is no suggestion in the Strasbourg judgment that a firm time limit is required.
I would accept the submission that the principles set out in Chahal and Saadi contain a specific application of the relevant rules in the context of the legality of detention.
Nothing in the broad dicta in the CJEU cases referred to on behalf of the appellant demonstrates a narrower approach in EU law.
Hardial Singh was considered by the ECtHR in Tabassum v United Kingdom (Application No 2134/10) decision on admissibility, 24 January 2012), where the applicant complained of unlawful detention pending deportation.
The ECtHR expressly considered the formulation of the Hardial Singh principles in R (WL (Congo)) and concluded at para 23 that the applicants period of detention did not exceed what was reasonable in all the circumstances of the case and was not arbitrary.
None of the cases cited on behalf of the appellant in his case to support his contention that mandatory time limits are a necessary component of the quality of law.
They all turn on very different facts.
See, for example Ismoilov v Russia (2008) 49 EHRR 42 and Muminov v Russia (2008) 52 EHRR 23.
In Ismoilov the ECtHR criticised the Russian system under review and concluded at para 140 that: in the absence of clear legal provisions establishing the procedure for ordering and extending detention with a view to extradition and setting up time limits for such detention, the deprivation of liberty to which the applicants were subjected was not circumscribed by adequate safeguards against arbitrariness.
There is nothing to suggest time limits are a general requirement of article 5(1)(f).
This is not to say that the absence of time limits is not a relevant factor in deciding in a particular case.
This is shown in a number of cases to which we were referred.
See, for example six cases against Turkey, namely Abdolkhani and Karimnia v Turkey (Application No 30471/08) (unreported) given 22 September 2009, para 135, applied in ZNS v Turkey (Application No 21896/08) (unreported) given 19 January 2010, para 56; Tehrani v Turkey (Application Nos 32940/08, 41626/08 and 43616/08) (unreported) given 13 April 2010, para 70; Charahili v Turkey (Application No 46605/07) (unreported) given 13 April 2010, para 66; Alipour and Hosseinzadgan v Turkey (Application Nos 6909/08, 12792/08 and 28960/08) (unreported) given 13 July 2010, para 57; and Dbouba v Turkey (Application No 15916/09) (unreported) given 13 July 2010, para 50.
In those cases the ECtHR treated the absence of a time limit as a relevant factor in reaching the same conclusion as in Ismoilov quoted in para 71 above, in almost identical terms.
In Abdolkhani, at para 135, the ECtHR said, in the context of detention pending deportation concluded: In sum, in the absence of clear legal provisions establishing the procedure for ordering and extending detention with a view to deportation and setting time limits for such detention, the deprivation of liberty to which the applicants were subjected was not circumscribed by adequate safeguards against arbitrariness.
See also Mathloom v Greece (Application No 48883/07) (unreported) given 24 April 2012 and Massoud v Malta (Application No 24340/08) (unreported) given 27 July 2010 to much the same effect.
Again, the absence of a time limit was treated as a relevant factor but no more.
In each case the ECtHR focused on the importance of having a procedure capable of avoiding the risk of arbitrary detention.
In my judgment in the instant case there is in place a clear statutory framework which involves appropriate judicial scrutiny and the consideration of the guidelines referred to above.
In short, each case depends upon its particular facts.
I would endorse the approach identified by Lord Thomas CJ and quoted in para 66 above: Each deprivation of liberty pending deportation requires proper scrutiny of all the facts by the SSHD in accordance with the Hardial Singh principles.
Those principles are the sole guidelines.
Nor can I accept the five reasons given on behalf of the appellant as to why the Hardial Singh approach is unlawful.
They are these.
First, it is said that this approach fails to address the fundamental legality test of reasonable foreseeability.
For my part, I would reject the argument based on reasonable foreseeability.
As explained above, the principles in Chahal are an application of the legality principle in the context of the legality of detention.
Secondly, it is said that Hardial Singh is not satisfied because detention under regulation 24(1) does not comply with the requirement that detention must be for the purpose of facilitating the deportation.
As I see it, facilitating the deportation is precisely the purpose of regulation 24(1) detention, even if no final decision has been made.
Thirdly, it is said that the principles in Hardial Singh only apply ex post facto.
In my view that is wrong.
What is required is proper scrutiny of all the facts: see paras 64 and 70 above.
The court is able to ensure that Hardial Singh is adhered to, but the primary responsibility to comply lies with the SSHD.
The courts provide supervision of the application of these criteria and in practice, challenges are brought to secure release, not just damages after the event.
Fourthly, it is said that a lack of legal certainty may amount to a restriction on free movement.
The authority cited for this proposition is a tax case, namely Safir v Skattemyndigheten i Dalarnas Ln (Case C 118/96) [1999] QB 451, which was not concerned with detention.
I would accept the submission made on behalf of the SSHD that it gives no reason to suppose that EU law requires more in this particular context than the ECHR.
Fifthly, the appellant argues that it is no answer to lack of legal certainty that the national courts interpret the measures compatibly with EU law.
That is not the case for the SSHD, which is that the Hardial Singh limitations form part of what has been accepted by European courts as meeting the requirements imposed by law.
For all these reasons I would reject the case for the appellant and in answer to the question posed by issue (3), would hold that the absence of a time limit does not, as a matter of principle, render such detention unlawful under EU law. (4) Does regulation 24(1) unlawfully restrict the rights of EEA nationals and their family by contrast to those enjoyed before the coming into force of the Directive which the EEA Regulations purport to implement?
I would answer this question in the negative, essentially for the reasons given
in the answer proposed to issue (1). (5) Do regulations 21 and 24 of the EEA Regulations 2006 fail accurately to transpose the safeguards of articles 27 and/or 28 of the Directive?
The essential point made on behalf of the appellant is that the Directive has not been properly transposed into the EEA Regulations 2006 because regulation 24 fails to transpose the safeguards contained in articles 27 and 28 of the Directive.
It is said that decisions taken under regulation 24(1) are not EEA decisions for the purposes of regulation 2 of the Regulations, which is the definition section.
It provides: EEA decision means a decision under these Regulations that concerns (a) (b) (c) a persons removal from the United Kingdom; (d) .
The argument is that a decision to detain a person in the position of the appellant, who is detained under regulation 24(1) pending a decision whether or not to remove him, is not a decision which concerns a persons removal within the meaning of sub paragraph (c).
In my view there is a short answer to this point.
The power to detain under regulation 24 is not free standing, but is purely ancillary to the powers of removal in the circumstances permitted by regulation 21, which properly transposes articles 27 and 28.
Where the Secretary of State has reason to believe that there is a case for removal under those provisions, it is clearly appropriate that she should have power to detain while the matter is being considered, and thereafter pending deportation, if otherwise there might be a risk of the subject absconding.
The creation of such a power is well within the margin of appreciation given to the national authorities under the Directive, provided it is suitable and proportionate to its purpose and reasonably exercised (see for example R (Lumsdon) v Legal Services Board [2015] 3 WLR 121, para 55).
It is not necessary to show that a decision under regulation 24 is itself an EEA decision within the meaning of article 2.
It is enough that it is directly linked to regulation 19(3)(b) which in turn is made expressly subject to regulation, and hence to requirements equivalent to those in the Directive.
Moreover, I can see no basis for concluding the regulations themselves are disproportionate and it is not said that the impugned decisions were arbitrary or disproportionate on the facts.
Both the judge and the Court of Appeal rejected the submission, albeit on somewhat different grounds.
The submission advanced on behalf of the SSHD is shortly this.
Regulation 24(1) provides: If there are reasonable grounds for suspecting that a person is someone who may be removed from the United Kingdom under regulation 19(3)(b), that person may be detained .
Thus, regulation 24(1) makes express reference back to regulation 19(3)(b).
Regulation 19(3)(b) permits the removal of an EEA national on grounds that: the Secretary of State has decided that the persons removal is justified on grounds of public policy, public security or public health in accordance with regulation 21.
So regulation 19(3)(b) in turn makes express reference back to the requirements of regulation 21 and is in any event itself an EEA decision and a relevant decision.
See paras 34 to 35 above.
In these circumstances, I would accept the submission made on behalf of the SSHD that regulation 21 implements the requirements of articles 27 and 28 of the Citizens Directive.
It appears to me to follow from the above that regulation 24(1) gives an express power to detain a person who may be removed under regulation 19(3)(b), which contains essentially the same criteria as articles 27 and 28 of the Directive.
It seems to me therefore that a person who is so detained can fairly be said to be detained pursuant to a decision which concerns a persons removal within the meaning of sub paragraph 2(c) of the EEA Regulation 2006 in the definition of an EEA decision.
For these reasons I would answer the question posed by issue 5 in the negative.
Regulations 21 and 24 of the EEA Regulations 2006 do not fail accurately to transpose the safeguards of articles 27 and/or 28 of the Directive. (6) Were the appellants administrative detention from 3 April until 6 June 2012 and the bail restrictions imposed upon him until 2 January 2013 unlawful by reason of the matters raised in questions (1) to (5) above?
It follows from the above that the answer must be no.
The appellants
detention was not unlawful for the reasons suggested.
The remaining question is whether the court should refer any of the questions discussed above to the CJEU for a preliminary reference.
I am not persuaded that the Supreme Court should do.
In so far as the questions raise issues of EU law, the principles adopted seem to me to be acte clair.
Conclusion
For the reasons given above I would dismiss the appeal.
Postscript
After preparing a draft judgment in the form set out above (as agreed by the other members of the court) we received a detailed note containing submissions on behalf of the appellant relying upon a decision of the Grand Chamber of the CJEU in JN v Staatssecretaris van Veiligheid en Justitie (Case C 601/15 PPU), in which judgment was handed down on 15 February 2016.
It was submitted that, where in the implementation of EU law, a member state authorises administrative detention prior to expulsion and seeks to justify it on public order grounds, first, the member state must previously have formed a concluded view as to the threat posed to public order by the individual and must have balanced that against the interference with liberty: Such a provision cannot form the basis for measures ordering detention without the competent national authorities having previously determined, on a case by case basis, whether the threat that the persons concerned represent to national security or public order corresponds at least to the gravity of the interference with the liberty of those persons that such measures entail. (see para 69) Second, administrative detention for the purpose of expulsion (including, in that instance of third country nationals exercising no free movement rights) in the implementation of EU law must be necessary.
Reliance was placed on the right to liberty in article 6 of the EU Charter of Fundamental Rights and upon article 52 of the Charter, which provides that limitations may be made only if they are necessary.
See paras 49 50 in JN.
It is submitted that article 52(3) of the Charter and article 5(1)(f) of the ECHR do not preclude article 6 of the Charter from proposing a necessity test in detention for expulsion for the reasons given in paras 47 and 48.
Thus, it is submitted, a legislative measure authorising administrative detention must be necessary in order to attain the legitimate objectives pursued by the legislation in question, since the disadvantages caused by the legislation must not be disproportionate to the aims pursued: see para 54.
It is stressed that, in view of the importance of the right to liberty, limitations on the exercise of the right must apply only in so far as they are strictly necessary.
See para 56, where reliance is also placed upon para 52 of the judgment in the Digital Rights Ireland Ltd v Minister for Communications, Marine and Natural Resources (Joined cases C 293/12 and C 594/12).
Reliance is further placed upon article 8(3) of Directive 2013/33/EU, which lays down standards for the reception of applicants for international protection.
It is said that article 8(3)(e) is the analogue, in the asylum context, of article 27 of the Citizens Directive.
Indeed, it is submitted that the Citizens Directive is a fortiori to Directive 2013/33/EU.
In all the circumstances it is submitted that the EEA Regulations incorrectly transposed the safeguards of article 27 of the Citizens Directive and that the test is one of necessity.
In all the circumstances it is said that, on this new ground, the appeal should be allowed and that, in any event, an appropriate question should be referred to the CJEU.
It is properly accepted on behalf of the appellant that Directive 2013/33/EU now relied upon is not binding on the United Kingdom.
It is not therefore in issue in these proceedings.
Where it does apply, it sets out an express legislative code which governs the circumstances in which an applicant for international protection may be detained.
Article 8(1) provides that the member states to which it applies shall not hold a person in detention for the sole reason that he or she is an applicant for international protection: see para 15 of the JN judgment.
Article 8(2) then provides that when it proves necessary and on the basis of an individual assessment of each case, member states may detain an applicant, if other less coercive alternative measures cannot be applied effectively.
Article 8(3) then provides that an applicant for international protection may be detained only on certain exhaustive grounds.
By contrast, as is correctly submitted on behalf of the SSHD, the Citizens Directive contains no legislative provisions which refer expressly to detention.
Articles 27 and 28 are concerned respectively with restrictions on freedom of movement and residence and removal.
The substantive issue in JN was whether the freestanding power contained in article 8(3)(e) was compatible with fundamental rights.
A question referred by the Dutch court was whether such a power could be compatible with article 5 of the ECHR if such detention was not imposed with a view to removal.
The CJEU held (in para 82) that the provision was valid.
There is no similar freestanding power in EU law applicable in the United Kingdom.
Moreover, the JN case was not concerned with the central issue in the Nouazli case, namely whether detention may be permitted in circumstances prior to the making of a decision to effect the removal of the family member of an EEA national.
By contrast, Directive 2013/33/EU contains a pre decision power to detain in order to decide on an applicants right to enter (article 8(3)(c)) and in order to secure the transfer of a claimant for international protection to the responsible member state (article 8(3)(f)).
Those powers were not in issue in Nouazli.
I have set out in detail above the basis upon which in my opinion the appeal of the appellant should be dismissed.
By contrast, the CJEU in JN was considering a different legislative provision and did not purport to address the issue before the court in this appeal.
I would accept the submission made on behalf of the SSHD that the CJEU did not lay down minimum criteria that must be satisfied in all cases within the scope of EU law.
It was instead addressing the requirements that must be satisfied before the exercise of a specific statutory power of unusually broad scope.
For these reasons I would not accept that this new point affords any supportable basis for allowing the appeal or indeed for making a reference to the CJEU.
I would therefore dismiss the appeal for the reasons I gave earlier.
Sentence Addendum to the Statement of Facts and Issues List of appellants convictions and sentences until and including the conviction giving rise to the detention under challenge in this appeal Offence Date 06/11/2001 Driving a motor vehicle with excess alcohol 21/08/2002 Failing to provide a specimen for analysis (driving or attempting to drive) 12/01/2004 Theft 22/01/2004 Possession controlled drug class A Drug Crack cocaine 28/06/2004 Theft from person Fine 100 Disqualification from driving 6 months Driving licence endorsed Fine 150 Disqualification from driving 18 months Driving licence endorsed Imprisonment 28 days Possession controlled drug Fine 50 Forfeiture and destruction Class B Cannabis Failing to surrender to bail Fine 100 Failing to surrender to bail Fine 150 Fine 100 Forfeiture Community rehabilitation order 12 months Community punishment order 140 hours concurrent Community punishment order 140 hours Community punishment order Attempt/ obtaining services by deception 140 hours concurrent Failing to surrender to bail Community punishment order 140 hours concurrent 30/12/2004 Obtaining property by deception Theft Date Offence 14/03/2005 Breach of community rehabilitation order 27/04/2005 Detainee fail/ refuse to provide sample of fluid for purpose of ascertaining whether class A drug is in body Handling stolen goods 18/05/2005 Theft from person 04/07/2005 Theft Theft Theft Possession controlled drug Class C cannabis Handling stolen goods (receiving) 24/05/2006 Theft from person 20/11/2006 Theft shoplifting Theft from person 20/05/2008 Possession of a class C drug Sentence Resulting from original conviction of 28/06/2004, order to continue Fine 50 or 1 day (served) Imprisonment 3 months Conditional discharge 18 months Imprisonment 4 months Imprisonment 2 months consecutive Imprisonment 2 months concurrent Fine 150 or 1 day (served) Forfeiture Imprisonment 4 months consecutive Imprisonment 21 weeks Imprisonment 4 months Imprisonment 4 months consecutive Fine 75 Victim surcharge 15 Forfeiture and destruction with intent to supply Possession of a class A drug Fine 75 03/06/2008 Being drunk and disorderly Fine 60 Date Offence 15/12/2008 Theft from person Theft from person Possession cannabis resin Affray Possession knife blade/ sharp pointed article in a public place 01/07/2010 Possession Cannabis resin 28/09/2010 Obstructing powers of search for drugs 22/10/2010 Possession Cannabis resin Failing to surrender to custody at appointed time 08/12/2010 Failing to comply with the requirements of a community order 13/12/2010 Theft from person 14/01/2011 Theft Sentence Imprisonment 4 months consecutive Imprisonment 4 months consecutive Imprisonment 1 week concurrent Forfeiture and destruction Imprisonment 15 months Imprisonment 9 months concurrent Forfeiture and destruction of razor Fine 100 Forfeiture and destruction Community order, unpaid work requirement 80 hours Subsequently varied on 08/12/2010 to curfew requirement 2 months with electronic tagging Fine 100 Victim surcharge 15 Forfeiture and destruction Fine 100 Resulting from original conviction of 30/09/2010, order revoked Imprisonment 5 months Imprisonment 5 months Consecutive 04/07/2011 13/07/2011 05/09/2011 Date Offence 19/01/2011 Possession controlled drugclass A cocaine Possession controlled drugclass B cannabis resin Handling stolen goods Theft from person Possession controlled drug class A crack cocaine Theft shoplifting Possession controlled drugclass A crack cocaine Failure to comply with the requirements of a community order Theft from person Sentence Forfeiture and destruction 1 days detention Forfeiture and destruction 1 days detention Imprisonment 12 weeks Imprisonment 3 months Community order, curfew requirement 3 months, subsequently varied to imprisonment 2 weeks One days detention Imprisonment 2 weeks consecutive Resulting from original conviction of 05/09/2011, order revoked Imprisonment 20 weeks 20/10/2011 14/11/2011 14/11/2011 25/01/2012 LORD CARNWATH:
I agree that the appeal should be dismissed for the reasons given by Lord Clarke.
I add a few words of my own to underline the need to avoid overcomplicating what is in essence a relatively narrow, albeit important, issue.
The appellant has an appalling record of thefts and other crimes (described by the tribunal as mainly petty opportunistic thefts not involving violence) extending over a decade before the events in question.
They had resulted in jail terms amounting cumulatively to at least five years.
It is not surprising that the Secretary of States patience ran out in early 2012 and that she set in motion steps for his removal from this country.
There was an administrative muddle in April 2012 over the powers used to detain him, but that is not an issue in the appeal.
Nor is it argued that the detention was in itself unreasonable in the circumstances, assuming there was power to do it.
The Secretary of States problem was that by then he had acquired permanent rights of residence here under European law, and thus could only be removed on serious grounds of public policy or public security.
He was entitled to have that issue determined by the First tier Tribunal.
They decided the point in his favour in on 2 January 2013, and the Secretary of State has properly accepted that decision.
We are concerned solely with his detention under regulation 24(1) from 3 April to 6 September 2012 (on bail from 6 June); and thereafter under regulation 24(3) (again on bail) until the tribunals decision.
The period of actual detention therefore lasted little over two months.
On one view the case could be seen as an example of the system working as it should.
However, he now seeks damages for that short period of detention, on the basis that the powers on which the Secretary of State relied did not comply with European law.
Mr Saini QC (who did not appear below) has developed his case in elaborate detail.
In terms of written submissions it is to be found in a 55 page statement of case, to which were added shortly before the hearing a 12 page note on supplementary authorities, and an 18 page note concerning statutory and factual context.
They depart in a number of respects from the case as presented below.
For the Secretary of State Mr Ward QC has not objected to these changes, but (perhaps understandably) has felt it necessary to respond in kind, with a 73 page statement of case.
The bundles of authorities include 184 items, including cases, legislative material and academic commentary.
I am however grateful to Mr Saini, in response to my request on the first day of the hearing, for reducing his submissions to a two page summary of appellants challenge.
Although the summary contains a note to the effect that all of the points in the submitted case are maintained, I assume that summary can be taken as indicating the substantial points on which he now relies.
The summary identifies four matters of challenge.
There is some overlap between them but the essential points can be stated briefly: (1) Equality/discrimination applicable to regulation 24(1) only.
The power to detain an EEA national under regulation 24(1) is discriminatory on the grounds of nationality, contrary to TFEU article 18, because there is no equivalent power in relation to a third country national. (2) Proportionality applicable to regulation 24(1) only.
The power was introduced for the first time in June 2009.
The Secretary of State has failed to show a need for a power which had not been required before.
Nor had she shown any reason why consideration of deportation could not have taken place during the criminal custodial term. (3) Legal certainty, proportionality and time limits applicable to regulation 24(3) as well as regulation 24(1).
This is principally a challenge to the Hardial Singh principles, which do not require a fixed time limit. (4) Further transposition flaws applicable to both regulation 24(1) and 24(3).
Regulation 24 is not in terms made subject to the principles set out in articles 27 and 28 of the Directive, or in regulation 21 which gives effect to them in domestic law.
In particular the test of reasonable grounds under regulation 24(1) is well below the threshold required by article 27.
On the first point I have nothing to add to what Lord Clarke has said (in agreement with the Court of Appeal).
Article 18 is not directed to the comparative treatment of nationals of other countries, who are outside the scope of European law.
The alternative formulation based on the case of R v Immigration Appeal Tribunal, Ex p Secretary of State for the Home Department (Case C 370/90) [1992] 3 All ER 798 (raised for the first time in the note on supplementary authorities) is equally unsustainable for the reasons given by Lord Clarke.
On the second point, the Secretary of State has a wide margin or appreciation as to the powers required to give effect to the Directive.
If their exercise were shown to be disproportionate in a particular case (which is not alleged here), it could to that extent be disapplied.
It is not a reason for striking down the regulation.
On the third point, the Hardial Singh principles are well established, and approved by high authority; their legality is not open to serious question for the reasons given by Lord Clarke.
The last question raises a possible point on the construction of the definition (in regulation 2(1)) of the expression decision that concerns a persons removal from the United Kingdom.
If necessary I would read this as extending to a decision such as in the present case which is part of the process leading to removal.
But in any event the powers in article 24 are ancillary to the substantive power of removal under regulation 19(3)(b).
That refers in terms to the requirements of regulation 21 (reproducing articles 27 and 28).
It follows that the Secretary of State cannot properly exercise her powers under article 24, with a view to action under article 19(3)(b), without taking account of the need as part of that process to satisfy regulation 21.
That seems to me sufficient to ensure that the action is compliant with the Directive.
For these reasons, which are no more than a distillation of those given by Lord Clarke, I would dismiss the appeal.
| UK-Abs | The appellant, an Algerian national, entered the United Kingdom in 1996 and was refused asylum.
He married a French national in 1997.
He was granted a residence permit, and had acquired a right of permanent residence by February 2003.
He had two children with his wife but they were estranged by July 2004 and she returned to France in late 2005.
By the end of January 2012, the Appellant had acquired 28 criminal convictions for 48 offences, including one 23 month sentence.
The Home Secretary unsuccessfully attempted to deport him for that reason in January 2007.
But he continued to offend, and was sentenced to 20 weeks imprisonment for an offence of theft on 25 January 2012.
On 3 April 2012, just as the appellant was due to be released from custody for that offence, the Secretary of State served him with notice of her intention to make a deportation order against him under the Immigration (European Economic Area) Regulations 2006, on grounds that he would pose a genuine, present and sufficiently serious threat to the interests of public policy if he remained.
He was detained from 3 April 2012 to 6 September 2012 (on bail from 6 June) under regulation 24(1) and Schedule 3 of the Immigration Act 1971 pending a decision being made on whether to deport him.
He was served with a fresh Notice to that effect on 7 September 2012, and was again detained from 7 September 2012 until 2 January 2013.
The appellant contended that his detention pending removal was unlawful, and sought judicial review.
He argued that his detention contravened article 27(1) of the Citizens Directive (2004/38/EC) and that regulation 24(1) was incompatible with European law and unlawful because it discriminated against him on the basis of nationality without lawful justification contrary to Article 18 TFEU (there being no equivalent provision for pre decision detention in relation to family members of British nationals or non EEA nationals).
The Upper Tribunal and the Court of Appeal dismissed his claim and appeal respectively.
Before the Supreme Court, the appellant raised four essential points of challenge, namely that (i) the power to detain under regulation 24(1) was discriminatory without lawful justification, (ii) the power was unnecessary and disproportionate, (iii) the absence of a time limit for detention infringed the Hardial Singh principle and (iv) regulations 21 and 24 failed to accurately transpose the safeguards in articles 27 and/or 28 of the Directive.
The Supreme Court unanimously dismisses Mr Nouazlis appeal, thereby holding that the appellants pre decision detention was not unlawful.
It further declines to make a preliminary reference to the CJEU.
Lord Clarke gives the judgment, and Lord Carnwath writes a concurring judgment.
The legal framework for detention pending a decision to deport comprises Articles 27 and 28 of the Citizens Directive, as transposed by the EEA Regulations 2006.
EEA Nationals or their family members exercising EU rights benefit from powerful protections against their expulsion from the UK, and can only be removed if certain limited circumstances apply, including where there are grounds of public policy, public security or public health [30, 36].
The power to detain under regulation 24(1) does not discriminate without lawful justification against EEA nationals and their family members.
The general principle is that Article 18 TFEU is only concerned with the way in which EU citizens are treated in member states other than their states of nationality, and not the way in which member states treat nationals of other countries residing within their territories see the decision of the European Court of Justice in Vatsouras and Koupstantze v Arbeitsgemainschaft (AGRE) Nurnnerg (Joined Cases C 22/08, C 23/08) [2009] ECR I 4585.
Third country nationals are not appropriate comparators for testing discrimination: such discrimination is simply a function of the limited scope of the EU legal order, into which third country nationals do not fall [39 49].
Nor is there discrimination between EU nationals and third country nationals contrary to article 21(1) of the EU Charter of Fundamental Rights [50 51, 61, 104].
The appellants new way of putting this argument was that discrimination occurs between British nationals and EEA nationals (exercising treaty rights) who each have third country spouses, since the spouse of the EEA national who is liable to be detained might be hypothetically deterred from exercising their own free movement rights the principle in Surinder Singh (R v Immigration Appeal Tribunal Ex p Secretary of State for the Home Department (Case C370/90) [1992] 3 All ER 798).
But this argument also fails, since there is no basis for holding that the actual or hypothetical rights of this appellants spouse, who was long since estranged, would be so affected in this case [52 60, 104] As to proportionality, it is not in dispute that regulation 24(1) must be applied proportionately, but it was not argued that it was applied disproportionately in this case [62].
In this case, the absence of a specified time limit for detention does not infringe the principles in R v Governor of Durham Prison, Ex P Hardial Singh [1984] 1 WLR 704.
That approach is fact sensitive, and the clear statutory framework here provides sufficient judicial scrutiny.
The Hardial Singh approach, moreover, is entirely consistent with European law [63 78, 105].
Finally, regulations 21 and 24 do not fail accurately to transpose the safeguards in articles 27 and 28 of the Directive and are compliant with it [80 84, 106].
The recent CJEU decision in JN v Staatssecretaris van Veiligheid en Justitie (Case C 601/15), brought to the Courts attention in written submissions after the conclusion of the hearing, concerns a different Directive that is not binding on the United Kingdom.
It also materially differs from the Citizens Directive because it contains an express freestanding power of detention for applicants for international protection, and not detention pending a deportation decision.
It does not affect the disposal of this appeal [88 96].
Lord Carnwath writes a concurring judgment, setting out the appellants four overall challenges and agreeing with Lord Clarke that they should be dismissed [97 107].
|
The Global Santosh was time chartered on terms that the vessel should be off hire during any period of detention or arrest by any authority or legal process, unless the detention or arrest was occasioned by any personal act or omission or default of the Charterers or their agents.
She was arrested as a result of a dispute between the receiver of the cargo and a party who appears to have been a sub sub charterer, and which had nothing to do with the owners or the ship.
The question which arises on this appeal is whether the arrest can be regarded as having been occasioned by the time charterers agents in the sense in which that word is used in the proviso.
The answer to this question turns on the language of the particular charter party, but it has wider implications of some importance.
Arbitrators appointed under the terms of the time charter have held by a majority that it cannot.
The matter comes before the courts on an appeal under section 69 of the Arbitration Act 1996.
The facts
The facts can be taken from the arbitrators award and the agreed statement of facts and issues.
By a time charter party dated 11 September 2008, NYK chartered the vessel Global Santosh to Cargill for one time charter trip intention cement via Sweden to West Africa Nigeria.
Intended cargo bulk cement.
Duration 35 days without guarantee.
The charter was on the Asbatime form, which was a variation of the New York Produce Exchange 1946 form.
There were a number of typed additional clauses.
Against the side note Sublet the charter reads at lines 31 33: Charterers shall have liberty to sublet the vessel for all or any part of the time covered by this Charter, but Charterers shall remain responsible for the fulfilment of this Charter.
By clause 8, NYK undertook that the master would be under the orders and directions of [Cargill] as regards employment and agency, and Cargill undertook to perform all cargo handling at their expense.
There are no less than three off hire clauses.
The printed form includes an off hire clause (clause 15) in standard terms covering loss of time from deficiency and/or default and/or strike or sabotage by officers or crew or deficiency of stores, fire, breakdown of, or damages to, hull, machinery or equipment, grounding. detention by average accidents to ship or cargo unless resulting from inherent vice, quality or defect of the cargo, dry docking for the purpose of examination or painting bottom, or by any other similar cause whatsoever preventing the full working of the vessel.
Typed clause 48 is a further off hire clause which largely overlaps with clause 15.
It relates to loss of time either in port or at sea, deviation from the course of the voyage or putting back whilst on voyage, by reason of breakdown of machinery, collision, stranding, fire or any other accident or damage to the vessel, or dry docking or periodical survey, or sickness or accident to the Master, Officers, Crew or any person on board the vessel other than persons travelling by the Charterers requests or by reason of sending stowaway or salvage, or by reason of the refusal of the Master, Officers or Crew to do their duties, or any Owners matters.
Typed clause 49 is an additional off hire clause relating specifically to detention resulting from capture, seizure or arrest.
It provides: Should the vessel be captured or seizured [sic] or detained or arrested by any authority or by any legal process during the currency of this Charter Party, the payment of hire shall be suspended until the time of her release, unless such capture or seizure or detention or arrest is occasioned by any personal act or omission or default of the Charterers or their agents.
Any extra expenses incurred by and/or during the above capture or seizure or detention or arrest shall be for Owners account. (emphasis added)
On 18 August 2008, before they entered into the time charter, Cargill had entered into a voyage charter party as disponent owner with Sigma Shipping Ltd (Sigma) as charterer, under which the performing vessel was to be nominated.
Cargill nominated the Global Santosh.
Pursuant to Cargills orders, the vessel carried a cargo of bulk cement from Slite in Sweden to Port Harcourt in Nigeria.
The cargo was one of six shipments of cement sold by Transclear SA to IBG Investments Ltd on C & FFO terms under a sale contract dated 14 December 2007.
IBG was named as the notify party in the relevant bill of lading, which also named the discharge port as Port Harcourt (Ibeto Jetty).
The majority arbitrators held that it seemed likely that Transclear was the sub charterer of the vessel but, whether by way of charter from Sigma or by a more indirect link, was not apparent.
The FO element of the sale terms stands for free out.
Under free out sale terms, the buyers/receivers (here, IBG) undertake to perform, or procure and pay for the performance of, the unloading of the cargo from the carrying vessel.
By the sale contract between Transclear and IBG demurrage was payable by IBG to Transclear for delay in discharge beyond the laytime agreed in that contract and Transclear was purportedly granted a lien over the cargo in respect of unpaid demurrage.
The contractual position as regards cargo handling was accordingly as follows.
By clause 8 of the time charter Cargill undertook to perform all cargo handling at their expense.
It follows that, as between Cargill and NYK, it was for Cargill to perform the discharge operation at its expense.
As between Cargill and Sigma, it was for Sigma to do so.
In fact, neither Cargill nor Sigma themselves carried out any discharging obligations.
They were left to others.
It appears that it was ultimately IBGs obligation, owed to Transclear under the contract of sale, to carry it out.
The vessel arrived at Port Harcourt on 15 October 2008 with a cargo of 30,324 metric tons of cement in bulk (the cargo) and tendered notice of readiness at 0635 hours local time on the same date.
However, as the majority arbitrators held at para 9 of their reasons, due to congestion at Port Harcourt, she was instructed to remain at Bonny Town Anchorage.
The congestion was caused at least in part by the breakdown of IBGs off loader.
No discharge operations took place at the anchorage, and the vessel did not proceed to a berth until 18 December 2008.
During that period the vessel remained on hire under the charter and Cargill continued to pay hire.
The vessel did not in fact berth on 18 December because she was turned away by the port authority and ordered to return to Bonny Town inner anchorage.
The authority gave those instructions pursuant to an order dated 17 December 2008 (the day before) made by the Federal High Court of Nigeria.
The majority arbitrators did not spell the facts out in any greater detail than to say at para 11 of their reasons (as amplified in para 36) that the order arose from an application brought by Transclear to secure a claim for demurrage against IBG, that what should have been arrested was the cargo, but that by an obvious mistake the order directed the arrest of the vessel.
The arbitrators added that the order and subsequent notice of arrest of the same date expressly prohibited any and all persons from interfering with and/or attempting to discharge the cargo.
Accordingly, the master returned to the anchorage and waited for the arrest to be lifted.
On 18 December 2008, Cargill gave these orders to the master in writing: Dear captain Good Day.
Pls do not commence cargo disch until you get written confirmation from us.
Pls call me back once you receive this message.
Best Regards.
Ritesh Chandra.
Subsequently, an agreement in respect of the outstanding demurrage was reached between Transclear and IBG which allowed the vessel to berth and discharge her cargo.
Following the issuance of an appropriate order by the presiding judge of the Court of Nigeria authorizing the cargos release, discharging operations began at 2230 hours (local time) on 15 January 2009 and were completed at 2235 hours (local time) on 26 January 2009.
Cargill withheld hire for the period of arrest but recommenced the payment of hire when actual discharge began.
Cargill relied on clause 49 of the charter to justify non payment of hire but, in answer, NYK relied on the proviso unless such capture or seizure or detention or arrest is occasioned by any personal act or omission or default of the Charterers or their agents.
The majority arbitrators held that the proviso did not apply and that the vessel was off hire during the period when she was under arrest.
On 23 May 2012, Hamblen J granted NYK leave to appeal under section 69 of the Arbitration Act 1996 on the question whether the arrest or detention of a time chartered vessel by or because of the acts or omissions of sub contractors, involved to perform the time charterers charter party obligations, fall within the meaning of an off hire clause excluding time from off hire if occasioned by any personal act or omission or default of the Charterers or their agents.
The proviso
Loss of time due to the arrest or detention by authority of a time chartered vessel is a long standing problem, aggravated by the difficulty in obtaining compensation for an arrest or detention which proves to be unjustified or is made in support of a claim which fails.
The problem is increasingly dealt with by express provision.
Clause 49 of this charter party is a typed clause, but variants of it are in common use.
The main purpose of such clauses is to protect the time charterer.
The proviso for cases where the arrest or detention is occasioned by the charterer or its agents is generally narrowly construed, and cases in which it applies are not necessarily expected to arise very often.
The classic cases for its application are those in which the vessel is arrested in legal proceedings or detained by authority on account of some characteristic of the cargo that the charterer has caused to be shipped or something that the charterer has ordered the vessel to do under the employment clause.
Even these cases will often give rise to difficult questions of causation.
Agency
The extension of the proviso to acts of the time charterers agents adds an additional layer of difficulty.
There was in this case no personal default on the part of Cargill as time charterers.
Their obligation under clause 8 to perform all cargo handling at their expense did not import any duty to handle cargo at any particular time, provided that they redelivered the ship at the end of the time charter term with no cargo on board.
It follows that to avail themselves of the proviso to clause 49, NYK must rely on an act or omission of Transclear or IBG, as the parties to the dispute which occasioned the arrest.
Strictly speaking, an agent is a person authorised by the principal to perform some act on his behalf.
Neither Transclear nor IBG was an agent of Cargill in this sense.
They had no contractual or other legal relationship with Cargill.
However, neither party to this appeal contends that the proviso applies only to agents in the strict legal sense.
Even where a time chartered ship is traded for the time charterers own account, cargo handling on discharge may be carried out by an independent contractor or a receiver acting for his own account.
But the essence of a time charter on these terms is that the vessel will not necessarily be traded for the time charterers own account.
The ship may be sub let, as lines 31 33 of this time charter envisage.
If so, the chain of contracts may comprise one or more sub time charters or voyage charters and/or a bill of lading.
Their terms will not necessarily be back to back in the relevant respects with those of the time charterer.
In such cases, the charter operates as a contract under which rights are enjoyed and obligations performed vicariously.
The extension of the proviso to the time charterers agent is intended to accommodate that state of affairs.
The legal implications of such arrangements have more often been assumed than considered.
The two decisions which have most fully addressed the point are the decision of the Court of Appeal in Mediolanum Shipping Co v Japan Lines Ltd (The Mediolanum) [1984] 1 Lloyds Rep 136 and the decision of Colman J in Merit Shipping Co Inc v T K Boesen A/S (The Goodpal) [2000] 1 Lloyds Rep 638.
In The Mediolanum, the question arose in the context of the safe port warranty in the New York Produce Exchange form of time charter.
The charterers had contracted to provide and pay for fuel.
They ordered her to a safe port but she was directed to an unsafe place in that port by the refinery with whom the charterer had contracted for the supply of bunkers.
Kerr LJ, delivering the judgment of the court, said at p 140: Although, in relation to the charterers, the refinery was in the position of an independent contractor, we naturally accept that for the purposes of the charterers obligation, under clause 2 of the charter party, to provide the fuel, the refinery was the agent of the charterers as between the charterers and the owners.
The reason is that, in that respect, the refinery was used by the charterers in order to perform one of the charterers' obligations under the contract.
The charterer was nevertheless held not to be in breach of the safe port warranty because even on the assumption that the refinerys authority as agent extended to designating a bunkering place, it was not at fault in designating this particular bunkering place.
In Trade Star Lines Corp v Mitsui & Co Ltd (The Arctic Trader) [1996] 2 Lloyds Rep 449, the legal status of the shipper was considered in the context of an argument about the implication of terms.
The details of the argument do not matter.
Evans LJ, delivering the judgment of the court, observed at p 459: It is clear, in our judgment, that when the time charterer instructs the master, pursuant to the employment provisions of clause 8, to receive certain cargo on board, and the cargo is loaded at the charterers expense, although under the supervision and maybe at the risk of the shipowner, then the cargo is loaded by or on behalf of the charterer for the purposes of the charter party, and a third party shipper should be regarded as the charterers agent accordingly.
In The Goodpal, the ship had been time chartered and then sub chartered for a time charter trip to two successive ports of discharge.
The sub charterer ordered the vessel to discharge a specified quantity of cargo at the first port of discharge, but the receivers ordered him to discharge more than that quantity.
As a result, there was a short outturn at the second port, which led to the arrest of the ship at the suit of the consignee there.
The question was whether the head charterer was liable for the short delivery on the footing that the receivers orders at the first port were given as their agents.
Colman J analysed the position as follows, at pp 642 643: In order to test the frequently repeated assertion that, for the purposes of the incidence of the rights and obligations of the parties to a time charter, whether on the NYPE or most other forms, the shipper or receiver, as the case may be, is to be treated as the charterers agent, it is necessary to identify certain basic and, as I believe, long established principles upon which time charters work. (iv) The process of loading the cargo is usually carried out and paid for by the shippers.
In as much as express provision is made for the loading to be under the supervision of the master, he is entitled in his discretion to intervene to require loading to be carried out in such a way that the seaworthiness of the vessel is not put at risk. (v) When the vessel is ordered by the charterers to proceed to a loading port to load a particular cargo and the process of loading is carried out by the shippers, they are availing themselves of the facility contractually derived either directly or indirectly from the charterers of being permitted to place their cargo on board the vessel for carriage to the port of discharge.
They are in one sense the agents of the time charterers, as described in the passage cited earlier in this judgment from The Arctic Trader, sup, but only to the extent that it is to them that the charterers have delegated the process of loading.
Within that limited area their acts or omissions are, so far as the owners are concerned, the acts and omissions of the charterers and their knowledge of the condition of the goods is to be imputed to the charterers. (viii) Just as the charterer can make available to a third party shipper the facility to load the vessel, so also there can be extended to a third party receiver the facility to discharge the cargo at the designated discharging port.
Once again, the receiver is in the position of a delegate of the charterer and in that limited sense can be described as the charterers agent.
If therefore he permits the vessel to be discharged in such a way as to damage the ship or other cargo on board, the charterers are obliged to indemnify the owners for loss and damage so caused.
Colman J went on to hold that the time charterers of The Goodpal were not responsible contractually for the order given by the receivers at the first port of discharge, because their agency could not extend to cargo which was not consigned to them but destined for other consignees at the second port.
The only relevant instructions were received from the receivers at the first discharge port who could not reasonably have been thought by anybody to be standing in the position of the charterers in relation to the balance of the cargo to be loaded at the second discharge port. (p 644)
As these observations, all from experienced specialists in the field, show, references in a time charter to acts of the charterers agents in the course of performance cannot necessarily be limited to persons doing those acts on his behalf in the strict legal sense of the term, or indeed to those standing in any direct legal relationship with him.
As between the owner and the time charterer, the rights of the time charterer are made available to those further down the contractual chain, and some at least of the time charterers obligations are satisfied by the acts of subcontractors.
As Colman J put it, the persons ultimately carrying out the relevant cargo handling operation (loading or discharging) are availing themselves of the facility contractually derived either directly or indirectly from the charterers.
They are, to that extent, the agents of the time charterers in the sense in which that word is employed in a provision such as clause 49.
The issue
Under the time charter of the Global Santosh, Cargill enjoyed the facility of directing where and (within the limits of the possible) when to discharge.
The parties who were ultimately entitled to the benefit of that facility were those interested in the cargo, namely Transclear and IBG.
It is common ground that they were for that purpose agents of Cargill.
Nobody suggests that the mere fact that they were Cargills agents for that purpose means Cargill is responsible for anything that they might do which results in the detention of the ship.
The reason is that not everything that a subcontractor does can be regarded as the exercise of a right or the performance of an obligation under the time charter.
There must be some nexus between the occasion for the arrest and the function which Transclear or IBG are performing as agent of Cargill.
If, for example, Transclear or IBG had caused the vessel to be arrested in support of a claim to a proprietary interest in it, it is accepted that she would have gone off hire.
The position would have been the same if they had caused her to be arrested in support of a cargo claim in connection with a sister ship.
On the same principle, it was held in The Goodpal that the owners claim against the time charterer failed because, although the receiver at the first port of discharge was the agent of the time charterer for certain purposes, those purposes did not extend to the particular acts by which he caused the problem.
In the present case, the right under the time charter whose exercise by Transclear and IBG is said to have occasioned the arrest is the right to call for the discharge of the cargo, and the relevant obligation under the time charter was the obligation to carry out the discharge operation.
It is not disputed that Transclear and IBG exercised that right and performed that obligation as agent for Cargill.
The real question concerns the scope of that agency.
To what acts or omissions did it extend?
The scope of the agency
This issue is a great deal more difficult than it is in the simple case where the vessel has been arrested because of something that the vessel has been ordered to do under the employment clause.
It is a measure of that difficulty that the courts below have given divergent answers to it.
The appeal from the arbitrators award was heard in the first instance by Field J.
In summary, he considered that Cargill were responsible for any act or omission or default in the course of the performance by the delegate of the delegated task, ie in the course of discharging: [2013] 1 Lloyds Rep 455, para 19.
He held that Transclears arrest of the cargo and the vessel was not done as part of the performance of the discharging operation, and was irrelevant.
However, he considered that IBGs failure to discharge the cargo within the laydays allowed by its contract of sale with Transclear and its failure to pay the resultant demurrage arising under that contract, were omissions in the course of their performance of the discharging operation.
This was because it was Cargill after all who set in train the process of delegation and gave delegating parties a free hand to agree terms with delegates (para 23).
He therefore allowed the appeal, but remitted the award to the arbitrators to determine whether the failure to pay demurrage could be regarded as the cause of the arrest and the resultant delay.
Both parties appealed to the Court of Appeal, which dismissed both the appeal and the cross appeal.
The substantive judgment was given by Gross LJ, with whom Gloster LJ and Sir Stanley Burnton agreed: [2014] 2 Lloyds Rep 103.
They substantially affirmed Field Js order, but on different grounds and with a variation to the terms of the remission to the tribunal.
Gross LJ rejected the requirement imported by the judge that the act or omission causing the delay must occur in the course of performance of the delegated task.
He also disputed the relevance of the demurrage terms agreed between Transclear and IBG.
But he took a wider view than Field J of the scope of the agency of Transclear and IBG.
He sought the answer in the basic distinction pointed out by Rix LJ in Hyundai Merchant Marine Co Ltd v Furnace Withy (Australia) Pty (The Doric Pride) [2006] All ER (Comm) 188, para 33, between matters such as the management of the vessel and its crew which lay within the owners sphere of responsibility, and the trading arrangements for the use of the vessel which lay within the charterers sphere of responsibility.
In Gross LJs view, the delay caused to the vessel in this case fell within Cargills sphere because NYK was not involved in the dispute between Transclear and IBG, which did not arise out of anything that the ship was alleged to have done or failed to do, but only to IBGs alleged failure to pay demurrage under a contract with which NYK were not concerned.
Gross LJ considered that the dispute arose out of Cargills trading arrangements concerning the vessel. (para 41).
By this I take him to have meant that by sub chartering to Sigma, Cargill made possible trading arrangements between parties further down the chain of contracts under which such disputes might arise.
I regret that I am unable to accept the reasoning of either of these judgments.
On the facts found by the arbitrators, which I have summarised, I think that their conclusion was correct.
The time charter did not specify what cargo handling operations were to occur, but under clause 8, Cargill was required to perform or procure to be performed whatever cargo handling operations occurred.
This imported a right to direct the vessel in accordance with Sigmas requirements and indirectly those of Transclear and IBG.
It also imported an obligation to ensure that cargo handling was done properly and to pay for it.
But, as I have observed, as between themselves and NYK, Cargill had no contractual obligation to procure the vessel to be discharged at any particular time, and no contractual interest in the timing of the operation.
They were obliged to pay hire regardless of when it occurred.
That was subject to clause 49, but the off hire event for which clause 49 provided was the capture, seizure or arrest of the vessel, irrespective of any effect on discharge.
Transclear and IBG did have obligations as to the timing of discharge, which arose from the laytime and demurrage provisions of their contract of sale, but neither NYK nor Cargill was a party to that contract.
This state of affairs gives rise, as it seems to me, to two problems for NYKs claim in these proceedings.
The first is that the effect of these arrangements, as between NYK and Cargill, was that such cargo handling operations as occurred, although carried out by IBG, were carried out on Cargills behalf, at their orders and expense under clause 8 of the time charter.
It was the vicarious exercise of a right of Cargill under the time charter, which Cargill indirectly made available to IBG.
But the defective performance of cargo handling operations is one thing.
An absence of cargo handling operations is another.
Whatever its cause, IBGs failure to discharge the cargo between the giving of notice of readiness on 15 October 2008 and the commencement of discharge on 15 January 2009 cannot meaningfully be regarded as the vicarious exercise by IBG of some right of Cargill under the time charter.
IBG were doing nothing in this period, as far as the vessel was concerned, and were therefore doing nothing on behalf of Cargill.
Their inactivity could be relevant to the question of responsibility posed by clause 49 only if it amounted to the vicarious breach of some obligation of Cargill under the time charter, which it did not.
It follows that any responsibility of Cargill under the time charter for IBGs acts or omissions in the conduct of cargo handling operations at the port of discharge, extended only to acts or omissions in the actual performance of those operations while they were in progress.
Field J thought otherwise, because the laydays under IBGs purchase contract began with the service of the notice of readiness three months earlier and, by sub chartering the vessel to Sigma, Cargill had set in train the chain of transactions which culminated in the appropriation of the cargo of the Global Santosh to that contract.
Like Gross LJ in the Court of Appeal, I do not think that the terms of IBGs purchase contract have any bearing on the present issue.
We are not concerned with the question whether the delay was a breach of the purchase contract.
The question is whether IBG, by omitting to discharge at any time before 15 January 2009, were vicariously exercising rights or vicariously infringing obligations under the time charter between NYK and Cargill.
That can only depend on the terms of the time charter.
The second difficulty in NYKs way is that we are not in this case concerned with responsibility for delay generally, but with responsibility for loss of time caused by the arrest of the vessel.
The arrest was occasioned by a dispute between Transclear and IBG about demurrage.
Incurring or enforcing a liability for demurrage under a sub contract could not possibly be regarded as the vicarious exercise of any facility made available to Cargill under the time charter.
It remains to consider the wider basis on which the matter was dealt with in the Court of Appeal.
Gross LJ asked himself whether the arrest was occasioned by matters lying within the owners or the time charterers sphere of responsibility.
If it was occasioned by matters lying within the time charterers sphere of responsibility, ie those relating to the charterers employment of the vessel, then it was in principle within the scope of the functions delegated down the chain of contracts.
I do not find this distinction helpful in the present context.
It is no doubt true that the proviso to clause 49 is broadly speaking concerned with matters for which the time charterer may be regarded as responsible.
But that does not tell us what those matters are.
Where the range of matters for which the time charterer is responsible depends on what functions he has delegated to a subcontractor, it is as I have pointed out necessary to identify the extent of the delegation.
Gross LJ seems to have regarded the delegation as extending to everything that arose out of Cargills trading arrangements concerning the vessel.
The only sense in which the arrest of the Global Santosh can be said to have been occasioned by Cargills trading arrangements concerning the vessel, is that by sub chartering her to Sigma Cargill made it possible for Transclear and IBG to become involved further down the chain.
That in turn provided the occasion for their dispute to lead to the arrest and detention of the vessel.
What this amounts to is that anything that the sub charterers or receivers may choose to do which results in the arrest of the vessel, becomes the responsibility of the time charterer if the occasion for doing it would not have arisen but for their having come in at the tail end of a chain of contracts which the time charterer initiated.
Such a test is impossible to justify, since it depends simply upon the status of the sub charterer or receiver, and would not necessarily require any nexus between the acts leading to the arrest and the performance of functions under the time charter.
At para 40(ii), Gross LJ thought that the agency would not extend to some act of a sub charterer or receiver which was wholly extraneous or unrelated to sub letting under the [sub charter] or inconsistent with its scheme.
This must of course be correct, but it is difficult to see how it can be accommodated within the basic principle which Gross LJ adopted.
It is right to add that clause 49 does not readily lend itself to the dichotomy suggested by Gross LJ.
While the other off hire clauses in Cargills time charter (clauses 15 and 48) relate broadly to matters relating to the owners management of the vessel which prevent him from making the contractual services available to the time charterer, this is not true of clause 49.
Capture, seizure or arrest will not necessarily lie within the spheres of responsibility of either party.
In The Doric Pride, supra, from which Gross LJ derived his dichotomy, Rix LJ was concerned with a proviso for cases where the capture, seizure or detention arose from the charterers choice of loading or discharging port, and it was in that context that he made the observations cited by Gross LJ.
Conclusion
dismiss NYKs appeal under section 69 of the Arbitration Act 1996.
I would allow the appeal, set aside the orders of both courts below and LORD CLARKE: (dissenting)
I have reached a different conclusion from that reached by Lord Sumption.
I would dismiss the appeal.
I gratefully adopt the account of the facts given by Lord Sumption in paras 1 to 11 of his judgment.
The question for decision is whether the vessel was off hire during the period when she was under arrest and unable to discharge as a result (as Lord Sumption puts it) of a dispute between the receiver of the cargo and a party who appears to have been a sub sub charterer which had nothing to do with the owners of the ship.
That depends upon whether the owners can show that the arrest was occasioned by any personal act or omission or default of the Charterers or their agents within the meaning of clause 49 of the charter.
It is common ground that Transclear and IBG were for some purposes the agents of the Cargill within clause 49.
As Lord Sumption puts it at para 22, the right under the time charter whose exercise by Transclear and IBG is said to have occasioned the arrest of the vessel is the right to call for the discharge of the cargo.
The relevant obligation under the time charter was the obligation to carry out such discharging obligations as should be required.
As Lord Sumption says, it is not disputed that Transclear and IBG exercised that right and performed that obligation as agent for Cargill.
The real question, he says, concerns the scope of that agency.
To what acts or omissions did it extend?
Approaching the matter in that way, I am of the opinion that the answer is that it extends to the operation of the vessel from the time that notice of readiness was given (or perhaps earlier) until the completion of discharge.
Throughout that time the vessel was complying with the orders of the charterers (ie Cargill) as to proceeding to a berth, waiting to discharge and subsequently discharging.
If she had been arrested by Transclear or IBG in the course of the discharging operations themselves there could surely be no doubt that they would be treated as the agents of Cargill.
To my mind the same is true of an arrest during the period during which she was waiting to discharge.
The true construction of the charter, like the construction of any contract, depends on the language used by the parties construed in its context and having regard to the commercial purpose of the clause.
In the case of arrest, one would surely expect the vessel to be off hire if she is arrested by reason of some act or default of her owners or, as a result of some event associated with the vessel or her owners.
Here, the arrest had nothing to do with NYK.
It was a detention or arrest at the instance of Transclear by reason of an alleged failure by IBG to pay demurrage under the agreement between Transclear and IBG.
Why then should the vessel be off hire in circumstances where it is common ground (a) that she was not off hire by reason of an earlier failure of IBG to provide a working offloader and (b) the arrest was not caused either by any act or omission on the part of NYK or by any event associated with the owners or the ship?
It is convenient to repeat here clauses 8 and 49 of the charter: 8.
Prosecution of Voyages The Captain shall prosecute his voyages with due despatch, and shall render all customary assistance with ships crew and boats.
The Captain (although appointed by the Owners) shall be under the orders and directions of the Charterers as regards employment and agency; and Charterers are to perform all cargo handling at their expense under the supervision of the Captain, who is to sign the bills of lading for cargo as presented in conformity with mates or tally clerks receipts.
However, at Charterers option, the Charterers or their agents may sign bills of lading on behalf of the Captain always in conformity with mates or tally clerks receipts.
All bills of lading shall be without prejudice to this Charter and the Charterers shall indemnify the Owners against all consequences or liabilities which may arise from any inconsistency between this Charter and any bills of lading or waybills signed by the Charterers or their agents or by the Captain at their request. 49.
Capture, Seizure, Arrest Should the vessel be captured or seizured or detained or arrested by any authority or by any legal process during the currency of this Charter Party, the payment of hire shall be suspended until the time of her release, unless such capture or seizure or detention or arrest is occasioned by any personal act or omission or default of the Charterers or their agents.
Any extra expenses incurred by and/or during the above capture or seizure or detention or arrest shall be for Owners account.
Notice of readiness was tendered at 0635 hours local time on 15 October 2008.
It seems to me to be a reasonable inference that the notice of readiness was communicated to all of Cargill, Sigma, Transclear and IBG.
The next step was for the discharge of the cargo.
I would accept that it was not the duty of Cargill as charterers to discharge the cargo at any particular time but, in accordance with lines 31 33 of the charter, they remained responsible for the fulfilment of the charter notwithstanding that the vessel was sub chartered.
Moreover, by clause 8, it was agreed that the master would be under the orders and directions of the Charterers as regards employment and agency; and the charterers [were] to perform all cargo handling at their expense.
It is common ground that the vessel remained on hire during the period between her arrival on 15 October and 18 December 2008 when she was instructed to proceed to a berth for discharging.
In the meantime she was simply waiting at Bonny Town Anchorage.
The delay was caused by congestion which was caused at least in part by the breakdown of IBGs offloader and thus by the failure of those responsible for the discharge to arrange for the discharging.
Under the charter that was of course Cargill, even though the delay was in fact caused in part by IBG.
It seems to me that in these circumstances it is appropriate to regard IBG as the agents of Cargill during this period for the purposes of the charter, even though they were not agents in the classic Bowstead sense of being appointed by Cargill to perform a particular act or class of act.
As I see it that is why it is correctly accepted that Cargill continued to pay hire for the period of delay and was obliged to do so.
In these circumstances it was or would have been appropriate to regard IBG as the agents of Cargill in respect of the delay caused by congestion which was in turn caused by the breakdown of their unloader.
I appreciate that there is no clause similar to clause 49 expressly putting the vessel off hire in that period.
But why is that so? The answer must be that the parties appreciated that there was no sensible basis for including the breakdown of sub charterers discharging equipment as an off hire event.
That was surely because it was accepted on all sides that (as stated above) the scheme of the time charter was that the vessel would be on hire throughout the time charter period unless there was some reason associated with the vessel or her owners why they should not receive hire during a particular period.
I agree that it is necessary for the owners to show that the particular acts which caused the vessel to be arrested were done in the capacity of Cargills agents, ie by way of vicarious enjoyment of Cargills contractual rights or vicarious performance of its obligations, pursuant to its express rights under clause 8 to give orders and directions as to employment and agency.
Further (by reason of lines 31 33) it had a right to sub charter the vessel under the charter and did so by sub chartering to Sigma, which in turn sub contracted in some way with Transclear and/or IBG.
I would accept the way the owners put their case as follows.
Cargill were enabled to generate the string of contracts referred to above and thus engage the involvement of both Transclear and IBG to discharge the vessel by virtue of the express liberty to sublet the vessel granted by the charter with NYK.
Under that liberty, Cargill were expressly to remain responsible for the fulfilment of the charter.
Cargill could delegate the performance of the charter to sub contractors but could not delegate responsibility.
The precise form and terms of the sub contracts which could be concluded pursuant to the liberty to sub let were a matter entirely for Cargill and their sub contractors, so long as they did not amount to a breach of the charter.
Thus Cargill were entitled to conclude the voyage charter with Sigma (imposing discharge functions and obligations on Sigma) and Sigma (or their intermediate sub contractors) were entitled to conclude a voyage charter or a sale contract with Transclear (equally imposing discharge functions and obligations on Transclear) and in turn Transclear were entitled to conclude a sale contract with IBG (imposing discharge functions and obligations on IBG).
The arrest was intimately linked to the discharge functions thus delegated in turn to both Transclear and IBG.
IBGs failure to discharge the vessel properly (ie within the laytime stipulated in the sale contract) led to it incurring a demurrage liability to Transclear, but, because IBG then failed to discharge the lien on the cargo for that claim, Transclear sought security for it by the arrest of the cargo and (as it transpired) also the arrest of the vessel.
The arrest prevented discharge of the cargo.
Quite apart from the novelty of a ship being arrested for a claim for demurrage, it is noteworthy that there was no claim against the vessel or NYK as her owners.
In these circumstances, while I agree with Lord Sumption in his para 27 that Cargill had no contractual obligation to the owners NYK to procure that the vessel be discharged at any particular time, I do not think that it is right to say that they had no contractual interest in the timing of the operation.
As Lord Sumption observes, they had a contractual obligation to pay hire, so that the longer the delay before discharge the more hire would have to be paid.
It seems to me to be a reasonable inference that Cargill were either aware of the arrangements between Sigma and Transclear or were aware that it was open to Sigma to make arrangements with Transclear (and Transclear with IBG).
In such circumstances they were certainly aware of the demurrage provisions in their sub charter with Sigma (and must know whether they had a claim for demurrage).
Equally they must have known that there was a real possibility of similar provisions down the line of sub charters.
As I see it, it is reasonable to hold that they must have appreciated that there might well be liabilities for demurrage down the line.
I do not think that it is fair to say (as Lord Sumption does) that the chain might have included a quite different sort of contract to which Cargill were not a party and of which they would not necessarily have had any knowledge.
It seems to me that it must have been clear to Cargill that there was every possibility that there would be sub sub charters on voyage terms and that some party other than them (or indeed Sigma) would ultimately be responsible.
Further, Lord Sumption draws a distinction between defective performance of the cargo handling operations on the one hand and the absence of cargo handling operations on the other.
He says this, in the context of what he calls the first problem facing NYK arising out of the arrangements: 28.
The first is that the effect of these arrangements, as between NYK and Cargill, was that such cargo handling operations as occurred, although carried out by IBG, were carried out on Cargills behalf, at their orders and expense under clause 8 of the time charter.
It was the vicarious exercise of a right of Cargill under the time charter, which Cargill indirectly made available to IBG.
But the defective performance of cargo handling operations is one thing.
An absence of cargo handling operations is another.
Whatever its cause, IBGs failure to discharge the cargo between the giving of notice of readiness on 15 October 2008 and the commencement of discharge on 15 January 2009 cannot meaningfully be regarded as the vicarious exercise by IBG of some right of Cargill under the time charter.
IBG were doing nothing in this period, as far as the vessel was concerned, and were therefore doing nothing on behalf of Cargill.
Their inactivity could be relevant to the question of responsibility posed by clause 49 only if it amounted to the vicarious breach of some obligation of Cargill under the time charter, which it did not.
It follows that any responsibility of Cargill under the time charter for IBGs acts or omissions in the conduct of cargo handling operations at the port of discharge, extended only to acts or omissions in the actual performance of those operations while they were in progress.
As stated above, and as Lord Sumption accepts in para 8, the vessel was not off hire during the period between 15 October and 18 December because of delay caused by defects in IBGs unloader.
That must be because at that time IBG was acting as the agent of Cargill because there was a sufficient causal nexus between the delay caused by congestion and the failure of IBG to provide an unloader for the purpose of discharging the cargo, which was of course the obligation of Cargill under the charter which had been delegated to others.
It is an example of the point made by Lord Sumption in the first sentence of his para 28.
The delay arose out of the vicarious exercise of the discharging operations by IBG carried out on Cargills behalf.
It was the vicarious exercise of a right of Cargill under the time charter, which Cargill indirectly made available to IBG.
The distinction between the defective performance of cargo handling operations and the absence of cargo handling operations altogether seems to me to be too narrow.
It would surely logically lead to the conclusion that NYK should not be paid hire while waiting to discharge because of breakdown of IBGs offloader.
The reason why it is not so suggested is surely that the charter is drawn up on the basis that the vessel will be on hire while carrying out the owners obligations under the charter.
Those obligations include waiting to discharge cargo in accordance with the orders and directions of [Cargill] as regards employment and agency in clause 8.
The whole period of waiting during the period of congestion, including that caused by the breakdown of the IBGs offloader falls within clause 8.
That makes commercial sense for the reason already given, namely that the delay arose out of the vicarious exercise of the discharging operations by IBG carried out on Cargills behalf.
As I see it, the discharging operations include the period of waiting after the notice of readiness and the period of actual discharge because the vessel is throughout complying with the charterers orders under clause 8.
Moreover, the vessel was also complying with Cargills instructions in their letter to the master of 18 December (para 9) when she did not commence cargo discharge because of the court order obtained by Transclear.
For these reasons, I do not think that it is right to distinguish between the time when the vessel is waiting for discharge and the time when she is in fact discharging.
In both cases the vessel is engaged in the actual performance of the owners obligations and/or in the performance of the owners rights.
The vessel is waiting as instructed by the charterers or their agents, who include for this purpose sub charterers and those who become responsible for discharge, as for example here Transclear and IBG.
This analysis seems to me to lead to the conclusion that, when the vessel was instructed not to commence discharging in Cargills letter to the master quoted above as a result of the order of the court in Nigeria, she was complying with charterers orders under clause 8.
Moreover when Transclear took action to delay cargo discharge which resulted in the detention of the vessel (albeit as a mistake) its claim arose out of arrangements made (or not made) for the discharge of the vessel as between itself and IBG.
I respectfully disagree with Lord Sumption when he says that the responsibility of the charterers after the service of the notice of readiness was limited to acts or omissions in the actual performance of cargo handling operations.
It extended throughout the period when the vessel, as stated above, was acting under the orders and directions of [Cargill] as regards employment and agency.
That was throughout the period when she was at anchor waiting for instructions to discharge the cargo, when she remained at anchor after the order of the Court, and thereafter when she proceeded to a berth and discharged the cargo.
It seems to me to be of some significance that (as quoted above) the proviso in clause 49, which reads unless such capture or seizure or detention or arrest is occasioned by any personal act or omission or default of the Charterers or their agents, expressly covers personal omissions and defaults of the charterers agents.
Nothing in clause 49 requires a positive act that is a specific breach of the charter, whether vicarious or otherwise.
As I see it, the failure to discharge within the laydays in the sub charter or sub sub charters (or the like) entered into by or with the authority of Cargill are omissions or defaults of the charterers agents within clause 49.
An absence of cargo handling operations is just as much defective performance of them.
Further, in his para 30 Lord Sumption says that the second difficulty in NYKs way is that we are not in this case concerned with responsibility for delay generally, but with responsibility for loss of time caused by the arrest of the vessel.
An arrest occasioned by incurring or enforcing a liability for demurrage under a sub charter could not possibly be regarded as the vicarious exercise of any facility made available to Cargill under the time charter.
I respectfully disagree.
As stated above, it seems to me that the cause of the arrest of the vessel was action taken by Transclear as a result of a failure of IBG to discharge the vessel within the lay days.
It makes no difference that this was a failure as between IBG and Transclear.
That failure was a failure on the part of an agent of the charterers, whether IBG or Transclear, or indeed Sigma, to discharge the vessel timeously, with the result that the vessel was arrested and delayed.
On this basis I would hold that the failure to discharge the cargo was caused by the acts or omissions of the charterers agents and that when the vessel was arrested by Transclear she was arrested by the charterers agents within the meaning of clause 49.
This makes commercial sense because (as stated earlier) there is no reason why the vessel should be off hire for a reason outside the control of the vessel or her owners.
On the contrary, she should be on hire and clause 49 construed accordingly.
After all, the charter expressly provided at lines 31 33 that the charterers had liberty to sublet the vessel but that Charterers shall remain responsible for the fulfilment of the charter.
It may well be that the charterers have rights over against Sigma on the basis that IBG and Transclear were delegates of Sigmas discharge functions under the sub charter between Cargill and Sigma.
We are not however concerned with those, although it would to my mind be bizarre if Cargill were entitled to demurrage at a time when the vessel was off hire, so that Cargill were not paying hire to the owners.
As I see it, the purpose of clause 49 is achieved by carving out of the clause the case of arrest occasioned by any personal act or omission or default of the Charterers or their agents.
For the reasons I have given, I would hold that Transclear and/or IBG were for this purpose the agents of Cargill when the vessel was arrested because the arrest was closely related to the discharge of the cargo and there is no suggestion that the vessel or her owners were in any way responsible.
The owners had no control over the process of delegation or sub delegation.
The delegation included delegation of the obligation to discharge, which was ultimately passed to IBG.
But IBG did not perform it at all.
Looking at the matter from the perspective of the commercial risks involved, it was Transclear who subcontracted with IBG.
The demurrage dispute was entirely a matter between those two parties.
Why should the owners be responsible for non performance of the obligation, in circumstances where it had no way of assessing the commercial risks attaching to the delegation? As it turned out, those commercial risks crystallised into IBGs failure to secure Transclears claim.
This had nothing to do with NYK.
In all these circumstances there is no good commercial reason why the vessel should not remain on hire.
I agree with Lord Sumption in para 21 that nobody suggests that the mere fact that Transclear and IBG were for some purposes agents of Cargill means that Cargill is responsible for anything they might do which results in the detention of the ship.
I further agree that that is because not everything a subcontractor does can be regarded as the exercise of a right or the performance of an obligation under the time charter.
I agree that, if Transclear or IBG had caused the vessel to be arrested in support of a claim to a proprietary interest in it or in support of a cargo claim in connection with a sister ship, the vessel would have gone off hire.
It appears to me that in those cases the proviso in clause 49 would not have applied because the arrest would not have been occasioned by Cargill or their agents because neither Transclear nor IBG would have caused the arrest in their capacity as Cargills agents.
The vessel would therefore have gone off hire under clause 49.
By contrast, on the facts here, Transclear did occasion the arrest in their capacity as Cargills agent for the reasons explained above.
I recognise that my construction of clause 8 (and clause 49) is wider than that proposed by Lord Sumption.
However, I do not think that it is as wide as that of the Court of Appeal.
The essence of my view is that stated in para 43 above.
Cargill were in charge of the discharging operations, which they arranged though Sigma, Transclear and IBG.
The vessel was throughout under the orders of the charterers.
A decision to this effect makes sense and will not open the floodgates.
Finally, I do not regard my view as inconsistent with any of the decided cases.
In The Mediolanum a refinery was engaged by charterers as an independent contractor but was held by Kerr LJ (in the passage quoted by Lord Sumption in para 16) to be the agent of the charterers because it was used by the charterer to perform one of the charterers obligations under the contract.
The claim failed for an unconnected reason, namely that the refinery was not responsible for designating the particular bunkering place.
The decision in The Arctic Trader (referred to by Lord Sumption in para 17) carries the issue no further.
In The Goodpal in the passages from the judgment of Colman J quoted at para 18 he referred to the position of the shippers and receivers as agents of charterers in connection with the process of loading and discharging respectively.
As Lord Sumption observes, Colman J held that the time charterers were not responsible contractually for the order given by the charterers at the first port of discharge because their agency could not extend to cargo which was not consigned to them but for other consignees at the second port.
He quotes this passage: The only relevant instructions were received from the receivers at the first discharge port who could not reasonably have been thought by anybody to be standing in the position of the charterers in relation to the balance of the cargo to be loaded at the second discharge port.
I would entirely accept those statements as applied in that case.
There is in my opinion no conflict between any of those principles and those which I would apply in this case.
For the reasons given above I would hold that the vessel was on hire throughout and would dismiss the appeal.
| UK-Abs | By a time charter dated 11 September 2008, on an amended NYPE form, the owners NYK Bulkship (NYK) chartered the vessel Global Santosh to charterers Cargill International (Cargill) for one time charter trip (the charter).
Cargill sub chartered the vessel to Sigma Shipping.
The vessel carried a cargo of cement from Slite, Sweden to Port Harcourt, Nigeria, pursuant to a contract of sale between Transclear SA (as sellers) and IBG Investments Ltd, which had the ultimate obligation to discharge the cargo.
Transclear had probably sub chartered the vessel, but whether this was from Sigma or by a more indirect link was not clear.
Under that sale contract, IBG was to pay demurrage to Transclear in the event of delay in discharge beyond the agreed laytime in the contract.
If that demurrage was unpaid, Transclear was purportedly granted a lien over the cargo.
The vessel arrived at Port Harcourt on 15 October 2008 and tendered notice of readiness.
She was instructed to remain at anchorage because of port congestion (caused, at least in part, by the breakdown of IBGs off loader).
She proceeded to berth on 18 December 2008, but was ordered back to anchorage and arrested on the basis of a Nigerian court order arising from a claim by Transclear to secure a demurrage claim against IBG.
This was an obvious mistake, because the order should have directed the arrest of the cargo, not the vessel.
Following an agreement between Transclear and IBG, the vessel finally began discharging on 15 January 2009 and completed discharge on 26 January 2009.
Cargill withheld hire for the period of the arrest.
It relied on an off hire clause in the charter, clause 49, which stated that the vessel should be off hire during any period of detention or arrest by any authority or legal process during the charter, with the proviso unless such capture or seizure or detention is occasioned by any personal act or omission or default of the Charterers or their agents.
Cargill commenced London arbitration claiming hire, but the arbitrators determined that the proviso in clause 49 did not apply during the period of the arrest.
On an appeal, the Commercial Court allowed the appeal, holding that IBGs failure to discharge within the laydays under its contract of sale with Transclear and to pay demurrage were omissions in the course of discharging, and remitted the question of causation back to the arbitrators.
The Court of Appeal dismissed the appeal, on the basis that the delay to the vessel fell within the charterer sphere of responsibility.
Cargill appealed to the Supreme Court.
The Supreme Court allows Cargills appeal by a majority of four to one, holding that the vessel was off hire throughout the period of arrest and that the proviso in clause 49 was not engaged.
Lord Sumption gives the lead judgment, with which Lord Neuberger, Lord Mance and Lord Toulson agree.
Lord Clarke writes a dissenting judgment, and would have dismissed the appeal and held that the vessel was on hire.
This appeal raises a question as to the meaning of charterers agents in clause 49 of the charter.
If a ship is sub let under a charter, the charter operates as a contract under which rights are enjoyed and obligations performed vicariously [14].
Agents is not used in its strict legal sense, but is used to refer to persons or subcontractors to whom the charterers rights are made available further down the chain, or who satisfy the time charterers obligations that have been delegated to them [19].
Not everything that a subcontractor does can be regarded as the exercise of a right or the performance of an obligation under a time charter.
For the purposes of clause 49, there must be a sufficient nexus between the occasion for the arrest and the function which Transclear or IBG were performing as agent of Cargill [21].
The arrest was not occasioned by any personal act or omission or default of the Charterers or their agents.
Firstly, Cargill was only responsible for IBGs acts or omissions in the actual performance of cargo handling operations while they were in progress.
Cargill had no obligation to procure discharge at any particular time, and no contractual interest in the timing of the operation.
In failing to carry out cargo handling operations between 15 October 2008 and 15 January 2009, IBG was not vicariously exercising Cargills rights, nor was it vicariously breaching Cargills obligations under the charter [28].
Secondly, the arrest was occasioned by a dispute between Transclear and IBG about demurrage under the sub charter.
That was not the vicarious exercise of any right made available to Cargill under the time charter [30].
The Court of Appeal was wrong to approach the matter by asking in whose sphere of responsibility the matters occasioning the arrest lay.
The only sense in which the arrest was occasioned by Cargills trading arrangements concerning the vessel was that Cargills sub charter to Sigma enabled Transclear and IBG to become involved further down the chain, and it was their dispute that caused the arrest.
That ignores the need for a sufficient nexus between the acts leading to the arrest and the performance of functions under the charter [31].
Lord Clarke, in a dissenting judgment, would have held that the vessel was on hire during the period of the arrest.
The agency extended to the operation of the vessel from the giving of the notice of readiness (or perhaps earlier), until the completion of discharge.
An arrest during the period during which she was waiting to discharge is the same as an arrest in the course of the discharging operations [36].
The arrest had nothing to do with NYK, but was linked to Cargills discharge functions delegated to Transclear and IBG.
An absence of cargo handling operations is just as much defective performance of them.
This solution makes commercial sense, because the parties knew that demurrage might be incurred down the line, because it was common ground that the vessel was not off hire by reason of IBGs earlier failure to provide a working off loader, and because the owners had no control over Cargills delegation to Transclear and IBG [34 58].
|
This appeal concerns an alleged infringement of Community Registered Design No 43427 0001 (the CRD), which is owned by the appellant, Magmatic Ltd. The CRD consists of six images prepared by a 3D Computer Assisted Design (CAD) program, in monochrome, with grey scale shading and distinct tonal contrasts.
These are two of those images: Although it might appear from these images that the horns, and possibly the front and rear clasps, are differently shaded from the body, it is clear from the six images, viewed collectively, that they are the same light grey shade as the rest of the body, whereas the wheels and spokes, the strap on the top and the strips in the front and the rear are shaded black.
Magmatics founder, Robert Law, won a prize in 1998 for a design of a ride on suitcase for children.
It had four wheels and a handle, and was known as the Rodeo.
He updated the design, which he then applied to register at the Office for Harmonization in the Internal Market (OHIM), who published it on 28 October 2003 as the CRD, with the express indication that the product depicted in the six images is for use as suitcases.
Since May 2004, Magmatic has (initially through a licensee and since 2006 by itself) manufactured and sold ride on suitcases for children under the trade mark Trunki, whose shape is very similar indeed to that shown on the CRD.
The Trunki case was initially marketed with the body and strap one colour, the horns and wheels another colour, and the strips, clasps and wheel spokes a third colour, but without ornamentation.
Subsequent models had slightly different colouring and included ornamentation.
Two examples of such subsequent models, which are based on images which are contained in Community Registered Designs, applied for in 2010 by Magmatic, are shown below.
The images included in these later registrations included both coloured CADs with markings and drawings with markings.
Two of those registered designs included CADs shown below: The first example has a red body, with black horns, nose, spots, bottom front, strip, handles, and wheels, and a white centre to the nose and white spokes.
The second example is coloured orange, with horns, front feet, nose and wheels which are white, but with black markings, nose centre, spokes, handles and strip.
In February 2013, Magmatic issued proceedings seeking damages and an injunction against the respondent, PMS International Group plc, alleging that PMS was importing into, and selling in, the United Kingdom and Germany a Kiddee Case which infringed the CRD.
These are two examples of a Kiddee Case:
It will be noted that in each example, the Kiddee Case is a suitcase with a number of features similar to the CRD; for instance, it is designed to look like an animal, with a wheel at each of its four bottom corners, and has a clasp at the front, and a saddle shaped top so that it can be ridden on.
On the other hand, it has differences from the CRD, such as being brightly coloured (in the first example it has two main colours, namely, red and black, and in the second example it is orange), and with eyes in the front, and (in the first example) a group of large spots or circles towards the rear and (in the second example) stripes and whiskers, and having an unsculptured ridge and covered wheels.
There are some aspects of the Kiddee Case which can be said to cut both ways in terms of similarity with the CRD: for instance it has two protuberances at the front, but they are antennae or ears rather than horns, and, while it has a ridge along the front, centre and rear, the ridge has a different shape from that of the CRD.
Community Design
Community Design Right is governed by Council Regulation (EC) No 6/2002 (the Principal Regulation).
Recital (14) of the Regulation mentions that a design has individual character if the overall impression produced on an informed user viewing the design clearly differs from that produced on him by the existing design corpus, taking into consideration the nature of the product to which the design is applied .
Recital (24) states that it is a fundamental objective that the procedure for registering a design should present the minimum cost and difficulty to applicants.
Article 4(1) of the Principal Regulation explains that a design shall be protected to the extent that it is new and has individual character.
The word design is defined in article 3(a) as the appearance of the whole or a part of a product resulting from the features of, in particular, the lines, contours, colours, shape, texture and/or materials of the product itself and/or its ornamentation.
Article 6 explains that a design has individual character if the overall impression it produces on the informed user differs from the overall impression produced on such a user by any design which has been made available to the public.
Article 10(1) states that [t]he scope of the protection shall include any design which does not produce on the informed user a different overall impression.
Article 10(2) states that, when assessing the scope of protection, the degree of freedom of the designer in developing his design is to be taken into consideration.
Article 36(1) of the Principal Regulation sets out the requirements of a valid application for registration of a design, which include a representation of the design suitable for reproduction.
Article 36(2) also requires an application to contain an indication of the products in which the design is intended to be incorporated or to which it is intended to be applied.
Article 36(3) states that an application may contain various things, including (d) the classification of the products in which the design is intended to be incorporated or to which it is intended to be applied.
Article 36(6) states that [t]he information contained in the elements mentioned in paragraph 2 and in paragraph 3(a) and (d) shall not affect the scope of protection of the design.
Commission Regulation (EC) No 2245/2002 (the Implementing Regulation) implements the Principal Regulation.
Article 4(1) of the Implementing Regulation states that the representation of the design shall consist in a graphic or photographic reproduction of the design, either in black and white or in colour.
Up to seven different views of the design are permitted.
Reflecting article 36 of the Principal Regulation, article 4(1)(c) of the Implementing Regulation states that no explanatory text, wording or symbols, other than the indication top may be displayed.
And article 4(1)(e) provides that the images accompanying an application to register a design shall be of a quality permitting all the details of the matter for which protection is sought to be clearly distinguished for entry in the Register of Community Designs.
As Jacob LJ said in Procter & Gamble Co v Reckitt Benckiser (UK) Ltd [2008] FSR 8, para 3: The most important things in a case about registered designs are: (1) (2) (3) the registered design; the accused object; and the prior article And the most important thing about each of these is what they look like.
And at para 27, he said that [t]he point of protecting a design is to protect that design as a design.
So what matters is the overall impression created by it: will the user buy it, consider it or appreciate it for its individual design?
The proceedings: first instance
Magmatic alleged that the Kiddee Case infringed the CRD on the ground that the Kiddee Case did not produce on the informed user a different overall impression from the CRD within article 10(1) of the Principal Regulation.
Magmatic also contended that the Kiddee Case infringed certain other IP rights of Magmatic, including United Kingdom unregistered design rights and copyright.
PMSs defence included a classic squeeze, namely the contention that, if, which it denied, the CRD covered the Kiddee Case then it also must extend to the Rodeo, and therefore it was invalid as it did not have individual character because it did not produce a different overall impression from the existing design corpus within article 4(1) of the Principal Regulation.
The matter came on for hearing before Arnold J, and after a trial which lasted four days, he gave a reserved judgment, in which he found that the CRD was not invalid over the Rodeo, but that the Kiddee Case infringed the CRD and the UK unregistered design rights, but not the copyright [2013] EWHC 1925 (Pat).
After setting out the facts, Arnold J made a number of initial findings before turning to the crucial issue of whether the Kiddee Case produce[s] on the informed user a different overall impression from the CRD.
At para 52, he rightly said that the most important thing about each of (i) the registered design [the CRD], (ii) the accused design [the Kiddee Case] and (iii) the prior art [the Rodeo] is what they look like.
At para 55, he identified the informed user primarily as the parent, carer or relative of a three to six year old child.
And at para 56, Arnold J mentioned that the only item of prior art relied on by PMS was the Rodeo which had been publicly disclosed in 1998.
However, that disclosure was, he said, on too limited a basis to be part of the design corpus, which, he held in para 57, was limited to a range of adult clamshell suitcases.
He went on at para 61 to say that, as the CRD represents a substantial departure from the design corpus and that the designer of the CRD had considerable design freedom, it follows that, subject to the impact of the Rodeo, the CRD is entitled to a broad scope of protection.
Having compared the CRD with the Rodeo, Arnold J said that PMS was right not to challenge the validity of the CRD except as part of its squeeze argument (para 64).
In paras 66 69 of his judgment, Arnold J addressed the question whether, when comparing the Kiddee Case with the CRD, the graphical designs on the surface of the Kiddee Case are to be ignored and concluded that they were, because, as he put it in para 69, the CRD is evidently for the shape of the suitcase, and the proper comparison is with the shape of the Kiddee Case.
In paras 70 75, he then identified and discussed the detailed similarities and differences between the CRD and the Kiddee Case.
In particular, he identified 11 items of similarity including [t]wo horns/protrusions located at the top of the front of the case, and six features of the Kiddee Case which were absent from the CRD, although he said that two of the six, namely [p]rominent animal markings and [e]yes at front were to be ignored, as the registration in this case was for a shape, as he had explained in para 69.
At para 76, Arnold J said that the informed user would notice both similarities and differences, but that what mattered was how those similarities and differences would affect the informed users overall impression, and identified the differences as being (i) the more rounded contours of the Kiddee Case around the seating area , (ii) the covered wheels of the Kiddee Case, (iii) the more flared areas around the clasps and (iv) the absence of [a] lip [at the bottom of front and rear] in the Kiddee Case.
At para 77, having said that, were it not for the Rodeo, he would have had little hesitation in holding that the Kiddee Case produced the same overall impression as the CRD, Arnold J described himself as rather more doubtful, given that the scope of protection to be afforded to the CRD was reduced by the prior art of the Rodeo.
Nonetheless, he concluded that: Despite the differences between the Kiddee Case and the CRD, the overall impression the Kiddee Case creates shares the slimmer, sculpted, sophisticated, modern appearance, prominent ridge and horn like handles and clasps looking like the nose and tail of an animal which are present in the CRD, but which are absent from the Rodeo.
Moreover, neither the Kiddee Case nor the CRD have anything like the handle which is a prominent feature of the Rodeo.
The proceedings: the Court of Appeal
PMS appealed to the Court of Appeal solely on the issue of whether the Kiddee Case infringed the CRD.
For reasons given by Kitchin LJ, with which Moses and Black LJJ agreed, the appeal was allowed [2014] RPC 24.
Kitchin LJ considered that Arnold J had erred in two respects, and he gave his reasons in paras 47 48.
Because Kitchin LJs reasoning in those two paragraphs is particularly reliant on what he had said in paras 41 42, it is appropriate to quote from all four paragraphs.
In para 41, Kitchin LJ began by saying that he thought that the judge had made two errors; he then explained that the CRD images were not simple line drawings, but three dimensional images which show the effect of light upon [the suitcases] surfaces.
He continued: 41.
Further and importantly, the suitcase looks like a horned animal with a nose and a tail, and it does so both because of its shape and because its flanks and front are not adorned with any other imagery which counteracts or interferes with the impression the shape creates.
As Mr Vanhegan submits, the CRD is, in that sense, relatively uncluttered and it conveys a distinct visual message.
Here then the first of the judges errors can be seen: he failed to appreciate that this is a design for a suitcase which, considered as a whole, looks like a horned animal.
In para 42, Kitchin LJ accepted that, as the CRD images were shown in monochrome, the design claimed is not limited to particular colours, so that PMS cannot point to the colour of the Kiddee Case as being a point of distinction.
He continued: 42.
That is not the end of the analysis, however, because each of the representations shows a distinct contrast in colour between the wheels and the strap, on the one hand, and the rest of the suitcase, on the other.
I have given anxious consideration to whether this is simply an artefact of the computer generation process or a visual cue to indicate that the wheels and the strap are each separate components.
However, I do not find either of these alternative explanations convincing.
The clasps are also separately functioning components and they are not shown in a contrasting colour and it seems to me that the wheels could perfectly well have been shown and depicted as separate components in the same colour as the rest of the body.
Moreover, depicted as they are and standing as they do at the four corners of the animal, the wheels are, to my eye, a rather striking aspect of the design as a whole.
Kitchin LJ next discussed Arnold Js analysis, and then at para 47, he returned to his first criticism, which involved a fuller discussion of what he had said in para 41, namely: 47.
First and most importantly, it seems to me the judge failed to carry out a global comparison having regard to the nature of the CRD and the fact that it is clearly intended to create the impression of a horned animal.
This is plainly one of its essential features.
Necessarily, therefore, a global assessment of the CRD and the accused designs requires a consideration of the visual impression they each create and in so far as that impression is affected by the features appearing on their front and sides, it seems to me those other features must be taken into account.
Thus taking the insect version of the Kiddee Case, I believe that the impression its shape creates is clearly influenced by the two tone colouring of the body and the spots on its flanks.
As a result it looks like a ladybird and the handles on its forehead look like antennae.
Overall the shape conveys a completely different impression from that of the CRD.
It was, in my judgment, wrong for the judge to eliminate the decoration on the accused design from his consideration entirely because it significantly affects how the shape itself strikes the eye, and the overall impression it gives.
At least in the case of this particular registered design, the global comparison necessarily requires account to be taken of the context in which the accused shape appears.
In para 48 of his judgment, Kitchin LJ identified the second error, as being the judges failure to take account of the colour contrast between the wheels and the body of the CRD, which Kitchin LJ had explained in para 42.
He described this contrast as a fairly striking feature of the CRD which was simply not present in the accused designs, and which was another matter which the judge ought to have taken into account in carrying out the global comparison.
Although Kitchin LJ said that he had identified two errors, it is convenient, in order to understand the arguments on this appeal, to treat him as raising three criticisms.
The first, discussed in para 41 and (more fully) in para 47, is that Arnold J failed to give proper weight to the overall impression of the CRD as an animal with horns, which was significantly different from the impression made by the Kiddee Case, which, in the examples shown in para 4 above, were either an insect with antennae or an animal with ears.
The second criticism, also considered in para 41 and, again more fully, in para 47, is that the judge failed to take into account the effect of the lack of ornamentation on the surface of the CRD.
The third criticism, in para 42 and, more summarily in para 48, is that the judge ignored the colour contrast in the CRD between the body and the wheels.
Given his conclusion that the judge had gone wrong in the respects he had identified in his paras 47 and 48, Kitchin LJ explained in para 49 that the Court of Appeal was free to form its own view on the central issue of whether the Kiddee Case infringed the CRD.
He then turned to address that issue, and concluded, at para 53, that the overall impression created by the two designs is very different, and therefore decided that the Kiddee Case did not infringe the CRD.
Accordingly, PMSs appeal succeeded.
Magmatic now appeals to this court.
The appellate courts function
Where it falls to a judge to determine whether an item infringes a Community Registered Design, the decision to be made is whether the item produce[s] on the informed user a different overall impression from the design.
That is an issue which involves a type of judgmental conclusion that often has to be reached in intellectual property cases [in respect of] which appellate courts should be slow to interfere with the judgment of the trial judge Lucasfilm Ltd v Ainsworth [2012] 1 AC 208, para 45 (Lord Walker and Lord Collins).
To the same effect, Lord Hoffmann said in Designers Guild Ltd v Russell Williams (Textiles) Ltd (trading as Washington DC) [2000] 1 WLR 2416, 2423: because the decision involves the application of a not altogether precise legal standard to a combination of features of varying importance, an appellate court should not reverse a judges decision unless he has erred in principle.
Kitchin LJ was therefore right to imply in para 49 of his judgment that it was only because he had concluded that Arnold J had gone materially wrong in his approach to the issue whether the Kiddee Case infringed the CRD that the Court of Appeal could reconsider that issue.
Once they had reached the conclusion that there had been material errors, it was, at least in principle, open to the Court of Appeal to consider and determine the issue for itself.
In this case, correctly in my view, Magmatic does not suggest that, if, contrary to its submission, the judge erred as Kitchin LJ held, the Court of Appeal was not entitled to consider and determine the issue for itself.
The Court of Appeal found that there was no infringement, and this court could only interfere with that conclusion, if we considered that Kitchin LJ had gone materially wrong in his approach see para 24 above.
In these circumstances, the arguments of substance before us have been limited (and rightly so) to the questions whether the Court of Appeals criticisms of Arnold Js approach, as set out in paras 41 42 and 47 48 of Kitchin LJs judgment, were correct.
Subject to one point, if we consider that those criticisms were justified, then Magmatics appeal should be dismissed and the Court of Appeals order upheld; and if we consider that they were unjustified, Magmatics appeal must be allowed and Arnold Js order restored.
The possibility of a reference
However, although its primary argument is that its appeal should be allowed, Magmatic alternatively contends that the issues raised by what I have identified in para 21 above as the second and third criticisms, involve a point of EU law which is not acte clair or acte clair, and which therefore should be referred to the Court of Justice of the European Union, the CJEU.
The Comptroller General of Patents, Designs and Trade Marks, in his capacity of Registrar of Designs, while very properly taking no other position in relation to the issues on this appeal, supports the argument that there are questions which ought to be referred to the CJEU.
There is no doubt that, if we are of the view that this appeal could only be resolved by determining a point of EU law which has not already been determined by the CJEU (ie is not acte clair) or whose determination nonetheless leaves room for reasonable doubt (ie is not acte clair), then, as the final court of appeal in the United Kingdom, we would be obliged to refer it to the CJEU pursuant to article 267 of the Treaty for the Functioning of the European Union see CILFIT Srl v Ministero della Sanit (Case 283/81) [1983] 1 CMLR 472.
It is rightly common ground that no question of acte clair arises, so the issue in this connection is whether this appeal raises an issue of EU law which is not acte clair and ought to be referred.
I turn then to the three criticisms made by Kitchin LJ of Arnold Js judgment.
The first concerns the impression created by the shape of the CRD as against the Kiddee Case.
The second criticism concerns the effect on that impression of the respective presence and absence of decoration on the body of the Kiddee Case and of the CRD.
The third concerns the effect of the allegedly contrasting colours of the CRD.
I shall discuss these criticisms in turn, but, before doing so, it is right to consider the proper approach to the images of a community registered design as it has a significant bearing on all three criticisms.
The images incorporated in a Community Registered Design
Article 3(a) of the Principal Regulation identifies what is meant by design, and, unsurprisingly, it refers to the appearance, which is expressed to include a number of different factors, all, some or one of which can be included in a particular registered design.
It is, of course, up to an applicant as to what features he includes in his design application.
He can make an application based on all or any of the lines, contours, colours, shape, texture materials and/or ornamentation of the product in question.
Further, he can make a large number of different applications, particularly as the Principal Regulation itself provides that applications for registration have to be cheap and simple to make.
As Lewison J put it in Procter & Gamble Co v Reckitt Benckiser (UK) Ltd [2007] FSR 13, para 48, [t]he registration holder is entitled to choose the level of generality at which his design is to be considered.
If he chooses too general a level, his design may be invalidated by prior article If he chooses too specific a level he may not be protected against similar designs.
So, when it comes to deciding the extent of protection afforded by a particular Community Registered Design, the question must ultimately depend on the proper interpretation of the registration in issue, and in particular of the images included in that registration.
Accordingly, it is right to bear in mind that an applicant for a design right is entitled, within very broad limits, to submit any images which he chooses.
Further, in the light of article 36(6), an applicant should appreciate that it will almost always be those images which exclusively identify the nature and extent of the monopoly which he is claiming.
As Dr Martin Schltelburg, the co ordinator of OHIMs Designs Department, has written, the selection of the means for representing a design is equivalent to the drafting of the claims in a patent: including features means claiming them The Community Design: First Experience with Registrations [2003] EIPR 383, 385.
And, as Dr Schltelburg went on to explain, an applicant is free to indicate which, if any, aspects of the images of a Community Registered Design are disclaimed: Where an applicant wishes to exclude features which are shown in the representation for explanatory purposes only, but do not form part of the claimed design, he may disclaim those auxiliary features by depicting them in broken lines (for drawings) or by means of colouring them (for black and white drawings or photos) or encircling them (for any drawing or photo).
This is entirely consistent with what is stated in paragraph 4.3 of OHIMs Manual Concerning Proceedings Before the Office for Harmonization in the Internal Market (Trade Marks and Designs), Registered Community Designs, Examination of Applications (2nd ed, in force at the relevant time for present purposes).
Over and above these considerations, it is also worth remembering that an applicant is entitled to make any number of applications.
More broadly, it is for an applicant to make clear what is included and what is excluded in a registered design, and he has wide freedom as to the means he uses.
It is not the task of the court to advise the applicant how it is to be done.
That it may be said is a matter of practice rather than law, and if further guidance is needed it can be sought from other sources, such as OHIM.
So far as the presence or absence of colouring in any image is concerned, in para 32 of his judgment on this case Kitchin LJ explained that: [a]n application for a Community Registered Design may be filed in black and white (monochrome) or in colour.
If colour forms no part of the design then it is conventional to file the design in black and white.
Similarly, if a particular colour does form part of an aspect of a design then it may be filed wholly or partly in that colour.
So also, if monochrome colours are a feature of the design, this can be shown by placing the design against a background of a uniform but different colour.
I now turn to address the three criticisms which the Court of Appeal made of
That this has long been well established is supported by Dr Schltelburgs article, in which he wrote that where a design is shown in colours, the colours are claimed, while a black and white drawing or photo covers all colours [2003] EIPR 383, 385.
Accordingly, as Kitchin LJ observed at para 42 of his judgment, the various representations [in the CRD] are shown in monochrome, and so it must be concluded that this design is not limited to particular colours, and therefore PMS cannot point to the colour of the Kiddee Case as being a point of distinction.
There is, rightly in my judgment, no challenge to that conclusion, which is consistent with what was said by the Fourth Chamber of the General Court in Sphere Time v OHIM (Case T 68/10) [2011] ECDR 20, para 82.
However, there is disagreement between Kitchin LJ and Arnold J as to the effect of the monochromatic nature and the shading on the CAD images included in the CRD in this case.
In that connection, there are two disagreements.
The first concerns the absence of ornamentation (which gives rise to Kitchin LJs second criticism of Arnold Js judgment).
The second disagreement is about the effect of the two tone colouring on the CRD images mainly grey but some black (which gives rise to Kitchin LJs third criticism of Arnold Js judgment).
the first instance judgment.
The Court of Appeals first criticism: the horned animal appearance
So far as the first criticism mentioned in para 21 above is concerned, Kitchin LJs statements in paras 41 and 47 of his judgment that the overall impression given by the CRD is that of a horned animal is clearly right.
Further, it is not a factor to which Arnold J specifically referred when carrying out the exercise of comparing the CRD and the Kiddee Case.
Having conducted a detailed analysis of the similarities and differences between the CRD and the Kiddee Case in paras 70 75 of his judgment, he rightly focussed on the overall impression in para 76.
In that paragraph, he identified specific items of difference, but, crucially, he did not mention the horns on the images of the CRD, let alone the horned animal appearance of those images.
In addition, while he rightly referred to the overall impression in para 77, Arnold J did not mention in that paragraph the fact that the CRD images present as a horned animal.
It is true that he observed that the Kiddee Case shares the horn like handles of the CRD, which may at first sight appear to undermine the criticism.
However, it appears to me that this observation actually supports the view that the judge did not consider the horned animal impression of the CRD as being particularly distinctive for present purposes, because he wrongly seems to have treated the antennae and ears of the Kiddee Case as horn like.
It is also true that, as Magmatic argues, Arnold J observed, at para 64, that the horns form an important part of the CRDs appearance and that the clasps look much more like the nose and tail of an animal, but these were comments made when comparing the CRD with the Rodeo not with the Kiddee Case, and, in any event, they were directed to detail, not to overall impression.
It is unrealistic for an appellate court to expect a trial judge in every case to refer to all the points which influenced his decision.
As Lord Hoffmann said in Piglowska v Piglowski [1999] 1 WLR 1360, 1372, reasons should be read on the assumption that, unless he has demonstrated the contrary, the judge knew how he should perform his functions and which matters he should take into account.
He also rightly said that an appellate court should resist the temptation to subvert the principle that they should not substitute their own discretion for that of the judge by a narrow textual analysis which enables them to claim that he misdirected himself, and that applies equally to an assessment such as that required by article 10(1) of the Principal Regulation.
However, when a judge has given a full and careful judgment, conscientiously identifying and specifying a significant number of points which weigh with him, an appellate court can properly conclude that his failure to mention a significant point means that he has overlooked it.
That conclusion is particularly valid here, given that the point in question is more significant than many of the points which the judge mentioned, because it goes to the overall impression of the image rather than detailed features, and it is with the overall impression with which one is ultimately concerned see article 10 of the Principal Regulation.
And, while it is important that an appellate court should not be over critical of any judgment, it is equally important to bear in mind that one of the main purposes of requiring a judge to give reasoned judgments is to ensure that the parties and an appellate court can see why he reached the conclusion which he did, and can assess whether he made any errors of law or fact.
Accordingly, while I am in full agreement with Lord Hoffmanns observations, I consider that the Court of Appeal was justified in its first criticism of the trial judge.
The Court of Appeals second criticism: decoration of the Kiddee Case
As he explained in paras 41 and 47 of his judgment, Kitchin LJ disagreed with Arnold J when it came to the question of the decoration on the Kiddee Case.
Kitchin LJ was of the view that the fact that the CRD image was not adorned with any imagery reinforced the impression it gave of a horned animal with a nose and a tail.
By contrast, he said, the impression which the shape in the first example of the Kiddee Case in para 4 above creates is clearly influenced by the two tone colouring of the body and the spots on its flanks, so that it looks like a ladybird and the handles on its forehead look like antennae.
This, he said, effectively reinforced the conclusion that the Kiddee Case produced on the informed user a completely different overall impression from the horned animal embodied in the CRD design.
The same conclusion, he said, applied to the second example of the Kiddee Case, as [t]he stripes on its flanks and the whiskers on either side of its nose immediately convey to the informed user that this is a tiger with ears.
It is plainly not a horned animal.
In my view, the point which Kitchin LJ was making in this second criticism was that the absence of decoration on the CRD reinforced the horned animal impression made by the CRD.
In other words, he considered that it supported what I have called his first criticism of Arnold Js judgment.
In my view, there is limited force in this point, in that, unless the decoration had been positively distracting in nature, such as flashing lights, it would have been unlikely to have much effect in diluting the horned animal impression made by the CRD.
However, I accept that the point has some force, in the sense that, unless it included items such as eyes and a mouth, any decoration could well detract from the animal impression, and, even if it consisted of such items, it could be said to distract the observers attention from the horns.
Magmatic, however, argued that this second criticism raised a significant question of principle, namely whether the absence of ornamentation can, as a matter of law, be a feature of a registered design, and, if so, whether it was a feature of the CRD in this case.
Magmatic further argued, with the support of the Comptroller General, that this question is one which should be referred to the CJEU as it is neither acte clair nor acte clair.
I do not agree with either argument.
As I have sought to explain, when making his second criticism, Kitchin LJ was not raising a free standing contention that a feature of the CRD was that it contained no decoration.
In the first place, that is not what Kitchin LJ said.
Secondly, if it had been what he had intended, it would not have been expressed as part of the first criticism.
Both points appear clear from what he said in para 47 of his judgment, namely that it would be wrong to eliminate the decoration on the accused design from consideration entirely because it significantly affects how the shape itself strikes the eye, and the overall impression it gives.
At least in the case of this particular registered design, the global comparison necessarily requires account to be taken of the context in which the accused shape appears.
In those circumstances, anything I say as to whether a Community Design can include an absence of decoration, would be obiter.
Nonetheless, it is worth expressing some views on the topic, as it was fully canvassed.
First, despite Magmatics argument to the contrary, it seems plain to me that absence of decoration can, as a matter of principle, be a feature of a registered design.
Simplicity or minimalism can notoriously be an aspect of a design, and it would be very curious if a design right registration system did not cater for it.
Secondly, whether absence of ornamentation is a feature of a particular design right must turn on the proper interpretation of the images on the registered design.
Thirdly, I accept that it may sometimes be hard to decide if absence of ornamentation is a feature of a particular registered design, because article 36(3) of the Principal Regulation and article 4(1) of the Implementing Regulation preclude any verbal descriptions (see paras 8 and 9 above).
Fourthly, if absence of ornamentation is a feature of a registered design, that does not mean that because an item has ornamentation, it cannot, for that reason alone, infringe the registered design in question: it merely means that the fact that an allegedly infringing item has ornamentation is a factor which can be taken into account when deciding whether or not it does infringe that design.
Two domestic cases are worth mentioning in this connection.
In Procter & Gamble, the registered design was illustrated by line drawings, which were clearly concerned purely with external shape.
Both Lewison J ([2007] FSR 13) and the Court of Appeal held, as Jacob LJ put it at [2008] FSR 8, para 40, that [t]he registration is evidently for a shape.
The proper comparison is with the shape of the alleged infringement.
Graphics on that (or on the physical embodiment of the design) are irrelevant.
Many line drawings simply show a physical shape, as in Procter & Gamble, but while they can show colouring and decoration, they are generally less appropriate for that purpose than photographs or CAD images, which can easily show subtle shadings and contours, as well as decoration, such as colours and ornamentation.
Accordingly, while each Community Registered Design image must be interpreted in its own context, a line drawing is much more likely to be interpreted as not excluding ornamentation than a CAD image.
That is consistent with what Dr Schltelburg wrote in the article from which I have already quoted, namely that [b]asically, the broadest claims can be achieved by drawings showing only the contours of the design.
In contrast, a photo specifies not only the shape, but the surface structure and the material as well, thereby narrowing the scope of protection accordingly [2003] EIPR 383, 385.
The notion that absence of ornamentation can be a feature of a registered design, even where the images consist of line drawings, was accepted by His Honour Judge Birss QC and the Court of Appeal (albeit that it was not in dispute between the parties in the case) in Samsung Electronics (UK) Ltd v Apple Inc [2013] ECDR 1 and [2013] FSR 9.
In that case, the line drawings included one or two small features (an opening catch and a rim around the edge), and the natural implication was that no other ornamentation was intended, a view supported by the fact that the plainness and transparency of the surface was subtly indicated by a few pairs of short lines suggesting the incidence of light on that surface.
As Jacob LJ put it at para 18 in that case, If an important feature of a design is no ornamentation, as Apple contended and was undisputed, the judge was right to say that a departure from no ornamentation would be taken into account by the informed user.
I note that the same view was taken of the same Community Registered Design by the Dsseldorf Court of Appeal (I 20W, 141/11, 24 July 2012, pp 2, 22, 26 without a pattern and without any patterning), and the Hague Court of Appeal (Case number 200.094.132/01, Apple Inc v Samsung Electronics Co Ltd, 24 January 2012, paras 5.1B and 5.3B1 and 6.4 without any embellishment and without any ornamentation).
Further, the Sixth Chamber of the General Court of the CJEU also appears to have taken the same view in the context of a different design in H & M Hennes & Mauritz BV & Co KG v Office for Harmonisation in the Internal Market (Trade Marks and Designs) (OHIM) (Cases T 525/13 and T 526/13), 10 September 2015, GC, para 37, when contrasting one designs formal simplicity with anothers surface which is adorned with ornamental motifs.
Thus, in summary, while the observations in paras 44 48 above are obiter, I consider that the Court of Appeals second criticism of the first instance judgment was correct, although it amounted to a relatively minor point which simply reinforced the first criticism.
It is right, however, to address the argument whether absence of ornamentation was a feature of the CRD in the present case.
There are powerful practical arguments against such a conclusion, namely the absence of any apparent reason for such a limitation and the inherent unlikelihood of the design of a childs ride on suitcase positively requiring no ornamentation.
On the other hand, there is the elegant uncluttered appearance of the CRD with the play of light on the products surface as described by Kitchin LJ, the use of a CAD rather than a line drawing, the existence of some specific limited colour differentiation (the strap, strips, wheels and spokes), and (in so far as admissible) the initial unornamented product and the contrast with Magmatics subsequent registered designs (see para 3 above).
Given that the Court of Appeal did not (despite Magmatics suggestion to the contrary) resolve this issue in the present case and it is unnecessary for us to do so in order to resolve this appeal, I would prefer to leave it open.
It is not as if a decision whether the absence of ornamentation in this particular CRD would be of much assistance in other cases; it is, I think, enough that we have decided (albeit on a strictly obiter basis) the point of principle that absence of ornamentation can be a feature of a Community Registered Design.
The Court of Appeals third criticism: the two tone colouring of the CRD
Kitchin LJs third criticism of Arnold Js judgment was that he failed to take into account the fact that the CRD image, as exemplified in para 1 above, was in two colours, one, shown grey, for the greater part of the body (including the horns), and the other, shown black, for the wheels and spokes, the strap and the strip.
As mentioned in para 14 above, Arnold J described the CRD as constituting a claim evidently for the shape of the suitcase and that decorations on the Kiddee Case were therefore to be ignored.
On the other hand, Kitchin LJs view was that the colouring contrasts on the CRD and the allegedly infringing articles represented a potentially significant difference, as the wheels and handles (ie horns) on the CRD rather stood out as features, whereas on the Kiddee Case the wheels were very largely covered, and the handles (at least on the first of the two examples in para 4 above) had the same colour as the body.
If, as in the case of the CRD, an applicant for a Community Registered Design elects to submit CADs of an item, whose main body appears as a uniform grey, but which has a black strip, a black strap and black wheels, the natural inference is that the components shown in black are intended to be in a contrasting colour to that of the main body.
That conclusion is reinforced by the short passages from Dr Schltelburgs article cited in paras 31 and 46 above.
It is also supported, as Kitchin LJ pointed out, by the fact that other features such as the clasps or the horns are not shown in a contrasting colour.
It was argued by Magmatic that the wheels were shown black because they had a specific function, but I find that unconvincing: there is no logical connection between the colour and the function, and it does not explain the black strip.
Accordingly, I consider that Kitchin LJ was right in concluding that the CRD claimed not merely a specific shape, but a shape in two contrasting colours one represented as grey and the other as black on the images, and that Arnold J was correspondingly wrong in holding that the CRD was a claim simply for a shape.
Once one concludes that a registered design claims not just a three dimensional shape, but a three dimensional shape in two contrasting colours, one colour for the body and another colour (or possibly other colours) for specified components, then it seems to me that it must follow that, when one compares the allegedly infringing article with that design on a like for like basis, one must take into account the colouring on that article.
If the predominant colour of the first example of the Kiddee Case shown in para 4 above was the front part and was coloured red, then one would presumably compare it with the CRD on the basis that the CRD was principally coloured red, but that the wheels and spokes, strap and strips of the CRD were in a contrasting colour, and the Kiddee Case was differently coloured.
I therefore consider that Kitchin LJ was right in his third criticism of the judge.
I should perhaps add that counsel for Magmatic pointed out that Arnold J rightly took into account that the wheels on the Kiddee Case were substantially covered by wheel arches whereas the wheels on the CRD were not.
That is plainly correct, but Kitchin LJs criticism was that the judge nowhere referred to the fact that the wheels of the CRD were shown having a different colour from the rest of the image (other than the strap and the strip).
Conclusions
The effect of this analysis is that the Court of Appeal was right to hold that the design claimed in this case was for a wheeled suitcase in the shape of a horned animal, but that it was not a claim for the shape alone, but for one with a strap, strips and wheels and spokes in a colour (or possibly colours) which contrasted with that of the remainder of the product.
Given that the Court of Appeal was right to hold that Arnold J misdirected himself in the respects discussed above, I consider that they were, to put it at its lowest, entitled to hold that the judge materially misdirected himself, and that the Court of Appeal should reconsider the question of infringement for itself.
For the reasons given in para 25 above, because the Court of Appeal addressed the question of infringement on the correct basis in law, this court should be very slow indeed to interfere with their conclusion that the Kiddee Case did not infringe the CRD.
I see no grounds for questioning Kitchin LJs conclusion, even if I considered that another judge (or even I) might have reached a different conclusion.
I should perhaps add that, while it may be little comfort to Magmatic, I think I would have reached the same conclusion.
It is a conclusion I would have reached with some regret, as the conception of the Trunki, a ride on wheeled case which looks like an animal, seems to have been both original and clever; as Arnold J said at para 16 of his judgment, [t]here is no dispute that the Trunki was an innovative design and it has won numerous awards and has been a significant commercial success.
Furthermore, it appears clear that Mr Beverley of PMS conceived the idea of manufacturing a Kiddee Case as a result of seeing a Trunki, and discovering that a discount model was not available.
Unfortunately for Magmatic, however, this appeal is not concerned with an idea or an invention, but with a design.
That leaves the question of a reference to the CJEU, discussed in paras 27 28 above.
Even if one accepts that it is arguable whether the criticisms made by the Court of Appeal were correct, the mere fact that an issue involving Community Registered Design is not beyond argument does not mean that it has to be referred pursuant to article 267.
Such a conclusion is mandated only where the issue raises a point of EU law.
Despite the fact that the Comptroller General supports the contention that there should be a reference, I do not consider that this appeal raises any issue which should be referred to the CJEU.
All the criticisms made by the Court of Appeal raise the question of how to interpret particular images on a particular Community Registered Design.
I do not consider that these criticisms raise a point of EU law, or indeed a point which is suitable to be referred to the CJEU.
If we were to refer such an issue to the CJEU, it appears to me that they would say that we should interpret the images on a Community Registered Design by reference to how it would appear to a reader in the light of the terms of the Principal Regulation, the Implementation Regulation and the practice of OHIM.
It is appropriate in this context to refer back to Magmatics contention that absence of ornamentation cannot be a feature of a Community Registered Design.
I accept that that contention raises a point of EU law.
However, I would not refer the point for two reasons.
First, as explained in para 43 above, it does not arise on this appeal; secondly, as explained in paras 44 48 above, while the Comptroller suggests that the contention may be right, I cannot regard it as arguable.
Minimalism can self evidently be an important aspect of a design just as intensive decoration can be.
It would be extraordinary if absence of ornamentation could not be a feature of a design, and, unsurprisingly, no authority has been cited to support such a proposition.
On the contrary.
For these reasons, I would not make a reference to the CJEU and would dismiss Magmatics appeal.
| UK-Abs | The founder of Magmatic Limited (Magmatic), Robert Law, won a prize in 1998 for a design of a ride on suitcase for children.
Mr Law subsequently updated the design and applied to register it at the Office for Harmonization in the Internal Market, who published it on 28 October 2003 as Community Registered Design No 43427 0001 (the CRD).
The CRD consists of six images prepared by a 3D Computer Assisted Design (CAD).
Since May 2004, Magmatic has manufactured and sold ride on suitcases for children under the trade mark Trunki whose shape is very similar to the design shown on the CRD.
In February 2013, Magmatic issued proceedings seeking damages and an injunction against PMS International Limited (PMS), alleging that PMS were importing into, and selling in, the United Kingdom and Germany ride on suitcases for children under the name Kiddee Case which infringed the CRD.
At first instance, the judge, Arnold J, found, amongst other matters, that the Kiddee Case infringed the CRD.
The Court of Appeal allowed PMS appeal.
Magmatic now appeal to the Supreme Court.
The Supreme Court unanimously dismisses Magmatics appeal.
Lord Neuberger gives the only judgment, with which the other Justices agree.
Community Design Right is governed by Council Regulation (EC) No 6/2002 (the Principal Regulation), which provides that a design shall be protected to the extent that it is new and has individual character [7].
What matters is the overall impression created by it, and that potential customers will appreciate it on the basis of its distinctiveness [6, 10].
In considering an issue of this nature, an appellate court should not reverse a judges decision unless he has erred in principle [24].
The Court of Appeal decided that issue for itself and came to a different conclusion from the judge on the basis of three criticisms of the judges approach [16 22].
Therefore the essential question in this appeal is whether those criticisms were justified [26].
The first criticism was that the judge failed to give proper weight to the overall impression of the CRD as an animal with horns, which was significantly different from the impression made by the Kiddee Case, which were either an insect with antennae or an animal with ears [21].
The overall impression given by the CRD is indeed that of a horned animal; and the judge did not specifically refer to this
when comparing the CRD with the Kiddee Case [37].
A trial judge cannot be expected in every case to refer to all the points which influenced his decision, but when a judge has given a full and careful judgment, conscientiously identifying a significant number of points which weigh with him, an appellate court can properly conclude that his failure to mention an important point means that he has overlooked it.
This was the case here [39].
The second criticism was that the judge failed to take into account the effect of the lack of ornamentation to the surface of the CRD [21], i.e. that the absence of decoration reinforced the horned animal impression [40].
This has limited force; unless it simply consisted of items such as eyes and a mouth, any decoration could well detract from the animal impression and even such items could be said to distract attention from the horns [41].
The Court of Appeals second criticism was correct, although it is only a relatively minor point which mildly reinforces the first criticism [49].
The third criticism was that the judge ignored the colour contrast in the CRD between the body of the suitcase and its wheels [21].
He described the CRD as constituting a claim evidently for the shape of the suitcase and decorations on the Kiddee Case were therefore to be ignored [51].
The CRD consisted of CADs of an item whose main body appears as a uniform grey but which had black strips, a black strap and black wheels.
The natural inference to be drawn is that the components shown in black are intended to be in a contrasting colour to that of the main body.
Accordingly, the Court of Appeal was correct: the CRD claimed not merely a shape, but a shape in two contrasting colours [53] and the judge was wrong in holding that the CRD was simply a claim for shape [53].
Accordingly, the Court of Appeal were right to hold that the judge materially misdirected himself and could properly consider the question of infringement for themselves.
As they approached the question of infringement on the correct basis in law, this Court should be very slow indeed to interfere with their conclusion that the Kiddee Case did not infringe the CRD [56].
The Court has sympathy for Magmatic and Mr Law, as the idea of the Trunki case was a clever one, but Design Right is intended to protect designs not ideas [57].
Magmatic contended that the second criticism raised the question whether the absence of ornamentation can as a matter of law be considered a feature of design and if so whether it was a feature of the CRD in this case [42].
Magmatic further argued, with the support of the Comptroller General of Patents Designs and Trademarks, that this question should be referred to the Court of Justice of the European Union as it is neither acte clair nor acte clair [42].
This Court rejects both arguments.
The Court of Appeal was not raising a freestanding point that absence of decoration was a feature of the CRD [43].
In any event, it is not arguable that that an absence of ornamentation cannot be a feature of a CRD [44 48, 60].
As to the question of whether absence of ornamentation was a feature of the CRD in the presence case, the Court of Appeal did not resolve this issue and it is unnecessary to do so in the present appeal [50].
Accordingly, no reference to the CJEU needs to be made, and the appeal is dismissed [59 61].
|
Does a decision by a public prosecutor to bring criminal proceedings against a person fall potentially within the scope of article 8 of the European Convention on Human Rights in circumstances where a) the prosecutor has reasonable cause to believe the person to be guilty of the offence with which they are charged and b) the law relating to the offence is compatible with article 8? That is the primary question raised by this appeal and it is one of general importance.
If that question is answered in the affirmative, the question arises whether in the present case the decision by the respondent (the CPS) to charge the appellant with the offence of possessing a false document under section 25(1) of the Identity Cards Act 2006 was a violation of her article 8 rights.
Prosecution of offences
Different states who are parties to the Convention have different institutions and processes for the investigation and prosecution of offences.
The CPS was established by the Prosecution of Offences Act 1985, section 1.
Its essential functions are to advise the police and others, including immigration officers, on the institution of criminal proceedings and to take over the conduct of such proceedings: section 3(2)(a)(aa)(e) and (ec).
The head of the CPS is the Director of Public Prosecutions (DPP).
Under section 10 the DPP is required to issue a Code for Crown Prosecutors.
The code requires prosecutors to apply a two stage test in deciding whether a person should be prosecuted for an offence.
The first stage involves considering whether there is enough evidence to provide a realistic prospect of conviction.
If that requirement is satisfied, the second stage involves deciding whether a prosecution would be in the public interest, which may entail weighing a wide variety of considerations.
The CPS is a body independent of the investigating authority, whether it be the police or immigration or other authority, and also independent of the court before which any prosecution may be brought.
Identity Cards Act 2006
Under section 25(1) of the Identity Cards Act 2006 (now substantially re enacted by section 4 of the Identity Documents Act 2010), it was an offence punishable with up to ten years imprisonment for a person to be in possession of an identity card relating to somebody else, with the intention of using it to establish his identity as that persons identity.
But it has long been recognised that those fleeing persecution may have to resort to deceptions such as possession and use of false papers in order to make good their escape: R v Asfaw (United Nations High Commissioner for Refugees intervening) [2008] 1 AC 1061, para 9, per Lord Bingham.
Article 31(1) of the 1951 Convention and Protocol relating to the Status of Refugees (1951) (Cmd 9171) and (1967) (Cmnd 3906) (the Refugee Convention) prohibits contracting states from imposing penalties, on account of their illegal entry or presence, on refugees coming directly from a territory where their life or freedom was threatened, provided that they present themselves without delay to the authorities and show good cause for their illegal entry or presence.
Article 31 of the Refugee Convention has been given effect in domestic law by section 31 of the Immigration and Asylum Act 1999, which applies to offences including those under section 25 of the Identity Cards Act 2006.
Section 31(1) of the 1999 Act provides: It is a defence for a refugee charged with an offence to which this section applies to show that, having come to the United Kingdom directly from a country where his life or freedom was threatened (within the meaning of the Refugee Convention), he presented himself to the authorities in the United i) Kingdom without delay; ii) showed good cause for his illegal entry or presence; and iii) made a claim for asylum as soon as was reasonably practicable after his arrival in the United Kingdom.
Although on a literal reading the defence might not be thought to apply to a person who stopped over in an intermediate country en route from the country of persecution to their country of intended refuge, in Asfaw the House of Lords held that article 31 of the Refugee Convention and section 31 of the 1999 Act were to be given a purposive interpretation consistent with their humanitarian aims, and that the protection given by them was not excluded by a short term stopover in an intermediate country.
The appellant was born on an island in Somalia on 26 December 1991.
She is a member of a minority clan.
She and her family suffered severe violence from majority clans over many years.
The violence included the murder of her father in 1995 and, two years later, the rape of the appellant herself in front of her disabled mother.
After that attack she and her mother moved to the mainland, but in 2008 another militant gang murdered her mother and beat the appellant senseless with a rifle.
In December 2008 the appellant fled from Somalia with a friend and she spent the next year living in Yemen.
On 25 December 2009 the appellant left Yemen with an agent and flew to an unknown destination in Europe, from where she travelled to Eindhoven in Holland.
On 27 December she flew from Eindhoven to the UK on a false passport provided to her by an agent.
On arrival at Stansted Airport on the evening of 27 December the appellant attempted to pass through immigration control using a British passport.
She was stopped and challenged by immigration officers from the United Kingdom Border Agency (UKBA), part of the Home Office.
She immediately claimed asylum and gave her true name and date of birth.
She was detained overnight.
On 28 December the appellant had an initial asylum screening interview in which she described how she had left Somalia and come to the UK.
She explained her reasons in summary and said that she was in fear of her life if she were to return home.
Later that day the appellant was told by an immigration officer, IO Webb, that she could return to Holland and, if so, she would not be prosecuted.
The appellant declined to return to Holland and maintained her claim for asylum.
Thereafter she was arrested on suspicion of committing an offence under section 25(1) of the 2006 Act.
On the same day the appellant was interviewed at Stansted Airport Police Station by IO Webb.
The appellant was represented at that stage by a duty solicitor.
Her account of her movements and her personal circumstances was consistent with her earlier account.
When asked why she had not claimed asylum in Holland, she said that she knew nothing about Holland and had been advised to travel to the UK to claim asylum.
On the evening of 28 December a CPS lawyer, Ms Jo Golding, reviewed the file.
She applied the full code test under the Code for Crown Prosecutors and concluded that both the evidential test and the public interest test were satisfied.
It was accepted on the appellants behalf in the courts below that the CPS was reasonably entitled to consider that the evidential test was satisfied at the time when the decision to prosecute was taken.
On 29 December the appellant appeared before a magistrates court and was remanded by the court in custody.
On 11 January 2010 she attended a preliminary hearing at Chelmsford Crown Court and was again remanded in custody.
On 28 January another CPS lawyer, Ms Charlotte Davison, conducted a full review of the case.
She raised a question about what consideration UKBA had given to the availability of a defence under section 31.
On 22 February a Plea and Case Management Hearing took place at the Crown Court.
The appellants counsel served the CPS with a skeleton argument that the proceedings should be dismissed because her case fell within the scope of the section 31 defence.
It appears from the Crown Court minute sheet that the prosecution had not received the skeleton argument in advance and it was agreed that the application should be adjourned.
After further exchanges between the CPS and UKBA, Ms Davisons view was that the period of a year spent by the appellant in Yemen took her outside the scope of section 31 and that she was minded to proceed with the prosecution.
On 26 May the appellants full asylum interview took place.
Six days later, on 1 June, the appellant appeared before Chelmsford Crown Court.
The CPS was on this occasion represented by a CPS advocate, Ms Lesli Sternberg.
At the hearing IO Webb told Ms Sternberg that a decision on the appellants asylum application was expected shortly and that it was likely to be granted.
In those circumstances the appellants application to dismiss the proceedings was adjourned until 14 June.
After the hearing Ms Sternberg researched the position of Somali refugees in Yemen.
Although Yemen was party to the Refugee Convention it appeared that the procedure for bringing it into effect was poor.
Ms Sternbergs view was that, subject to confirmation of the grant of asylum, the prosecution should not continue because it would not be in the public interest.
On 10 June the appellant was granted asylum.
On the next day the prosecution offered no evidence at a mention hearing at the Crown Court.
The appellant was found not guilty and released from custody.
The proceedings
On 22 December 2010 the appellant issued proceedings against the CPS, the Home Office and the police for damages on various grounds including breach of her rights under article 8.
The claims against the Home Office and the police were not pursued.
On 1 February 2013 Irwin J dismissed the claim.
On the facts, he accepted that the appellant was very vulnerable and already suffering anxiety and depression before the decision to prosecute her and her incarceration, and that her arrest and remand in custody had added to the psychological impact.
He accepted too that if the CPS had learned more from UKBA at an early stage about conditions in Somalia and the Yemen, it would probably not have begun a prosecution before the outcome of her asylum application.
However, he held that the decision to prosecute was not capable of engaging article 8.
He said that in presenting false papers to an immigration officer the appellant was not engaged in an activity which was part of her private life, but was self evidently a matter affecting the business of the state.
He accepted that the consequences of the decision to prosecute could affect her enjoyment of a private life, but he rejected the consequentialist argument as a basis for applying article 8 to the decision to prosecute.
Otherwise, he said, article 8 would apply to every decision to prosecute for any offence, at least where there was a possibility of a custodial sentence or a remand in custody.
He held that a decision to prosecute could only engage article 8 if the prosecution targeted an activity which could credibly claim to be an exercise of an article 8 right.
If, however, article 8 was engaged, Irwin J concluded that the CPSs decision was justified on the material which it had.
Irwin Js dismissal of the appellants claim was upheld by the Court of Appeal on 6 February 2014 in a decision which is reported at [2014] 1 WLR 3238.
The leading judgment was given by Pitchford LJ, with whom the other members of the court agreed.
After reviewing the authorities he accepted that article 8 could apply to a law criminalising behaviour which itself amounted to the exercise of a right protected by article 8, but he held that section 25 of the 2006 Act did not interfere with rights protected by that article.
It did not impede the appellants ability to claim asylum, and the possession of false identity documentation with intent to deceive at the point of border control was not an expression of personal autonomy.
Pitchford LJ also accepted that a decision to prosecute for an offence under section 25 might fall within article 8 if, for example, the prosecutor knew that there was no proper basis for the prosecution.
But he held that article 8 was not engaged by a decision to prosecute for a Convention compliant offence in the absence of extreme circumstances.
If, however, article 8 was engaged, the concession made that the appellants case passed the evidential test meant that in the absence of compelling circumstances personal to the appellant the public interest in prosecution was obvious.
The outcome would be a matter for judicial decision and it was not for the prosecutor, when deciding to prosecute, to concern herself with questions of remand or likely sentence, which would be for the court to determine.
He concluded therefore that if article 8 was engaged, there was no breach.
Did article 8 apply to the decision to prosecute?
Mr Richard Hermer QC argued that article 8 applied to the decision to prosecute for two reasons: it targeted conduct which was itself protected by article 8, and its consequences were to interfere with the enjoyment of the appellants private life.
Mr Hermer submitted that the range of article 8 is broad, that the threshold for it to apply is low, and that it is almost inevitable that the decisions of the CPS, as a public body, will impact on the private life of the defendant and so engage article 8.
He said that anything done by a public body which has the consequence of affecting someones private life in a more than minimal way involves interference with respect for it within the meaning of article 8.
Broad as article 8 undoubtedly is, the consequentialist argument advanced by Mr Hermer is far too broad.
To take an example far removed from the present case, if a highway authority closes a road for roadworks, or introduces a partial closure, there may be a more than minimal effect on how long it takes residents to get to work, but that cannot be enough to make article 8 applicable.
Such matters are part of the ordinary incidents of daily life in a community and involve no lack of respect for personal autonomy of the kind which article 8 is designed to protect.
Questions about the possible application of article 8 to a prosecutorial decision were considered by the House of Lords and the European Court of Human Rights in the case reported as R v G [2009] 1 AC 92 and G v United Kingdom (2011) 53 EHRR SE 237.
The appellant aged 15, had sexual intercourse with a girl aged 12.
He pleaded guilty to a charge of rape of a child under 13, contrary to section 5 of the Sexual Offences Act 2003, on the written basis that the intercourse was consensual in fact (although by reason of her age the girl was incapable of giving legal consent) and that he believed her to be aged 15 because she had told him so.
The prosecution accepted his basis of plea and he received a custodial sentence.
He appealed to the Court of Appeal against conviction and sentence.
It was argued that his conduct amounted to a less serious offence under section 13, aimed specifically at a person under 18 who had sexual intercourse with a child under 13, and that on the accepted facts it was a disproportionate interference with his private life, contrary to article 8, to proceed on the more serious charge, which had the consequence of giving him a criminal record as a rapist.
The Court of Appeal dismissed his appeal against conviction but substituted a non custodial sentence.
The House of Lords upheld the Court of Appeals decision by a three to two majority.
Lord Hoffmann said that article 8 confers a qualified right protecting a persons private or family life, but if the state is justified in treating the persons conduct as unlawful that is the end of the matter.
Lady Hale also considered that article 8 did not apply, because a rule which prevented a child under 13 from giving legally recognised consent to sexual activity and a statute which treated penile penetration as a most serious form of such activity did not amount to a lack of respect for the private life of the penetrating male.
If, however, article 8 applied, Lady Hale considered that the interference was justified and proportionate in the pursuit of the legitimate aims of the protection of health and morals and of the rights and freedoms of others.
Lord Hope and Lord Carswell disagreed.
They considered that prosecutorial choices must be exercised compatibly with the Convention, and that the decision to proceed against G under section 5, rather than section 13, was disproportionate.
Lord Mance did not expressly state whether article 8 applied but he agreed with Lord Hoffmann and Lady Hale that it was not breached.
G took his case to Strasbourg, but the court held that his complaint was inadmissible.
On the question whether article 8 applied, the court said that not every sexual activity behind closed doors would necessarily fall within its scope, but, in the circumstances that both parties in fact consented and that G reasonably believed the girl to be the same age as himself, it was prepared to accept that the sexual activities at issue fell within the meaning of private life.
However, it held that the states margin of appreciation regarding the means of protecting children from sexual exploitation was wide and that the complaint must be rejected as manifestly ill founded.
The focus of the reasoning of the Strasbourg court is significant.
It focused on the nature of Gs conduct.
The court was prepared to accept that uncoerced sexual behaviour of a 15 year old boy with a girl whom he believed to be the same age could fairly be seen as falling within the meaning of private life.
Perhaps because it was an admissibility decision and the court was satisfied that the complaint of a breach of article 8 was manifestly ill founded, it did not directly address Lord Hoffmanns and Lady Hales reasons for holding that the article did not apply.
There is no support in the Strasbourg authorities for the argument that even if the conduct for which a person is prosecuted was not within the range of article 8, the article may apply to a decision to prosecute because of the attendant consequences.
By commencing a criminal prosecution the CPS places the matter before a court.
In other Convention countries the court is itself in charge of deciding whether a person should be treated as an accused in a criminal case.
There is a striking absence of any reported case in which it has been held that the institution of criminal proceedings for a matter which is properly the subject of the criminal law may be open to challenge on article 8 grounds (as Munby LJ observed in R (E) v Director of Public Prosecutions [2012] 1 Cr App R 66, paras 72 75).
It would be illogical; for if the matter is properly the subject of the criminal law, it is a matter for the processes of the criminal law.
The criminalisation of conduct may amount to interference with article 8 rights; and that will depend on the nature of the conduct.
If the criminalisation does not amount to an unjustifiable interference with respect for an activity protected by article 8, no more does a decision to prosecute for that conduct.
The consequences will be matters for the determination of the court.
Article 6 protects the defendants right to a fair hearing within a reasonable time by an independent and impartial tribunal.
Turning to the argument that the prosecution targeted conduct which was protected by article 8, Mr Hermer submitted that the courts below wrongly concentrated too much on the moment when the appellant tried to pass through immigration control on a false passport and should have looked at her conduct in the wider context of a vulnerable young person who had suffered grievously and was trying to escape by the only means available to her.
He submitted that proper investigation should have led the CPS to realise at an early stage that she had a defence under section 31 and in any event that a prosecution was not in the public interest.
The decision which is challenged is the initial decision to prosecute. (The issues listed in the agreed statement of facts and issues all focus on that decision, although in the course of his oral argument Mr Hermer sought to extend the challenge to include the conduct of the CPS throughout the period from the decision to prosecute up to the decision to offer no evidence.
I refer to this in the postscript below.) The difficulty for the appellant in advancing the claim that the decision to prosecute her was a violation of her human rights is that it is accepted that the offence under section 25 is compliant with her Convention rights, and it was conceded in the courts below that the CPS was reasonably entitled to conclude at the time of the decision to prosecute that the evidential test was satisfied.
It is difficult to envisage circumstances in which the initiation of a prosecution against a person reasonably suspected of committing a criminal offence could itself be a breach of that persons human rights.
It is true that the CPS is not bound to prosecute in every case, depending on its view of the public interest, but I do not see that the fact that in this jurisdiction a prosecution is not obligatory makes a difference.
Whether it is in the public interest to prosecute is not the same as whether a prosecution would unjustifiably interfere with a right protected by article 8.
applicability of article 8 to the decision to prosecute.
I agree with Irwin J and the Court of Appeal on the question of the
However, if article 8 was applicable, I agree also that there was no breach.
Things could have been done better and it is regrettable that the claimant, a vulnerable young woman, spent the time that she did in custody.
Criticism can be made of the CPS for the length of time it took to investigate the position regarding the Yemen and to conclude that the appellant was likely to succeed in the section 31 defence, but that is far from there being a breach of article 8 in the decision to prosecute.
Indeed, even if the original decision to prosecute was an error of judgment by the CPS, it would not in my view have involved a breach of article 8.
It would be a different thing if the state deliberately trumped up false charges against someone as a form of harassment.
In terms of domestic law, that would involve the torts of malicious prosecution or misfeasance in public office or both, to which article 8 would add nothing; but no duty of care is owed by the police towards a suspect (Calveley v Chief Constable of the Merseyside Police [1989] AC 1228), and the same applies to the CPS.
In Elguzouli Daf v Comr of Police of the Metropolis [1995] QB 335 (cited with approval in Brooks v Comr of Police of the Metropolis [2005] 1 WLR 1495, Van Colle v Chief Constable of the Hertfordshire Police [2009] 1 AC 225 and Michael v Chief Constable of South Wales Police [2015] AC 1732) two claimants were arrested, charged and remanded in custody for some weeks before the CPS discontinued proceedings against them.
In the first case the claimant contended that the CPS was negligent in failing to act with due diligence in obtaining the results of forensic evidence which showed him to be innocent.
In the second case the claimant contended that it should not have taken the CPS three months to conclude that the prosecution was bound to fail.
In both cases the Court of Appeal upheld decisions striking out the statements of claim against the CPS.
Steyn LJ in the leading judgment said that a citizen who is aggrieved by a prosecutors decision has potentially extensive remedies for a deliberate abuse of power, but the court rejected the argument that the CPS should owe a duty of care towards those it decided to prosecute.
The duty of the CPS is to the public, not to the victim or to the suspect, who have separate interests.
To recognise a duty of care towards victims or suspects or both, would put the CPS in positions of potential conflict, and would also open the door to collateral interlocutory civil proceedings and trials, which would not be conducive to the best operation of the criminal justice system.
Similar considerations are relevant when considering the applicability of article 8 in the context of a decision to prosecute.
A decision to prosecute does not of itself involve a lack of respect for the autonomy of the defendant but places the question of determining his or her guilt before the court, which will itself be responsible for deciding ancillary questions of bail or remand in custody and the like.
Postscript
As mentioned above, Mr Hermer sought during the course of his oral argument to advance an additional argument that the prosecution of the appellant was a breach of her article 8 rights in its continuation, if not in its commencement.
This was not how the case had been presented in the lower courts or in the appellants written case or in the statement of facts and issues.
In those circumstances Mr Havers QC properly objected to this court being asked to conduct its own factual examination of the CPSs alleged shortcomings during the course of the prosecution.
If this had been a live issue, it would have been necessary to consider whether (and, if so, in what circumstances) article 8 may become applicable to the CPS in the continuation of a prosecution, if it was not applicable at the time of its commencement.
The court did not hear argument on that question, about which it would therefore not be appropriate to express a concluded view.
It may be that a defendants right to a prompt and fair disposal of criminal proceedings, which have been properly commenced, lies in the particular provision of article 6 rather than in the general language of article 8, but without the benefit of considered argument it is better to say no more.
Conclusion
LORD KERR:
At para 75 of the Court of Appeals judgment [2014] 1 WLR 3238 Pitchford LJ said: I would dismiss the appeal.
I do not accept that before a prosecutor decides to prosecute she must anticipate and assess all possible consequences to the defendant of prosecution.
Among the hierarchy of Convention rights article 5 applies to regulate the defendants right not to be detained arbitrarily.
The state has, in performance of its responsibilities under article 5, instituted a system of criminal justice by which a judicial decision is made whether it is necessary to detain the defendant pending trial and, in the event of conviction, whether the defendant should be sentenced to a term of custody.
These are matters all within the wide margin of appreciation afforded to member states.
It is in my judgment, not for the prosecutor, when making the decision whether to prosecute, save in exceptional circumstances which did not exist here, to concern herself either with the risk of detention pending trial or with the probable sentence on conviction (save perhaps as to the latter for the purpose of assessing the seriousness of the conduct alleged).
The prosecutor would in that event be taking on herself the judgment it is for the judicial authority to make.
She is entitled to have in mind the obligation of the court itself to act in compliance with the law and the Convention.
To give practical examples: should the judge conclude that the prosecution is unfair he or she has power to stay the indictment as an abuse of processor to grant bail; should it emerge that the prosecution is oppressive because the defendant is physically or mentally unwell, the judge has power to adjourn the proceedings and/or to grant bail. (emphasis supplied)
These observations must be viewed in light of a later judgment of the Court of Appeal in Zenati v Metropolitan Police Comr [2015] EWCA Civ 80; [2015] QB 758.
In that case a police officer, suspecting that the claimant's passport might be counterfeit, charged him with offences under the Identity Cards Act 2006.
The claimant was remanded in custody on 10 December 2010.
On the same day, the Crown Prosecution Service asked the officer in the case to arrange a more comprehensive examination of the passport to be carried out by the National Document Fraud Unit by 24 December.
The request was not forwarded to the officer until 31 December.
On 19 January the officer was informed that the passport was genuine.
At a plea and management hearing on 4 February, the CPS informed the judge that they needed to obtain a statement from immigration authorities to confirm that the passport was a forgery.
The judge allowed 14 days for this to be done.
As a consequence, the claimant was detained for more than three weeks after the CPS should have been informed that the passport was genuine.
The Court of Appeal found that this was capable of amounting to a breach of article 5(1)(c) and article 5(3).
At para 44 Lord Dyson MR said: if the investigating authorities fail to bring to the attention of the court material information of which the court should be made aware when reviewing a detention, this may have the effect of causing a decision by the court to refuse bail to be in breach of article 5(3).
The investigating authorities must not prevent the court from discharging its duty of reviewing the lawfulness of the detention fairly and with a proper appreciation of all the relevant facts of which the authorities should make the court aware.
Unless this is done, there is a risk that the court will make decisions which lead to arbitrary detention in breach of article 5(3).
The propriety of continuing a prosecution must be kept under review by prosecuting authorities, not least for the reason which the Master of the Rolls articulated.
In this case, the possibility of a defence under section 31 of the 1999 Act was in play (or should have been) from the earliest stages.
The view taken by Ms Davison that the period which the appellant had spent in Yemen precluded such a defence was misconceived for the reasons given by Lord Toulson.
Although it did not feature in the case, there is, therefore, a real issue as to whether the appellants detention beyond the time that it should have been recognised that she had an unanswerable defence under section 31, constituted a violation of her article 5 rights.
If a decision to prosecute resulting in detention is capable of amounting to a breach of article 5, it is capable of interfering with article 8.
In Norris v Government of the United States of America (No 2) [2010] 2 AC 487 Lord Phillips said this at para 52: It is instructive to consider the approach of the Convention to dealing with criminals or suspected criminals in the domestic context.
Article 5 includes in the exceptions to the right to liberty (i) the arrest of a suspect, (ii) his detention, where necessary, pending trial, and (iii) his detention while serving his sentence if convicted.
Such detention will necessarily interfere drastically with family and private life.
In theory a question of proportionality could arise under article 8(2).
In practice it is only in the most exceptional circumstances that a defendant would consider even asserting his article 8 rights by way of challenge to remand in custody or imprisonment: see R (P) v Secretary of State of the Home Department [2001] 1 WLR 2002, para 79, for discussion of such circumstances.
Normally it is treated as axiomatic that the interference with article 8 rights consequent upon detention is proportionate.
This passage is important in the present context for its implicit acceptance that detention for the purpose of prosecuting a criminal offence is at least capable of engaging article 8.
That is not an extravagant proposition.
If prosecuting authorities are aware or ought to have become aware that the basis for a proposed prosecution no longer obtains, or that there is a defence available to the defendant which will provide a complete answer to the crime charged, and if they fail to act on that information in order to secure the defendants release, that is an obvious instance of a failure to have respect for the defendants right to a private life.
The responsibility of the prosecuting authorities cannot be shirked because the court has a duty to inquire into the basis on which someone continues to be held in custody pending trial.
That is a relevant circumstance but it does not relieve the prosecution of its duty to act on a change in circumstances which makes detention no longer justified.
This is particularly so where the court, as in this case, was dependent on information which it was the prosecutions obligation to supply which bore on the question of whether the appellant should continue to be detained.
A decision to prosecute someone against whom there is evidence that they have committed a criminal offence does not automatically constitute a failure to have respect for that persons private life.
Respect may be forfeit by engaging in criminal activity which justifies prosecution, although measures taken to identify an individual suspected of criminal activity may not involve forfeiture of the right see JR38s application [2015] UKSC 42; [2016] AC 1131.
In that case there was disagreement between the members of the court as to whether steps taken to identify a minor by publishing photographs of him engaging in criminal behaviour engaged article 8.
That debate is not relevant in the present case for it has been accepted that there was an evidential basis for prosecuting the appellant at the time that the prosecution was initiated.
On that basis I agree that this appeal must be dismissed.
As Lord Toulson has pointed out, the focus of the appellants case has always been that the decision to prosecute constituted the breach of article 8.
It was simply not possible to allow a late entry into the field of argument that continuing to prosecute involved such a violation.
The respondents had not produced evidence germane to that case and it would not have been fair (even if it had been feasible) to require them to do so.
I reach the decision that the appellant must fail in her appeal with regret.
This woman, in her short life, has had to endure experiences of the most horrific nature.
They have been described in Lord Toulsons judgment.
It is not in the least surprising that she had resort to the subterfuge of false papers in order to secure the measure of safety which she believed that this country would afford her.
It is sad that her terrible circumstances were compounded by her incarceration at a time when she was vulnerable and defenceless.
| UK-Abs | In deciding whether to institute criminal proceedings, the Crown Prosecution Service (CPS) is required to apply a two stage test.
They must first consider whether there is enough evidence to provide a realistic prospect of conviction and, if that is satisfied, decide whether the prosecution would be in the public interest [3].
Under section 25(1) of the Identity Cards Act 2006 (2006 Act) it was an offence for a person to be in possession of an identity card relating to someone else, with the intention of using it to establish his or her identity as that persons identity.
However, it is recognised that individuals fleeing persecution may have to resort to the use of false papers to make good their escape.
Therefore, under section 31 of the Immigration and Asylum Act 1999 (section 31) (which gives effect to Article 31(1) of the 1951 Convention and Protocol Relating to the Status of Refugees (the Refugee Convention)) it is a defence for a refugee charged under section 25 of the 2006 Act if he came to the UK directly from a country where his life or freedom was threatened and inter alia made a claim for asylum as soon as was reasonably practicable.
Directly has been given a purposive interpretation, so that the defence is not excluded by a short term stopover in an intermediate country [5 7].
The appellant was born in Somalia.
She is the member of a minority clan.
She and her family suffered severe violence from majority clans over the years; both her mother and father were murdered and the appellant was raped and severely beaten.
In December 2008, the appellant fled Somalia to Yemen.
A year later she left Yemen and travelled to Holland.
On 27 December, she flew from Holland to the UK on a false passport.
She was challenged by the UK Border Agency on arrival and immediately claimed asylum.
The following day, after an initial asylum screening interview, she was arrested on suspicion of committing an offence under section 25(1) of the 2006 Act.
The CPS concluded that both the evidential and public interest tests were satisfied.
The appellant was remanded in custody.
During this time, another CPS lawyer reviewed the appellants case.
She considered the section 31 defence but decided it was not available to the appellant because of the year the appellant had spent in Yemen.
On 1 June 2010, the appellant appeared before the Crown Court.
However, the proceedings were adjourned as a decision on the appellants asylum application was expected shortly and was thought likely to be granted.
After the hearing the CPS advocate researched the position of Somali refugees in Yemen and found that although Yemen is a party to the Refugee Convention its procedure for bringing it into effect was poor.
The CPS advocate concluded that, subject to the grant of asylum, the prosecution of the appellant should not continue as it was not in the public interest.
On 10 June 2010, the appellant was granted asylum.
The following day the prosecution offered no evidence at a mention hearing at the Crown Court.
The appellant was found not guilty and released from custody [8 20].
The appellant brought proceedings against the CPS, the Home Office and the police for damages on various grounds including a breach of her rights under article 8 of the European Convention on Human Rights (the Convention).
The claims against the Home Office and the police were not
pursued.
The High Court dismissed the appellants claim against the CPS.
The decision to prosecute could only engage article 8 if the prosecution targeted an activity which could credibly claim to be an exercise of an article 8 right.
Presenting an immigration officer with false papers was not an activity that formed part of the appellants private life [22].
The Court of Appeal upheld the High Courts decision [23].
The Supreme Court unanimously dismisses the appeal.
Lord Toulson, with whom Lord Mance, Lord Reed and Lord Hughes agree, gives the lead judgment.
Lord Kerr gives a concurring judgment.
Although article 8 is broad, it is not so broad as to encompass everything done by a public authority which has the consequence of affecting someones private life in a more than minimal way [25 26].
Neither the Strasbourg authorities nor domestic case law supports the contention that the institution of criminal proceedings, for a matter which is properly the subject of the criminal law and for which there is sufficient evidence, may be open to challenge on article 8 grounds.
It would be illogical; for if the matter is properly the subject of the criminal law, it is a matter for the processes of the criminal law.
The criminalisation of conduct may amount to an interference with article 8 rights.
However, if it does not amount to an unjustifiable interference, then neither does the decision to prosecute for that conduct [31 32].
In this case the decision which is challenged is the initial decision to prosecute.
However, it is accepted that the offence under section 25 of the 2006 Act is compliant with Convention rights and it was conceded in the courts below that the CPS was reasonably entitled to consider that the evidential test was satisfied at the time when the decision to prosecute was taken.
It is difficult to envisage circumstances in which the initiation of a prosecution against a person reasonably suspected of committing a criminal offence could itself be a breach of that persons human rights.
It does not matter that prosecution is not obligatory in the UK; whether it is in the public interest to prosecute is not the same as whether a prosecution would breach an individuals article 8 rights [34].
Article 8 is therefore not applicable to the decision to prosecute [35].
The CPS can be criticised regarding the length of time taken to conclude that the appellants section 31 defence would succeed.
However, even if article 8 was applicable, this would not amount to a breach in the decision to prosecute.
Even if the original decision to prosecute was an error of judgment by the CPS this would not have breached article 8.
It would be different if the the state had deliberately trumped up false charges.
However, this would involve the torts of malicious prosecution and/or misfeasance in public office, to which article 8 would add nothing [36].
A decision to prosecute does not itself involve a lack of respect for the autonomy of the defendant but places the question of determining his or her guilt before the court [38].
Lord Kerr raises the possibility that the continuation of the decision to prosecute beyond the time that it should have been recognised that the appellant had an answerable defence under section 31 constituted an interference with the appellants freedom of liberty under article 5 of the Convention and article 8 rights [41 46].
However, argument was not heard on these questions.
Lord Kerr therefore also dismisses the appeal.
The decision to prosecute did not amount to a breach of article 8 in circumstances where it was accepted there was an evidential basis for prosecuting the appellant at the time of that decision [47].
|
These proceedings were brought by the Financial Conduct Authority (FCA) against Asset Land Investment plc and associated parties, alleging the carrying on of regulated activities without authorisation, contrary to section 19 of the Financial Services and Markets Act 2000 (FSMA).
The activities in question related to sales of individual plots at six possible development sites in various parts of the country.
The only issue in the appeal is whether these activities amounted to collective investment schemes within the meaning of section 235, and thus regulated activities for the purpose of section 19 (as defined by section 22 and the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (SI 2001/544)). (It is convenient to refer generally to FCA as embracing its predecessor, the Financial Services Authority or FSA.)
The FCA became aware in early 2007 that Asset Land was selling land to investors, and was representing itself as responsible for seeking rezoning for residential development and for arranging a sale to a developer.
Following correspondence with Asset Lands solicitors, SJ Berwin, it accepted assurances that the company would cease to make such representations.
In a further exchange in July 2008, SJ Berwin indicated that there were by then 64 plot owners, who had all been informed of the change in the arrangements.
They had been offered the choice of exchanging their existing plots for plots that were larger in size and had access to services and roads (enhanced plots), thereby allegedly making it possible for plot owners to apply for planning permission themselves in respect of their individual plots; or of selling their existing plots back to the company for the price paid.
It was said that of the 64 owners one had chosen to sell his plot back and the rest had opted for an enhanced plot.
On the basis of this and other information provided by SJ Berwin, the FCA closed its inquiry in November 2008.
In June 2011 it formed the view that the agreed restrictions on the companys method of working were not being observed.
It reopened its inquiry, and gave notice of the appointment of investigators.
The present proceedings were begun in June 2012, following a worldwide freezing injunction against the company and Mr Banner Eve.
In a judgment given on 8 February 2013 ([2013] EWHC 178 (Ch); [2013] 2 BCLC 480) Andrew Smith J decided that its activities amounted to a collective investment scheme, in breach of the Act.
After a second hearing on remedies the judge directed an inquiry into the amounts of restitutionary orders to be made under section 382.
He made interim orders for payments totalling over 20m, based on FCA estimates of the amounts paid by investors for their plots, and on the assumption that their residual value, in the absence of planning permission, was nil.
There is at this stage no issue before us arising out of those remedial orders (which have been suspended pending the determination of this appeal).
The judges decision on liability was upheld by the Court of Appeal, in a judgment given by Gloster LJ ([2014] EWCA 435; [2014] Bus LR 993).
Two of the parties Asset Land and its principal owner and director, Mr Banner Eve, appeal to this court.
The statutory definition
The issue turns on the interpretation and application to the facts of section 235, which reads as follows: 235: Collective investment schemes In this Part collective investment scheme means any (1) arrangements with respect to property of any description, including money, the purpose or effect of which is to enable persons taking part in the arrangements (whether by becoming owners of the property or any part of it or otherwise) to participate in or receive profits or income arising from the acquisition, holding, management or disposal of the property or sums paid out of such profits or income. (2) The arrangements must be such that the persons who are to participate (participants) do not have day to day control over the management of the property, whether or not they have the right to be consulted or to give directions. (3) The arrangements must also have either or both of the following characteristics (a) the contributions of the participants and the profits or income out of which payments are to be made to them are pooled; the property is managed as a whole by or on (b)
behalf of the operator of the scheme
The background and general purpose of the legislation are described by Lord Sumption.
In Financial Services Authority v Fradley [2005] EWCA 1183; [2006] 2 BCLC 616, para 32, Arden LJ gave helpful guidance as to the correct approach to construction of the relevant section: First section 235 is drafted in an open textured way in that it is drafted at a high level of generality and uses words such as arrangements and property of any description, which have a wide meaning.
Secondly, the application of section 235 depends on the specific facts of the case and in the event of a dispute those facts will have to be determined by a court of law on the evidence before it.
Once those facts are found, then it is unlikely that an appellate court will set those findings aside unless the judge was plainly wrong.
Thirdly, since contravention of the general prohibition in section 19 may result in the commission of criminal offences [subject to section 23(3) of FSMA], section 235 must not be interpreted so as to include matters which are not fairly within it.
We have been referred to comparable legislation, and related authorities, from other Commonwealth countries.
However, the wording varies, sometimes significantly.
For example, the Australian Corporations Act 2001, Part 1.2, applies to a managed investment scheme, but refers in the definition of that expression, to investors control not over management of the property, but over the operation of the scheme.
Such differences make it advisable to keep the discussion within the ambit of the United Kingdom statute and authorities decided under it.
Section 235 and land banking
The possible application of section 235 to so called land banking arrangements was given prominence by the publication in March 2006 of draft FSA guidance, which became section 11 of its PERG Manual.
We were told by Mr Peacock QC for the FCA that this was a response to the proliferation of schemes offering investors the opportunity to participate in land development projects.
As illustrated by the present case, large sums of money may be involved.
In the earlier schemes the promoter would often be subject to a contractual obligation to negotiate a sale to a developer, and would retain a call option over individual plots.
Once it became known that such arrangements would be regarded as unlawful under section 235, and often following legal advice, adjustments were made to the schemes to keep them outside what was thought to be the ambit of the section.
As already noted, the present is such a case.
Another reported example of such changes in a land banking scheme (in a director disqualification case) is described in the judgment of Hildyard J in Secretary of State for Business Innovation and Skills v Chohan [2013] Lloyds Rep FC 351 (paras 73ff).
He quotes (para 88) the advice of leading counsel (Mr Blair QC) summarising the changes then thought necessary to comply with the law in the light of the guidance: To be safe, the scheme must ensure that the owners actually control the management of their property (and that any management that is carried out on their behalf by the promoter is done on an individual basis).
And the scheme must ensure that the owners are not subject to rights or duties, as against the promoter, or anyone else, that could lead to the conclusion that they were locked into any kind of collective management or development of the land.
It is the FCAs case that in many instances the wording of brochures, marketing material and contracts ignored reality.
The more unscrupulous operators simply took to making covert as opposed to overt representations, and promises to investors regarding the planning or rezoning gains that they would procure for the site.
Whatever was said, the true object of the schemes, at least as understood by investors, was to enable them to benefit from an increase in the collectivised value of the individual plots, to be brought about by the operators supposed expertise and experience in the rezoning process, without any real involvement by investors in the management of that process.
Although individuals could sell their plots at any time, this was not what was expected to happen.
Other schemes have related to different forms of land exploitation.
In Financial Conduct Authority v Capital Alternatives Ltd [2015] EWCA Civ 284, [2015] Bus LR 767 (Capital Alternatives) the Court of Appeal considered two schemes, one relating to exploitation of a rice farm in Sierra Leone, the other to tradable carbon credits in respect of forest areas in Australia, Sierra Leone and the Amazon.
It will be necessary to consider some aspects of the judgment in due course.
This appeal raises the general question whether the FCAs understanding of the law is correct, and specifically whether the law was correctly applied to the facts of the present case.
It has potentially wide ranging significance for the application of the Act to this and similar arrangements.
In re Sky Land Consultants plc
Before turning to the judges findings in detail, it is convenient to refer to the judgment of David Richards J in In re Sky Land Consultants plc [2010] EWHC 399 (Ch) (Sky Land), which has been influential in subsequent cases and in FCA practice.
It involved a land banking arrangement similar in many respects to the present.
It was held to amount to a collective investment scheme within section 235.
In that case, as in the present, the company purported to change its practices following intervention by the FCA.
The changes were held by the judge insufficient to take it outside section 235.
The case concerned two sites, the Crewe land and the Winterton land, involving sales respectively of some 56 and 98 individual plots.
The companys option agreements for both sites stipulated the terms of any future transfers of individual plots, including a restrictive covenant precluding residential development without the consent of Sky Land (paras 22, 25).
In the first period investors were given the clear understanding that the company would seek to obtain planning permission for each site as a whole, and would bear the full cost of doing so (paras 29 33).
Its website identified by name its planning consultants and planning solicitors.
The judge noted the common expectation (though not formally agreed) that in the meantime the land would remain in the occupation of the original owner and would continue to be farmed (para 34).
Following the intervention of the FCA, the company agreed to write to investors indicating that the restrictions would be removed, that Sky Land cannot and will not play any further role in the development of the site, and that the individual owners would need to make their own arrangements to realise the value of the site as a whole (paras 37 39).
The judge concluded that these statements had not been fulfilled, and that the company had continued as before, representing to investors that it would deal with planning and sale, and undertaking activities for that purpose (para 70).
The judge concluded that the arrangements fell within section 235: A scheme whereby investors purchase individual plots within a site on the shared understanding that the company will seek planning permission and market the site including the plots are clearly capable of being arrangements Each of these requirements [of section 235(1)] appears to be satisfied: (i) the arrangements concern land sold off in small plots to investors, (ii) the investors become owners of the individual plots and (iii) the purpose of the arrangements is to receive profits arising from the sale of the individual plots as parts of the larger site. (para 73)
He rejected the argument that the property for these purposes should be looked at by reference to individual plots: I consider the property to be the land comprising the individual plots sold to investors.
It is that land, very probably as part of a larger site which includes areas retained by the original owner and areas acquired by the company, for which planning permission and a buyer would be sought by the company.
The investors participate by each becoming an owner of part of the property.
While it is legally possible for an investor to sell his plot on its own, that is not what is intended or likely to happen.
The purpose is to obtain planning permission, for, and to sell, the property as a whole. (para 75)
On the question whether the individual investors had day to day control for the purposes of section 235(2), the answer depended on the reality of how the arrangements are operated, as to which he saw no real issue: There was no aspect of the management of the property over which the investors had day to day (or any other) control.
Steps with a view to obtaining planning permission and with a view to developing or selling the property were in the hands of the company.
The physical management of the land continued, as it had before, to be under the control of those farming the land. (para 76)
Under section 235(3)(b), the issue was whether the property was managed as a whole by the company.
He said: What constitutes management is dictated by the property.
Some property, short dated deposits for example, require active and constant management.
The management of property of long term nature may involve only intermittent activity.
As regards the land in question, management could be said to involve (i) long term goals, such as planning permission, development and sale, and (ii) the short term physical stewardship of the land.
The latter was of no real concern to the investors.
This was not intended to be an investment in agricultural land the reasonable inference from the evidence is that investors were content to leave it to the company to agree the use of the land pending development or sale.
The purpose was to make a profit from an actual or prospective change from agricultural to residential or other use.
The management of the property, so far as relevant to the investors, was taking steps with a view to obtaining planning permission and developing or selling the land.
Such activities fall naturally within the ambit of management of land.
The respondents submission that individual participants were left to deal with their own plots as they see fit has no basis in the evidence. (paras 77 79)
This reasoning was in substance adopted in the present case by the judge and by the Court of Appeal.
The facts in more detail
The judges findings as to the course of dealings between the company and the investors was based largely on the oral evidence of 15 of the latter.
Mr Banner Eve was the sole witness for the company, but his evidence was regarded by the judge as generally unreliable.
The judges difficulties were compounded by the limited documentary evidence available from the company itself, but also by the FSAs failure to anticipate the need to agree or prove some of the documents (para 21).
It is no criticism of the judge that his findings as to how the companys business was in practice conducted, or intended to be conducted, are lacking in precision on some aspects.
Happily there is no significant disagreement on matters material to the issues in the appeal.
Asset Land Associates Ltd (later Asset Land Investment plc) was incorporated in April 2005.
It was owned (as to 95% of its shares) by Mr Banner Eve and his wife, who were also directors.
Mr Banner Eve controlled its day to day activities.
Some later purchases were made in the name of Asset LI Inc, a Panamanian corporation, of which Mr Cohen (another defendant) was a director.
The judge found that Mr Banner Eve was as fully involved with the activities of that company as with the English company.
Nothing turns on the difference for the purpose of this appeal.
I will refer generally to both as Asset Land or the company.
The first site was in South Godstone.
It can be taken as typical.
The company acquired two sites in February 2006 followed by a third in October 2007.
The judge found (on the basis of inferences from bank statements) that the company began to sell plots at South Godstone and receive payments for them shortly after 2 February 2006.
It sold plots at trade exhibitions and through telephone sales.
In 2007 it began to sell properties through off shore brokers, including an agency called Services Global Destinations (Global) in Spain.
During the life of the project some 300 to 400 investors bought plots at South Godstone.
The site has never been allocated for development, nor sold to a developer.
A valuation report prepared in March 2013 by consultants for the FCA recorded that the site was in the green belt and had currently little prospect of development.
There is no evidence of what attempts (if any) were made by or on behalf of the company (or anyone else) to secure rezoning, or to attract the interest of developers.
Later sites acquired and apparently marketed in the same way were in Liphook (acquired on 30 April 2008), Lutterworth (11 August 2008), Newbury (20 March 2009), Harrogate (14 May 2010), Stansted (June 2011).
They all remain unallocated, and are likewise assessed as currently having little prospect of development.
The judge accepted the investors evidence as showing how the company sold plots between July 2007 and 2012: A representative telephoned the potential investor, often by way of a cold call but sometimes in response to an interest in making an investment or buying land expressed over the internet or elsewhere.
There generally followed several telephone discussions between Asset Land and the investors.
They were given extravagant expectations about the profit that they were likely to make from a short term investment, often within no more than a year or two.
Some, but by no means all, potential investors were sent brochures in hard copy or electronically If the investor agreed to invest in a plot (or plots), he or she paid a deposit, generally of 10% of the price.
Before paying a deposit, most investors had received at least one letter from Asset Land, and the represented defendants rely upon wording in small print by way of a footer, and its wording was similar to that on the so called check box form [see below] Some time after paying their deposit, the investors were required to pay the rest of the price.
After they had done so, Asset Land sent them two copies of a contract for the purchase of the plot(s) that they were buying.
It was not Asset Lands practice for investors to have a copy of the contract before they had fully paid for their plot(s) (paras 62 64)
This account was also confirmed by the contents of a draft letter prepared for a potential investor in November 2011, which spoke of re zoning being anticipated for two to three years, after which the land would be entered into the LDF (Local Development Framework), and then made available to developers to purchase.
Investors were told to have their signature to the contract witnessed, in some cases by a solicitor, but none was encouraged to seek legal or other professional advice.
Those who spoke of using a solicitor were told that it was unnecessary to do so (para 65 67).
The documents sent to a prospective investor included a so called check box form, to be completed and returned to the company.
The form included confirmation that the investor had read and understood a disclaimer (which appeared as a footer in smaller print at the bottom of the form).
This noted that the company did not give investment advice or offer regulated investment products to the public, and that having sold the land the company does not pursue re zoning or planning permission , and neither it nor any person connected with it would have any role in pursuing re zoning or planning permission.
The contract itself contained what the judge called a representations clause, by which it was confirmed that no representations were relied on outside the contract; and a services clause, which provided that the seller would not apply for planning permission for the property or provide any other services amounting to regulated activities under the Act, although it reserved the right to apply for planning permission for land retained by itself.
Notwithstanding these written provisions, and notwithstanding differences in the detailed understanding of the various witnesses, the judge found that they all shared a consistent understanding of the structure of the scheme: i) That Asset Land would seek to progress planning procedures with a view to the sites being used for housing. ii) That Asset Land would then procure their sale, probably to developers. iii) That the investors who sold the plots at the site would be paid a share of the total consideration paid by the purchaser. (paras 71 76)
The judge found further support for his view of the arrangements in the evidence of a Sky News reporter, Mr Mansfield (paras 78 80).
In spring 2012, in connection with a programme about land banking, he had contacted the company in the guise of a potential investor.
In a secretly recorded discussion with a company representative (Ms McKenna) about the Harrogate and the Stansted sites, he was told how Asset Land operated.
This involved buying sites by reference to strict criteria, usually with gas, water and electricity all plugged so that a developer can build quickly to maximise his profit margins .
The right to build would be sold on to developers under sealed bids.
The company was nothing to do with planning permission since it was not involved in construction; but it would, she said, walk (him) hand in hand right up to the end of the investment, advise him of a fair and true market offer, and then return the title deeds to the developer from whom he would by return of post to (his) bank account get the profit (para 78).
After agreeing to invest in a plot on the Harrogate site, Mr Mansfield met Mr Cohen (director of ALI Panama) who emphasised that he would have title to his plot and be in control of it: All we do is re zone [the land], get a percentage of the value lifted and then, thats it, were out of it people who buy it, normally construction companies come in and buy it and they put in for the planning and everything.
When an offer was made, all the investors would be made aware of it, and they would have to agree the price because otherwise an investor might be left out in the cold anyway because [the developers would] just leave [his plot] as gardens.
To avoid the risk of two or three people saying Oh no, were not going to sell and holding the process up for everybody else, they would normally say its 50% who say yes, and then in the contract you have to agree (para 79).
The judge summarised the effect of Mr Mansfields evidence: consistently with the FSAs case, the scheme explained to Mr Mansfield was that (i) Asset Land would seek to have the sites re zoned, and (ii) Asset Land would arrange for a third party, in all likelihood a developer, to make an offer for the site as a whole.
Mr Cohen recognised that a minority were legally entitled to refuse the offer, but the scheme operated on the basis that it would make no financial sense to do so and in reality they would have to sell. (para 80)
Ms McKennas reference to sale by sealed bids also reflects email exchanges in 2010 between Mr Banner Eve and Ms Smeed Hughes (who worked for the company and became a friend: para 25).
The judge noted these emails in support of his conclusion that, to Mr Banner Eves knowledge, brokers were telling investors that sites would be sold as a whole with the obvious inference that the company would arrange the sales (para 150).
One in January 2010 spoke of the land at South Godstone being sold by sealed bids; another in July spoke of land having been sold at auction; and the third in August commented that Global seemed to adopting different pitches as to how the land would be sold, a favourite being the sealed bids routine, or developers already lined up to purchase.
Management activity
As already noted, a significant feature of section 235 is the reference to management of the property, either by the operator or by (or under the control of) the participants.
The judge did not find it necessary to make detailed findings on the nature and extent of management activity under the arrangements.
In agreement with David Richards J in Sky Land he held that steps with a view to enhancing the development value of the land and selling to a developer constituted such management.
That approach has since been endorsed by the Court of Appeal in Financial Conduct Authority v Capital Alternatives Ltd [2015] EWCA Civ 284; [2015] Bus LR 767, where management of a development site was contrasted with that of the agricultural property in issue in that case: The [Sky Land] judgment rightly concentrated on the management with which the investors were concerned, namely that which would lead to the intended profit.
In the present case that is the management of the farm with its buildings, roads, fields, irrigation areas, machinery and equipment, appurtenances and labourers. (para 85, per Christopher Clarke LJ)
Similarly Vos LJ highlighted the need to read the word managed in the context of the particular type of scheme in issue (para 120): The arrangements that need to have the characteristic of being managed as a whole are those relating to one or more of the acquisition, holding, management or disposal of the property.
The question of whether the property is managed as a whole may be answered differently depending on which of these types of arrangements have been made in order to produce the intended profits or income.
For example, in the land bank cases, the arrangements relate to the obtaining of planning permission which is the core management activity from which profit is expected to arise on disposal.
That is plainly a management of the property as a whole The reasoning of the courts below
The High Court
The judge first addressed the question whether the company had changed its operations after the FSAs intervention in 2007.
He held that it continued to lead investors to believe that it would work with the planning authorities to enhance the prospects of housing development, and arrange for planning applications.
It also led investors to think that the whole site would be sold together and the proceeds distributed.
That was the obvious way for the plots to be sold, and the companys representatives confirmed that this was what would happen (paras 109 110).
Under the heading the disclaimer defence: the representations clause and the services clause, he considered arguments relating to the interpretation of the clauses and the application of the Unfair Terms in Consumer Contracts Regulations 1999 (SI 1999/2083) (paras 114 141).
He concluded that the representations clause did not assist the defendants because properly interpreted it did not cover what the brokers told investors, it was not binding under the 1999 Regulations, and it was of no effect under the Misrepresentation Act 1967; likewise the services clause did not assist because, even assuming that it could be read as submitted by the company, it was not binding under the 1999 Regulations (para 141).
He identified three issues under section 235: i) Were there arrangements within section 235(1)? ii) Were the arrangements such the investors did not have day to day control? iii) Were the arrangements such that the property was managed as a whole by or on behalf of the operator? He answered all three in favour of the FCA.
On the first, adopting the reasoning of David Richards J, he held that there were arrangements within section 235: I conclude that, as the FSA submitted, the brokers (or other sales representatives) of Asset Land and investors with Asset Land made arrangements when plots were marketed and investors paid a deposit that they should acquire land at a site, and that the object of the arrangements (as evinced in the exchanges) was that Asset Land should achieve a sale of the site (or a substantial part of it) after it had sought to enhance its value and so the price that it would attract by improving the prospects for housing development (through the site being re zoned, if not granted planning permission), the price paid for it being shared between the owners of the land. (para 157)
He rejected the arguments of Mr Coppel QC (for the company) based on the varying understandings of different investors, and the lack of mutual expectation of adherence to [what was planned].
The investors all had a shared understanding of the essential features of the schemes.
It was enough that the understanding was reasonably based on what they were told by the companys representatives, whether or not the company had any intention of acting in accordance with them (paras 159 160).
He also rejected arguments based on non contractual disclaimers in the letters, including the footers in the check box forms.
The footers were verbose and not prominently presented and did not in terms exclude the possibility of a planning application by an agent acting for the company.
The investors reasonably continued to rely on what they had been told.
The whole structure of the scheme called for plots to be sold together and this could be coordinated only by Asset Land (paras 161 163).
Finally he rejected the argument that the company and the investors could not be found to have entered into arrangements inconsistent with the contracts signed by them: People do not live their lives only by reference to their legal rights, and often manage their affairs, and make arrangements, on the basis that the legal framework in which they operate will not be invoked, or is unlikely to be invoked.
Non legal arrangements are commonly made in parallel with legal contracts: they do not operate only outside territory occupied by contractual arrangements.
Nor are non contractual arrangements and contracts inconsistent if they express differences about what the parties are to do: they operate on different levels (para 164)
On the second issue (section 235(2)), again following the reasoning in Sky Land, he held that the relevant property was each site acquired by Asset Land (para 157), and that on that basis none of the investors had any control over the site as whole (para 168).
He reached the same view even treating the relevant property as the individual plots, given that the key feature of management was to do with enhancing the development status of the land and arranging a sale, which was in the hands of Asset Land.
It was true that investors had the right as owners to deal with their land, and to apply for planning permission: But section 235(2) is not about what legal rights investors had over their plots.
First, the subsection is directed to having actual control, and requires that the investors must actually exercise that control sufficiently to be regarded as being in effective control.
Secondly, [citing Sky Land] section 235(2) is about what the arrangements were and the reality of how [they] are operated.
In reality the arrangements described by Asset Lands representatives and therefore contemplated by the investors could not work if investors in fact exercised the rights to which Mr Coppel referred. (para 169)
On the third point (section 235(3)(b)) he said: , the essential nature of the schemes was that plots were investments, and the plan was that they were to be sold as part of the sites after their value had been enhanced through planning permission or the prospect of development after re zoning.
The management of the property relevant for identifying the characteristics of the arrangements is therefore, as I see it, management directed to what David Richards J called in [Sky Land] at para 78, the long term goals.
The arrangements were that Asset Land would deal with those management matters and the whole structure of the schemes made it obvious that only Asset Land would do so and realistically investors could not do so. (para 172)
The Court of Appeal
The Court of Appeal in substance adopted the reasoning of the judge on the main issues.
Without disrespect it is unnecessary to repeat its reasoning for the purposes of this judgment.
It will be sufficient to refer below to those aspects which are subject to specific challenge by the appellants.
The appellants arguments in the Supreme Court
General approach
In this court, Mr Michael Blair QC for the appellants submitted that, given the serious consequences of a finding that the arrangements fall within section 235, a conservative approach to construction is appropriate, and one which promotes certainty.
He accepted (appellants case, para 58) the judges finding as to the consistent understanding of the arrangements shared by the investors (para 28 above): that the company would progress the necessary planning procedures, and procure sale of the sites, and the investors would share in the proceeds.
But he criticised the legal conclusions drawn from those findings by the courts below.
His submissions were grouped under four principal grounds (case, para 59ff): i) Ground 1 The Court of Appeal erred in its identification of the component parts of the arrangements, and in particular gave inadequate weight to an essential feature of the arrangements, that each investor was intended to (and in fact did) own his plot(s) outright. ii) Ground 2 Under sections 235(2) and (3) the court erred in treating the property as each of the sites acquired by the company, rather than the aggregate, from time to time, of the all plots sold to and owned outright by individual investors, together with all the investors appurtenant rights.
Applying that approach to section 235(2), it should have held that the arrangements left investors with the necessary control: they owned their individual plots outright, had full control over their inclusion in the scheme or eventual sale, and so between them had day to day control of the management of all the relevant property. iii) Ground 3 Under section 235(3)(b) the critical question was whether the arrangements reserved to the investor the final decision as to the exploitation of the property pursuant to the arrangements.
The answer must be yes.
Because each investor was the outright owner of his plot, only he could make the final decision to sell (or not sell) his individual plot. iv) Ground 4 The interpretation adopted by the courts below would if uncorrected potentially interfere with a wide range of legitimate business arrangements that should not be characterised as Collective Investment Schemes.
These grounds were developed in impressive detail in the written and oral submissions.
The following is no more than a summary of what I understood to be the main points.
Ground 1 arrangements
Under the first ground (para 87ff), the appellants accepted that the company made arrangements for the purpose of section 235.
However the courts had extended that concept beyond the legislative intention, for reasons discussed under four sub issues: whose arrangements?, representations, pick and choose, and timing.
The overall thrust was that it was wrong to look for a form of compact between the promoter and potential participants.
In the interests of certainty in the application of the law, the relevant arrangements had to be those made by the operator himself.
They were to be judged objectively, as by an independent observer, taking account of their physical structures and operating machinery, the property to be subject to the arrangements, and representations made by or on behalf of the promoter as to their content; but not of investors understandings, save so far as they were evidence of what representations were actually made.
Furthermore it was wrong for the court to pick and choose between the different elements, oral and written, of the arrangements (such as the contractual documents, which were an intrinsic part of what was proposed by the operator).
The Court of Appeal had also been wrong also to focus on the early stage of evolution of the arrangements, rather than looking at their whole period.
Ground 2 property and day to day control
The second ground (paras 119ff) was similarly divided into four sub issues: property, purpose, exercise and legal rights and realities.
In substance they addressed two linked issues of interpretation under the section: identification of the property (relevant to both sections 235(2) and (3)(b)), and the meaning of day to day control over management (relevant to section 235(2)).
First he criticised the Court of Appeal for wrongly treating the judgment of David Richards J in Sky Land as equating the property with the site acquired by the promoter, rather than the aggregate of the interests owned by the investors.
He illustrated the distinction by reference to the example of a property development consisting of individual units and common parts, such as a block of flats, where the flat owners individual rights consist of their ownership of their own flats, and also rights relating to the common parts, to be exercised jointly with other flat owners.
On the Court of Appeals interpretation, the flat owners could never have day to day control of the property.
By contrast, he submitted, under the manifestly better approach in Sky Land, the arrangement would not be within section 235 because the individual flat owners would have day to day control of their flats and of their rights over the common parts, which together constituted the relevant property (case para 128).
He also criticised the courts below, following Sky Land, for directing attention to the purpose of the arrangements, which is a word used in subsection (1) but not subsection (2).
The steps taken to achieve the purpose of enhancing the planning status of the site and attracting a developer did not require the company to have any control over management of the property.
They could have been undertaken in relation to land owned by strangers.
The only essential acts of management relating to individual plots were the decisions first whether or not to withdraw from the arrangements and secondly whether or not to sell to a particular buyer and on what terms.
These were under the control of the individual owners.
The judge and the Court of Appeal had been wrong also to direct attention to the question not of control as such, but of how it was exercised in practice (following Hamblen J in Brown v InnovatorOne plc [2012] EWHC 1321 (Comm), para 1170).
Mr Blair submits that this is a misreading of the section, under which the question is whether the investors have day to day control, not whether or how they exercise it.
Further, the concept of control is concerned with the physical and legal aspects of the arrangements, not with their purpose or effect (nor how it may have been represented to investors).
It is the legal rights and duties which reflect the realities of the scheme.
Ground 3 management by the operator as a whole
Mr Blairs submissions under this ground (paras 175ff) were the counterpart of those under Ground 2.
The relevant property is the aggregate, from time to time, of the all plots owned by the individual investors, and it is they who have ultimate control over its management.
He drew an analogy with FCA guidance as to the role of a managing agent in respect of a block of flats (PERG 11.2).
The effect of this guidance, as he submitted, was that an arrangement with respect to multiple units of property would not entail management of the property as a whole by or on behalf of the operator if the arrangement has the following characteristics: (i) individual investors each own a unit of property outright; (ii) the final decision as to whether or not to deal with or exploit the unit in question (to let out the flat, or sell the plot) rests with the owner of that unit; and (iii) the investor receives any net proceeds of dealings with his individual unit.
The critical question was whether the arrangements reserved to the investor the final decision as to the application of his own unit.
It was immaterial that they would in practice follow the recommendation of the promoter, so long as they retained the right to exercise their own choice as to how to proceed, whether on their own or in collaboration with other unit holders.
Ground 4 conservative interpretation
Finally (paras 189 191) he submitted that section 235 should not be stretched to cover issues for which other remedies were available, for example misrepresentation, breach of contract, or unenforceability of unfair terms in contracts.
There were well established remedies for such practices, in private law or under the comprehensive regulatory regime for consumer protection.
The expansion of collective investment schemes in order to bring such ordinary commercial transactions within the regulatory ambit of the FCA was neither necessary nor sensible.
Discussion
Arrangements
I can deal shortly with the first ground.
It was not in dispute, as David Richards J held, that section 235 can in principle cover a scheme of the present kind, involving sale of a property in small units to investors with a view to participation in the development profits of the whole site.
The word arrangements has its ordinary meaning, and there is no dispute that Asset Land entered into arrangements within the meaning of the section.
The content of the arrangements was a matter of fact for the judge.
Mr Blair accepts his finding as to the consistent understanding of the investors of what was involved.
He argues that the focus of attention should have been on the arrangements as made by the operator, including the documents prepared for that purpose, rather than as they were perceived by others.
In my view this is an artificial and unrealistic distinction.
The judge was entitled to take the view that the understandings of the investors conformed to what was intended by the operator.
Similarly he was not required to give special weight to contractual or other documents, without regard to their context.
The four sub issues raised under this head by Mr Blair are in truth no more than factors which may be relevant in the overall assessment, none of them definitive.
The judge concluded that arrangements within the section were made when plots were marketed and investors paid their deposits, the object of the arrangements being that the company should achieve a sale of the site after seeking to enhance its value by improving the prospects for housing development, the price to be shared between the owners.
That conclusion was amply supported by the evidence, and discloses no error of law.
The property and its management
Grounds 2 and 3 overlap and it is convenient to deal with them together.
It is clear in my view that the relevant property for the purposes of section 235(1) was each of the companys sites taken as a whole, not the individual plots.
That was the property whose sale was to lead to the profits which were the object of the exercise, and which brought the scheme within the scope of the section.
The appellants, as I understand Mr Blairs submissions, do not dispute that the property means more than the individual plots.
However, it is, he submits, not so much the site as acquired by the company, but the aggregate of all the plots owned by the individual investors.
It is by virtue of those individual ownerships, viewed collectively, that they have ultimate control over its management.
Under his suggested analogy with a block of flats, section 235 would not apply, because the individual flat owners have day to day control of their flats and of their rights relating to the common parts, which together would constitute the relevant property.
In my view the distinction drawn by Mr Blair is not one of substance.
The property for the purposes of subsection (1) is the whole site.
That definition remains the same in principle throughout the section.
But management control of the property under subsections (2) and (3) may be achieved in different ways.
It is necessary to consider the mechanisms by which the participants on the one hand or the operator on the other manage or have management control of the property.
The mechanisms may not be the same in each case, and they need not be legal mechanisms.
That follows from the acceptance that the term arrangements is not limited to agreements binding in law.
By the same token, the control envisaged by those arrangements is not confined to legal control.
Have control in subsection (2) is not a technical term.
In context, as David Richards J held in Sky Land, it must be taken to refer to the reality of how the arrangements are to be operated, which may or may not involve rights or powers enforceable in law.
Nor is there any absolute rule for what Mr Blair calls multiple units of property, including blocks of flats.
The FCAs guidance (PERG 11.2) draws the correct contrast: If the substance is that each investor is investing in a property whose management will be under his control, the arrangements should not be regarded as a collective investment scheme.
On the other hand, if the substance is that each investor is getting rights under a scheme that provides for someone else to manage the property, the arrangements would be regarded as a collective investment scheme.
The judge found that the facts of the present case brought it within the FCAs second category.
He was clearly entitled to do so.
Mr Blair does not, as I understand him, challenge the judges view (following Sky Land) that the relevant management of the property as a whole comprised the steps necessary to obtain planning permission and secure a sale to a developer.
It was no part of the arrangements that the investors should have any part in, or control over, those management activities.
Their ability as individual owners to determine ultimately whether or not to participate in a sale cannot be equated with control of its management in the meantime.
In any event as the judge found, it would make no sense for them in practice to opt out of the realisation of the profit which was the only purpose of the arrangements.
Even if one directs attention to the rights attached to individual units, there is no parallel with the position of individual lessees in a block of flats.
They have day to day control over the management both of their own flats and (collectively) of the common parts, which together make up the relevant property.
That remains the position even if in practice they delegate part of that control to a managing agent.
It represents the substance of the arrangements from the outset.
Under the present arrangements, by contrast, the investors ownership of the individual units was not linked to any exercise of management control, individually or collectively.
It was not even envisaged that the plots should be separately identifiable on the ground.
The move to marketing of so called enhanced plots did not alter the position.
That may have been designed in theory to enable investors to promote individual developments, although the practicalities of that were not put to the test, nor explored in evidence.
In any event, the possibility of some individual management activity of that kind added nothing to their management control of the remainder of the property.
Conversely, turning to subsection (3)(b), under the arrangements as found by the judge control of the management activities for the property as a whole lay with the company.
It was acting as the operator of the scheme, not as mere managing agent for the individual owners.
It is true that its control was not underpinned by any legal rights over the units making up the property.
That did not affect the substance of the arrangements, even if it might have been an obstacle to their effective implementation.
Indeed it might have been thought that lack of legal control would lead to a need for increased management activity to ensure that individual plot owners continued to be committed to the project as it progressed.
Unsurprisingly, it was no part of Mr Blairs case that the companys management activity should be disregarded because it lacked reality.
That would have been tantamount to an admission that the whole scheme was a fraudulent sham.
For the purpose of applying the definition under section 235, the judge was entitled to take the arrangements as found by him at their face value.
The issue was not whether those arrangements were good or bad, or even dishonest, but whether they fell within the statutory words.
For these reasons I would reject the appeal under Grounds 2 and 3.
On this view, no separate issue arises under Ground 4.
I accept of course that section 235 should not be stretched to cover matters covered by other legal remedies, under common law or statute.
However, the judges application of the section to the facts as found by him involved no distortion of its natural meaning or its intended purpose.
Conclusion
the appeal.
In conclusion, I would uphold the decisions of the courts below, and dismiss LORD SUMPTION: (with whom Lord Mance, Lord Clarke and Lord Hodge agree)
I agree with Lord Carnwath that this appeal should be dismissed.
My reasons are similar to his, but I propose to express them in a judgment of my own because this is the first case to reach this court or the Appellate Committee of the House of Lords about one of the more problematic features of the United Kingdoms system of statutory investor protection, namely the regulation of collective investment schemes.
The appeal is about a scheme for investing in land with development potential.
Such schemes are commonly referred to as land banks, although the variety of arrangements that carry that label is so wide that the term is probably better avoided.
The question at issue is whether the arrangements made by companies controlled by Mr David Banner Eve to enable members of the public to invest in land constituted a collective investment scheme regulated by the Financial Services and Markets Act 2000.
Asset Land was not authorised under the Act to establish or operate collective investment schemes.
The facts
Shorn of peripheral detail, the facts are straightforward.
Between February 2006 and October 2007, Asset Land Investment plc bought three adjoining parcels of greenfield land at South Godstone in Surrey with a view to consolidating them into a single site.
The object was to increase the value of the site by persuading the local authority to re zone it for housing development.
The site would then be sold as a whole at a profit to a developer.
Shortly after acquiring the first parcel the company began to subdivide it into plots and to offer the plots for sale to investors.
Ultimately, the consolidated site was divided into 319 plots.
Subsequently, another site was acquired at Liphook in Hampshire.
A Panamanian company called Asset LI Inc, in which the judge found that Mr Banner Eve was also involved, acquired further sites at Newbury, Lutterworth, Harrogate and Stansted.
The additional sites were acquired with the same object and were treated in the same way.
Like the judge, I shall refer to the English and the Panamanian company indiscriminately as Asset Land.
At the trial, there was much dispute and a good deal of evidence about the manner in which the plots had been marketed to investors.
The judge found that it was done orally, mainly by telephone, and usually began with a cold call.
Potential investors were given extravagant expectations about the profits to be made, often within a year or two.
If the investor decided to proceed, he was required to pay a deposit, generally 10% of the price.
Sometime after the payment of the deposit the investor was required to pay the balance of the price.
After the investor had paid the full price, he received two copies of the contract for the purchase of his plot(s) from the relevant Asset Land company.
He also received a check box form.
Once these documents had been signed and returned, the investors plot was conveyed to him and in due course he received a Land Registry certificate of title.
Asset Land retained title to the roadways between the plots, the access points to the site and certain other common spaces.
During the marketing process, different investors were given different understandings of how the development potential would be realised.
However, the judge found that the salesmen gave them all to understand that the scheme had three basic features, which he summarised as follows (para 71): (i) that Asset Land would seek to progress planning procedures with a view to the sites being used for housing; (ii) that Asset Land would then procure their sale, probably to developers; (iii) that the investors who sold the plots at the site would be paid a share of the total consideration paid by the purchaser.
I shall refer to these as the core representations.
On the judges findings, there was no general understanding about how the shares of the total price would be calculated, although one investor seems to have been told that it would be pro rata to the size of each plot.
It is, however, clear that it was not proposed to price each plot separately so that if, say, part of the site was approved for affordable housing the owners of plots in that part would get less while others whose plots lay across an access point designated in the planning permission would be able to hold out for more.
Each investor would derive his profit from a share of the price realised for the site as a whole.
The core representations by which Asset Land explained how the scheme would work did not extend to requiring investors to sell on terms proposed by Asset Land.
But the judge went on to find that in practice the whole structure of the scheme called for plots to be sold together and this could be coordinated only by Asset Land (para 162); and that, although each investor could sell, lease, mortgage or occupy his plot as he pleased once he had acquired it, and could apply for the re zoning of the site or planning permission for his own plot, in reality the arrangements described by Asset Lands representatives and therefore contemplated by the investors could not work if investors in fact exercised [these] rights (para 169).
The contracts of purchase and the check box form contradicted the representations in a number of respects.
In particular, the contracts included a representations clause (clause 14) and a services clause (clause 16).
The representations clause provided: The Buyer confirms that there are and have been no representations made by or on behalf of the Seller on the faith of which the Buyer is entering into this Agreement except and to the extent to which such representations are herein expressly set out or form part of written replies by the Solicitors for the Seller to the written Inquiries before Contract raised by the solicitors for the Buyer or the Sellers replies to Property Information Forms.
The services clause provided: For the avoidance of doubt, the Seller is not obliged to and will not apply for planning permission in relation to the Property or in relation to the land as a whole of which the Property forms part, nor will the Seller provide any other services to the Buyer following the purchase of the Property by the Buyer to the extent that the provision of such services would constitute the carrying on by the Seller of regulated activities for the purposes of the Financial Services and Markets Act 2000 unless the Seller is authorised under that Act and permitted by the Financial Services Authority to carry on the relevant regulated activities.
Notwithstanding the foregoing, the Seller reserves the right to (but is not obliged to) apply for planning permission in relation to any land owned by the Seller which forms part of the land of which the Property forms part.
In addition, the check box form included a non contractual confirmation, signed by the investor, that he had read and understood a disclaimer in the following terms: Asset Land Investment plc is not regulated by the Financial Services Authority (FSA) or any other regulatory body.
Asset Land Investment plc is not authorized to give investment advice or offer regulated investment products to the public.
Asset Land Investment plc offers parcels of land for sale.
Asset Land Investment plc does not pursue planning permission or re allocation of the land once it has been sold and as such, this is not to be viewed as a Collective Investment Scheme (as defined by the Financial Services and Markets Act 2000).
Neither Asset Land Investment plc nor any person connected with it will have any role in pursuing planning permission as a way of increasing the value of the land.
The judge found that the arrangements governing the scheme were contained in the core representations made when the plots were marketed and before the price was paid (para 157).
The contract and the check box form came later.
The judge rejected the submission that these last documents superseded or supplemented the representations.
This was because the services clause dealt with planning permission but not re zoning of the sites, and was in any event unenforceable under the Unfair Terms in Consumer Contracts Regulations 1999 (SI 1999/2083); the representations clause was of no effect under the Misrepresentation Act 1967; and the disclaimer was verbose, not prominently presented and would not have been read or understood by many investors.
The investors, he said, reasonably continued to rely on what they had been told (para 161).
The Financial Services and Markets Act 2000: the general prohibition
Section 19 of the Financial Services and Markets Act 2000 substantially re enacts section 3 of the Financial Services Act 1986.
It provides that no person may carry on a regulated activity unless that person is authorised or exempt.
This is referred to in the Act of 2000 as the general prohibition.
In the earlier Act, regulated activities had been defined in the Act itself.
But in the Act of 2000, a regulated activity is simply defined as an activity of a specified kind which relates to an investment of a specified kind or is carried on in relation to property of any kind: section 22.
For this purpose, specified means specified by the Treasury by statutory instrument.
The relevant statutory instrument is the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (SI 2001/544).
The order identifies specified activities as including (i) activities such as promoting, advising on, managing or dealing in investments; and (ii) establishing, operating or winding up a collective investment scheme: para 51(1)(a) (now renumbered as article 51ZE).
Specified investments are identified in Part III of the same order.
Although the Treasury is empowered to specify any assets as investments, the order in fact identifies broadly the same kinds of asset as had previously been identified in the Financial Services Act 1986.
They comprise shares, bonds and other debt instruments, government and public securities, warrants and tradeable certificates for any of the foregoing, mortgages, options and futures, contracts for differences, units in a collective investment scheme, and similar financial instruments.
The statutory consequences of a breach of the general prohibition are severe.
The infringer commits a criminal offence: section 23.
Any contract made in the course of carrying on the relevant activity is unenforceable: section 26(1).
And there are provisions for compensation and restitution in favour of the other party: section 26(2).
Collective Investment Schemes
Specific provision is made for collective investment schemes in Part XVII of the Financial Services and Markets Act 2000.
Chapter I of Part XVII comprises definitions, including the general definition in section 235, which provides: 235 Collective investment schemes. (1) In this Part collective investment scheme means any arrangements with respect to property of any description, including money, the purpose or effect of which is to enable persons taking part in the arrangements (whether by becoming owners of the property or any part of it or otherwise) to participate in or receive profits or income arising from the acquisition, holding, management or disposal of the property or sums paid out of such profits or income. (2) The arrangements must be such that the persons who are to participate (participants) do not have day to day control over the management of the property, whether or not they have the right to be consulted or to give directions. (3) The arrangements must also have either or both of the following characteristics the property is managed as a whole by or on the contributions of the participants and the (a) profits or income out of which payments are to be made to them are pooled; (b) behalf of the operator of the scheme.
If arrangements provide for such pooling as is (4) mentioned in subsection (3)(a) in relation to separate parts of the property, the arrangements are not to be regarded as constituting a single collective investment scheme unless the participants are entitled to exchange rights in one part for rights in another. (5) The Treasury may by order provide that arrangements do not amount to a collective investment scheme in specified circumstances; or if the arrangements fall within a specified (a) (b) category of arrangement.
The rights or interests of participants in a collective investment scheme are referred to in the Act as units: see section 237(2).
The statutory definition substantially re enacts section 75 of the Financial Services Act 1986, except that the exclusions which are left to secondary legislation in the later Act are defined in the body of the earlier one (subject to the general right of amendment reserved to the Treasury).
Chapter II of Part XVII comprises restrictions on the promotion of collective investment schemes.
Chapters III, IV and V then provide detailed schemes of regulation for the three classes of collective investment scheme at which the Act is principally directed, respectively unit trusts, open ended investment companies and recognised overseas schemes.
More recently a fourth category has been added by amendment, namely master feeder structures governed by EU legislation for UCITS (undertakings for collective investments in transferable securities), but nothing more needs to be said about these.
The definition and its statutory predecessor of 1986 have been regarded as highly unsatisfactory provisions by professional advisers ever since they were first enacted, mainly because of their generality, lack of definition and dependence on secondary legislation to take transactions out of the scope of the legislation which ought not to be there.
As its opening words show, section 235 is primarily intended to operate in conjunction with the detailed provisions of Part XVII relating to units trusts, open ended investment companies and recognised overseas schemes, all of which must satisfy the general definition in section 235 in addition to further criteria specific to each of the three categories.
In that context, its application is relatively straightforward.
However, section 417, which is a general interpretation section covering the entire Act, adopts the definition in section 235 for all other purposes.
Most of the difficulties about the definition arise from its application to transactions not covered by Part XVII.
Those difficulties were comprehensively examined in a report prepared by a committee chaired by Michael Brindle QC under the auspices of the Financial Markets Law Committee in July 2008 (Operating a Collective Investment Scheme).
The litigation arising from land banks has only served to emphasise them.
The legislative background
Before examining the statutory provisions in greater detail, it is necessary to say something about the background against which they were enacted and their place in the statutory scheme as a whole.
The current statutory provisions for regulating collective investment schemes have their origin in previous schemes for regulating unit trusts, ie arrangements under which a manager invests in securities which are then held in trust for participants.
Unit trusts became popular during the 1950s, when they largely replaced direct investment in securities for many private investors, especially the less experienced ones.
At that time, statutory investor protection was based on the Prevention of Fraud (Investments) Act 1939, which had introduced a licensing scheme for dealers in securities.
The Act was replaced by the Prevention of Fraud (Investments) Act 1958.
This retained the basic scheme of the 1939 Act but included a special regime for the managers and trustees of unit trusts.
They were not subject to the Acts restrictions on dealing in securities, provided that the unit trust had been authorised under section 17 of the Act by what was then the Board of Trade.
A substantial body of practice for authorising and de authorising unit trusts was developed by the Board of Trade and its successor the Department of Trade and Industry, which resulted in unit trusts becoming the most heavily regulated financial products in the United Kingdom.
In 1981 Professor LCB Gower was commissioned to examine the existing arrangements for statutory investor protection.
He reported in 1984 in his Review of Investor Protection, Part I, Cmnd 9215 (1984), making extensive recommendations for overhauling the existing law.
One of Professor Gowers principal objections to the then current statutory arrangements was that their coverage was arbitrary and adventitious.
They regulated certain modes of investment while leaving unregulated other arrangements which were functionally similar.
In particular, he recommended the extension of regulation to other modes of collective investment which operated in a similar way to unit trusts, except that instead of holding a beneficial interest in the assets, the participant had purely contractual rights (as in the case of life insurance) or redeemable shares (as in the case of open ended investment companies).
During the consultation process which preceded the publication of his report, the question was raised of regulating alternative investments in physical assets, such as land, wine, bloodstock, works of art and the like.
Professor Gower said about this (para 4.03): Although some responses suggested that physicals as well as futures should be regarded as investments, I do not think that this is necessary.
Nor, consistently with the provisional views expressed in the discussion document, do I think it necessary to include stamps, medallions, works of art, porcelain, limited editions, and other collectibles, or interests in land providing that the acquirer obtains exclusive control over them and is not in reality buying rights to share in the income or capital appreciation under an arrangement whereby someone else controls and manages them.
If the latter is the situation, they should be treated as investments.
This would liberalise and strengthen the present law.
Professor Gower recommended that all forms of investment should be regulated other than those in physical objects over which the investor will have exclusive control: para 4.29(a).
In 1985, the Government published a White Paper, Financial Services in the United Kingdom: A New Framework for Investor Protection (Cmnd 9432) 1985.
The White Paper announced the governments intention of introducing new legislation.
It declared, at para 4.2: The definition of investments will set the boundary of the regulated area.
It is therefore fundamental to the proposed system of regulation.
In defining investments the Government proposes, with minor exceptions, to adopt Professor Gowers approach.
The definition which will be in the primary legislation will be specific (to provide certainty for practitioners, customers and investors) and wide (to achieve consistency of treatment between different financial services).
In addition to securities and other financial products such as futures contracts or options, the legislation would cover participatory rights in other forms of property: para 4.3(iii).
But it would exclude property which can be inspected by or for the potential purchaser and which passes under his direct physical control if he buys it: para 4.7(i).
Chapter 9 of the White Paper dealt with the specific forms of regulation proposed for unit trusts, in which category it included not only unit trusts properly so called but open ended investment companies and all collective investment arrangements other than pensions and life assurance; para 9.2.
The latter were to be regulated under separate statutory arrangements.
These principles informed the drafting of Part I, Chapter VIII of the Act of 1986 and Part XVII of the Act of 2000 which replaced it in 2001.
In both cases, the draftsman resolved to deal with the regulation of collective investment schemes comprising physical assets as part of the broader system of statutory regulation governing unit trusts and open ended investment companies, which they largely resembled.
In keeping with the policy objectives identified by Professor Gower, there is an important difference, which runs through the whole of the Act between financial instruments and physical assets.
With very limited exceptions, regulated activities must relate to assets specified by the Treasury in the Regulated Activities Order.
They are (as I have pointed out) financial instruments of one kind or another.
Regulated activities as defined do not relate to physical or other non specified assets.
Collective investment schemes are the one exception to this.
They may comprise arrangements with respect to property of any description.
The only respect in which the Act regulates non specified assets is that regulated activities include (i) establishing, operating or winding up a collective investment scheme, which may include non specified assets, and (ii) promoting, advising on, managing or dealing in units in a collective investment scheme, which may include non specified assets.
In other words, the Financial Services and Markets Act 2000 regulates only the indirect sale or holding through collective investment schemes of non specified assets.
It has no application to the direct acquisition, management or disposal of non specified assets such as land.
A huckster may engage in all manner of sharp practice in selling land to consumers, in which case he is likely to fall foul of the common law rules concerning misrepresentations and may well infringe consumer protection legislation such as the Unfair Terms in Consumer Contracts Regulations 1999 (SI 1999/2083) (now in Part 2 of the Consumer Rights Act 2015).
But he will not be carrying on an activity regulated by the Financial Services and Markets Act 2000, and will not in general fall under the regulatory powers of the Financial Conduct Authority.
Under the Asset Land schemes as found by the judge, Asset Land sold the plots to the investors, but thereafter proposed to do just two things: negotiate with the planning authority to rezone the site and then find a buyer for it.
It is accepted by Mr Peacock QC, who appeared for the Financial Conduct Authority, that if Asset Land had simply sold the land and left it at that, they would not have been operating a collective investment scheme.
That is plainly right, because land is not a specified asset.
Selling it to investors is not therefore a regulated activity.
He also accepted that if a planning consultant and an estate agent had come in after the investors had acquired their plots and assumed the functions of negotiating with the planning authority and finding a developer willing to buy the site, the planning consultant and the estate agent would not be operating a collective investment scheme.
That is also plainly right.
They would simply have been providing professional services to the landowners.
Advising, negotiating and finding a buyer might in some circumstances be regulated activities in relation to specified assets, but not in relation to physical assets like land.
The Authoritys submission is that it makes all the difference that Asset Land was going to perform all of these functions.
But why should that matter? Mr Peacock was inclined to submit that it was because Asset Land set up the whole thing and promoted it as a package.
But, with respect, that will not do.
The Act does not regulate the establishment or promotion of schemes, unless they are collective investment schemes or involve regulated activities in relation to specified assets.
It must first be established that they are.
I would agree with the submission, which provided the abiding theme of the Authoritys argument, that it is important when construing a regulatory statute of this kind not to allow technical distinctions to frustrate the purpose of the legislation.
But the Financial Services and Markets Act 2000 cannot be construed on the assumption that it was intended to regulate every kind of investment in which members of the public are liable to have advantage taken of them by an unscrupulous intermediary.
In the first place, as cases like Office of Fair Trading v Abbey National plc [2010] 1 AC 696 remind us, most regulatory legislation is a compromise between the protection of consumers and the avoidance of regulatory overkill.
In a statute such as the Financial Services and Markets Act 2000, which deliberately sets out to regulate some forms of investment but not others, the omission of some transactions from the regulatory net cannot of itself be regarded as compromising the efficacy of the statutory scheme.
Secondly, there is, as the White Paper preceding the 1986 Act pointed out, a tension between the need to provide certainty for practitioners, customers and investors, and the need to cast the net wide enough to ensure consistency of treatment between different financial services.
The consequences of operating a collective investment scheme without authority are sufficiently grave to warrant a cautious approach to the construction of the extraordinarily vague concepts deployed in section 235.
Arden LJ was surely right in Financial Services Authority v Fradley [2006] 2 BCLC 616, para 32, to say that the section must not be interpreted so as to include matters which are not fairly within it.
It must, moreover, be interpreted in a way that provides intelligible criteria which can be applied by professional advisers considering schemes in advance of their being marketed.
The Treasury has a wide power under section 235(5) to exempt particular categories of transaction, but criminal liability and the avoidance of contracts are not results which can properly be made to depend wholly on the discretion of the Treasury or the enforcement division of the Financial Conduct Authority.
It follows that any conclusion that Mr Banner Eve and his companies were operating collective investment schemes must be firmly founded on the language and purpose of section 235, without making arbitrary teleological assumptions.
Section 235: general
Section 235 begins in subsection (1) with a wholly general description of collective investment schemes which on its own would cover virtually all cooperative arrangements for deriving profits or income from assets.
Subsections (2), (3) and (4) narrow down the breadth of that description.
They are the heart of the definition.
Their function is to give effect to the distinction between direct and indirect dealings, which I have described above.
The paradigm cases of arrangements for indirect dealing with assets are the three classes of collective investment regulated by Part XVII to which the definition is primarily directed: unit trusts, open ended investment companies and corresponding overseas schemes.
All of these have the common feature that the investors have no control over the assets comprised in the scheme.
This is because they have no legal interest in the assets, and in the case of an open ended investment company no beneficial interest either.
Of course, other forms of collective investment may exhibit the same lack of control over the assets on the part of the investors, but in different ways.
Hence the wider terms of the statutory definition and its application to schemes lying outside Part XVII.
Section 235(1): arrangements
A collective investment scheme means, as section 235(1) provides, arrangements of the prescribed description.
Subsections (1) to (4) all describe the characteristics that the relevant arrangements must have if the resultant scheme is to qualify as a collective investment scheme.
Arrangements is a broad and untechnical word.
It comprises not only contractual or other legally binding arrangements, but any understanding shared between the parties to the transaction about how the scheme would operate, whether legally binding or not.
It also includes consequences which necessarily follow from that understanding, or from the commercial context in which it was made.
In these respects, the definition is concerned with substance and not with form.
It is, however, important to emphasise that it is concerned with what the arrangements were and not with what was done thereafter.
Of course, what was done thereafter may throw light on what was originally understood.
It may for example serve to show that some record of the understanding was a sham.
It may found an argument that the arrangements originally made were later modified.
But it must be possible to determine whether arrangements amount to a collective investment scheme as soon as those arrangements have been made.
Whether the scheme is a collective investment scheme depends on what was objectively intended at that time, and not on what later happened, if different.
The judge held that the core representations represented a shared understanding about how the scheme would work.
On his findings there can I think be no real doubt but that that he was right to say that the mutual understanding based on the core representations constituted arrangements within the meaning of that word in section 235, and that so far as they were inconsistent with those representations, the contract, the disclaimer and publicity material were not part of the arrangements.
Section 235(1): with respect to property
The next question is: with respect to what property were Asset Lands arrangements with these investors made? The core representations are consistent only with its being the whole of a site.
It is not the individual plots.
Nor is it, as Asset Land submitted, the totality of the individual plots plus the rights of the plot holders over the roadways, access points and common parts.
The reason is that the property referred to in subsection (1) is the property from whose acquisition, holding, management or disposal the profits or income were to be derived.
On the judges findings, that was the whole site.
It was the whole site that was to be rezoned, and it was the whole site which was to be sold to a developer.
The profit which each investor would derive from these transactions would be derived from an aliquot share of the entire sale price for the site.
Section 235(2): day to day control
The arrangements must be such that the investors do not have day to day control of the management of the property.
The judge adopted the opinion of Hamblen J in Brown v InnovatorOne plc [2012] EWHC 1321 (Comm) at para 1170, that the subsection was directed to investors having actual control and required that they must actually exercise that control sufficiently to be regarded as being in effective control: para 169.
The Court of Appeal (para 83) agreed with him, but I regret that I do not, essentially for the reason which I have given in para 91 above.
Control of property means the ability to decide what is to happen to it.
I would accept that that does not only mean the legal ability to decide.
It extends to a case where the arrangements are such that the investor will in practice be able to do so.
But the critical point is that the absence of day to day control in subsection (2) has to be a feature of the arrangements.
This is necessarily prospective, viewed from the time when the arrangements are made.
Either those arrangements confer or allow control on the part of the investors or they do not.
The test cannot depend on what happens after the arrangements have been made.
Nor would a test based on the actual exercise of control be realistic.
Some kinds of property require little or nothing by way of management.
Some situations do not require any exercise of management control.
The question must necessarily be in whom would control be vested were control to be required.
For the answer to turn on what exercise of control turned out to be required, would add an arbitrary element to the test which can hardly have been intended.
In my opinion, subsection (2) in this case is satisfied for the simpler reason which the judge gave as his main one.
The property over whose management the investors must lack day to day control means the property referred to in subsection (1) with respect to which the arrangements were made.
The question is therefore whether the arrangements were such that the investors had day to day control of the management of the whole site.
This cannot refer to the powers of control exercisable by any individual investor.
It is hard to conceive of a case in which an individual investor could ever have day to day control of any more than his own plot.
The subsection must therefore refer to the control exercisable by the investors collectively.
In the case of Asset Lands sites, the investors collectively did not have the relevant control for two reasons.
First, they were not in a position to exercise control of the management of the whole site because the roadways, access points and other common parts were retained by Asset Land.
The investors had only easements in respect of those parts.
Secondly, even if the investors had been for practical purposes in a position to control the management of the whole site by organising themselves to that end, there were no arrangements to that effect.
It follows that the critical part of the definition is subsection (3).
Section 235(3)(b): management of the property as a whole
Section 235(3) lays down two alternative criteria.
The arrangements must be such that either (a) the contributions and the profits or income are pooled, or (b) the property is managed as a whole by or on behalf of the operator of the scheme.
The Authority does not rely on (a).
That is because the arrangements in this case envisaged the pooling of the proceeds of sale, but not the pooling of their contributions, ie their plots.
It follows that the question whether subsection (3) was satisfied depends on paragraph (b).
It should be noted that paragraph (b) operates entirely irrespective of whether there is any pooling.
It would be the determinative provision in this case even if the arrangements had been that the plots would be individually priced and each investor would receive the price of his own plot.
Subsection (3)(b) provides that what has to be managed as a whole is the property the subject of the scheme, not the scheme itself so far as that is different.
Acts by way of management of the scheme are relevant only so far as they involve the management of the property.
In a classic collective investment scheme, say a unit trust, the property the subject of the scheme will usually comprise incorporeal property such as securities.
But where the property of the scheme comprises physical assets, subsection (3)(b) requires the arrangements to be such that the operator manages the physical assets.
In this case the property falling to be managed by or on behalf of the operator is, as we have seen, the site.
Accordingly, the question is whether, objectively, the functions which the arrangements assigned to Asset Land after the investors acquisition of his plot constituted management of the site.
Asset Land had, as I have pointed out, two functions: negotiating with the planning authority and finding a buyer for the site.
These two functions amounted to managing the business project, in other words the scheme.
But that is not the question.
The question is whether, either separately or together, they also constituted managing the site.
Management is a protean word which can embrace a wide range of activities involving varying degrees of control over the property being managed.
But in section 235 it has a specific purpose.
Subsections (2) and (3) together perform two closely allied functions.
They describe the classic features of unit trusts and open ended investment companies, under which the investor has no control over the assets.
And they give effect to Professor Gowers recommendation that investment in physical assets (which are covered only through the provisions relating to collective investment schemes) should not be regulated if the investor had exclusive control of them.
In each case, the section is concerned with arrangements under which the investor exchanges property over which he has entire dominion for units in a larger property over which he has more limited rights.
A collective investment scheme may exist in respect of property of which the investors become owners, as section 235(1) makes clear.
But their rights in respect of that property are nevertheless limited by the collective nature of the scheme.
Section 235(3) identifies two ways in which the investor may part with control over the property.
The reason why the subsection treats them as alternative criteria for recognising a collective scheme is that they are functionally equivalent.
Subsection (3)(a) refers to cases where the contributions and the profits or income generated by them are pooled, which necessarily imports a loss of control in favour of whoever controls the pool.
Subsection (3)(b) refers to cases in which there may be no pooling, but there is an equivalent loss of control to the operator by virtue of his powers of management of the whole property.
The fundamental distinction which underlies the whole of section 235 is between (i) cases where the investor retains entire control of the property and simply employs the services of an investment professional (who may or may not be the person from whom he acquired it) to enhance value; and (ii) cases where he and other investors surrender control over their property to the operator of a scheme so that it can be either pooled or managed in common, in return for a share of the profits generated by the collective fund.
Unit trusts and open ended investment companies are, as I have said, the paradigm cases in the latter category, and indeed the only cases regulated in detail by Part XVII to which section 235 primarily relates.
In the context of land schemes, a good example of a surrender of control by virtue of the arrangements for the management of the property is supplied by the facts of Financial Conduct Authority v Capital Alternatives Ltd [2015] EWCA Civ 284; [2015] Bus LR 767: a farm was divided into plots which were owned outright by investors but run by a manager with complete autonomy over its management: see paras 74 75.
It is convenient to deal first with Asset Lands role in finding a buyer.
In my opinion, this is an act of management if the arrangements empowered Asset Land to effect a sale on the investors behalf, in the same way as the manager of a unit trust sells securities.
The same would be true if the arrangements required the investors to sell on the terms approved by the company.
Selling or procuring the sale of an asset is an act of management.
The power of disposition which is involved would constitute sufficient control to satisfy the object of section 235(3)(b).
This appears to have been the position in In re Sky Land Consultants plc, where the investors entered into a marketing agreement appointing the promoter as their sole agent to sell their plots and gave him a power of attorney for that purpose.
The promoter claimed to have abandoned these rights after being challenged by the Financial Services Authority, but the judge found that the changes were notified to only a handful of investors and that the scheme continued to be marketed as before.
For that reason I think that that case was rightly decided notwithstanding my reservations about aspects of the reasoning.
On the other hand, Asset Lands role in finding a buyer was not an act of management within the meaning of subsection (3)(b) if all that they were expected to do was put a proposal for sale before the investors for them to approve or reject as they saw fit.
On that footing the alleged manager had no control at all.
The distinction is necessary if there is to be a workable distinction between collective investment schemes and cases in which an intermediary such as an estate agent simply supplies professional services without assuming control over the assets.
Some examples will illustrate the point.
A wine merchant stores investors wines in specialised storage along with those of other customers, thereby enhancing their value over time.
Investors buy flats to let in a block managed by a single manager.
Adjoining owners of plots in a commercial forest employ a professional forester to manage the whole forest and sell the timber.
The owners of the four flats in a town house get together to instruct an estate agent to sell the whole house as a single property.
In each of these cases the owners property or its proceeds are not necessarily pooled, and they do not necessarily have day to day control over all of the property comprised in the arrangement.
But, as I have pointed out, paragraph (b) of section 235(3) is an alternative to paragraph (a) and operates entirely independently of any considerations of pooling.
Mr Peacock understandably did not go so far as to suggest that these arrangements would be collective investment schemes.
But if they are not, then why not? In my opinion, it can only be because in each case the assets were not managed as a whole by or on behalf of the operator of the scheme.
This was because the owner retained entire dominion over his property and merely contracted for professional services in relation to its exploitation.
On which side of the line does the present case fall? In strictly legal terms, the three core representations did not call for any surrender of control over the plots to an investment intermediary.
On the contrary, each investor remained the entire owner and sole controller of his plot and simply counted on Asset Land to enhance its value and find him a buyer.
But the transaction cannot be viewed only in legal terms, and the judge has found that the practical consequences of the arrangements went wider than the express terms of the three core representations.
He discounted the significance of the investors legal right to dispose of their plots as they pleased, because he considered that the arrangements embodied in the core representations could not work if the investors exercised the rights that they theoretically possessed: see paras 162, 169 of his judgment.
The dominion of the investors over their plots, although apparently complete, was in reality an illusion.
This was essentially a factual assessment for the judge and, a challenge to it having failed in the Court of Appeal, it could not be right for this court to substitute a different view of its own.
On that ground, which is substantially narrower than the submissions addressed to us by the Financial Conduct Authority, but enough for the resolution of this appeal, I agree that the schemes with which we are concerned are collective investment schemes.
| UK-Abs | These were proceedings brought by the Financial Conduct Authority (FCA) against Asset Land Investment plc and associated parties (Asset Land) and its principal owner and director Mr Banner Eve, alleging they had carried on a of regulated activities without authorisation, namely the operation of collective investment schemes, contrary to section 19 of the Financial Services and Markets Act 2000 (FSMA).
The activities related to sales of individual plots at six possible development sites in various parts of the United Kingdom.
Asset Land divided the sites into plots which they sold to investors, representing that it would be responsible for seeking rezoning for residential development and for arranging a sale to a developer.
The High Court held that in the circumstances this amounted to operating a collective investment scheme.
The Court of Appeal upheld the decision.
Asset Land and Mr Banner Eve appealed to the Supreme Court.
The Supreme Court unanimously dismisses the appeal by Asset Land and Mr Banner Eve, finding that Asset Lands activities amounted to operating collective investment schemes under section 235 FSMA, and were thus regulated activities for the purpose of section 19.
Lord Carnwath gives the lead judgment.
Lord Sumption gives a concurring judgment.
Section 235 FSMA concerns collective investment schemes constituting by arrangements respecting property which enable participants to receive profits or income arising from the acquisition, holding, management or disposal of the property.
To fall within section 235 the participants in the scheme must not have day to day control over the management of the property, and the property must be managed as a whole by or on behalf of the operator of the scheme.
Lord Carnwath addresses the four principle grounds of appeal raised by the Appellants.
Ground 1 was that the Court of Appeal erred in its identification of the component parts of the arrangements, and gave inadequate weight to an essential feature, namely that each investor intended to, and did own his plot(s) outright.
Lord Carnwath rejects the Appellants distinction between the arrangements made by the operator and how they were perceived by others as artificial and unrealistic.
He finds that the judge was entitled to take the view that the investors understandings conformed to what was intended by the operator, and was not required to give special weight to contractual or other documents, without regard to their context [54].
Ground 2 was that the court erred in treating the property under section 235(2) and (3) as each of the sites acquired by the company, rather than the aggregate of all the plots sold to individual investors,
and should have held that the arrangements left investors with the necessary control.
Ground 3 argued that that the critical question under section 235(3)(b) was whether the arrangements reserved to the investor the final decision as to the exploitation of the property pursuant to the arrangements, the correct answer to which was yes.
Lord Carnwath deals with Grounds 2 and 3 together, finding that the relevant property for the purposes of section 235(1) is the whole site, but that management control of the property under section 235(2) and (3) may be achieved in different ways, and may not be by legal mechanisms or legal control.
Have control in subsection 2 refers to the reality of how the arrangements are to be operated [57 59].
Lord Carnwath holds that the judge was entitled to find that the relevant management of the property as a whole comprised the steps necessary to obtain planning permission and secure a sale to a developer, and it was no part of the arrangement that the investors should have any part in or control over those management activities [60].
Ground 4 was that the courts interpretation would potentially interfere with a wide range of legitimate business arrangements which should not be characterised as collective investment schemes.
Lord Carnwath finds that no issue arises, as the judges application of section 235 on the facts as found by him involved no distortion of its natural meaning or intended purpose [63].
Lord Sumption reviews the policy underlying the regulation of collective investment schemes.
He finds that whether a scheme is a collective investment scheme depends on what was objectively intended at the time the arrangements are made, and not on what later happens [91].
The essence of such a scheme is a lack of legal or practical control by the investor of the profit generating investment which is the subject of the scheme.
The investor exchanges property over which he has entire dominion for units in a larger property over which he has more limited rights.
A distinction must therefore be made between (i) cases where the investor retains entire control of the property and simply employs the services of an investment professional (who may or may not be the person from whom he acquired it) to enhance value; and (ii) cases where he and other investors surrender control over their property to the operator of a scheme so that it can be either pooled or managed in common, in return for a share of the profits generated by the collective fund.
He holds that the judge was right to say that the mutual understanding based on the core representations made by Asset Land to the investors constituted arrangements under section 235, and that so far as the contract, disclaimer and publicity material were inconsistent with those representations, they were not part of the arrangements [92].
The core representations were consistent only with the property the subject of the arrangements being the whole of a site.
It was the whole site which was to be rezoned and sold to a developer, and the profit which each investor would derive would be derived from an aliquot share of the entire sale price for the site [93].
As to day to day control, the question must be in whom would control be vested were control to be required, section 235(2) must refer to the control exercisable by the investors collectively.
The investors collectively did not have the relevant control of the management of the whole sites because common parts were retained by Asset Land [94 95].
That left as the critical question whether the property was managed as a whole.
That depended on whether, objectively, the functions which the arrangements assigned to Asset Land after the investors acquisition of his plot constituted management of the site [97].
The transaction cannot be viewed only in legal terms, and the judge found that the dominion of the investors over their plots was in reality an illusion.
This was a factual assessment by the judge and it is not right for this court to substitute a different view.
On this narrower ground, Lord Sumption agrees that the schemes are collective investment schemes [102].
|
In our society, a great deal of intellectual effort is devoted to tax avoidance.
The most sophisticated attempts of the Houdini taxpayer to escape from the manacles of tax (to borrow a phrase from the judgment of Templeman LJ in W T Ramsay Ltd v Inland Revenue Comrs [1979] 1 WLR 974, 979) generally take the form described in Barclays Mercantile Business Finance Ltd v Mawson [2004] UKHL 51; [2005] 1 AC 684, para 34: . structuring transactions in a form which will have the same or nearly the same economic effect as a taxable transaction but which it is hoped will fall outside the terms of the taxing statute.
It is characteristic of these composite transactions that they will include elements which have been inserted without any business or commercial purpose but are intended to have the effect of removing the transaction from the scope of the charge.
The present appeals are concerned with composite transactions of this nature, designed to avoid the payment of income tax on bankers bonuses.
They are among a number of cases concerning broadly similar schemes.
In each case, the scheme was intended to take advantage of Chapter 2 of Part 7 of the Income Tax (Earnings and Pensions) Act 2003 (ITEPA), as amended by Schedule 22 to the Finance Act 2003 (Chapter 2).
Although the schemes were also designed to avoid the payment of national insurance contributions, it is unnecessary to discuss that aspect, as it is common ground that the position in that regard is the same as in relation to income tax.
The background and context of Chapter 2
It may be helpful to begin by considering the relevant legislation.
Chapter 2 is best understood against the background of the previous law, and in its context within Part 7 of ITEPA.
Under ordinary principles of tax law, where an employee receives shares as part of his remuneration, he is liable to income tax on the value of the shares, less any consideration which he may have given for them, in accordance with the decision of the House of Lords in Weight v Salmon (1935) 19 TC 174.
That case concerned a situation where the managing director of a company had been allowed to subscribe for shares at par as a reward for successful performance.
The position where an employee is granted a conditional share option was considered by the House of Lords in Abbott v Philbin [1961] AC 352.
That was a case where a companys senior employees had been given an option to subscribe for its shares at the then current market price, the option being exercisable at any time within the next ten years.
The employees were thus incentivised to increase the companys prosperity.
The option was non transferable and would expire on the employees death or retirement.
It was held that income tax was chargeable on the realisable monetary value of the option at the date of its acquisition, rather than on the value realised when it was subsequently exercised, as the Revenue had argued.
Lord Reid said at p 376: I can sum up my view by saying that conditions and restrictions attached to or inherent in an option may affect its value, but are only relevant on the question whether the option is a perquisite if they would in law or in practice effectively prevent the holder of the option from doing anything when he gets it which would turn it to pecuniary account.
The decision in Abbott v Philbin was reversed by section 25 of the Finance Act 1966 (later consolidated as section 186 of the Income and Corporation Taxes Act 1970), which removed any charge to income tax on the grant of employees share options, and instead imposed a charge on the gain realised when the option was exercised, assigned or released.
Section 78 of the Finance Act 1972 subsequently conferred an exemption from the charge in relation to approved share option schemes, on the view that such schemes could perform valuable social and economic functions.
Those provisions applied only to share option schemes.
They did not apply to share incentive schemes under which an employee subscribed for, or was awarded, shares to which restrictions might be attached for a prescribed period, and which might become more valuable on the lifting of the restrictions.
An employee might, for example, be awarded shares subject to the condition that they would be forfeited if performance targets were not met.
Until 1998, the Revenue took the view that no charge to income tax arose when shares of that type were acquired.
Nor, until the 1972 Act, was there any specific charge to income tax when the restrictions attached to the shares were lifted.
Section 79 of the 1972 Act, however, imposed a charge to income tax on the value of employment related shares (less any consideration given) when the restrictions were lifted, or the employee ceased to have a beneficial interest in the shares, or a period of seven years elapsed from their acquisition, whichever was the earliest.
The timing of the charge reflected the fact that it was at the point when the risk of forfeiture was lifted that the value of the shares could most easily be determined and realised.
Approved share option schemes were excluded from the scope of the charge.
Another exception related to shares which were not subject to any restrictions other than those applicable to all shares of the same class, where the majority of the shares of that class were acquired otherwise than in pursuance of offers to employees.
The latter exception has a counterpart in the modern legislation, in section 429 of ITEPA, to which it will be necessary to refer later.
That remained the broad outline of the income tax regime applicable to share options and share incentive schemes until 1998.
By then, the Revenue had received legal advice, in relation to remuneration provided in the form of shares subject to forfeiture, that the Abbott v Philbin principle applied, so that a charge to tax arose at the time when the shares were first awarded, on a value reduced by the risk of forfeiture.
It appears from contemporaneous documents (a Budget news release issued on 17 March 1998, and the explanatory notes which accompanied the subsequent Bill) that the advice gave rise to two problems.
First, it was considered fairer to tax shares which were subject to the risk of forfeiture at the point when the risk was lifted or, if earlier, when the shares were sold, rather than when the shares were acquired.
That was because it was at the point when the restriction was lifted that the value of the shares could most easily be determined, and that the employee was often able to realise their value.
Secondly, it was considered necessary to prevent tax avoidance schemes involving remuneration in shares subject to forfeiture from being set up in order to exploit the new understanding of the legal position.
Parliament addressed those problems by enacting section 50 of the Finance Act 1998, which inserted sections 140A to 140C into the Income and Corporation Taxes Act 1988.
The general effect of those provisions was to remove the charge to income tax when an employee received shares on terms which meant that they might later be forfeited, unless the shares could still be subject to the risk of forfeiture more than five years later.
Instead, there was a charge to income tax on the market value of the shares when the risk of forfeiture was lifted or, if sooner, when the shares were sold.
Sections 140A to 140C of the 1988 Act were re enacted as the original Chapter 2 of ITEPA, but a few months later a new and more complex Chapter 2 was substituted by the Finance Act 2003.
The substituted Chapter 2 formed part of an amended Part 7 of ITEPA, introduced to close loopholes, prevent avoidance and deal with other anomalies, according to the explanatory notes.
Part 7, as amended, was considered by this court in Grays Timber Products Ltd v Revenue and Customs Comrs [2010] UKSC 4; [2010] 1 WLR 497.
That case concerned Chapter 3D of Part 7, but, in a judgment with which the other members of the court agreed, Lord Walker discussed the wider context.
As he explained, the provisions of Part 7 reflect three different legislative purposes.
Those purposes have already become clear from the discussion of the historical background: .
First there is Parliaments recognition that it is good 4. 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 .
Second, if arrangements of this sort are to act as 5. 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 . 6.
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. 7.
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.
In the only other judgment delivered in that case, Lord Hope commented at para 56 that if there is any theme in the Act it is one of anti avoidance and the closing down of perceived tax loopholes.
The provisions of Chapter 2
As section 417 of ITEPA states, Part 7 contains special rules about cases where securities, interests in securities, or securities options are acquired in connection with an employment.
In terms of section 420(1), the following (amongst other things) are securities: (a) shares in any body corporate (wherever incorporated) . (b) debentures, debenture stock, loan stock, bonds, certificates of deposit and other instruments creating or acknowledging indebtedness In terms of section 420(5), the following (amongst other things) are not securities: (b) money and statements showing balances on a current,
deposit or savings account
Section 421B(8) defines the expression employment related securities as meaning securities or an interest in securities to which Chapters 2 to 4 apply.
In terms of section 421B(1), those chapters apply to securities, or an interest in securities, acquired by a person where the right or opportunity to acquire the securities or interest is available by reason of an employment of that person or any other person.
In terms of section 421B(2), securities, or an interest in securities, are acquired at the time when the person acquiring the securities or interest becomes beneficially entitled to them.
As was explained earlier, the award to an employee of shares in a company by reason of his employment gives rise under ordinary tax rules to a charge to income tax on the market value of the shares at that time, even where the shares are subject to a condition or restriction affecting their value.
But Chapter 2 creates a special regime for employment related securities if they are restricted securities or a restricted interest in securities at the time of their acquisition.
Those expressions are defined by section 423(1): (1) 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.
In relation to section 423(1)(a), it is argued on behalf of the banks in the present appeals that the shares in question are restricted securities by virtue of section 423(2).
It provides: This subsection applies to provision under which (a) there will be a transfer, reversion or forfeiture of the employment related securities, or (if the employment related securities are an interest in securities) of the interest or the securities, if certain circumstances arise or do not arise; (b) as a result of the transfer, reversion or forfeiture the person by whom the employment related securities are held will cease to be beneficially entitled to the employment related securities, and that person will not be entitled on the transfer, (c) reversion or forfeiture to receive in respect of the employment related securities an amount of at least their market value (determined as if there were no provision for transfer, reversion or forfeiture) at the time of the transfer, reversion or forfeiture.
Section 424 sets out a number of exceptions.
It is relevant to note subsections (b) and (c): Employment related securities are not restricted securities or a restricted interest in securities by reason only that any one or more of the following is the case that person [ie, the person by whom they are (b) held] may be required to offer for sale or transfer the employment related securities on the employee ceasing, as a result of misconduct, to be employed by the employer or a person connected with the employer, or (c) the employment related securities (or the securities in which they are an interest) may be redeemed on payment of any amount.
Section 425(2) confers an exemption from income tax in respect of the acquisition of employment related securities where they are restricted securities by virtue of section 423(2) at the time of the acquisition, and will cease to be restricted securities by virtue of that provision within the next five years.
The exemption from tax is optional: the employer and employee may elect that it is not to apply, in which case a charge to income tax will arise in accordance with Abbott v Philbin.
Section 426 imposes a tax charge in relation to the securities if a chargeable event occurs.
For present purposes, the relevant chargeable event is the securities ceasing to be restricted securities.
Section 429, however, allows an exemption from the charge under section 426 where, put shortly, a whole class of shares in a company is affected by the same restriction, all the shares of the class are affected in the same way by the chargeable event, and either (a) the company is employee controlled by virtue of holdings of shares of the class, or (b) the majority of the companys shares of the class are held by persons unrelated to the company.
It follows that where section 429 applies (as, for example, where the company is owned by its employees, or where most of the shares of the class awarded to the employees are held by members of the public, and the other requirements of the section are met), the recipient of the shares is given the same favourable income tax treatment as the recipient of shares under an approved share option scheme.
Subsequent to the date of the schemes with which these appeals are concerned, section 429 was amended by paragraph 6 of Schedule 2 to the Finance (No 2) Act 2005 so as to exclude its application to tax avoidance schemes.
Other Chapters
It is also relevant to note Chapter 3A, comprising sections 446A to 446J.
As section 446A(1) explains, Chapter 3A applies in certain cases where the market value of employment related securities (or other relevant securities or interests in securities) is reduced by things done otherwise than for genuine commercial purposes.
Things done otherwise than for genuine commercial purposes include anything done as part of a scheme or arrangement the main purpose, or one of the main purposes, of which is the avoidance of tax (section 446A(2)).
Section 446B applies where the market value of employment related securities at the time of their acquisition has been reduced by at least 10% as a result of things done otherwise than for genuine commercial purposes within the previous seven years.
In such circumstances, it imposes a tax charge on the difference between the securities actual market value and the market value which they would have had if it had not been artificially depressed.
Section 446B does not apply, however, where section 425(2) applies: section 446B(3).
Section 446E has the effect of adjusting the charge under section 426, if such a charge arises, where the market value of the securities is artificially low immediately after the chargeable event, or on 5 April in any year (there being, in those circumstances, a deemed chargeable event on that date).
Artificially low is defined as meaning reduced by at least 10% as a result of things done otherwise than for genuine commercial purposes within the seven years preceding the chargeable event (or, if section 425(2) applies, the seven years preceding the acquisition of the securities).
Chapter 3B deals in a broadly similar manner with cases where the market value is artificially enhanced; Chapter 3C with securities acquired for less than market value; and Chapter 3D with securities disposed of for more than market value.
The schemes in outline
Before considering in detail the facts of the individual appeals, it may be helpful to explain briefly how, in broad terms, schemes of the kind in issue were designed to work.
The modus operandi can be summarised as follows.
The bank decided to award discretionary bonuses to certain of its employees, but to pay the amount of the bonuses into a scheme designed to take advantage of the provisions of Chapter 2, so that the employees would avoid liability to income tax.
Rather than paying the bonuses directly to the employees, the bank instead used the amount of the bonuses to pay for redeemable shares in a special purpose offshore company set up solely for the purpose of the scheme.
The shares were then awarded to the employees in place of the bonuses.
Conditions were attached to the shares which were intended to enable them to benefit from the exemptions from income tax conferred by sections 425(2) and 429.
Once the exemptions had accrued, the shares were redeemable by the employees for cash.
Employees resident and domiciled in the United Kingdom, who were liable to capital gains tax, could however defer the redemption of their shares until they had held them for two years, by which time the rate of tax chargeable, with the benefit of business taper relief, was only 10%.
A typical scheme therefore involved carrying out the following pre ordained steps: (1) The bank decided which of its employees would receive discretionary bonuses, and the amount of those bonuses. (2) Company Z was created in an offshore jurisdiction.
Care was taken that Company Z was not an associated company of the bank for the purposes of section 429. (3) A special class of redeemable shares in Company Z was created.
As shares, these were securities as defined in section 420(1)(a).
The shares were subject to a short term restriction designed to satisfy the requirements of section 423(2). (4) The restriction involved a contingency which was unlikely to occur but might conceivably do so.
In cases where the occurrence of the contingency lay beyond the control of those involved in the scheme, hedging arrangements were entered into so that the employees were compensated in the event of the restriction being activated. (5) Directly or indirectly, the bank paid the aggregate amount of the bonuses to Company Z as the price of the shares. (6) The purchaser received the shares and allocated beneficial interests to the employees identified at step (1) in amounts equal to the amounts that the bank had decided to award them as bonuses.
Exemption from a charge to income tax on the employees acquisition of the shares was asserted under section 425(2), on the basis that the shares were restricted securities by virtue of section 423(2). (7) A short time later, the restriction was removed from the shares.
Exemption from a charge to tax on this event was asserted under section 429. (8) A short time after that, the employees became entitled to redeem their shares, and many did so.
No liability to income tax arose by reason of the redemption. (9) Some employees who were resident and domiciled in the UK continued to hold their shares for the two years necessary to mitigate a charge to capital gains tax using taper relief.
They then redeemed their shares. (10) In due course Company Z was wound up.
It is necessary next to consider in greater detail the facts of each of the present appeals, and the reasoning of the tribunals and courts below on the issues which remain in dispute.
In the following summary, some immaterial details have been simplified.
The UBS case
During the tax year 2003/2004 UBS AG, a well known bank, devised an employee bonus scheme which was designed to take advantage of the provisions of Chapter 2 as explained above.
It had no purpose other than tax avoidance, and such consequential advantages as would flow from tax avoidance.
The scheme involved the carrying out of a number of pre ordained steps according to a detailed timetable.
Once the structure of the scheme had been finalised, a brochure was sent to the employees explaining it in detail and inviting their participation. 426 employees agreed to participate.
Some of the documentation required under the scheme, such as board minutes of the vehicle company, was pre drafted.
The scheme was then implemented as planned.
On 23 January 2004 UBS agreed which of its employees were to be awarded a discretionary bonus for the tax year 2003/2004, and the amount of their bonuses.
On 28 January, UBS subscribed 91,880,000 (1,000 per share) for 91,880 non voting shares in a company called ESIP Ltd, incorporated in Jersey a few days earlier for the purposes of the scheme.
That sum was the equivalent of the cash payments which the employees would otherwise have received as cash bonuses.
The following day UBS awarded 91,856 shares to the employees who had agreed to participate, in amounts corresponding to the amounts of their bonuses, and the remaining shares to trustees of a UBS employee benefit trust.
The employees were notified of the face value of their awards.
ESIP was required, as a condition of UBSs subscription for the shares, to deposit the subscription price in an interest bearing account until 20 February 2004.
Article 2(7) of ESIPs articles of association, as adopted on 26 January 2004, set out the rights of holders of the shares to participate in dividends and surplus assets on a winding up, and also to redeem all or any of their shares on 22 March 2004, 22 March 2006 or 22 June 2006 for the same amount as they would have received if there had been a winding up on the relevant redemption date.
Article 2(14) provided for an immediate and automatic sale of the shares to the UBS employee benefit trust if on any date during the three week period from 29 January to 19 February 2004 the closing value of the FTSE 100 Index exceeded a trigger level, defined as 6.5% above its closing value on 28 January.
In that event, the shares were to be sold for a price equal to 90% of their market value on the date of the sale if no restrictions (including for the avoidance of doubt under [article 2(14)]) applied to those shares.
It was not likely that the FTSE 100 would exceed the trigger level during the relevant period, but there was a genuine possibility that it might: the trigger level was set so as to create a probability of between 6 and 12%.
It is a matter of agreement that the forced sale provision had the effect of reducing the market value of the shares when they were acquired by the employees by an amount which was more than de minimis.
The forced sale provision had no rationale other than tax avoidance: its only purpose was to make the shares restricted securities by virtue of section 423(2) of ITEPA.
The First tier Tribunal (Dr David Williams and Mr David Earle) found that the risk taken as the trigger event had been deliberately chosen as one that a counterparty was prepared to offset entirely, as will shortly be explained.
As a condition of UBSs subscription for the shares, ESIP applied about 3% of the 91,880,000 in purchasing call options from UBS relating to the FTSE 100 with an expiry date of 20 February 2004.
The effect of the call options was that, if the FTSE 100 exceeded the trigger level, ESIP would make a gain, resulting in an increase of about 10% in its net assets.
It followed that, if the forced sale provision were triggered, although the employees would be required to sell their shares for 90% of their unrestricted market value, they would not be materially worse off as a result, since the unrestricted market value of the shares would be equal to approximately 110% of the value they would have had if the trigger event had not occurred.
The amount they would receive would thus be approximately equivalent to the original subscription price, which in turn was equal to the cash bonuses which the employees would otherwise have received.
The words not be materially worse off are taken from the agreed statement of facts and issues.
More precisely, the First tier Tribunal found that the effect of the hedging was that, if the trigger event occurred, the employees would receive 99.2% of the value which their shares would otherwise have had.
There was a remote possibility that the employees might even receive slightly more than 100%.
The First tier Tribunal noted that there had been a deliberate decision that the call option arrangements should not completely neutralise the effect of any trigger event: The aim was at first that there should be a complete offset between the loss to an employee if the trigger event occurred with the result communicated to senior management that there would be no reduction in value in the payout to the employee.
He or she would receive the same whether or not the trigger event occurred.
At some point someone thought a deliberate near miss was better than an exact hit in terms of offsetting the loss.
As the trigger event did not occur, this was not tested . [T]he reality was that the scheme as a whole was carefully designed so that employees could not suffer any significant loss if the trigger event was realised.
The reality of the risk was that an employee stood about a 10% chance of losing 0.8% of the bonus amount to be weighed against the opportunity to remove a 41% tax charge. (para 105)
The First tier Tribunal summarised the effect of the scheme as follows, at para 135: The effect was that, at the close of the relevant period, ESIP Ltd would either have shares unaffected by the trigger event, or shares affected by the trigger event plus the benefits from the options.
The scheme was originally so constructed that the values of the beneficial interests of individuals in the shares would have been the same under either of those two outcomes.
This was then altered to create a small loss.
The effect of the trigger event was the reduction in the value of the [shares] by a predetermined amount.
The options purchased were of such a value that the sums received under the options if the trigger event occurred totalled slightly less than the loss in the value of the shares, again by a predetermined amount.
Both figures were artificial in the sense that neither was determined by, or could be influenced by, any event outside the control of those establishing the scheme, or could alter once the shares and options were purchased.
UBS as employer and the individual recipients as employees knew from the start of the scheme that the employees, as shareholders, would receive the money paid in by UBS from one or both of the parallel elements a few weeks later save, in the unlikely occurrence of the trigger event, to a deliberately determined and insignificant extent.
In the event, the FTSE 100 did not exceed the trigger level during the relevant period, and so the shares ceased to be subject to the forced sale provision on 19 February 2004, and the call options did not pay out.
Once the relevant period had expired without a forced sale taking place, ESIP was required, as a further condition of UBSs subscription for the shares, to buy shares in UBS during the last five days of February 2004, so that the value of each ESIP share was then linked to the performance of the UBS share price.
On 26 February 2004 UBS reminded the employees of their entitlement to redeem the shares during the following month, and explained how to do so.
On 22 March 2004, about 50% of the shares were redeemed for 977.50 per share.
Almost all the remaining shares continued to be held by employees.
Dividends were paid on the shares in November 2004 (13 per share) and December 2005 (20 per share).
On 22 March 2006 and 22 June 2006, further shares were redeemed, for about 1,519 per share and 1,429 per share respectively, reflecting a large increase in the value of UBS shares.
The remaining 44 shares were redeemed in November 2006 when a resolution was passed to wind up ESIP.
The case came before the First tier Tribunal as an appeal from a determination made by the Revenue that the sums allocated to the employees as bonuses at the start of the scheme were liable to income tax and national insurance contributions as earnings from their employment.
The First tier Tribunal dismissed the appeal.
The First tier Tribunal accepted that the shares were securities as defined in the legislation.
They were real shares.
It was possible for employees to hold them for over two years, and some did so.
If they did so, they received dividends.
The shares were also employment related securities: the employees acquired the shares by reason of their employment.
The arrangements were not a sham in the sense explained by Diplock LJ in Snook v London and West Riding Investments Ltd [1967] 2 QB 786, 802: they were not intended to deceive.
In considering whether the shares were restricted securities within the meaning of section 423, the First tier Tribunal initially left to one side what has been described in these proceedings as the Revenues broad Ramsay argument (by reference to the case of W T Ramsay Ltd v Inland Revenue Comrs [1982] AC 300), to the effect that the scheme should be ignored and the employees held liable to income tax as if they had received cash payments directly.
On that basis, it accepted that the scheme was an arrangement for the purposes of section 423(1)(a).
It accepted that the forced sale provision was not a sham.
It also accepted that the effect of that provision was to reduce the market value of the shares at the time of their acquisition by the employees by a small amount, so as to satisfy the requirements of section 423(1)(b).
It did not, however, accept that it was an arrangement which made provision to which section 423(2) applied.
In forming that view, the First tier Tribunal focused on the requirement in section 423(2)(c) that the employee will not be entitled on the transfer, reversion or forfeiture to receive in respect of the employment related securities an amount of at least their market value (determined as if there were no provision for transfer, reversion or forfeiture) at the time of the transfer, reversion or forfeiture.
It considered that that requirement was not satisfied, since the effect of the call options was that the employees were entitled on a forced sale to virtually the same amount as they would have received if there were no forced sale provision.
This reasoning assumed that, if there were no provision for transfer, reversion or forfeiture, then there would be no call options: the First tier Tribunal compared the amount which the employees were entitled to receive in respect of their securities on a forced sale, taking account of the triggering of the call options, with the market value of the securities on the hypothesis that neither the forced sale provisions nor the call options existed.
On that basis, the First tier Tribunal found that the shares were not restricted securities.
The Upper Tribunal (Henderson J and Mr Charles Hellier) took a different view.
It considered that section 423(2)(c) required the market value of the shares on the date of the forced sale to be determined as if there were no provision for transfer, reversion or forfeiture, but did not require the call options to be disregarded.
In other words, whereas the First tier Tribunal had compared the employees entitlements with a market value determined as if there were neither a forced sale provision nor the call options designed to neutralise its effect, the Upper Tribunal construed section 423(2)(c) as requiring only the first of these to be ignored.
The statutory hypothesis, in its view, was a situation in which the shares were not subject to the forced sale provision, but in all other respects including the existence and triggering of the call options was the same as it actually was.
On that basis, the Upper Tribunal found that the employees were entitled on a forced sale to receive only 90% of the market value of their shares on that date, determined as if there were no forced sale provision.
The requirement laid down in section 423(2)(c) was therefore met.
The Court of Appeal (Rimer, Kitchin and Christopher Clarke LJJ) agreed, stating that it was plain that the ordinary and natural sense of the words in question was that they required no more than that the forced sale provision be ignored.
This question of statutory construction is no longer in issue.
It illustrates, however, the artificial consequences which result if the legislation is applied to a scheme of this nature.
Although it is inconceivable that there would in fact have been call options in the absence of the forced sale provision (since their sole rationale was to neutralise the effect of that provision), it is only if section 423(2)(c) is construed as requiring the market value to be assessed on that unreal basis that its requirements can be satisfied.
Returning to the decision of the First tier Tribunal, it next considered whether, applying the Ramsay approach and on a realistic appraisal of the facts, the scheme fell outside the intended scope of Chapter 2 altogether.
It concluded that it did.
It observed that Chapter 2 was intended to deal with a real, practical problem, and that in examining whether the scheme was within Chapter 2 it was necessary, following the speech of Lord Nicholls of Birkenhead in Inland Revenue Comrs v Scottish Provident Institution [2004] UKHL 52; 2005 1 SC (HL) 33; [2004] 1 WLR 3172, to look at the commercial reality of what was happening, and to be alert to a situation where the arrangements, viewed realistically and as a whole, did not create restricted securities.
In the view of the First tier Tribunal, the reality was that, had the scheme not been in place, the employees would have received a bonus as part of their pay in February 2004.
That bonus would have been earnings, and therefore subject to deduction of income tax and national insurance contributions, leaving in most cases a net sum of 59% of the original entitlement.
Under the scheme, the employees instead received beneficial interests in shares with a right to encash those interests.
If the rights were encashed without the forced sale provision being triggered, the employees received the same sums as would have been received as earnings, but without any deduction of income tax or national insurance contributions.
Alternatively, in the less probable event of a forced sale, the employees might receive slightly less (or, possibly, slightly more) than that sum, but again with no deduction of income tax or national insurance contributions.
In short, but for the scheme, an employee would have received 59 from UBS if paid earnings, but under the scheme would probably receive 100, and in any event over 99.
The scheme therefore delivered a significant gain in the bonus receivable by employees as compared with the receipt of earnings, whatever the outturn of the scheme arrangements, although there was the possibility of an insignificant difference as between the outturns under the probable and improbable alternatives.
Further, if employees so chose, the timetable of the arrangements was much the same as applied to the receipt of earnings.
The scheme had no purpose other than tax avoidance.
In those circumstances, the scheme could not be regarded as one providing restricted securities within the scope of Chapter 2.
It was in reality a mechanism for the payment of cash bonuses, and the employees should therefore be taxed as if they had received cash rather than securities.
The Upper Tribunal disagreed with the First tier Tribunals conclusion.
It observed that it was incorrect to say that the employees received the same sums when their shares were redeemed as they would have received as earnings: by that time, ESIP had invested its assets in UBS shares, with the result that the sums received reflected the performance of those investments.
This had only a limited effect on those who redeemed their shares at the earliest opportunity, because of the short period of time during which the assets had been invested, but it had a greater effect on those who held their shares for longer: see para 36 above.
The Upper Tribunal concluded that there was no intellectually coherent way of equating the payment in by the employer with the ultimate payment out to the employee.
The scheme could not be treated as merely an artificially contrived method of paying money to employees.
The Upper Tribunal therefore allowed UBSs appeal.
The Court of Appeal agreed that the argument that the scheme should be treated as merely a mechanism for the payment of cash should be rejected.
It also heard argument on a narrower Ramsay argument in respect of which the Revenue sought permission to appeal.
That argument, which had been raised before the First tier Tribunal but was not argued before the Upper Tribunal, proceeded on the basis that the ESIP shares were securities, but not restricted securities within the meaning of section 423, with the consequence that a charge to tax arose in respect of the market value of the shares at the time when they were acquired by the employees.
The argument centred on UBSs admission that the forfeiture condition had no commercial purpose and had been inserted purely for the purpose of tax avoidance, and on the contention that the hedging provisions rendered the forfeiture condition unreal from a commercial perspective.
The argument was rejected, and permission to appeal on that ground was refused.
Rimer LJ, with whose judgment the other members of the court agreed, considered that there was no scope for arguing that the shares were other than securities . acquired in connection with an employment within the meaning of sections 417(1) and 420.
They were therefore securities for the purposes of Chapter 2; and, provided that they satisfied the conditions of section 423, they were also restricted securities.
In relation to section 423, Rimer LJ commented that he did not understand the argument that because the forfeiture provision had no commercial rationale, the shares could not be restricted securities.
He did not follow on what basis it could be said that the certain circumstances referred to in section 423(2)(a) could only be circumstances included other than for tax avoidance purposes.
There appeared to him to be no justification for any such distinction.
The circumstances in which the securities in question might be forfeited were real, even though their inclusion in the scheme was tax motivated.
If the shares were restricted securities within the meaning of section 423, from where in Chapter 2, he asked rhetorically, did one derive the conclusion that Chapter 2 could not apply simply because the scheme was driven by considerations of tax avoidance? In forming that view, Rimer LJ was influenced by the inability of all counsel to explain the rationale of the tax exemption conferred by section 429, which he described as the section at the heart of the appeals.
The DB case
During the tax year 2003/2004 DB Group Services (UK) Ltd (DB), the main employer in the group headed by Deutsche Bank AG, another well known bank, decided to pay discretionary bonuses to employees by means of a scheme designed to take advantage of the provisions of Chapter 2.
This was an off the shelf scheme devised by Deloitte and Touche LLP and marketed by them to DB.
Deloitte also played a central role in coordinating its implementation by all involved in accordance with a detailed timetable.
The scheme was generically similar to the UBS scheme, but differed from it in some respects.
Prior to the implementation of the scheme, DB decided which of its employees were to be awarded a discretionary bonus for the tax year 2003/2004, and the amount of their bonuses.
The scheme was explained to the relevant employees in advance of its implementation, and they were offered the opportunity to participate.
They were informed that the scheme allowed for their bonus to be delivered to them in the form of shares in a vehicle company.
Some 300 employees agreed to take part.
On 6 February 2004 DB paid 91,300,000 (1,000 per share) in respect of 91,300 redeemable shares in a company, incorporated in the Cayman Islands for the purposes of the scheme, called Dark Blue Investments Ltd (Dark Blue).
That company invested its assets in low risk investments.
The shares were allocated to the employees the same day, in amounts corresponding to the bonuses which they would otherwise have received.
The shares carried voting rights and a right to participate in dividends.
They could be redeemed for a price intended to reflect their market value on various dates between 8 July 2004 and 8 December 2006.
In order for the shares to qualify as restricted securities by virtue of section 423(2), the memorandum and articles of Dark Blue contained a provision under which the shares were to be forfeited if, before 2 April 2004, the person who held or was beneficially entitled to them ceased to be employed by DB, or notice was given to or by that individual of termination of employment, for any reason other than redundancy, death or disability, or without cause.
The shares could not be transferred during that period.
For practical purposes, therefore, an employee would forfeit his shares if he voluntarily resigned or was dismissed for misconduct during a period of about eight weeks.
Neither contingency was likely to occur, not least because its occurrence lay largely within the control of the employee, for whom it would have significant financial consequences.
Furthermore, by virtue of section 424(b) of ITEPA, shares are not restricted securities by reason only of a provision for forfeiture in the event of dismissal for misconduct: see para 17 above.
In the event, there was no employee to whom the provision applied.
The First tier Tribunal found that the forfeiture provision resulted in a reduction in the market value of the shares on 6 February 2004 which was not negligible.
At the highest estimate, the reduction might be of the order of 2 3%.
42% of the Dark Blue shares were redeemed at the first opportunity in July 2004, at a price of 1,003.73 per share.
The rest were redeemed between then and December 2006 at prices reflecting the value of the underlying investments at the date of redemption.
The case came before the First tier Tribunal as an appeal from a determination that the sums allocated to the employees as bonuses at the start of the scheme were liable to income tax and national insurance contributions as earnings from their employment.
The First tier Tribunal heard the appeal immediately before that of UBS, and dismissed it.
The First tier Tribunal again considered the case initially by leaving the Revenues broad Ramsay argument out of account.
On that basis, it accepted that the shares were securities, on the same grounds as in the UBS case.
It accepted that the forfeiture provision satisfied the requirements of section 423(1)(a), being one to which section 423(2) applied.
The market value of the securities was less than it would be but for that provision, as required by section 423(1)(b).
It followed that, leaving aside the wider challenge to the scheme, the shares met the definition of restricted securities by virtue of section 423(2).
Looking at the scheme as a whole, however, the First tier Tribunal described it as a contrived and closely coordinated series of events so that the various individual requirements of Chapter 2 were met but without regard to any other aim or purpose than that of triggering the various exemptions in the Chapter: para 102.
DB and the other entities involved merely carried out a predetermined sequence of events, funded entirely by DB, so that its funds were transferred to its employees.
The funding of the scheme was derived entirely from the sums which DB had allocated to providing employees with bonuses for the financial year in question.
The only purpose of the scheme was to utilise the exemptions in sections 425 and 429 so that the employees paid no income tax or national insurance contributions on the sums transferred to them.
All those involved in the scheme played assigned roles undertaken either to achieve the desired reduction in taxation or to receive a fee for facilitating that aim.
Dark Blue was purely a vehicle for the scheme.
The shares were created solely so that they could be treated as restricted securities within Chapter 2.
In the view of the First tier Tribunal, Parliament had not intended to provide the double exemption from income tax under sections 425 and 429 for artificial arrangements with no commercial purpose.
It therefore concluded that the scheme was not within Chapter 2.
As in the UBS case, it passed directly from that conclusion to a decision that the employees should be taxed as if they had received cash.
The Upper Tribunal heard the appeal together with that in the UBS case.
It agreed that, leaving the Ramsay argument to one side, the shares were restricted securities qualifying for exemption under section 425.
For similar reasons to those which it had given in the UBS case, however, it considered that the First tier Tribunal had pushed the Ramsay principle well beyond permissible bounds.
There was in its view no permissible construction of Chapter 2 which could lead to the conclusion that it was inapplicable to the facts of the case.
It concluded, however, that notwithstanding the great pains which had been taken to ensure that Dark Blue was not formally controlled by DB, nevertheless actual control existed on the facts.
DB was therefore an associated company of Dark Blue, with the consequence that the scheme did not qualify under section 429 for exemption from the charge imposed under section 426 on the lifting of the restrictive condition.
The Court of Appeal also heard the appeal together with that in the UBS case.
It reversed the Upper Tribunals decision on the question of control, but agreed with it that the Revenues broad Ramsay argument should be rejected.
As in the UBS case, it permitted the Revenue to present a narrower Ramsay argument to the effect that the shares were not restricted securities within the meaning of Chapter 2, so that the employees should be taxed on their receipt of the shares.
That argument was however rejected for the same reasons as in the UBS case, and permission to appeal on that ground was refused.
The Ramsay approach
As the House of Lords explained in Barclays Mercantile Business Finance Ltd v Mawson, in a single opinion of the Appellate Committee delivered by Lord Nicholls, the modern approach to statutory construction is to have regard to the purpose of a particular provision and interpret its language, so far as possible, in the way which best gives effect to that purpose.
Until the case of W T Ramsay Ltd v Inland Revenue Comrs [1982] AC 300, however, the interpretation of fiscal legislation was based predominantly on a linguistic analysis.
Furthermore, the courts treated every element of a composite transaction which had an individual legal identity (such as a payment of money, transfer of property, or creation of a debt) as having its own separate tax consequences, whatever might be the terms of the statute.
As Lord Steyn said in Inland Revenue Comrs v McGuckian [1997] 1 WLR 991, p 999, in combination those two features a literal interpretation of tax statutes, and an insistence on applying the legislation separately to the individual steps in composite schemes allowed tax avoidance schemes to flourish to the detriment of the general body of taxpayers.
The significance of the Ramsay case was to do away with both those features.
First, it extended to tax cases the purposive approach to statutory construction which was orthodox in other areas of the law.
Secondly, and equally significantly, it established that the analysis of the facts depended on that purposive construction of the statute.
Thus, in Ramsay itself, the terms loss and gain, as used in capital gains tax legislation, were purposively construed as referring to losses and gains having a commercial reality.
Since the facts concerned a composite transaction forming a commercial unity, with the consequence that the commercial significance of what had occurred could only be determined by considering the transaction as a whole, the statute was construed as referring to the effect of that composite transaction.
As Lord Wilberforce said: The capital gains tax was created to operate in the real world, not that of make belief.
As I said in Aberdeen Construction Group Ltd v Inland Revenue Comrs [1978] AC 885, it is a tax on gains (or I might have added gains less losses), it is not a tax on arithmetical differences.
To say that a loss (or gain) which appears to arise at one stage in an indivisible process, and which is intended to be and is cancelled out by a later stage, so that at the end of what was bought as, and planned as, a single continuous operation, there is not such a loss (or gain) as the legislation is dealing with, is in my opinion well and indeed essentially within the judicial function. (p 326)
Unfortunately, the Committee commented in Barclays Mercantile at para 34, the novelty for tax lawyers of this exposure to ordinary principles of statutory construction produced a tendency to regard Ramsay as establishing a new jurisprudence governed by special rules of its own.
In the Barclays Mercantile case the Committee sought to achieve some clarity about basic principles (para 27).
It summarised the position at para 32: The essence of the new approach was to give the statutory provision a purposive construction in order to determine the nature of the transaction to which it was intended to apply and then to decide whether the actual transaction (which might involve considering the overall effect of a number of elements intended to operate together) answered to the statutory description.
As Lord Nicholls of Birkenhead said in MacNiven v Westmoreland Investments Ltd [2003] 1 AC 311, 320, para 8: The paramount question always is one of interpretation of the particular statutory provision and its application to the facts of the case.
As the Committee commented, this is a simple question, however difficult it may be to answer on the facts of a particular case.
This approach has proved to be particularly important in relation to tax avoidance schemes as a result of two factors identified in Barclays Mercantile at para 34.
First, tax is generally imposed by reference to economic activities or transactions which exist, as Lord Wilberforce said, in the real world.
Secondly, tax avoidance schemes commonly include elements which have been inserted without any business or commercial purpose but are intended to have the effect of removing the transaction from the scope of the charge.
In other words, as Carnwath LJ said in the Court of Appeal in Barclays Mercantile, [2002] EWCA Civ 1853; [2003] STC 66, para 66, taxing statutes generally draw their life blood from real world transactions with real world economic effects.
Where an enactment is of that character, and a transaction, or an element of a composite transaction, has no purpose other than tax avoidance, it can usually be said, as Carnwath LJ stated, that to allow tax treatment to be governed by transactions which have no real world purpose of any kind is inconsistent with that fundamental characteristic.
Accordingly, as Ribeiro PJ said in Collector of Stamp Revenue v Arrowtown Assets Ltd [2003] HKCFA 46; (2003) 6 ITLR 454, para 35, where schemes involve intermediate transactions inserted for the sole purpose of tax avoidance, it is quite likely that a purposive interpretation will result in such steps being disregarded for fiscal purposes.
But not always.
As was noted in Barclays Mercantile at para 35, there have been a number of cases since Ramsay in which it was decided that elements inserted into a transaction without any business or commercial purpose did not prevent the composite transaction from falling within a charge to tax, or bring it within an exemption from tax, as the case might be.
Examples include Inland Revenue Comrs v Burmah Oil Co Ltd 1982 SC (HL) 114, Furniss v Dawson [1984] AC 474, Carreras Group Ltd v Stamp Comr [2004] UKPC 16; [2004] STC 1377, Inland Revenue Comrs v Scottish Provident Institution and Tower M Cashback LLP 1 v Revenue and Customs Comrs [2011] UKSC 19; [2011] 2 AC 457.
In each case the court considered the overall effect of the composite transaction, and concluded that, on the true construction of the relevant statute, the elements which had been inserted without any purpose other than tax avoidance were of no significance.
But it all depends on the construction of the provision in question.
Some enactments, properly construed, confer relief from taxation even where the transaction in question forms part of a wider arrangement undertaken solely for the purpose of obtaining the relief.
The point is illustrated by the decisions in MacNiven v Westmoreland Investments Ltd [2001] UKHL 6; [2003] 1 AC 311 and Barclays Mercantile itself.
The position was summarised by Ribeiro PJ in Arrowtown Assets, para 35, in a passage cited in Barclays Mercantile: The ultimate question is whether the relevant statutory provisions, construed purposively, were intended to apply to the transaction, viewed realistically.
References to reality should not, however, be misunderstood.
In the first place, the approach described in Barclays Mercantile and the earlier cases in this line of authority has nothing to do with the concept of a sham, as explained in Snook.
On the contrary, as Lord Steyn observed in McGuckian at p 1001, tax avoidance is the spur to executing genuine documents and entering into genuine arrangements.
Secondly, it might be said that transactions must always be viewed realistically, if the alternative is to view them unrealistically.
The point is that the facts must be analysed in the light of the statutory provision being applied.
If a fact is of no relevance to the application of the statute, then it can be disregarded for that purpose.
If, as in Ramsay, the relevant fact is the overall economic outcome of a series of commercially linked transactions, then that is the fact upon which it is necessary to focus.
If, on the other hand, the legislation requires the court to focus on a specific transaction, as in MacNiven and Barclays Mercantile, then other transactions, although related, are unlikely to have any bearing on its application.
Scottish Provident
On the same date as Barclays Mercantile, Lord Nicholls also delivered the opinion of the Committee, similarly constituted, in the Scottish Provident case.
The case concerned a scheme designed to take advantage of a change in the law governing the taxation of gains and losses made by mutual life offices on the grant or disposal of options to buy or sell gilts.
Under the scheme, the life office, SPI, granted Citibank the option to buy a quantity of gilts from it at a strike price of 70, well below their anticipated market value at the time the option was exercised, in return for a premium.
Under the law then in force, the premium was exempt from tax.
After the law had changed, Citibank exercised the option, requiring SPI to sell the gilts to it at a loss.
Under the law then in force, the loss was allowable for tax purposes.
In order to ensure that no real loss could be suffered by either party, the scheme also provided for Citibank to grant an option to SPI, entitling it to buy a matching quantity of gilts from the bank at a strike price of 90, calculated so that the overall movements of money between the parties were equivalent.
It was anticipated that both options would be exercised, but there was a possibility that they might not be.
In the event, both options were exercised, and neither gilts nor money changed hands.
The question which arose under the relevant statutory provision was whether the option which SPI granted gave Citibank an entitlement to gilts.
If the option was considered in isolation, then plainly it did.
If, however, the option was viewed as part of a larger scheme by which Citibanks right to buy the gilts from SPI was cancelled by SPIs right to buy the same gilts from Citibank, then in a commercial sense Citibank had no real entitlement to gilts.
The special commissioners found in favour of SPI, on the basis that there was a genuine possibility that both options would not be exercised.
That was held by the Committee to be an error of law.
It stated: 22. the uncertainty arises from the fact that the parties have carefully chosen to fix the strike price for the SPI option at a level which gives rise to an outside chance that the option will not be exercised.
There was no commercial reason for choosing a strike price of 90.
From the point of view of the money passing (or rather, not passing), the scheme could just as well have fixed it at 80 and achieved the same tax saving by reducing the Citibank strike price to 60.
It would all have come out in the wash.
Thus the contingency upon which SPI rely for saying that there was no composite transaction was a part of that composite transaction; chosen not for any commercial reason but solely to enable SPI to claim that there was no composite transaction.
It is true that it created a real commercial risk, but the odds were favourable enough to make it a risk which the parties were willing to accept in the interests of the scheme. 23.
We think that it would destroy the value of the Ramsay principle of construing provisions such as [the provision in question] as referring to the effect of composite transactions if their composite effect had to be disregarded simply because the parties had deliberately included a commercially irrelevant contingency, creating an acceptable risk that the scheme might not work as planned.
We would be back in the world of artificial tax schemes, now equipped with anti Ramsay devices.
The composite effect of such a scheme should be considered as it was intended to operate and without regard to the possibility that, contrary to the intention and expectations of the parties, it might not work as planned.
Thus, on the basis that the statutory provision was properly construed as being concerned with a real and practical entitlement to gilts, it did not apply to a legal entitlement which was intended and expected to be cancelled by an equal and opposite obligation, even if there was a risk that the arrangement might not work as intended.
The present appeals
It is necessary now to return to the statutory provisions in issue in the present appeals.
Rather than dealing with the arguments in the way in which they were presented, in terms of broader and narrower versions of a Ramsay approach, it seems to me to be preferable to begin with the interpretation of the legislation, and the fundamental question whether it can be given a purposive interpretation going beyond its literal terms: that is to say, whether a Ramsay approach is possible at all, and if so, the purposive construction on which it is to be based.
If those issues are determined in the Revenues favour, the question next arises how, on its proper interpretation, the legislation is to be applied to the facts.
It is at that stage that what have been described as the broad and the narrow approaches require to be considered.
Purposive construction
As counsel for UBS and DB emphasised, ITEPA contains no explanation of the purpose of Chapter 2 upon which a purposive interpretation might be based.
Nor do its provisions anywhere indicate that restrictive conditions attached to securities purely for tax avoidance purposes fall outside the scope of Chapter 2.
Furthermore, Parliament dealt with certain kinds of tax avoidance in Chapters 3A to 3D, but made no provision in respect of schemes of the kind with which these appeals are concerned.
In the light of these considerations, and bearing in mind that Part 7 generally, and Chapter 2 in particular, are extensive and highly detailed, counsel argued that it was impossible to attribute to Parliament an unexpressed intention to exclude schemes of the present kind from the ambit of Chapter 2.
It cannot be denied that these are forceful arguments, and the Court of Appeal found them persuasive.
Nevertheless, the context of Chapter 2 provides some indication of what Parliament intended.
Part 7 is clearly concerned with particular taxation issues which arise when employees are remunerated in shares and other securities.
As was noted in para 12 above, the purposes of Part 7 were identified in broad terms in Grays Timber Products as being threefold: to promote employee share ownership, particularly by encouraging (1) share incentive schemes; (2) since such schemes require benefits to be contingent on future performance, creating a problem if tax is charged on the acquisition of the shares in accordance with Abbott v Philbin, to wait and see in such cases until the contingency has fallen away; and (3) to counteract consequent opportunities for tax avoidance.
The background to Chapter 2, explained more fully in paras 3 11 above, supports that view.
Fiscal legislation concerning employment related securities had its origins in anomalies which arose where shares awarded to employees as a form of remuneration, for business or commercial reasons, were subject to restrictions designed to incentivise future performance.
The taxation of the shares in accordance with general principles of the law of taxation, as established in Weight v Salmon and more particularly in Abbott v Philbin, had the effect that the sum charged to tax failed to reflect the economic gain realised by the employee in the event that the shares increased in value as intended.
Parliaments response was to impose a charge to tax when the restrictions were lifted (subject to the exemption of favoured arrangements), rather than when the shares were acquired.
Chapter 2, as originally enacted, re enacted provisions introduced in 1988 in order to prevent the application of Abbott v Philbin, and forestall consequent opportunities for tax avoidance.
The amended version of Chapter 2 with which these appeals are concerned was enacted shortly afterwards to address aspects of the previous provisions which were considered to leave them vulnerable to avoidance or to create anomalies.
The structure of the legislation continued to be based on the exemption of restricted securities from income tax when the shares were acquired, and the imposition of a charge to tax when the restrictive conditions were lifted, subject to a widely drawn exemption from the latter charge.
It is in the context explained in para 74, and against the background described in para 75, that it is necessary to consider the scope of the exemption on acquisition conferred by section 425(2), and more specifically the question whether, in section 423(1), the words any contract, agreement, arrangement or condition which makes provision to which any of subsections (2) to (4) applies should be construed as referring to provision with a genuine business or commercial purpose.
Approaching the matter initially at a general level, the fact that Chapter 2 was introduced partly for the purpose of forestalling tax avoidance schemes self evidently makes it difficult to attribute to Parliament an intention that it should apply to schemes which were carefully crafted to fall within its scope, purely for the purpose of tax avoidance.
Furthermore, it is difficult to accept that Parliament can have intended to encourage by exemption from taxation the award of shares to employees, where the award of the shares has no purpose whatsoever other than the obtaining of the exemption itself: a matter which is reflected in the fact that the shares are in a company which was brought into existence merely for the purposes of the tax avoidance scheme, undertakes no activity beyond its participation in the scheme, and is liquidated upon the termination of the scheme.
The encouragement of such schemes, unlike the encouragement of employee share ownership generally, or share incentive schemes in particular, would have no rational purpose, and would indeed be positively contrary to rationality, bearing in mind the general aims of income tax statutes.
More specifically, it appears from the background to the legislation that the exemption conferred by section 425(2), in respect of the acquisition of securities which are restricted securities by virtue of section 423(2), was designed to address the practical problem which had arisen of valuing a benefit which was, for business or commercial reasons, subject to a restrictive condition involving a contingency.
The context was one of real world transactions having a business or commercial purpose.
There is nothing in the background to suggest that Parliament intended that section 423(2) should also apply to transactions having no connection to the real world of business, where a restrictive condition was deliberately contrived with no business or commercial purpose but solely in order to take advantage of the exemption.
On the contrary, the general considerations discussed in para 77 above, and the approach to construction explained in paras 64 and 68 above, point towards the opposite conclusion.
One answer which counsel for UBS and DB give to that argument is based on the supposed absence of any rationale for the exemption conferred by section 429.
This point impressed the Court of Appeal: understandably so, since although these appeals are not directly concerned with section 429, the absence of any rationale for the exemption conferred by that provision would undermine an analysis based on the premise that Parliament possessed some rational intention in enacting sections 423 and 425.
As was explained in para 19 above, however, the exemption conferred by section 429 is confined to two specific situations falling within the broader class of cases qualifying for exemption under section 425: namely cases where a class of shares in a company is affected by the same restriction, which is lifted on the occurrence of a similar event, and either (a) the company is employee controlled by virtue of holdings of shares of the class, or (b) the majority of the companys shares of the class are held by persons unrelated to the company.
In relation to the first of these situations, it is understandable that Parliament should have intended to encourage employee share ownership in companies which were employee controlled by virtue of such shareholdings.
Such an intention would be consistent with the general approach described in paras 74 and 75 above.
The second situation is one which has long received special treatment, as was explained in para 7 above.
The distinctive feature of that situation, as counsel for the Revenue explained, is that there is only a tenuous link between the increase in the value of the shares, consequent upon the lifting of the restrictive condition, and the employment relationship: a similar increase in value will be enjoyed by all holders of shares of the relevant class in similar circumstances, and most of those shareholders are not employees of the company, or otherwise related to it.
The counter argument based on Chapter 3A
As explained earlier, in arguing against a construction of Chapter 2 which would exclude tax avoidance schemes of the present kind, counsel for UBS and DB emphasised that Parliament had dealt expressly and in detail with tax avoidance in Chapters 3A to 3D, the first of those chapters being the most directly relevant to the present case.
In those circumstances, it was argued, Parliament could not be taken to have had any wider, unexpressed, intention to counter tax avoidance.
That argument was accepted by the Court of Appeal.
Chapter 3A contains detailed anti avoidance provisions directed at securities with an artificially depressed market value.
In some circumstances, the existence of such provisions might support an inference that Parliaments intentions in relation to anti avoidance had been exhaustively expressed.
That is not however the position in relation to Chapters 2 and 3A.
As explained earlier at para 21, the provision in Chapter 3A concerned with taxation on the acquisition of employment related securities is section 446B.
That provision applies where the market value of employment related securities at the time of their acquisition has been reduced by at least 10% as a result of things done otherwise than for genuine commercial purposes (including anything done as part of a tax avoidance scheme) within the period of seven years ending with the acquisition.
Section 446B does not apply where section 425(2) applies, that is to say where the securities are restricted securities by virtue of section 423(2): section 446B(3).
As was pointed out on behalf of UBS and DB, section 446B(3) presupposes that securities can be restricted securities for the purposes of section 425 even though their value has been reduced by measures taken as part of a tax avoidance scheme.
That is indeed obvious.
A share incentive scheme with performance related conditions, for example, could fall within section 425, on the basis that the shares were restricted securities, even though the share price on the date of acquisition had been artificially depressed.
Whether a condition attached to the shares renders them restricted securities, and whether the share price has been artificially depressed, are two separate questions.
In other words, section 446B is concerned with the artificial manipulation of the market value of shares at the time of their acquisition by measures taken during the preceding seven years.
It does not entail that all securities whose value has been reduced by tax avoidance measures are necessarily restricted securities.
It has nothing to say about the circumstances in which the exemption conferred by section 425(2) should be granted, or specifically about the circumstances in which securities are to be treated as restricted securities as defined in section 423.
That question depends on the proper interpretation and application of section 423.
Mutatis mutandis, the same applies to the similar argument advanced by UBS and DB on the basis of section 446E, discussed at para 22 above.
Conclusion on purposive construction
In summary, therefore, the reference in section 423(1) to any contract, agreement, arrangement or condition which makes provision to which any of subsections (2) to (4) applies is to be construed as being limited to provision having a business or commercial purpose, and not to commercially irrelevant conditions whose only purpose is the obtaining of the exemption.
Application to the facts
In the UBS case, the condition whether the FTSE 100 rose by a specified amount during a three week period was completely arbitrary.
It had no business or commercial rationale beyond tax avoidance.
Such a condition is simply not relevant to the application of section 423, if, for the reasons already explained, that section is concerned with provision having a genuine business or commercial purpose.
Applying section 423 to the facts, viewed from a commercially realistic perspective, it follows that the condition to which the UBS shares were subject should be disregarded, with the consequence that the shares are not restricted securities within the meaning of that section.
That conclusion is fortified by another aspect of the facts of the UBS case.
The economic effect of the restrictive condition was in any event nullified by the hedging arrangements, except to an insignificant and pre determined extent (namely 0.8% at most see para 32 above).
The fact that what the First tier Tribunal described as a deliberate near miss was designed into the scheme, rather than a complete offsetting of the risk, is immaterial.
Paras 22 and 23 of the opinion in Scottish Provident, cited at para 70 above, are in point.
As the Committee stated, the effect of the scheme should be considered as it was intended to operate.
So considered, the benefit to the employee was not truly dependent on the contingency set out in the condition.
The restrictive condition in the DB case was simpler but equally artificial.
Leaver provisions in employee benefit arrangements often serve a genuine business or commercial purpose.
But that cannot be said of the condition attached to the Dark Blue shares.
The forfeiture provision operated for only a very short period, during which the possibility that it might be triggered lay largely within the control of the employee who would be adversely affected.
It had no business or commercial purpose, and existed solely to bring the securities within the scope of section 423(2).
Paras 22 and 23 of the opinion in Scottish Provident are again in point.
DB deliberately included a contingency which created a minor risk, but one which the parties were willing to accept in the interests of the scheme.
The scheme should therefore be considered as it was intended to operate, without regard to the possibility that it might not work as planned.
The appeals thus belong to the line of cases mentioned in Barclays Mercantile, where it was decided that elements which have been inserted into a transaction without any business or commercial purpose did not, as the case might be, prevent the composite transaction from falling within a charge to tax or bring it within an exemption from tax (para 35).
That was the approach adopted, for example, in Inland Revenue Comrs v Burmah Oil Co Ltd in relation to what Lord Diplock described as a pre ordained series of transactions . into which there are inserted steps that have no commercial purpose apart from the avoidance of a liability to tax which in the absence of those particular steps would have been payable (p 124).
Where a purposive construction so requires, one can proceed in such a case in the manner described by Lord Brightman in Furniss v Dawson at p 527: . the inserted steps are to be disregarded for fiscal purposes.
The court must then look at the end result.
Precisely how the end result will be taxed will depend on the terms of the taxing statute sought to be applied.
The proper basis of taxation: shares or cash?
Since the restrictive conditions attached to the shares do not make provision to which section 423 applies, it follows that the shares are not restricted securities within the meaning of that section.
Is that the end result, in Lord Brightmans phrase, or is it appropriate to go further and disregard other steps: namely, the use of the bonus funds to buy shares in the vehicle companies, the award of the shares to the employees, and the subsequent redemption of the shares for cash? Those steps were disregarded by the First tier Tribunal, so that the end result was that the employees were treated as though they had been paid in cash.
In the broad version of its Ramsay argument, the Revenue invited this court to adopt the same approach.
The schemes, it argued, were simply vehicles for passing cash bonuses to employees without paying income tax and national insurance contributions.
The shares, although genuine, functioned merely as a cash delivery mechanism.
They were not designed or intended to have any other function.
In agreement with the Upper Tribunal and the Court of Appeal, I find this argument unpersuasive.
In the first place, the employees actually received shares, not cash.
Subject to one qualification, the vehicle companies did not hold cash.
The qualification is that ESIP held cash during the period prior to 27 February 2004; but the cash was not at the disposal of the employees, since they could not redeem their shares until almost four weeks later.
Throughout the intervening period, ESIPs funds were invested in UBS shares.
Dark Blues assets were invested in low risk investments.
In both cases, therefore, the realisable value of the shares depended on the performance of the assets in which the companies funds were invested, as shares normally do.
The amount of cash for which the shares might be redeemed was neither fixed nor ascertainable when the shares were acquired, and was unlikely to be the same as the bonus which had initially been allocated to the employees.
In the event, the difference turned out to be modest in the case of the employees who redeemed their shares at the earliest opportunity, but matters could have turned out differently.
I would not, however, attach the significance which the Upper Tribunal did to the fact that, in the case of the UBS employees who held their shares for longer, the redemption price diverged more widely from their initial bonus allocation.
If the shares were properly treated as equivalent to cash on the first redemption date, that cash was then at the disposal of the employees, and their choice to leave it invested in shares could not affect that position.
If the shares were not restricted securities, their recipients therefore fall to be taxed in respect of their receipt of the shares in accordance with ordinary taxation principles.
That is broadly as the Revenue contended in the narrower version of their argument, subject to one qualification.
The Revenue argued that the shares should be valued for income tax purposes without regard to the restrictive conditions, since those conditions were not intended to be commercially relevant.
I am unable to agree.
The shares were subject to conditions which, as the First tier Tribunal found, had the effect of reducing their value on the date of acquisition by a small amount (below the 10% threshold which would bring section 446B into play).
Applying ordinary taxation principles, as laid down in Abbott v Philbin, the value of the shares has to be assessed as at the date of their acquisition, taking account of those conditions.
To disregard the conditions would be to treat the employees as having received a more valuable perquisite than they actually received.
It is however also necessary to take account of the call options purchased by ESIP out of the sum paid by UBS for its subscription for the shares.
Since the options offset the risk to shareholders arising from the conditions, they presumably enhanced the value of the shares and are therefore relevant to the valuation of the perquisite received by the employees.
This point illustrates the need to apply the Ramsay approach with sensitivity to the particular fiscal context which is relevant: the conditions have to be disregarded for the purpose of deciding whether the shares were restricted securities, since that is necessary in order to apply Chapter 2 as Parliament intended; but they do not have to be disregarded for the purpose of assessing the value of the perquisite, since ordinary taxation principles require the tax to be based on its true value.
Money?
A further argument advanced by the Revenue was that the shares could not be regarded as restricted securities because they were money, and therefore excluded from the definition of securities, for the purposes of Chapter 2, by section 420(5)(b).
The shares were said to be money on the basis that the commercial reality of the scheme was the payment of cash: in particular, the shares were always intended to be redeemable for cash.
It may well be that, in an appropriate case, the statutory term money, construed purposively, might apply to arrangements which, viewed realistically, were no more than disguised or artificially contrived methods of paying cash to employees.
For the reasons explained in para 92, however, that approach cannot be applied on the facts of the present appeals.
It is also apparent from some of the examples of securities given in section 420(1)(b), such as debentures, certificates of deposit, and other instruments creating or acknowledging indebtedness, that the ability to redeem an instrument for cash does not render it money.
Indeed, the implication of section 424(c) is that redeemable shares are included within the scope of Chapter 2.
Conclusion
The error of the Court of Appeal in these cases lies, in my opinion, in adopting a literal construction of Chapter 2, and applying it to a correspondingly formal analysis of the facts.
Adopting a purposive construction of Chapter 2, the conditions relied upon in order to bring the shares in question within the scope of the exemption conferred by section 425(2) failed to make provision of the kind required by section 423(1)(a): that is to say, provision having a business or commercial purpose, as distinct from provision whose only purpose was the obtaining of the exemption.
That does not however mean that the conditions are to be disregarded for all fiscal purposes.
Income tax is payable on the value of the shares as at the date of their acquisition in accordance with Abbott v Philbin, account being taken of any effect which the conditions may have had.
I would allow the appeals on that basis, subject to such adjustments to the assessments as may be necessary to reflect any effect which the conditions may have had on the value of the shares as at the date of their acquisition.
| UK-Abs | The appeals, brought by the Commissioners for Her Majestys Revenue and Customs (HMRC), are concerned with schemes which were designed to avoid the payment of income tax on bankers bonuses, by taking advantage of exemptions under Chapter 2 of Part 7 of the Income Tax (Earnings and Pensions) Act 2003, as amended by Schedule 22 to the Finance Act 2003 (ITEPA).
In particular, under section 425(2) of ITEPA, an exemption is conferred on the award to employees of restricted securities, defined by section 423 as shares which are subject to provision for their forfeiture if some contingency occurs.
Under the schemes, the banks decided to award discretionary bonuses to their employees, but rather than paying the bonuses to them directly, the banks instead used the amount of the bonuses to pay for redeemable shares in offshore companies set up for the purposes of the schemes.
The shares were then awarded to the employees in place of the bonuses.
Conditions were attached to the shares making them subject to forfeiture if a contingency occurred, so as to qualify for the exemption.
In the UBS case, the contingency was a specified rise in the FTSE 100 within the next three weeks.
The contingency was unlikely to occur, and it was also hedged against so that the employees would lose out slightly, but not significantly, if it did occur.
In the DB case, the contingency was the employees being dismissed for misconduct or voluntarily resigning within the next six weeks.
Once the exemptions had accrued, the shares were redeemable by the employees for cash.
HMRC decided that tax should be assessed as if the employees had been paid in cash the amount of the bonuses allocated to them.
UBS and DBs appeals to the First Tier Tribunal were dismissed.
The Upper Tribunal heard the cases together and allowed UBSs appeal.
DBs appeal was dismissed on the basis that the scheme failed to comply with a technical requirement for exemption.
The Court of Appeal dismissed HMRCs appeal in the UBS case, and allowed DBs appeal.
The Supreme Court unanimously allows HMRCs appeals.
Lord Reed gives the lead judgment, with which the other Justices agree.
Lord Reed explains that the case of W T Ramsay Ltd v Inland Revenue Comrs [1982] AC 300 extended the purposive approach to statutory construction, which was orthodox in other areas of the law, to tax cases.
It also established that the analysis of the facts depends on that purposive construction of the statute [61 62].
Taxing statutes generally draw their life blood from real world transactions with real world economic effects.
Where an enactment is of that character, and a transaction, or an element of a composite transaction, has no purpose other than tax avoidance, it can usually be said that to allow tax
treatment to be governed by transactions which have no real world purpose of any kind is inconsistent with that fundamental characteristic.
Where schemes involve intermediate transactions inserted for the sole purpose of tax avoidance, it is quite likely that a purposive interpretation will result in such steps being disregarded for fiscal purposes [64].
In the present appeals, Lord Reed begins by asking whether a purposive interpretation of the legislation is possible.
The context of Chapter 2, and the background to its enactment, provide some indication of Parliaments intention.
The purposes of Part 7 were broadly identified in Grays Timber Products Ltd v Revenue and Customs Comrs [2010] UKSC 4 as being: (i) to promote employee share ownership by encouraging share incentive schemes; (ii) since such schemes require benefits to be contingent on future performance, creating a problem if tax is charged on the acquisition of the shares, to wait and see in such cases until the contingency has fallen away; and (iii) to counteract consequent opportunities for tax avoidance [74].
The background to the enactment of Chapter 2 indicates that it was intended to address practical problems, and to forestall opportunities for tax avoidance [75].
It is difficult to accept that Parliament intended to encourage, by exemption from taxation, the award of shares to employees, when the award of such shares has no purpose other than the obtaining of the exemption itself [77].
The section 425(2) exemption, in respect of the acquisition of securities which are restricted securities by virtue of section 423(2), was designed to address practical problems arising from valuing a benefit which was, for business or commercial reasons, subject to a restrictive condition involving a contingency.
Nothing suggests that Parliament intended that section 423(2) should also apply to restrictive conditions that have no business or commercial purpose, but are deliberately contrived solely to take advantage of the exemption [78].
This is not undermined by the section 429 exemption, which is confined to two specific situations falling within the broader section 425 exemption, whose purposes are consistent with the general approach to Chapter 2 [80].
The fact that Parliament has expressly dealt with tax avoidance in Chapters 3A to 3D does not support the inference that Parliaments intentions in relation to anti avoidance had been exhaustively expressed [82].
Lord Reed concludes that the reference in section 423(1) to any contract, arrangement or condition which makes provision to which any of subsections (2) to (4) applies is to be construed as being limited to provision having a business or commercial purpose, and as not applying to commercially irrelevant conditions whose only purpose is the obtaining of the exemption [85].
In the UBS case, Lord Reed finds that the condition was completely arbitrary, and had no business or commercial rationale.
Further, the economic effect of the restrictive condition was nullified by the hedging arrangements, except to an insignificant and pre determined extent.
Accordingly, the condition should be disregarded, with the consequence that the shares are not restricted securities within the meaning of section 423 [86 7].
The condition in the DB case operated only for a very short period, during which the possibility that it might be triggered lay largely within the control of the employee who would be adversely affected.
It had no business or commercial purpose, and thus fell outside section 423 [88].
Having found that the exemption does not apply, Lord Reed holds that the proper basis for taxation of the bonuses is as shares, and not as cash.
The shares did not simply function as a cash delivery mechanism: the amount of cash for which the shares might be redeemed was neither fixed nor ascertainable when the shares were acquired [92].
The value of the shares has to be assessed as at the date of their acquisition, and the restrictive conditions must be taken into account, as ordinary taxation principles require the tax to be based on the shares true value [94 5].
|
The issue in this case concerns the true meaning and ambit of the additional right of appeal specific to asylum claims which was given by section 83 of the Nationality, Immigration and Asylum Act 2002 (NIAA 2002).
That section has now been repealed by section 15(3) of the Immigration Act 2014 and replaced by a wider right of appeal.
It remains, however, in force for the present appellant, and perhaps for some others.
The Court of Appeal gave permission, before the Immigration Act 2014 had been passed, for the present appeal to be brought to this court: [2014] 1 WLR 2766.
The principal right of appeal against immigration decisions made by the Home Secretary was, in NIAA 2002, given by section 82.
Stripped of inessentials, a right of appeal to an immigration judge was given by that section in respect of a variety of listed immigration decisions.
Importantly for present purposes, those included the principal decisions which will lead to removal from this country, such as a decision to remove, or a refusal to vary leave to remain which will leave the claimant without it.
A claim for asylum, that is to say a claim to be a refugee entitled to the benefit of the Refugee Convention, was not amongst the list of immigration decisions and did not therefore attract the section 82 right of appeal.
However, if an appeal under section 82 existed because there was also an immigration decision of one of the kinds listed, the claimant was expressly entitled by section 84(1)(g) to raise the argument that his removal would put this country in breach of its obligations under the Refugee Convention.
By this somewhat circuitous but effective route a right of appeal against refusal of asylum in practice existed under the NIAA 2002, as under previous legislation, if there was an immigration decision to appeal under section 82.
Generally, there was.
But it might happen that there was not if, for example, when the asylum claim was refused by the Home Secretary, leave to remain was granted.
In that event, the continued presence of the claimant would be lawful and there would be no occasion for an appeal under section 82, under which the question of refugee status could be determined.
The issue of refugee status is significant, because some legal consequences flow from it if it is held to exist.
It was not that uncommon for those whose asylum claims failed nevertheless to be granted limited leave to remain; a simple example was unaccompanied minors who were and are very often granted leave to remain until they reach the age of majority, in order to avoid removing children who have no sufficient family or other support: see TN (Afghanistan) v Secretary of State for the Home Department [2015] UKSC 40; [2015] 1 WLR 3083.
an asylum claim, in specified circumstances.
It said: Section 83, however, provided a specific right of appeal against a refusal of 83.
Appeal: asylum claim (1) This section applies where a person has made an asylum claim and (a) his claim has been rejected by the Secretary of State, but (b) he has been granted leave to enter or remain in the United Kingdom for a period exceeding one year (or for periods exceeding one year in aggregate). (2) The person may appeal to the Tribunal against the rejection of his asylum claim.
The appellant is a citizen of Uganda.
On 27 September 2010 he was granted limited leave to remain in the United Kingdom as a student until 30 April 2012.
Before that time had expired, he applied for a variation of his leave to remain on the grounds that he should be accepted as a refugee.
The basis of that claim was that his brother was suspected of being involved in terrorist activities directed against the Ugandan Government, and he claimed that by reason of his relationship and the suspicion that he might be involved with his brother, he faced a real risk of persecution if he were to be returned.
On 7 February 2012 the Secretary of State rejected the claim and refused to vary the limited leave to remain, but she did not curtail it.
Thus the appellant had, at the time that his asylum claim was refused, about 11 weeks or so left of his limited student leave to remain.
The appellant appealed to the First tier Tribunal, where his claim to refugee status was refused on the merits without any question of jurisdiction being raised and apparently on the unspoken assumption that the appeal was brought under section 82.
When, however, he pursued his case to the Upper Tribunal, contending that the First tier decision was perverse, the jurisdiction point was taken before Upper Tribunal Judge Clive Lane.
He held that there had never been any right of appeal, and for that reason declined to investigate the case further.
On further appeal, the Court of Appeal came to the same conclusion.
The question is a shortly stated one of statutory construction.
The rival arguments were developed on both sides with exemplary elegance and concision.
As often happens, the brevity with which the issue can be identified does not reflect the intrinsic difficulty of resolving it.
The appellants case runs as follows.
Section 83 gives a general right of appeal to those whose claim to i) refugee status has been refused. ii) The limitation upon that right of appeal constituted by subsection (1)(b) should be broadly rather than narrowly construed, since refugee status is a matter of significance and engages this countrys international obligations to permit a properly qualified claimant to exercise the rights secured by the Convention.
Nor should a construction be adopted which restricts the appellants right of access to the tribunal. iii) The natural meaning of section 83 is that any grant(s) of leave to remain totalling more than 12 months bring the claimant within the section and afford him the right of appeal.
It matters not whether the grant of leave to remain came before or after the refusal of the asylum claim.
Indeed, a grant or grants which had expired before the asylum claim was made would also do so. iv) The alternative construction advanced by the Secretary of State and upheld by the Court of Appeal, namely that subsection (1)(b) applies only to grant(s) of leave to remain made after the refusal of the asylum claim would be tantamount to making the right of appeal hinge on the leave to remain decision rather than, as it is clearly designed to do, on the decision to refuse asylum.
The Secretary of State supports the conclusion of both the Upper Tribunal and the Court of Appeal that the true construction of section 83 requires the grant(s) of leave to remain to be either contemporaneous with or to post date the refusal of the asylum claim.
That, she contends, is also consistent with the purpose of the statute which she asserts is to provide an appeal to those who have no section 82 appeal and will not have such in the reasonably near future.
She also suggests that the wider structure of the NIAA supports this construction, in particular sections 78, 94 and 83A, which are considered below.
As the submissions were developed in oral argument it became apparent that there are four possible constructions of section 83: (i) any grant(s) of leave to remain totalling more than 12 months bring the claimant within the section, whenever they occurred and whether or not they had expired before the asylum claim was made and determined; this was the appellants primary case; (ii) grant(s) of leave to remain totalling more than 12 months bring the claimant within the section providing such leave is still current at the time of the determination of the asylum claim; this was the appellants alternative position; (iii) grant(s) of leave to remain bring the claimant within the section providing that such leave totalled more than 12 months counting from the date of refusal or later grant, and whether the grant(s) were made before or after refusal; this was the alternative contention of the Secretary of State if her principal one ((iv) below) failed; (iv) grant(s) of leave to remain totalling more than 12 months bring the claimant within the section if but only if they (and all of them if more than one) are either contemporaneous with or post date the determination of the asylum claim; this was the Secretary of States primary case and was adopted by the Upper Tribunal and the Court of Appeal.
At one time in the past the Secretary of State contended in cases concerning section 83 that the wording used demanded that there be a nexus between the refusal of the asylum claim and the grant of more than 12 months limited leave.
In other words, it was contended that the one must be logically connected to the other.
That contention was rejected by Beatson J, as he then was, at first instance in AS (Somalia) v Secretary of State for the Home Department [2011] EWHC 627 (Admin).
In that case, AS had arrived as an unaccompanied minor.
He had made two asylum claims.
The first had been rejected in November 2006 but he had been granted limited leave to remain for approximately four months until he was 18.
Subsequently, he applied to extend that leave, and in addition made a second claim to be adjudged a refugee.
The second asylum claim was never determined but the claimant was, three years after it was made, granted indefinite leave to remain.
Thus there was no more than 12 months leave associated with the first refusal of asylum, and no refusal of asylum associated with the much later grant of indefinite leave.
The judge held that AS was within section 83 and on appeal the Secretary of State abandoned the argument to the contrary.
The Court of Appeal [2011] EWCA Civ 1319; [2012] INLR 332 (per Sullivan LJ) rightly recorded at para 17 that this was plainly correct.
The fact that section 83 brings within its provisions the case of multiple grants of leave totalling 12 months shows that there does not have to be a nexus between the refusal of asylum and the grant(s).
In the present case, Mr Eadie QC for the Secretary of State correctly disclaimed the argument for nexus.
To the extent that the Upper Tribunal in the present case, giving judgment without sight of AS (Somalia), founded in part on the need for nexus, it was wrong.
It was common ground before us that there are three differences to record between section 82 appeals and those under section 83.
They were succinctly summarised by Elias LJ at para 14 in the Court of Appeal as follows: First, the Secretary of State may certify a claim [under section 82] as clearly unfounded under section 94, and where she does this it precludes any in country right of appeal.
This does not apply to an asylum rejection under section 83.
Second, section 96 allows the Secretary of State to prevent repetitious appeals if the grounds advanced ought to have been made in response to an earlier decision.
Again, this power can only be exercised with respect to section 82 appeals and does not apply to section 83 appeals.
Third, by section 78, where an appeal is lodged under section 82, the appellant may not be removed until it is determined.
That benefit does not extend to appeals under section 83.
It is convenient also to note the adjacent section 83A, which was added into NIAA 2002 by section 1 of the Immigration, Asylum and Nationality Act 2006.
Section 83A provides for the related case of a person who was originally granted asylum as a refugee but has subsequently been held to have ceased to be such, for example because conditions have changed in his home country.
Section 83A reads as follows: (1) This section applies where a person has made an asylum claim, (a) (b) he was granted limited leave to enter or remain in the United Kingdom as a refugee within the meaning of the Refugee Convention, (c) a decision is made that he is not a refugee, and (d) following the decision specified in para (c) he has limited leave to enter or remain in the United Kingdom otherwise than as a refugee.
It is true that section 83 can, as a matter of language, be read in a number of different ways.
It is, however, not the most natural reading of it to construe subsection (1)(b) as if it read he has been granted at any time, now or in the past, leave to enter or remain , as construction (i) would entail.
Nor to my mind is it the most natural reading of the words that subsection (1)(b) must be taken as if it said he has subsequently been granted leave to enter or remain , as construction (iv) would require.
Section 83 appears to focus on the time when the asylum claim has been rejected, for it is concerned with appeals against this decision, and then to ask whether, when a claimant wishes to appeal, the condition in subsection (1)(b) is met.
This characteristic of section 83 suggests that it is concerned with grants of leave to remain which are operative after the refusal of asylum, but not with those which have existed in the past but which are spent before any question of asylum arises.
On its face, however, the section (1)(b) condition of having been granted more than 12 months leave might be met by a grant or grants which came before the refusal of asylum, as well as by ones which came afterwards.
The principal difficulty in the way of the appellants foundation argument for his alternative submissions arises from the form and content of section 83.
That section does not, as is suggested, first create a general right of appeal against refusal of asylum, and then make that right subject to a limitation contained in subsection (1)(b).
Subsection (1)(b) is not a limitation of the right of appeal.
Rather, it is a condition for the right of appeal arising.
It is a key to admission, not a partial barrier to entry.
It cannot sensibly be read as if it said that there exists a right of appeal unless there has been a grant or grants of limited leave to appeal totalling 12 months or less.
In particular it clearly does not apply where there is no grant of leave at all.
The appellants second difficulty is that his primary case would mean that a past and expired grant of limited leave opened the door to this appeal against refusal of asylum when there is no conceivable reason why it should.
On construction (i) a claimant would be within section 83 if, 20 years ago, he had been a student in the UK, enjoying a grant of limited leave to remain for something over a year, had then left this country and had returned only recently, on whatever basis (or none) but without more than 12 months leave to remain, whereupon he had made an asylum claim.
There would be no possible reason why his historical experience of lawful residence for over 12 months should have any bearing at all on whether he had a separate right of appeal under section 83, as distinct from having only the same right that most asylum claimants have, namely to raise his refugee claim in a section 82 appeal.
Mr Biggs realistically did not advance the argument which has been ventilated at earlier stages in this or other cases, namely that the history of previous lawful residence is meant to bring such a claimant within section 83 on the grounds that it demonstrates some connection with the UK and a consequent claim on a preferential procedure.
There appears no conceivable reason why Parliament should have meant to provide a claimant in this position with a separate section 83 right of appeal.
An expired grant of leave fell to be considered in R (Omondi) v Secretary of State for the Home Department [2009] EWHC 827 (Admin) and Judge Ockelton, sitting as a deputy judge of the High Court, drawing on marked experience of immigration practicalities, reached the same conclusion.
Construction (ii) suffers from the same difficulty, albeit less acutely.
There appears to be no sensible reason why historic grant(s) of leave to remain totalling more than 12 months should import the right to appeal under section 83 if they are largely spent by the time of the refusal of asylum, and thus, as at that time, the 12 month condition is not met.
Conversely, the difficulty with construction (iv) is that it would treat differently two people whose cases are materially the same.
A claimant whose asylum claim was rejected but who, a week or so later, was granted 18 months leave to remain, would be within section 83 and have its right of appeal against the asylum decision.
A second claimant, who had been granted two years leave to remain six months before his asylum claim was rejected, would not.
But as at the refusal of asylum their positions in relation to leave to remain would be effectively identical.
There appears no reason why Parliament should have intended this result.
Mr Biggs suggested another case in which, if construction (iv) were correct, section 83 would, undesirably, cease to afford a right of appeal.
That is the case of indefinite leave to remain granted before the refusal of asylum.
In such a case, on construction (iv) there would never be an opportunity to take the refusal of asylum to appeal and to establish refugee status.
How likely that case is may possibly be open to enquiry, but it would indeed fail construction (iv).
On the other hand, a grant of indefinite leave to remain made after the refusal of asylum would bring the section 83 right of appeal, because plainly indefinite leave is for a period exceeding one year.
There is no obvious reason for the difference between the two cases.
The purpose of section 83 is tolerably clear.
It is to provide an additional and more targeted right of appeal beyond the ordinary one created by section 82.
It is to provide a vehicle for the determination by the tribunal of refugee status, when that status is asserted but rejected by the Secretary of State, in those cases where no such vehicle otherwise exists, nor will exist within a reasonable time.
In the straightforward case of an asylum claim which is rejected and no other basis for remaining in the UK exists, there will follow a removal decision which generates a right of appeal under section 82, and on that appeal the claimant will succeed if he shows that he is entitled to refugee status.
In the case of a person, such as an unaccompanied minor, whose asylum claim is refused, but who is granted a short period of leave to remain, there will in the relatively near future either be a further grant of leave to remain or there will be a refusal of it and a decision to remove.
At that foreseeably proximate stage, there will, unless leave is extended, again arise a right of appeal under section 82 in which refugee status, if established, will guarantee success.
Section 83 is designed to create an extra right of appeal for those who have a longer period of leave to remain and who would otherwise have no section 82 vehicle which they could use.
As Upper Tribunal Judge Clive Lane concisely put it in the Upper Tribunal, section 83 is aimed at this class of applicant, so that he should not be deprived of his right to challenge the refusal of his asylum claim where that refusal is not accompanied by a decision to remove him.
In FA (Iraq) v Secretary of State for the Home Department [2010] EWCA Civ 696; [2010] 1 WLR 2545, paras 13 and 30 both Longmore and Pill LJJ expressed the same idea when they observed that section 83 was aimed at people in whose cases the Secretary of State would not be reconsidering the immigration position in the near future.
In TN (Afghanistan) at para 32, Lord Toulson referred to the additional consideration that where conditions in the home country may be fluctuating rapidly, it makes good sense for tribunals not to become clogged with cases which are due to be reviewed before long in any event.
Once that is understood, it is clear that the construction which most nearly serves the purpose of the statute is construction (iii).
That focuses on identifying those claimants in whose cases there will not be a section 82 vehicle for an appeal on refugee status for longer than the 12 month period which Parliament has set as the relevant one.
Thus the claimant may avail himself of section 83 if he has limited leave totalling more than 12 months counting from the date of refusal or, if later, the date of grant (or, a fortiori, if he has been granted indefinite leave).
That is so whether or not his leave started before the refusal, and whether his leave is the result of a single grant or of more than one.
If, however, when he seeks to appeal, any current leave has 12 months or less to run from the date of refusal of the asylum claim, or from a later grant, then he is left to his section 82 appeal in due course.
Conversely, neither construction (i) nor (ii) serves the purpose of the provision at all.
Both would bring within section 83 those who do not need it, because there will, within a relatively short time, be a further decision of the kind which, if it involves an end to leave to remain, will bring with it a right to appeal under section 82, whilst if it extends leave to more than 12 months from refusal the claimant can take advantage of section 83.
Construction (iv) would serve this statutory purpose, but would, as explained above, leave out some whose case falls within that purpose.
Likewise, once this purpose is understood, the statutory structure under which sections 78 and 94 do not apply to appeals under section 83 falls into place.
There is no need for the suspensive rule of section 78 because the claimant is lawfully in the UK.
There is no adverse decision, under which he becomes unlawfully present, which calls for suspension.
Nor, for the same reason, is there the same need for certification of claims as unfounded.
True, the view might have been taken that a manifestly unfounded asylum claim could be certifiable to avoid time and expense on an appeal to the tribunal, but there would not be the same prolongation of unlawful residence which appears to be the basis of the power to certify, and it makes perfectly good sense for the determination of the asylum appeal to be left to the tribunal, even if it has no merit.
On the other hand, as the Secretary of State contended, these provisions would be necessary if section 83 brought within its terms a person whose grant(s) of leave to remain were historic and either spent or soon to be spent, for he would indeed be (or about to be) unlawfully present in this country.
To that extent, the structure of the Act outside the precise terms of section 83 provides some further support for saying that constructions (i) and (ii) are not correct.
The fact that the provisions of section 96 for prevention of repetitious appeals do not apply to an appeal within section 83 is no indication to the contrary.
As was pointed out in both the Administrative Court and the Court of Appeal in AS (Somalia), where one of the claimants had previously made an unsuccessful asylum claim, the making of an unmeritorious second claim by a claimant who is lawfully here, whilst it is to be discouraged, is not to be equated with the kind of desperate application which is likely to be made by those who are under threat of removal, and it does not stand in the same need of active measures to prevent it.
Moreover, since a tribunal considering a second asylum claim will, in accordance with Devaseelan v Secretary of State for the Home Department [2002] UKIAT 702; [2003] Imm AR 1, begin by assuming the correctness of the first decision and thus look for fresh or different considerations not previously assessed, an undeserving second claim need not detain the appellate system for an unacceptable time.
That was Mr Ockeltons view in Abiyat (rights of appeal) Iran [2011] UKUT 00314 (IAC); [2012] INLR 131, a view endorsed by Sullivan LJ in AS (Somalia) at para 40.
Next, the absence of any need for a nexus between refusal of asylum and the grant(s) of leave to remain (as confirmed in AS (Somalia)) tends somewhat to support construction (iii) and to counter construction (iv).
That is because it demonstrates that it is the existence of leave of the prescribed length, at the relevant time, rather than the date on which it was granted, which matters.
The Court of Appeal in the present case also drew attention to the conjunctive but which links subparagraph (a) to subparagraph (b), distinguishing it from the and which might have been used.
The Secretary of State supported this argument, contending that the use of but indicated a requirement that the grant(s) of leave must come at the same time or after the refusal of asylum, and thus supported construction (iv).
Whilst it is true that and would not be so open to this argument, as a matter of syntax but does not necessarily mean subsequent to; it may simply be used to mean however, or although and thus to be neutral on the timing of the grant(s).
Nor, to my mind, do the terms of section 83A provide support to the Secretary of States argument for construction (iv).
First, it is not in any event safe to use a subsequently drafted section to construe a statutory provision which was written some years earlier.
That is different from considering adjacent sections produced by the same author contemporaneously.
Second, the use of the word following in subparagraph (d) does not necessarily connote a subsequent grant.
Section 83A requires that following the refusal, the claimant shall be the beneficiary of leave to remain.
It focuses, as does section 83, on what his position is as at the refusal of leave and thereafter, but not on when the grant was made.
The use in subparagraph (d) of the words has leave, rather than is granted leave tends to confirm this and to point away from insistence on subsequent grant.
These several additional reasons all support what is both a natural reading of section 83 and most consistent with its purpose, namely that the proper construction is (iii), as explained in para 22 above.
Since the remaining period of leave which the present appellant enjoyed was well short of the period of more than 12 months from refusal of his asylum claim required by section 83, he did not fall within the section.
It follows that the appeal must be dismissed, although not quite for the reasons given by the Court of Appeal.
It, like the Upper Tribunal in Win (section 83 order of events) [2012] UKUT 00365 (IAC); [2013] Imm AR 154 went further than it should have done by adopting construction (iv); it is not clear that construction (iii) was put before either court, and the appellants in both cases failed to meet the test whichever was adopted.
| UK-Abs | This case concerns the statutory rights to appeal immigration decisions under the Nationality, Immigration and Asylum Act 2002 (NIAA 2002).
The relevant provisions have now been repealed, however they were relevant to the appellant because of the timing of his claim.
The main right of appeal under NIAA 2002 in relation to immigration decisions was s82.
Whilst this did not cover asylum claims, where an appeal existed under s82 then the claimant in question was entitled by s84(1)(g) to raise the argument that his removal would put the UK in breach of its obligations under the Refugee Convention.
By this route, a right of appeal against refusal of asylum effectively existed in NIAA 2002 if there was an immigration decision to appeal under s82.
Generally there was such a decision to appeal under but not in all circumstances.
For example, where the asylum was refused but leave to remain was granted.
In this context, s83 provided a specific, additional right of appeal against refusal of asylum where the asylum claim was rejected but the applicant had, per s83(1)(b), been granted leave to remain or enter the [UK] for a period exceeding one year (or for periods exceeding one year in aggregate).
The appellant is a citizen of Uganda.
On 27 September 2010, he was granted limited leave to remain in the United Kingdom as a student until 30 April 2012.
Before that time had expired, on 7 February 2012, he applied for asylum on the grounds that the Ugandan governments treatment of him might be affected because of his familys alleged political activities in Uganda.
The Secretary of State rejected his claim and did not vary his limited leave to remain.
The question was whether under s83 it was necessary for the relevant grant of leave to remain to be contemporaneous with or to post date the refusal of the asylum claim in order for the appellant to benefit from the right of appeal.
After being unsuccessful before the Court of Appeal the appellant appealed to the Supreme Court.
The Supreme Court unanimously dismisses the appellants appeal.
Lord Hughes gives the only judgment, with which the other Justices agree.
Lord Hughes identifies four possible readings of s83: [10] 1) any grant(s) of leave to remain totalling more than 12 months bring the claimant within the section, whenever they occurred and whether or not they had expired before the asylum claim was made and determined; 2) grant(s) of leave to remain totalling more than 12 months bring the claimant within the section providing such leave is still current at the time of the determination of the asylum claim;
3) grant(s) of leave to remain bring the claimant within the section providing that such leave totalled more than 12 months counting from the date of refusal or later grant, and whether the grant(s) were made before or after refusal. 4) grant(s) of leave to remain totalling more than 12 months bring the claimant within the section if but only if they (and all of them if more than one) are either contemporaneous with or post date the determination of the asylum claim; this was the Secretary of States primary case and was adopted by the Upper Tribunal and the Court of Appeal.
Lord Hughes notes that whilst s83 can be read as a matter of language a number of ways, some are more natural than others.
In particular, s83 appears to focus on the time when the asylum claim has been rejected, for it is concerned with appeals against this decision, and then to ask whether, when a claimant wishes to appeal, the condition in subsection 1(b) is met. [14] The purpose of s83 is tolerably clear.
It is to provide an additional and more targeted right of appeal beyond the ordinary one created by s82.
It is to provide a vehicle for the determination by the tribunal of refugee status, when that status is asserted but rejected by the Secretary of State, in those cases where no such vehicle otherwise exists, nor will exist within a reasonable time. s83 was designed to create an extra right of appeal for those who have a longer period of leave to remain and who would otherwise have no s82 vehicle which they could use.
The intention was that those in this situation should not be deprived of the right to challenge the refusal of their asylum claim where that refusal is not accompanied by a decision to remove them. [21] Once this is understood, it is clear that the construction which most neatly serves the purpose of the statute is interpretation 3, i.e. that grants of leave to remain bring the claimant within the section providing that such leave totalled more than 12 months counting from the date of refusal or later grant, and whether the grants were made before or after refusal. [22]
|
This is an appeal by leave of the Court of Appeal on a point of law arising in the course of the trial of the appellant, Jack Taylor, in the Crown Court at Exeter for aggravated vehicle taking, contrary to section 12A of the Theft Act 1968.
The facts
The facts can be shortly stated.
On the evening of 23 June 2012, the appellant, who was in Exmouth, took a Ford Transit Tipper truck from a friend, David Marriott, in order to collect another friend from Exeter.
The truck belonged to Marriotts employer, and the Crown alleges that it was taken without the owners consent.
Having picked up the friend, the appellant was driving back to Exmouth when he collided on a bend in a narrow country lane with a scooter driven by Steven Davidson Hackett.
The scooter slid under the wheels of the truck, and Davidson Hackett was killed.
The appellant was later found to be over the drink drive limit.
He was also uninsured.
But the Crown, after a careful investigation of the accident, accepts that there was no evidence on which a jury could be sure that the manner of his driving was at fault or open to criticism.
The statutory framework
if Section 12 of the Theft Act provides that a person shall be guilty of an offence without having the consent of the owner or other lawful authority, he takes any conveyance for his own or anothers use or, knowing that any conveyance has been taken without such authority, drives it or allows himself to be carried in or on it.
This a summary offence carrying a maximum sentence of six months imprisonment.
There are a number of offences of varying degrees of gravity which may be committed by drivers whose manner of driving causes death, injury or damage.
At the relevant time, they included manslaughter, causing death by dangerous driving, causing death by careless or inconsiderate driving, dangerous driving, careless or inconsiderate driving, causing death by careless driving when under the influence of drink or drugs, and various other offences involving drink or drugs.
All of these offences require mens rea, generally provided by the absence of due care.
The appellant was not charged with any of them, and in the light of the agreed facts about the manner of his driving, he could not have been convicted of any of them.
Instead, he was charged with aggravated vehicle taking contrary to section 12A of the Theft Act 1968.
Vehicle Taking Act 1992.
It provides so far as relevant, as follows: Section 12A of the Theft Act was inserted by section 1 of the Aggravated 12A Aggravated vehicle taking (1) Subject to subsection (3) below, a person is guilty of aggravated taking of a vehicle if (a) he commits an offence under section 12(1) above (in this section referred to as a basic offence) in relation to a mechanically propelled vehicle; and (b) it is proved that, at any time after the vehicle was unlawfully taken (whether by him or another) and before it was recovered, the vehicle was driven, or injury or damage was caused, in one or more of the circumstances set out in paragraphs (a) to (d) of subsection (2) below. (2) The circumstances referred to in subsection (1)(b) above are that the vehicle was driven dangerously on a road (a) or other public place; that, owing to the driving of the vehicle, an (b) accident occurred by which injury was caused to any person; (c) that, owing to the driving of the vehicle, an accident occurred by which damage was caused to any property, other than the vehicle; (d) that damage was caused to the vehicle. (3) A person is not guilty of an offence under this section if he proves that, as regards any such proven driving, injury or damage as is referred to in subsection (1)(b) above, either the driving, accident or damage referred to in (a) subsection (2) above occurred before he committed the basic offence; or (b) he was neither in nor on nor in the immediate vicinity of the vehicle when that driving, accident or damage occurred.
At the time when section 12A was enacted, it carried a maximum sentence of two years imprisonment, or five years if the accident caused the death of the victim.
The five years was increased by section 285(1) of the Criminal Justice Act 2003 to 14 years.
The Crown contends that the only element of fault required for the offence under section 12A(2)(b) is the unauthorised taking of the vehicle, and that no further fault on the part of the defendant need be proved in relation to the occurrence of the accident.
The proceedings
The appellant was charged on an indictment containing five counts.
Of these Counts 1, 2 and 5 can for present purposes be ignored.
Count 1 related to a previous occasion; Count 2 related only to David Marriot; and the Crown decided not to proceed on Count 5.
That left only Count 3, which charged him with aggravated vehicle taking; and Count 4, which charged him jointly with Marriott with causing the death of Mr Davidson Hackett while driving uninsured, contrary to section 3ZB of the Road Traffic Act 1988 (as inserted by section 21(1) of the Road Safety Act 2006).
On 31 July 2013, the Supreme Court gave judgment in R v Hughes [2013] 1 WLR 2461, holding that an offence under section 3ZB of the Road Traffic Act 1988 required proof that there was some element of fault in the defendants control of the vehicle, which contributed in a more than minimal way to the victims death.
The case came before the Recorder of Exeter (His Honour Judge Gilbert QC) on 13 January 2014.
At the opening of the case, an application was made on behalf of both defendants to vacate Count 4 in the light of the decision in Hughes.
After an adjournment overnight, the Crown accepted that there was no fault in the manner of Mr Taylors driving and announced that they would offer no evidence on Count 4.
A verdict of Not Guilty was accordingly directed on that count.
The question then arose whether the decision in Hughes also ruled out a conviction on Count 3.
The Recorder was invited by both parties to rule on this point.
The Crown sought to distinguish Hughes.
It relied on the decision of the Court of Appeal (Criminal Division) in R v Marsh [1997] 1 Cr App R 67 as authority for the proposition that there was no element of fault in the offence of aggravated vehicle taking.
The Recorder decided that point against them.
He ruled that fault had to be proved in relation to the accident.
The Crown asked for leave to appeal his ruling on the count of aggravated vehicle taking, and the proceedings were adjourned until the appeal had been disposed of.
The appeal was heard on 9 April 2014 by the Court of Appeal (Criminal Division) (Pitchford LJ, Sweeney J and HHJ Bourne Arton).
They allowed the appeal on the ground that Marsh remained binding authority, but certified a question of general public importance and gave leave to appeal to the Supreme Court.
The certified question was as follows: Is an offence contrary to section12A(1) and 2(b) of the Theft Act 1968 committed when, following the basic offence and before recovery of the vehicle, the defendant drove the vehicle, and without fault in the manner of his driving the vehicle was involved in an accident which caused injury to a person.
The authorities
Three cases are directly in point, R v Marsh [1997] 1 Cr App R 67, R v Williams [2011] 1 WLR 588, and R v Hughes [2013] 1 WLR 2461.
The facts of Marsh were in the relevant respects indistinguishable from those of the present case, except that the injury to the victim was not fatal.
Like the present case, it turned on the meaning of the words owing to the driving of the vehicle, an accident occurred by which injury was caused to any person in section 12A(2)(b).
The Court of Appeal ruled that fault in relation to the accident was not an element of the offence.
The judgment of the court was delivered by Laws J. He held that the only relevant requirement of the subsection was that the driving of the vehicle should have been the cause of the accident, and that it was not legitimate to imply words which would require proof that the manner of the driving was the cause of the accident.
He pointed out that section 12A(2)(a) expressly required that the vehicle should have been driven dangerously, but that no corresponding requirement of fault could be found in subsections (b), (c) or (d).
He therefore concluded that once it was established that the basic offence of taking the vehicle had been committed, no further element of fault was required.
In Williams, the offence charged was causing death by driving when unlicensed, disqualified or uninsured, contrary to section 3ZB of the Road Traffic Act 1988.
The statute provided that a person committed an offence if, being unlicensed, uninsured or disqualified, he causes the death of another person by driving a motor vehicle on a road. (The reference to disqualified drivers has since been removed, and separate offences created to cover them.) The facts were that the defendant was driving through Swansea, without a licence or insurance, when a pedestrian crossed the central reservation and stepped in front of his car.
On the facts, the accident was entirely the fault of the pedestrian.
Nevertheless, the trial judge ruled that fault was not an element of the offence, and the defendant was convicted.
His ruling was upheld by the Court of Appeal.
They considered, at para 14, that the approach of this court in Marsh applies even more clearly to the offence under section 3ZB of the 1988 Act.
In Hughes, where the same offence was charged, the facts were remarkable.
Mr Hughes was driving his familys camper van, when a vehicle approached in the other direction, veering all over both sides of the road.
The other driver, a Mr Dickinson, was overtired, having driven a long distance, and high on heroin.
There was a collision in which Mr Dickinson was killed.
It was common ground that Mr Hughes driving was faultless and that there was nothing that he could have done to avoid the accident.
But he was driving without a licence or insurance, and was prosecuted under section 3ZB for causing Mr Dickinsons death.
The trial judge ruled that he had not committed the offence because he had not caused the death.
The Court of Appeal [2011] 4 All ER 761 overturned the ruling, once again applying Marsh.
It held, as it had done in Williams, that the approach of this court in Marsh applies even more clearly to the offence under section 3ZB.
The decision was reversed in the Supreme Court.
The judgment of the court was delivered by Lord Hughes and Lord Toulson.
They started by drawing attention to the consequences of the Court of Appeals decision at para 9: The difficulty, however, exposed by the present case and others like it is that instead of Mr Hughes being punished for what he did wrong, namely for failing to pay his share of the cost of compensation for injuries to innocent persons, he is indicted and liable to be punished for an offence of homicide, when the deceased, Mr Dickinson, was not an innocent victim and could never have recovered any compensation if he had survived injured.
A further difficulty is that since using a car uninsured is an offence of strict liability, it is an offence which may well be committed not only by the likes of Mr Hughes, who deliberately fail to take out insurance, but also by those who overlook a renewal notice, or who find themselves uninsured because of an office mistake by brokers, or because they have driven someone elses car when both they and the owner believed there was valid insurance but in fact there was not, for example because a condition in the policy had been overlooked.
If the ruling in the present case is correct, all such persons will be guilty of a very serious offence of causing death by driving if a fatal collision ensues, even if they could have done nothing to avoid it.
Has Parliament used language which unambiguously has such far reaching effects?
The argument of the Crown, as summarised at para 15 of the judgment, was that the object of the enactment was to impose criminal liability for a death if it involved the presence of the defendant at the wheel of a car on the road where he had no business to be.
This courts reasons for rejecting that argument in Hughes may be summarised as follows: (1) The statutory requirement that the driving should cause the death was not satisfied if all that could be shown was that the accident would not have happened if the uninsured driver of the car had not been on the road.
The fact that the car was on the road was a precondition of the accident, and perhaps the occasion for it, but was not the effective cause or even one among a number of effective causes: By the test of common sense, whilst the driving by Mr Hughes created the opportunity for his car to be run into by Mr Dickinson, what brought about the latters death was his own dangerous driving under the influence of drugs.
It was a matter of the merest chance that what he hit when he veered onto the wrong side of the road for the last of several times was the oncoming vehicle which Mr Hughes was driving.
He might just as easily have gone off the road and hit a tree, in which case nobody would suggest that his death was caused by the planting of the tree, although that too would have been a sine qua non. (para 25) (2) In the absence of a test of effective causation, the offence would be committed even in a case where the casualty resulted from the deliberate act of the victim, as in the case of the suicide or attempted murder considered in para 16 of the judgment. (3) The culpability of the defendants conduct in taking the vehicle in the first place could not logically constitute the mens rea appropriate to an offence the essence of which that it caused a mans injury or death.
To say that he is responsible because he ought not to have been on the road is to confuse criminal responsibility for the serious offence of being uninsured with criminal responsibility for the infinitely more serious offence of killing another person. (para 17) (4) The fact that there were other offences which were unquestionably fault based, including the offence of causing death by careless or inconsiderate driving, which was created by the same statute, did not mean that there was no element of fault in the offence of causing death while driving unlicensed or uninsured.
It was not uncommon for the elements of different offences to overlap, and for particular offences to add little to those which already exist. (5) The gravity of any offence of homicide, and the potential severity of the penalties, meant that if Parliament intended these consequences to follow in a case where the conduct of the defendant had not caused the death, it must make its intention unequivocally clear, not least so that the court could be satisfied that the legislators had confronted the moral dilemma with knowledge of the consequences.
Should we depart from Hughes?
The Crowns primary case on this appeal was that the decision in Hughes should be overruled under Practice Statement (Judicial Precedent) [1966] 1 WLR 1234.
The main point urged in support of this course was that that the Crown had conceded in Hughes that the absence of fault could not be irrelevant in all circumstances.
It is correct that when taxed with some of the more extreme consequences of the Crowns case, Counsel beat a tactical retreat on this point.
He accepted that the defendant could not be convicted if the death was due to the deliberate act of the deceased.
As Lord Hughes and Lord Toulson pointed out (para 16), once that is accepted, it is difficult to see where else a line is to be drawn than by following the normal approach to causation taken by the common law.
Counsel submitted that the exception could be rationalised on the ground that the deliberate act of the victim broke the chain of causation.
But as the judgment points out, that presupposes that there is a chain of causation to be broken.
What is clear is that the concession did not displace the need for argument or analysis.
It simply exposed the weakness of the Crowns case.
Lord Hughes and Lord Toulson dealt with the matter as an issue of principle.
It is difficult to imagine that their conclusion or their reasons would have been any different if the Crown had stuck to its original, extreme position.
In those circumstances, the only basis on which it could be right to depart from the decision now is that the court as presently constituted takes a different view.
A mere difference of opinion can rarely justify departing from an earlier decision of this court.
I can see nothing in the present case which could justify our taking such a course, and I would decline to do so.
Can Hughes be distinguished?
The next question is whether, on the footing that Hughes is binding for what it decides, it can be distinguished.
The Supreme Court left open the question how far its reasoning could be applied to the offence under section 12A of the Theft Act and it expressed no view on the correctness of the decision in Marsh.
This was because there were differences between the offences created by section 3ZB of the Road Traffic Act 1988 and section 12A of the Theft Act 1968 and differences in the statutory language which created them.
Four differences are, at least potentially relevant: (1) Unlike driving while unlicensed or uninsured, which are offences of strict liability, section 12A of the Theft Act requires that the defendant should have committed the basic offence of taking the vehicle without consent.
That is not an offence of strict liability.
Under section 12(1) knowledge of the absence of authority is an essential element. (2) Although aggravated vehicle taking carries a higher sentence if the vehicle is involved in a fatal accident, the death of the victim is not an element of the offence.
This is not therefore strictly speaking an offence of homicide. (3) The offence under section 3ZB is causing the death of another person by driving a motor vehicle on a road.
By comparison, it can be argued that the driving is merely incidental to the offence of aggravated vehicle taking as defined in section 12A of the Theft Act.
The dangerous driving, personal injury or damage to property which constitute the first three aggravating circumstances must have occurred after the taking of the vehicle and before its recovery, but there is no requirement that the defendant should have been driving it, provided that he was party to the taking of the vehicle and was in or in the immediate vicinity of the vehicle when the driving, accident or damage occurred.
He may have been a passenger or standing by the kerbside.
Indeed, in the circumstances referred to in section 12A(2)(d) (that damage was caused to the vehicle) it is not even necessary that the vehicle should have been driven at the time of the damage.
These considerations might be taken to suggest that it is the harm rather than the driving which is the gravamen of the offence. (4) Section 12A(3) makes special defences available in two specific cases where the defendant could not be held responsible, namely where the damage occurred before he took the vehicle and where he was neither in nor in the vicinity of the vehicle at the relevant time.
This would arguably have been unnecessary if the offence was subject to a more general requirement of fault.
I shall return to these factors below.
For present purposes it is enough to observe that the essential point made in Hughes is common to both offences.
The phrase caused the death of another person by driving a motor vehicle on a road. (section 3ZB of the Road Traffic Act 1988) and the phrase owing to the driving of the vehicle, an accident occurred by which injury was caused to any person (section 12A(2)(b) of the Theft Act 1968) both posit a direct causal connection between the driving and the injury.
If the requirement of causation is satisfied by the mere fact that the taking of the vehicle accounted for its being in the place where the accident occurred, then all of the anomalous consequences which this court regarded as extraordinary in Hughes apply equally to the offence under section 12A.
It means that the defendant is liable to be convicted and sentenced to a long period of imprisonment on account of an aggravating factor for which he bears no responsibility.
Strict liability
This brings me to the fundamental reason why in my opinion this appeal must succeed, and why I would have taken the same view even if I had felt able to distinguish the language of section 12A of the Theft Act or depart from the reasoning in Hughes.
The Crowns argument effectively invites the court to treat the section as imposing strict liability for the aggravating factors which differentiate this offence from the basic offence under section 12, in circumstances where that course is neither necessary nor warranted by the language of the Act.
The full definition of every crime, said Stephen J in R v Tolson (1889) 23 QBD 168, 187, contains expressly or by implication a proposition as to a state of mind.
The reason was stated in the same case by Wills J, at pp 171 172: It is, however, undoubtedly a principle of English criminal law, that ordinarily speaking a crime is not committed if the mind of the person doing the act in question be innocent.
It is a principle of natural justice and of our law says Lord Kenyon, CJ, that actus non facit reum, nisi mens sit rea.
The intent and act must both concur to constitute the crime: Fowler v Padget (1798) 7 TR 509, 514.
The leading modern case to this effect is Sweet v Parsley [1970] AC 132, in which the rule was reaffirmed by the House of Lords after a period in which it had been somewhat inconstantly applied.
Lord Reid expressed the general principle at p 149: 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.
It is also firmly established that the fact that other sections of the Act expressly require mens rea, for example because they contain the word knowingly, is not in itself sufficient to justify a decision that a section which is silent as to mens rea creates an absolute offence.
In the absence of a clear indication in the Act that an offence is intended to be an absolute offence, it is necessary to go outside the Act and examine all relevant circumstances in order to establish that this must have been the intention of Parliament.
I say must have been because it is a universal principle that if a penal provision is reasonably capable of two interpretations, that interpretation which is most favourable to the accused must be adopted.
The rule was never absolute, even in late Victorian England, when Tolson was decided.
But in general a criminal offence will require proof of mens rea unless strict liability is either required by the clear language of the act or necessary for the achievement of its purpose.
Cases in the latter category usually involve regulatory statutes.
Wills J, immediately after the passage which I have quoted, gave as examples bye laws regulating the width of thoroughfares, the height of buildings, the thickness of walls, and a variety of other matters necessary for the general welfare, health, or convenience.
Such legislation generally has two characteristic features.
The first is that its requirements are founded on collective convenience rather than moral imperatives.
Lord Reed in Sweet v Parsley called such offences quasi criminal.
But, as he observed at p 149, where the offence carries a significant moral stigma, it is necessary to consider whether, in a case of this gravity, the public interest really requires that an innocent person should be prevented from proving his innocence in order that fewer guilty men may escape.
The second characteristic feature of offences of strict liability is that, although fault in the actual commission of the offence may be unnecessary, there are nonetheless positive steps that the prospect of criminal liability may cause people to take in order to prevent the offence from occurring.
Lord Diplock put the point concisely in the same case, at p 163: Where penal provisions are of general application to the conduct of ordinary citizens in the course of their everyday life the presumption is that the standard of care required of them in informing themselves of facts which would make their conduct unlawful, is that of the familiar common law duty of care.
But where the subject matter of a statute is the regulation of a particular activity involving potential danger to public health, safety or morals in which citizens have a choice as to whether they participate or not, the court may feel driven to infer an intention of Parliament to impose by penal sanctions a higher duty of care on those who choose to participate and to place upon them an obligation to take whatever measures may be necessary to prevent the prohibited act, without regard to those considerations of cost or business practicability which play a part in the determination of what would be required of them in order to fulfil the ordinary common law duty of care.
But such an inference is not lightly to be drawn, nor is there any room for it unless there is something that the person on whom the obligation is imposed can do directly or indirectly, by supervision or inspection, by improvement of his business methods or by exhorting those whom he may be expected to influence or control, which will promote the observance of the obligation. (emphasis added) The main reason why the House of Lords declined to hold Miss Sweet strictly liable for the fact that her tenants kept cannabis in the rooms which she let out to them was that there were no reasonable steps which she could have taken to stop them doing it or discover that they had: see in particular pp 150F H (Lord Reid), 154 5 (Lord Morris), 157B D (Lord Pearce).
Section 12A
The first point to be made about section 12A of the Theft Act is that it is in no sense a regulatory or quasi criminal enactment.
Aggravated vehicle taking is a serious crime.
Driving offences causing serious injury or damage are a source of growing public concern.
The aggravating factors which differentiate the section 12A offence from the basic offence expose the defendant to a maximum sentence of 14 years imprisonment, the same as for causing death by dangerous driving.
Although the death of the victim is not strictly speaking an element of the offence, the increased maximum sentence for cases where someone has been killed reflects the real stigma associated with it.
Even where the only damage is to property, the maximum sentence is two years.
The one respect in which section 12A imposes strict liability is that the offence may be committed not only by the driver but by anyone else who was party to the basic offence under section 12(1) and is in or in the immediate vicinity of the vehicle at the time of the dangerous driving, injury or damage.
That emerges unequivocally from the statutory language.
But it is important to note that it is also a rational response to the mischief of the enactment, which has close analogies to the principle underlying cases of strict liability identified by Lord Diplock in Sweet v Parsley.
The Act treats someone who has been party to the taking of a vehicle without authority as having control over it thereafter.
He is in a position to take positive steps to ensure that it is driven safely and not in a manner which causes personal injury or damage to property.
That is the rationale of the proviso that he must have been in or in the immediate vicinity of the vehicle at the time when the dangerous driving, injury or damage occurred.
His responsibility continues to be engaged while he is present.
However, it is one thing for the legislature to make a person who has taken a car without authority responsible for the fault of another person who drives it in his presence.
It is another thing altogether to make him responsible for personal injury or damage which could not have been prevented, because it occurred without fault or was entirely the fault of the victim.
That would be a sufficiently remarkable extension of the scope of the strict liability to require clear language, such as the draftsman has actually employed to impose liability on a taker who is not the driver.
There is no such language in section 12A.
Of the four aggravating circumstances identified in subsection (2), (a) expressly imports a requirement of fault (the car must have been driven dangerously), while (b), (c) and (d) contain nothing which expressly excludes such a requirement.
As Lord Reid explained in Sweet v Parsley, at p 149D E, this difference cannot itself be enough to make (b), (c) and (d) operate independent of fault.
On the contrary, in the case of (b) and (c), it is implicit in the requirement that the accident must have occurred owing to the driving of the vehicle, that there will have been something wrong with the driving.
As this court pointed out in Hughes, the driving cannot be said to have caused the accident if it It follows from the admitted absence of fault in the driving of the vehicle that merely explained how the vehicle came to be in the place where the accident occurred.
Application to the facts
the driving did not cause the death of Mr Davidson Hackett.
The Crown ran an alternative argument to the effect that excess of alcohol in the appellants blood at the time of the accident constituted sufficient fault to go to the jury.
This was said to be because if he had been sober he would not have been driving at all, [and] the fatal accident would not have happened.
To my mind this argument is misconceived.
The relevant fault is the fault in the driving which is necessary to establish the causal connection between the driving and the accident.
The fact that the appellant had excess alcohol in his blood establishes that he was guilty of the summary offence under section 5(1)(a) of the Road Traffic Act 1988, but not that this circumstance had anything to do with the accident.
On the agreed facts, it had none.
I need not therefore comment on the oddity of the suggestion that he was only driving his friend back to Exmouth because he had drunk too much and would not have driven if he had been sober.
Disposition
I would express the test applicable in this case in the same terms as Lord Hughes and Lord Toulson expressed it in Hughes at para 36.
There must be at least some act or omission in the control of the car, which involves some element of fault, whether amounting to careless/inconsiderate driving or not, and which contributes in some more than minimal way to the death.
For these reasons I would allow the appeal and answer the certified question no.
| UK-Abs | Under section 12A of the Theft Act 1968 the offence of aggravated vehicle taking is committed where a person has committed the basic offence of taking a vehicle without authority, and owing to the driving of the vehicle, an accident occurred by which injury was caused to any person (s12A (2) (b)).
If the injury is fatal, the offence carries a maximum of 14 years imprisonment.
On 23 June 2012, the appellant and another man called Marriott took a van belonging to Marriots employer, without the latters consent.
While driving it, he collided with a scooter on a bend in a narrow country lane.
The driver of the scooter was killed, and the appellant was later found to be over the drink drive limit and uninsured.
The appellant was charged jointly with Mr Marriott with aggravated vehicle taking contrary to s12A of the Theft Act 1968 and with causing the death of the scooter driver whilst uninsured contrary to s3ZB of the Road Traffic Act 1988.
The Crown accepted that there was no fault in the manner of the appellants driving.
A Not Guilty verdict was therefore directed on the Road Traffic Act count, in accordance with the decision in R v Hughes [2013] WLR 2461.
The judge held that fault also had to be proved in relation to the accident on the aggravated vehicle taking count; a decision which the Crown appealed.
The Court of Appeal allowed the appeal, relying on R v Marsh [1997] 1 Cr App R 67, in which it was held that no element of fault was required in the offence of aggravated vehicle taking.
But it certified a question of law of general public importance for consideration by the Supreme Court, namely Is an offence contrary to s12A (1) and 2(b) of the Theft Act 1968 committed when, following the basic offence and before recovery of the vehicle, the defendant drove the vehicle, and without fault in the manner of his driving the vehicle was involved in an accident which caused injury to a person.
The Supreme Court unanimously allows the appeal, holding that the driving must have been at fault for a person to be convicted of aggravated vehicle taking under s12A of the Theft Act 1968.
Lord Sumption gives the judgment.
The reasoning in R v Hughes cannot be distinguished, because the offences under s12A(2)(b) of the Theft Act 1968 and s3ZB of the Road Traffic Act 1988 are both drafted in terms which require a direct causal connection between the driving and the injury. [20 22; 30].
Strict liability is typically imposed where the enactment is regulatory or quasi criminal.
Aggravated vehicle taking under s12A is neither: it is a serious crime, exposing defendants to the possibility of much longer maximum sentences.
It imposes strict liability only to the extent that anyone who was party to the taking of the vehicle (and in the immediate vicinity at the time of the injury) commits the offence, whether or not he was driving at the time.
The appellants driving explained how the vehicle came to be in the place where the accident occurred, but cannot be said to have caused it [23 29].
The test is as set out in R v Hughes: there must be at least some act or omission in the control of the car which involves some element of fault, whether amounting to careless/inconsiderate driving or not, and which contributes in some more than minimal way to the death [30; 32 3].
This summary is provided to assist in understanding the Courts decision.
It does not form part of the reasons for the decision.
The full judgment of the Court is the only authoritative document.
Judgments are public documents and are available at: http://supremecourt.uk/decided cases/index.html
|
This appeal concerns a tenants break clause in a lease.
The lease had been granted for a term expiring on 2 February 2018, and, in the normal way, the rent was payable in advance on the usual quarter days.
The tenant exercised its right under the break clause to determine the lease on 24 January 2012, after it had paid the full quarters rent due on 25 December 2011.
The issue is whether it can recover from the landlords the apportioned rent in respect of the period from 24 January to 24 March 2012.
The resolution of that issue turns on the interpretation of the lease, and it requires the court to consider the principles by reference to which a term is to be implied into a contract.
The Contractual documentation
The defendants were the landlords and the claimant was the tenant under four sub underleases of different floors in a building known as The Point (the Building) in Paddington Basin, London W2.
Each sub underlease was set out in a Schedule to a deed made on 15 January 2010, which varied or restated the provisions of a previous sub underlease which had been granted to the claimant in 2006.
The origin of most of the provisions of each of the four sub underleases granted in 2010 is to be found in the four sub underleases granted in 2006.
In this judgment, it is only necessary to refer to one of the four deeds (the Deed), the sub underlease it granted (the Lease) and the sub underlease (the earlier Lease) it replaced, as any differences between the four Deeds, the four 2010 sub underleases and the four 2006 sub underleases are irrelevant for present purposes.
The Lease demised the third floor of the Building (the Premises) together with the use of two car parking spaces to the claimant for a term of years starting on 25 January 2006 and ending on 2 February 2018.
The reddendum reserved a rent consisting of (a) the Basic Rent and (b) the Car Park Licence Fee.
The Basic Rent was 919,800 plus VAT per annum, which was to be reviewed in accordance with Schedule 4, which provided for reviews on certain specified review dates.
The Basic Rent was to be paid yearly and proportionately for any part of a year by equal quarterly instalments in advance on the [usual] quarter days.
As at 25 December 2011, the Basic Rent was 1,236,689 per annum plus VAT.
The Car Park Licence Fee was 6,000 per annum, which was to be paid by equal quarterly instalments in advance on the [usual] quarter days.
The Lease was validly excluded from the ambit of sections 24 28 of the Landlord and Tenant Act 1954, which meant that, if not determined before 2 February 2018, the Lease would end on that date.
Clause 8.1 of the Lease entitled the claimant (so long as it remained the tenant) to determine the Lease, by giving the landlords six months prior written notice (a break notice) to take effect on the first break date, namely 24 January 2012, and clause 8.2 provided for a second break date of 24 January 2016.
Clause 8.3 stipulated that a break notice would only have effect if on the break date there are no arrears of Basic Rent or VAT on Basic Rent.
Clause 8.4 provided that a break notice would only take effect on the first break date if on or prior to the first break date the tenant pays to the landlord the sum of 919,800 plus VAT.
Clause 8.5 was concerned with consequential conveyancing machinery.
Clause 8.6 entitled the landlords to waive compliance with all or any of the conditions set out in clause 8.3.
Clause 8.7 stated that if the provisions of this clause are complied with the Lease should end on the break date without prejudice to the rights of either party in respect of any previous breach by the other.
A very similar clause to clause 8 was contained in the earlier Lease: hence the choice of break dates, which were on anniversaries of the date of grant of the earlier Lease.
Schedule 5 to the Lease dealt with insurance.
In brief, the landlords covenanted to insure the Building against specified risks, and the tenant was obliged to pay to the landlord a fair proportion [assessed by reference to the ratio of the floor area of the Premises to that of the Building] of every premium payable by the landlord for insuring the Building .
These payments were reserved as rent.
Schedule 7 to the Lease was concerned with the services which the landlord covenanted to provide to the occupiers of the Building, and the service charge which the tenant was to pay in return.
The service charge, which was reserved as rent, was to be a fair proportion (assessed in a similar way to the insurance rent) of the cost to the landlords of providing the services.
This was initially to be based on an annual estimate, which was to be paid on account in advance by equal instalments on the usual quarter days.
Paragraph 4.5 of the Schedule provided for payment by the tenant of a balancing sum in ten working days if the actual expenditure was greater than the payment on account, and paragraph 4.6 entitled the tenant to be credited with any overpayment against the next payment on account, if the expenditure was less than the payment on account.
As is almost invariably the case with modern commercial leases, the Lease was a very full and detailed document.
It ran to some 70 pages, including 15 pages of tenants covenants and nine pages of landlords covenants, and it included, in clause 5, a right for the landlords to forfeit the Lease for non payment of rent or other breach of covenant by the tenant.
The provisions for review of the Basic Rent in Schedule 4 ran to four pages, and required a periodic review of the rent to the then current market rental value of the Premises as at certain specified review dates.
Paragraph 8 of Schedule 4 stated that if the reviewed rent was not determined by a review date, rent at the preceding rate is to be payable and, once the reviewed rent is determined, a balancing figure is payable by the tenant to the landlords.
It is not necessary to say much about the Deed, save that clause 4 provided that, if the tenant did not exercise its right to break the Lease (and the other three sub underleases) on 24 January 2012, the landlords would pay the tenant 150,000 by crediting it against the tenants liability for the rent due on the following quarter day, 25 March 2012.
The factual background
On 7 July 2011, pursuant to clause 8.1, the claimant tenant served a break notice on the defendant landlords to determine the Lease on 24 January 2012.
On 19 July 2011, the defendants invoiced the claimant for its share of the insurance rent premium under Schedule 5 (the insurance rent) in respect of the year from 1 July 2011, in the sum of 14,972.85 plus VAT, which the claimant paid two weeks later.
Shortly before 25 December 2011, the claimant paid the defendants the rent due on that date in respect of the quarter from that date up to and including 24 March 2012, the day before the next quarter day, thereby ensuring that clause 8.3 of the Lease was satisfied.
This rent consisted of the Basic Rent (as reviewed) of 309,172.25 plus VAT, and the Car Park Licence Fee of 1,500.
On or about 18 January 2012, the claimant paid the defendants 919,800 plus VAT, pursuant to clause 8.4 of the Lease.
As a result of these payments, the break notice served on 7 July 2011 was effective, and the Lease determined on 24 January 2012.
On 3 September 2012, more than eight months after the expiry of the Lease, the defendants served on the claimant a service charge certificate in respect of the services provided in the calendar year 2011.
This showed that the cost of the services had been less than the estimate, and the defendants credited the claimant with its excess payment.
Although there were similar issues about the Car Park Licence Fee, the insurance rent and the service charge, the principal issue between the parties at trial was whether the claimant was entitled to be refunded a sum equal to the apportioned Basic Rent in respect of the period 24 January 2012 (when the Lease expired) and 25 March 2012, given that the claimant had paid the Basic Rent (in the sum of 309,172.25 plus VAT) on 25 December 2011 in respect of that period even though the Lease had expired on 24 January 2012.
In a carefully reasoned judgment, Morgan J held that the claimant was so entitled [2013] EWHC 1279 (Ch).
For reasons given by Arden LJ (with whom Jackson and Fulford LJJ agreed), the Court of Appeal allowed the defendants appeal [2014] EWCA Civ 603.
The claimant now appeals to this court, contending, as it did in the courts below, that there should be implied into the Lease a term that, if the tenant exercises the right to break under clause 8 and the Lease consequently determines on 24 January, the landlords ought to pay back a proportion of the Basic Rent paid by the tenant due on the immediately preceding 25 December (the apportioned sum), being apportioned in respect of the period 24 January up to and including the ensuing 24 March 2012.
A similar issue arises in relation to the Car Park Licence Fee and the insurance rent, which I shall deal with at the end of this judgment.
Implied terms in contracts
It is rightly accepted on behalf of the claimant that there is no provision in the Lease which expressly obliges the landlords to pay the apportioned sum to the tenant.
Accordingly, it follows that in order to succeed the claimant has to establish that such an obligation must be implied into the Lease.
As Lady Hale pointed out in Geys v Socit Gnrale [2013] 1 AC 523, para 55, there are two types of contractual implied term.
The first, with which this case is concerned, is a term which is implied into a particular contract, in the light of the express terms, commercial common sense, and the facts known to both parties at the time the contract was made.
The second type of implied terms arises because, unless such a term is expressly excluded, the law (sometimes by statute, sometimes through the common law) effectively imposes certain terms into certain classes of relationship.
There have, of course, been many judicial observations as to the nature of the requirements which have to be satisfied before a term can be implied into a detailed commercial contract.
They include three classic statements, which have been frequently quoted in law books and judgments.
In The Moorcock (1889) 14 PD 64, 68, Bowen LJ observed that in all the cases where a term had been implied, it will be found that the law is raising an implication from the presumed intention of the parties with the object of giving the transaction such efficacy as both parties must have intended that at all events it should have.
In Reigate v Union Manufacturing Co (Ramsbottom) Ltd [1918] 1 KB 592, 605, Scrutton LJ said that [a] term can only be implied if it is necessary in the business sense to give efficacy to the contract.
He added that a term would only be implied if it is such a term that it can confidently be said that if at the time the contract was being negotiated the parties had been asked what would happen in a certain event, they would both have replied Of course, so and so will happen; we did not trouble to say that; it is too clear.
And in Shirlaw v Southern Foundries (1926) Ltd [1939] 2 KB 206, 227, MacKinnon LJ observed that, [p]rima facie that which in any contract is left to be implied and need not be expressed is something so obvious that it goes without saying.
Reflecting what Scrutton LJ had said 20 years earlier, MacKinnon LJ also famously added that a term would only be implied if, while the parties were making their bargain, an officious bystander were to suggest some express provision for it in their agreement, they would testily suppress him with a common Oh, of course!.
Support for the notion that a term will only be implied if it satisfies the test of business necessity is to be found in a number of observations made in the House of Lords.
Notable examples included Lord Pearson (with whom Lord Guest and Lord Diplock agreed) in Trollope & Colls Ltd v North West Metropolitan Regional Hospital Board [1973] 1 WLR 601, 609, and Lord Wilberforce, Lord Cross, Lord Salmon and Lord Edmund Davies in Liverpool City Council v Irwin [1977] AC 239, 254, 258, 262 and 266 respectively.
More recently, the test of necessary to give business efficacy to the contract in issue was mentioned by Lady Hale in Geys at para 55 and by Lord Carnwath in Arnold v Britton [2015] 2 WLR 1593, para 112.
In the Privy Council case of BP Refinery (Westernport) Pty Ltd v President, Councillors and Ratepayers of the Shire of Hastings (1977) 52 ALJR 20, 26, Lord Simon (speaking for the majority, which included Viscount Dilhorne and Lord Keith) said that: [F]or a term to be implied, the following conditions (which may overlap) must be satisfied: (1) it must be reasonable and equitable; (2) it must be necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it; (3) it must be so obvious that it goes without saying; (4) it must be capable of clear expression; (5) it must not contradict any express term of the contract.
In Philips Electronique Grand Public SA v British Sky Broadcasting Ltd [1995] EMLR 472, 481, Sir Thomas Bingham MR set out Lord Simons formulation, and described it as a summary which distil[led] the essence of much learning on implied terms but whose simplicity could be almost misleading.
Sir Thomas then explained that it was difficult to infer with confidence what the parties must have intended when they have entered into a lengthy and carefully drafted contract but have omitted to make provision for the matter in issue, because it may well be doubtful whether the omission was the result of the parties oversight or of their deliberate decision, or indeed the parties might suspect that they are unlikely to agree on what is to happen in a certain eventuality and may well choose to leave the matter uncovered in their contract in the hope that the eventuality will not occur.
Sir Thomas went on to say this at p 482: 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. [He then quoted the observations of Scrutton LJ in Reigate, and continued] [I]t 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
Sir Thomass approach in Philips was consistent with his reasoning, as Bingham LJ in the earlier case The APJ Priti [1987] 2 Lloyds Rep 37, 42, where he rejected the argument that a warranty, to the effect that the port declared was prospectively safe, could be implied into a voyage charter party.
His reasons for rejecting the implication were because the omission of an express warranty may well have been deliberate, because such an implied term is not necessary for the business efficacy of the charter and because such an implied term would at best lie uneasily beside the express terms of the charter.
In my judgment, the judicial observations so far considered represent a clear, consistent and principled approach.
It could be dangerous to reformulate the principles, but I would add six comments on the summary given by Lord Simon in BP Refinery as extended by Sir Thomas Bingham in Philips and exemplified in The APJ Priti.
First, in Equitable Life Assurance Society v Hyman [2002] 1 AC 408, 459, Lord Steyn rightly observed that the implication of a term was not critically dependent on proof of an actual intention of the parties when negotiating the contract.
If one approaches the question by reference to what the parties would have agreed, one is not strictly concerned with the hypothetical answer of the actual parties, but with that of notional reasonable people in the position of the parties at the time at which they were contracting.
Secondly, a term should not be implied into a detailed commercial contract merely because it appears fair or merely because one considers that the parties would have agreed it if it had been suggested to them.
Those are necessary but not sufficient grounds for including a term.
However, and thirdly, it is questionable whether Lord Simons first requirement, reasonableness and equitableness, will usually, if ever, add anything: if a term satisfies the other requirements, it is hard to think that it would not be reasonable and equitable.
Fourthly, as Lord Hoffmann I think suggested in Attorney General of Belize v Belize Telecom Ltd [2009] 1 WLR 1988, para 27, although Lord Simons requirements are otherwise cumulative, I would accept that business necessity and obviousness, his second and third requirements, can be alternatives in the sense that only one of them needs to be satisfied, although I suspect that in practice it would be a rare case where only one of those two requirements would be satisfied.
Fifthly, if one approaches the issue by reference to the officious bystander, it is vital to formulate the question to be posed by [him] with the utmost care, to quote from Lewison, The Interpretation of Contracts 5th ed (2011), para 6.09.
Sixthly, necessity for business efficacy involves a value judgment.
It is rightly common ground on this appeal that the test is not one of absolute necessity, not least because the necessity is judged by reference to business efficacy.
It may well be that a more helpful way of putting Lord Simons second requirement is, as suggested by Lord Sumption in argument, that a term can only be implied if, without the term, the contract would lack commercial or practical coherence.
Before leaving this issue of general principle, it is appropriate to refer a little further to Belize Telecom, where Lord Hoffmann suggested that the process of implying terms into a contract was part of the exercise of the construction, or interpretation, of the contract.
In summary, he said at para 21 that [t]here is only one question: is that what the instrument, read as a whole against the relevant background, would reasonably be understood to mean?.
There are two points to be made about that observation.
First, the notion that a term will be implied if a reasonable reader of the contract, knowing all its provisions and the surrounding circumstances, would understand it to be implied is quite acceptable, provided that (i) the reasonable reader is treated as reading the contract at the time it was made and (ii) he would consider the term to be so obvious as to go without saying or to be necessary for business efficacy. (The difference between what the reasonable reader would understand and what the parties, acting reasonably, would agree, appears to me to be a notional distinction without a practical difference.) The first proviso emphasises that the question whether a term is implied is to be judged at the date the contract is made.
The second proviso is important because otherwise Lord Hoffmanns formulation may be interpreted as suggesting that reasonableness is a sufficient ground for implying a term. (For the same reason, it would be wrong to treat Lord Steyns statement in Equitable Life Assurance Society v Hyman [2002] 1 AC 408, 459 that a term will be implied if it is essential to give effect to the reasonable expectations of the parties as diluting the test of necessity.
That is clear from what Lord Steyn said earlier on the same page, namely that [t]he legal test for the implication of a term is strict necessity, which he described as a stringent test.)
It is necessary to emphasise that there has been no dilution of the requirements which have to be satisfied before a term will be implied, because it is apparent that Belize Telecom has been interpreted by both academic lawyers and judges as having changed the law.
Examples of academic articles include C Peters The implication of terms in fact [2009] CLJ 513, P Davies, Recent developments in the Law of Implied Terms [2010] LMCLQ 140, J McCaughran Implied terms: the journey of the man on the Clapham Omnibus [2011] CLJ 607, and JW Carter and W Courtney, Belize Telecom: a reply to Professor McLauchlan [2015] LMCLQ 245).
And in Foo Jong Peng v Phua Kiah Mai [2012] 4 SLR 1267, paras 34 36, the Singapore Court of Appeal refused to follow the reasoning in Belize at least in so far as it suggest[ed] that the traditional business efficacy and officious bystander tests are not central to the implication of terms (reasoning which was followed in Sembcorp Marine Ltd v PPL Holdings Pte Ltd [2013] SGCA 43).
The Singapore Court of Appeal were in my view right to hold that the law governing the circumstances in which a term will be implied into a contract remains unchanged following Belize Telecom.
The second point to be made about what was said in Belize Telecom concerns the suggestion that the process of implying a term is part of the exercise of interpretation.
Although some support may arguably be found for such a view in Trollope at p 609, the first clear expression of that view to which we were referred was in Banque Bruxelles Lambert SA v Eagle Star Insurance Co Ltd [1997] AC 191, 212, where Lord Hoffmann suggested that the issue of whether to imply a term into a contract was one of construction of the agreement as a whole in its commercial setting.
Lord Steyn quoted this passage with approval in Equitable Life at p 459, and, as just mentioned, Lord Hoffmann took this proposition further in Belize Telecom, paras 17 27.
Thus, at para 18, he said that the implication of the term is not an addition to the instrument.
It only spells out what the instrument means; and at para 23, he referred to The danger in detaching the phrase necessary to give business efficacy from the basic process of construction.
Whether or not one agrees with that approach as a matter of principle must depend on what precisely one understands by the word construction.
I accept that both (i) construing the words which the parties have used in their contract and (ii) implying terms into the contract, involve determining the scope and meaning of the contract.
However, Lord Hoffmanns analysis in Belize Telecom could obscure the fact that construing the words used and implying additional words are different processes governed by different rules.
Of course, it is fair to say that the factors to be taken into account on an issue of construction, namely the words used in the contract, the surrounding circumstances known to both parties at the time of the contract, commercial common sense, and the reasonable reader or reasonable parties, are also taken into account on an issue of implication.
However, that does not mean that the exercise of implication should be properly classified as part of the exercise of interpretation, let alone that it should be carried out at the same time as interpretation.
When one is implying a term or a phrase, one is not construing words, as the words to be implied are ex hypothesi not there to be construed; and to speak of construing the contract as a whole, including the implied terms, is not helpful, not least because it begs the question as to what construction actually means in this context.
In most, possibly all, disputes about whether a term should be implied into a contract, it is only after the process of construing the express words is complete that the issue of an implied term falls to be considered.
Until one has decided what the parties have expressly agreed, it is difficult to see how one can set about deciding whether a term should be implied and if so what term.
This appeal is just such a case.
Further, given that it is a cardinal rule that no term can be implied into a contract if it contradicts an express term, it would seem logically to follow that, until the express terms of a contract have been construed, it is, at least normally, not sensibly possible to decide whether a further term should be implied.
Having said that, I accept Lord Carnwaths point in para 71 to the extent that in some cases it could conceivably be appropriate to reconsider the interpretation of the express terms of a contract once one has decided whether to imply a term, but, even if that is right, it does not alter the fact that the express terms of a contract must be interpreted before one can consider any question of implication.
In any event, the process of implication involves a rather different exercise from that of construction.
As Sir Thomas Bingham trenchantly explained in Philips at p 481: 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 implication of contract terms involves a different and altogether more ambitious undertaking: the interpolation of terms to deal with matters for which, ex hypothesi, the parties themselves have made no provision.
It is because the implication of terms is so potentially intrusive that the law imposes strict constraints on the exercise of this extraordinary power.
It is of some interest to see how implication was dealt with in the recent case in this court of Aberdeen City Council v Stewart Milne Group Ltd 2012 SLT 205.
At para 20, Lord Hope described the implication of a term into the contract in that case as the product of the way I would interpret this contract.
And at para 33, Lord Clarke said that the point at issue should be resolved by holding that such a term should be implied rather than by a process of interpretation.
He added that [t]he result is of course the same.
It is true that Belize Telecom was a unanimous decision of the Judicial Committee of the Privy Council and that the judgment was given by Lord Hoffmann, whose contributions in so many areas of law have been outstanding.
However, it is apparent that Lord Hoffmanns observations in Belize Telecom, paras 17 27 are open to more than one interpretation on the two points identified in paras 23 24 and 25 30 above, and that some of those interpretations are wrong in law.
In those circumstances, the right course for us to take is to say that those observations should henceforth be treated as a characteristically inspired discussion rather than authoritative guidance on the law of implied terms.
Having made those general remarks about implied terms, I turn to consider the specific issue on this appeal, namely the claimants contention that it is entitled to claim the apportioned sum from the defendants by virtue of an implied term to that effect in the Lease.
I shall start by focussing on the terms of the Lease and the Deed, and then turn to the broader picture.
The arguments based on the provisions of the Lease and the Deed
Each quarters rent paid in advance under a modern commercial lease, such as the Lease in this case, can fairly be said to be referable to the tenants use and enjoyment of the demised premises for the forthcoming quarter.
Accordingly, the sum of 309,172.25 plus VAT due on 25 December 2011, and paid shortly before that date, can fairly be said, at least in general terms, to have been envisaged as being the tenants quid pro quo for being able to occupy and enjoy the Premises up to 25 March 2012.
There is therefore real force in the contention that, if the defendants can retain the apportioned sum, it would be unfairly prejudicial to the claimant and a pure windfall for the defendants.
A provision that the defendant landlords should reimburse the claimant tenant the apportioned sum would thus seem to be reasonable and equitable.
The claimants case is reinforced by the fact that, as explained in para 4 above, the two break dates of 24 January 2012 and 2016 owe their origin to the date of grant of the earlier Lease, and that date was dependent on the date on which the head landlord gave its consent to the grant of the earlier Lease.
Thus, it can fairly be said that the parties had agreed the terms of the break clause, not knowing whether the break dates would be shortly after, shortly before or even on, a quarter day.
This supports the notion that they are unlikely to have intended that the apportioned rent was intended to be retained by the landlords as part of the compensation for the tenants operation of the break clause.
This point is mildly weakened by the fact that the parties could have varied the break dates, or the terms of clause 8, when they came to renegotiate in 2010 the terms originally agreed in the 2006 Lease, but it still has force.
A further point on which the claimant relies arises from the fact that the Basic Rent is stipulated in the Lease to be paid yearly and proportionately for any part of a year by equal quarterly instalments in advance (emphasis added).
It is common ground that the effect of the italicised words is that, if the Lease had run its full course to 2 February 2018, the tenant would only have had to pay an apportioned part of the Basic Rent due on 25 December 2017, because, as at that date, the parties would have known that the Lease would expire before the next quarter day, 25 March 2018.
In the present case, it is common ground that, because the claimant had not paid the sum of 919,800 plus VAT due under clause 8.4 before 25 December 2011, it would not have been known as at that date whether the Lease would come to an end before 25 March 2012, and the tenant therefore had to pay the quarters rent in full: it only became clear that the Lease would determine on 24 January 2012 when the claimant paid the 919,800 plus VAT on 18 January.
However, if the claimant had paid the 919,800 plus VAT before 25 December 2011, the claimant argues (rightly in my view) that it would have been clear on 25 December 2011 that the Lease would end on 24 January 2012, so that the claimant would only have had to pay an appropriate proportion of the Basic Rent on 25 December 2011.
The claimant accordingly contends that commercial common sense mandates that it should be in the same financial position whether it pays the 919,800 plus VAT before 25 December 2011 or chooses to wait, as it is entitled to, until after 25 December 2011 to pay that sum. (I might add that this point is somewhat reinforced when one considers what would have happened if the tenant had waited till the second break date to determine the Lease: because clause 8.4 only applies to the first break date, the tenant would have been entitled to pay only an apportioned part of the quarters Basic Rent on 25 December 2015.)
The claimant raised other points which, to my mind, had less force.
Thus, the fact that the Basic Rent was payable yearly and proportionately for any part of a year was said of itself to support the implied term for which the claimant contends.
Given that the italicised words did not justify the claimant paying only an apportioned part of the rent due on 25 December 2011 on the facts of this case, those words appear if anything to undermine the claimants case: the fact that the Lease expressly provided that only part of a quarters rent was to be paid in some circumstances could fairly be said to undermine the notion that one should imply a term which has a similar effect in other circumstances.
There is considerable force in the points discussed in paras 33 35 above, and between them they help make out a powerful case for contending that it is necessary for business efficacy that the term contended for by the claimant should be implied into the Lease.
However, it is necessary to consider the countervailing arguments.
The defendants rely on the fact that the Lease is a very detailed document, which had been entered into between two substantial and experienced parties, and had been negotiated and drafted by expert solicitors.
In particular, the Lease makes provision for a large number of contingencies.
Accordingly, it is said, with obvious justification, that the observations of Sir Thomas Bingham in Philips Electronique quoted in para 19 above are particularly in point.
More specifically, the defendants refer to the express provisions relating to the payment of money in connection with clause 8.
First, there is the payment of 919,800 plus VAT under clause 8.4.
It is said that, while it involves no logical inconsistency, it is somewhat peculiar to imply into the Lease a term requiring the landlords to pay the tenant around 200,000 plus VAT on 25 January 2012, when the Lease has an express term requiring the tenant to pay the landlords around 900,000 plus VAT by 24 January 2012: the implied term lie[s] uneasily with the express terms to use Bingham LJs expression in The APJ Priti.
Secondly, there is the condition in clause 8.3 which required the tenant to have paid all rent due on 25 March 2012 if it wished to exercise the right to break.
Given that the effect of that provision is that the tenant must have paid rent for the whole quarter ending on 25 March 2012, it can again be said to be somewhat peculiar to imply a term requiring the landlord to repay the tenant most of that sum.
Clauses 8.3 and 8.4 of the Lease, together with clause 4 of the Deed, which provided that the tenant would be paid 150,000 if it did not exercise its right to break, show how carefully and fully the parties considered and identified their rights against each other in relation to clause 8 of the Lease.
There is force in the argument that these three provisions show that the parties had directed their minds to the specific question of what payments were to be made between them in connection with clause 8, and in particular what sums were to be paid if the right to break either was implemented or was not implemented, and that this renders it inappropriate for the court to step in and fill in what is no more than an arguable lacuna.
There is, in my view, less force in the defendants reliance on paragraph 8 of Schedule 4 to the Lease (discussed in para 7 above).
I see the logic of the argument that the fact that the rent review provisions expressly dealt with a similar point is an indication that the parties must have intentionally excluded any reference to such a point in clause 8.
However, the rent review provisions were no doubt taken from a previous precedent, and, while careful thought would have been given to their precise terms, a provision such as paragraph 8 of Schedule 4 would have been in any sophisticated modern rent review clause.
Having said that, I suppose that it might be said that the defendants could make something of the fact that such a provision is not normally included in a standard break clause, but I think that is too remote from the issue in this case to be of any help, and it is, sensibly, not a point which was developed, or even raised, in argument.
The general law on apportionment of rent payable in advance
The arguments discussed so far have focussed on the terms of the Lease (and the Deed) and their commercial effect.
However, it is also necessary to consider the established legal background against which the Lease was entered into, and in particular the general attitude of the law to the apportionability of rent payable in advance.
It has long been well established that rent, whether payable in arrear or advance, is not apportionable in time in common law.
Accordingly, if a lease under which the rent is payable in arrear was forfeited or came to an end prematurely for some other reason, the landlord loses the right to recover the rent due on the rent day following that determination, at least according to the common law see eg William Cluns Case (1613) 10 Co Rep 127a.
Parliament sought to remedy this initially in a limited way through the now repealed section 15 of the Distress for Rent Act 1737 and the Apportionment Act 1834, and then more comprehensively through the Apportionment Act 1870, which is still in force.
Section 2 of the 1870 Act prospectively provides that All rents, annuities, dividends, and other periodical payments in the nature of income should like interest on money lent, be considered as accruing from day to day, and shall be apportionable in respect of time accordingly.
There is no doubt that section 2 applies to rent payable in arrear, as was held by Malins V C in Capron v Capron (1874) LR 17 Eq 288.
In Ellis v Rowbotham [1900] 1 QB 740, the Court of Appeal held that the 1870 Act did not apply to rent payable in advance and, ever since then, it has been assumed that this was the law.
At the invitation of the court, it was argued on behalf of the claimant that Ellis should be overruled.
I am satisfied that it should be approved.
In their brief reasoned judgments, both AL Smith and Romer LJJ explained that (i) the mischief that the 1870 Act was concerned to correct related solely to rent in arrear, and (ii) rent paid in advance could not be said to be accruing from day to day, unlike rent in arrear.
There is no reason to doubt the first reason.
As to the second reason, it has obvious force if one treats the statutory reference to a sum accruing as a liability to pay the sum accruing.
The conclusion reached in Ellis is also supported by the reference to interest on money lent, because interest has virtually invariably been payable in arrear.
In addition, sections 3 and 4 of the 1870 Act, which are consequential provisions expressed to apply to The apportioned part of any such rent, annuity, dividend, or other payment (emphasis added), can only apply to rent or other payments payable in arrear, and not in advance, as they deal with the date when such rent or other payments are to be treated as having become due after the relevant event (ie, in the case of rent, determination of the lease).
Even if we were considering the effect of section 2 in the absence of the longstanding decision in Ellis, I would have concluded that the section did not apply to rent paid in advance, essentially for the reasons summarised in para 44 above.
However, like Collins LJ who concurred in the conclusion reached in Ellis, I would not have regarded the issue as altogether free from doubt, in the light of the very wide words of the section (All rents, annuities etc).
As it is, the conclusion is reinforced by the fact that Ellis has stood for well over 100 years, and has been followed and applied in a number of first instance and Court of Appeal decisions without any expressions of doubt as to its correctness see eg Hildebrand v Lewis [1941] 2 KB 135, where at p 139 the Court of Appeal, citing Ellis in support, described it as well settled that where rent is payable in advance the Apportionment Act does not apply.
I find it difficult to accept that this court could properly rule that a statute had a meaning which we thought was simply wrong, however long that meaning had been assumed to be correct.
Nonetheless, I consider that, in a case where we had real doubt as to the correct meaning of a statute, we should favour the meaning which has been generally assumed to be correct for a long period, especially when the basis of that assumption is a judicial decision.
In this case, however, it is not necessary to go even that far, because, as just explained, I consider that the conclusion reached by the Court of Appeal 115 years ago in Ellis was correct.
It follows from this conclusion that neither the common law nor statute apportions rent in advance on a time basis.
And this was, correctly, generally understood to be the position when the Deed and the Lease were negotiated and executed.
The claimants argument, by contrast, is that a term should be implied into the Lease that the Basic Rent payable in advance on 25 December 2011 should effectively be apportioned on a time basis.
The fact that the Lease was negotiated against the background of a clear, general (and correct) understanding that rent payable in advance was not apportionable in time, raises a real problem for the argument that a term can be implied into the Lease that it should be effectively apportionable if the Lease is prematurely determined in accordance with its terms.
The point can be taken a little further.
It is a very well established rule that a landlord who forfeits a lease under which the rent is payable in advance is entitled to payment of the whole of the rent which fell due on the quarter day preceding the forfeiture.
The rule was well described by Lord Denning MR in Canas Property Co Ltd v KL Television Services Ltd [1970] 2 QB 433, 442, where he addressed a case where the rent was payable in advance on the usual quarter days and the landlord forfeited the lease by serving a writ (now a claim form) for instance on 25 April.
He said, citing Ellis, that, given that the rent is payable in advance, the writ should claim for the whole quarters rent due in advance on March 25 and mesne profits from June 24 to the date of delivery of possession. (It may well be that the mesne profits should run from the date of service of the writ, but nothing hangs on that for present purposes.) Lord Denning contrasted the position where the landlord forfeited a lease under which the rent was payable in arrear, where, he said, the writ should claim rent at the rate of from March 25 to the date of service of the writ and mesne profits thereafter.
Lord Dennings approach was followed and applied by the Court of Appeal in Capital and City Holdings Ltd v Dean Warburg Ltd (1988) 58 P & CR 346.
Thus, it is clear that, where a lease provides for payment of rent in advance on the usual quarter days, and the landlord forfeits the lease during the currency of a quarter, he is entitled to retain the whole of the rent due on the quarter day immediately before the forfeiture if it has been paid, and, if it has not been paid, he is entitled to recover and retain the whole of that rent.
Conclusions
If one concentrates on the factors identified in paras 33 35 above, there appears to be a strong case for the implied term for which Mr Fetherstonhaugh QC powerfully argued on behalf of the claimant.
The point made in para 33 supports the contention that, not merely would an implied term be fair, but that clause 8 could be said to work rather unfairly without the implied term.
The point made in para 35, supported by what is said in para 34, provides real support for the proposition that, without the implied term, clause 8 would operate in a rather capricious way.
On the other hand, as Mr Dowding QC rightly said on behalf of the defendants, the factors identified in paras 38 40 above chime with the warnings given by Sir Thomas Bingham in Philips and his reasons for rejecting an implied warranty in APJ Priti.
The Lease is a very full and carefully considered contract, which includes express obligations of the same nature as the proposed implied term, namely financial liabilities in connection with the tenants right to break, and that term would lie somewhat uneasily with some of those provisions.
There is little point in resolving the hypothetical question whether, in the absence of the points discussed in paras 43 49 above, I would have concluded that a term should be implied as the claimant contends.
Even if I would have reached that conclusion, I consider that it could not have stood once one faced up to the clear and consistent line of judicial decisions which formed the backcloth against which the terms of the Lease, and in particular the provisions of clause 8, were agreed.
Save in a very clear case indeed, it would be wrong to attribute to a landlord and a tenant, particularly when they have entered into a full and professionally drafted lease, an intention that the tenant should receive an apportioned part of the rent payable and paid in advance, when the non apportionability of such rent has been so long and clearly established.
Given that it is so clear that the effect of the case law is that rent payable and paid in advance can be retained by the landlord, save in very exceptional circumstances (eg where the contract could not work or would lead to an absurdity) express words would be needed before it would be right to imply a term to the contrary.
I accept that refusing to accede to the proposed implied term in this case can lead to the operation of clause 8 having the somewhat curious effect discussed in para 35 above.
However, while the difference in result between the tenant paying the 919,800 plus VAT before or after 25 December 2011 can fairly be said to be capricious or anomalous, it does not begin to justify a suggestion that the contract is unworkable.
Indeed, the result cannot be said to be commercially or otherwise absurd, particularly as it is entirely up to the tenant as to when that sum is paid.
Further, the fact that rent payable in advance is not apportionable can always lead to potential unfairness.
For instance, a landlord with a right to forfeit on 23 March for a continuing breach of covenant could wait for three days to re enter, in order to be able to receive the whole of the rent due in respect of the quarter to 24 June.
It is instructive to see how Morgan J, who accepted the claimants case that there was an implied term, approached the question of apportionment of rent in the event of a forfeiture.
At para 38 of his judgment, after referring to Ellis, he said that he consider[ed] that the parties are to be taken to have contracted against the background of the established law, and he would not have been prepared to imply such a term in a forfeiture.
However, he held that such a term could be implied where the Lease determined under clause 8, but not where it determined as a result of a forfeiture, because (i) at the date of the Lease , there was no established law to the contrary in the case of a tenants break clause, whereas there was in relation to forfeiture, and (ii) it is significant that the parties agreed that the lessee could only break the Lease if it paid a sum equivalent to one years rent to compensate the lessor for the fact that it is losing its income stream from the break date.
I am unconvinced by either of those reasons.
The first reason effectively ignores the point that the reasoning in Ellis, Canas and Capital and City applies equally to a case where a lease determines by forfeiture as it does to a case where it determines by exercise of a right to break.
The second distinction appears rather to point the opposite way, as explained in para 39 above.
The fact that the tenant has to make a payment of over 900,000 plus VAT by 24 January 2012 in order to exercise the right to break, lies uneasily with the notion that one should imply a term that the tenant should be paid around 200,000 plus VAT the following day, but no such problem exists with implying such a term on a forfeiture.
Another reason was advanced before us, namely that forfeiture normally arises because of some failure on the part of the tenant.
I agree that it does, but not always; more importantly, I do not see that as a justification for rejecting an implied term in relation to a forfeiture if such a term is to be implied in relation to the exercise of a break clause.
Further, given that the exercise of the break clause is in the hands of the tenant, and the exercise of a right to forfeit is in the hands of the landlords, any argument for an implied term based on fairness is stronger in relation to forfeiture than in relation to clause 8.
Once one discards the two reasons given by the judge for reaching a different conclusion as to an implied term on the exercise of the break clause from that which would apply on a forfeiture, it seems to me that the logic of the analysis of Morgan J, who has considerable experience in this field, is that the claimants case should fail in relation to the Basic Rent, as the Court of Appeal concluded.
Finally, I turn to the Car Park Licence Fee and the insurance rent.
The reasons for rejecting the appellants argument in relation to the Basic Rent apply equally to the Car Park Licence Fee: indeed, the position is a fortiori as the reservation of the Car Park Licence Fee includes no words such as and proportionately for any part of a year, and the sum involved is very small in relative terms.
So far as the insurance rent is concerned, the position is less clear.
It is in a sense a payment for a service, and, as Morgan J rightly concluded, the service charge should be apportioned.
However, that conclusion is based on the provisions of para 4.6 of Schedule 7 to the Lease, summarised in para 6 above, which enables the service charge to be apportioned, through the medium of a payment to the tenant: the reference to a credit plainly extends to giving effect to the credit, through payment, once the landlord and tenant relationship has come to an end.
I do not consider the service charge to be a good analogy, because the service charge is paid for various ongoing services rather than a one off contribution to a single payment, and because there is no such provision in Schedule 5, summarised in para 5 above, in relation to the insurance rent.
The appellant argues that the reference to a fair proportion in Schedule 5 coupled with fact that there is no reference to the period for which the landlords should take out the insurance renders it easy to imply the term for which the appellant contends.
In my view, however, unless it could be shown to have been unreasonable for the respondents to have insured the Building for the whole of the ensuing year when they did so, the reasons for dismissing this appeal in relation to the Basic Rent and the Car Park Licence Fee apply equally to the insurance rent.
After all, the insurance rent is a single annual sum, specifically reserved as rent, with no provision for apportionment, and it became payable in full in July 2011; further, the money involved is, relatively speaking, small.
It is almost invariable for a landlord, indeed for any property owner, to insure its property on an annual basis, unless there is a specific reason not to do so, and that was clearly the established practice in the present case.
It may be that the landlords could not have recovered the insurance rent for a full year in a case where it would have been unreasonable for them to have expected the tenant to pay for a full years cover.
However, no such argument was advanced in this case, and it was probably too late to do so in any event, as the insurance rent had been paid for the year in question.
Accordingly, I would dismiss this appeal.
LORD CARNWATH:
I agree that the appeal should be dismissed for the reasons given by Lord Neuberger so far as addressed to the issues between the parties.
I add some brief comments only on the issue of implied terms, and in particular Lord Neubergers comments on the status of the Privy Council judgment in the Belize case.
Unlike him, I would have been content to take my starting point not in the 19th century cases (such as The Moorcock), but in the most modern treatment at the highest level.
That is undoubtedly to be found in the judgment of the Privy Council in the Belize case (Attorney General of Belize v Belize Telecom Ltd [2009] 1 WLR 1988).
It is important to remember that this was not an expression of the views of Lord Hoffmann alone, as is implied in some commentaries, but was the considered and unanimous judgment of the Board as a whole (including Lady Hale, and Lord Rodger, Lord Carswell, Lord Brown, none of them known for lack of independent thought).
In the leading textbook on the subject (Lewison, Interpretation of Contracts 5th ed (2014)), the judgment is realistically taken to represent the current state of the law of England and Wales (p 284, para 6.03).
The rest of that chapter contains an illuminating discussion of the working out of the principles stated by Lord Hoffmann, as applied by the courts in different contractual contexts and different factual situations.
We would need very good reasons for treating the judgment as less than authoritative, and we have not been asked by the parties to do so.
In the present case, there has been no dispute as to the authority of the Belize judgment, only as to its interpretation.
The appellants seek to interpret it as supporting a more liberal approach than the traditional necessity test (in the words of their printed case): those courts which purport to follow Belize, but in so doing apply the tests of business efficacy, absolute necessity and the officious bystander, are departing from the test decided by the Privy Council.
The issue, therefore, is whether the type of necessity that is required for the implication of a term is what may be termed (a) absolute necessity (ie the contract simply will not operate without the term); or (b) reasonable necessity (ie the contract will not operate as it must reasonably have been intended by the parties to operate). (para 59) The respondents by contrast submit that, properly understood, the judgment should not be read as involving any watering down of the traditional tests.
To my mind there is no doubt that the respondents interpretation is correct.
This is so, whether one looks to the words of Lord Hoffmann alone, or to subsequent authority in the higher courts of this country.
The appellants have sought to support their submission by a commendably thorough review of the many cases in which Belize has been cited, in this country and in other common law jurisdictions.
In my view, with the possible exception of the Singapore case referred to by Lord Neuberger to which I will come, such support is lacking.
Very soon after it was given, the Belize judgment was subject to detailed consideration by Lord Clarke MR in the Court of Appeal in Mediterranean Salvage & Towage Ltd v Seamar Trading & Commerce Inc [2009] EWCA Civ 531 (10 June 2009); [2010] 1 All ER (Comm) 1.
The judgment was adopted also by Rix LJ (para 48).
As the third member of the court, I was more cautious at that early stage, deciding the appeal on the narrow basis that the implied term had not been shown by the owners to be necessary, and their case was not improved by substituting any of the other formulations of the test discussed in the cases (para 63).
Lord Clarke began by predicting (accurately as it has turned out) that Lord Hoffmanns analysis will soon be as much referred to as his approach to the construction of contracts in Investors Compensation Scheme [1998] 1 WLR 896, 912 913 (para 8).
He observed that the implication of a term is an exercise in the construction of the contract as a whole (para 9, citing the two House of Lords authorities referred to by Lord Hoffmann).
He then quoted extensively from the judgment, including its citation of Lord Simons summary of the tests for implication of a term (see Lord Neuberger para 18).
He did not see the judgment as involving a loosening of the traditional tests: It is thus clear that the various formulations of the test identified by Lord Simon are to be treated as different ways of saying much the same thing.
Moreover, as I read Lord Hoffmanns analysis, although he is emphasising that the process of implication is part of the process of construction of the contract, he is not in any way resiling from the often stated proposition that it must be necessary to imply the proposed term.
It is never sufficient that it should be reasonable. (para 15) In support he cited also the speech of Lord Wilberforce in Liverpool City Council v Irwin [1977] AC 239, 253 254, rejecting the more flexible approach proposed in the Court of Appeal by Lord Denning MR.
Lord Clarke also noted (para 17) the contrast drawn by Sir Thomas Bingham MR in Philips Electronique (a passage cited by Lord Neuberger at para 29) between the courts usual role in contractual interpretation of finding the true meaning of the words actually used by the parties, and the more ambitious undertaking involved in the interpolation of terms to deal with matters for which [they] have made no provision.
Lord Clarke concluded this passage by noting the stress laid by the authorities on the importance of the test of necessity.
Is the proposed implied term necessary to make the contract work? (para 18).
The appellants cite a number of later cases in the Court of Appeal in which the Belize judgment has been discussed in some detail (notably Crema v Cenkos Securities plc [2011] 1 WLR 2066, para 42ff per Aikens LJ; Stena Line Ltd v Merchant Navy Ratings Pension Fund Trustees Ltd [2011] Pens LR 223, para 36ff per Arden LJ; Jackson v Dear [2014] 1 BCLC 186, para 15ff per McCombe LJ, adopting the summary of the cases by Briggs J at first instance).
None of these involves any material departure from Lord Clarkes analysis.
More significantly it gains direct support from the succinct observation by Lady Hale (herself a party to the Belize judgment) in Geys v Socit Gnrale [2013] 1 AC 523, para 55 (paraphrased by Lord Neuberger at para 15), where she referred to: those terms which are implied into a particular contract because, on its proper construction, the parties must have intended to include them: see Attorney General of Belize v Belize Telecom Ltd [2009] 1 WLR 1988.
Such terms are only implied where it is necessary to give business efficacy to the particular contract in question.
The appellants refer also to the treatment of the Belize judgment in other common law countries, including Canada, Australia, New Zealand and Hong Kong.
None of these citations raises any doubt as to the authority of the Belize judgment, nor any reason to question Lord Clarkes interpretation of it.
The one exception appears to be the Singapore Court of Appeal, in which (as Lord Neuberger points out: para 24) the judgment has been subject to detailed and critical analysis in Foo Jong Peng v Phua Kiah Mai [2012] 4 SLR 1267 (followed in Sembcorp Marine Ltd v PPL Holdings Pte Ltd [2013] SGCA 43).
Their analysis draws, inter alia, on criticisms made by Paul Davies, Recent developments in the law of implied terms [2010] LMCLQ 140.
I note that there is no criticism in that article of Lord Clarkes judgment as such.
Rather it is cited as a supposed example of the less than wholly enthusiastic reception which the Belize judgment is thought to have received in later cases.
That and other academic articles, as well as the judgment of the Singapore Court of Appeal, have themselves been subject to critical examination in a recent article by Professor Richard Hooley, Implied terms after Belize Telecom [2014] CLJ 315, in which he welcomes the doctrinal coherence to interpretation and implication brought by the Belize judgment.
Other academic views, before and since, are cited by Lord Neuberger (para 24).
I see no purpose in reviewing the respective academic contributions in any detail, given the weight of judicial authority for the proposition (with which I understand we all agree) that the judgment is not to be read as involving any relaxation of the traditional, highly restrictive approach to implication of terms.
Once that point is established, then I am not convinced with respect that the other points made by the Singapore court are sufficient to justify undermining the authority of the Boards reasoning.
The passage from the courts conclusion quoted by Lord Neuberger (para 24) needs to be read in its full context: In summary, although the process of the implication of terms does involve the concept of interpretation, it entails a specific form or conception of interpretation which is separate and distinct from the more general process of interpretation (in particular, interpretation of the express terms of a particular document).
Indeed, the process of the implication of terms necessarily involves a situation where it is precisely because the express term(s) are missing that the court is compelled to ascertain the presumed intention of the parties via the business efficacy and the officious bystander tests (both of which are premised on the concept of necessity).
In this context, terms will not be implied easily or lightly.
Neither does the court imply terms based on its idea of what it thinks ought to be the contractual relationship between the contracting parties.
The court is concerned only with the presumed intention of the contracting parties because it can ascertain the subjective intention of the contracting parties only through the objective evidence which is available before it in the case concerned.
In our view, therefore, although the Belize test is helpful in reminding us of the importance of the general concept of interpretation (and its accompanying emphasis on the need for objective evidence), we would respectfully reject that test in so far as it suggests that the traditional business efficacy and officious bystander tests are not central to the implication of terms.
On the contrary, both these tests (premised as they are on the concept of necessity) are an integral as well as indispensable part of the law relating to implied terms in Singapore. (emphasis added)
This summary is useful because it draws together in short form the threads of an elaborate and carefully considered judgment.
As I read it the key points come down to three: i) Although the implication of terms is one aspect of the concept of interpretation, it should be treated as separate and distinct from the more general process of interpretation; ii) The court is concerned not with what it thinks ought to be the contractual relationship between the contracting parties, but rather with their presumed intention as ascertained through objective evidence; iii) The central place of the business efficacy and officious bystander tests should be affirmed as an integral as well as indispensable part of the law of Singapore.
The first point is an interesting debating point, but to my mind of little practical significance.
It is not a point addressed by the parties before us understandably, if they regarded it (as I would) as settled, if not by the Belize judgment itself, then by the authorities relied on by Lord Hoffmann (noted by Lord Neuberger at para 25).
Lord Neuberger (para 28) prefers a sequential approach: first interpretation, then implication.
However, as he accepts (para 26) both processes are parts of the exercise of determining the scope and meaning of the contract.
On this point also I see no reason to depart from what was said in Belize.
While I accept that more stringent rules apply to the process of implication, it can be a useful discipline to remind oneself that the object remains to discover what the parties have agreed or (in Lady Hales words) must have intended to agree.
In that respect it remains, and must be justified as, a process internal to the relationship between the parties, rather than one imposed from outside by statute or the common law (see the distinction noted by Lord Neuberger: para 15).
Nor do I agree that support for such a division can be found in the judgments referred to by Lord Neuberger: that is, the judgments of the Master of the Rolls in the Philips case (already cited), and of this court in Aberdeen City Council.
The passage from the former is useful as emphasising the narrow constraints on implication.
But I do not read the Master of the Rolls as treating it as a notionally separate exercise from that of interpretation. (Nor did Lord Clarke MR when quoting the same passage in Mediterranean Salvage: see above.) The contrast rather is between two aspects of the courts task in respect of contractual interpretation: the usual role involving the resolution of ambiguities in the language used by the parties, and the extraordinary power involving interpolation of terms that they have not used.
In the same way the passages cited from Aberdeen City Council do not appear to support a sharp distinction between interpretation and implication, still less for the necessity of a sequential approach.
No one thought it necessary to refer to Belize.
Lord Clarke preferred implication, but acknowledged that the two processes achieved the same result.
There is no indication that he had changed his view since Mediterranean Salvage.
He seems to have treated them as two sides of the same coin.
Lord Hope who gave the lead speech (which also had majority support) clearly saw them as part of a single exercise: the implied term was the product of interpretation.
The case seems if anything to illustrate an iterative, rather than sequential, process (see Lord Grabiner, The iterative process of contractual interpretation (2012) 128 LQR 41).
The results of different interpretative techniques were considered and compared, in the light of the language used and its business context, to achieve a result which best represented the assumed intentions of the parties.
On the second point, in so far as there is a difference from the Singapore court, I prefer the approach of Lord Neuberger which seems to me entirely consistent with Belize.
As he says (para 21), one is concerned not with the hypothetical answer of the actual parties, but with that of notional reasonable people in the position of the parties at the time at which they were contracting, or in other words of Lord Hoffmanns reasonable addressee (Belize, para 18).
On the third point, there is no doubt as to the continuing significance of the traditional tests, as summarised by Lord Simon.
If however the Singapore court intended thereby to prescribe a more rigid application of those tests, whether individually or cumulatively, I prefer the approach of the Board in Belize (para 27): The Board considers that this list is best regarded, not as [a] series of independent tests which must each be surmounted, but rather as a collection of different ways in which judges have tried to express the central idea that the proposed implied term must spell out what the contract actually means, or in which they have explained why they did not think that it did so.
This passage is also cited, albeit with only qualified approval, by Lord Neuberger (para 21).
In conclusion, while I accept that Lord Hoffmanns judgment has stimulated more than usual academic controversy, I would not myself regard that as a sufficient reason to question its continuing authority.
On the contrary, properly understood, I regard it as a valuable and illuminating synthesis of the factors which should guide the court.
Applying that approach to the present case leaves me in no doubt that the appeal should be dismissed.
LORD CLARKE:
I agree that the appeal should be dismissed for the reasons given by Lord Neuberger.
I only add a few words of my own because of the debate between Lord Neuberger and Lord Carnwath on Lord Hoffmanns view on the relationship between the approach to construction and the approach to the implication of a term which he expressed on behalf of the Judicial Committee of the Privy Council in Attorney General of Belize v Belize Telecom Ltd [2009] 1 WLR 1988.
I do so in part in order to clarify what I said in the cases referred to by Lord Carnwath, especially Mediterranean Salvage & Towage Ltd v Seamar Trading & Commerce Inc [2009] EWCA Civ 531, [2010] 1 All ER (Comm) 1 and Aberdeen City Council v Stewart Milne Group Ltd [2012] SLT 240.
As Lord Carnwath says at para 62, I did not doubt Lord Hoffmanns observation that the implication of a term is an exercise in the construction of the contract as a whole.
I recognise, however, in the light of Lord Neubergers judgment, especially at paras 22 to 31, that Lord Hoffmanns view involves giving a wide meaning to construction because, as Lord Neuberger says at para 27, when one is implying a word or phrase, one is not construing words in the contract because the words to be implied are ex hypothesi and not there to be construed.
However, like Lord Neuberger (at para 26) I accept that both (i) construing the words which the parties have used in their contract and (ii) implying terms into the contract, involve determining the scope and meaning of the contract.
On that basis it can properly be said that both processes are part of construction of the contract in a broad sense.
I agree with Lord Neuberger and Lord Carnwath that the critical point is that in Belize the Judicial Committee was not watering down the traditional test of necessity.
I adhere to the view I expressed at para 15 of my judgment in the Mediterranean Salvage & Towage case (which is quoted by Lord Carnwath at para 62) that in Belize, although Lord Hoffmann emphasised that the process of implication was part of the process of construction of the contract, he was not resiling from the often stated proposition that it must be necessary to imply the term and that it is not sufficient that it would be reasonable to do so.
Another way of putting the test of necessity is to ask whether it is necessary to do so in order to make the contract work: see the detailed discussion by Lord Wilberforce in Liverpool City Council v Irwin [1977] AC 239, 253 254.
| UK-Abs | In 2006, BNP granted to Marks & Spencer (M&S) sub underleases of four different floors in a building known as The Point in Paddington Basin, London W2 from 25 January 2006 to 2 February 2018.
Any difference between the sub underleases is irrelevant for the purposes of the appeal, so it is only necessary to refer to one of them (the Lease).
Under the Lease, the rent payable comprised a basic rent of 919,800 plus VAT which was payable yearly and proportionately for any part of a year by equal quarterly instalments in advance on the usual quarter days, and a car park licence fee of 6,000 per annum also payable by equal quarterly instalments in advance.
The Lease also provided for the landlord to recover, by way of rent, (i) a fair proportion of the costs of insuring the building and (ii) a service charge in respect of services provided to the building.
Clause 8 entitled M&S to determine the Lease on 24 January 2012 by giving BNP six months prior written notice (a break notice).
A break notice would only have effect to determine the Lease on 24 January 2012 if: (i) there were no arrears of rent on that date (clause 8.3); and (ii) M&S paid BNP the sum of 919,800 plus VAT (clause 8.4).
On 7 July 2011, M&S served a break notice on BNP.
Shortly before 25 December 2011, M&S paid BNP the basic rent due on that date for the period from 25 December 2011 up to and including 24 March 2012.
On or about 18 January 2012, M&S paid BNP 919,800 plus VAT.
As a result of these payments, the break notice was effective and the lease determined on 24 January 2012.
M&S subsequently brought a claim for the return of the apportioned basic rent in respect of the period from 25 January to 24 March 2012, contending that there should be implied into the Lease a term that, if the tenant exercised the right to determine the Lease on 24 January 2012, it should be entitled to a refund from the landlord of the proportion of the basic rent paid in respect of the period from the date of determination up to and including 24 March 2012.
Similar claims were made by M&S in respect of the car park licence fee, the insurance rent and the service charge.
The High Court held that M&S was so entitled.
The Court of Appeal subsequently allowed BNPs appeal.
M&S appeal to the Supreme Court.
The Supreme Court unanimously dismisses M&Ss appeal.
Lord Neuberger writes the leading judgment, with which Lord Sumption and Lord Hodge agree.
Lord Carnwath and Lord Clarke both write concurring judgments.
The test for implication of contractual terms The judicial approach to the implication of contractual terms represents a clear, consistent and principled approach [21].
A term will only be implied if it satisfies the test of business necessity or it is so obvious that it goes without saying [17 18]; it will be a rare case where only one of those two requirements are met [21].
The implication of a term is not critically dependent on proof of the actual intention of the parties.
If one approaches the question by reference to what the parties would have agreed, one is concerned with the hypothetical answer of notional reasonable people in the position of the parties at the time they were contracting [21].
It is a necessary but not sufficient condition for implying a term that it appears fair or that one considers that the parties would have agreed it if it had been suggested to them [21].
The judgment of Lord Hoffmann in Attorney General of Belize v Belize Telecom [2009] 1 WLR 1988 did not dilute the test for the implication of contractual terms [24, 57 74, 75 77].
Application to the facts It is well established that rent, whether payable in arrear or advance, is not apportionable in time in common law [44].
Section 2 of the Apportionment Act 1870 provides that all rents and other periodical payments should be considered as accruing from day to day and be apportionable in respect of time accordingly [44].
There is no doubt that section 2 applies to rent payable in arrear [45].
The conclusion of the Court of Appeal in Ellis v Rowbotham [1900] 1 QB 740 that the 1870 Act did not apply to rent payable in advance, is correct [45 46].
This mirrors the position on a forfeiture, where a landlord who forfeits a lease under which the rent is payable in advance is entitled to the payment of the whole of the rent which fell due on the quarter day preceding the forfeiture [48].
Given the clear, general understanding that neither the common law nor statute apportion rent payable in advance on a time basis, it would be wrong, save in a very clear case, to attribute to a landlord and a tenant, particularly where they have entered into a full and professionally drafted lease, an intention that the tenant should receive back an apportioned part of rent payable and paid in advance [47, 51].
M&S argued that, had it paid the sum of 919,800 plus VAT due under clause 8.4 before 25 December 2011, it would have been known at that date that the lease would come to an end before 25 March 2012 and thus BNP would only have been due an appropriate portion of the basic rent on 25 December 2011, and that commercial common sense therefore mandated that it should be in the same position whether it paid the 919,800 plus VAT before or after 25 December 2011 [35 36].
This argument is rejected.
Any anomaly in the working of the lease does not establish that the contract is unworkable or that the result is commercially or otherwise absurd [52].
The same conclusion applies to the car park licence fee and the insurance rent, but not to the service charge, in respect of which there is specific provision which contemplates repayment [55].
|
London suffered from serious rioting for four days from 6 to 9 August 2011.
The rioters caused extensive damage to property.
Property owners and insurers suffered significant losses.
Several owners of uninsured property, including two of the respondents in this appeal, lost their businesses when they became insolvent as a result of those losses.
Property owners and insurers, which had compensated their assureds, submitted claims for compensation from the appellant police authority (MOPC) under section 2 of the Riot (Damages) Act 1886 (the 1886 Act).
The MOPC contested those claims initially on both liability to compensate and the quantification of loss.
The liability of the MOPC to pay compensation is no longer in issue.
The question is the quantification of the claims.
This appeal raises a question of statutory construction.
It is whether persons who suffer loss when rioters destroy their property can in principle obtain compensation for consequential losses, including loss of profits and loss of rent, under section 2 of the 1886 Act, and if so on what basis.
Factual background
This appeal is concerned with one riotous incident which occurred on the third night of the London riots.
At about 11.40 pm on 8 August 2011 a gang of youths broke into the Sony DADC distribution warehouse, which is situated in a business park on Solar Way in Enfield.
The youths stole goods from the warehouse and also threw petrol bombs which caused a fire.
The fire destroyed the warehouse and the stock, plant and equipment within it.
The insurers of Sony DADC, which were the lessees of the warehouse, the insurers of the freehold owner of the warehouse, and companies which were customers of Sony DADC and whose stock in the warehouse had been destroyed, made claims against the MOPC.
The legal proceedings
In the Commercial Court of the High Court, Flaux J had to decide two preliminary issues.
The first issue concerned liability and was whether the warehouse had been destroyed by persons assembled together riotously and tumultuously within the meaning of section 2(1) of the 1886 Act.
In his judgment dated 12 September 2013 Flaux J held that it had been.
The Court of Appeal (Lord Dyson MR, Moore Bick and Lewison LJJ) in a judgment dated 20 May 2014 upheld that finding.
The second preliminary issue is the subject matter of this appeal.
Flaux J held that section 2 of the 1886 Act provided compensation only for physical damage and not for consequential losses.
The Court of Appeal reversed that finding.
It held that section 2(1) of the 1886 Act provided a right to compensation for all heads of loss, including consequential loss, proximately caused by physical damage to property for which the trespassing rioter is liable at common law, save to the extent that they are excluded by the statute.
The MOPC appeals to this court against that finding.
The Riot (Damages) Act 1886
Section 2(1) of the 1886 Act as amended provides: Where a house, shop, or building in a police area has been injured or destroyed, or the property therein has been injured, stolen, or destroyed, by any persons riotously and tumultuously assembled together, such compensation as hereinafter mentioned shall be paid out of the police fund of the area to any person who has sustained loss by such injury, stealing, or destruction; but in fixing the amount of such compensation regard shall be had to the conduct of the said person, whether as respects the precautions taken by him or as respects his being a party or accessory to such riotous or tumultuous assembly, or as regards any provocation offered to the persons assembled or otherwise. (emphasis added)
I can cover the other relevant provisions of the 1886 Act briefly.
Section 2(2) allows the insurer which has indemnified its assured in whole or in part to claim compensation.
Section 3(1) provides: Claims for compensation under this Act shall be made to the compensation authority of the police area in which the injury, stealing, or destruction took place, and such compensation authority shall inquire into the truth thereof, and shall, if satisfied, fix such compensation as appears to them just.
Section 3(2) empowers the Secretary of State to make regulations governing when, how and under what conditions claims for compensation are to be made under the Act and subsection (3) provides that the regulations are to be published in the London Gazette.
The compensation authority does not have the final say on the fixing of compensation, as section 4 provides that an aggrieved claimant may bring an action against the authority to recover compensation.
Section 6 provides that the Act applies to damage to or the destruction of machinery, plant and equipment used in manufacturing, agriculture and mining.
Finally, section 7 identifies the appropriate claimants if a church or chapel, or school, hospital, public institution or public building is damaged or destroyed.
The Court of Appeals judgment
In support of its view that the 1886 Act provides for the recovery of consequential losses, the Court of Appeal began with a linguistic analysis of section 2(1).
It pointed out that the words, which I have emphasised in para 7 above, compensated for loss sustained by such injury, stealing, or destruction.
This was loss that was caused by (i) damage to or destruction of a building, or (ii) damage, destruction or stealing of property in the building.
Such loss could as a matter of linguistic analysis include consequential losses, such as the loss of rent while an owner repaired his building.
Secondly, the other provisions in the 1886 Act, including the now repealed preamble (which I discuss in para 31 below), did not militate against this view.
Case law on predecessor legislation suggested that remedial statutes should be given a liberal interpretation.
Thirdly, that case law, which I discuss in paras 20 to 23 below, also suggested a principle that the relevant community, which was then the hundred, stood as sureties for the trespassers.
There was no reason to think that a rioter would not have been liable in tort for consequential losses before Parliament legislated in 1714.
Thus the local authority incurred such liability under statute.
The 1886 Act did not depart from what the Court of Appeal described as the fundamental standing as sureties principle.
Fourthly, the court rejected any reliance on the regulations which the Secretary of State promulgated in the London Gazette in 1886 as an aid to the interpretation of the 1886 Act.
Fifthly, the court rejected for lack of evidence a submission on behalf of the MOPC that there was a settled practice of interpreting the 1886 Act as excluding compensation for consequential losses.
Sixthly, the court considered that there was an anomaly if the 1886 Act did not cover consequential loss.
An owner of a commercial building which was damaged in a riot might choose to sell it in a damaged state and claim as his compensation the diminution in value caused by the physical damage.
Where a building was valued by reference to its capacity to generate income, part of that diminution in value could be attributable to loss of rent or loss of profits that the purchaser would suffer pending the completion of remedial works.
By contrast, if an owner decided to repair the building and suffered a loss of rent or a loss of profits while the remedial works were carried out, he could not recover such losses if the 1886 Act did not extend to consequential losses.
The court said that there was no rational basis for imputing to Parliament an intention to allow recovery for such losses as part of a claim for diminution of value but to exclude a free standing claim for losses of the same character.
Seventhly and finally, the court derived no assistance from parallel Scottish legislation, namely section 10 of the Riotous Assemblies (Scotland) Act 1822 (3 Geo IV, c 33) because of its use of different language.
The MOPCs challenge and the respondents answer
Lord Pannick QC for the MOPC submitted that Flaux J had reached the correct conclusion on the interpretation of section 2 of the 1886 Act and that his order on this point should be restored.
In support of his contention he relied on what he called the purpose and the plain meaning of the words in section 2(1) and also on sections 3 and 7 and the repealed preamble of the 1886 Act.
He also relied as a contemporaneous exposition of meaning on the first regulations under the 1886 Act which the Home Secretary promulgated on 28 July 1886.
He departed from the argument of settled practice which had been included in his written case, accepting that evidence of such practice had not been adduced.
But he submitted that the historical background to the 1886 Act and in particular the history of prior legislation and judicial pronouncements on that legislation supported the view that the legislation from the outset was a self contained statutory scheme for compensation which was not co extensive with the tortious liability of the trespasser.
In the prior legislation the compensation was limited to physical damage to the premises or property in it.
The 1886 Act did not materially alter the nature of that compensation scheme.
Mr Michael Crane QC for the first to third respondents presented the issue for this court as being whether the 1886 Act excludes in principle a head of loss caused by physical damage to property inflicted by rioters and otherwise compensable under the English law of tort.
In advocating a negative answer to that question, he submitted that the words of the 1886 Act contained no such limitation and that the history of the legislation since the 1714 Riot Act (1 Geo I, c 5) was consistent with the ancient notion that the inhabitants of the hundred stood surety for the good behaviour of their fellow subjects.
The principle was that the liability in damages of the rioter should be transferred to the hundred.
That principle survived the transfer by the 1886 Act of that liability from the hundred to the police authority.
The 1886 Act contained no clear language to limit the liability of the police authority by excluding the recovery of consequential loss.
In short, the history of the legislation showed that the heads of loss recoverable from time to time in an action against the trespasser were recoverable as a matter of strict liability initially from the hundred and since 1886 from the police authority.
The Court of Appeal had been correct in concluding that the police authority stood in the shoes of the trespasser save to the extent that the 1886 Act provided otherwise.
The appropriate analogy in construing the 1886 Act was with a strict liability in tort, arising from the failure of the police to maintain law and order.
He founded his argument also on the anomaly which had carried weight in the judgment of the Court of Appeal (its sixth reason which I have summarised in para 10 above).
Mr Simon Pritchard for the fourth and fifth respondents, which had been trading companies, made submissions adopting and supporting those of Mr Crane.
He also explained that those respondents were in large part uninsured and that Sony DADCs liability as bailee had been restricted by contract to the manufacturing replacement cost of damaged stock.
Their inability to recover the market value of their stock and their lost profits had precipitated their insolvency.
Discussion
The appeal, as I have said, raises a question of statutory construction.
While the arguments have been wide ranging, the resolution of the dispute is to be found in the words of the 1886 Act, interpreted against the backdrop of the prior legislative history.
In my view this is a case in which history rather than legal theory casts light, revealing the correct answer.
Linguistic analysis of the relevant provisions of the 1886 Act by itself does not provide a clear cut answer.
Section 2(1) speaks of compensation for loss by the injury or destruction of a building or the injury, stealing or destruction of property within the building.
Those statutory words do not disclose whether the loss which the claimant has sustained by the destruction etc of his property is simply the damage to the property, to be compensated by payment of the cost of repair or the diminution in value of the building or other property, or extends to consequential loss, such as the loss of rent or loss of profit which the claimant would have derived from the property.
Section 6 of the 1886 Act provides that compensation will be payable in the same way for the injury or destruction of manufacturing or agricultural machinery and fixtures and for equipment in a mine or quarry.
By providing that the Act will apply in like manner to such property, it casts no light on the scope of section 2.
What is striking, however, is that the 1886 Act does not expressly provide compensation for either (a) personal injury caused by rioters and resulting medical expenditure or (b) damage to property in the streets such as a parked car.
We were referred to no jurisprudence to support the view that such losses could be claimed under the 1886 Act even where they resulted from damage to or the collapse of a building.
On any view, therefore, the Act provides only partial compensation for damage caused by rioters.
Further, those limitations show that it is not correct to interpret the words sustained loss by such destruction as creating an unqualified causal test to which the normal rules of causation in tort can readily be applied.
I do not find the other provisions of the 1886 Act to be of any assistance in addressing the disputed question.
Section 3 requires the compensation authority of the police area to fix such compensation as appears to them just, while section 4 allows persons who are aggrieved by the decision of the compensation authority to raise an action against it in order to obtain a judicial determination of their claims.
Section 7 identifies who may be the claimants for damage to a church, chapel, school, hospital, public institution or public building by deeming them to have sustained loss from such injury, stealing, or destruction.
It goes on to state that claims may be made in relation both to the building and to the property therein.
I do not interpret its speaking of loss from destruction etc as altering the test in section 2.
Nor do I construe the phrase in relation both to the building as casting light on the scope of the claims that may be made in relation to a building.
Such light comes in my view from the interpretation of the 1886 Act in the context of the prior legislative history since 1714, to which I now turn.
Parliament first provided for compensation for riot damage in 1714 in response to the public disorder which followed the succession to the throne of Great Britain of George, the Elector of Hanover, as George I. Section 1 of the Riot Act 1714 made it a felony punishable by death for an unlawful assembly of 12 or more persons to fail to disperse after a justice of the peace or other specified official had read a proclamation commanding them to do so.
The procedure, which was a precondition of the felony, became popularly known as reading the Riot Act.
Section 4 made it a felony punishable by death for rioters to demolish or pull down buildings for religious worship, dwelling houses and farm buildings.
Section 6, provided that when rioters had demolished or pulled down all or part of such buildings, the inhabitants of the hundred in which such damage shall be done, shall be liable to yield damages to the person or persons injured and damaged by such demolishing or pulling down
wholly or in part
The 1714 Act did not specify the scope of the damages to be paid by the local community.
Cases, which followed later riots, enabled judges to give some guidance.
In Ratcliffe v Eden (1776) 2 Cowp 485 (98 ER 1200), which followed upon a riot by sailors in Liverpool, the Court of Kings Bench was concerned with the question of whether the victim of a riot could recover compensation not only for the damage to his house but for also the destruction of the furniture and household goods within his house.
The hundred argued that the victim could not recover for the furniture and goods as their destruction was a separate and independent act from the damage to the house.
The court rejected this defence.
Lord Mansfield (at p 488) explained that the 1714 Act had altered the nature of the offence; rioters were no longer trespassers but felons and were to be hanged.
Before the Act the trespassers would have been liable in damages.
Under the Act the inhabitants of the hundred instead were liable in damages and this was an inducement to them to perform their duty of preventing or suppressing riots.
He stated: This is the great principle of the law, that the inhabitants shall be in the nature of sureties for one another.
It is a very ancient principle; as old as the institution of the decennaries by Alfred, whereby the whole neighbourhood or tithing of freemen were mutual pledges for each others good behaviour.
The same principle obtains in the Statutes of Hue and Cry.
It is the principle here.
As the destruction of the furniture and goods occurred at the same time as the damage to the house, it was part of the demolition of the house just as it would be if the pulling down of the house crushed the furniture.
Ashhurst J took the same view.
Aston J advocated a liberal interpretation, at p 489: The object and principle of this Act was, to transfer the damages occasioned by the trespass, from the rioters to the hundred; to make it felony in the offenders themselves, and to put the party injured in the same state as before.
It is a remedial law, and ought to be extended.
Other cases followed the anti Catholic Gordon Riots in London in June 1780, which caused extensive damage and destruction of property, including Lord Mansfields house in Bloomsbury Square.
In Hyde v Cogan (1781) 2 Doug 699 (99 ER 445) the court again considered whether the hundred was liable for the destruction of furniture in a house as well as the demolition of the house.
In this case the argument advanced on behalf of the hundred was that the 1714 Act was penal against both the trespasser and the hundred and ought to be interpreted narrowly.
Lord Mansfield, although present, declined to express an opinion, leaving Willes, Ashhurst and Buller JJ to decide the case.
The judges rejected the contention that section 6, which provided for the compensation, was penal and held that it was remedial; Buller J said that, as a result, it should be interpreted liberally.
In that bygone age when, according to Willes J, the furniture in a London house might be worth twice as much as the house itself, that liberal interpretation brought household goods within the scope of the statutory compensation scheme.
The court also had before it a note of the judgment of Lord Loughborough in the Court of Common Pleas in the case of Wilmot v Horton, which had been decided earlier in the same year.
In that case Lord Loughborough gave both the remedial nature of the Act and its substitution of the liability of the hundred for that of the offender as the reasons for allowing the recovery of compensation for the destruction of furniture within the house.
In Mason v Sainsbury (1782) 3 Doug 61 (99 ER 538) the question was whether insurers, who had indemnified the owner for the damage to his house in those riots, could maintain an action in the name of the assured against the hundred under the 1714 Act.
In answering the question affirmatively, the Court of Kings Bench again explained that the Act put the hundred in the place of the trespassers.
Lord Mansfield stated (at p 64): the Act puts the hundred, for civil purposes, in the place of the trespassers; and upon principles of policy, as in the case of other remedies against the hundred, I am satisfied that it is to be considered as if the insurers had not paid a farthing.
In London Assurance Co v Sainsbury (1783) 3 Doug 245 (99 ER 636) the court held that insurers could not sue the hundred in their own names and overturned the award of damages by a jury.
Mr Crane pointed out that the jury had awarded damages on the buildings, rent, and stock in trade, in both houses and furniture (emphasis added).
Indeed it did; but its judgment was reversed on other grounds and this court was referred to no other case in which the courts have allowed recovery for anything other than physical damage to property.
Moving on over two centuries, in Yarls Wood Immigration Ltd v Bedfordshire Police Authority [2010] QB 698 Rix LJ at para 54 described the rationalisation of the liability of the hundred and now the police authority in these terms: It seems to me that what Lord Mansfield had to say about that question, so much closer to the origin of the first Riot Act 1714, still retains pertinence, expressing as it does the common sense of the matter.
It is for the sake of the party whose property has been damaged, it is to encourage the inhabitants (now the police force) of the locality, but including the party injured himself, all to assist in the preservation of the peace, it is to share the burden both of keeping the peace and of the misfortune of loss or injury.
Moreover, as is so often the case with strict liability, it is because those who are liable to compensate are also regarded by the law as standing in the shoes of the wrongdoers themselves (as, for instance, in the case of the vicariously liable), in part because their obligation, their strict obligation, is to prevent what has happened happening.
I recognise the force of the respondents emphasis on the statements of principle that the community (and now the police force) stood as sureties for the wrongdoer.
But, for the following three reasons, I do not accept that the rationalisation can bear the weight that the respondents seek to place on it.
First, while the 1714 Act imposed on the hundred the obligation to compensate only for loss occasioned by the destruction of, or damage to, buildings, which the case law to which I have referred extended to furniture and household goods, the prior law of hue and cry imposed no such restriction.
The obligation on the community to raise hue and cry (hutesium et clamor) when encountering an offender dates back to before the Norman Conquest, as Lord Mansfield said.
For example, John Hudson, The Oxford History of the Laws of England, (2012) vol 2, p 171, refers to a statute of King Cnut (II Cn, c 29) imposing the obligation on someone who failed to raise hue and cry to make amends at the rate of the thiefs wergeld, in other words to pay compensation to the victim.
Historically, wergild and bot, which had been features of law in England since at the latest the reign of the Kentish king, Aethelbert, in the late sixth and early seventh centuries, extended to payment of compensation for injuries or death and continued as part of the legal scene after the Norman Conquest at least into the 12th century, and afterwards in out of court settlements: Professor Anthony Musson, Wergeld: Crime and the compensation culture in medieval England, www.gresham.ac.uk.
Codes were made from time to time establishing fixed values for specified types of injury and damage.
The Statute of Winchester of 1285 (13 Edw I) made the hundred answerable for any theft or robbery if it failed to apprehend and deliver up the offender.
Pollock and Maitland, The History of English Law before the Time of Edward I (1898) vol 1, pp 648 649, describe this as a form of joint and several liability to the victim.
The Statute of Hue and Cry 1584 1585, to which reference was made in section 6 of the 1714 Act, allowed the victim to prosecute the hundred by way of special action on the case for damages where the offender was not apprehended.
It also set up a system by which a Justice of the Peace and constables could recover the damages from the inhabitants of the hundred and pay the victims, thereby sharing the burden within the community.
Secondly, while under the 1714 Act the hundred incurred strict liability for the riot, the prior hue and cry legislation allowed the community to escape liability if hue and cry were raised and the offenders caught.
Under the older law, therefore, the hundred were not sureties for the offender unless they failed to apprehend him.
It may have been the intention of Parliament that because the 1714 Act made riot a felony punishable by death, with the result that the offender would not be around to pay compensation and as, like other felons, his assets would be forfeited to the Crown, the injured party should have a right of compensation against the hundred in substitution for his action of trespass.
Be that as it may, it is clear that the principle on which the respondents founded could vary in its application.
Thirdly, and to my mind most importantly, the legislative history after 1714 undermines the respondents reliance on the general principle in the interpretation of the 1886 Act.
The toughening of the criminal law which the 1714 Act represented was extended by the notorious Criminal Law Act 1722 (9 Geo I, c 22), commonly known as the Black Act.
This introduced many new statutory felonies in response to the activities of poaching gangs (known as blacks because they blackened their faces) after the economic downturn caused by the South Sea Bubble.
Section 7 of the Black Act provided for compensation from the hundred for the damages sustained by the killing and maiming of cattle, the cutting down of trees and the destruction of agricultural buildings and equipment.
In the Malicious Injury Act 1769 (9 Geo III, c 29), in order to remove uncertainties as to the scope of the 1714 Act, Parliament made it a felony for any rioter to demolish, destroy or damage any mills or specified engines and equipment used in the mining industry or fences made for enclosing land by virtue of Acts of Parliament.
Compensation for damage by rioters to mills and to works associated with mills was introduced by the Compensation for Injuries to Mills etc Act 1801 (41 Geo III, c 24).
In response to the developing industrial revolution, Parliament enacted the Malicious Damage Act 1812 (52 Geo III, c 130) which extended the compensation regime to protect industrial buildings and equipment by creating statutory felonies of (a) maliciously setting fire to commercial and industrial buildings and engines and (b) demolishing or beginning to demolish such buildings and equipment in the course of a riot.
Section 3 of the Act provided that persons injured by the damage caused by rioters (in (b) above) were empowered to recover the value of such erection, building or engine, and of the machinery belonging thereto, or used therein, which shall be destroyed in such demolishing as aforesaid, or the amount of the damage which may be done to any such erection, building or engine or machinery aforesaid, in such tumultuous and riotous demolishing in part as aforesaid Section 2 of the Malicious Damage Act 1816 (56 Geo III, c 125) provided for compensation for destruction or damage by rioters of equipment used in the mines and collieries.
Like the 1812 Act above it empowered the claimants to recover the value of such property.
Section 38 of the Seditious Meetings Act 1817 (57 Geo III, c 19) imposed on the inhabitants of the hundred the liability to pay full compensation for the destruction of or damage or injury to any house, shop, or other building whatever or for the destruction, taking away or damage of any fixtures thereto attached, or any furniture, goods, or commodities in those buildings in the course of a riot.
Thereby it gave statutory effect to the 18th century decisions which included furniture and household goods within the scope of the compensatory regime of the 1714 Act.
The Riotous Assemblies Act 1822 (3 Geo IV, c 33) introduced separate provisions for compensation in England and Wales on the one hand and Scotland on the other.
Section 1 of the Act prohibited the raising of proceedings against the hundred under the legislation mentioned above if the damage sustained in the riot did not exceed 30.
Section 10, which established a new compensation regime for Scotland, survived the repeal of the English provisions by the Act which I discuss next.
The Remedies against the Hundred (England) Act 1827 (7 & 8 Geo IV, c 31) is particularly important as it amended and consolidated the prior legislation and as it remained in force until repealed by the 1886 Act.
Section 2 provided for compensation for the demolition or destruction in whole or in part of a wide range of buildings and industrial machinery, requiring the hundred to yield full compensation to the person or persons damnified by the offence, not only for any damage so done to any of the subjects hereinbefore enumerated, but also for any damage which may at the same time be done by any such offenders to any fixture, furniture, or goods whatever, in any such church, chapel, house, or other of the buildings or erections aforesaid.
In my view this wording of the 1827 Act, like the 1812 Act and the 1816 Act before it, makes it clear that the statutory compensation was confined to physical damage to property.
repealed preamble stated: I can detect nothing in the 1886 Act which removed that limitation.
The now Whereas by law the inhabitants of the hundred or other area in which property is damaged by persons riotously and tumultuously assembled together are liable in certain cases to pay compensation for such damage, and it is expedient to make other provision respecting such compensation and the mode of recovering the same. (emphasis added) There was no suggestion in the preamble of any intention to alter the basis on which compensation would be paid.
The 1886 Act made the following principal changes to the arrangements for statutory compensation: (i) As a result of changes in local government, it transferred liability to pay compensation from the hundred to the police authority (section 2(1)); (ii) The Secretary of State became responsible for creating and regulating the procedure by which claims could be made, the conditions for those claims and the circumstances in which they might be rejected (section 3(2)); (iii) The police authority was charged with inquiring into the claims and fixing compensation as appeared to it to be just (section 3(1)); (iv) The police authority was directed to have regard to the conduct of the claimant, such as any provocation of the rioters or failure to take proper precautions to protect his property, when deciding what compensation was due (section 2(1)); (v) Compensation was payable not only if a building or property inside it had been destroyed or damaged by rioters but also if property in the building had been stolen by them (section 2(1)); (vi) Insurers were given a right to claim compensation in their own names and the right of the insured person who had received insurance payments was correspondingly reduced (section 2(2)); and (vii) A claimant who was dissatisfied with the police authoritys decision could commence an action in the courts to recover compensation, which could not exceed the amount claimed from the police authority (section 4(1)).
None of the provisions suggested any intention to extend the measure of compensation beyond physical damage to property.
In my view it is not correct to use a judicial rationalisation of a statutory scheme to override the words which Parliament has used.
From 1714 to this day, the community, whether in the form of the hundred or the police authority, has not stood in the shoes of the offender for all purposes of compensation.
As I have said (in para 16 above) the statutory provisions have given only partial compensation for the loss, injury and damage which a person may suffer as a result of rioting.
I see no reason for inferring that Parliament intended that the statutory compensation should extend beyond the cost of repairing physical damage to property.
When regard is had to the words of the statute, in the context of the prior legislative history, there is no reason to think that Parliament ever intended that the compensation scheme should mirror the offenders liability in tort or that its scope should develop as the law of damages for tort developed.
While the adoption of a liberal interpretation, as enjoined by the 18th century case law, justified the inclusion of furniture and household goods within the scheme if they were damaged as a result of the demolition of the building or at the same time in the course of the same riot, it cannot alter the nature of the compensation scheme.
In summary, I consider that the words of the 1886 Act should be construed in the light of the prior legislation.
The 1714 Act used open textured wording, requiring the payment of damages to persons injured or damaged by the demolition of their houses.
The courts liberal interpretation extended the hundreds liability to cover physical damage to household goods and furniture but no further.
This limited extension was incorporated into the 1817 Act.
Over time, statutory innovations extended the scope of the compensation to cover agricultural buildings, mills, commercial and industrial buildings, the contents of those buildings, and mines and collieries.
There is nothing in the wording of the 1886 Act that supports an intention to extend the scope of the compensation to cover consequential loss.
Several provisions suggest a contrary intention.
I refer in particular to the absence of compensation for personal injury, or for injury to property other than buildings and their contents, together with the unusual provision for compensation to be reduced according to very broad assessments of the conduct of the claimant.
Together, they support the conclusion that the 1886 Act, like its predecessors, created a self contained statutory scheme which did not mirror the common law of tort.
Further, I do not accept that there is any anomaly in this interpretation.
A claim for loss of rent or loss of profits in addition to the cost of restoring or replacing a building is different from an estimation of the diminution in value of a commercial building, in which the valuation of the undamaged building had regard to its income earning potential.
They are different heads of loss.
A claim for the diminution in value of the building is a measure of the compensation available for the damage to the building itself, for example if the owner chooses to sell the damaged building instead of restoring it.
If that diminution in value is greater than the cost of the restoration of the building, the claim will normally be capped at the latter figure.
Even if there were an anomaly, that would not entitle the court to refuse to give effect to the words of the statute.
In the debate in this appeal counsel speculated on when the common law first recognised a claim for consequential loss.
This court was referred to The Kate [1899] P 165, an Admiralty case concerning the collision of two vessels.
The court held that the proper measure of damages was the value of the lost vessel at the end of the voyage and also the profits lost under the charter party.
In his judgment, the President, Sir F H Jeune, supported that conclusion by referring to The Columbus (1849) 3 Wm Rob 158.
In the absence of further citation of authority, I am prepared to assume that by 1886 the common law of damages for tort would in principle include a claim for lost rent or lost profits arising from damage to a building.
But that does not assist the respondents unless they could establish that the 1886 Act was intended to mirror the common law.
Mr Crane also referred to Bedfordshire Police Authority v Constable [2009] 2 All ER (Comm) 200, in which the Court of Appeal addressed the question whether a police authoritys liability under the 1886 Act for the damage to property caused by a riot in an immigration detention centre was covered by its insurance contract, which gave an indemnity in respect of all sums which the assured may become legally liable to pay as damages.
The court, in the leading judgment of Longmore LJ, held that it was because the police authority was notionally in breach of its responsibility for preservation of law and order (paras 24 26).
I have no difficulty with that conclusion, which is consistent with the thinking behind the medieval practice of hue and cry.
But it falls far short of equating the statutory scheme with the wrongdoers civil liability in tort.
I can deal with the other submissions relatively briefly.
First, in reaching my conclusion on the meaning of the 1886 Act I do not rely on the 1886 regulations which the Secretary of State promulgated in the London Gazette as an aid to the interpretation of the Act.
The regulations were not laid before Parliament.
But that of itself, while affecting their weight, would not exclude them from consideration as a guide to statutory meaning in accordance with Lord Lowrys guidance in Hanlon v The Law Society [1981] AC 124, 193G 194G.
They are consistent with the view which I have reached of the meaning of the Act by other means and might have been an important adminicle of evidence if the MOPC had produced evidence in support of a case of settled practice.
Secondly, section 10 of the Riotous Assemblies (Scotland) Act 1822 (3 Geo IV, c 33), formerly part of the Riotous Assemblies Act 1822 which I mentioned in para 29 above, gives only limited support to my view.
Although my conclusion about the 1886 Act tallies with that reached by Temporary Judge, Morag Wise QC, in her opinion on the Scottish provision in the 1822 Act in Board of Managers of St Marys Kenmure v East Dunbartonshire Council 2013 SLT 285, there are, as she recognised, minor differences between the wording of the Scottish provision and that of both the English provisions in the 1822 Act and the 1886 Act, which might have supported a different interpretation of the English provisions.
In any event, I do not need to rely on the Scottish provision in reaching my clear view on the meaning of the 1886 Act.
Thirdly, the MOPC advances an argument of public policy.
The argument runs thus.
The common law does not impose a duty of care on the police to prevent a third party injuring a person or damaging property: Michael v Chief Constable of South Wales Police [2015] AC 1732.
The strict liability of the police under the 1886 Act is an exception to the common law principle of no liability.
Therefore the court should be slow to widen the liability imposed by the Act.
I am not persuaded by this argument.
In my view, it is difficult to use the public policy of the common law as an interpretative tool because the statutory compensation has never sought to mirror the common law, but has created a self contained regime for compensation for property damage caused by rioters.
Conclusion
For these reasons I would allow the appeal.
| UK-Abs | London suffered from serious rioting from 6 to 9 August 2011.
In one incident at 11:40pm on 8 August 2011, a gang of youths broke into the Sony DADC distribution warehouse at the business park on Solar Way in Enfield.
They stole goods from the warehouse and threw petrol bombs, starting a fire which destroyed the warehouse and the stock, plant and equipment within.
The insurers of Sony DADC (which were the lessees of the warehouse), the insurers of the freehold owner of the warehouse, and companies (which were customers of Sony DADC and whose uninsured stock in the warehouse had been destroyed) made claims for compensation from the appellant, the Mayors Office for Policing and Crime (the MOPC) under s.2 of the Riot (Damages) Act 1886 (the 1886 Act).
The MOPC contested those claims on both its liability to pay compensation and the quantification of loss.
The High Court and the Court of Appeal decided that the MOPC was liable and that finding is no longer in issue.
The remaining issue before the Supreme Court is the quantification of the claims, which raises a question of statutory construction: whether persons who suffer loss when rioters destroy their property can in principle obtain compensation for consequential losses, including loss of profits and loss of rent, under s.2 of the 1886 Act.
The High Court held that s.2 provided compensation only for physical damage and not for consequential losses, but the Court of Appeal reversed that decision, holding that s.2 provided a right to compensation for all heads of loss, including consequential loss, proximately caused by physical damage to property for which the trespassing rioter is liable at common law.
The Supreme Court unanimously allows the MOPCs appeal.
Lord Hodge gives the lead judgment, with which the other Justices agree.
The wording of the 1886 Act by itself does not provide a clear cut answer to the issue.
In particular, s.2(1) does not clarify whether the loss for which a claimant may claim compensation is simply the physical damage to his property, or extends to consequential losses [14 15, 17].
The 1886 Act does not expressly provide compensation for either (a) personal injury caused by rioters, or (b) damage to property in the streets (e.g. a parked car) and there is no jurisprudence to support the view that such losses could be claimed.
On any view, therefore, the Act provides only partial compensation for damage caused by rioters [16].
Legislative history The 1886 Act must be construed in the light of the prior legislative history [13].
Parliament first provided for compensation for riot damage in the Riot Act 1714 (the 1714 Act).
Section 6 provided that when rioters had demolished certain buildings, the inhabitants of the hundred (an historical administrative subdivision of a county or shire) were liable to pay damages to the injured party [18 19].
The 1714 Act did not specify the scope of the damages to be paid by the hundred, so guidance was provided by the courts, which extended the right to compensation for loss occasioned to furniture and household goods [20 23].
However, this case law does not support a general principle that the hundred stood as sureties for the wrongdoer [24].
This is because: (1) While the 1714 Act imposed on the hundred the obligation to compensate only for loss occasioned by the destruction of, or damage to, buildings, the prior laws governing the hundreds liability for a failure to raise hue and cry imposed no such restriction [25]. (2) While under the 1714 Act the hundred incurred strict liability for the riot, the prior hue and cry legislation allowed the community to escape liability if hue and cry were raised and the offenders caught: the hundred were not sureties for the offender unless they failed to apprehend him [26]. (3) Most importantly, the legislative history after the 1714 Act shows there was no broad principle of compensation.
In particular, the wording of the Remedies against the Hundred (England) Act 1827 (which amended and consolidated the prior legislation and remained in force until the 1886 Act) makes it clear that the statutory compensation was confined to physical damage to property [27 30].
The 1886 Act made certain changes to the statutory scheme, including transferring the liability to pay compensation from the hundred to the local police authority, and directing the police authority to have regard to the claimants conduct when deciding what compensation was due.
None of these changes suggest an intention to extend the measure of compensation beyond physical damage to property [31 32].
When regard is had to the words of the 1886 Act in the context of its legislative history, there is no reason to think that Parliament ever intended that the statutory compensation scheme should mirror the rioters liability in tort, or should develop as the law of damages for tort developed [33].
The Act, like its predecessors, sets out a self contained statutory compensation scheme which does not extend to cover consequential losses [34].
|
By notice dated 3 November 2010 the Secretary of State for Work and Pensions, in accordance with regulations, suspended payment to Cameron Mathieson, then a boy aged three, of Disability Living Allowance (DLA) on the ground that he had by then been an in patient in an NHS hospital for more than 84 days (12 weeks).
Did the Secretary of State thereby violate Camerons human rights?
Proceedings
On 10 January 2012 the First tier Tribunal (Social Security and Child Support) dismissed Camerons appeal against the Secretary of States decision to suspend payment of the DLA.
On 15 January 2013 the Upper Tribunal (Administrative Appeals Chamber) determined a further appeal which Cameron had brought and with which, following his sad death on 12 October 2012, his father, Mr Craig Mathieson, had proceeded pursuant to an appointment under regulation 30(1) of the Social Security (Claims and Payments) Regulations 1987 (SI 1987/1968).
The Upper Tribunal set aside the decision of the First tier Tribunal on the ground of an error of law but, in the event, it likewise dismissed the appeal.
On 5 February 2014, by a judgment delivered by Laws LJ with which Ryder and Underhill LJJ agreed, the Court of Appeal dismissed Mr Mathiesons further appeal: [2014] EWCA Civ 286.
Mr Mathieson now appeals to the Supreme Court.
Cameron was born on 19 June 2007.
He lived in Warrington with his parents, together with his sister and two brothers who, at the time of his birth, were aged about ten, nine and two.
At his birth, part of his bowel had to be removed.
Shortly afterwards he was diagnosed with cystic fibrosis and, later, also with Duchenne muscular dystrophy.
The conjunction of both conditions in Cameron was one of profound misfortune and grim prognosis which at that time befell only one other child in the UK.
The muscular dystrophy precipitated severe developmental delay.
One area of it was in Camerons ability to communicate; so Mr Mathieson learnt the signs and symbols of Makaton in order better to communicate with him.
Other conditions, including a clotting disorder and deep vein thrombosis in his left leg, made his needs even more complex.
Mr and Mrs Mathieson had to learn how to administer chest physiotherapy to him, entailing chest percussion and postural drainage, for 20 minutes twice a day.
Thereafter they had to prepare and administer nebulised antibiotics to him through special equipment, as well as a host of other medications and supplements.
Mr and Mrs Mathieson found that Camerons need for exceptional and sophisticated care and attention, together with the ordinary care needs of the three older children, required them to relinquish their business and, once they had spent their savings, to fall back on state benefits.
The First tier Tribunal described Cameron as having the most severe and profound disabilities likely to come before a tribunal and added that he was blessed with loving and caring parents who were utterly devoted to his care.
On 4 July 2010 Cameron, who was showing symptoms of chronic bowel obstruction, was admitted to Ward C2 in the specialist respiratory unit at Alder Hey Hospital, Liverpool.
He was to remain there until 4 August 2011.
The doctors considered that he had needs for an even more complex package of care, including intravenous feeding, which could not easily be set up for delivery to him by Mr and Mrs Mathieson at home.
It is important to note the role played by Mr and Mrs Mathieson at Alder Hey during the 13 months of Camerons treatment there.
In this connection Nurse Burrows, an advanced nurse specialist attached to the cystic fibrosis team at the unit, wrote a report dated 28 October 2010, which, as the fact finder, the First tier Tribunal unsurprisingly accepted as accurate.
The nurse reported that: (a) Camerons care needs far exceeded those of any other child in the clinic; the clinic relied heavily on Mr and Mrs Mathieson to undertake his daily care in the clinic; (c) one or other of Mr and Mrs Mathieson was resident in the hospital at all times; they remain[ed] his primary caregivers; the clinic relied on them to monitor his condition daily and on several occasions they were the first to notice deterioration in it; they participated in all discussions and decisions about his care; (b) (d) (e) (f) (g) (h) (i) (j) as they had done at home, they administered chest physiotherapy to Cameron at the clinic twice a day and thereafter the nebulised antibiotics; they prepared and administered his feeding by nasogastric tube; they administered warfarin to him in order to combat the clotting; and they changed his stoma bags up to eight times a day.
Mr Mathieson supplemented the evidence of the nurse.
He said that Ward C2 had 13 beds for children in individual rooms; that most of the children there needed constant care; that the nurses were capable and dedicated but that there were never more than three of them at any one time; that parental care of the children was recognised as essential; that the result of the need for him or Mrs Mathieson to be at the hospital meant that during those 13 months they in effect spent no time together; that each of them had at first made numerous journeys from Warrington to Alder Hey (25 miles) and back in the family car but had been constrained to reduce them because of the cost of petrol; that, until it became too expensive, they had also regularly brought the older children to see Cameron at weekends; that, on days when he was well enough and with the encouragement of the clinic, they had taken Cameron back to his nursery school in Warrington for a short time and had then returned him to Alder Hey (ie another 50 mile journey); that, although he and Mrs Mathieson had been able to sleep free of charge either on camp beds alongside Cameron or in the Ronald McDonald house for parents at Alder Hey, they had incurred further expenditure in respect of food and drink for themselves, of parking and of Camerons laundry; and that in his estimate (which the Upper Tribunal accepted) the extra expense caused by the need for Cameron to be moved to Alder Hey had been about 8,000 over the 13 months.
DLA was introduced by the Disability Living Allowance and Disability Working Allowance Act 1991 (the 1991 Act).
The favoured mechanism was to insert sections about it into the Social Security Act 1975 (the 1975 Act).
One section, namely section 37ZA, provided, at subsection (1), that DLA was to consist of a care component and a mobility component.
Prior to 1991 the benefit analogous to the care component had been the attendance allowance, which, by section 2(1) of the 1991 Act, was from then onwards restricted to those aged at least 65; and the benefit analogous to the mobility component had been the mobility allowance, which, by section 2(3) of the 1991 Act, was abolished.
In 1992 the 1975 Act was repealed and the provisions for DLA were incorporated into sections 71 to 76 of the Social Security Contributions and Benefits Act 1992 (the Benefits Act).
These sections remain in force.
Under Part 4 of the Welfare Reform Act 2012 (the 2012 Act), DLA is to be replaced by the personal independence payment; and, once the scheme for making such payments is fully operable, the provision in section 90 of the 2012 Act for the repeal of sections 71 to 76 of the Benefits Act will come into force.
To date, however, the personal independence payment has been introduced only for persons aged at least 16: regulation 5 of the Personal Independence Payment (Transitional Provisions) Regulation (SI 2013/387).
Section 72 of the Benefits Act governs entitlement to the care component.
Camerons entitlement derived from the second and third, labelled (b) and (c), of the three conditions set in subsection (1), which requires the person to be so severely disabled physically or mentally that (b) by day, he requires from another person frequent attention throughout the day in connection with his bodily functions and (c) at night, he requires from another person prolonged or repeated attention in connection with his bodily functions.
In Cockburn v Chief Adjudication Officer; Secretary of State for Social Security v Fairey (aka Halliday) [1997] 1 WLR 799 the House of Lords held that the phrase bodily functions relates primarily to activities which the fit person normally performs for himself and which involve a high degree of physical intimacy; and Lord Hope of Craighead, at p 821, offered examples, namely getting into and out of bed, eating, drinking, bathing, washing hair and going to the lavatory.
Subsection (1A) of section 72 of the Benefits Act adds that, in relation to a person under the age of 16, the conditions in subsection (1)(b) and (c) are satisfied only if his requirements are substantially in excess of the normal requirements of persons of his age.
Section 72(3) and (4) of the Benefits Act specifies three rates of the care component the highest rate, the middle rate, and the lowest rate and provides that a person who satisfies the conditions set in both (b) and (c) of subsection (1) is entitled to the highest rate.
Section 73 of the Benefits Act governs entitlement to the mobility component.
Camerons entitlement derived from the conditions set in subsection (1)(a), which requires the person to be aged at least three and to be suffering from physical disablement such that he is either unable to walk or virtually unable to do so.
Section 73(10) and (11) specifies two rates of the mobility component the higher rate and the lower rate and provides that a person who satisfies the conditions set in subsection (1)(a) is entitled to the higher rate.
Section 73 of the Social Security Administration Act 1992 (the Administration Act) is entitled Overlapping benefits general.
Section 73(1)(b) states that regulations may provide for adjusting benefit, including DLA, payable to a person who is undergoing medical or other treatment as an in patient in a hospital.
The precursor to section 73(1)(b) was section 85(1) of the 1975 Act, which was in similar terms and was entitled Overlapping benefits.
The regulations in issue in this appeal are regulations 8, 10, 12A and 12B of the Social Security (Disability Living Allowance) Regulations 1991 (SI 1991/2890) (the 1991 Regulations).
They were made pursuant, in particular, to section 85(1) of the 1975 Act and to section 5(1) of the 1991 Act, following Parliaments affirmative resolution pursuant to section 12(1) of the later Act.
Regulation 8(1) provides that, subject to regulation 10, a person is not entitled to receive such DLA as is referable to the care component for any period during which he is maintained free of charge while undergoing medical or other treatment as an in patient in an NHS hospital.
But para 2 of regulation 10 provides that, in the case of a person aged under 16, regulation 8 shall not apply for the first 84 days of any such period; and para 1 provides that, in the case of any other person, regulation 8 shall not apply for the first 28 days of any such period.
Regulations 12A and 12B make provision identical to regulations 8 and 10 in respect of receipt of such DLA as is referable to the mobility component.
The regulations in force prior to 1991 in relation to payment of attendance allowance and mobility allowance had also provided for its suspension once the recipient had been in hospital for more than 28 days.
But they had made no distinction between adults and children: the extension for children aged under 16 from 28 days to 84 days was therefore introduced in the 1991 Regulations.
Camerons DLA
It is important to note that, notwithstanding that he was a child, it was Cameron, not either or both of his parents, who was entitled to DLA.
There were changes, which it is unnecessary to record, in the rates of his entitlement.
By 3 November 2010 the Secretary of State had decided that he was entitled to the highest rate of the care component and to the higher rate of the mobility component.
But on 3 November 2010 he also decided to suspend payment of both components with effect from 6 October 2010 on the ground that by then Cameron had been an in patient at Alder Hey for more than 84 days.
By 6 October he had in fact been an in patient there for 94 days.
The DLA had of course been payable to Mr Mathieson on Camerons behalf.
As such, it had no doubt to be deployed for Camerons benefit but otherwise it had been deployable without restriction, whether in facilitating the performance of his bodily functions or otherwise.
It had been a valuable component of the familys income.
Mr Mathiesons estimate (accepted by the Upper Tribunal) was that its suspension between October 2010 and August 2011 caused the family to suffer a loss of about 7,000.
His evidence was that, in order to help meet the shortfall, he had to borrow 4,000 from friends.
The Secretary of State is concerned to place the 84 day rule referable to DLA in the context of other state benefits payable to families generally and to the Mathieson family in particular.
Prior to Camerons removal to Alder Hey, the family received child benefit for all four children, child tax credit, carers allowance and income support as well, apparently, as housing benefit and council tax benefit.
Even after the first 84 days of Camerons stay there, the familys child benefit continued to be payable in full, even the part referable to him, because Mr and Mrs Mathieson were still regularly [incurring] expenditure in respect of him: section 143(4) of the Benefits Act.
Their child tax credit included an extra element because Cameron was in receipt of DLA and a further element because its care component was at the highest rate.
But neither element fell to be withdrawn when, pursuant to the 84 day rule, DLA was suspended: regulation 8(3)(b) of the Child Tax Credit Regulations 2002 (SI 2002/2007).
It was a condition of Mr Mathiesons entitlement to the carers allowance that Cameron should be in receipt of the care component of DLA at either the highest or the middle rate; and the carers allowance, as such, did indeed fall away upon suspension of his DLA.
But it made little difference to Mr and Mrs Mathieson because their income support was thereupon increased proportionately.
Thus, argues the Secretary of State, considerable benefits continued to be payable to the family, including in respect of Cameron, even after his 84th day at Alder Hey.
But, with respect, to where does his argument lead? Prior to Camerons removal to Alder Hey income support, which was means tested, brought the familys economy up to, but not beyond, subsistence level.
The Secretary of State concedes that there would have been no surplus available to meet such extra expenditure as the family might incur as a result of Camerons removal.
The fact that a number of benefits continued to be paid, even after his 84th day at Alder Hey, does not address the difficulty that, when the family was facing an increase in its expenditure of about 8,000, application of the 84 day rule caused it to suffer a decrease in its income of about 7,000.
Article 14
Article 14 of the European Convention on Human Rights (the Convention), entitled Prohibition of discrimination, provides: The enjoyment of the rights and freedoms set forth in this Convention shall be secured without discrimination on any ground such as sex, race, colour, language, religion, political or other opinion, national or social origin, association with a national minority, property, birth, or other status.
It is enjoyment only of the rights and freedoms set out in the Convention which the article requires to be secured without discrimination on any of the identified grounds.
The framers of the article did not wish the prohibition of discrimination to extend beyond the four corners of the other articles.
A free standing prohibition of discrimination in the enjoyment of any right set forth by law and indeed generally, on any of the identified grounds, was introduced much later in the Twelfth Protocol; but the UK has not signed it.
(a) Scope
In his invocation of article 14, Mr Mathieson therefore needs first to establish a link with one or more of the Conventions other articles.
He alleges a link with either or both of Camerons rights to the peaceful enjoyment of his possessions under article 1 of Protocol 1 (A1P1) and to respect for his family life under article 8.
For the purposes of article 14, Mr Mathieson does not need to establish that the suspension of DLA amounted to a violation of Camerons rights under either of those articles: otherwise article 14 would be redundant.
He does not even need to establish that it amounted to an interference with his rights under either of them.
He needs to establish only that the suspension is linked to, or (as it is usually described) within the scope or ambit of, one or other of them.
How can a public authoritys action be within the scope of an article without amounting to an interference with rights under it? The case of Carson v United Kingdom (2010) 51 EHRR 369 provides an example.
There the Grand Chamber of the European Court of Human Rights (the ECtHR) explained at paras 63 65 that A1P1 did not require a contracting state to establish a retirement pension scheme but that, if it did so, the scheme fell within the scope of A1P1 and so had to be administered without discrimination on any of the grounds identified in article 14.
The case of Hode and Abdi v United Kingdom (2012) 56 EHRR 960 provides another example.
There the ECtHR explained at para 43 that article 8 did not require the state to grant admission to a refugees non national spouse but that, if it introduced a scheme for doing so, it fell within the scope of article 8 and so had to be administered without discrimination on any of the identified grounds.
The Secretary of State concedes that the provision of DLA falls within the scope of A1P1 but disputes that it falls within the scope of article 8.
So I will proceed at first on the basis of the concession; later, and only if necessary, I will address the dispute.
(b) Status
On which of the grounds of discrimination prohibited by article 14 does Mr Mathieson rely? He relies on the concluding reference to other status.
The premise of his argument is that payment of the care component of DLA is expressly limited, and that the mobility component is in effect limited, to the severely disabled: see sections 72 and 73 of the Benefits Act.
Mr Mathieson argues that Camerons status on 6 October 2010 was that of a severely disabled child who was in need of lengthy in patient hospital treatment and that, in comparison with a severely disabled child who was not in need of lengthy in patient hospital treatment, application to Cameron of the 84 day rule discriminated against him contrary to article 14.
Any such comparator would need to be a severely disabled child because otherwise he would not be entitled to DLA at all.
But disability has degrees of severity and the suggested comparator could presumably be a child with a disability of severity either equal to, or indeed lesser than, that of the child in need of lengthy in patient hospital treatment.
At first sight Mr Mathiesons contention appears contrived.
Does it pass muster? The Upper Tribunal concluded that it did.
Before the Court of Appeal the Secretary of State, without conceding that the Upper Tribunals conclusion was correct, did not actively contest it; and so, not without some misgivings, that court proceeded on the basis that, had there been discrimination, it would have been on the ground of the status identified by Mr Mathieson.
In this court, however, the Secretary of State actively contests that Cameron had any status on which the decision to suspend his DLA was based.
In AL (Serbia) v Secretary of State for the Home Department [2008] UKHL 42, [2008] 1 WLR 1434, Lady Hale addressed at para 26 the list of prohibited grounds in article 14 and suggested that [i]n general, the list concentrates on personal characteristics which the complainant did not choose and either cannot or should not be expected to change.
In R (RJM) v Secretary of State for Work and Pensions [2008] UKHL 63, [2009] AC 311, Lord Neuberger of Abbotsbury expanded at para 45 upon Lady Hales analysis of the nature of the prohibited grounds by suggesting that they generally required concentration on what somebody is, rather than what he is doing or what is being done to him.
But, by its very decision in the RJM case, namely that the appellants homelessness conferred on him a status prohibited by article 14, the House of Lords demonstrated that the prohibited grounds extended well beyond innate characteristics.
The House held that they included not only the suspect grounds, or, to use a less ambiguous word, the core grounds, which, according to Lord Walker of Gestingthorpe at para 5, included gender, sexual orientation, pigmentation of skin and congenital disabilities.
Lord Walker offered the simile of a series of concentric circles and suggested that these core grounds fell within the circle of the narrowest diameter.
But then there was a wider circle which included acquired characteristics, such as nationality, language, religion and politics.
Indeed, so Lord Walker suggested, there was an even wider circle which included, for example, the homeless appellant then before the House; which also included the complainant in the Carson case, who had chosen a particular country of residence; and which even included the complainant in Sidabras and Dziautas v Lithuania (2004) 42 EHRR 104, who had previously been employed by the KGB.
The value of Lord Walkers simile lies in what he then added: The more peripheral or debateable any suggested personal characteristic is, the less likely it is to come within the most sensitive area where discrimination is particularly difficult to justify.
The RJM case in the House of Lords was soon followed by the Clift case in the ECtHR.
Mr Clift had been sentenced in England to a term of imprisonment of 18 years for crimes including attempted murder.
The Parole Board recommended his release on licence once he had served half of his sentence.
The Secretary of State rejected its recommendation.
Had the recommendation been made in relation to a prisoner serving a sentence of a term of less than 15 years or a life sentence, the Secretary of State would have had no power to reject it.
Mr Clift alleged that in such circumstances the Secretary of States rejection of the Boards recommendation discriminated against him, contrary to article 14, in the enjoyment of his right to liberty under article 5 of the Convention.
He contended that the discrimination was on the ground of his status as a person sentenced to a term of at least 15 years.
In the domestic courts his contention had failed: R (Clift) v Secretary of State for the Home Department [2006] UKHL 54, [2007] 1 AC 484.
The House of Lords had articulated an inhibition, less keenly felt by this court nowadays, about extending the meaning of convention terms beyond what the ECtHR had authorised: see Lord Bingham of Cornhill at para 28 and also Lord Hope at para 49.
In the ECtHR, however, Mr Clifts claim to have had a status within in the meaning of article 14 (and to have suffered discrimination on that ground) prevailed: Clift v United Kingdom (Application No 7205/07), The Times, 21 July 2010.
The court said: 60 The question whether there is a difference of treatment based on a personal or identifiable characteristic is to be assessed taking into consideration all of the circumstances of the case and bearing in mind that the aim of the Convention is to guarantee not rights that are theoretical or illusory but rights that are practical and effective (emphasis supplied).
It is clear that, if the alleged discrimination falls within the scope of a Convention right, the ECtHR is reluctant to conclude that nevertheless the applicant has no relevant status, with the result that the inquiry into discrimination cannot proceed.
Decisions both in our courts and in the ECtHR therefore combine to lead me to the confident conclusion that, as a severely disabled child in need of lengthy in patient hospital treatment, Cameron had a status falling within the grounds of discrimination prohibited by article 14.
Disability is a prohibited ground (Burnip v Birmingham City Council [2012] EWCA Civ 629, [2013] PTSR 117).
Why should discrimination (if such it be) between disabled persons with different needs engage article 14 any less than discrimination between a disabled person and an able bodied person? Whether, as in Camerons case, the person is born disabled or whether he becomes disabled, his disability is or becomes innate; and insofar as in the RJM case Lord Walker seems to have had three circles in mind, Camerons case falls either within the narrowest of them or at least within the one in the middle.
(c) Justification
In Stec v United Kingdom (2006) 43 EHRR 1017 the ECtHR determined challenges to social security provisions which linked compensation for the financial effects of an accident at work to the different state retirement ages for men and women.
So the argument was that, taken with A1P1, article 14 had been violated by discrimination on ground of sex.
The Grand Chamber observed at para 51 that [a] difference of treatment is discriminatory if it has no objective and reasonable justification; in other words, if it does not pursue a legitimate aim or if there is not a reasonable relationship of proportionality between the means employed and the aim sought to be realised.
It is worthwhile to note, in parenthesis, a terminological difference between the ECtHR and the House of Lords.
In the RJM case, cited at para 21 above, Lord Neuberger considered at para 22, as did Lord Walker at para 5 and Lord Mance at para 7, whether the discrimination can be justified.
I confess that I prefer the approach of the ECtHR.
If justification is established, the result is not justified discrimination.
For justification will negative the existence of discrimination at all.
In the Stec case the Grand Chamber proceeded at para 52 to address the margin of appreciation which it should afford to the UK in relation to its social security provisions and held that it should generally respect its policy choices in that area unless they were manifestly without reasonable foundation; by application of that principle, it concluded that the challenges failed.
Of course it does not necessarily follow that the domestic judiciary should afford a margin of equal generosity to the domestic legislature: In re G (Adoption: Unmarried Couple) [2008] UKHL 38, [2009] AC 173, para 37 (Lord Hoffmann).
Indeed this court has at last helpfully recognised that the very concept of a margin of appreciation is inapt to describe the measure of respect which, albeit of differing width, will always be due from the UK judiciary to the UK legislature: In re Recovery of Medical Costs for Asbestos Diseases (Wales) Bill [2015] UKSC 3, [2015] 2 WLR 481, paras 44 and 54 (Lord Mance).
Nevertheless, in the RJM case, Lord Neuberger cited para 52 of the judgment in the Stec case and concluded at para 56 that the provision of state benefits to the homeless was an area where the court should be very slow to substitute its view for that of the executive.
In Humphreys v Revenue and Customs Comrs [2012] UKSC 18, [2012] 1 WLR 1545, this court went further.
There a father in receipt of means tested benefits who cared for his children for three days each week challenged a rule that child tax credit should be paid entirely to their mother because she had the main responsibility for them.
He alleged indirect discrimination on grounds of sex because the rule prejudiced more fathers than mothers.
Having considered the Stec case and the RJM case, Lady Hale (with whose judgment all other members of the court agreed) held at paras 19 and 20 that the court should determine the fathers challenge by reference to whether the rule was manifestly without reasonable foundation; but she added at para 22 that it did not follow that the rule should escape careful scrutiny.
Applying those principles, she rejected his challenge.
She considered that the rule makers had been entitled to conclude that some of a childs needs, such as for clothes and shoes, would be more likely to be met if the entire benefit was paid to the primary carer: para 29; and that there were costly administrative complexities in any apportionment of some of the benefit to the secondary carer while he remained in receipt of means tested benefits: para 30.
It is noteworthy that, in a table of policy issues which Lady Hale annexed to her judgment, the makers of that rule, when resolving not to amend it so as to permit the benefit to be shared, had carefully set out the rival advantages and disadvantages of so doing.
One of the rule makers arguments in the Humphreys case, as in the present case, was that a bright line rule has intrinsic merits in particular in the saving of administrative costs.
The courts accept this argument but only within reason.
In R (Animal Defenders International) v Secretary of State for Culture, Media and Sport [2008] UKHL 15, [2008] 1 AC 1312, Lord Bingham accepted at para 33 that hard cases which fell on the wrong side of a general rule should not invalidate it provided that it was beneficial overall.
And when the Carson case had been considered, with another case, by the House of Lords, in R (Carson) v Secretary of State for Work and Pensions [2005] UKHL 37, [2006] 1 AC 173, Lord Hoffmann had observed at para 41 that a line had to be drawn somewhere.
He had added: All that is necessary is that it should reflect a difference between the substantial majority of the people on either side of the line.
The Secretary of State has placed in evidence an extract from Hansard (HC Debates), 25 March 2003, col 26WH, in which Ms Maria Eagle, the Parliamentary Under Secretary of State for Work and Pensions, responded to a complaint about the suspension of payment of DLA to an adult in hospital after 28 days.
She pointed out that the suspension was pursuant to the rule against overlapping provision.
As I have explained, the 1991 Regulations were indeed made pursuant to section 85 of the 1975 Act, entitled Overlapping benefits.
Ms Eagle continued as follows, at cols 27WH 28WH: All in patients disability related needs are met by the national health service.
That is where the rule against overlapping provision comes in, and that is why DLA [is] withdrawn after a shorter period namely, once an adult has been in hospital for 28 days.
For children under 16, the rule is 84 days.
Those arrangements are based on the principle that double provision in this case, NHS in patient care and payment of DLA for the same need should not be made from public funds.
The difference between the arrangements for adults and for children is recognition of the therapeutic value of visits and treats for a disabled child who is adjusting to life in hospital.
But are all the disability related needs of children in hospital met by the NHS? And does Ms Eagles reference to the value for the child that the family should make visits to him and bring him treats bear any relation to the demands, personal and financial, which are made of parents when their severely disabled child is in hospital? The evidence of Mr Mathieson gives a negative answer to both questions.
But is the case of Mr and Mrs Mathieson a hard case, unreflective of the position of most parents in their situation?
In the only, short, witness statement filed on behalf of the Secretary of State in these proceedings his policy officer referred to an article by Dr Ruth Davies in the Journal of Child Health Care, vol 14(1) (2010) at p 6, entitled Marking the 50th anniversary of the Platt Report: from exclusion, to toleration and parental participation in the care of the hospitalised child.
Dr Davies explains that in Victorian times parents were not allowed to visit their children in hospital more than a few hours a week; that with the rise of behaviourism, with its rejection of the importance for a child of a parents emotional support, there was little change in the approach to parental visits during the first half of the 20th century; that in 1959 a committee chaired by Sir Harry Platt wrote a report published by the Ministry of Health, entitled The Welfare of Children in Hospital, in which it recommended that parents be allowed to visit their children whenever they could and to help as much as possible with their care and that consideration be given to the admission of mothers with their children, especially if aged under five; that for the next 20 years the nursing profession largely resisted the recommendation for unrestricted parental visiting; that after about 1980 changes occurred at an accelerated pace; that, in line with studies in the UK and elsewhere, hospitals increasingly recognised that there were both humanitarian and cost saving advantages in encouraging parents to care for their children in hospital and indeed to reside with them there; and that, as the title of the article suggests, parental participation in the care of a child in hospital has ultimately become the norm.
The Childrens Trust Tadworth, a charity devoted to the interests of children with multiple disabilities, and Contact a Family, a charity devoted to the support of families with disabled children, have been spear heading a campaign designed to persuade the Secretary of State to abrogate the rule whereby, after 84 days in hospital, a childs DLA is suspended.
Their first report, entitled Stop the DLA Takeaway was published in 2010 and was placed in evidence before the Upper Tribunal.
Subsequently they sought to strengthen their case by conducting an online survey, which was completed by 104 families across the UK with disabled children who had spent significant periods of time in hospital.
This led to the charities second report, entitled Stop the DLA Takeaway Survey Report, which was published in 2013.
Mr Mathieson sought to place it in evidence before the Court of Appeal, which put it aside on the basis that it added little to the first report.
In their first report the charities asserted: The law as it stands suggests that families are getting some form of respite when their child is in a hospital or other medical setting.
It suggests that a parents responsibilities and costs are reduced.
This could not be further from the truth.
It alleged that the level of care provided by parents either remained the same or increased when their children were in hospital.
It asserted: Research shows that there are extra costs for a family when their child is in hospital or another medical setting: loss of earnings travel for family members parking costs meals at hospital childcare for siblings.
In their second report the charities were able to strengthen the assertions in their first report by reference to striking results of their survey.
The results were as follows: Almost all carers (99%) provide more (68%) or the same (31%) level of care when their child is in hospital compared to when their child is at home. disability when they are staying in hospital. 93% have increased costs relating to their childs The survey confirmed that the families faced the types of increased costs identified in the first report, together with other costs relating to telephones, internet access and toys intended to keep the child occupied.
In the second report the charities estimated that each year about 400 to 500 families suffered the suspension of DLA after their childs 84th day in hospital and that the annual costs to the state of abrogating the suspension would be about 2.7m to 3.4m.
By consent, this court gave Mr Mathieson leave to place before it a letter from the Citizens Advice Bureau attached to Great Ormond Street Hospital (the CAB).
It wrote: It can be devastating for families when payments of Disability Living Allowance stop.
The caring responsibilities of parents of child in patients are enormous.
It is often not realised that parents are required to attend hospital when their children are in patients and to take an active part in their medical management.
If they fail to attend, the hospitals social workers are informed.
Many carers live either in make shift beds on the wards or in nearby hospital provided accommodation.
The CAB added that the caring responsibilities of parents may increase once their child becomes an in patient; that they need to be trained to administer treatments, such as feeding through a gastrostomy; that the hospital relies on them to communicate with it on behalf of a non verbal child; that their increased costs include costs of travel, of meals at the hospital and of childcare for siblings; and that their financial difficulties can be compounded by loss of earnings.
The CAB concluded: Our view is that the 84 day rule unfairly and unjustifiably restricts benefit entitlement.
When the 84 day rule was introduced, it may have been the case that families were discouraged or not permitted to stay with their children in hospital.
However, it ignores the modern reality of paediatric in patient healthcare and it removes necessary support from under the feet of the countrys most vulnerable people.
In that the person centrally affected by the suspension will be (a) a child under 16, (b) who is severely disabled and (c) whose medical problems are so profound as to necessitate his remaining in hospital for more than 84 days, it is hard to disagree with the CABs reference to the countrys most vulnerable people.
The Secretary of States policy officer responds that by 1991 parental presence in hospital was no longer discouraged; but she does not adequately grapple with its evidence about an increase in family expenditure.
More significantly the Secretary of State has adduced no evidence in response to the charities two reports.
The court must bear in mind that, although both charities are highly reputable, they have launched a campaign and that the purpose of the reports is to support it.
The court must therefore look critically at the reports but it has nothing to set against them.
The surveys conclusion that 99% of parents provide no lesser level of care when their child is in hospital and that 93% of them suffer an increase in costs demonstrates: (a) (b) that the case of Mr and Mrs Mathieson is not a hard case, unreflective of the position of most parents in their situation; that the personal and financial demands made on the substantial majority of parents who help to care for their disabled children in hospital are, to put it at its lowest, no less than when they care for them at home.
The conclusion of the survey conducted by the charities also suggests that, with respect to Ms Eagle and always to whatever is said in Parliament, her reference in 2003 to visits and treats for a child in hospital betrayed her departments insufficient understanding of the role of parents with a child in hospital.
The Secretary of State responds that any insufficiency in her parenthetical explanation of the reasons for the 84 day rule for children does not betoken his departments inability then to have given (or, more relevantly, now to give) a sufficient explanation of the reasons for it; that the very extension of the benefit for children in hospital from 28 days to 84 days, introduced in 1991, has demonstrated the sensitivity of his department to the different situation of adults and children in hospital; and, above all, that what matters is not how the reasons for a provision may have been presented but whether good reasons for it exist.
Nevertheless there is nothing before the court to indicate that, whether in 1991 or at any time thereafter, the Secretary of State has asked himself: are benefits nowadays overlapping to an extent which justifies the suspension of a childs DLA following his 84th day in hospital?
In this regard Mr Mathieson invites the court to approach the Secretary of States need to justify the 84 day rule through the prism of international conventions.
They are not part of our law so our courts will not ordinarily reach for them.
Courts sometimes find, however, that the law which they are required to apply demands reference to them.
Article 3.1 of the UN Convention on the Rights of the Child (1989) (Cm 1976), ratified by the UK, 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.
The UN Committee on the Rights of the Child, in its General Comment No 14 (2013) on article 3.1, analysed a childs best interests in terms of a three fold concept.
In R (SG) v Secretary of State for Work and Pensions [2015] UKSC 16, [2015] 1 WLR 1449, at paras 105 106, Lord Carnwath described the committees analysis as authoritative guidance.
The first aspect of the concept is the childs substantive right to have his best interests assessed as a primary consideration whenever a decision is made concerning him.
The second is an interpretative principle that, where a legal provision is open to more than one interpretation, that which more effectively serves his best interests should be adopted.
The third is a rule of procedure, described as follows: Whenever a decision is to be made that will affect a specific child, an identified group of children or children in general, the decision making process must include an evaluation of the possible impact (positive or negative) of the decision on the child or children concerned Furthermore, the justification of a decision must show
that the right has been explicitly taken into account
Article 7.2 of the UN Convention on the Rights of Persons with Disabilities, also ratified by the UK, provides: In all actions concerning children with disabilities, the best interests of the child shall be a primary consideration.
It is impossible to conceive that the UN Committees analysis of a childs best interests for the purposes of article 3.1 of the Convention on the Rights of the Child does not equally apply to the best interests of a disabled child for the purposes of article 7.2 of the Convention on the Rights of Persons with Disabilities.
There can be no doubt that the Secretary of States decision to suspend payment of DLA to children following their 84th day in hospital has been an action concerning children and children with disabilities, undertaken by an administrative authority with delegated legislative powers, within the meaning of both conventions.
On the evidence before the court, however, the Secretary of State has never conducted an evaluation of the possible impact of the decision on the children concerned, with the result that he has perpetrated a breach of the procedural rule which constitutes the third aspect of the concept of the best interests of children.
Unsurprisingly might one say inevitably? breach of the procedural rule has generated a violation of the substantive right of disabled children to have their best interests assessed as a primary consideration, which constitutes the first aspect of the same concept.
So the Secretary of State is in breach of international law.
But does this conclusion affect Camerons human rights?
In ZH (Tanzania) v Secretary of State for the Home Department [2011] UKSC 4, [2011] 2 AC 166, Lady Hale at para 21 quoted with approval the observation of the Grand Chamber of the ECtHR in Neulinger v Switzerland (2010) 28 BHRC 706, para 131, that the Convention cannot be interpreted in a vacuum but must be interpreted in harmony with the general principles of international law.
The Court of Appeal concluded, however, that the circumstances of the present case left no room for either of the international conventions to give a steer to the proper interpretation of Camerons rights.
Consistently with that conclusion, the Secretary of State proceeds to submit that it is in principle illegitimate to have regard to the conventions and in this regard he relies upon the recent decision of this court in the SG case cited at para 39 above.
It is clear that in the SG case the Secretary of State submitted that, while an international covenant might inform interpretation of a substantive right conferred by the Convention, it had no role in the interpretation of the parasitic right conferred by article 14 and thus, specifically, no role in any inquiry into justification for any difference of treatment in the enjoyment of the substantive rights.
But his submission was not upheld.
While Lord Reed did not expressly rule upon it, it was rejected by Lord Carnwath (paras 113 119), by Lord Hughes (paras 142 144), by Lady Hale (paras 211 218) and by Lord Kerr (paras 258 262).
Lord Carnwath, for example, pointed out at paras 117 119 that the Secretary of States submission ran counter to observations in the Court of Appeal in the Burnip case, cited at para 23 above, and indeed to the decision of the Grand Chamber in X v Austria (2013) 57 EHRR 405.
The decision of the majority in the SG case was not that international conventions were irrelevant to the interpretation of article 14 but that the UN Convention on the Rights of the Child was irrelevant to the justification of a difference of treatment visited upon women rather than directly upon children: para 89 (Lord Reed), paras 129 131 (Lord Carnwath) and para 146 (Lord Hughes).
The noun adopted by the Grand Chamber in the Neulinger case, cited above, is harmony.
A conclusion, reached without reference to international conventions, that the Secretary of State has failed to establish justification for the difference in his treatment of those severely disabled children who are required to remain in hospital for a lengthy period would harmonise with a conclusion that his different treatment of them violates their rights under two international conventions.
Were this court to allow Mr Mathiesons appeal, it would, however, be disagreeing with the conclusion not only of the Court of Appeal but also, and in particular, of the Upper Tribunal.
There is powerful authority which underlines the hesitation with which appellate courts should interfere with the conclusion of a specialist tribunal within the area of its expertise.
In AH (Sudan) v Secretary of State for the Home Department [2007] UKHL 49, [2008] AC 678, the House of Lords restored a conclusion by the Asylum and Immigration Tribunal (the AIT) that it was reasonable to expect Sudanese asylum seekers from Darfur to relocate to Khartoum.
Lady Hale at para 30, in a passage with which Lord Hope agreed at para 19, observed that it was probable that, in understanding and applying the law in their specialised field, expert tribunals will have got it right.
In MA (Somalia) v Secretary of State for the Home Department [2010] UKSC 49, [2011] 2 All ER 65, this court, adopting Lady Hales observation, restored a conclusion by the AIT that a Somali asylum seeker had failed to establish that, if returned to Mogadishu, he would be at real risk of inhuman or degrading treatment.
Furthermore, in R (Jones) v First tier Tribunal (Social Entitlement Chamber) [2013] UKSC 19, [2013] 2 AC 48, this court upheld the validity of a tribunal decision that there had been no crime of violence for the purposes of the Criminal Injuries Compensation Scheme; and Lord Carnwath observed at para 47 that the development of a consistent approach to that expression was primarily a task for the tribunal.
In this regard the Secretary of State relies in particular upon the recent decision of the Court of Appeal in Obrey v Secretary of State for Work and Pensions [2013] EWCA Civ 1584, [2014] HLR 133.
A superficial reading suggests considerable similarities between the Obrey case and the present case.
Under challenge was the rule whereby, after 52 weeks as an in patient in hospital, a person was no longer to be treated as occupying his home for the purposes of entitlement to housing benefit.
The claim was that, in breach of article 14 of the Convention when taken with A1P1, the rule indirectly discriminated against mental patients because they were more likely than other patients to remain in hospital for more than 52 weeks.
The Court of Appeal dismissed the challenge of three claimants to the Upper Tribunals conclusion that the 52 week rule was justified.
Sullivan LJ at paras 17 18, in passages with which Laws LJ specifically agreed at para 30, rejected a submission that the issue of justification under article 14 fell outside the specialist competence of the Upper Tribunal; and Sullivan LJ proceeded at paras 19 to 28 to explain that, in reaching its conclusion, the Upper Tribunal had made no error of law.
I agree that, albeit perhaps less obviously than, for example, in relation to circumstances in Khartoum or Mogadishu, the relevant chamber of the Upper Tribunal is likely to have particular insight into the existence or otherwise of justification for a social security provision.
That said, I consider that there was an error of law in the tribunals analysis of Mr Mathiesons case.
First, it focussed upon the sort of attention which Cameron had received, or might have received, at Alder Hey in connection with bodily functions.
His need for attention in connection with bodily functions had indeed been the threshold to his entitlement to the care component of DLA.
But, as explained in para 14 above, there is no restriction on how DLA, once awarded, may, on his behalf and for his benefit, be deployed; and so it by no means followed that the inquiry into justification for the suspension should so narrowly be focussed.
The focus should be upon whether the disability related needs which Cameron exhibited at home continued to exist throughout his stay at Alder Hey and whether to a substantial extent Mr and Mrs Mathieson continued to attend to them there.
In any event, however, the catalogue of care provided by them to Cameron at Alder Hey suggests that they there attended no less to his bodily functions than when he had been at home.
Second, it observed that the staff at Alder Hey would if necessary have provided for Cameron the care which Mr and Mrs Mathieson provided for him there.
As long, said the tribunal, as the general position is that the NHS will meet all in patients disability related needs (in the sense of those that might otherwise found an entitlement to DLA), the position has a rational foundation.
But what nursing staff need to do in the event that parents fail to perform the role expected of them is irrelevant.
The tribunal also held: even if there are a small number of children at the extreme end of the spectrum whose needs for attention in connection with their bodily functions cannot fully be met by the NHS and whose families may, as here, incur additional costs as a result, that is merely one facet of how adopting a bright line rule operates in practice.
Even if the number of such children has increased since the early 1990s, there is no suggestion that the number represents more than a small minority even now.
With respect to the tribunal, and putting to one side its continued focus upon bodily functions, there was a suggestion in the charities first report that the number of families which incurred additional costs as a result of their childs admission to hospital was more than a small minority.
But that it is indeed far from being a small minority has now been amply established in their second report, which was not before the tribunal.
Answer
I conclude therefore that: (a) by his decision dated 3 November 2010 to suspend payment of DLA to Cameron, the Secretary of State violated his human rights under article 14 of the Convention when taken with A1P1; there is therefore no need to consider whether he also violated Camerons human rights under article 14 when taken with article 8; in that the Secretary of State was not obliged by any provision of primary legislation to suspend the payment, he acted unlawfully in making the decision dated 3 November 2010: section 6(1) and (2) of the Human Rights Act 1998 (the 1998 Act); (b) (c) (d) accordingly the First tier Tribunal should have allowed Camerons appeal against that decision; should have set it aside; and, if only for the sake of clarity, should have substituted a decision that Cameron was entitled to continued payment of DLA with effect from 6 October 2010 to the date from which payment of it was reinstated; and this court should allow Camerons appeal and make the orders at (d) which the First tier Tribunal should have made. (e)
Mr Mathieson seeks further relief which the Secretary of State energetically opposes.
First, he seeks a formal declaration that the Secretary of State violated Camerons human rights.
The First tier Tribunal had no power to make a formal declaration and it appears that, by virtue of sections 12(4) and 14(4) of the Tribunals, Courts and Enforcement Act 2007, the jurisdiction of the Upper Tribunal and of the Court of Appeal in relation to Mr Mathiesons successive appeals was no wider than that of the First tier Tribunal.
It may well be that this court is not similarly confined but a formal declaration would seem to add nothing to the conclusions articulated in (a) and (c) of para 48 above.
Second, more controversially, Mr Mathieson asks this court to discharge its interpretative obligation under section 3 of the 1998 Act by somehow reading the provisions for suspension of payment of DLA in regulations 8(1) and 12A(1) of the 1991 Regulations so as not to apply to children.
In my view however it is impossible to read them in that way.
Anyway, as the Secretary of State points out, it may not always follow that the suspension of payment of a childs DLA following his 84th day in hospital will violate his human rights.
Decisions founded on human rights are essentially individual; and my judgment is an attempted analysis of Camerons rights, undertaken in the light, among other things, of the extent of the care given to him by Mr and Mrs Mathieson at Alder Hey.
Although the courts decision will no doubt enable many other disabled children to establish an equal entitlement, the Secretary of State must at any rate be afforded the opportunity to consider whether there are adjustments, otherwise than in the form of abrogation of the provisions for suspension, by which he can avoid violation of the rights of disabled children following their 84th day in hospital.
LORD MANCE: (with whom Lord Clarke and Lord Reed agree)
I have had the benefit of reading Lord Wilsons judgment.
I have found this appeal more finely balanced than he has done, although I have come ultimately to the same conclusion.
Courts should not be over ready to criticise legislation in the area of social benefits which depends necessarily upon lines drawn broadly between situations which can be distinguished relatively easily and objectively.
I would emphasise this as an important principle in terms rather more forceful than I think para 27 of Lord Wilsons judgment conveys.
In R (Animal Defenders International) v Secretary of State for Culture, Media and Sport [2008] UKHL 15, [2008] AC 1312, Lord Binghams speech on this point read more fully at para 33 as follows: Thirdly, legislation cannot be framed so as to address particular cases.
It must lay down general rules: James v United Kingdom (1986) 8 EHRR 123, para 68; Mellacher v Austria (1989) 12 EHRR 391, paras 52 53; R (Pretty) v Director of Public Prosecutions (Secretary of State for the Home Department intervening), [2002] 1 AC 800, para 29; Wilson v First County Trust Ltd (No 2) [2004] 1 AC 816, paras 72 74; R (Carson) v Secretary of State for Work and Pensions [2005] UKHL 37, [2006] 1 AC 173, paras 41, 91.
A general rule means that a line must be drawn, and it is for Parliament to decide where.
The drawing of a line inevitably means that hard cases will arise falling on the wrong side of it, but that should not be held to invalidate the rule if, judged in the round, it is beneficial.
In the present case, a line has been drawn in secondary legislation, the Social Security (Disability Living Allowance) Regulations 1991, regulations 8 and 10, according to which the receipt of a disability living allowance attributable to entitlement to the care component (which I shall for simplicity call DLA) is made conditional in any period upon the person not being maintained free of charge while undergoing medical or other treatment as an in patient, except as regards the first 28 days or, in the case of a person under 16, the first 84 days during which he or she is so maintained.
That is a bright line, operating by reference to hospitalisation free of charge after defined periods.
Inevitably, it is capable of being criticised as arbitrary.
The length of the specified periods cannot be expected to correspond precisely with the extent of actual needs.
They must have been seen as some form of broad allowance in respect of the initial period of adaptation from normal life to a substantial spell in hospital.
There must be patients in hospital for more and less than the specified periods of 28 and 84 days who in practice have precisely the same needs.
But the courts cannot expect the legislator to assess the appropriate length of any such period of adaptation on an individual basis or at any more precise level.
By the same token, the Secretary of State submits here that the basic criterion of hospitalisation free of charge represents a broad test, which draws a rational and readily applicable line, reflecting a view that in a National Health Service hospital the patients disability related needs will be met by the hospital.
The difficulty with that view is that it fails to reflect the modern emphasis on the importance of parents, in particular, continuing to provide assistance in connection with bodily functions while their child is undergoing long term hospitalisation.
Lord Wilson has drawn attention to this point in his paras 30 and 35.
The Upper Tribunal was, in my view, in error (in para 46) in seeing it as an answer to the point that the National Health Service would itself have had to act, if the parents had not done so.
The Upper Tribunal went on to say that: even if there are a small number of children whose needs are at the extreme end of the spectrum whose needs for attention in connection with their bodily functions cannot fully be met by the NHS and whose families may, as here, incur additional costs as a result, that is merely one facet of how adopting a bright line rule operates in practice.
Even if the number of such children has increased since the early 1990s, there is no suggestion that the number represents more than a small minority even now.
It is not evident from this passage what larger group the Upper Tribunal had in mind when speaking of a small number and a small minority.
On the evidence before us, a significant group of children with severe disability needs is adversely affected by the present regulations, and continues to receive in hospital attendance in respect of disability by home carers such as parents no less than when at home.
Again, I can refer to Lord Wilsons judgment, paras 31 to 36 and to his conclusion to that effect in para 47.
The absence of any restriction on the use of DLA, once awarded, cannot of itself bear on, or support, Mr Mathiesons case that the withdrawal of DLA during any period of hospitalisation extending beyond 84 days was unjustified.
The grant of DLA is linked to the existence of disability related needs.
It is plainly legitimate to make its continuation or withdrawal conditional upon the continuation of the same needs.
Here, however, the evidence indicates that the same needs, in terms of parental attention, existed and were met during Camerons hospitalisation after, as before, the expiry of the 84 day period.
But, in order to continue to provide this parental attention, the parents had, necessarily, to incur ancillary expenses and loss, such as extra travel and meal costs and loss of earnings.
The Secretary of State points out that other social benefits, in particular child benefit and child tax credit, remained in payment throughout Camerons hospitalisation, and submits that they would not be required in the same way during hospitalisation.
In particular, the childs meals would be provided in hospital.
The Upper Tribunal made the same point in its para 48.
Bearing in mind that this appeal is about disability related needs, and the payments made in respect of them, this argument, essentially one of swings and roundabouts, is not to my mind particularly attractive.
Had it been fully developed and been shown to be significant on the facts, I might nevertheless have given it more weight.
As it is, I do not consider that it can counterbalance the prima facie conclusion that the withdrawal of DLA after 84 days was not justified in Camerons case by any matching reduction in his needs for disability related attention by his parents.
In the light of the above, I turn to consider whether Cameron was discriminated against on grounds of status within the meaning of article 14 of the Convention.
To my mind, a child hospitalised free of charge (essentially in a NHS, rather than private, hospital) for a period longer than 84 days can be regarded as having a different status to that of a child not so hospitalised.
The focus shifts on that basis to the issue of justification for the difference in treatment, and that I have already effectively covered.
The difference in treatment was not justified, because on the evidence Cameron continued to have disability related needs to which his parents were expected to continue to attend, and to meet which substantial expenditure was also necessarily incurred.
With regard to the appropriate remedy to give effect to these conclusions, I agree that this should be tailor made and limited to Camerons particular position, by simply deciding that the decision in his case cannot stand and that he was entitled to continued payment of DLA after 84 days.
The Secretary of State may be able to refine the criteria for the receipt or cessation of DLA in other cases in a manner which avoids the inequity involved in its withdrawal in respect of those in Camerons position.
We cannot address in general declaratory terms the position of children receiving DLA and hospitalised for longer than 84 days, as Mr Mathieson invites us to do.
| UK-Abs | Cameron Mathieson was born on 19 June 2007 and sadly passed away on 12 October 2012.
He was diagnosed with cystic fibrosis and Duchenne muscular dystrophy soon after he was born, and his parents went to great lengths to meet his exceptional and complex care needs during his short life [3].
They received, on his behalf, the state benefit known as Disability Living Allowance (DLA).
Camerons disabilities were so severe that he was entitled to the highest rates of the care component and the higher rate of the mobility component of DLA [8 10].
On 4 July 2010 Cameron was admitted to Alder Hey Hospital in Liverpool for symptoms of chronic bowel obstruction.
He remained there as an inpatient until 4 August 2011 [4].
During his stay one or other of his parents was present in the hospital at all times.
They remained his primary caregivers, including administering twice daily physiotherapy, giving nebulised antibiotics, feeding him via a nasogastric tube, and changing his stoma bag up to eight times a day [5].
The additional costs incurred by the family over the duration of Camerons hospital admission, including the costs of travel from their home in Warrington, amounted to around 8,000 [6].
Regulations 8(1), 10, 12A and 12B of the Social Security (Disability Living Allowance) Regulations 1991 (the 1991 Regulations) together provide that a child under 16 will cease to receive DLA after the 84th day of his or her admission as an inpatient in an NHS hospital [12].
In the case of a person aged 16 or over, DLA is withdrawn after the 28th day.
On 3 November 2010 the Secretary of State decided that Camerons DLA should be suspended effective from 6 October 2010 on grounds that he had been an inpatient at Alder Hey for more than 84 days [13].
The Mathieson family continued to receive other state benefits including child benefit, child tax credit, and income support [15].
However, the suspension of DLA from October 2010 to August 2011 amounted to a loss of about 7,000 [14].
Cameron challenged the Secretary of States decision in the First tier Tribunal (Social Security and Child Support), which dismissed his appeal on 10 January 2012.
After Cameron died, his father continued the proceedings in his stead [2].The Upper Tribunal (Administrative Appeals Chamber) dismissed Mr Mathiesons further appeal on 15 January 2013, as did the Court of Appeal on 5 February 2014.
The Supreme Court unanimously allows the appeal, sets aside the Secretary of States decision and substitutes the decision that Cameron Mathieson was entitled to continued payment of DLA with effect from 6 October 2010 [48].
Lord Wilson (with whom Lady Hale, Lord Clarke and Lord Reed agree) gives the leading judgment.
Lord Mance (with whom Lord Clarke and Lord Reed agree) gives a concurring judgment.
Camerons father, Mr Mathieson, in taking forward the appeal contended that the 84 day rule breached Article 14 of the European Convention on Human Rights (ECHR), which 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 [16].
It was conceded by the Secretary of State that the provision of DLA falls within the scope of Article 1 of Protocol 1 ECHR, which protects the peaceful enjoyment of possessions [18].
Therefore, the government is obliged to administer DLA without discrimination on any of the identified grounds [17].
The ground relied upon by Mr Mathieson was other status, namely that of being a severely disabled child in need of lengthy inpatient hospital treatment [19].
Lord Wilson concludes that such status falls within the grounds of discrimination prohibited by Article 14: disability has been found to be a prohibited ground, and discrimination between disabled persons with different needs equally engages Article 14 [23].
Lord Mance, in his concurring judgment, prefers to formulate the relevant status as being that of a child in an NHS hospital for over 84 days, rather than a private hospital [60].
Lord Wilson goes on to consider whether the difference in treatment in withdrawing DLA from children in hospital for longer than 84 days was justified, or whether it amounted to unlawful discrimination.
A difference in treatment on a prohibited ground will be justified if it pursues a legitimate aim and there is a reasonable relationship of proportionality between the means employed and the aim sought to be realised [24].
In the area of welfare benefits, a court will not interfere with the governments approach unless the rule applied is manifestly without reasonable foundation [26].
Neither will a bright line rule be invalidated because hard cases fall on the wrong side of it, provided that the rule is beneficial overall [27].
In this case, the governments aim in imposing the 84 day rule was to avoid overlapping provision to meet disability related needs [28].
However, the court was presented with evidence showing that the disability related needs of children in hospital are far from being entirely met by the NHS.
Since the 1980s, parental participation in the care of a child in hospital has been increasingly encouraged and ultimately become the norm [30].
An online survey of families with disabled children showed that almost all carers provide the same or a greater level of care when their child is in hospital rather than at home, and bear increased costs [33].
The Citizens Advice Bureau confirmed that parents are positively required to take an active part in their childs medical management in hospital, and that financial difficulties arise due to expenditure on travel, meals and childcare for siblings, together with loss of parental earnings [35].
This evidence (to which the Secretary of State did not adduce any material in response) demonstrated that the Mathiesons situation was not a hard case; rather, the personal and financial demands made on the substantial majority of parents with disabled children in hospital are at least no less than when they care for them at home [36].
Therefore, state provision for disabled children in hospital is not overlapping to an extent which justifies the suspension of DLA after the 84th day.
This conclusion is in harmony with the rights afforded to Cameron under international law by the UN Convention on the Rights of the Child and the UN Convention on the Rights of Persons with Disabilities [44].
Although Mr Mathieson invites the court to disapply the provisions for the suspension of DLA under the 1991 Regulations in the case of children, the court declines to do so, leaving it to the Secretary of State to decide what measures should be taken to avoid the violation of the rights of disabled children such as Cameron following their 84th day in hospital [49].
|
The appellant, Paul Macklin, was convicted after trial on 26 September 2003 of a charge of possession of a handgun in contravention of section 17 of the Firearms Act 1968, and a further charge of assaulting two police officers by repeatedly presenting the handgun at them.
The only issue in dispute at his trial was whether he was the person who had been pursued by the officers after an incident to which they had been called, and during that pursuit had turned repeatedly and pointed the gun at them.
At the trial, the appellant was identified by both of the officers.
One gave evidence implying that he recognised the appellant at the time of the incident.
The other had identified the appellant from a selection of photographs shown to him after the incident.
Their evidence was challenged at the trial in cross examination by counsel for the appellant, and in counsels address to the jury.
In his directions to the jury, the judge warned them about the risk that visual identification evidence might be unreliable.
In accordance with the practice at the time, he gave no directions specifically concerning the risks which might be associated with the identification of an accused person in court.
Some years later, following developments in practice in relation to the
disclosure of unused material, the Crown disclosed to the appellant a quantity of material which had not been disclosed at the time of the trial.
This included statements given to the police by a number of witnesses who had seen part of the pursuit of the gunman by the officers, or had seen the car in which he escaped.
One of those witnesses was recorded as giving a description of the gunman which was inconsistent with the appearance of the appellant.
Two other witnesses were recorded as having failed to identify the appellant when shown his photograph.
It was also disclosed that the police had found fingerprints belonging to someone other than the appellant inside the car, and that the person identified by the fingerprints had a criminal record.
In the light of these disclosures, in 2012 the appellant was granted leave to appeal against his conviction on three grounds.
The first ground was based on the Crowns failure to disclose material evidence to the defence.
The second ground was based on the Crowns leading and relying on the evidence of dock identifications by the police officers, without the other material evidence having been disclosed, and without the officers having previously participated in an identification parade.
The third ground was based on a contention that the judge had misdirected the jury in relation to the identification evidence, in that he had failed to warn the jury in relation to the dangers of dock identification evidence, particularly where no identification parade had been held.
The first and second of these grounds of appeal raised devolution issues, as defined in paragraph 1 of Schedule 6 to the Scotland Act 1998 (the 1998 Act).
In other words, it was contended that, in the respects identified in those grounds of appeal, the Lord Advocate, who was a member of the Scottish Government and the person responsible for the conduct of the prosecution, had acted in a manner which was incompatible with the appellants Convention rights under article 6(1) of the European Convention on Human Rights.
On 11 September 2013 the High Court of Justiciary refused the appeal, for reasons which were explained in an opinion delivered by Lord Mackay of Drumadoon: [2013] HCJAC 80; 2013 SCCR 616.
The appellant was subsequently granted permission to appeal to this court under section 288AA of the Criminal Procedure (Scotland) Act 1995 (the 1995 Act), inserted by section 36 of the Scotland Act 2012 (the 2012 Act).
The jurisdiction of this court
It is important to understand the nature of the jurisdiction exercised by this court under section 288AA of the 1995 Act.
The court does not sit as a criminal appeal court exercising a general power of review.
Subject to a small number of specified exceptions, every interlocutor and sentence pronounced by the High Court in appeals in solemn proceedings is, by statute, final and conclusive and not subject to review by any court whatsoever: 1995 Act, section 124(2).
One exception enables the High Court to review its own decisions on references by the Scottish Criminal Cases Review Commission.
The other exceptions enable this court to determine compatibility issues (an expression which I shall explain shortly) on references under section 288ZB of the 1995 Act (inserted by section 35 of the 2012 Act) and appeals under section 288AA, and to determine devolution issues on appeals under paragraph 13(a) of Schedule 6 to the 1998 Act.
The concept of a compatibility issue was introduced by section 34 of the 2012 Act, which inserted a new section 288ZA into the 1995 Act.
That section defines a compatibility issue as a question arising in criminal proceedings as to whether a public authority has acted (or proposes to act) in a way which is made unlawful by section 6(1) of the Human Rights Act 1998, or in a way which is incompatible with EU law, or whether an Act of the Scottish Parliament or any provision of such an Act is incompatible with any of the Convention rights or with EU law.
Section 36(4) of the 2012 Act amended the definition of devolution issues in paragraph 1 of Schedule 6 to the 1998 Act so as to exclude compatibility issues from its scope.
One consequence of these provisions is that some questions which fell within the definition of devolution issues before the 2012 Act came into force no longer fall within that definition, but fall instead within the definition of compatibility issues.
Another consequence is that some questions which, before the 2012 Act came into force, did not fall within the definition of devolution issues, now fall within the definition of compatibility issues.
The present case illustrates the point.
As I have explained, the first and second grounds of appeal before the High Court raised questions as to the compatibility of the conduct of the prosecution with the appellants Convention rights.
Under the 1998 Act as it stood prior to amendment by the 2012 Act, those questions constituted devolution issues.
Under section 288ZA of the 1995 Act, on the other hand, those questions would be classified as compatibility issues.
The appellants third ground of appeal, concerning an alleged misdirection by the trial judge, did not raise a devolution issue, since the trial judge was not a member of the Scottish Government.
Under the provisions introduced by the 2012 Act, on the other hand, a direction by a judge may raise a compatibility issue, if there is a question whether the judge has acted in a way which was incompatible with the appellants Convention rights.
In order to address potential problems arising from the differences between the system operating before the 2012 Act came into force and the system operating afterwards, transitional provisions were introduced by the Scotland Act 2012 (Transitional and Consequential Provisions) Order 2013 (SSI 2013/7).
Article 2 of the Order introduced the concept of a convertible devolution issue, defined as a question arising in criminal proceedings before the relevant date which (a) is a devolution issue, (b) would have been a compatibility issue had it arisen on or after that date and (c) had not been finally determined before the relevant date.
The relevant date was 22 April 2013, when the relevant provisions of the 2012 Act came into force.
As at that date, the devolution issues raised by the appellants first and second grounds of appeal had not been finally determined.
As I have explained, those issues would have been compatibility issues had they arisen on or after that date.
It follows that those questions are convertible devolution issues.
By virtue of article 3 of the order, convertible devolution issue became compatibility issues on the relevant date (subject to exceptions which do not apply in the present case).
The questions raised by the appellant as to the compatibility of the conduct of the prosecution with his Convention rights are therefore compatibility issues.
No compatibility issue arises, however, in relation to the directions given by the trial judge, since his directions did not give rise to a devolution issue, and therefore did not give rise to a convertible devolution issue.
Finally, in relation to jurisdiction, it is important to understand the limited nature of this courts powers on an appeal for the purpose of determining a compatibility issue.
In terms of section 288AA(2) of the 1995 Act, the powers of the Supreme Court are exercisable only for the purpose of determining the compatibility issue, that is to say, in the present case, the question whether the Lord Advocate has acted in a way which is made unlawful by section 6(1) of the Human Rights Act.
When it has determined the compatibility issue, the Supreme Court must remit the proceedings to the High Court: section 288AA(3).
The present appeal
The compatibility issue raised in the present appeal concerns the question whether the Crown acted incompatibly with the appellants Convention rights under article 6(1) by failing to disclose material evidence to the defence and by leading and relying on the evidence of identification by the police officers, without the other material evidence having been disclosed, and without the officers having previously participated in an identification parade.
Counsel for the appellant emphasised in his submissions that these were not two separate complaints, about non disclosure on the one hand, and dock identification on the other hand.
He was not arguing that the appellants Convention rights had been violated by the dock identification or the judges directions.
His submission was that these aspects of the proceedings had cumulatively resulted in a violation by the prosecution of article 6(1).
The Crowns reliance on identification of the appellant in court, without an earlier identification parade, formed part of the context in which the significance of the non disclosure of the other material bearing on identification had to be assessed.
As the European Court of Human Rights explained in Edwards v United Kingdom (1992) 15 EHRR 417, the question whether a failure of disclosure has resulted in a breach of article 6(1) has to be considered in the light of the proceedings as a whole, including the decisions of appellate courts.
This means that the question has to be approached in two stages.
First, it is necessary to decide whether the prosecution authorities failed to disclose to the defence all material evidence for or against the accused, in circumstances in which a failure to do so would result in a violation of article 6(1).
If so, the question which then arises is whether the defect in the trial proceedings was remedied by the subsequent procedure before the appellate court.
That was held to have occurred in Edwards, where the Court of Appeal had considered in detail the impact of the new information on the conviction.
The European court observed that it was not within its province to substitute its own assessment of the facts for that of the domestic courts, and, as a general rule, that it was for those courts to assess the evidence before them.
Those observations were repeated in Mansell v United Kingdom (2003) 36 EHRR CD 221, where the non disclosure of material evidence in the trial proceedings was again held to have been remedied by the Court of Appeals examination of the impact of the non disclosure upon the safety of the conviction.
That approach was translated into a domestic context in the case of McInnes v HM Advocate [2010] UKSC 7; 2010 SC (UKSC) 28.
As Lord Hope explained at paras 19 and 20, two questions arise in a case of this kind to which a test must be applied.
The first question is whether the material which has been withheld from the defence was material which ought to have been disclosed.
The test here is whether the material might have materially weakened the Crown case or materially strengthened the case for the defence.
If that test is satisfied, the question then arises as to the consequences of the non disclosure.
The test here is whether, taking all the circumstances of the trial into account, there is a real possibility that the jury would have arrived at a different verdict.
In the present case, it was conceded by the Crown before the High Court that the statement given by the witness who had given a description inconsistent with the appellants appearance, and the statements given by the two witnesses who had failed to identify the appellant from a photograph, ought to have been disclosed.
In concluding that the Crown had not been under a duty to disclose the remainder of the undisclosed statements, the court stated that, in their opinion, there was nothing in any of the statements in question that would either have weakened the Crown case or strengthened the defence case.
Similarly, in concluding that the Crown had not been under a duty to disclose the fingerprint evidence, the court stated that, in their opinion, it did not constitute evidence which materially weakened the Crown case or materially strengthened the defence case.
Those conclusions reflected the terms of the first test in McInnes.
The court explained in detail their reasons for reaching those conclusions on the facts of the case.
The High Court then considered the significance of the failure to disclose the statements which should have been disclosed.
In relation to the statement given by the witness whose description of the gunman was inconsistent with the appellants appearance, they stated that they were not persuaded that leading the evidence of that witness would have given rise to a real possibility that the jury would have returned a different verdict.
In relation to the statements given by the two witnesses who had failed to identify the appellant from a photograph, they concluded that, in the context of the evidence as whole, there was no real possibility that the evidence of the witnesses in question would have caused the jury to come to a different view as to the identity of the gunman.
Those conclusion reflected the terms of the second test in McInnes.
Detailed reasons were given for reaching those conclusions.
They were based on a review of the entirety of the evidence, including the identification evidence given in court by the police officers.
The court also considered separately the question whether the Crowns leading of the identification evidence from the police officers had in itself resulted in the Lord Advocates acting incompatibly with article 6(1), that question having been raised before them as a distinct ground of appeal.
After reviewing the relevant circumstances, the court concluded that the leading of the evidence had not been a violation of article 6(1).
Before this court, counsel for the appellant challenged the High Courts conclusion that some of the undisclosed material did not require to be disclosed under article 6(1).
In that connection, he submitted that, under current Crown practice, all of the material would have been disclosed.
The practice of the Crown, whether past or present, is not however the measure of the requirements of article 6(1).
To say, as counsel submitted, that if material would be disclosed now, it should have been disclosed then, is a non sequitur.
The question is to be determined by applying the first test laid down in McInnes.
The High Court applied that test.
Counsel also challenged the High Courts conclusion as to the significance of the admitted failures in disclosure.
He submitted that, although the High Court had framed their analysis and their conclusions in terms of the second test laid down in McInnes, their conclusions were so manifestly wrong that they had not in reality applied that test.
Counsel accepted, as a general proposition, that this court had no jurisdiction to review how the High Court applied the test, but submitted that the position was otherwise where the High Court had merely paid lip service to the test, and had reached so absurd a conclusion that the test could not in reality have been applied.
In that connection, he submitted that, comparing the facts of the present case with those of the case of Holland v HM Advocate [2005] UKPC D 1; 2005 SC (PC) 3, the non disclosure had been of less significance in Holland, but a violation of article 6(1) had nevertheless been found by the Judicial Committee in that case.
In McInnes, Lord Hope explained at para 18 that the question for the Supreme Court, where there has been a failure in the duty of disclosure, is to determine the correct test for the determination of the appeal.
It does not, he said, extend to the question whether the test, once it has been identified, was applied correctly.
Lord Hope explained that that followed from the statutory finality of the High Courts decision under section 124(2) of the 1995 Act, subject to an appeal against a determination of a devolution issue.
The question as to what was the correct test formed part of the devolution issue, but The application of the test to the facts of the case was a matter that lay exclusively within the jurisdiction of the appeal court.
Lord Brown similarly stated at para 34 that this court could decide whether the High Court adopted the correct legal test but not whether it then applied that test correctly on the facts.
The other members of the court agreed.
Mutatis mutandis, those dicta apply equally to the determination of a compatibility issue.
by Lord Hope later in his judgment, at para 25: In the present case, counsel for the appellant relied on an observation made As I have already observed, it is not for this court to say whether the test was applied correctly.
But it is open to it to examine the reasons given by the appeal court for concluding that there had not been a miscarriage of justice to see whether they show that it applied the correct test.
In that passage, Lord Hope was not qualifying what he had earlier said in para 18.
As the earlier part of para 25 makes clear, he was addressing the fact that the High Court had not, in that case, purported to apply the test subsequently laid down in McInnes, but had instead applied the test, applicable generally in solemn appeals, of whether there had been a miscarriage of justice.
In applying that test, the High Court had asked itself whether there was a real risk of prejudice to the defence (see McInnes at para 16).
The question which Lord Hope was addressing in para 25 was whether, in formulating the test in that way, the High Court had asked itself the wrong question.
Lord Hope answered the question by examining the High Courts reasoning, from which it appeared that, although the courts description of the test was incomplete, the test that it applied was the correct one.
Counsel for the Crown conceded that this court might have jurisdiction to intervene if the High Court merely purported to apply the McInnes test but did not actually apply it.
Short of some exceptional case, however, it is difficult to envisage circumstances in which an argument that the High Court had identified the correct test, but had failed to apply it, would be distinguishable from an argument that the test had not been applied correctly.
The latter argument is one that this court cannot entertain.
It is important that that principle, which gives effect to the finality accorded to the High Courts decisions, should not be undermined by permitting challenges to the correctness of the High Courts application of the McInnes test to be dressed up in the guise of arguments that it identified the test but failed to apply it.
In the present case, it is clear from its reasoning that the High Court not only identified the correct test but also applied it to the circumstances of the case.
The suggested comparison with the decision in Holland is of no assistance.
In the first place, the Judicial Committee was not in that case performing the same exercise as this court in the present appeal.
The High Court had not in that case applied the McInnes test: the case preceded McInnes by several years.
Furthermore, the Judicial Committee proceeded in that case on the basis that the High Court, in considering the impact of non disclosure and dock identification separately at different hearings before differently constituted courts, had failed to consider the cumulative impact of both aspects of the trial upon the fairness of the proceedings, and that that question must therefore be considered for the first time by the Committee itself: see para 43.
The approach adopted by the Judicial Committee reflected those circumstances, neither of which is present in this appeal.
Moreover, and in any event, contrasting the conclusions reached by different panels of judges as to the significance of failures to disclose different evidence in the circumstances of different cases tells one nothing about the correctness of either decision, even if that were a matter which this court could properly assess.
I would dismiss the appeal.
LORD GILL: (with whom Lord Neuberger, Lady Hale, Lord Sumption, Lord Hughes and Lord Toulson agree)
The conviction
On 26 September 2003 the appellant was convicted at Aberdeen High Court of a contravention of section 17 of the Firearms Act 1968 and of assault on two police officers by repeatedly presenting a handgun at them.
The evidence of identification
The agreed facts were that the police officers, Sergeant Henry Ferguson and Constable Simon Reid, chased a suspect on foot from Printfield Terrace to Hilton Terrace, Aberdeen.
Three times during the chase the suspect confronted them and pointed a handgun at them.
The incident occurred in broad daylight just after midday in the month of May. The suspect had not disguised his face in any way.
The suspect escaped in a black Ford Sierra.
It was abandoned nearby.
At the trial the stark issue was the identification of the gunman.
Sergeant Ferguson identified the appellant in the dock.
He said that at the time of the incident he thought that the suspects face was familiar, but he could not say who he was.
When he returned to Police Headquarters he made enquiries about the suspects identity.
He had a conversation with a colleague to prod his memory.
In cross examination he was asked if he had any doubt about his identification.
He replied No doubt whatsoever.
Constable Reid too made a dock identification.
He confirmed that about two hours after the incident at Police Headquarters he had been shown photographs and had identified the person that he thought had been the gunman.
In cross examination he was asked if there was any possibility that he had identified the wrong person in court.
He replied no.
He was asked if he was sure about that.
He replied Yes.
Two witnesses said that the man in the dock was not the gunman.
The first, Michael Reid, was said by the trial judge in his report to have been nervous.
The second, John Ronald, was a criminal with a serious record of crimes of dishonesty.
He prevaricated in evidence as to whether he knew the appellant.
There were various discrepancies in his three police statements.
The appellant himself said that at the material tine he had been at the home of Adrian Martin and his mother, neither of whom were cited by the defence.
He agreed that on the morning after the incident he had checked in at a hotel in Aberdeen under a false name and was arrested there on the following day.
One witness, Ian Whyte, supported the alibi.
His credibility was undermined by his criminal record and by his having visited the appellant in prison twice before he gave his evidence.
Subsequent disclosure
In 2005 the Judicial Committee of the Privy Council allowed two appeals from the High Court in which the question of non disclosure of evidence by the Crown was a material issue (Holland v HM Advocate 2005 SC (PC) 3; Sinclair v HM Advocate 2005 SC (PC) 28.
In consequence of those decisions and the change in Crown practice to which they led, the Crown disclosed the fact that a fingerprint of Thomas Pirie, a criminal with a serious record, had been found on the internal rear view mirror of the abandoned Sierra.
The Crown also disclosed the statements of six individuals who had seen the incident or the abandonment of the car.
The decision of the High Court
The appellant appealed on the grounds inter alia that the Crown had failed to disclose material evidence; and that by leading and relying on the evidence of the dock identifications without having disclosed that evidence and without having held an identification parade, the Lord Advocate had infringed the appellants rights under article 6.
The High Court held that the fingerprint evidence and three of the now disclosed statements neither materially weakened the Crown case nor materially strengthened the defence case.
It accepted that the other three statements should have been disclosed, but held that disclosure of them would not have given rise to a real possibility of a different verdict.
It concluded that the act of the Lord Advocate in leading dock identifications from the two police officers without there having been an identification parade did not infringe article 6.
The present appeal
The issues raised in this appeal were raised before the High Court as devolution issues (Scotland Act 1998, section 57(2); Schedule 6, paragraph 13(a)).
On 22 April 2013 when the relevant provisions of the Scotland Act 2012 came into force, those issues were still unresolved.
They therefore became convertible devolution issues (Scotland Act 2012 (Transitional and Consequential Provisions) Order 2013 (SSI 2013/7)) and by virtue of section 36(6) of the 2012 Act, which added section 288AA to the Criminal Procedure (Scotland) Act 1995 (the 1995 Act), fell to be dealt with as compatibility issues as defined in section 288ZA of the 1995 Act (1995 Act, sections 288AA(1), (2) and (4)).
As such, they are within the jurisdiction of this court, which can be exercised only on compatibility issues (1995 Act, section 288AA).
Non disclosure
It was for the High Court to assess whether all or any of the undisclosed evidence might materially have weakened the Crown case or materially have strengthened the defence case (McDonald v HM Advocate 2010 SC (PC) 1, at para 50).
The High Court held, as the Crown had conceded, that the evidence in three of the statements met that test.
The next question was whether the effect of the non disclosure of those statements had been to deprive the appellant of a fair trial.
It was for the High Court to decide, on a consideration of all of the circumstances of the trial, whether there was a real possibility that the jury would have arrived at a different verdict if the undisclosed evidence had been before it.
It decided that there was no such possibility.
On the face of it, therefore the High Court applied both parts of the test set by this court in McInnes v HM Advocate 2010 SC (UKSC) 28.
On the first part of the McInnes test counsel for the appellant submitted that since in current Crown Office practice all of the undisclosed evidence would be disclosed, that was proof that the appellants article 6 rights had been infringed.
That argument is specious.
The current practice of the Crown is to make an extensive disclosure of evidence, some of which may be of little assistance to either prosecution or defence.
The fact that any piece of evidence is disclosed does not mean that its non disclosure would be a breach of article 6.
As to the consequences of non disclosure, counsel submitted that the High Court had failed to apply the second part of the McInnes test.
I do not agree.
The Crowns submission to the High Court on this point was founded expressly on the McInnes test (Macklin v HM Advocate 2013 SCCR 616, at paras 24 and 25).
The High Court considered the case in that context and, reciting the words of the test, made clear that it had applied it (at paras 33, 36 and 37).
We therefore have to consider the scope of this courts jurisdiction in this appeal.
Every interlocutor and sentence pronounced by the High Court under Part VIII of the Criminal Procedure (Scotland) Act 1995 is final and conclusive and is not subject to review in any court whatsoever, save for certain exceptional cases, one of which is the taking of an appeal of this nature (1995 Act, section 124(2)).
The question whether the High Court applied the correct test is a proper question for the consideration of this court, being a compatibility issue; but the question whether the High Court applied the test correctly is not.
That is now settled law (McInnes, at paras 18 and 25).
Nevertheless, counsel for the appellant submitted that in McInnes Lord Hope of Craighead had qualified his general statement of the law to that effect by the following words: it is not for this court to say whether the test was applied correctly.
But it is open to it to examine the reasons given by the appeal court for concluding that there had not been a miscarriage of justice to see whether they show that it applied the correct test. (para 25)
Counsel wrested these words from Lord Hopes opinion to support the proposition that even if the High Court says that it has applied the McInnes test, this court can examine exactly how it did so and may decide that it paid only lip service to it if its conclusions on the evidence are manifestly wrong.
I do not accept that proposition.
The meaning of Lord Hopes dictum, to my mind, is perfectly clear.
Lord Hope was referring only to this courts exercise of its limited jurisdiction in a question under paragraph 13(a); that is to say its decision, from an examination of the High Courts reasons, whether the High Court identified and applied the correct test.
In this case I am in no doubt that it did.
On that view, the High Courts conclusions on the significance of the non disclosure in relation to the verdict do not arise for our consideration.
Counsel for the Crown conceded that this court would have jurisdiction if the High Court had failed to apply the McInnes test despite having said that it had applied it.
That concession, in my view, does not open the door to appeals based on the contention that the High Court failed to apply the McInnes test correctly.
I agree with Lord Reed (para 22) that the finality of the decisions of the High Court would be undermined if challenges to the correctness of its application of the McInnes test were to be dressed up in the guise of arguments that it had identified the test but failed to apply it.
Dock identification
Counsel accepted that dock identification is not per se incompatible with article 6.
He did not put dock identification forward as a free standing compatibility issue.
He submitted that the fact that the police officers had not taken part in an identification parade, taken together with the undisclosed evidence, led to the inevitable conclusion that, looked at as a whole, the trial was unfair.
For this submission counsel for the appellant took as his template the exercise in evidential review carried out by Lord Rodger of Earlsferry in Holland v HM Advocate (supra).
In Holland both non disclosure and dock identification were in issue.
There were two points on which the Crown had withheld disclosure of material evidence.
In Holland the two issues in the case had been dealt with in separate hearings by differently constituted divisions of the High Court.
In Lord Rodgers view the question was whether, looked at as a whole, the appellants trial was fair in terms of article 6 (at para 77).
On that view, he considered that it was necessary for the Judicial Committee to assess the evidence overall.
In the result, the Judicial Committee held that there had been a breach of article 6.
Counsel compared the evidence in Holland with the evidence in this case and, taking Lord Rodgers approach, submitted that we too should look at the entirety of the evidence and should conclude from it that the appellant had not had a fair trial.
In considering two specific aspects of the evidence in Holland Lord Rodger said that since counsel for the defence had been unaware of the undisclosed evidence, he could not say that counsels inability to refer to it in cross examination might not possibly have affected the jurys verdict (paras 82 and 83).
Views differ on the interpretation of those words.
They seem clear to me.
But that point is now history.
Whatever the Judicial Committee considered to be the test in Holland, this court has drawn a line under the matter by fixing the test of real possibility, a test with which Lord Rodger himself came to agree (McInnes, at para 30).
I conclude therefore that counsels reliance on Holland is misconceived.
I reject the case for the appellant on this issue.
Conclusion
I agree that the appeal should be refused.
| UK-Abs | In 2003 the appellant, Mr Macklin, was convicted of possession of a handgun in contravention of section 17 of the Firearms Act 1968, and a further charge of assaulting two police officers by repeatedly pointing the handgun at them.
The issue in dispute at his trial was whether he was the person who had been pursued by the officers and who had pointed the gun at them.
He was identified at trial by both officers.
One of them had recognised the appellant at the time of the incident, and the other had identified him from a selection of photographs shortly afterwards.
Their evidence was challenged in cross examination.
The judge warned the jury about the risk that visual identification evidence might be unreliable, but gave no specific directions concerning the risks associated with the identification of an accused person in court.
Some years later the Crown disclosed material which had not been disclosed at the trial, including statements given to the police by witnesses.
One witness gave a description inconsistent with the appellants appearance.
Two witnesses failed to identify the appellant when shown his photograph.
It was also disclosed that the police had found fingerprints belonging to someone else in the car, and that that person had a criminal record.
In 2012 the appellant was granted leave to appeal against his conviction, on the basis of (i) the Crowns failure to disclose material evidence; (ii) the Crowns leading and relying on dock identifications by the police officers, without having disclosed material evidence and without the officers having participated in an identification parade; and (iii) a contention that the judge had misdirected the jury in failing to warn them of the dangers of dock identification evidence.
The appellant argued that, with respect to the first two matters, the Lord Advocate had acted in a manner incompatible with article 6(1) of the European Convention on Human Rights.
The appellants appeal was refused by the High Court of Justiciary.
He was subsequently granted permission to appeal to the Supreme Court.
The Supreme Court unanimously dismisses Mr Macklins appeal.
Lord Reed gives the leading judgment.
Lord Gill gives a concurring judgment.
The other justices agree with both judgments.
Lord Reed explains that the jurisdiction of the Supreme Court under section 288AA of the Criminal Procedure (Scotland) Act 1995 is not to sit as a criminal appeal court exercising a general power of review, but to determine compatibility issues, which are questions as to whether a public authority has acted unlawfully under section 6(1) of the Human Rights Act 1998 or has acted incompatibly with EU law, or whether a provision of an Act of the Scottish Parliament is incompatible with Convention rights or EU law [5 7].
As a consequence of section 34 of the Scotland Act 2012, which introduced compatibility issues into the 1995 Act by inserting a new section 288ZA, and the Scotland Act 2012
(Transitional and Consequential Provisions) Order 2013, the first two grounds raised by the appellant were converted from being devolution issues to compatibility issues.
However the third ground, which concerns the directions given by the trial judge, did not give rise to a devolution issue which could be converted into a compatibility issue [10].
The question of whether a failure of disclosure has resulted in a breach of article 6(1) ECHR has to be considered in the light of the proceedings a whole, including the decisions of appellate courts.
This involves consideration firstly of whether the prosecution failed to disclose all material evidence, in circumstances in which such a failure would result in a violation of article 6(1), and secondly whether the defect in the trial procedures was remedied by the procedure before the appellate court [13].
As held in McInnes v HM Advocate [2010] UKSC 7, on the question of whether withheld material should have been disclosed, the test is whether the material might have materially weakened the Crowns case or materially strengthened the defences case.
Where this is satisfied, the test concerning the consequences of the non disclosure is whether, taking all the circumstances of the trial into account, there is a real possibility that the jury would have arrived at a different verdict [14].
The Crown conceded before the High Court of Justiciary that the statement of the witness who had given a description inconsistent with the appellants appearance, and the statements given by the witnesses who failed to identify the appellant when shown his photograph, should have been disclosed.
The High Court applied the first test in McInnes to the remaining withheld evidence and explained its reasons for concluding that the material did not require to be disclosed.
In relation to the material which should have been disclosed, the High Court then applied the second test in McInnes and explained its reasons for concluding that there was no real possibility that the jury would have arrived at a different verdict [15 16].
The High Court also considered whether the Crowns leading of the identification evidence from the police officers had resulted in the Lord Advocates acting incompatibly with article 6(1) and concluded that it had not [17].
The fact that under current Crown practice, the withheld material would have been disclosed does not lead to the conclusion that the non disclosure breaches article 6(1); it is the first of the McInnes tests which must be applied [18].
In determining a compatibility issue, applying Lord Hopes dicta in McInnes, the Supreme Court can decide whether the High Court has adopted the correct test, but not whether it then applied that test correctly to the facts [20].
It was conceded that the Supreme Court might have jurisdiction to intervene if the High Court merely purported to apply the McInnes test but did not actually apply it.
But this does not permit examination of whether the test was correctly applied to the facts.
This principle gives effect to the finality accorded to the High Courts decisions.
It should not be undermined by permitting dressed up challenges to the application of the correct test [22].
In the present case it is clear from the reasoning of the High Court that it identified the correct test and also applied it to the circumstances of the case.
Comparison with Holland v HM Advocate [2005] UKPC D 1 does not assist, as the Judicial Committee of the Privy Council was performing a different exercise and its decision reflected the particular circumstances of that appeal [23].
Mr Macklins appeal should therefore be dismissed [24].
Lord Gill gives a concurring judgment, finding that the High Court identified and applied the correct test, and that its conclusions on the significance of the non disclosure in relation to the verdict do not fall within this Courts jurisdiction [25 49].
|
This appeal is about an alleged corporate raid.
According to the judgment of Mann J, at para 224, this expression is a loose, convenient and pejorative shorthand which can be applied to a variety of situations, but in this case means an attempt to exploit a minority shareholding in a company to obtain effective management or voting control without paying what other shareholders would regard as a proper price.
I shall use the expression in that sense in spite of its pejorative overtones, but only because it is convenient.
One of the tools available to a public company seeking to resist the covert acquisition of control by raiders is a statutory disclosure notice calling for information about persons interested in its shares.
There are statutory provisions empowering the court to restrict the exercise of rights attaching to shares if those interested in them fail to comply with a disclosure notice.
But it is common for the articles of a public company to empower the board to impose such restrictions.
The questions at issue on this appeal affect companies which have adopted powers of this kind in their articles.
They are, in bald summary, what are the proper purposes for which the board may restrict the exercise of rights attaching to shares, and in what circumstances can the restrictions be challenged on the ground that they were imposed for a collateral purpose?
JKX Oil & Gas Plc is an English company listed on the London Stock Exchange.
It is the parent company of a group whose business consists in the development and exploitation of oil and gas reserves, primarily in Russia and the Ukraine.
For reasons which are disputed, and for present purposes irrelevant, the company has not prospered of late.
Its difficulties have been reflected in its share price which has fallen to historically low levels.
In 2013, the directors of JKX perceived that it had become the target of a raid by two companies, Eclairs and Glengary, both incorporated in the British Virgin Islands.
Eclairs is a company controlled by trusts associated with Mr Igor Kolomoisky and Mr Gennadiy Bogolyubov.
Mr Kolomoisky is a prominent Ukrainian businessman and politician and Mr Bogolyubov is his business associate.
Eclairs beneficially owns some 47m shares amounting to 27.55% of the issued share capital of JKX.
Glengary is a company controlled by Mr Alexander Zhukov in which his right hand man Mr Ratskevych also has a small holding.
The company beneficially owns 19m shares amounting to 11.45% of the issued share capital of JKX.
The judge found that Mr Kolomoisky and Mr Bogolyubov had a reputation as corporate raiders.
Rather less is known about Mr Zhukov, but the directors of JKX believed him to have had business dealings with Mr Kolomisky in the past.
Between 2010 and 2012, JKX was trying to raise capital.
It encountered some difficulty in raising it from banks and other financial institutions, partly because of the risks associated with investment in the Ukraine, and partly because Mr Kolomoiskys substantial stake in the company proved to be a deterrent.
A number of proposals were made for raising capital by the issue and allotment of new shares, but these failed because Mr Kolomoisky opposed them.
They would have required shareholders special resolutions, and Eclairs holding constituted a blocking minority.
On 7 March 2013, Eclairs wrote to JKX calling upon it to convene an extraordinary general meeting to consider ordinary resolutions for the removal of the Chief Executive Dr Davies and the Commercial Director Mr Dixon from the board, and the appointment of three new directors.
Enquiries suggested that this move had been concerted between Mr Kolomoisky and Mr Zhukov, and that the proposed new directors were associates of theirs.
Newspapers in the Ukraine reported that Mr Kolomoisky was trying to take control of JKXs principal Ukrainian subsidiary.
The company received Eclairs request on 15 March 2013.
Its response was to issue five disclosure notices between 20 and 26 March.
On the Eclairs side, they were addressed to Eclairs and Mr Bogolyubov, and on the Glengary side to Glengarry, Mr Zhukov and Mr Ratskevych.
On 13 May 2013, further disclosure notices were issued to the same addressees as the March notices plus, on the Eclairs side, Mr Kolomoisky.
The notices requested information about the number of shares held, their beneficial ownership and any agreements or arrangements between the various persons interested in them.
The responses, which were received promptly, admitted the existence of interests in JKX shares, but denied that the addressees were party to any agreement or arrangement among themselves.
On 23 April 2013, the company convened an AGM for 5 June 2013.
The business included the re election of Dr Davies, the approval of the directors remuneration report and three resolutions empowering the board to allot shares for cash, to disapply statutory pre emption rights upon the allotment of shares, and to make market purchases of the companys shares.
On 23 May 2013, Eclairs published an advertisement in the Financial Times and an open letter to shareholders.
In these documents, shareholders were invited to oppose the above five proposed resolutions.
Since the resolutions to authorise market purchases and to disapply pre emption rights required a special resolution, this meant that as matters stood they were certain to fail.
The other resolutions required only an ordinary resolution but would be difficult to get through in the face of opposition from two blocks together controlling 39% of the company.
The responses to the second batch of disclosure notices were received on 27 and 28 May 2013.
On 30 May, a board meeting was held.
One director (Mr Miller) was absent, but had given instructions to the chairman as to how he wished to vote, and two others (Dr Davies and Mr Dixon) recused themselves and took no part in the proceedings.
The remaining directors considered that the responses to the notices were inadequate because they believed that there were agreements or arrangements between the addressees which they had not disclosed.
They resolved to issue restriction notices under powers conferred on the board by the companys articles on the 47m shares in which Eclairs was interested and the 19m shares in which Glengary was interested.
The effect of the restriction notices was to suspend the right to vote at general meetings attaching to these shares and to restrict the right of transfer.
On 4 June 2013, the day before the AGM, Eclairs and Glengary began separate proceedings in the Chancery Division challenging the restriction notices.
A number of grounds were advanced, most of which were rejected by Mann J and have now fallen away.
The one ground which subsists and is now before this court is that the board acted for a collateral, and therefore improper, purpose.
It was contended that the only proper purpose for which the power could be exercised was to extract the information, and that the real purpose of the board had been to ensure that the resolutions at the forthcoming AGM would be passed.
In the event, the company gave undertakings to David Richards J on the day that the proceedings were commenced, the effect of which was to allow the votes attaching to the 47m and 19m shares to be cast on the resolutions without prejudice to their validity.
Disclosure notices
The power to issue a statutory disclosure notice originates in section 27 of the Companies Act 1976.
That provision was subsequently replaced by section 74 of the Companies Act 1981, and then by section 212 of the Act of 1985.
It is now contained in section 793 of the Companies Act 2006.
Section 793 empowers a public company to issue a disclosure notice to any person whom it knows or reasonably believes to be interested in its shares.
The notice may require that person to disclose (among other things) whether or not it is interested in shares, the nature of that interest if there is one, and whether any persons interested are party to any agreement for the acquisition of interests in shares or the exercise of any rights conferred by the holding of shares.
Sections 820 825 of the 2006 Act contain very broadly framed provisions for determining when a person is to be regarded as interested in shares for these purposes.
It extends to any legal or equitable interest, or any right to exercise or control the exercise of any right attaching to shares, or any such right or interest vested in a company under a persons control or in specified categories of close relative, or any control or influence arising from an agreement for the acquisition of shares.
Under the statute, the failure of a person interested in shares to comply with a disclosure notice may result in the restriction of the rights conferred by those shares.
Section 794(1) provides: 794 Notice requiring information: order imposing restrictions on shares Where a notice under section 793 (notice requiring (a) information about interests in companys shares) is served by a company on a person who is or was interested in shares in the company, and (b) that person fails to give the company the information required by the notice within the time specified in it, the company may apply to the court for an order directing that the shares in question be subject to restrictions.
For the effect of such an order see section 797.
Section 797 identifies the restrictions as being that any transfer of the shares is void, no voting rights are exercisable, no further shares may be issued in right of the shares or pursuant to an offer made to their holder, and except in a liquidation no payment of capital or income may be made on the shares.
In the case of JKX, corresponding powers were conferred on the board by article 42, which empowered the board to issue a restriction notice whenever a statutory disclosure notice had been issued under section 793 and had not been complied with.
It provided (so far as relevant): (2) Notwithstanding anything in these articles to the contrary, if (a) a disclosure notice has been served on a member or any other person appearing to be interested in the specified shares, and (b) the Company has not received (in accordance with the terms of such disclosure notice) the information required therein in respect of any of the specified shares within 14 days after the service of such disclosure notice, then the board may (subject to para 7 below) determine that the member holding the specified shares shall, upon the issue of a restriction notice referring to those specified shares in respect of which information has not been received, be subject to the restrictions referred to in such restriction notice, and upon the issue of such restriction notice such member shall be so subject.
As soon as practicable after the issue of a restriction notice the Company shall serve a copy of the notice on the member holding the specified shares. (3) The restrictions which the board may determine shall apply to restricted shares pursuant to this article shall be one or more, as determined by the board, of the following: that no transfer of the restricted shares shall be (a) that the member holding the restricted shares shall not be entitled, in respect of the restricted shares, to attend or be counted in the quorum or vote either personally or by proxy at any general meeting or at any separate meeting of the holders of any class of shares or upon any poll or to exercise any other right or privilege in relation to any general meeting or any meeting of the holders of any class of shares, (b) effective or shall be registered by the Company, (c) that no dividend (or other moneys payable) shall be paid in respect of the restricted shares and that, in circumstances where an offer of the right to elect to receive shares instead of cash in respect of any dividend is or has been made, any election made thereunder in respect of such specified shares shall not be effective. (4) The board may determine that one or more of the restrictions imposed on restricted shares shall cease to apply at any time.
If the Company receives in accordance with the terms of the relevant disclosure notice the information required therein in respect of the restricted shares all restrictions imposed on the restricted shares shall cease to apply seven days after receipt of the information.
Article 42 differs in a number of respects from sections 794 800 of the Companies Act 2006, notably in vesting the power to impose restrictions on the board instead of the court.
It also contains a definition section which specifies the circumstances in which the board is entitled to treat a response to the notice as non compliant.
Article 42(1)(j) provides: (j) for the purposes of paragraphs (2)(b) and (4) of this article the Company shall not be treated as having received the information required by the disclosure notice in accordance with the terms of such disclosure notice in circumstances where the board knows or has reasonable cause to believe that the information provided is false or materially incorrect.
These were the powers which the board of JKX purported to exercise at their meeting on 30 May 2013 and which are now challenged.
The proper purpose rule
Part 10, Chapter 2 of the Companies Act 2006 codified for the first time the general duties of directors.
The proper purpose rule is stated in section 171(b) of the 2006 Act, which provides that a director of a company must only exercise powers for the purposes for which they are conferred.
The rule thus stated substantially corresponds to the equitable rule which had for many years been applied to the exercise of discretionary powers by trustees.
It is a principle in this court, Sir James Wigram V C had observed in Balls v Strutt (1841) 1 Hare 146, that a trustee shall not be permitted to use the powers which the trust may confer upon him at law, except for the legitimate purposes of the trust.
Like other general duties laid down in the Companies Act 2006, this one was declared to be based on certain common law rules and equitable principles as they apply in relation to directors and have effect in place of those rules and principles as regards the duties owed to a company by a director: section 170(3).
Section 170(4) accordingly provides that the general duties are to be interpreted and applied in the same way as common law rules or equitable principles, and regard shall be had to the corresponding rules and equitable principles in interpreting and applying the general duties.
The proper purpose rule has its origin in the equitable doctrine which is known, rather inappropriately, as the doctrine of fraud on a power.
For a number of purposes, the early Court of Chancery attached the consequences of fraud to acts which were honest and unexceptionable at common law but unconscionable according to equitable principles.
In particular, it set aside dispositions under powers conferred by trust deeds if, although within the language conferring the power, they were outside the purpose for which it was conferred.
So far as the reported cases show the doctrine dates back to Lane v Page (1754) Amb 233 and Aleyn v Belchier (1758) 1 Eden 132, 138, but it was clearly already familiar to equity lawyers by the time that those cases were decided.
In Aleyns Case, Lord Northington could say in the emphatic way of 18th century judges that no point was better established.
In Duke of Portland v Topham (1864) 11 HLC 32, 54 Lord Westbury LC stated the rule in these terms: that the donee, the appointor under the power, shall, at the time of the exercise of that power, and for any purpose for which it is used, act with good faith and sincerity, and with an entire and single view to the real purpose and object of the power, and not for the purpose of accomplishing or carrying into effect any bye or sinister object (I mean sinister in the sense of its being beyond the purpose and intent of the power) which he may desire to effect in the exercise of the power.
The principle has nothing to do with fraud.
As Lord Parker of Waddington observed in delivering the advice of the Privy Council in Vatcher v Paull [1915] AC 372, 378, it does not necessarily denote any conduct on the part of the appointor amounting to fraud in the common law meaning of the term or any conduct which could be properly termed dishonest or immoral.
It merely means that the power has been exercised for a purpose, or with an intention, beyond the scope of or not justified by the instrument creating the power.
The important point for present purposes is that the proper purpose rule is not concerned with excess of power by doing an act which is beyond the scope of the instrument creating it as a matter of construction or implication.
It is concerned with abuse of power, by doing acts which are within its scope but done for an improper reason.
It follows that the test is necessarily subjective.
Where the question is one of abuse of powers, said Viscount Finlay in Hindle v John Cotton Ltd (1919) 56 Sc LR 625, 630, the state of mind of those who acted, and the motive on which they acted, are all important.
A company director differs from an express trustee in having no title to the companys assets.
But he is unquestionably a fiduciary and has always been treated as a trustee for the company of his powers.
Their exercise is limited to the purpose for which they were conferred.
One of the commonest applications of the principle in company law is to prevent the use of the directors powers for the purpose of influencing the outcome of a general meeting.
This is not only an abuse of a power for a collateral purpose.
It also offends the constitutional distribution of powers between the different organs of the company, because it involves the use of the boards powers to control or influence a decision which the companys constitution assigns to the general body of shareholders.
Thus in Fraser v Whalley (1864) 2 H & M 10, the directors of a statutory railway company were restrained from exercising a power to issue shares for the purpose of defeating a shareholders resolution for their removal.
In Cannon v Trask (1875) LR 20 Eq 669, which concerned the directors powers to fix a time for the general meeting, Sir James Bacon VC held that it was improper to fix a general meeting at a time when hostile shareholders were known to be unable to attend.
In Anglo Universal Bank v Baragnon (1881) 45 LT 362, Sir George Jessel MR held that if it had been proved that the power to make calls was being exercised for the purpose of disqualifying hostile shareholders at a general meeting, that would be an improper exercise of the directors powers.
In Hogg v Cramphorn Ltd [1967] 1 Ch 254, Buckley J held that the directors powers to issue shares could not properly be exercised for the purpose of defeating an unwelcome takeover bid, even if the board was genuinely convinced, as the current management of a company commonly is, that the continuance of its own stewardship was in the companys interest.
The companys interest was an additional and not an alternative test for the propriety of a board resolution.
In all of these cases, either there was no dispute about the directors purpose or else the only purpose which could plausibly be ascribed to them was an improper one.
But what if there are multiple purposes, all influential in different degrees but some proper and others not? An analogy with public law might suggest that a decision which has been materially influenced by a legally irrelevant consideration should generally be set aside, even if legally relevant considerations were more significant: R(FDA) v Secretary of State for Work and Pensions [2013] 1 WLR 444, at paras 67 69 (per Lord Neuberger of Abbotsbury MR).
In some contexts, such as rescission for deceit or breach of the rules relating to self dealing, equity is at least as exacting.
But the proper purpose rule, at any rate as applied in company law, has developed in a different direction.
Save perhaps in cases where the decision was influenced by dishonest considerations or by the personal interest of the decision maker, the directors decision will be set aside only if the primary or dominant purpose for which it was made was improper.
To some extent this is a pragmatic response to the range of a directors functions and the conflicts which are sometimes inseparable from his position.
The main reason, however, is a principled concern of courts of equity not just to uphold the integrity of the decision making process, but to limit its intervention in the conduct of a companys affairs to cases in which an injustice has resulted from the directors having taken irrelevant considerations into account.
In his seminal judgment in the High Court of Australia in Mills v Mills (1938) 60 CLR 150, 185 186, Dixon J pointed out the difficulties associated with too rigorous an application of the public law test to the decisions of directors: it may be thought that a question arises whether there must be an entire exclusion of all reasons, motives or aims on the part of the directors, and all of them, which are not relevant to the purpose of a particular power.
When the law makes the object, view or purpose of a man, or of a body of men, the test of the validity of their acts, it necessarily opens up the possibility of an almost infinite analysis of the fears and desires, proximate and remote, which, in truth, form the compound motives usually animating human conduct.
But logically possible as such an analysis may seem, it would be impracticable to adopt it as a means of determining the validity of the resolutions arrived at by a body of directors, resolutions which otherwise are ostensibly within their powers.
The application of the general equitable principle to the acts of directors managing the affairs of a company cannot be as nice as it is in the case of a trustee exercising a special power of appointment.
It must, as it seems to me, take the substantial object the accomplishment of which formed the real ground of the boards action.
If this is within the scope of the power, then the power has been validly exercised.
Once one accepts the need to compare the relative significance of different considerations which influenced the directors, the question inevitably arises what is the primary or dominant purpose, and how is it to be identified.
One possibility is that it is the weightiest purpose, ie the one about which the directors felt most strongly.
The other is that it is the purpose which caused the decision to be made as it was.
Of course, the two things are connected.
The ordinary inference is that the weightiest purpose (in this sense) will also have been causative, and that minor purposes will not have been.
In most cases the two tests will in practice lead to the same result.
But that will not always be so and, as will be seen, it is not necessarily the case here.
The first test seems to me to be difficult to justify, for reasons of both practicality and principle.
The practical difficulty was pointed out by Dixon J in the passage which I have quoted.
It would involve a forensic enquiry into the relative intensity of the directors feelings about the various considerations that influenced them.
A director may have been influenced by a number of factors, but if they all point in the same direction he will have had no reason at the time to arrange them in order of importance.
The attempt to do so later in the course of the dispute is likely to be both artificial and defensive.
Moreover, a realistic appreciation of the directors position will show that it is liable to lead to the wrong answer.
Directors of companies cannot be expected to maintain an unworldly ignorance of the consequences of their acts or a lofty indifference to their implications.
A director may be perfectly conscious of the collateral advantages of the course of action that he proposes, while appreciating that they are not legitimate reasons for adopting it.
He may even enthusiastically welcome them.
It does not follow without more that the pursuit of those advantages was his purpose in supporting the decision.
All of these problems are aggravated where there are several directors, each with his own point of view.
The fundamental point, however, is one of principle.
The statutory duty of the directors is to exercise their powers only for the purposes for which they are conferred.
That duty is broken if they allow themselves to be influence by any improper purpose.
If equity nevertheless allows the decision to stand in some cases, it is not because it condones a minor improper purpose where it would condemn a major one.
It is because the law distinguishes between some consequences of a breach of duty and others.
The only rational basis for such a distinction is that some improprieties may not have resulted in an injustice to the interests which equity seeks to protect.
Here, we are necessarily in the realm of causation.
The question is which considerations led the directors to act as they did.
In Hindle v John Cotton Ltd (1919) 56 Sc LR 625, 631, Lord Shaw referred to the moving cause of the decision, a phrase taken up by Latham CJ in Mills v Mills, supra, at p 165.
But this cryptic formula does not help much in a case where the board was concurrently moved by multiple causes, some proper and some improper.
One has to focus on the improper purpose and ask whether the decision would have been made if the directors had not been moved by it.
If the answer is that without the improper purpose(s) the decision impugned would never have been made, then it would be irrational to allow it to stand simply because the directors had other, proper considerations in mind as well, to which perhaps they attached greater importance.
This was the point made by Dixon J in the passage immediately following the one which I have cited from his judgment in Mills v Mills But if, except for some ulterior and illegitimate object, the power would not have been exercised, that which has been attempted as an ostensible exercise of the power will be void, notwithstanding that the directors may incidentally bring about a result which is within the purpose of the power and which they consider desirable.
Correspondingly, if there were proper reasons for exercising the power and it would still have been exercised for those reasons even in the absence of improper ones, it is difficult to see why justice should require the decision to be set aside.
Dixon Js formulation has proved influential in the courts of Australia.
As the majority (Mason, Deane and Dawson JJ) pointed out in the High Court of Australia in Whitehouse v Carlton House Pty (1987) 162 CLR 285, 294: As a matter of logic and principle, the preferable view would seem to be that, regardless of whether the impermissible purpose was the dominant one or but one of a number of significantly contributing causes, the allotment will be invalidated if the impermissible purpose was causative in the sense that, but for its presence, the power would not have been exercised.
I thing that this is right.
It is consistent with the rationale of the proper purpose rule.
It also corresponds to the view which courts of equity have always taken about the exercise of powers of appointment by trustees: see Birley v Birley (1858) 25 Beav 299, 307 (Sir John Romilly MR), Pryor v Pryor (1864) 2 De G J & S 205, 210 (Knight Bruce LJ), Re Turners Settled Estates (1884) 28 Ch D 205, 217, 219, Roadchef (Employee Benefits Trustees) Ltd v Hill [2014] EWHC 109 (Ch), para 130, and generally Thomas on Powers, 2nd ed (2012), paras 9.85 9.89.
The leading modern case is Howard Smith Ltd v Ampol Petroleum Ltd [1974] AC 821, a decision of the Privy Council on appeal from New South Wales, which proceeded on the basis that the law was the same in England and in New South Wales.
It was another case of a board decision to issue and allot new shares against the background of a takeover bid, although rather unusually it was the directors who wanted the bid to succeed over the opposition of two existing shareholders who together held a majority of the shares.
Delivering the advice of the Privy Council, Lord Wilberforce observed at p 834: The directors, in deciding to issue shares, forming part of Millers unissued capital, to Howard Smith acted under clause 8 of the companys articles of association.
This provides, subject to certain qualifications which have not been invoked, that the shares shall be under the control of the directors, who may allot or otherwise dispose of the same to such persons on such terms and conditions and either at a premium or otherwise and at such time as the directors may think fit.
Thus, and this is not disputed, the issue was clearly intra vires the directors.
But, intra vires though the issue may have been, the directors power under this article is a fiduciary power: and it remains the case that an exercise of such a power though formally valid, may be attacked on the ground that it was not exercised for the purpose for which it was granted.
The main interest of the decision for present purposes lies in the fact that it was a case of multiple concurrent purposes.
The company was genuinely in need of fresh capital, and the directors had received legal advice that this was the only ground on which they could properly authorise an issue of shares.
The number of shares to be issued and the amount of the subscription had been carefully calculated to match the companys capital requirements.
After a trial lasting 28 days in which the four directors supporting the share issue gave evidence, Street J had found that the companys need for capital, although urgent, was not yet critical and that its normal practice had been to meet its capital requirements by borrowing rather than issuing shares.
For this reason he rejected the evidence of the four directors that their sole purpose was to meet the companys shortage of capital and found that their primary purpose was in fact to dilute the shareholdings of those who opposed the bid.
Lord Wilberforce adopted the primary purpose test which had been applied by the judge (p 832B C) and affirmed his decision (p 832F H): when a dispute arises whether directors of a company made a particular decision for one purpose or for another, or whether, there being more than one purpose, one or another purpose was the substantial or primary purpose, the court, in their Lordships opinion, is entitled to look at the situation objectively in order to estimate how critical or pressing, or substantial or, per contra, insubstantial an alleged requirement may have been.
If it finds that a particular requirement, though real, was not urgent, or critical, at the relevant time, it may have reason to doubt, or discount, the assertions of individuals that they acted solely in order to deal with it, particularly when the action they took was unusual or even extreme.
Lord Wilberforce did not express the point in terms of causation, but it is I think clear that by the substantial or primary purpose, he meant the purpose which accounted for the boards decision.
He approved the judges adoption of Dixon Js test (pp 831 832), and went on to adopt an analysis of the facts based on that test.
Although the directors were influenced by the companys need for capital, the decisive factor in Howard Smith Ltd v Ampol Petroleum Ltd was that but for their desire to convert the majority shareholders into a minority, the directors would not have sought to raise capital by means of a share issue, nor at that point of time.
The judgment of Mann J
In Mann Js view, the only purpose for which the power to impose restrictions was conferred by article 42 was to provide a sanction or an incentive to remedy the default (para 206).
In a meticulous judgment he went on to make the following findings of fact, at paras 168 79 and 183 200: (1) He expressed no view of his own on the merits of the dispute between the company and Messrs Kolomoisky and Bogolyubov and their associates.
But he found that the board had reasonable cause to believe (whether or not it was right) that they were parties to an agreement or arrangement relating to shares in JKX with a view to carrying out a raid on the company.
The board believed that the objective of the raiders was to depress the value of the shares so as to enable them to buy other shares more cheaply and eventually to take control of the companys Ukrainian subsidiary.
They regarded the removal of Dr Davies and Mr Dixon and their replacement by inexperienced associates of the raiders as part of that plan.
They therefore had reasonable cause to believe that the answers to the disclosure notices had been false. (2) Of the seven directors who took part in the decision, six gave evidence and were cross examined.
The seventh was not cross examined in relation to purpose for want of time, and no point was taken on that.
Of the six, one was found to have had the primary purpose of extracting the information from the addressees of the disclosure notices.
Another took a balanced view which attached substantially the same importance to extracting the information and preventing the raiders from voting against the resolutions at the AGM.
The judge summarised the motives of the other four as follows (para. 189): While they may (and in all probability actually did) appreciate that the restrictions would have to be lifted if the information was provided, they did not regard the ability to impose restrictions as being one designed to protect the company pending the provision of information; they regarded it as one which they could use, and did actually use, to get an advantage (the opportunity to pass the resolutions) for its own sake, not linked to the extraction of information.
Putting the matter another way, they did not regard the opportunity to get special resolutions passed which would otherwise not be passed (and the increased chance of getting the ordinary ones passed too) as an incidental benefit of imposing restrictions as an incentive to provide information; they elevated it in their minds, and in their purposes, to something with its own independent merit as a way of doing down the raiders for the benefit of the shareholders. (3) The judge concluded (para. 200): The differences between relevant states of mind can be quite subtle in this situation, but I find that the evidence demonstrates that the following purposes, beliefs and states of mind existed among the voting directors: (a) They all knew that the purpose of the notices was to get information. (b) They all appreciated that the effect of restrictions would be (unless the information was provided before the AGM) that Eclairs/Glengary would be prevented from voting, with the effect that all the resolutions would be likely to be passed, or that there was a very enhanced prospect of that happening. (c) They all saw that as operating for the benefit of the company as a whole, and as hindering the cause of the raiders. (d) The majority of the voting directors (Mrs Dubin, Mr Moore, Mr Miller and Lord Oxford) saw that as a sort of standalone proper and useful objective, and achieving it was a substantial purpose of voting for the restrictions, separate from the need to have information.
Those directors did not have in mind the protection of the company pending the provision of the information; they had in mind protecting the company full stop.
The restrictions were thus a useful weapon the raiders.
The disenfranchisement of the raiders at the AGM was not just an incidental effect of the imposition of restrictions; it was the positively desired effect, seen as beneficial to the company in the long term. (e) The bona fides of those directors, and the genuineness of their desire to benefit the company as a whole, was not challenged, and in my view cannot be challenged. to be used against (4) It followed that the primary purpose of the board in issuing the restriction notices was to influence or determine the fate of the resolutions before the AGM.
The directors took the opportunity of using the power to alter the potential votes at the forthcoming AGM in order to maximise the chances of the resolutions being passed in a manner which they thought was in the best interests of the Company (para 227).
Since this was beyond the purpose for which the power to impose restrictions was conferred, he set aside the restriction notices and the board resolutions authorising them with effect from the time that they were made.
In the course of final speeches, the judge raised with the parties the question whether the board would have reached the same decision even if they had not taken account of the impact of the restriction notices on the resolutions at the AGM.
On the basis of what I heard, and the shape of the case before me he said, he thought it likely, and to be frank virtually inevitable that the board would have reached the same conclusion and imposed the same restrictions even if they had confined themselves to the proper purpose of inducing the addressees of the disclosure notices to comply with them and imposing sanctions for their failure to do so to date.
He provisionally concluded that on this alternative factual hypothesis the court would have had a discretion whether to set aside the board resolution and restriction notices, which it might have exercised in favour of the company.
The alternative factual hypothesis had not, however, been pleaded or addressed by the relevant witnesses and had formed no part of the companys case.
For this reason the judge, having raised the point, refused to allow the company to take it at that late stage.
He put the position as follows (para 232): on the evidence that I have heard, I find it very hard indeed to believe that the directors would have come to any different conclusion.
I deal with this in a short section below in which I consider the facts.
However, in circumstances in which the directors have not made such a case in their own evidence in chief (or in the pleadings of the company), it would, in the end, be a step too far to allow them to say my purpose was X, but if I had been told that that was an improper purpose and I had to consider a legitimate purpose Y, I would have arrived at the same decision.
If that were to be their case then it should have been positively advanced at some stage during the hearing.
Although on the evidence I heard I find it difficult to see that the directors would have come to a different decision, none the less I can see that the claimants might have wished to have advanced their case differently, perhaps devoting more attention to the earlier events leading up to the service of the notices and what happened, and what the thinking was, between then and the board meeting.
The short section below was paras 235 237.
In these paragraphs, the judge summarised what he would have found if he had allowed the company to advance the alternative factual hypothesis and had been obliged to deal with it on the basis of the existing evidence.
He appears to have done this in case there was an appeal against his refusal to allow the point to be taken.
In the event, however, there was no appeal on that point.
The judgments of the Court of appeal
The appeals were heard by Longmore and Briggs LJJ and Sir Robin Jacob.
There was no challenge to the judges findings of fact.
The appeal revolved entirely around their legal significance.
By a majority, the court allowed the appeal.
The majority (Longmore LJ and Sir Robin Jacob) considered that the proper purpose doctrine had no significant place in the operation of article 42 or Part 22 of the 2006 Act (para 138).
They appear to have reached this conclusion for three overlapping reasons.
The first was that restrictions arising from a shareholders failure to comply with a disclosure notice did not reflect a unilateral exercise of power by the board.
By this they meant that the shareholder could avoid the restrictions by complying with the disclosure notice.
Why should the law protect him when all he had to do was tell the truth? (para 136).
Their second reason was that the restrictions on the voting and other rights attaching to the shares was the very thing that article 42 was designed to permit if the directors reasonably considered that the disclosure notices had not been complied with.
So once the board had reached that conclusion, there was no further limitation on their power to issue a restriction notice.
The majoritys third reason was that no limitation on the proper purpose of a restriction notice was expressed, either in Part 22 of the 2006 Act or in article 42 of JKXs articles.
In their view there was no room for the implication of such a purpose, because in the nature of things the statutory disclosure procedure was most likely to be operated at a time of controversy in the companys affairs.
They thought, at para 141, that the draftsman was unlikely to have intended a detailed enquiry into the minds of directors in what may often be a rapidly changing scene; and, at para 142, that in a battle for control against predators who were up to something subversive but secret the directors would naturally want to see them disenfranchised.
In their view, the result of applying the proper purpose rule would be to emasculate the statutory scheme and the corresponding provisions of article 42.
Underlying much of this reasoning was the view expressed in their peroration, that any other view would only be an encouragement to deceitful conduct and not something which English company law should countenance (para 143).
In a formidable dissent, Briggs LJ set out the rationale for the proper purpose test and the authorities for its application to the exercise of discretionary powers by companies.
He accepted the view of Mann J that the purpose of article 42 was to encourage or coerce the provision of information which had been requested under section 793, with the rider that it was also to prevent the accrual of any unfair advantage to any person as a result of the failure to comply with such a request.
Even with that limited expansion, on the judges findings of fact the directors decision to impose restrictions under article 42 was improper, and there were no satisfactory reasons why the rule should not be applied to the draconian powers conferred by article 42 of JKXs articles.
He added (para 122): Furthermore, I consider it important that the court should uphold the proper purpose principle in relation to the exercise of fiduciary powers by directors, all the more so where the power is capable of affecting, or interfering with, the constitutional balance between shareholders and directors, and between particular groups of shareholders.
The temptation on directors, anxious to protect their company from what they regard as the adverse consequences of a course of action proposed by shareholders, to interfere in that way, whether by the issue of shares to their supporters, or by disenfranchisement of their opponents shares, may be very hard to resist, unless the consequences of improprieties of that kind are clearly laid down and adhered to by the court.
The proper purpose of article 42
The submission of Mr Swainston QC, who appeared for the company, was that where the purpose of a power was not expressed by the instrument creating it, there was no limitation on its exercise save such as could be implied on the principles which would justify the implication of a term.
In particular, the implication would have to be necessary to its efficacy.
In my view, this submission misunderstands the way in which purpose comes into questions of this kind.
It is true that a companys articles are part of the contract of association, to which successive shareholders accede on becoming members of the company.
I do not doubt that a term limiting the exercise of powers conferred on the directors to their proper purpose may sometimes be implied on the ordinary principles of the law of contract governing the implication of terms.
But that is not the basis of the proper purpose rule.
The rule is not a term of the contract and does not necessarily depend on any limitation on the scope of the power as a matter of construction.
The proper purpose rule is a principle by which equity controls the exercise of a fiduciarys powers in respects which are not, or not necessarily, determined by the instrument.
Ascertaining the purpose of a power where the instrument is silent depends on an inference from the mischief of the provision conferring it, which is itself deduced from its express terms, from an analysis of their effect, and from the courts understanding of the business context.
The purpose of a power conferred by a companys articles is rarely expressed in the instrument itself.
It was not expressed in the instrument in any of the leading cases about the application of the proper purpose rule to the powers of directors which I have summarised.
But it is usually obvious from its context and effect why a power has been conferred, and so it is with article 42.
Article 42(2) authorises the issue of a restriction notice only in the event that a disclosure notice has been issued under section 793 of the 2006 Act and the company has received either no response or a response which it knows or has reasonable cause to believe is false or materially incorrect.
Under article 42(4) in the event that the information is supplied after the restrictions have been imposed (ie that a response has been received which the directors have no reasonable cause to regard as wrong), they are automatically lifted seven days thereafter.
Any dividends or other payments in respect of the shares which were withheld while the restrictions were in force will then become payable under article 42(6).
As Millett J observed in In re Ricardo Group Plc [1989] BCLC 566, 572 about the corresponding power of the court to impose restrictions under what was then section 216 and Part XV of the Companies Act 1985, these restrictions are granted as a sanction to compel the provision of information to which the company is entitled.
It follows, in my judgment, that once the information is supplied, any further justification for the continuance of the sanction disappears.
The inescapable inference is that the power to restrict the rights attaching to shares is wholly ancillary to the statutory power to call for information under section 793.
It follows that I accept the view of Mann J that the purpose of article 42 is to provide a sanction or incentive to remedy a failure to comply with the disclosure notice.
But I would not limit it to inducing the defaulter to comply, any more than I believe Mann J to have done in this case or Millett J in In re Ricardo Group.
Otherwise the board would be disabled from imposing restrictions in a case where the defiant obduracy of the defaulter made it obvious that the restrictions would not produce compliance.
I would therefore identify the purpose in slightly different terms.
In my view article 42 has three closely related purposes.
The first is to induce the shareholder to comply with a disclosure notice.
This is the purpose which Millett J and Mann J regarded the restrictions as serving, and it is the least that they can have been intended to achieve.
Secondly, the article is intended to protect the company and its shareholders against having to make decisions about their respective interests in ignorance of relevant information.
As Hoffmann J observed in In re TR Technology Investment Trust Plc [1988] BCLC 256, 276, the company, through its existing board, is given the unqualified right to insist that contests for the hearts and minds of shareholders are conducted with cards on the table.
Thirdly, the restrictions have a punitive purpose.
They are imposed as sanctions on account of the failure or refusal of the addressee of a disclosure notice to provide the information for as long as it persists, on the footing that a person interested in shares who has not complied with obligations attaching to that status should not be entitled to the benefits attaching to the shares.
That is the natural inference from the range and character of restrictions envisaged in article 42(3), which affect not only the right to participate in the companys affairs by voting at general meetings, but the right to receive dividends.
These three purposes are all directly related to the non provision of information requisitioned by a disclosure notice.
None of them extends to influencing the outcome of resolutions at a general meeting.
That may well be a consequence of a restriction notice.
But it is no part of its proper purpose.
It is not itself a legitimate weapon of defence against a corporate raider, which the board is at liberty to take up independently of its interest in getting the information.
Basing himself on the observation of Hoffmann J in In re TR Technology Investment Trust Plc, Mr Swainston argued that the purpose of a restriction notice was related to the non provision of the information in a broader sense.
The argument was that for as long as the addressee of a disclosure notice failed to put his cards on the table, the directors were justified in treating the restrictions as a free standing technique for frustrating the raiders plans.
In my view this extends the purpose of a restriction notice beyond its proper limits.
It treats failure to comply with a disclosure notice as no more than a gateway or condition precedent to the directors right to impose and maintain the restrictions for any purpose which they bona fide conceived to be in the interests of the company, including securing their preferred outcome at the AGM.
But as the judge put it, at para 206, the non provision of information is not to be taken as a justification for opening up a new front against the predator with the benefit of a new weapon.
Otherwise, directors would be entitled to impose restrictions in a case where they attached no importance to the information requisitioned in the disclosure notice.
However difficult it may be to draw in practice, there is in principle a clear line between protecting the company and its shareholders against the consequences of non provision of the information, and seeking to manipulate the fate of particular shareholders resolutions or to alter the balance of forces at the companys general meetings.
The latter are no part of the purpose of article 42.
They are matters for the shareholders, not for the board.
We were pressed with a number of arguments about the purpose of article 42 based on an analogy with Part 22 of the Companies Act 2006.
I did not find these arguments helpful.
The two schemes are both directed at an assumed failure to comply with a statutory disclosure notice, and have a number of other points in common.
But they differ in a number of respects, some of them significant.
Arguments based on language which is to be found in the statute but not in the articles are unlikely to throw any light on the purpose of the latter.
Does the proper purpose rule apply?
At this stage, two preliminary observations are called for.
The first is that the imposition of restrictions under article 42 is a serious interference with financial and constitutional rights which exist for the benefit of the shareholder and not the company.
In the case of listed companies such as JKX a restriction notice is also an interference with the proper operation of the market in its shares, in which there is not only a private but a significant public interest.
One would expect such a draconian power to be circumscribed by something more than the directors duty to act in the companys interest as they may in good faith perceive it.
The second preliminary observation concerns the role of the proper purpose rule in the governance of companies.
The rule that the fiduciary powers of directors may be exercised only for the purposes for which they were conferred is one of the main means by which equity enforces the proper conduct of directors.
It is also fundamental to the constitutional distinction between the respective domains of the board and the shareholders.
These considerations are particularly important when the company is in play between competing groups seeking to control or influence its affairs.
The majority of the Court of Appeal were right to identify this as the background against which disclosure notices are commonly issued.
But they drew the opposite conclusion from the one which I would draw.
They seem to have thought it unrealistic, indeed undesirable, against that background to expect directors to distinguish between the proper purpose of enforcing the disclosure notice and the improper purpose of defeating the ambitions of one group of shareholders.
I find this surprising.
The decision to impose restrictions under article 42 requires the directors to recognise the difference between the purpose of a decision and its incidental consequence.
That certainly calls for care on their part and possibly for legal advice.
But there is nothing particularly special in this context about a decision to issue a restriction notice under a provision such as article 42.
The directors task is no more difficult than it was in the many cases like Howard Smith Ltd v Ampol Petroleum Ltd in which other fiduciary powers, such as the power to issue shares, have been held improperly exercised because in the face of pressures arising from a battle for control the directors succumbed to the temptation to use their powers to favour their allies.
I would agree with the majority of the Court of Appeal that in that situation the board would naturally wish to have the predators disenfranchised.
That is precisely why it is important to confine them to the more limited purpose for which their powers exist.
Of all the situations in which directors may be called upon to exercise fiduciary powers with incidental implications for the balance of forces among shareholders, a battle for control of the company is probably the one in which the proper purpose rule has the most valuable part to play.
I therefore approach with some scepticism the suggestion that in this of all contexts the proper purpose rule has no application.
Of the three reasons given by the majority of the Court of Appeal, I have already dealt with their second reason, which was essentially a slightly repackaged version of Mr Swainstons gateway argument, and with their third, which is that no limiting purpose can be implied in a case where the directors are likely to exercise their powers for the purpose of disenfranchising a predator.
I reject both of them as contrary to principle.
I would add that I am unimpressed by the suggestion that it is impractical to examine the state of mind of the directors in a rapidly changing situation such as a takeover bid or an attempted raid.
The present proceedings were begun on the day before the AGM.
The interests of both parties were sufficiently protected pending the decision by the orders made on the same day by David Richards J, and the dispute was heard by Mann J within seven weeks and decided within three months.
In some cases, for example where a tight timetable is imposed under the City Code on Takeovers and Mergers, it may be necessary to accelerate the procedure even more drastically, but the judges of the Chancery Division are perfectly capable of responding to these exigencies as they arise.
That brings me to the majoritys first and, I think, main reason, which was that the power to impose restrictions under article 42 was not a unilateral power.
The addressees of the disclosure notices had only to answer the questions fully and truthfully to bring the restrictions to an end.
I reject this also.
The short and principled objection to it was given by Briggs LJ.
The limitation of the power to its proper purpose derives from its fiduciary character.
If its exercise would otherwise be an abuse, it cannot be an answer to say that the person against whom it is directed had only himself to blame.
Moreover, the majoritys proposition assumes that that person is the only one whose interests are adversely affected.
But that is not right.
Other shareholders who agreed with them would be deprived of their support.
In Anglo Universal Bank v Baragnon, supra, Sir George Jessel MR considered that the proper purpose rule would apply to a board decision to make calls on shareholders if the object was to prevent particular shareholders from voting at general meetings, although any shareholder could remove the disability by paying.
There is no trace in this or any other authority of a distinction between unilateral and non unilateral powers.
Moreover, I reject the majoritys premise.
The problem cannot always be resolved by unilaterally complying with the disclosure notice.
Under a provision in the form of article 42 there may be a deemed non compliance with a disclosure notice even in a case where the answers are prompt, complete and accurate.
This is because the directors may reasonably though erroneously conclude that the answers are defective.
This is not a fanciful hypothesis.
The interest in shares about which information may be sought under section 793 of the 2006 Act is very broadly defined.
It will often be a highly debatable question whether it exists.
An alleged omission to disclose a relevant agreement or arrangement between persons with a relevant interest may be just as debatable.
An agreement sufficient to give rise to a concert party may be informal.
An arrangement may be no more than a nod and a wink or a tacit understanding.
Reasonableness in these circumstances is very much in the eye of the decision maker.
It will depend on what other facts or inferences are available to him.
With the best will in the world, things may look very different on the other side of the partition.
The weapon which the majoritys analysis puts into the hands of the board is a blunderbuss whose shot is liable to injure the just and the unjust alike.
That is part of the reason why I am unable to accept the majoritys parting assertion, at para 143, that the application of the proper purpose rule would be an encouragement to deceitful conduct by predators with subversive but secret projects.
There is, however, a more fundamental objection to it, which is that it is incoherent once the operation of the rule is properly understood.
If the deceit consists simply in the secrecy, ie in the withholding or deemed withholding of the information, a decision to impose restrictions which is based simply on that fact will be entirely consistent with the proper purpose of the power.
But secrecy is one thing, subversion another.
If the real objection is to the subversion, it is nothing to do with the issue or enforcement of disclosure notices.
Directors owe a duty of loyalty to the company, but shareholders owe no loyalty either to the company or its board.
Within broad limits, derived for the most part from Part 30 of the Companies Act 2006 (Protection of Members against Unfair Prejudice) and the City Code on Takeovers and Mergers, they are entitled to exercise their rights in their own interest as they see it and to challenge the existing management for good reasons or bad.
The present case
What the judges findings amount to is that although at the critical board meeting the majority genuinely wanted to receive the information which they had requisitioned, once they were satisfied that it had not been provided and turned to consider the issue of restriction notices, they were interested only in the effect that this would have on the outcome of the forthcoming general meeting.
They did not have in mind the protection of the company pending the provision of the information; they had in mind protecting the company full stop (para 200(d)).
In any case where concurrent purposes are being considered, they must have been actual purposes in the minds of the directors, not merely possible or hypothetical ones.
If the only consideration which actually influenced the decision was an improper one, it is difficult to envisage any basis on which their decision could have been sustained.
I have drawn attention earlier in this judgment to the relevance of causation in this field.
The judge posed the question (para 228) whether the notices could be saved on the footing that although the directors purpose was improper, they would have acted in the same way if the improper considerations had been ignored and they had applied their minds to proper ones.
Suppose that the directors had decided to issue the restriction notices as a sanction for the non provision of the information and to protect the company from the consequences of its non disclosure pending its provision.
Suppose that they also made the decision in order to secure the passing of the resolutions, but would have done the same thing even if that had never entered their minds.
On that hypothesis, it would be difficult to regard the impact on the resolutions as a primary consideration.
The want of the information would have been a sufficient justification of the restrictions and the resolutions would have been irrelevant, in fact no more than a welcome incidental consequence.
That, however, was not the companys case.
As summarised by the judge (paras 181, 207 208), their case was that once the raiders had failed to provide the information, the power to make a restriction order could properly be exercised for the purpose of defeating their attempt to influence or control the companys affairs, provided that this was conceived in good faith to be in the companys interests.
Indeed it could properly be exercised for the purpose of ensuring the passage of the resolutions at the general meeting in the face of their objections.
There was no attempt to justify the decision on some narrower basis if these purposes were found to be improper.
Forensic judgments of this kind are often required and they are not easy.
This one was no doubt a realistic approach in the face of the facts.
But for whatever reason, none of the parties focused on the possibility that the same decision might have been reached without reference to the desire to defeat the raiders, until the judge drew their attention to its possible relevance.
By that time it was too late to explore the point with the witnesses.
In his judgment (paras 235 237), the judge summarised the findings of fact which he would have made if he had allowed the company to rely on the alternative hypothesis that the directors had disregarded their desire to defeat the raiders.
He thought that they would have applied their minds to the right point and made the same decision.
But the judge did not allow the company to take the point and there has been no appeal against that refusal.
Since his reason for refusing was that the claimants had not had a proper opportunity to challenge the alternative hypothesis in the course of the evidence, it seems to me that the judges hypothetical alternative findings are not properly before this court.
I would allow the appeal and restore the decision of Mann J.
In the light of the observations of other members of the court, I should record that while we received no oral argument on the role of causation in identifying the relevant purpose(s) of a board decision, full and helpful written submissions on the point were delivered after the hearing, at the invitation of the court.
LORD CLARKE: (with whom Lord Neuberger agrees)
I initially intended simply to agree with Lord Sumptions judgment.
Like Lord Mance (and Lord Neuberger), I agree with Lord Sumption that the appeal should be allowed for the reasons given in his paras 27 to 43.
I am inclined to agree with the other views expressed by Lord Sumption but there does seem to me to be force in Lord Mances reservation that not all the points were the subject of full argument and consideration below.
In these circumstances I would prefer to defer reaching a final conclusion on the other points identified by Lord Mance until they arise for decision and have been the subject of such argument.
LORD MANCE: (with whom Lord Neuberger agrees)
I gratefully adopt Lord Sumptions summary of the relevant facts in paras 1 to 13 and of the judgments of Mann J and the Court of Appeal in paras 25 to 29.
I also agree with his reasons for allowing this appeal in paras 30 to 44.
I have read with interest the discussion of the proper purpose rule in paras 14 to 24.
It accepts an analysis which was suggested in general terms by the judge at first instance, but which became immaterial in the light of his refusal to allow any point on causation to be raised.
It was not in those circumstances advanced by any party during the oral hearing before the Supreme Court.
The analysis was first revived by the Supreme Court in a draft judgment handed down, but then withdrawn before delivery in the light of the parties representations.
Thereafter, both appellants confirmed that they had argued the case before the Supreme Court on the basis that, if the proper purpose rule applied, the restriction notices fell to be set aside, since the judge had found the notices to have been issued for the principal purpose of improving the prospects of passing at the forthcoming AGM two special resolutions to authorise market purchases and to disapply pre emption rights as well as of passing three ordinary resolutions.
Eclairs submitted that any issue as to whether a but for test should be applied should in these circumstances await a case where it arose squarely.
Eclairs and Glengary each supplied a copy of its submissions to the judge at the trial in 2013, which had suggested a two pronged alternative analysis, according to which the notices would be set aside if a court concluded either that (a) the principal purpose was to ensure the passing of the resolutions or (b) even if that was not the principal purpose, the notices would not have been issued but for the wish to ensure the passing of the resolutions.
JKX on the other hand sought to use the Supreme Courts new development in the law as a springboard to argue that the appeals should not be allowed and/or that there should be a further hearing on the issue of causation.
I readily accept my part in agreeing to the original draft judgment.
But I am now satisfied, having considered the authorities without the benefit of oral or written submissions other than those dating from 2013 submitted by Eclairs and Glengary, that we should not express any firm or concluded views on points which do not arise for decision on this appeal.
I will summarise my reasons.
First, it would be helpful to clarify the meaning of section 171(b) of the Companies Act 2006, providing that directors may use their powers only for the purposes for which they were conferred.
On the face of it this is clear.
All purposes in mind must be legitimate.
But Buckley on the Companies Act (looseleaf ed) suggests that it itself involves a primary purpose test, commenting at 3[869]: What if a power were used for mixed purposes, some good and some bad? According to the old law the exercise would be good if its primary purpose were proper.
By virtue of CA 2006, section 170(4), this law should inform the construction of CA 2006, section 171(b).
Thus, a director who has exercised powers for mixed purposes has still only exercised them primarily, if not exclusively, for the purposes for which they are conferred and this should be within CA 2006, section 171(b).
CA 2006, section 171(b) can be construed (as it should be), in accordance with CA 2006, section 170(4) to mean that a director must exercise his powers primarily (or substantially) only for the purposes for which they are conferred.
Buckley cites for the old law Howard Smith Ltd v Ampol Petroleum Ltd [1974] AC 821.
Lord Sumption at paras 14 and 21 treats section 171(b) as requiring a directors power to be used with an entire and single view to the real purpose and object of the power, assimilating a directors power in this respect with the exercise of discretionary powers by trustees.
But Dixon J in the judgment in Mills v Mills (1938) 60 CLR 150, 185 186, which Lord Sumption commends at para 18, expressly noted that The application of the general equitable principle to the acts of directors managing the affairs of a company cannot be as nice as it is in the case of a trustee exercising a special power of appointment.
It must, as it seems to me, take the substantial object the accomplishment of which formed the real ground of the boards action.
If this is within the scope of the power, then the power has been validly exercised.
I would therefore wish to have submissions on the scope of the duty under section 171(b).
Second, whatever the scope of the duty, I understand Lord Sumptions point that the granting of relief in the event of a breach of section 171(b) is a different matter.
But here too I think it would both assist and be wise to hear submissions.
I do not for my part think that the interpretation which Lord Sumption puts in para 24 on Lord Wilberforces speech in Howard Smith Ltd v Ampol Petroleum Ltd [1974] AC 821 is necessarily or clearly what Lord Wilberforce meant.
Equally, the passage already quoted from Dixon Js judgment in Mills v Mills appears to me far from conclusive, while its later explanation in the High Court in Whitehouse v Carlton House Pty (1987) 162 CLR 285, 294 (quoted by Lord Sumption at para 22) is, at least arguably, consistent with but for causation being viewed either as the only test or as affording an extended basis for the grant of relief, even where the principal purpose was legitimate, as Eclairs and Glengary submitted to the judge.
In these circumstances, although I have sympathy with Lord Sumptions view that but for causation offers a single, simple test, which it might be possible or even preferable to substitute for references to the principal or primary purpose, I am not persuaded that we can or should safely undertake what all parties consider would be a new development of company law, without having heard argument.
Third, Lord Sumption expresses the view in para 20 that identification of the principal or primary purpose for which directors exercised a power would involve a forensic enquiry into the relative intensity of the directors feelings about the various considerations that influenced them, in relation to which directors evidence would be likely to be both artificial and defensive.
To the extent that that is a difficulty, I cannot see that it exists any the less in relation to a test based on but for causation.
Human nature being what it is, that is just as likely to give rise to artificial and defensive attempts to justify what was done.
If anything, I would have thought that the principal or primary purpose in mind would be likely to be easier to identify, since it is likely to be reflected in directors exchanges before and/or at the time of the decisions under examination, than the answer to a question whether they would have acted as they did without taking into account their main expressed purpose.
They will have been less likely to have directed express attention to this: that is, unless well advised by their lawyers, in which case further caution might be necessary about accepting their assertions at face value.
Fourth, if a but for test were to be adopted, attention should I think be given to the standard to which the directors, on whom the onus would presumably lie, would have to show that they would have reached the same decision, even if they had not had the illegitimate purpose in mind.
Would probability be enough? Or would the test be whether their decision would inevitably have been the same? See eg by analogy the public law test, as stated by May LJ in Smith v North East Derbyshire Primary Care Trust [2006] 1 WLR 3315, and quoted by Lord Neuberger in R (FDA) v Secretary of State for Work and Pensions [2012] EWCA Civ 332; [2013] 1 WLR 444, para 68.
| UK-Abs | Under sections 793 797 of the Companies Act 2006 (the Act), a company can issue a statutory disclosure notice calling for information about persons interested in its shares.
The court can restrict the exercise of rights attaching to shares in the event of non compliance.
JKX Oil & Gas plc, like many companies, has a provision in its company articles (article 42) empowering the board to impose such restrictions where a statutory disclosure notice has not been complied with.
Article 42 provides that the board is entitled to treat a response to a disclosure notice as non compliant where it knows or has reasonable cause to believe that the information provided is false or materially incorrect.
In 2013, the directors of JKX perceived that it had become the target of a so called corporate raid by two minority shareholders, Eclairs (controlled by trusts associated with Igor Kolomoisky and by Gennadiy Bogolyubov) and Glengary (controlled by Alexander Zhukov and Mr Ratskevyich).
JKX issued disclosure notices between 20 26 March and on 13 May, requesting information from Eclairs, Glengary and Messrs. Kolomoisky, Bogolyubov, Zhukov, and Ratskevyich about the number of shares held, their beneficial ownership, and any agreements or arrangements between the persons interested in them.
The responses admitted the existence of interests in the shares but denied that there was any agreement or arrangement.
On 23 May, Eclairs publicly invited shareholders to oppose the resolutions proposed at the forthcoming AGM on 5 June, including resolutions for the re election of certain directors.
At a meeting on 30 May, the JKX board considered that there were agreements or arrangements between the addressees of the disclosure notices which had not been disclosed in the responses.
It resolved to exercise the powers under article 42 to issue restriction notices in relation to the shares held by Eclairs and Glengary, suspending their right to vote at general meetings and restricting the right of transfer.
Eclairs and Glengary challenged the restriction notices, relying on the proper purpose rule at s171(b) of the Act (a director must only exercise powers for the purposes for which they are conferred).
Mann J held that the boards decision was invalid.
The article 42 power could be exercised only to provide an incentive to remedy the default or a sanction for failing to do so.
The board had reasonable cause to believe that there was an agreement or arrangement between the addressees.
But the boards purpose was to influence the fate of the resolutions at the AGM.
The Court of Appeal allowed the appeal by a majority, holding that the proper purpose rule did not apply to article 42 because the shareholders only had to answer the questions more fully in order to avoid the imposition of restrictions on the exercise of their rights, and because the application of the rule was inappropriate in the course of a battle for control.
The Supreme Court allows the appeals by Eclairs and Glengary, holding that the proper purpose rule applies to the exercise of the power under article 42, and that the directors of JKX acted for an improper purpose.
The judgment is given by Lord Sumption, with whom Lord Hodge agrees.
Lord Mance (with whom Lord Neuberger agrees) agrees that the appeals should be allowed, but prefers to express no view on aspects of the reasoning.
Lord Clarke agrees, but prefers to defer a final conclusion on those aspects until they arise for decision and have been the subject of full argument.
The proper purpose rule is concerned with abuse of power: a company director must not, subjectively, act for an improper reason. [14 16] Where the instrument conferring a power is silent as to its purpose, this can be deduced from the mischief of the provision, its express terms and their effect, and the courts understanding of the business context. [30] Under article 42 in this case, the power to restrict the rights attaching to shares is ancillary to the statutory power to call for information under s 793.
Article 42 has three closely related purposes: (i) to induce a shareholder to comply with a disclosure notice; (ii) to protect the company and its shareholders against having to make decisions about their respective interests in ignorance of relevant information; and (iii) as a punitive sanction for a failure to comply with a disclosure notice.
Seeking to influence the outcome of shareholders resolutions or the companys general meetings is no part of those proper purposes. [31 33] The proper purpose rule applies to article 42.
It is irrelevant whether Eclairs and Glengary could have averted the imposition of restrictions on their rights as shareholders by giving different answers to the questions.
The proper purpose rule is the principal means by which equity enforces directors proper conduct, and is fundamental to the constitutional distinction between board and shareholder.
A battle for control of the company is probably the context where the proper purpose rule has the most valuable part to play. [35 40] Lord Sumption and Lord Hodge consider that where the directors have multiple concurrent purposes, the relevant purpose or purposes are those without which the decision would not have been made.
If that purpose or those purposes are improper, the decision is ineffective. [17 24] Mann J found that four of the six directors were concerned only with the effect of the restriction notices on the outcome of the general meeting.
They acted for an improper purpose. [41, 25] Lord Neuberger, Lord Mance and Lord Clarke agree that the appeals should be allowed, but decline to express a concluded view on the application of a but for test to the proper purpose rule. [46 55]
|
William Leonard McMullan, known as Lenny McMullan, and Denise Brewster lived together for some ten years before December 2009.
On Christmas Eve that year, they became engaged.
Sadly, Lenny McMullan died two days later.
His death was sudden and unexpected; he was only 43 years old.
He was found dead in the home that he shared with Ms Brewster in Lilac Avenue, Coleraine, County Londonderry.
The couple had bought the house together in April 2005.
Mr McMullan died intestate.
He had no children.
At the time of his death, Mr McMullan was employed by Translink, the company which provides Northern Irelands public transport services.
He had worked for that company for approximately 15 years.
Throughout that time Mr McMullan was a member of and paid into the Local Government Pension Scheme Northern Ireland (the scheme).
The first respondent, the Northern Ireland Local Government Officers Superannuation Committee (NILGOSC), is the statutory body responsible for administering the scheme.
When Mr McMullan died, NILGOSC administered the scheme pursuant to the Local Government Pension Scheme (Benefits, Membership and Contributions) Regulations (Northern Ireland) 2009 (SI 2009/32) (the 2009 regulations).
The second respondent, the Department of the Environment for Northern Ireland (DENI), made and was responsible for the 2009 regulations.
Among other things, the 2009 regulations provide for the payment of retirement pensions to members of the scheme and for the payment of pensions and other benefits to certain survivors of members.
In April 2009, on the coming into force of the 2009 regulations, a cohabiting surviving partner became eligible for the first time, for payment of a survivors pension.
But, in order to qualify for payment of the pension, a cohabiting surviving partner had to be nominated by the member.
Ms Brewster believes that Mr McMullan had completed a form in which he nominated her.
NILGOSC says, however, that it did not receive the form and has refused to pay her a survivors pension.
The appeal has proceeded on the basis that the nomination was not made.
Ms Brewster applied for judicial review of NILGOSCs decision not to award her a survivors pension, arguing that the absolute requirement of nomination imposed on unmarried partners as a condition of eligibility for a survivors pension under the 2009 regulations constitutes unlawful discrimination contrary to article 14 of the European Convention on Human Rights and Fundamental Freedoms (ECHR), when read in conjunction with article 1 of the First Protocol (A1P1) to ECHR.
In a judgment delivered on 9 November 2012, (neutral citation [2012] NIQB 85) Treacy J held that the nomination requirement was an instrument of disentitlement (para 59) in relation to unmarried partners and that whilst the impugned regulations pursued a legitimate aim, there was not a reasonable relationship of proportionality between the means employed and the aim sought to be achieved.
He therefore made an order declaring that the requirement of nomination of a cohabiting partner in the 2009 scheme was not compatible with article 14 ECHR read together with A1P1.
He quashed the decision of NILGOSC dated 1 July 2011 by which it had declined to pay the appellant a survivors pension.
NILGOSC and DENI appealed.
On 1 October 2013, by a majority, Girvan LJ dissenting, the Court of Appeal (Higgins, Girvan and Coghlin LJJ, neutral citation [2013] NICA 54) allowed the appeal.
Higgins LJ found that the nomination requirement was not unjustified or disproportionate; and Coghlin LJ also concluded that the requirement had not been shown to be manifestly without reasonable justification.
Survivor benefit schemes for unmarried partners of public service employees
In December 1998, the government in Westminster published a Green Paper on pension reform.
It was entitled A new contract for welfare: partnership in pensions.
The Green Paper stated that occupational pension schemes were one of the great welfare success stories of this country (para 1, p 65).
It was observed that, [m]ost large occupational pension schemes in the private sector now provide survivors benefits for the unmarried partners of the opposite sex of scheme members, although in the overwhelming majority of cases this is at the discretion of the trustees (para 59, p 76).
At the time of the publication of the Green Paper, in contrast to private sector schemes, public service schemes only provided survivors pensions to the spouse of a deceased member (para 60, p 76).
The first public sector scheme to introduce survivors pensions for unmarried partners was the Civil Service Pension Scheme in 2002.
It included a requirement to jointly [make] and [sign] a declaration in a form prescribed by the Minister.
No evidence has been proffered as to why the requirement for such a declaration was included.
In October 2004 a consultation exercise was conducted into the operation of the England and Wales Local Government Pension Scheme: Facing the Future - Principles and propositions for an affordable and sustainable Local Government Pension Scheme in England and Wales.
This was carried out through the Office of the Deputy Prime Minister.
It was proposed that survivors benefits be extended generally to cohabiting partners, provided that members of individual schemes wanted this and were prepared to meet the extra cost involved.
The consultation paper suggested that certain considerations arose because of the different situations of, on the one hand, married or civil partners and, on the other, cohabiting unmarried couples but the only consideration referred to in the paper itself was the nature of proof required in the latter case to establish they were living together as if they were husband and wife or civil partners.
Outlining the types of evidence that would be required to verify the authenticity of the relationship, the paper adumbrated a number of different requirements, including that there be a valid nomination of a partner with whom there would be no legal bar to marriage or civil registration - essentially an opt-in obligation: para B8.7.
Once again, the consultation paper provided no explanation as to why it was thought that evidence of a valid nomination was needed in addition to objective evidence of the nature of the relationship.
Moreover, there was no consultation question inviting response to the proposed evidence requirements.
In June 2006 a further consultation paper was issued setting out four options, all of which proposed survivors pensions for cohabitants but none of which contained a nomination requirement: Where next? - Options for a new-look Local Government Pension Scheme in England and Wales.
The consultation paper stated, however, that the Law Commission was conducting a project on cohabitation and that a final report was expected by August 2007.
It was noted that the Law Commission was considering the case for allowing cohabiting couples to opt-in to a scheme imposing enforceable financial obligations in the event of their separation: paras 6.14-6.15.
The Law Commissions inquiry into and subsequent report on cohabitation was, of course, conducted on a much wider plane than consideration of survivors benefits for unmarried partners of public service employees.
The consultation paper published in advance of the commissions consideration ranged over all manner of financial protection for unmarried cohabiting couples: Cohabitation: The Financial Consequences of Relationship Breakdown (2006) (Consultation Paper No 179).
A key element of the discussion was whether an opt-in provision was required in order to anchor financial security for cohabiting partners.
In its consultation paper the commission adverted to the fact that opt-in schemes had been introduced in several European states and elsewhere but that the take-up for these schemes, even where open to both opposite-sex and same-sex couples, is generally low: para 5.45.
The reasons for that were discussed in the consultation paper.
It could be that one partner was unwilling to make the commitment or that the other, willing to make the commitment, was reluctant to raise it lest that jeopardise the relationship.
As the consultation paper pointed out at para 5.28, it might be considered too harsh to deny all legal protection to the economically weaker party in the event of separation.
Even if the failure to take that step were due to inertia, or a lack of proper appreciation of the legal significance of not taking that step, the harshness of the result in some cases could be regarded as a wholly disproportionate sanction for that inactivity.
The commissions provisional view was set out in paras 5.53 and 5.54 of the consultation paper: 5.53 In our view, a scheme that applied by default to eligible cohabitants, subject to a right to opt out, would create an appropriate balance between affording scope for party autonomy and securing fairer outcomes for individuals at the end of cohabiting relationships.
It would mean that inactivity would not, as it currently does, leave the more vulnerable party unprotected at the point of separation: the scheme would apply by default in the absence of a valid opt-out agreement.
5.54 Many other jurisdictions have adopted this approach, following the trend set in 1984 by New South Wales, the first jurisdiction to create a statutory scheme for financial relief between cohabitants.
That pattern has been replicated across other jurisdictions, including the rest of Australia, most of the Canadian provinces, New Zealand, some parts of Spain, Sweden and, most recently, Scotland.
After extensive consultation, the Law Commissions final report was duly published on 3 July 2007 (Cohabitation: The Financial Consequences of Relationship Breakdown (Law Com No 307) (Cm 7182)) and, having observed that most consultees had agreed with the commissions provisional view, it firmly rejected an opt-in requirement.
The penalisation of cohabitants for their failure to subscribe to an opt-in scheme was discussed at para 2.88 of the report: research suggests that providing people with information about the law and what they should do to protect their legal position does not guarantee that they will take those steps, or even be able to do so.
Indeed, while there was considerable support among respondents to the Living Together Campaign survey for opt-in regimes, the fact that so few of those individuals had taken action based on the information that they had obtained suggests that few would in practice register their relationship or be able to do so.
A major underpinning of the commissions preference for the opt-out scheme was the protection of the vulnerable partner in the relationship and this might be considered to have more direct relevance to separation of cohabiting partners, rather than the death of one of them.
The latter situation was discussed in the commissions report at para 6.13 where it was stated: It is important not to equate separation and death.
Many consultees felt, and we agree, that there is a qualitative difference between a relationship cut short by death and a relationship terminated by separation.
On separation, there has ordinarily been a failure of commitment by at least one of the parties.
It is, therefore, legitimate when considering the eligibility of separating couples under our recommended scheme to ask whether the length of the relationship indicated that there was, at least at one time, sufficient commitment between the parties to justify bringing the relationship within the scheme.
Where a relationship is terminated by death, however, the ending of the relationship does not of itself suggest that there was any lack of commitment on either side.
This qualitative difference may well affect what should be regarded as reasonable financial provision on death and who should be eligible to make a claim under the 1975 [Inheritance (Provision for Family and Dependants)] Act.
It is, of course, the case that these comments were made in the context of whether cohabitants should be included in the categories of person entitled to make an inheritance claim under the 1975 legislation.
But important general considerations underlie the observations.
In the first place, it will be more readily deducible that the requisite level of commitment existed between the parties where the ending of the relationship is brought about by death rather than separation.
Secondly, notions of fairness have an obvious role to play when one is considering whether it is right to deny financial benefit to a surviving unmarried partner when a married partner would have an automatic right to that benefit.
These considerations bear on the justification for the preservation of the requirement of nomination in the impugned regulations.
The Local Government Pension Scheme (Benefits, Membership and Contributions) Regulations 2007 (SI 2007/1166) (which, of course, applied in England and Wales) were laid before Parliament in April 2007, three months before the Law Commissions report was published.
Notwithstanding the fact that no proposal for a nomination requirement had been made in the consultation paper, such a requirement featured in regulations 24 and 25.
The Explanatory Note to the regulations did not give a reason for the nomination requirement.
The Local Government Pension Scheme in England and Wales was revised in 2013 with effect from 1 April 2014 for claims arising after that date: the Local Government Pension Scheme Regulations 2013 (SI 2013/2356).
The revisions included the removal of the opt-in or nomination requirement for unmarried couples.
The same change was made to the Scottish scheme by the Local Government Pension Scheme (Scotland) Regulations 2014 (SSI 2014/164).
The circumstances in which these changes took place and why they were not introduced in Northern Ireland are discussed in paras 24-28 below.
The background to the Northern Ireland scheme
In an affidavit filed in these proceedings on behalf of DENI, Marie Cochrane, a deputy principal in the department, stated that the scheme in Northern Ireland had mirrored the scheme in Great Britain because it was considered to be generally desirable that local government employees should have equivalent pension benefits right across the UK.
In August 2006, therefore, while the consultation in England and Wales was taking place, a separate consultation exercise was begun in Northern Ireland.
Although the Northern Ireland exercise was separate from that which had started in England and Wales some two months before, the consultation paper for the latter formed the centrepiece of the documentation sent to consultees in Northern Ireland.
Consultees were told that the Northern Irish scheme maintains parity with the scheme in Great Britain.
As earlier noted, the consultation paper for England and Wales did not suggest a nomination requirement in any of the four proposals that it contained.
Nor did the letter from Ms Cochrane which started the consultation process in Northern Ireland.
Despite the absence of any reference to a nomination requirement, NILGOSC, in its response to the consultation letter, raised the issue.
In its letter of 9 October 2006 to DENI, it pointed out that the Civil Service Pension scheme stipulated that there be a valid nomination of a cohabiting partner to receive a survivors pension.
NILGOSC immediately referred to a number of inequalities that would arise from such a requirement and to the possibility of legal challenge if these were not addressed.
These included:- 1.
The fact that married or civil partners did not have to be living together in order to benefit from the scheme, whereas cohabiting unmarried partners did; 2.
A married or civilly registered couple did not have to be in an exclusive, long term relationship established for a minimum of two years in order for a survivor pension to be paid; and 3.
A survivor pension would automatically be paid to a married or civilly registered partner; no nomination was required in their case.
The lack of a valid nomination form was likely to result in disputes where all the other criteria were met.
Since neither the consultation paper for the England and Wales exercise nor the letter from Ms Cochrane which set the Northern Ireland consultation in train contained any reference to a nomination requirement, it is unsurprising that no policy objectives that might be achieved by such a requirement were identified by DENI when it set up the consultation process.
But the letter from NILGOSC certainly brought the question of the need for such a requirement to centre stage.
The appellant has pointed out that no evidence has been produced by DENI to show that the matter was considered at all, even after the letter from NILGOSC was received.
Indeed, the only policy driver which emerges from a consideration of contemporary documents is the need to maintain parity with the rest of Great Britain.
No independent assessment of the need for or the viability of a nomination requirement was undertaken.
It appears that no attempt was made to address the possible difficulties that NILGOSCs letter had identified.
The 2009 Regulations
The 2009 Regulations were made under powers conferred by the Superannuation (Northern Ireland) Order 1972 (SI 1972/1073 (NI 10)).
Article 9 of that Order allowed DENI to make regulations providing for pensions, allowances or gratuities to be paid to or in respect of such persons, or classes of persons, as were to be prescribed.
In general, these were persons employed by local authorities and other public service employees.
On 6 June 2008 DENI invited consultees to comment on the draft regulations.
The draft regulations included the nomination requirement.
The only reference to this in the 6 June letter was that survivor benefits would be payable to widows, widowers, civil partners and nominated cohabiting partners, but the letter did not provide any explanation for the reason for including a condition of nomination nor did it specifically invite comment on it.
The 2009 Regulations were made on 25 February 2009 and the new Pension Scheme came into effect on 1 April 2009.
The relevant provisions are contained in regulations 24 and 25.
The material parts of those regulations are as follows: 24(1) If a member dies leaving a surviving spouse, nominated cohabiting partner or civil partner, that person is entitled to a pension payable from the day following the date of death 25(1) Nominated cohabiting partner means a person nominated by a member in accordance with the terms of this regulation.
(2) A member (A) may nominate another person (B) to receive benefits under the Scheme by giving the Committee a declaration signed by both A and B that the condition in paragraph (3) has been satisfied for a continuous period of at least two years which includes the day on which the declaration is signed.
(3) The condition is that - (a) A is able to marry, or form a civil partnership with, B; (b) A and B are living together as if they were husband and wife or as if they were civil partners; (c) neither A nor B is living with a third person as if they were husband and wife or as if they were civil partners; and (d) B are financially interdependent.
either B is financially dependent on A or A and (4) But a nomination has no effect if the condition in paragraph (3) has not been satisfied for a continuous period of at least two years which includes the day on which the declaration is signed.
(5) A nomination ceases to have effect if - either A or B gives written notice of revocation (a) to the Committee; (b) A makes a subsequent nomination under this regulation; (c) either A or B marries, forms a civil partnership or lives with a third person as if they were husband and wife or as if they were civil partners; or (d) B dies.
(6) B is As surviving nominated partner if - the nomination has effect at the date of As death; (a) and (b) B satisfies the Committee that the condition in paragraph (3) was satisfied for a continuous period of at least two years immediately prior to As death.
It is clear that mere nomination will not satisfy the requirements of regulation 25.
By para (4) of the regulation, nomination has no effect if the condition specified in para (3) has not in fact been satisfied for the requisite period.
And by para 6(b) the nominated partner is required to satisfy the committee that the condition in para (3) had indeed been fulfilled.
So the applicant must show that she has been a cohabitant for two years before the date of declaration and been in that position for two years before the date of death.
The provisions demand of the surviving cohabitant that she or he prove to the satisfaction of the committee that the stipulations in para (3) have been met.
They are freestanding of the nominating procedure.
The question therefore arises, what is the function of requiring nomination? The appellant says that it adds nothing to the process of establishing that the qualifying conditions have been met.
The 2013 Regulations in England and Wales and the 2014 Regulations in Scotland
The Local Government Pension Scheme in England and Wales was revised with effect from 1 April 2014 for claims arising after that date.
The revisions included the removal of the opt-in requirement for unmarried couples.
Survivors pensions are now available to cohabiting partners.
They are defined in Schedule 1 to the Local Government Pension Scheme Regulations 2013 as follows: cohabiting partner means a person whom the appropriate administering authority is satisfied fulfils the following conditions - (a) the person (P) has fulfilled the condition in paragraph (b) for a continuous period of at least two years on the date the member (M) died, and (b) the condition is that - (i) M is able to marry, or form a civil partnership with P, (ii) M and P are living together as if they were husband and wife or as if they were civil partners, (iii) neither M nor P is living with a third person as if they were husband and wife or as if they were civil partners, and (iv) either P is financially dependent on M, or M and P are financially interdependent.
As stated in para 16, the same change was made to the Scottish scheme by the Local Government Pension Scheme (Scotland) Regulations 2014.
The circumstances in which the nomination requirement in the England and Wales scheme was removed were explained in an affidavit of Chris Megainey, the deputy director (Workforce, Pay and Pensions) in the Department for Communities and Local Government (DCLG).
He explained that the first consultation document which was issued before the draft 2013 regulations were prepared had included a proposal that the nomination requirement be maintained but consultees were invited to address the question of the need for its retention in light of the decision of Treacy J in the present case.
Seventeen of the responses which were received (a significant majority) expressed a wish that DCLG should explore the possibility of introducing a less onerous system for determining a cohabiting partners entitlement to a survivors pension.
In response to these replies, further consultations took place and it was decided that the nomination requirement should be removed.
In a second affidavit, Mr Megainey said that, to the best of his knowledge and belief, the nomination requirement was removed from the legislation because it was considered to be unnecessary.
Kimberley Linge, Policy Manager in the Scottish Public Pensions Agency (SPPA), explained the reasons for the change in the Scottish regulations.
She said that after the Court of Appeal had given its decision in the present case, SPPA had sought advice from the Scottish Government Legal Department about the nomination issue.
The advice received was to the effect that the nomination requirement was an overly burdensome one for cohabitants when compared with the requirements imposed on married partners and civil partners.
Initially, that advice was not acted upon but following discussion at the Scottish Local Government Pension Scheme Advisory Group (a tripartite group comprising the unions, the Convention of Scottish Local Authorities and the Scottish Government) it was agreed to dispense with the nomination requirement.
The application to re-open the appeal
When the appellants advisers became aware of the changes to the English 2013 and the Scottish 2014 regulations, they applied to the Court of Appeal for a re- opening of the appeal.
This was against the background that in the draft amended regulations which had been proposed in Northern Ireland in 2014 the nomination requirement was to be retained.
DENI opposed the application to re-open the appeal.
In an affidavit filed to support DENIs opposition to the reopening of the appeal, Ms Cochrane stated: I can confirm that the Department was not aware, at the date of hearing of this Appeal, of the intention of DCLG to amend the specific provision on the nomination requirement for a cohabiting partner survivor benefit.
The Department, which is not copied into consultations by DCLG, first became aware of the existence of the 20 June 2013 consultation document on or about 24 June 2013 through either the DCLG website or through a specialist pensions bulletin published by Pendragon.
However, the Department did not become aware of the relevant part of the 20 June 2013 consultation until some point after 8 July 2013 Having become aware of the relevant part of the 20 June 2013 consultation document, I did not consider that this could have any bearing upon the Brewster case because the said case had already been heard on 8 and 9 May 2013 and because the proposed changes were prospective and related only to England & Wales.
Also a separate process for the development of proposals for the reformed Local Government Pension Scheme in Northern Ireland was underway.
I was not aware of the need to advise Departmental Solicitors Office of a prospective change in another jurisdiction and consequently did not do so.
The application to re-open the appeal was refused on 22 May 2014 and the Northern Irish scheme was revised on 27 June 2014.
The new scheme did not remove the nomination requirement for unmarried couples.
No evidence has been offered of any contemporaneous consideration of the need to preserve this requirement or of the desirability of amending the Northern Irish scheme so as to bring it into line with the changes in the rest of the United Kingdom, notwithstanding that before Treacy J and the Court of Appeal, DENI had relied on the allegedly critical importance of parity with the England and Wales scheme.
The policy behind the nomination requirement
Ms Cochrane dealt with the policy objectives underlying the 2009 Regulations and, in particular, the procedural requirements for cohabitants claiming survivor benefit in para 13 of her first affirmation, dated 21 February 2012, where she said: the decision to introduce in Northern Ireland the same procedural requirements for claiming a survivors benefit was heavily influenced by the reforms already introduced in England & Wales.
The policy objectives of those requirements were those identified in the 2004 consultation paper issued by the Office of the Deputy Prime Minister.
They were designed to ensure that the existence of a cohabiting relationship, equivalent to marriage or civil partnership was established in an objective manner and also that the wishes of the scheme member had been identified through the execution of a valid nomination form during his lifetime.
One can understand why the procedural requirements designed to establish that a genuine and subsisting relationship existed had been included in the regulations.
But this does not explain why a nomination was required.
If it was shown (as, for the reasons given in para 23 above, it had to be) that there was indeed a cohabiting relationship which satisfied the tests as to its genuineness and existence at the time of the death, why was a nomination process needed? This added nothing to the evidential hurdle which a surviving unmarried partner of a scheme member had to face.
If the requirements in regulation 25(3) (other than the making of a nomination) are satisfied, the only conceivable object of the nomination requirement was to find out what the scheme member wanted.
But what had those wishes to do with the question of entitlement? It is not enough simply to state that the procedural requirements were designed to ensure that the wishes of the scheme member had been ascertained, in order to invest that aim with the necessary attribute of legitimacy.
The confirmation of those wishes does not have some intrinsic, undeniable value.
The purpose behind the avowed need to ascertain them must be stated.
It has been said that its purpose was not to permit a scheme member to prevent, for vindictive reasons, his cohabiting partner from receiving a survivors benefit, although, on its face, it certainly had that potential.
If that was not its purpose, what then was it? DENI adopted Higgins LJs characterisation of the purpose of the scheme to be to permit some cohabitants in certain defined circumstances to obtain the same pension provision as those who are married or in a civil partnership - para 17 of his judgment.
DENI expressly disavowed the legitimate aim of the regulations which Treacy J had identified viz to facilitate entitlement without discrimination on grounds of status.
What the judge had said about the aim of the regulations appears at para 54 of his judgment: The aim or underlying objective of this aspect of the pension scheme is to place unmarried, stable, long-term partners in a similar position to married couples and those in a civil partnership to facilitate entitlement to a pension without discrimination on the grounds of status.
DENIs repudiation of the judges description of the aim of the regulations (in so far as they relate to the treatment of surviving unmarried partners of scheme members) is, to say the least, surprising.
It is especially so in light of DENIs proper - but inevitable - acceptance that the provision of a survivor benefit under the scheme engages A1P1 of ECHR and that the appellants status, as a person who was in a cohabiting relationship other than a marriage or a civil partnership at the time of her partners death, is a relevant status for the purposes of article 14 ECHR.
The judge had been careful to couch his description of the aim of this aspect of the pension scheme in terms which reflected the stability and long term nature of the relationship.
It surely must be the case that the regulations were geared to eliminate unwarranted differences of treatment between married or civil partner survivors on the one hand and, on the other hand, those unmarried long term partners who were in a stable relationship with the scheme member before death.
Given DENIs acceptance that the provision of a survivor benefit engages A1P1 and that the appellant has the requisite status to rely on article 14, unwarranted (ie unjustified) difference of treatment (ie discrimination) would bring it into breach of its ECHR obligations if such unequal treatment was not eradicated.
In my view, DENI simply cannot be heard to say that elimination of unjustified difference of treatment between, on the one hand, the survivor of a scheme member who establishes that they were in a stable long term relationship with that member and, on the other, a married or civil partner of a scheme member was not the aim of the inclusion of unmarried partners within the survivors entitlement.
This must have been its objective and, expressed in that way, it is no more than a rephrasing of the judges formulation of the aim.
The error of DENIs submission on this point and, with respect, Higgins LJs characterisation of the aim of the regulations on this aspect is to confuse the aim with the means employed to achieve it.
Permitting some cohabitants in certain defined circumstances to obtain the same pension provision as married or civil partner survivors is the way in which unjustified discrimination is avoided.
It is not an end in itself.
The essential question, therefore, is whether imposing a nomination requirement in fact conduces to unwarranted difference of treatment or to its removal.
It is for this reason that it is relevant to note that the wishes of a married scheme member did not have to be stated or ascertained.
If nomination was not required of a married survivor of a scheme member and if the overall aim of the amended regulations was to place a surviving cohabitant who was in a stable, long term relationship with the deceased scheme member on an equal footing with a surviving spouse or civil partner, the need for a nomination procedure in the case of the cohabitant is difficult to find.
If it was designed to test the truth of a claim that the relationship was stable and long-lasting, that would be one thing.
But it was not.
The obligation to establish those features of the relationship was entirely independent of the nomination procedure.
Nothing in the contemporaneous documentation suggests that this consideration underlay its inclusion in the scheme.
One must therefore look elsewhere to find out why the nomination procedure was considered to be needed.
As to the averment in Ms Cochranes affirmation that the policy objectives of the procedural requirements were those identified in the 2004 consultation paper issued by the Office of the Deputy Prime Minister, Girvan LJ correctly pointed out at para 6 of his judgment in the Court of Appeal, that that consultation paper provides no explanation as to why nomination would or should be evidentially required.
The 2004 paper is of no assistance, therefore, as to any objective which the nomination procedure might achieve.
Moreover, as again Girvan LJ rightly observed in para 6, there was simply no evaluation of the pros and cons of having a nomination or opt-in procedure.
The only discernible reason operating at the time the 2009 regulations were made was that it was considered necessary and/or desirable that they should mirror the provisions in England and Wales.
Post hoc justification for the nomination requirement
In para 15 of her first affirmation, Ms Cochrane alluded to the formal dimension that the nomination procedure brought to a claim for survivors pension.
She said: It is the view of the Department that these [procedural] requirements are reasonable and proportionate measures designed to establish in a formal manner, the intentions of the deceased about a matter which has testamentary significance.
Furthermore, cohabiting relationships are different from marriage and civil partnerships insofar as they may be commenced and ended without legal formality and do not involve a change of an individuals legal status.
The Department is of the view that if a Scheme member chooses to have a cohabiting relationship which is neither marriage nor civil partnership, the requirements of the 2009 Regulations are an appropriate means by which to determine the existence, formality and status of the relationship in addition to obtaining independent verification of the deceaseds wishes.
It has not been suggested by DENI that these considerations featured in its assessment of whether a nomination procedure was required before the 2009 Regulations were made.
They must nevertheless be considered now in order to see whether they support the claim as to the reasonableness and proportionality of the measure.
The value of formality in this setting is not explained.
Since the regulations require a surviving cohabitant to establish that she or he had been in a long term relationship with the scheme member, it is difficult to see what formality adds to the question of entitlement.
The same may be said of the circumstance that cohabitation does not involve a change in legal status.
It is in the very nature of cohabitation that there is no legal formality or change of status involved.
But there is no immediately obvious reason that some ersatz substitute for the legal formality of marriage or civil partnership would contribute to the assessment of a cohabitants entitlement to a survivors pension.
That entitlement derives from the survivor having been in a longstanding relationship with the scheme member.
In so far as the use of the word existence in the final sentence of the cited passage connotes some extra proof of the relationship, as I have already pointed out, the terms of regulation 25 require the survivor to establish by independent means that the relationship was of the nature and duration required to satisfy the schemes requirements.
There was no further need of proof beyond this.
On the question of the verification of the deceaseds wishes, I have already made clear in paras 31-36 above why I do not consider that this is a relevant consideration.
Before the Court of Appeal, both respondents took up the theme of testamentary significance, which had been foreshadowed in Ms Cochranes affirmation.
They submitted that by lodging a nomination form, the scheme member and her or his cohabitant were required to make a public affirmation akin to the formal and public commitment of marriage and that this added a necessary ingredient of correctness to the process.
This argument found favour with the majority, Higgins LJ, describing it as crucial (para 19) and Coghlin LJ characterising the nomination form as a public statement from both participants equivalent to the production of a certificate of marriage or civil partnership (para 23).
The need for a formal or public affirmation is not explained.
Certainly, in this context, it has no inherent value.
It does not, of and in itself, make the survivor any more deserving of the pension.
The essence of entitlement is that the relevant parties have lived together for a sufficiently long period and that one is financially dependent on the other or that they are financially interdependent.
Being required to make a public declaration that these conditions obtain adds nothing to the objective inquiry as to whether they in fact exist.
Arguments were also advanced to the effect that administrative costs would increase if the nomination procedure was abandoned and that actuarial predictions were easier with that procedure in place.
No evidence to support those claims was presented to the Court of Appeal and the arguments were not pursued before this court.
Echoes of them might be found in the printed case of DENI to the effect that the nomination requirement is a bright-line inclusionary rule of general application directed to workability and legal certainty but again no material to establish the truth of these assertions was proffered.
It is clear, therefore, that the making of a nomination adds nothing to the evidential demands made of a survivor to show that she or he was in a longstanding relationship with the deceased scheme member and that they were either financially dependent on or financially interdependent with the deceased.
It is also evident that no intrinsic value attaches to the making of such a nomination.
The areas of agreement
of A1P1 which provides: It is not in dispute that the denial of a survivors pension falls within the ambit 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.
Although the right to a pension might not be regarded, in conventional terms, as a possession, it is well settled that A1P1 protects possessions, which 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.
It does not, however, guarantee the right to acquire property (see Kopeck v Slovakia (2004) 41 EHRR 43, para 35 (GC) and J A Pye (Oxford) Ltd v United Kingdom (2007) 46 EHRR 45, para 61 (GC)).
It is likewise not in dispute that the appellant, as a person who was in a cohabiting relationship other than a marriage or a civil partnership at the time of her partners death, enjoyed a relevant status for the purposes of article 14 ECHR (In re G (Adoption Unmarried Couple) [2008] UKHL 38; [2009] AC 173, paras 8, 107 and 132).
Article 14 provides that the enjoyment of the rights and freedoms in ECHR shall be secured without discrimination on any ground such as sex, race, colour, language, religion, political or other opinion, national or social origin, association with a national minority, property, birth or other status.
It was also agreed that a surviving unmarried partner falling within regulation 25(6)(b) of the 2009 Regulations is in an analogous situation to a surviving married partner or civil partner.
The single area of dispute between the parties, therefore, is whether the interference with the appellants right to property has been objectively justified - see para 13 of Higgins LJs judgment.
The starting point in the analysis of whether there is objective justification for interference with the appellants right to property must be the duty of the state to secure her entitlement to equal treatment.
Unlike, for instance, the duty under article 8 of ECHR, which enjoins the state to respect the citizens right to a private life etc, article 14 requires of the state that it should ensure that her rights under ECHR are in place unless there is objective justification for denying them to her.
The European Court of Human Rights (ECtHR) has been careful to question whether discrimination in the enjoyment of survivors rights based on some prior failure to regularise a relationship has been justified: Marckx v Belgium (1979) 2 EHRR 330.
In that case ECtHR held that the limitations placed on the capacity of an unmarried mother to give and bequeath, and her child to take and inherit, property were discriminatory if they had no objective and reasonable justification in the sense that there was no reasonable relationship of proportionality between the means employed and the aim sought to be realised: para 33.
The obligation to secure rights must require a greater level of vigilance on the part of the state authorities than is animated by a duty to have respect for a particular species of right.
The duty to secure rights calls for a more proactive role than the requirement to respect rights.
The question whether justification has been demonstrated must be assessed objectively - see R (SB) v Governors of Denbigh School [2006] UKHL 15; [2007] 1 AC 100, para 30, per Lord Bingham of Cornhill.
That is not to say, however, that the court should substitute its view for that of the decision-maker.
Indeed, it may be appropriate to accord a wide margin of discretionary judgment to the conclusion of a decision-maker, particularly where it is the legislature that makes the choice and where the conclusion lies within the field of socio-economic policy.
Thus, for instance, in the case of Swift v Secretary of State for Justice [2013] EWCA Civ 193; [2014] QB 373, where a claim pursuant to section 1(3)(b) of the Fatal Accidents Act 1976 was dismissed because, although the claimant was a cohabiting partner of the deceased, she did not meet the condition of having lived in the same household for a period of two years immediately before the date of death, it was held that Parliament was better placed than the courts to appreciate what was in the public interest on an issue of socio-economic policy (para 24).
But the margin of discretion may, of course, take on a rather different hue when, as here, it becomes clear that a particular measure is sought to be defended (at least in part) on grounds that were not present to the mind of the decision-maker at the time the decision was taken.
In such circumstances, the courts role in conducting a scrupulous examination of the objective justification of the impugned measure becomes more pronounced.
An example of this is to be found in the case of Belfast City Council v Miss Behavin Ltd [2007] UKHL 19; [2007] 1 WLR 1420, paras 46-47, where Lord Mance asked: what is the position if a decision-maker is not conscious of or does not address his or its mind at all to the existence of values or interests which are relevant under the Convention? The court is then deprived of the assistance and reassurance provided by the primary decision-makers considered opinion on Convention issues.
The courts scrutiny is bound to be closer, and the court may have no alternative but to strike the balance for itself, giving due weight to such judgments as were made by the primary decision-maker on matters he or it did consider.
The appellant has submitted that where the decision-maker has not made any judgment, in advance of its decision, about the factors which it later deploys in support of that decision, no institutional deference can be due to such post hoc logic.
Ms Mountfield QC, who appeared for the appellant, has argued that those factors must be judged on their own terms.
They should be given only such weight as their cogency and any supporting evidence warrant.
While accepting that such factors could, in principle, attract weight as a result of the particular experience or expertise of the deciding body, she argues that the court should not exercise restraint by virtue of the bodys constitutional responsibility for taking the decision, because the factors advanced post hoc did not form any part of the reasoning behind the bodys discharge of its function.
I am not prepared to accept this submission without qualification.
Obviously, if reasons are proffered in defence of a decision which were not present to the mind of the decision-maker at the time that it was made, this will call for greater scrutiny than would be appropriate if they could be shown to have influenced the decision- maker when the particular scheme was devised.
Even retrospective judgments, however, if made within the sphere of expertise of the decision-maker, are worthy of respect, provided that they are made bona fide.
DENI has submitted that the correct legal test to be applied in determining whether the nomination requirement in the 2009 Regulations is justified and proportionate is that set out in Stec v United Kingdom (2006) 43 EHRR 47 at para 52: ... a wide margin is usually allowed to the State under the Convention when it comes to general measures of economic or social strategy.
Because of their direct knowledge of their society and its needs, the national authorities are in principle better placed than the international judge to appreciate what is in the public interest on social or economic grounds, and the court will generally respect the legislatures policy choice unless it is manifestly without reasonable foundation.
Mr McGleenan QC, who appeared for DENI, pointed out that the manifestly without reasonable foundation test was adopted and applied by this court in R (JS) v Secretary of State for Work and Pensions (Child Poverty Action Group intervening) [2015] UKSC 16; [2015] 1 WLR 1449 (also known as R (SG) v Secretary of State for Work and Pensions) where at para 11 Lord Reed, having cited the test enunciated in Carson v United Kingdom (2010) 51 EHRR para 13, stated: That approach was followed by this court in Humphreys v Revenue and Customs Comrs [2012] UKSC 18; [2012] 1 WLR 1545, where Lady Hale stated at para 19 that the normally strict test for justification of sex discrimination in the enjoyment of Convention rights gives way to the manifestly without reasonable foundation test in the context of welfare benefits.
I am prepared to accept for the purpose of this appeal that the test to be applied is that of manifestly without reasonable foundation.
Whether that test requires adjustment to cater for the situation where the proffered reasons are the result of deliberation after the decision under challenge has been made may call for future debate.
Where the state authorities are seen to be applying their direct knowledge of their society and its needs on an ex post facto basis, a rather more inquiring eye may need to be cast on the soundness of the decision.
Since it does not affect the outcome of this appeal, however, I am content that the without reasonable foundation formula should be taken to apply in this instance.
Both DENI and NILGOSC drew heavily on the joint dissenting judgment of Lord Sumption and Lord Reed in R (Tigere) v Secretary of State for Business Innovation and Skills [2015] UKSC 57; [2015] 1 WLR 3820 in advancing the claim that where a persons status is not an immutable characteristic of the individual affected, the state should be accorded a correspondingly wide margin of appreciation when determining whether discrimination based on that status is justifiable and proportionate to its objective.
The judgment was also cited in support of the bright- line rule that the nomination procedure is said to establish and in advancing the case that, in the socio-economic field, a broad area of discretionary judgment should be allowed to state authorities.
These principles, well-recognised as they are, depend heavily on the context in which it is sought to apply them.
As it happens, I have no difficulty in accepting that each is worthy of close consideration in this case.
But whether they impel the outcome for which the respondents contend must be subject to careful examination of the particular aspects of the case which they are said to affect.
To set the scene for that examination, it is necessary to look at some passages from Lord Sumption and Lord Reeds dissenting judgment.
On the first of the arguments viz that where the status involved is not an immutable characteristic, there should be a commensurately broader discretion available to the decision-maker, it should, of course, be recalled that in Tigere the status concerned was one of immigration.
But I accept that statements made concerning that status may apply to the present case where the status is one of cohabitant.
At para 74 of the joint judgment, Lord Sumption and Lord Reed said: The Strasbourg court has accepted that a persons immigration status can be an other status for the purpose of article 14: Bah v United Kingdom (2011) 54 EHRR 773, paras 45-46.
But it also made it clear that, because immigration status is not an immutable characteristic of the individual affected, the state should be accorded a correspondingly wide margin of appreciation when determining whether discrimination based on that status is justifiable and proportionate to its objective, at para 47: The nature of the status on which differential treatment is based weighs heavily in determining the scope of the margin of appreciation to be accorded to contracting states Immigration status is not an inherent or immutable personal characteristic such as sex or race, but is subject to an element of choice While differential treatment based on this ground must still be objectively and reasonably justified, the justification required will not be as weighty as in the case of a distinction based, for example, on nationality.
It is relevant that the appellant and Mr McMullan had chosen not to marry for the ten years that they lived together (although, of course, they had clearly decided to change that situation shortly before he died).
The appellants status is one which she chose and not one with which she was born or which she could not avoid.
Unquestionably, that circumstance alters the approach that one takes to the difference in treatment to which she was subject vis--vis a married or civil partner.
But should that bring about a markedly more benevolent review of the imposition of the nomination requirement? After all, the essential purpose of the change in the scheme brought about by the 2009 Regulations was to include persons such as the appellant.
Moreover, it was necessary for the authorities to bring about that change in order to secure her entitlement to equal treatment and, incidentally, to comply with their obligations under ECHR and the Human Rights Act 1998.
The reason that it was decided to include the nomination requirement was to make the scheme congruent with that in England and Wales.
No independent evaluation of the need for this particular procedure was undertaken.
It was not present to the mind of the decision-maker that a wider discretion was available because the status of those affected was not an inherent or immutable personal characteristic.
For all these reasons, while this is a factor that should not be left out of account, it does not weigh heavily in the assessment as to whether the discrimination is justifiable and proportionate to its objective.
On the bright-line rule argument, the respondents relied on para 91 of Lord Sumption and Lord Reeds judgment: The advantages of a clear rule in a case like this are significant.
It can be applied accurately and consistently, and without the element of arbitrariness inherent in the discretionary decision of individual cases.
By simplifying administration it enables speedy decisions to be made and a larger proportion of the available resources to be applied to supporting students.
Young people considering applying to universities need to know whether they will get a student loan or not.
The Student Loan Company, which administers the scheme, needs to process a very large number of applications for loans in the relatively short interval between the acceptance of a student by a university and the start of the academic year.
The contrast between the situation in Tigere and the present case is immediately obvious.
The authorities in Tigere had identified the difficulties in administration which they claimed would beset the student loan scheme if those whose immigration status was uncertain were included in it.
That was central to the policy decision.
The volume of applications for loans called for a clear rule, it was claimed, even though this might cause hardship in individual cases.
This was a thought-through approach to what the authorities apprehended would be a considerable logistical problem.
In the present case, no thought was given to possible difficulties with administration that might arise if the nomination procedure was not included in the new scheme which the 2009 Regulations introduced.
Indeed, even after the appellants challenge was made, DENI has not been able to produce tangible evidence that there would be significant problems in administering the scheme if the nomination requirement was abandoned.
Vague suggestions as to the workability of the scheme and the advantages of actuarial predictions were made but these were not supported by evidence.
It is also significant that in England and Wales, where a significantly greater number of applications require to be transacted, it is considered that the nomination procedure is not necessary.
I consider, therefore, that the desirability of a bright-line rule is, at most, of marginal significance in this case.
On the argument that a broad margin of appreciation should be afforded to the decision to include the nomination procedure because it fell within the socio- economic sphere, the respondents relied on paras 75 and 76 of Lord Sumption and Lord Reeds judgment in Tigere, which quoted from a passage in Stec already referred to above at para 53. 75.
Student loans are provided out of public funds on terms which are much more advantageous to students than any commercial alternative.
They are a form of state benefit.
Such benefits are almost invariably selective and the criteria for selection necessarily involve decisions about social and economic policy and the allocation of resources.
For this reason, discrimination in their distribution gives rise to special considerations in the case law of the Strasbourg court.
The test is to be found in the decision of the Grand Chamber of the European Court of Human Rights in Stec v United Kingdom, 43 EHRR 1017, para 52: 76.
Commenting on this test in R (RJM) v Secretary of State for Work and Pensions [2009] AC 311, Lord Neuberger (with whom Lord Hope, Lord Walker and Lord Rodger agreed) remarked on its practical implications, observing that the fact that there are grounds for criticising, or disagreeing with, these views does not mean that they must be rejected.
Equally, the fact that the line may have been drawn imperfectly does not mean that the policy cannot be justified.
Of course, there will come a point where the justification for a policy is so weak, or the line has been drawn in such an arbitrary position, that, even with the broad margin of appreciation accorded to the state, the court will conclude that the policy is unjustifiable.
The test was reviewed and reaffirmed by this court in Humphreys v Revenue and Customs Comrs [2012] 1 WLR 1545, paras 15-21 (Baroness Hale of Richmond JSC).
It has recently been applied by this court in R (SG) v Secretary of State for Work and Pensions (Child Poverty Action Group intervening) [2015] 1 WLR 1449, paras 11, 69 (Lord Reed JSC).
Where a conscious, deliberate decision by a government department is taken on the distribution of finite resources, the need for restraint on the part of a reviewing court is both obvious and principled.
Decisions on social and economic policy are par excellence the stuff of government.
But where the question of the impact of a particular measure on social and economic matters has not been addressed by the government department responsible for a particular policy choice, the imperative for reticence on the part of a court tasked with the duty of reviewing the decision is diminished.
In this case, DENI was not concerned about socio-economic choices when it decided to mimic the nomination requirement that was in place in England and Wales.
It was motivated solely by the desire to maintain consistency between the two schemes.
Of course, after the appellants challenge materialised, the department addressed possible advantages that might accrue if the nomination requirement was maintained and, as I have said, these are not to be dismissed solely because they are the product of hindsight - nor even because they have been put forward post hoc as a possible justification for discrimination in reaction to the appellants claim.
But the level of scrutiny of the validity of the claims must intensify to take account of the fact that the claims are made ex post facto and the claimed immunity from review on account of the decision falling within the socio- economic sphere must be more critically examined.
A suggestion that any matter which comes within the realm of social or economic policy should on that account alone be immune from review by the courts cannot be accepted.
It must be shown that a real policy choice was at stake.
While it is not essential that the policy options were clearly in play at the time the choice was made, obviously, when they were, the cause for reluctance by courts to intervene is enhanced.
In the present case, however, for the reasons earlier given, not only were socio-economic factors not at the forefront of the decision-making process at the time that the decision to include the nomination procedure was made, but the attempt to justify retention of the procedure on those grounds was characterised by general claims, unsupported by concrete evidence and disassociated from the particular circumstances of the appellants case.
I do not consider, therefore, that this is a factor of any significance in this instance.
The test for proportionality
The test for the proportionality of interference with a Convention right or, as in this case, the claimed justification for a difference in treatment, is now well settled - see the judgments of Lord Wilson in R (Aguilar Quila) v Secretary of State for the Home Department [2011] UKSC 45; [2012] 1 AC 621 at para 45, Lord Sumption in Bank Mellat v HM Treasury (No 2) [2013] UKSC 39; [2014] AC 700 para 20 and Lord Reed in Bank Mellat at para 74.
As Lord Reed said, it is necessary to determine (1) whether the objective of the measure is sufficiently important to justify the limitation of a protected right, (2) whether the measure is rationally connected to the objective, (3) whether a less intrusive measure could have been used without unacceptably compromising the achievement of the objective, and (4) whether, balancing the severity of the measures effects on the rights of the persons to whom it applies against the importance of the objective, to the extent that the measure will contribute to its achievement, the former outweighs the latter.
For the reasons earlier given, I consider that the objective of the particular provisions in the 2009 Regulations which are involved here must have been to remove the difference in treatment between a longstanding cohabitant and a married or civil partner of a scheme member.
To suggest that, in furtherance of that objective, a requirement that the surviving cohabitant must be nominated by the scheme member justified the limitation of the appellants article 14 right is, at least, highly questionable.
Be that as it may, I consider that there is no rational connection between the objective and the imposition of the nomination requirement and that this also fails to meet the third and fourth standards in Lord Reeds formulation.
Conclusion
I would allow the appeal; make a declaration that the requirement in the 2009 Regulations that the appellant and Mr McMullan should have made a nomination be disapplied; and that the appellant is entitled to receive a survivors pension under the scheme.
I would allow the appeal; make a declaration that the requirement in the 2009 Regulations that the appellant and Mr McMullan should have made a nomination be disapplied; and that the appellant is entitled to receive a survivors pension under the scheme.
| UK-Abs | This case concerns a requirement in the Local Government Pension Scheme (Benefits, Membership and Contributions) Regulations 2009 (the 2009 Regulations) that unmarried co habiting partners be nominated by their pension scheme member partner in order to be eligible for a survivor's pension.
The survivor must also show that he or she has been a cohabitant for two years before the date on which the member sent the nomination and has been in that position for two years before the date of death.
There is no similar nomination requirement for married or civil partner survivors.
The Department of the Environment of Northern Ireland (DENI) included a nomination requirement in the 2009 Regulations in order to ensure parity with other local government pension schemes in Scotland and England and Wales, which at the time had similar requirements.
The appellant, Denise Brewster, lived with her partner, William Leonard McMullan, for around ten years before December 2009.
On Christmas Eve that year, they became engaged.
Mr McMullan died two days later.
At the time of his death, Mr McMullan was employed by Translink, a public transport operator, for whom he had worked for approximately 15 years.
Throughout that time he had been a member of, and had paid into, the Local Government Pension Scheme (the scheme).
Ms Brewster believes that Mr McMullan had completed a form in which he nominated her to be eligible for a survivors pension, but the Northern Ireland Local Government Officers Superannuation Committee (NILGOSC), which administers the scheme, says it did not receive any form.
Accordingly, NILGOSC refused to pay her a survivors pension.
Ms Brewster applied for a judicial review of this decision.
The High Court held that the requirement of nomination of a cohabiting partner in the 2009 Regulations was incompatible with article 14 of the European Convention on Human Rights (which prohibits discrimination) read together with article 1 protocol 1 (peaceful enjoyment of possessions) (A1P1).
The Court of Appeal allowed the respondents appeal, finding that the nomination requirement was neither unjustified nor disproportionate.
In the meantime, prompted by the judgment of the High Court, the equivalent regulations in England and Wales and in Scotland were amended to remove the nomination requirement in those schemes.
When the appellant became aware of these changes, she applied to the Court of Appeal for her appeal to be re opened.
Her application was refused and she now appeals to the Supreme Court.
The Supreme Court unanimously allows Ms Brewsters appeal and declares that the requirement in the 2009 Regulations that the appellant and Mr McMullan should have made a nomination be disapplied;
and that the appellant is entitled to receive a survivors pension under the scheme.
Lord Kerr gives the judgment, with which the other Justices agree.
The parties are agreed that a survivors pension, as a possession, falls within the ambit of A1P1 and that the appellant, as a surviving unmarried cohabiting partner, enjoys a relevant status for the purpose of article 14 and is in an analogous situation to a surviving married partner or civil partner [44 47].
The only issue, therefore, is whether the interference with the appellants right to property has been objectively justified.
The starting point in assessing justification must be the duty of the state under article 14 to secure the appellants right to equal treatment.
The duty to secure rights calls for a more proactive role than the requirement to respect rights.
The question of justification must be assessed objectively, but the court should not substitute its view for that of the decision maker, particularly in matters of socio economic policy [49].
According to DENI, the objective behind the nomination requirement was to establish the existence of a cohabiting relationship equivalent to marriage or civil partnership and identify the wishes of the scheme member [29].
The 2009 Regulations, however, already require a surviving partner to establish that a genuine and subsisting relationship existed, so the nomination requirement adds nothing to this evidential hurdle.
The confirmation of the members wishes has no intrinsic value [31].
Although the status of cohabitation is not an immutable characteristic but a matter of choice, this was not a factor that was considered by the decision maker [59].
The desirability of establishing a bright line rule is also of marginal significance in this case, as no thought was given to the possible difficulties with administration that might arise if the nomination procedure was not included and no evidence was produced that it would cause significant problems in administering the scheme, particularly as in England and Wales it is considered that the nomination procedure is not necessary [62].
Given DENIs acceptance that the provision of a survivor benefit engages A1P1 and that the appellant has the requisite status to rely on article 14, the objective behind the nomination requirement must have been to eliminate unwarranted differences of treatment between married or civil partner survivors on the one hand and unmarried long term partners in a stable relationship on the other [34].
When it comes to general measures of economic or social strategy, the court will generally respect the legislatures policy choice unless it is manifestly without reasonable foundation [53 55].
Where a conscious, deliberate decision by a government department is taken on the distribution of finite resources, the need for restraint on the part of a reviewing court is both obvious and principled.
But where the question of the impact of a particular measure on social and economic matters has not been addressed by the government department responsible for a particular policy choice, the imperative for reticence on the part of a court tasked with the duty of reviewing the decision is diminished [64].
A matter is not immune from review purely on account of coming within the realm of social or economic policy it must be shown that a real policy choice was at stake.
In the present case, not only were socio economic factors not at the forefront of the decision making process, but the attempt to justify retention of the procedure was characterised by general claims, unsupported by concrete evidence and disassociated from the particular circumstances of the appellants case [65].
There is no rational connection between the objective, which was to remove the difference of treatment between a longstanding cohabitant and a married or civil partner, and the imposition of the nomination requirement and therefore its discriminatory effect cannot be justified [67].
|
In this appeal two men who had been convicted of very serious offences and who would continue to be detained in a penal institution on 18 September 2014 sought to establish a right of convicted prisoners to vote in the Scottish independence referendum on that date.
As a prompt decision was needed, the court debated the matter and dismissed the appeal on the same day as the hearing.
This judgment sets out the reasoning of the majority of the court.
The proceedings giving rise to the appeal were applications for judicial review of the Scottish Independence Referendum (Franchise) Act 2013 (the Franchise Act), an Act of the Scottish Parliament.
The Franchise Act based the franchise for the referendum on the franchise for local government elections, which is determined by the Representation of the People Act 1983 (the 1983 Act), and extended it to young voters over the age of 16.
Section 2(1)(b) of the 1983 Act provides that a person who is subject to any legal incapacity to vote is not entitled to vote as an elector at a local government election.
Section 3(1) of the 1983 Act incapacitates convicted prisoners from voting.
Such prisoners have lacked the legal capacity to vote since 1969.
Before then, there were other legal provisions which disenfranchised felons or had the effect of preventing prisoners from being registered to vote.
The challenges follow on from decisions of the European Court of Human Rights (the Strasbourg Court) concerning the disenfranchisement of convicted prisoners.
In Hirst v The United Kingdom (No 2) (2005) 42 EHRR 849 the Grand Chamber held that the general and automatic disenfranchisement of convicted prisoners was a violation of article 3 of Protocol No 1 (A3P1) of the European Convention on Human Rights (ECHR).
In Scoppola v Italy (No 3) (2012) 56 EHRR 663 the Grand Chamber confirmed its judgment in Hirst.
More recently, this court in McGeoch v Lord President of the Council 2014 SC (UKSC) 25 (R (Chester) v Secretary of State for Justice [2014] AC 271) has applied the principles in Hirst and Scoppola in claims under the Human Rights Act 1998 (HRA 1998).
The appellants did not claim that, if their appeal were to succeed, they would necessarily have a right to vote in the referendum but asserted that it was important to review the lawfulness of the legislation, which was a matter of general public importance.
The Lord Advocate and the Advocate General for Scotland did not challenge that assertion.
Lord Glennie, who heard the applications in the Outer House of the Court of Session, issued his opinion refusing them on 19 December 2013 (2014 SLT 213).
The First Division of the Inner House of the Court of Session refused a reclaiming motion on 2 July 2014 (2014 SLT 755).
An expedited appeal was presented to this court on 24 July 2014.
Mr Aidan ONeill QC for the appellants, submitted that the Franchise Acts blanket disenfranchisement of convicted prisoners in relation to the independence referendum was ultra vires the Scottish Parliament under the following headings: 1. 2. 3. 4. 5.
because it was incompatible with A3P1 of the ECHR; because it was incompatible with article 10 of the ECHR (article 10); because it was incompatible with the law of the European Union (EU law); because it contravened the substantive requirements of the International Covenant on Civil and Political Rights (ICCPR); because it was incompatible with the basic democratic principles of the common law constitution, namely the principle of universal suffrage and the concomitant fundamental right to vote; and because it contravened the common law requirements of the rule of law. 6.
The first three challenges are concerned with the effect which the Scotland Act 1998 gives to certain international norms, namely Convention rights incorporated into domestic law by HRA 1998 or EU law (defined in section 126(9) of the Scotland Act) which has precedence within its sphere over domestic law under the European Communities Act 1972, as limitations on the powers of the Scottish Parliament.
Section 29(1) of the Scotland Act 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.
Subsection (2)(d) states that a provision is outside that competence so far as it is incompatible with any of the Convention rights or with EU law.
In relation to those three challenges the issue is whether the appellants or other convicted prisoners have rights which invalidate the relevant provisions of the Franchise Act.
The fourth challenge raises a separate issue, namely whether the ICCPR has any effect in domestic law.
The fifth and sixth challenges raise the questions whether the common law recognises a principle of universal suffrage and whether a denial of such a principle would be contrary to the rule of law.
I consider each challenge in turn.
(i) A3P1 of the ECHR
A3P1 is entitled Right to free elections.
It provides: 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 article requires the contracting states to hold elections at reasonable intervals and the Strasbourg Court, drawing on the travaux prparatoires, has interpreted it as also conferring a right of participation, both by standing for election and voting, in the election of representatives to the legislature: Mathieu Mohin and Clerfayt v Belgium (1987) 10 EHRR 1, paras 46 51.
The natural meaning of the article is that the phrase the free expression of the opinion of the people in the choice of the legislature is the product of the free elections at reasonable intervals by secret ballot.
The article states that the elections are to be held under conditions which will ensure that free expression.
Article 31(1) of the Vienna Convention on the Law of Treaties (1969) provides, as a general rule of interpretation: A treaty shall be interpreted in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in the light of its object and purpose.
In my view the ordinary meaning of the words of A3P1 strongly supports the view that the signatories of the ECHR were undertaking to hold periodic elections to a democratically elected legislature.
The requirement that the elections are held at reasonable intervals also suggests that the drafters of A3P1 did not have referendums in mind.
The words in their ordinary meaning do not support a wider view that A3P1 was intended to cover any major political decision which was put to a popular vote, however important that decision might be.
That the object and purpose of A3P1 is so limited is confirmed by the consistent case law of the European Commission on Human Rights and the Strasbourg Court.
The Lord Ordinary, Lord Glennie, in para 22 of his opinion referred to X v United Kingdom (Application No 7096/75, 3 October 1975) and 11 subsequent decisions on admissibility which vouched the principle that A3P1 applies to elections to the legislature and has no application to voting in other elections or in a referendum.
Lady Paton, delivering the succinct opinion of the First Division, agreed in para 24.
It is not necessary to analyse all of those decisions, which vouch a consistent line of reasoning.
I therefore examine four to highlight the scope of the reasoning of the Strasbourg Court.
X v UK concerned the referendum in 1975 on whether the United Kingdom should remain a member of the EEC.
The Commission decided that A3P1 did not cover the referendum because it was not an election concerning the choice of the legislature.
In v Latvia (Application No 14755/03, 26 January 2006) the Third Section dealt with a complaint that a prisoner had not been allowed to vote in a referendum on Latvias accession to the EU.
It rejected the application as inadmissible, reiterating that the obligations imposed on Contracting States by A3P1 were limited to parliamentary elections and do not apply to referendums.
Niedwied v Poland (2008) 47 EHRR SE6 concerned a prisoner who had been deprived of a right to vote in (i) the presidential election of 2000, (ii) parliamentary elections in 2001 and (iii) the referendum on Polands accession to the European Union in 2003.
The Strasbourg Court rejected the claims in respect of (i) and (iii) ratione materiae because the A3P1 obligations related to the choice of legislature.
The fourth decision, McLean and Cole v United Kingdom (2013) 57 EHRR SE95, concerned complaints by convicted prisoners about their disenfranchisement from (i) elections to the European Parliament in 2009, (ii) the United Kingdom parliamentary election of 2010, (iii) elections to the Scottish Parliament in 2007 and 2011, (iv) the nationwide referendum on the alternative vote also in 2011 and (v) local government elections.
The court held that local authorities in the United Kingdom were not part of the legislature in A3P1 and that complaint (v) was inadmissible.
In relation to complaint (iv) the court reiterated (in para 32) that A3P1 was limited to elections concerning the choice of the legislature and did not apply to referendums.
It continued (in para 33): There is nothing in the nature of the referendum at issue in the present case which would lead the court to reach a different conclusion here.
It follows that complaint concerning the alternative vote referendum is incompatible ratione materiae with the provisions of the Convention and its Protocols and must be rejected pursuant to article 35(4).
Mr ONeill QC founded on the first sentence of this extract to argue that the Strasbourg Court would apply A3P1 to a particular referendum, such as a referendum transferring powers from one legislature (the UK Parliament) to another (the Scottish Parliament).
He also pointed out that some of the admissibility decisions did not contain detailed reasoning.
For the reasons which we set out below we are not persuaded by either point.
For completeness I also refer to Anchugov and Gladkov v Russia [2013] ECHR 638 in which the First Section of the Strasbourg Court held (in paras 54 and 55) that the obligations which A3P1 imposed on Contracting States did not extend to the election of a Head of State.
Thus a complaint under A3P1 of exclusion from the important election of the Russian President was declared inadmissible ratione materiae.
While the Court considered (in paras 38 40) as relevant legal material article 25 of the ICCPR, which I discuss in paras 26 31 below, only the disenfranchisement from the parliamentary elections was held to breach A3P1.
The courts of the United Kingdom are not bound by the judgments of the Strasbourg Court in interpreting the ECHR.
In section 2 of HRA 1998 the courts are obliged only to take into account that jurisprudence.
There is room for disagreement and dialogue between the domestic courts and the Strasbourg Court on the application of provisions of the ECHR to circumstances in the UK.
Nonetheless, it is consistent with the intention of Parliament in enacting HRA 1998 that our courts should follow a clear and constant line of decisions of the Strasbourg Court, 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: Manchester City Council v Pinnock (Nos 1 and 2) [2011] 2 AC 104, Lord Neuberger at para 48.
On occasion our domestic courts may choose to go further in the interpretation and application of the ECHR than Strasbourg has done where they reach a conclusion which flows naturally from Strasbourgs existing case law: Rabone v Pennine Care NHS Trust [2012] 2 AC 72, Lord Brown of Eaton under Heywood para 112; In re G (Adoption: Unmarried Couple) [2009] AC 173.
As Mr ONeill submitted, the Strasbourg Court has on many occasions emphasised both that democracy is a fundamental feature of the European public order and that the ECHR was designed to promote the ideals and values of a democratic society: see for example Staatkundig Gereformeerde Partij v The Netherlands (Application No 58369/10, 10 July 2012) at para 70.
Further, it is in the appellants favour that there is no doubt that a vote whether to secede from a 307 year old Union is a momentous and historic decision for a democratic country.
If the ECHR protected a principle of universal suffrage in all important democratic decisions, the Scottish independence referendum would clearly merit such protection.
But, in my view, the case law of the Strasbourg Court is unequivocal.
What A3P1 requires is regular periodic elections to the legislature of a Contracting Party and it also protects the right to vote and stand for election in such elections.
The legislature is not confined to a national Parliament but includes the European Parliament Matthews v UK (1999) 28 EHRR 361 but it does not include local authorities in the United Kingdom: McLean & Cole v UK.
There is thus no real support for the appellants position in the Strasbourg jurisprudence.
There is no clear direction of travel in that jurisprudence to extend A3P1 to referendums.
On the contrary, between 1975 and 2013 there have been at least 12 applications in which claims under A3P1 concerning a right to vote in referendums have been rejected as inadmissible.
The fact that in some cases the Strasbourg Court has not set out detailed reasoning does not assist the appellants.
The applications were treated as manifestly ill founded, avoiding the need for such reasoning.
At best for the appellants there is the first sentence from the quotation in para 11 above from McLean and Cole, which could suggest that there could be a referendum which would be the equivalent of an election to a legislature.
But that must be construed against the backdrop that the Strasbourg Court has held that referendums which could have a direct and material effect on the powers and operation of a legislature are not within the ambit of A3P1.
Thus accession to the European Union, by which the European Parliament is introduced as a new legislature in relation to a Contracting State and the powers of the national legislature are constrained, is outside A3P1: Z v Latvia and Niedwied v Poland.
So also is a referendum on the way in which the legislature is elected: McLean and Cole.
In my view there is no material difference between accession and secession in this context.
In each case the powers of one legislature are reduced in favour of another legislature.
Nor am I persuaded that the Edinburgh Agreement, by which the United Kingdom Government and the Scottish Government agreed to be bound by the outcome of the Scottish independence referendum, is a point of distinction from other referendums.
The secession of Scotland from the UK could, in theory at least, have been organised constitutionally without a referendum by legislation of the UK Parliament.
The fact that the referendum is a very important political decision for both Scotland and the rest of the United Kingdom is not material.
If the political importance of a democratic decision were the criterion for inclusion within A3P1, it is likely that the election of the executive President of the Russian Federation would have come within that article.
But it did not: Anchugov and Gladkov v Russia.
In view of the clear line of case law by the Strasbourg Court, I do not think, for the reasons discussed in para 28 below, that article 25 of the ICCPR affects the proper interpretation of A3P1.
In Mathieu Mohin and Clerfayt v Belgium the Strasbourg Court stated (at para 53):
Article 3 (P1 3) applies only to the election of the legislature, or at least of one of its chambers if it has two or more (fn 76: Travaux Prparatoires, vol VIII, pp 46, 50 and 52).
The word legislature does not necessarily mean only the national parliament, however; it has to be interpreted in the light of the constitutional structure of the State in question.
The passage of time and the Strasbourg case law since 1988 have not altered the meaning of A3P1.
There are clearly arguments of legal policy which could suggest that a right to vote in a historic constitutional referendum should be protected in the same way as a right to vote in an election of a national or European legislature.
In several cases the Strasbourg Court has stated that any general, automatic and indiscriminate departure from the principle of universal suffrage risks undermining the democratic validity of the legislature thus elected and the laws which it promulgates: Hirst at para 62; Sitaropoulos and Giakoumopoulos v Greece (2012) 56 EHRR 320 (Grand Chamber) at para 68; Scoppola v Italy (No 3) (Grand Chamber) at para 84; and Shindler v UK (2013) 58 EHRR 148 (4th Section) at para 103.
That reasoning could readily be applied to democratic decisions other than elections to the legislature.
A referendum which results in the creation of a new legislature or the transfer of powers from one legislature to another could have an equal effect on the democratic validity of the resulting Parliament.
But A3P1, as currently worded, does not protect such a wider right of participation in public life.
The appellants claim under A3P1 therefore fails.
(ii) Article 10 of the ECHR
Article 10 of ECHR provides 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 courts below held that article 10 does not confer any wider right to vote than is conferred by A3P1.
I agree, essentially for the reasons which they gave (the Lord Ordinary at paras 37 and 40 43 and the First Division at para 25).
The European Commission on Human Rights and the Strasbourg Court have repeatedly held in decisions on admissibility that article 10 did not protect the right to vote or other rights already secured by A3P1 as the lex specialis.
See, for example, Liberal Party v United Kingdom (1980) 4 EHRR 106, paras 14 16, and the other cases to which the Lord Ordinary referred at para 37 of his opinion.
This is consistent with the wording of article 10 and with the approach to construction of the ECHR which considers an individual article in the context of the Convention as a whole.
In any event, there is nothing in the Strasbourg jurisprudence to suggest that a claim under article 10, if admitted as in Hirst v United Kingdom, would confer a wider right of political participation by voting or standing for election than that protected by A3P1: Hirst, para 89; Anchugov and Gladkov, paras 113 116; danoka v Latvia (2006) 45 EHRR 478, para 141.
The claim under article 10 therefore fails.
(iii) European Union law
The appellants asserted that the disenfranchisement of convicted prisoners entailed a breach of EU law.
The argument ran thus.
If voters in Scotland
voted for independence, the appellants as Scottish born British citizens
would automatically be made citizens of an independent Scotland on the enactment of the Scottish Governments draft Scottish Independence Bill.
An independent Scottish Government would have to apply to join the EU.
If the application did not succeed, the appellants new Scottish nationality would not carry with it the rights of EU citizenship, including the rights in the Charter of Fundamental Rights of the EU.
Because the outcome of the referendum might affect rights conferred and protected by the legal order of the EU, Mr ONeill QC submitted that the legislative conditions for participation in the referendum were amenable to judicial review carried out in the light of EU law.
The blanket and comprehensive statutory prohibition from voting was, he submitted, contrary to EU law and thus outside the legislative competence of the Scottish Parliament.
I do not think that the prohibition from voting in the independence referendum involves any breach of EU law for the following two reasons.
First, it must be borne in mind that a yes vote in the referendum would not itself determine the citizenship of the appellants or other people born in Scotland.
The Scottish Government and UK Government would have to negotiate the terms of Scotlands secession from the UK and it is not possible at this time to say whether people may be empowered to elect to retain United Kingdom citizenship.
While the Scottish Independence Bill, if enacted as currently drafted, would end the UK citizenship of a Scottish born citizen, that Bill might be amended in the light of the negotiations.
It would not have been the independence referendum but legislation that followed those negotiations and also negotiations between the Scottish Government and the governments of European Union Member States which might have given rise to a withdrawal of EU citizenship.
The judgment of the Court of Justice of the European Union in Rottmann v Freistaat Bayern [2010] QB 761 may be distinguished on the basis that the Scottish Parliament in enacting the Franchise Act to provide for the franchise of the referendum was not exercising powers in the sphere of nationality in a way which affected the rights conferred or protected by the EU legal order.
Secondly, as the Lord Advocate and the Advocate General for Scotland submitted, this court has recently held that EU law does not incorporate any right to vote, such as that recognised in the Strasbourg Courts case law on the ECHR: McGeoch v Lord President of the Council 2014 SC (UKSC) 25, Lord Mance at paras 56 59.
The EU law challenge therefore fails. (iv) The International Covenant on Civil and Political Rights (ICCPR)
Mr ONeill prayed in aid article 25 of the ICCPR for two purposes.
First, he submitted that this Court should use the article as an aid in the interpretation of the scope of A3P1 of the ECHR.
Secondly, he argued that the Act was outside the competence of the Scottish Parliament because it was contrary to the UKs obligations in international law contained in that article.
Article 25 of the ICCPR provides: Every citizen shall have the right and the opportunity, without any of the distinctions mentioned in article 2 and without unreasonable restrictions: (a) To take part in the conduct of public affairs, directly or through freely chosen representatives; (b) To vote and to be elected at genuine periodic elections which shall be by universal and equal suffrage and shall be held by secret ballot, guaranteeing the free expression of the will of the electors; (c) To have access, on general terms of equality, to public service in his country.
Article 2 involves an undertaking to respect the ICCPR rights without distinction of any kind.
The United Nations Human Rights Committee, which was established under article 28 of the ICCPR, expressed the view in Gillot v France (Communication No 932/2000) (2002) 10 IHRR 22, that article 25 applied to referendums on self determination in New Caledonia.
The French government did not contest that view, which can readily be justified by reference to the combination of paras (a) and (b) of article 25 of the ICCPR.
In the General Comment adopted by the Human Rights Committee under article 40, para 4 of the ICCPR, 27 August 1996, the Committee stated (in para 6): Citizens participate directly in the conduct of public affairs when they exercise power as members of legislative bodies or by holding executive office.
This right of direct participation is supported by paragraph (b).
Citizens also participate directly in the conduct of public affairs when they choose or change their constitution or decide public issues through a referendum or other electoral process conducted in accordance with paragraph (b).
The different wording of article 25 of the ICCPR from that of A3P1 of the ECHR explains the different interpretations of the scope of the provisions.
Thus in Yevdokimov and Rezanov v Russian Federation (Communication No 1410/2005) the Committee concluded that article 25 of the ICCPR extends to the vote on the election of the Russian President, while in Anchugov and Gladkov the Strasbourg Court, having cited article 25 of the ICCPR, held that A3P1 did not.
The decisions on article 25 of the ICCPR do not in my view assist the interpretation of A3P1 of the ECHR.
Mr ONeill QCs submission that the Scottish Parliament lacks the competence to legislate in breach of article 25 of the ICCPR fails to allow for the fundamental separation of powers in our constitution.
The UK Parliament and the Scottish Parliament make laws; the executive branch of the UK Government makes international treaties; but unless those treaties are incorporated into law, they do not affect domestic rights.
In J H Rayner (Mincing Lane) Ltd v Department of Trade and Industry [1990] 2 AC 418, Lord Oliver of Aylmerton stated (p 500B C): [A]s a matter of the constitutional law of the UK, the Royal Prerogative, whilst it embraces the making of treaties, does not extend to altering the law or conferring rights upon individuals or depriving individuals of rights which they enjoy in domestic law without the intervention of Parliament.
Treaties, as it is sometimes expressed, are not self executing.
There is a clear difference between Convention rights which have been incorporated into the domestic laws of the UK by HRA 1998 and rights arising under the ECHR, which are not part of this countrys law but obligations under international law: In re McKerr [2004] 1 WLR 807, Lord Nicholls at para 25, Lord Hoffmann at paras 62 63; R v Secretary of State for the Home Department, Ex p Brind [1991] 1 AC 696, Lord Bridge of Harwich pp 747G 748F.
The drafters of the Scotland Act 1998 clearly bore in mind the distinction between international and domestic obligations.
Section 126(10) excluded from the expression international obligations the obligations to observe and implement EU law and the Convention rights.
The latter obligations, as part of our domestic law, limit the competence of the Scottish Parliament (section 29(2)(d); para 6 above).
No such limit is imposed on the Scottish Parliament in relation to the international obligations of the UK, which are not part of our domestic law.
Instead, section 35(1) empowers the Secretary of State, who is a minister of the UK Government, to make an order prohibiting the Presiding Officer from submitting a Bill for Royal Assent if it contains provisions which he has reasonable grounds to believe would be incompatible with any international obligations.
That provision do[es] not limit the legislative competence of the Scottish Parliament in a way that can be decided upon by a court: Whaley v Lord Advocate 2008 SC (HL) 107, Lord Hope at paras 8 9.
The challenge based on international law, and in particular article 25 of the ICCPR, therefore fails.
(v) The common law right to vote
In essence Mr ONeill QC argued that because we live in a developed liberal parliamentary democracy the common law had developed to recognise as a fundamental or constitutional right a principle of universal and equal suffrage, subject only to proportionate limitations, such as for a minimum age, which must be provided for by law.
I have no difficulty in recognising the right to vote as a basic or constitutional right.
The House of Lords did so in Watkins v Secretary of State for the Home Department [2006] 2 AC 395.
See for example Lord Bingham (para 25) and Lord Rodger (para 61).
It is also not in doubt that the judiciary have the constitutional function of adapting and developing the common law through the reasoned application of established common law principles in order to keep it abreast of current social conditions.
Nor is it controversial to suggest that judges can take into account rules of international law which are binding on the United Kingdom when interpreting statutes and in developing the common law: R v Lyons [2003] 1 AC 976, Lord Bingham at para 13, Lord Hoffmann paras 27 28; R (Osborn) v Parole Board [2013] 3 WLR 1020, Lord Reed para 62.
In McGeoch v Lord President of the Council Lord Sumption (para 121) stated:
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 my view the concluding words are an important limitation.
Like the courts below I do not think that the common law has been developed so as to recognise a right of universal and equal suffrage from which any derogation must be provided for by law and must be proportionate.
It is important to bear in mind, as the Lord Ordinary did in para 70 of his opinion, the historical development of the right to vote.
Parliaments were initially summoned and the franchise created by the Kings writ.
In the fifteenth century parliamentary legislation in both Scotland and England and Wales sought to regulate the franchise.
In Scotland the Election of Commissioners Act 1681 established the county franchise which survived until 1832.
Since then the franchise has been extended by statute.
It has thus been our constitutional history that for centuries the right to vote has been derived from statute.
The UK Parliament through its legislation has controlled and controls the modalities of the expression of democracy.
It is not appropriate for the courts to develop the common law in order to supplement or override the statutory rules which determine our democratic franchise.
In In re McKerr [2004] 1 WLR 807, Lord Nicholls of Birkenhead stated (para 30): The courts have always been slow to develop the common law by entering, or re entering, a field regulated by legislation.
Rightly so, because otherwise there would inevitably be the prospect of the common law shaping powers and duties and provisions inconsistent with those prescribed by Parliament.
R v Lyons [2003] 1 AC 976 is a recent instance where the House rejected a submission having this effect.
See also the similar statements of Lord Steyn (para 51) and Lord Hoffmann (para 71).
In my view that consideration is apt in relation to the submission that this court should recognise a common law right of universal and equal suffrage and provides a complete answer to the submission.
Such a right would contradict sections 2(1)(b) and 3(1) of the 1983 Act.
Although the impugned Act is an Act of the Scottish Parliament to which the doctrine of parliamentary sovereignty does not apply, the appellants proposition has to be tested against the provisions of the 1983 Act.
So tested, I am satisfied that there is no common law right of universal and equal suffrage which could require the Scottish Parliament to extend the franchise in the Act to encompass convicted prisoners.
While the common law cannot extend the franchise beyond that provided by parliamentary legislation, I do not exclude the possibility that in the very unlikely event that a parliamentary majority abusively sought to entrench its power by a curtailment of the franchise or similar device, the common law, informed by principles of democracy and the rule of law and international norms, would be able to declare such legislation unlawful.
The existence and extent of such a power is a matter of debate, at least in the context of the doctrine of the sovereignty of the United Kingdom Parliament: see AXA General Insurance Co Ltd v Lord Advocate 2012 SC (UKSC) 122, Lord Hope (paras 49 51) and in relation to the Scottish Parliament Lord Reed (paras 153 154).
But such a circumstance is very far removed from the present case, and there is no need to express any view on that question.
Finally, I derive little assistance from Sauv v Attorney General of Canada [2002] 3 SCR 519, to which Mr ONeill QC referred.
In that case the Supreme Court of Canada considered the constitutionality of a statutory disenfranchisement of convicted prisoners serving a sentence of more than two years in the context of sections 3 and 15(1) of the Canadian Charter of Rights and Freedoms.
The majority of the court held that the right to vote was fundamental to Canadian democracy and the rule of law (McLachlan CJ at paras 9 and 58) and that the disenfranchisement in the election legislation was unconstitutional.
The judgment has to be understood in the context of the Charter of Rights which in section 3 gives every citizen of Canada the right to vote in the election of members of federal and provincial legislatures and in section 15(1) gives every individual equal benefit of the law.
Further, in Haig v Canada [1993] 2 SCR 995 the Supreme Court held that section 3 of the Charter of Rights did not extend to a federal referendum on the constitution of Canada: LHeureux Dub J at pp 1030 1033.
In my view, the Canadian cases provide no support for the appellants position.
I therefore reject the submission that there is a common law right to vote.
(vi) The Rule of Law
In my view there is no separate argument that the rule of law encompasses a universal right to vote.
Nor can the rule of law be a means of subverting the dualist approach of the laws of the UK towards international treaties: paras 29 and 30 above.
The Franchise Act has established the franchise for the referendum in accordance with the rule of law.
The Scotland Act 1998, in Schedule 5, Part I, para 5A, empowered the Scottish Parliament to enact legislation to hold a referendum on Scottish independence, by excluding such a referendum from reserved matters.
This gave the Scottish Parliament
Conclusion
authority to apply the 1983 Act to the referendum franchise as well as to extend the franchise to young people aged 16 or over.
It is for these reasons that the court dismissed the appeal.
As the appellants were legally assisted persons and remained in detention, it was agreed that the court should make an order awarding costs against them as assisted persons but modifying their liability to nil.
LORD NEUBERGER: (with whom Lady Hale, Lord Clarke, Lord Hodge and Lord Reed agree)
I agree with Lord Hodge that this appeal must be dismissed for the reasons which he gives.
I add a few words of my own on the issue which divides the Court, namely the applicability of article 3 of the First Protocol to the European Convention on Human Rights (A3P1) to a referendum under the Scottish Independence Referendum (Franchise) Act 2013 (the Referendum).
A3P1 is in these terms: 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.
Given the issue on this appeal, namely whether the Referendum would be or was unlawful because people in prison who would otherwise be entitled to vote are excluded from the franchise, it is important to note the structure of the article.
The first half of the article imposes a duty, which is to hold free elections at reasonable intervals by secret ballot.
The second half of the article is directed to what is required of that ballot.
The phrase on which the appeal rests, namely which will ensure the free expression of the opinion of the people, thus does not apply to every national ballot: it only applies to a ballot in which the expression of opinion can be said to involve the choice of the legislature.
My agreement with Lord Hodge and the courts below that the respondent is right and that A3P1 does not apply to the Referendum is founded on four reasons based on the language of the article.
Three of those reasons rely on the natural meaning of the words, and the fourth reason arises from the Strasbourg Courts jurisprudence.
It is perhaps worth emphasising that, in my view, the second reason is enough on its own to justify this conclusion, and that may well also be true of the third and fourth reasons.
The first reason, which would probably not be enough on its own, is that the word elections is not a word that naturally covers a referendum which does not involve electing anyone to any post.
Of course, it might be said (perhaps particularly by a lawyer) that the Referendum required the Scottish people to elect whether to leave the United Kingdom, but that is a pedantic or syntactical point, which avoids addressing the natural meaning of the word election.
Save in technical contexts (such as English legal terminology), which plainly do not arise here, an election is a ballot where people choose between more than one candidate.
The second reason is based on the expression at reasonable intervals.
It is appropriate, indeed necessary, in the present age that every democratic state has a national election to select the members of the national legislature at reasonable intervals.
And no one can doubt that A3P1 requires what we in the United Kingdom call general elections to be held at reasonable intervals.
However, it would be little short of absurd to suggest that there can be an obligation on a government to have a referendum, particularly one such as the Referendum the subject of this appeal which is concerned with a classic one off issue, at reasonable intervals.
There could be no objection under A3P1, for instance, if no further referendum was ever held in relation to Scottish independence.
At reasonable intervals cannot mean once.
Thirdly the requirement that people are entitled to vote in the choice of the legislature does not naturally suggest a choice as to which legislature governs or does not govern.
The definite article before legislature strongly suggests that the legislature to which the article refers is a specific and established entity, and that it is its membership to which the article refers.
Indeed, there is no doubt that A3P1 refers to general elections, ie to elections for the membership of the legislature, and it is a little difficult to see how the words the choice of the legislature can do double duty, and refer to such elections and to referenda or other ballots which have a different aim.
Fourthly, decisions of the of the Strasbourg Court indicate that A3P1 only applies to directly effective elections ie to elections which ipso facto result in what the people voted for, and not to ballots which require some further legal step to produce that result.
Thus, in a general election in the UK, a Member of Parliament is elected as soon as all the votes are cast.
Nothing else is needed, apart from the pure machinery of counting the votes and announcing the result.
On the other hand, while the main political parties had committed themselves to accept the result of the Referendum, a yes vote would not of itself have triggered independence for Scotland.
If there had been a yes vote, Scotland would not have achieved independence unless and until the UK Parliament had voted in favour, and, whatever the main parties had promised, Members of Parliament would have been free, indeed constitutionally bound, to vote as they saw fit.
The Strasbourg Court appears to have consistently considered that a referendum which was not automatic, and only advisory, in nature was not within the ambit of A3P1.
It can be traced to the Commissions admissibility decision X v United Kingdom (Application No 7096/75), where it was held that A3P1 did not apply to the 1975 UK referendum on whether to leave the EEC (as it then was), because it was of a purely consultative character.
That formulation has been impliedly adopted in subsequent decisions of the Commission and the Court, some of which are considered in paras 10 16 of Lord Hodges judgment.
The 1975 referendum, which was considered in X v UK, would almost certainly have been regarded as committing the UK to leaving the EU in practice, but it could not have been legally binding any more than the Referendum was or would have been.
I agree with Lord Hodge that article 31(1) of the Vienna Convention on the Law of Treaties (quoted in his para 8 above) takes things no further.
The travaux prparatoires relating to A3P1 throw no light on the present issue.
What they do show is an intention not to require elections for the executive or the judiciary, but that is not germane to the issue on this appeal.
I cannot see how the deletion of the words and government after legislature at the end of the draft A3P1 assists the conclusion that the article does not have the meaning preferred by Lord Hodge and the courts below.
On the contrary: the retention of those two words would have provided some support for an argument that A3P1 was intended to have a wider meaning than it otherwise would have.
There is, I accept, some initial attraction in the argument that, if a provision such as A3P1 is meant to apply to the membership of a legislature, then it ought a fortiori to apply to the logically anterior, and arguably more fundamental, issue of the existence or nature of the legislature itself.
However, quite apart from the fact that the article does not apply to such an issue as a matter of language, I do not consider that this argument can in fact withstand scrutiny.
The purpose of A3P1 is to ensure that the membership of any national legislature is the subject of elections which must be (i) reasonable in terms of frequency, and (ii) on the basis of universal (or close to universal) suffrage.
There is no reason in terms of practice or principle why this should apply to a vote on the form of the legislature.
The effect of the article is that, whatever the form of the legislature and, however that form is determined, it must be a legislature whose membership is elected in accordance with A3P1.
Thus, the UK Parliament could decide to dissolve itself and to be replaced by a new legislature without a national ballot approving the decision, but election to the membership of the new legislature would have to be effected by a national ballot, as it must comply with A3P1.
Taken to its logical conclusion, it appears to me that, because its membership of the EU involves the UK being in some way subject to the European Parliament, the appellants argument would mean that leaving the EU would actually require a national ballot and joining the EU in 1973 without a national ballot must have infringed A3P1.
For these reasons, which are little more than a footnote to Lord Hodges reasons, I would reject this appeal, but, as he points out, there is a further ground for doing so.
The decisions starting with X v UK and referred to by Lord Hodge in his paras 10 16 above, show that there is a clear and consistent view in Strasbourg that A3P1 does not apply to referenda.
It is open to us to go further than the Strasbourg Court in deciding on the ambit of a provision in the Convention, but such an unusual course would require sound justification.
I can see no such justification in the present case.
LADY HALE:
This is a difficult case.
I agree with Lord Hodge and Lord Neuberger that, on a literal interpretation, article 3 of the First Protocol (A3P1) does not apply to the Scottish independence referendum.
But I also agree with Lord Kerr and Lord Wilson that the evolutive approach to the interpretation of the Convention adopted by the European Court of Human Rights strongly suggests that it might indeed encompass a referendum such as this and that the European Court may well have been hinting just as much in para 33 of its decision in McLean and Cole v United Kingdom (2013) 57 EHRR SE95, quoted by Lord Hodge at para 11.
I further agree that, if we are confronted with a question which has not yet arisen in the European Court, we have to work out the answer for ourselves, taking into account, not only the principles which have been developed in Strasbourg, but also the principles of our own law and constitution.
However, while it is clear that A3P1 requires the holding of regular parliamentary elections, it is also clear that it does not require the holding of a referendum, even on such an important issue as Scottish independence.
Nor would I take it for granted that article 1 of the International Covenant on Civil and Political Rights, quoted by Lord Kerr at para 81, requires there to be such a referendum.
This depends upon several difficult questions, not only about the interpretation of article 1, but also about the import of the Treaty of Union between Scotland and England, and how that Treaty might lawfully be brought to an end, issues of the highest constitutional importance upon which we have heard no argument at all.
In the end, therefore, I conclude that, as A3P1 does not require there to be such a referendum, then the requirements (which the Strasbourg Court has implied into that article) as to the right of individuals to participate in the elections which it does require do not apply to such a referendum.
If this be so, the only source of such a right would be the common law.
It would be wonderful if the common law had recognised a right of universal suffrage.
But, as Lord Hodge has pointed out, it has never done so.
The borough franchise depended upon royal charter.
The 40 shilling freehold county franchise appears to have been the creation of Parliament.
Every subsequent expansion of the franchise, from the great Reform Act of 1832 onwards, has been the creation of Parliament.
It makes no more sense to say that sentenced prisoners have a common law right to vote than it makes to say that women have a common law right to vote, which is clearly absurd. 56.
For these reasons, I would dismiss this appeal.
LORD KERR: 58.
The appellants, Leslie Moohan and Andrew Gillon, challenge the validity of the Act of the Scottish Parliament which authorised the referendum on Scottish independence.
The referendum took place on 18 September this year.
The appeal was heard by this court as a matter of urgency in July and, as Lord Hodge has explained, the courts decision was announced on the day of the hearing, with reasons to follow. 59.
The Act under challenge was the Scottish Independence Referendum (Franchise) Act 2013.
The appellants challenge was advanced on a number of grounds.
It was claimed that the Act, in indiscriminately preventing convicted prisoners from voting, was incompatible with the European Convention on Human Rights; was in violation of EU law; and constituted a breach of a fundamental common law right to vote.
The Convention arguments 60.
It is clear from the decisions of both the ECtHR and this court that a blanket ban on prisoner voting in elections is incompatible with article 3 of Protocol 1 (A3P1) to the Convention.
It provides: 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. 61.
The critical question to be determined on the Convention arguments, therefore, is whether the independence referendum falls within the scope of that article.
If it does, the 2013 Act is not law (section 29, Scotland Act 1998), it having been agreed between the parties that it would not be possible for this court to excise the offending provisions and leave the remainder of the Act in place. 62.
The appellants also claimed that the refusal to allow them to participate in the referendum constituted a violation of article 10 of the ECHR which guarantees freedom of expression.
For the reasons given by Lord Hodge in paras 19 and 20 of his judgment, with which I agree, this claim must fail.
Application of the principle expressed in the maxim, lex specialis derogat legi generali, precludes reliance on article 10.
This applies in domestic and international law contexts.
Where two provisions are capable of governing the same situation, a law dealing with a specific subject matter overrides a law which only governs general matters.
A3P1 is specifically concerned with freedom of expression in the choice of legislature.
Article 10, dealing with freedom of expression generally, cannot provide rights in relation to voting which are greater than those provided for by A3P1.
The correct approach to interpretation of A3P1 63.
A3P1 is not to be read as if it were a Westminster or a Holyrood statute.
It is an instrument of international law, to be interpreted according to that systems markedly distinct canons of interpretation.
These are encapsulated in articles 31 and 32 of the Vienna Convention on the Law of Treaties (VCLT): see, eg, Genocide (Bosnia and Herzegovina v Serbia and Montenegro) 2007 ICJ Rep 43, 109 110.
The following provisions of those articles are particularly relevant to this case: Article 31 General rule of interpretation 1.
A treaty shall be interpreted in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in the light of its object and purpose. 2.
The context for the purpose of the interpretation of a treaty shall [include] its preamble and annexes 3.
There shall be taken into account, together with the context: c.
Any relevant rules of international law applicable in the relations between the parties.
Article 32 Supplementary means of interpretation Recourse may be had to supplementary means of interpretation, including the preparatory work of the treaty and the circumstances of its conclusion, in order to confirm the meaning resulting from the application of article 31 64.
It would be wrong to read article 31 as reflecting something like the so called golden rule of statutory interpretation where one starts with the ordinary meaning of the words and then moves to other considerations only if the ordinary meaning would give rise to absurdity.
That is not international law.
The International Law Commission made clear in its Commentary to the draft treaty, at p 219, that, in accordance with the established international law which these provisions of VCLT codified, such a sequential mode of interpretation was not contemplated: 65. 66.
The Commission, by heading the article General rule of interpretation in the singular and by underlining the connection between paras 1 and 2 and again between para 3 and the two previous paragraphs, intended to indicate that the application of the means of interpretation in the article would be a single combined operation.
I should say that, even if a golden rule type of interpretation was considered to be appropriate, I do not consider that this would impel the interpretation for which the respondent and the intervener contend.
They argue that A3P1 does not apply to this referendum because the Strasbourg cases have applied it only to elections to a legislature and, at any rate, not to referendums.
For reasons that I will give presently, I do not accept that the position is as clear cut as the respondent and the intervener contend.
In any event, if A3P1 was designed to apply only to elections to legislatures, it would have been most naturally expressed as reading, The High Contracting Parties undertake to hold free elections to the legislature at reasonable intervals by secret ballot.
Instead the core of the obligation is to hold free elections.
A corollary of that is that any vote that is held must be held fairly.
And that obligation is to be performed under conditions which will ensure the free expression of the opinion of the people in the choice of the legislature.
This phrasing may, on one view, point to a focus on legislative elections, but it by no means justifies an exclusion of other votes.
Why should it? If voting for a representative in a legislature is deemed sufficiently important that it should be guaranteed to all, why would voting for the form of government be deemed less important? If the interpretation of A3P1 is not free from doubt, recourse to the travaux prparatoires is appropriate article 32 VCLT.
They suggest that its focus on legislatures is not intended to be a positive restriction of its application only to legislative elections, but rather a right of political participation that did not extend to elections of the executive (elections to the judiciary not having been contemplated to begin with).
The background to this is that the United Kingdom had proposed that the text of the article should read: Signatory governments undertake to respect the political liberty of their nationals and, in particular, 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 legislature and government (emphasis added).
The delegate of Sweden, a constitutional monarchy, was unable to commit his Government with regard to this proposal.
That followed the expression of unease by both Sweden and Norway, another constitutional monarchy, about the definition of the right of the people to choose their government. (Preparatory work on article 3 of Protocol No 1 to the ECHR, p 59).
Such hesitation is understandable, as a provision in those terms might have been interpreted as requiring the end of monarchical government in two countries with so long and proud a tradition of it.
The reference to choice of government urged by the United Kingdom was accordingly dropped. 67.
Approaching the problem with the three powers of government in mind, and with no reason to think beyond that, it was therefore logical for the drafters of Protocol No 1 to express a right that excluded elections to the judiciary and executive as a right in positive terms to participate in legislative elections.
But it does not follow that A3P1 ought not to apply to situations which were not in the contemplation of its original drafters.
In addition to the imperative to interpret the Convention as a living instrument (see, eg, Tyrer v United Kingdom (1978) 2 EHRR 1), the court has an obligation to interpret A3P1 in light of its object and purpose (VCLT, article 31(1)).
The object and purpose of A3P1 must be as contributors to the overall purpose of the Convention as expressed in the preamble.
It envisages the guarantee of an effective political democracy as the foundation for all other rights enjoyed by those within its protection. 68.
Provided the exclusion of elections to executive and judicial posts from A3P1 is respected, it is difficult to see how that purpose would be other than frustrated by preventing the safeguards applicable to ordinary legislative elections from applying to this most fundamental of votes.
The fact, if indeed it be the fact, that the framers of A3P1 did not have referendums in mind does not provide a definitive answer.
Of their nature, referendums are held less frequently and more irregularly than elections to legislatures.
But a referendum on whether a country should become independent of others with which it has been united for centuries and whether, in consequence, it should have a radically different form of government is surely intimately associated with citizens expression of opinion about the choice of legislature. 69.
The majoritys reasoning lays emphasis on the requirement to hold elections at regular intervals but, in my view, this is secondary to the primary aim of the provision which is to ensure that citizens should have a full participative role in the selection of those who will govern them.
Given that a referendum as to whether Scotland should become an independent nation would have made a critical difference to the form of government to which the appellants and other citizens in Scotland would be subject, I consider that the right to vote in this particular referendum should be recognised as an undeniable aspect of the appellants A3P1 right.
Strasbourgs approach to referendums 70.
The ECtHR has so far declined to extend the ECHRs protections to referendums.
The question arises, however, whether that exclusion by the Strasbourg Court is categorical.
As Lord Hodge has pointed out in para 11 of his judgment, in McLean and Cole v United Kingdom (2013) 57 EHRR SE95, at para 33 the ECtHR, in dismissing the applicants complaint that they had been disenfranchised from the nationwide referendum on the alternative vote, said that there was nothing in the nature of the referendum at issue in that case which warranted a different conclusion from that reached in earlier decisions concerning referendums.
Lord Hodge was not disposed to attribute to the words, the referendum at issue in the present case the significance which the appellants seek to attach to them.
At para 16 of his judgment he suggested that the statement must be construed against the backdrop that the Strasbourg Court has held that referendums which could have a direct and material effect on the powers and operation of a legislature are not within the ambit of A3P1.
But it is noteworthy that in para 32 of the judgment the ECtHR said this: The Convention organs have emphasised on a number of occasions that article 3 of Protocol No 1 is limited to elections concerning the choice of the legislature and does not apply to referendums (see X v United Kingdom (7096/75) 3 October 1975; Bader v Germany (26633/95) 15 May 1996; Castelli v Italy (35790/97 and 38438/97) 14 September 1998; Hilbe v Liechtenstein (31981/96) 9 September 1999; and Borghi v Italy (54767/00) 20 June 2002 (extracts). (emphasis added) 71.
The ECtHR appears here to draw a contrast between, on the one hand, elections which concern the selection of legislatures and, on the other, referendums which, in their conventional form, are not usually associated with that type of choice.
A distinction can be drawn between referendums which merely have an effect on the powers and operation of a legislature and those which necessarily determine the type of legislature that citizens of a country will have.
The latter surely involve the choice of legislature.
Deciding whether Scotland should be independent is inextricably bound up with the question of what sort of legislature it will have; whether it will be a sovereign Parliament or one which must act within the range of powers devolved to it.
I do not consider that Strasbourg can be said to have set its face against recognising that A3P1 should cover referendums that, in effect, determine the choice of legislature for a countrys people. 72.
Another way of approaching the question is to focus on the rationale for, and therefore the proper scope of, the exclusion of referendums from A3 P1.
Of the cases cited by the ECtHR in McLean and by the Lord Ordinary in the present case, only the admissibility decision of the Commission in X v United Kingdom (Application No 7096/75, 3 October 1975) contains any reasoning.
All of the others either cite X without further discussion, or cite one or more cases which in turn cite X (or a case citing X), likewise without further discussion.
It is therefore X that illuminates the reasons why Strasbourg has not subsequently applied A3P1 to referendums, and consequently the scope of such a restriction.
The Commission held in that case that the referendum on continued British membership of the European Union fell outside A3P1 for two reasons: [I]t was of a purely consultative character and there was no legal obligation to organise such a referendum.
It did not, therefore, fall within the scope of article 3 of Protocol No 1 to the Convention.
It follows that a right to participate in the referendum could not be derived from that provision 73.
The independence referendum meets both criteria which the Commission considered were absent in X. Both the United Kingdom and Scottish governments had agreed that the result of the referendum would be binding and section 1(1) of the Scottish Independence Referendum Act imposed the legal obligation to organise the referendum.
It is strictly unnecessary to go further but it would be wrong not to observe the serious deficiencies in the Commissions reasoning.
First, there was a legal obligation to hold the referendum in X: it was imposed by section 1(1) of the Referendum Act 1975.
Secondly, and more fundamentally, it cannot be correct that the absence of a legal obligation (in domestic law) to hold a particular vote means that that vote does not fall within A3P1.
If that were so, the obligation to hold free elections would have no effect in a totalitarian country whose laws did not require elections at all.
That would be absurd.
The Commission may have meant that the obligation to hold the vote had to be imposed by international law, but that would simply be begging the question.
X, and consequently all subsequent Strasbourg authorities concerning referendums, must therefore be regarded with some caution.
Be that as it may, even if one takes X and its progeny as good law, this referendum would fall within A3P1.
There is not, in the words of Lord Slynn in R (Alconbury Developments Ltd) v Secretary of State for the Environment, Transport and the Regions [2001] UKHL 23; [2003] 2 AC 295, para 26, any clear and constant jurisprudence of the ECHR to contrary effect and at least some indications in Strasbourg case law that a vote which involves the selection of a form of legislature as an incident of a referendum would come within the ambit of A3P1. 74.
In v Latvia (Application No 14755/03, 26 January 2006) the ban on prisoners voting in the EU accession referendum was said not to breach A3P1 because the obligations imposed by this provision are limited to parliamentary elections and do not apply to referendums.
In support of this proposition the court relied on Bader v Austria (Application No 26633/95, Commission decision of 15 May 1996).
In that case the Austrian Constitutional Court, had found that there was a fundamental difference between elections and referendums on the basis that in elections the voter had the opportunity to choose between competing political parties whereas in referendums the voter had to give his opinion on an issue which had already been determined by the legislature.
The voter did not have to decide on parties and personalities but on the question whether a decision by the legislator should acquire the force of law or not. 75.
Apart from that contained in X itself, this is the only articulation of the justification for distinguishing between voting in a referendum and voting for a candidate in an election to a legislature.
But the distinction between the form of referendum involved in the Bader case and the present is not difficult to find.
Quite apart from the fact that political parties took up markedly different positions on the Scottish referendum and, to that extent, the choice made by the voter reflected his or her predilection for the stance of each, the referendum involved here did not involve the endorsement of a decision already taken by a legislature.
On the contrary, it concerned the choice of the mode of government for that country.
The philosophical underpinning for A3P1 must surely be that citizens should be entitled to have influence in how they are to be governed.
To deny them participation in the stark choice between the two forms of government that the referendum posed must strike at the root of the values which A3P1 are designed to protect. 76.
Democracy is the only political model contemplated by the ECHR.
The concept of universal entitlement to participate in the political process is the natural concomitant of the underlying premise of all human rights law, as recognised in article 1 of the Universal Declaration of Human Rights, that All human beings are born free and equal in dignity and rights.
This spirit informs the Convention and its application.
In United Communist Party of Turkey v Turkey (1998) 26 EHRR 121, at para 45 the court said: Democracy is without doubt a fundamental feature of the European public order (see the Loizidou judgment cited above, p 27, 75).
That is apparent, firstly, from the Preamble to the Convention, which establishes a very clear connection between the Convention and democracy by stating that the maintenance and further realisation of human rights and fundamental freedoms are best ensured on the one hand by an effective political democracy and on the other by a common understanding and observance of human rights (see the Klass and Others judgment cited above, p 28, 59).
The Preamble goes on to affirm that European countries have a common heritage of political tradition, ideals, freedom and the rule of law.
The court has observed that in that common heritage are to be found the underlying values of the Convention (see the Soering v the United Kingdom judgment of 7 July 1989, Series A no 161, p 35, 88); it has pointed out several times that the Convention was designed to maintain and promote the ideals and values of a democratic society (see the Kjeldsen, Busk Madsen and Pedersen v Denmark judgment of 7 December 1976, Series A No 23, p 27, 53, and the Soering judgment cited above, p 34, 87).
In addition, articles 8, 9, 10 and 11 of the Convention require that interference with the exercise of the rights they enshrine must be assessed by the yardstick of what is necessary in a democratic society.
The only type of necessity capable of justifying an interference with any of those rights is, therefore, one which may claim to spring from democratic society.
Democracy thus appears to be the only political model contemplated by the Convention and, accordingly, the only one compatible with it. 77.
This is the most extensive analysis by the ECHR of the vital importance of effective political democracy.
It demonstrates that democracy and democratic principles are indissolubly linked to the society which the Convention seeks to foster.
To find that the choice of government by which one is to be ruled lies outside the sphere of protection that the Convention provides would be remarkable indeed.
Self determination 78.
Although the material relating to other treaties was deployed in the appellants written case principally in support of an argument that the common law must reflect their terms, Mr ONeill QC submitted on their behalf at the hearing that they were also relevant to the interpretation of A3P1 directly.
In particular, the appellants relied on the International Covenant on Civil and Political Rights (ICCPR), the parties to which include all parties to the ECHR.
It is therefore, in the terms of article 31(3)(c) VCLT, a relevant rule of international law applicable in the relations between the parties which must be taken into account in interpreting A3P1. 79.
Two provisions of the ICCPR are relevant.
Article 25 is the rather more expansively phrased counterpart of A3P1: Every citizen shall have the right and the opportunity, without any of the distinctions mentioned in article 2 and without unreasonable restrictions: (a) To take part in the conduct of public affairs, directly or through freely chosen representatives; (b) To vote and to be elected at genuine periodic elections which shall be by universal and equal suffrage and shall be held by secret ballot, guaranteeing the free expression of the will of the electors; (c) To have access, on general terms of equality, to public service in his country. 80.
The appellants relied on two decisions of the United Nations Human Rights Committee, Gillot v France (2002) 10 IHRR 22 and Yevdokimov and Rezanov v Russian Federation (21 March 2011, Application No 1410/2005).
These make it clear that article 25 ICCPR extends to referendums and to the election of a head of state, respectively.
Given my conclusion about the applicability of A3P1 to referendums of the type involved in this appeal, the decision in Gillot would not present a difficulty in the use of article 25 of ICCPR as an aid to the interpretation of A3P1.
But in Yevdokimov and Rezanov it was applied to the election of the Russian President.
In light of ECtHRs decision in Anchugov and Gladkov v Russia (Application Nos 11157/04 and 15162/05) where it was held that A3P1 did not apply to the election of a head of state, despite having considered the Yevdokimov and Rezanov case, the use of article 25 as a freestanding aid to the interpretation of A3P1 is at least problematical. 81.
The same considerations do not apply to article 1 of the ICCPR.
It provides: 1.
All peoples have the right of self determination.
By virtue of that right they freely determine their political status and freely pursue their economic, social and cultural development. 2.
All peoples may, for their own ends, freely dispose of their natural wealth and resources without prejudice to any obligations arising out of international economic co operation, based upon the principle of mutual benefit, and international law.
In no case may a people be deprived of its own means of subsistence. 3.
The States Parties to the present Covenant, including those having responsibility for the administration of Non Self Governing and Trust Territories, shall promote the realization of the right of self determination, and shall respect that right, in conformity with the provisions of the Charter of the United Nations. 82.
The Scottish people were exercising their right to self determination when they voted in the referendum.
They were freely determining their political status.
The circumstance that they acquired that right by virtue of the 2013 Act does not detract from that argument.
Not only is the right to self determination guaranteed by the ICCPR; it is also a peremptory norm of international law, also known as ius cogens, with which no other rule of international law may conflict: see, eg, International Law Commission, Conclusions of the work of the Study Group on the Fragmentation of International Law: Difficulties arising from the Diversification and Expansion of International Law (2006), paras 33 and 41. 83.
Given that under the VCLT the ICCPR must be interpreted as a coherent whole, it is clearly arguable that the protections guaranteed by article 25 ICCPR ought to apply to any vote taken in the exercise of the article 1 right to self determination.
That is consonant with the conclusion reached above that the corollary of the core obligation in A3P1 is that any election that is held must be held freely ie with every safeguard that has been held necessarily to apply.
Thus, although article 25 does not, solely on its own account, provide the irrefutable interpretation of A3P1, taken in combination with article 1 of the ICCPR, it sheds light on how the Convention provision should be applied.
I do not consider that its influence on the proper application of A3P1 can be dismissed on the basis that the wording of article 25 differs from that of A3P1 and that different interpretations of the two provisions are therefore acceptable.
Conclusion 84.
In light of my conclusions on the proper interpretation to be given to A3P1 I would have allowed the appeal.
I agree with Lord Hodge, however, in his rejection of the arguments founded on EU law for the reasons that he has given. 85.
Since it is unnecessary for me to do so, I would prefer not to express a view on the claim that the appellants enjoyed a common law right to vote beyond agreeing with what Lord Sumption said in McGeoch v Lord President of the Council 2014 SC (UKSC) 25, quoted with approval by Lord Hodge in para 33 of his judgment. 87. 86.
The common law can certainly evolve alongside statutory developments without necessarily being entirely eclipsed by the latter.
And democracy is a concept which the common law has sought to protect by the incremental development of a system of safeguarding fundamental rights.
In this regard, it marches in step with other European states see, for instance, Lautenbach (2013) in European states the protection of human rights, democracy and the rule of law are interwoven and all part of the domestic [and legal] system: The Concept of the Rule of Law and the European Court of Human Rights, p 209.
It is therefore at least arguable that exclusion of all prisoners from the right to vote is incompatible with the common law.
I must regard it as a moot point whether the observations of Lords Nicholls, Steyn and Hoffmann in In re McKerr [2004] 1 WLR 807 provide a complete answer to the claim that the common law should, in the absence of any Convention right, now recognise a right to vote.
I acknowledge, however, the force of the point made by Lord Hodge that, insofar as a claim to a common law right to vote conflicted with sections 2(1)(b) and 3(1) of the Representation of the People Act 1983, it could not succeed.
I would wish to hear rather fuller argument than was possible on this appeal on the effect of the interaction between the 1983 Act and the 2013 Act (which is, of course, a measure of the Scottish Parliament) before reaching a final conclusion on this issue. 88.
LORD WILSON: Introduction 89.
The Lord Advocate acknowledges that the rights under A3P1 of convicted prisoners in Scotland are currently violated by the blanket prohibition, not yet reformed, against their voting in elections to the UK Parliament, to the Scottish Parliament and to the European Parliament.
Such was the interpretation given to A3P1 by the Grand Chamber of the European Court of Human Rights (the ECtHR) in Hirst v United Kingdom (No 2) (2005) 42 EHRR 849; and in R (Chester) v Secretary of State for Justice [2013] UKSC 63, [2014] AC 271, this court decided to adopt it: see the judgment of Lord Mance at paras 9 and 34.
Such being part of our law, the Lord Advocate nevertheless invited us, at the hearing on 24 July 2014, to hold that the rights under A3PI of convicted prisoners in Scotland were not violated by the blanket prohibition against their voting in the Scottish referendum on 18 September 2014.
That seemed to me to suggest so bizarre an anomaly as to demand the closest scrutiny.
My conclusion was that it did not withstand it.
I agree with the judgment of Lord Kerr. 90. 91.
The question in the referendum was whether Scotland should become an independent country.
Of all the ramifications raised by that question, perhaps the most important was its effect on the identity of the legislature which would both rule and serve the Scottish people.
Those who voted yes voted that the sovereign legislative power of the UK Parliament should no longer extend to Scotland; that instead sovereignty should reside in the people of Scotland; and that, subject to the proposed written constitution for Scotland, the Scottish Parliament should become the sole repository of legislative power in Scotland.
I cannot accept the suggestion of Lord Hodge in para 16 above that the effect of secession, like that of accession to the EU, would be no more than to reduce the power of the UK Parliament.
Had it been necessary (which it was not) to ask whether voters in the referendum were choosing their legislators as well as their legislature, one might have responded that they were choosing whether all those individuals to be elected in constituencies in England, Wales and Northern Ireland to serve as members of the UK Parliament should have any continuing role as legislators for the people of Scotland.
Lord Kerr points out at para 72 above that in the X case the European Commission of Human Rights laid stress on its understanding (right or wrong) that the UKs referendum in 1975 on continued membership of the EEC was of a purely consultative character.
On any view the same could not be said of the Scottish referendum.
By the Edinburgh Agreement dated 15 October 2012, the UK government and the Scottish government agreed that it should deliver a decisive expression of the views of the people in Scotland.
In his Opinion the Lord Ordinary observed that he had no reason to doubt that the outcome of the referendum will in practice and as a matter of agreement be binding.
Lord Neubergers hypothesis at para 47 above that a majority of the members of the UK Parliament might nevertheless have refused to enact legislation reflective of a yes vote seems to me, with respect, to be far fetched.
Interpretation of A3P1 92.
Lord Kerr suggests at para 63 above that A3P1 falls to be interpreted in accordance with article 31 of the Vienna Convention on the Law of Treaties (the Vienna Convention).
I agree.
In Bankovic v Belgium (2001) 11 BHRC 435, the Grand Chamber of the ECtHR said at para 55: The court recalls that the convention must be interpreted in the light of the rules set out in the Vienna Convention So the search is for the ordinary meaning to be given to the terms of [A3P1] in their context and in the light of its object and purpose. 93.
It is in my view significant, as well as unusual, that the objective of A3P1 has been set out as part of its terms.
It is to ensure the free expression of the opinion of the people in the choice of the legislature.
Those words are dominant: the other words of the article are subservient to them.
I consider both that the drafters of the article did not have in mind a secession referendum but that, had they had it in mind, they would have expressly provided that a right to vote in it fell within its ambit.
Although neither of those considerations is relevant, what is intriguing is that the drafters alighted upon a phrase choice of the legislature which happens, as I have explained, to be a particularly apt description of the exercise in which Scottish voters were engaged on 18 September.
Yes, indirectly and generically, they might also be said to have been choosing their legislators but on any view they were choosing their legislature.
Lord Neuberger suggests at para 46 above that the reference in the article to the legislature strongly suggests an established entity.
I cannot subscribe to his construction: in my view the reference is to the choice of the legislature which will exercise power over the voters irrespective of whether it is already established.
In any event, however, both the UK Parliament and the Scottish Parliament were already established entities. 94.
I turn from the dominant words to the subservient words, in which I must confront the reference to elections at reasonable intervals.
It is possible that in time to come there will be another secession referendum in Scotland but one cannot say that such referenda might, still less should, take place at reasonable intervals. 95.
The general rule of interpretation set by article 31 of the Vienna Convention requires that the terms of the articles in the ECHR should be read in their context and in the light of their object and purpose.
This will sometimes precipitate the need to depart from a literal interpretation.
Take the case of Pretto v Italy (1983) 6 EHRR 182.
It was the practice of the Court of Cassation in Italy to disseminate its judgments solely by depositing them in its registry.
Article 6(1) of the ECHR provides that [j]udgment shall be pronounced publicly .
The ECtHR accepted at para 28 that the Court of Cassation had not pronounced its judgment publicly.
Nevertheless it held that the rights of the disappointed litigant under article 6(1) had not been violated.
It said at para 26: The Court therefore does not feel bound to adopt a literal interpretation.
It considers that in each case the form of publicity to be given to the judgment must be assessed in the light of the special features of the proceedings in question and by reference to the object and purpose of article 6(1). 96.
I have already explained that the objective behind A3P1 is set out in the dominant words of the article itself.
But, at a higher level of generality, what are the object and purpose behind the objective of seeking to ensure the free expression of the opinion of the people in the choice of the legislature? 97.
Article 31(2) of the Vienna Convention provides that the context of the terms of a treaty includes its preamble.
Short though the preamble to the ECHR is, the government signatories chose in it to reaffirm their belief that the freedoms which were the foundation of justice and peace in the world would best be maintained on the one hand by an effective political democracy and on the other by a common understanding and observance of the human rights upon which they depend.
Thus it was that in Zdanoka v Latvia (2006) 45 EHRR 478 the Grand Chamber embarked on its assessment of the ambit of A3P1 by observing at para 98 that it was apparent from the preamble to the ECHR that democracy constituted a fundamental element of the European public order.
It proceeded at para 103 to reaffirm the words by which, five months earlier in the Hirst case, it had identified the overall object and purpose of A3P1.
There it had said at para 58: The Court has had frequent occasion to underline the the importance of democratic principles underlying interpretation and application of the Convention and it would use this occasion to emphasise that the rights guaranteed under article 3 of Protocol No 1 are crucial to establishing and maintaining the foundations of an effective and meaningful democracy governed by the rule of law. 98.
Indeed in the Hirst case it had proceeded in para 82 to describe A3P1 as a vitally important Convention right.
If, as the Grand Chamber has held and as this court has acknowledged (see R (Barclay) v Lord Chancellor and Secretary of State for Justice [2009] UKSC 9, [2010] 1 AC 464, para 53, Lord Collins of Mapesbury), A3P1 is indeed crucial to establishing and maintaining the foundations of an effective democracy, it follows that its effect will be apt to establishing and maintaining them.
If the ambit of the article were not to have extended to the referendum about whether Scotland should become an independent country, it would not have been apt to establishing and maintaining the foundations of a democracy in Scotland.
The object and purpose of the article therefore drive a conclusion that its ambit did extend to it and, were that conclusion to be overridden by the reference in the article to reasonable intervals, then (for a clich can often be the most telling means of making a point) the tail would be wagging the dog. 99.
But the requisite exercise in interpreting A3P1 is not yet complete.
For article 31(3)(c) of the Vienna Convention requires account to be taken of any relevant rules of international law.
In Neulinger v Switzerland (2010) 28 BHRC 706 the ECtHR observed at para 131 that the ECHR should not be interpreted in a vacuum but, in accordance with article 31(3)(c), should be interpreted in harmony with general principles of international law.
In ZH (Tanzania) v Secretary of State for the Home Department [2011] UKSC 4, [2011] 2 AC 166, Lady Hale at para 21 indorsed that observation.
In Bayatyan v Armenia (2011) 54 EHRR 467 the ECtHR added at para 102 that account had to be taken not only of the terms of international instruments but also of their interpretation by competent organs. 100.
It is therefore no surprise to find that, in cases about the effect of A3P1, the ECtHR has regularly had regard to article 25 of the International Covenant on Civil and Political Rights 1966 (the ICCPR) and to its interpretation by the Human Rights Committee which was established under article 28 of it and which reports on its implementation and determines issues arising under it: see the Hirst case, cited at para 89, paras 26 27; Scoppola v Italy (No 3) (2012) 56 EHRR 663, paras 40 42; and Anchugov and Gladkov v Russia (Applications Nos 11157/04 and 15162/05), 4 July 2013, paras 38 40.
In the last of those cases the court proceeded to observe at para 94 that the rights enshrined in A3P1 were the same as those enshrined in article 25 of the ICCPR.
In para 28 above Lord Hodge demonstrates, by reference to conflicting determinations about rights to vote in the election of the Russian President, that the ambit of article 25 must be somewhat more extensive than that of A3P1.
But it is unsurprising that the determination of the Human Rights Committee in that particular regard shed no light on the meaning of the choice of the legislature in A3P1.
By contrast the approach of the committee in Gillot v France, Communication No 932/2000, (2002) 10 1HRR 22, sheds significant light on it.
Although it did not uphold the complaint that the rules for qualification to vote in the referenda in New Caledonia about secession from France were such as to violate rights under article 25, France did not even seek to deny, nor did the committee appear to hesitate before accepting, that rules for qualification to vote in referenda about secession had to be consonant with the rights set out in article 25.
Determinations of the ECtHR about referenda 101.
Since in my view every aspect of the requisite approach to the construction of A3P1 militates in favour of a conclusion that a secession referendum falls within its ambit, I turn to see whether the ECtHR has determined otherwise and, in either event, how this court should then proceed. 102.
The Lord Advocate contended that there is a clear and constant line of determinations by the ECtHR that A3P1 does not apply to referenda.
This is true.
But it is too glib.
For the court has never had occasion to consider the application of A3P1 to a secession referendum.
No doubt the least dissimilar of its determinations are those which hold that the article does not apply to referenda about accession to the EU.
But there remains a substantial difference between a determination whether to curtail some of the powers of the existing legislature by accession to the EU and whether to eliminate every aspect of the role of the existing legislature by creation of a new state.
And what about the terms used by the ECtHR in its admissibility decision in the McLean and Cole cases cited by Lord Hodge at para 11 above? One of the complaints, unsurprisingly inadmissible, was of a disentitlement to vote in the UKs referendum in May 2011 on whether to conduct its elections under the alternative vote system.
What did the court have in mind in choosing to point out that there was nothing in the nature of the referendum at issue in the present case which would lead it to decline to follow its earlier decisions that A3P1 did not apply to referenda? The answer is not hard to find.
The two applicants were convicted prisoners and at least one of them was imprisoned in Scotland.
The court gave its decision on 11 June 2013 and less than three months earlier the Scottish government had told the world that the referendum on Scottish independence would take place on 18 September 2014. 103.
The majority of the court considers that the case law of the ECtHR is, to use the word favoured by Lord Hodge at para 14 above, unequivocal.
I am driven to say that I totally disagree.
There is no decision of the ECtHR in point.
All one can say is that to determine that A3P1 extended to voting in the Scottish referendum would be to go significantly further than the ECtHR has gone.
In Brown v Stott [2003] 1 AC 681, Lord Bingham of Cornhill, borrowing a phrase devised by another judge in another context, described the ECHR at p 703 as a living tree capable of growth and expansion within its natural limits while adding that its limits often called for careful consideration.
But three years later Lord Bingham articulated the Ullah principle.
Does that principle disable this court from going significantly further than has the ECtHR by determining that A3P1 extended to voting in the Scottish referendum? Retreat from the Ullah principle 104.
I offer this timeline.
The facts of the decisions to which I refer are irrelevant. (a) 1998: Parliament requires the court to take into account any decision of the ECtHR so far as it is relevant: section 2(1) of the HRA 1998. (b) 2001: Lord Slynn of Hadley observes that in the absence of special circumstances the court should follow any clear and constant jurisprudence of the ECtHR: R (Alconbury Developments Ltd) v Secretary of State for the Environment, Transport and the Regions [2001] UKHL 23, [2003] 2 AC 295, para 26.
He explains that otherwise the case may proceed to that court, which is likely to follow its own jurisprudence. (c) 2004: Lord Bingham articulates what has become known as the Ullah principle, namely that the court must keep pace with evolving Strasbourg jurisprudence no more, but certainly no less: R (Ullah) v Special Adjudicator [2004] UKHL 26, [2004] 2 AC 323, para 20.
He cites Lord Slynns observation with approval and (d) explains that it reflects the fact that the ECHR is an international instrument, the correct interpretation of which can be authoritatively expounded only by the ECtHR.
Equally however, he might have noted that such parts of the ECHR as are scheduled to the HRA 1998 also represent domestic law, the correct interpretation of which can be authoritatively expounded only by this court, as had been held only three months earlier in In re McKerr [2004] UKHL 12, [2004] 1 WLR 807, para 63, Lord Hoffmann.
June 2007: Lord Brown of Eaton under Heywood observes that the final words of the Ullah principle might equally have been no less, but certainly no more: R (Al Skeini) v Secretary of State for Defence [2007] UKHL 26, [2008] AC 153, para 106 (with which Baroness Hale agrees, para 90).
Lord Brown explains that, were this court to construe a Convention right too widely, the UK could not apply to ECtHR to have it corrected but that, in the obverse situation, the aggrieved individual could apply to have it corrected.
In my respectful view, however, the notion that the ECtHR has power to correct a decision of this court is a constitutional aberration. (e) October 2007: Lord Bingham observes that the ECtHR has not been required to determine any case closely comparable with the case before the court, that it is inappropriate to align it with the least dissimilar of the ECtHR cases and that instead the task of the court is to seek to give fair effect to the principles laid down by the ECtHR: Secretary of State for the Home Department v JJ [2007] UKHL 45, [2008] AC 385, para 19. (f) 2008: Lord Hope of Craighead, possibly unaware of what Lord Brown has recently said, stresses that the words of the Ullah principle are certainly no less and not certainly no more and that the jurisprudence of the ECtHR is not to be treated as a straitjacket: In re G (Adoption: Unmarried Couple) [2008] UKHL 38, [2009] AC 173, para 50. (g) 2009: Lord Phillips of Worth Matravers, giving the judgment of the court, holds that it is open to it to decline to follow a decision of the ECtHR if it seems insufficiently to have appreciated aspects of our domestic process: R v Horncastle [2009] UKSC 14, [2010] 2 AC 373, para 11. (h) February 2011: Lord Neuberger, giving the judgment of the court, qualifies Lord Slynns observation by stating that the duty to follow any clear and constant jurisprudence of the ECtHR arises only if its effect is not inconsistent with a fundamental aspect of our law and if its reasoning does not overlook or misunderstand a point of principle: Manchester City Council v Pinnock [2011] UKSC 6, [2011] 2 AC 104, para 48. (j) (i) October 2011: Lord Kerr, in a dissenting judgment, expresses powerful criticism of what he calls Ullah type reticence: Ambrose v Harris [2011] UKSC 43, [2011] 1 WLR 2435, paras 126 130. 2012: Lord Brown suggests that the Ullah principle establishes only that the court should not unwillingly find a violation of Convention rights unless clearly compelled to do so by the law of the ECtHR; that it would be absurd to wait for it to make a decision almost directly in point before finding a violation; and that the court can carry its law a step further if it follows naturally from it: Rabone v Pennine Care NHS Trust [2012] UKSC 2, [2012] 2 AC 72, para 112. (k) 2013: Lord Mance observes that the court could refuse to follow a decision of the Grand Chamber of the ECtHR only in the event of inconsistency with a fundamental principle of our law or of egregious oversight or misunderstanding: the Chester case, cited at para 89 above, para 27. 2013: Lord Sumption points out, that by article 46 of the Convention, the UK has an international obligation to abide by the final judgment of the ECtHR in any case to which it is a party, with the result that it cannot do (l) otherwise save in altogether exceptional cases: the Chester case, cited at para 89 above, para 121. (m) 2014: Lord Neuberger suggests that, where the decisions of the ECtHR are not directly in point, the court should extract and apply the principles which underlie them: Surrey County Council v P [2014] UKSC 19, [2014] AC 896, para 62. (n) 2014: Lord Kerr suggests that the duty of the court under section 6 of HRA 1998 not to act incompatibly with a Convention right requires it to determine whether an alleged right exists even where the jurisprudence of the ECtHR discloses no clear answer: the Surrey County Council case, cited at subpara (m) above, para 86. 105.
The effect of the above is that protracted consideration over the last six years has led this court substantially to modify the Ullah principle.
The present case does not require further consideration of the current status of Lord Binghams opinion that our courts must certainly [do] no less than to keep pace with the jurisprudence of the ECtHR.
For present purposes the relevant part of his opinion was we must do no more, or, as Lord Brown at one time considered, certainly [do] no more, than to keep pace with it.
At any rate where there is no directly relevant decision of the ECtHR with which it would be possible (even if appropriate) to keep pace, we can and must do more.
We must determine for ourselves the existence or otherwise of an alleged Convention right.
And, in doing so, we must take account of all indirectly relevant decisions of the ECtHR and, in particular, of such principles underlying them as might, whether as currently expressed or as subject to the natural development apt to a living instrument, inform our determination. 106.
Such is the exercise which I believe that I have performed above and it explains the conclusion which I reached on 24 July 2014 that the rights of convicted prisoners in Scotland under A3P1 had been violated by the blanket prohibition against their voting in the referendum.
| UK-Abs | Under the Scottish Independence Referendum (Franchise) Act 2013 (the Franchise Act), convicted prisoners were not eligible to vote in the Scottish independence referendum on 18 September 2014 [2].
The Appellants were Scottish prisoners who challenged that exclusion through judicial review proceedings [1].
They relied on previous case law establishing that a general and automatic prohibition that bars prisoners from participating in general elections will violate article 3 of Protocol No 1 (A3P1) of the European Convention on Human Rights (ECHR) [3].
A3P1 is entitled Right to free elections and 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 appellants judicial review applications were refused by Lord Glennie in the Outer House of the Court of Session on 19 December 2013.
The First Division of the Inner House of the Court of Session refused a reclaiming motion on 2 July 2014 [4].
The Supreme Court heard and decided the appellants appeal on 24 July 2014, in order that the matter be resolved promptly in advance of the then imminent referendum [1].
This judgment sets out the reasons for that decision.
The Supreme Court dismisses the appeal by a majority of five to two.
It holds that the statutory disenfranchisement of convicted prisoners from voting in the Scottish referendum was lawful.
Lord Hodge gives the substantive judgment of the majority (comprising himself, Lord Neuberger, Lady Hale, Lord Clarke and Lord Reed).
In their view, the words of A3P1 on their ordinary meaning refer to an obligation to hold periodic elections to a democratically elected legislature.
However, the requirement that such elections take place at reasonable intervals suggests that the drafters did not have referendums in mind [8].
There is unequivocal case law from the European Court of Human Rights (ECtHR) to show that the reach of A3P1 is limited to periodic general elections to the legislature [14].
Four cases are cited as examples of referendums not covered by A3P1: the UKs 1975 referendum on whether to remain in the EEC in X v United Kingdom (Application No 7096/75, 3 October 1975); referendums on accession to the EU by Latvia ( v Latvia (Application No 14755/03, 26 January 2006)) and Poland (Niedwied v Poland (2008) 47 EHRR SE6) [10]; and the UKs nationwide referendum on the alternative vote (McLean & Cole v United Kingdom (2013) 57 EHRR SE95) [11].
Although the Supreme Court is not bound to follow ECtHR authority, it will ordinarily do
so when, as here, there is a clear and constant line of decisions delineating the scope of a Convention right [13].
These cases also show that the political importance of a democratic decision is the not the criterion for its inclusion within A3P1 [17].
The appellants advanced several arguments as to why the Franchise Act was unlawful, which are not accepted.
Article 10 of the ECHR, protecting freedom of expression, does not confer any wider right to vote than is provided by A3P1 [19].
The prohibition on prisoners voting does not breach EU law because: (i) the outcome of the referendum would not in itself have been determinative of voters EU citizenship [23]; and (ii) EU law does not incorporate any right to vote [24].
The appellants relied on Article 25 of the International Covenant on Civil and Political Rights (ICCPR), which protects the right to participate in referendums on self determination, both as an aid to interpreting A3P1 and as a free standing international law obligation [26].
Neither point succeeded.
Article 25 ICCPR is different in wording and scope from and does not inform the interpretation of A3P1 [28].
The ICCPR is not incorporated into UK domestic law and therefore Article 25 does not affect the legislative competence of the Scottish Parliament [30].
The right to vote is a basic or constitutional right [33] but the common law has not developed so as to recognise a right of universal and equal suffrage from which any derogation must be provided for by law and proportionate [34].
Neither is the right to vote inherent in the rule of law on a separate basis from a statutory franchise [38].
Lord Neuberger gives a concurring judgment focussing on the natural meaning of the words of A3P1 [44 46].
Lady Hale gives a concurring judgment expressing her view that A3P1 does not require the holding of a referendum, even on such an important issue as Scottish independence [54] and hence does not have a bearing on the right to vote in such a referendum [55].
Lord Kerr and Lord Wilson dissent from the majority.
Lord Kerr, with whom Lord Wilson agrees [90], considers that the natural meaning of the words of A3P1 not only encompasses elections to the legislature but also elections that will determine the form of the legislature [65].
The ECHR is a living instrument and A3P1 may apply to situations which were not in the contemplation of its original drafters [67].
A fundamental purpose of the ECHR is to guarantee an effective political democracy; that purpose would be frustrated by preventing the safeguards applicable to ordinary legislative elections from applying to this most fundamental of votes [68].
The requirement to hold elections at regular intervals is secondary to the primary aim of A3P1 which is to ensure that citizens should have a full participative role in the selection of those who will govern them [69].
The ECtHR case law has not, so far, considered a referendum that will determine the type of legislature that a countrys people will have [71].
Lord Wilson adds that the words ensure the free expression of the opinion of the people in the choice of the legislature are dominant in A3P1 (and particularly apt to describe the Scottish independence referendum) [93] while the words at regular intervals are subservient [94] and must not be interpreted to contrary effect to the object and purpose of the provision [96].
The ECtHR authorities on referendums are not directly on point [103] and it is open to the Supreme Court to go further than the Strasbourg case law in developing a Convention right [105].
|
The question in this case is whether the appellant falls within the scope of section 193 of the Housing Act 1996 as amended, which applies, by virtue of subsection (1), where the local housing authority are satisfied that an applicant is homeless, eligible for assistance and has a priority need, and are not satisfied that he became homeless intentionally.
In such a case, section 193(2) requires the authority to secure that accommodation is available for occupation by the applicant.
In the present case, there is no doubt that the appellant is homeless, eligible for assistance and has a priority need.
The question is whether the authority were entitled to be satisfied that she became homeless intentionally.
The appellant surrendered her tenancy of a bedsitting room in a hostel in Leyton on 25 October 2011, as she was unhappy about smells in the hostel.
She moved into temporary accommodation in Kings Cross.
That arrangement came to an end during November 2011, when she was asked to leave because the house was over crowded.
On 24 November 2011 she applied to the respondent authority for accommodation as a homeless person under the 1996 Act.
She was provided with interim accommodation in Ilford, where she remained until 23 December 2011.
She was then moved to interim accommodation in Leytonstone, where she still remains until after the decisions which are challenged.
On 15 February 2012 she had a baby daughter.
If she had still been living in the hostel in Leyton, she would then have had to leave it, as only single persons were permitted to reside there.
On 1 August 2012 the authority decided that they were satisfied that she was homeless, eligible for assistance and had a priority need, but were also satisfied that she became homeless intentionally.
On 31 January 2013, a decision to the same effect was made by a review officer on a review under section 202 of the 1996 Act.
The basis of the decision was that the applicant had surrendered her tenancy of the room in the hostel in October 2011 and in consequence had ceased to occupy accommodation which was available for her occupation, and which it would have been reasonable for her to continue to occupy until she gave birth.
Her contention that it would not have been reasonable for her to continue to occupy the accommodation because of an unpleasant smell was rejected.
Her contention that she would have had to leave the hostel in any event when she gave birth was regarded as irrelevant.
There was no finding as to the date on which the appellant became homeless.
The issue raised in the appeal is, in substance, whether the review officer was entitled to be satisfied that the appellant became homeless intentionally, on the basis that she deliberately gave up the accommodation in the hostel, given that she would have been homeless in any event by the time her application was considered.
In that regard, it is contended that the birth of the baby broke the chain of causation between the appellants leaving the hostel and her state of homelessness when the application was considered.
In relation to that issue, the court is invited to depart, if necessary, from the decision of the House of Lords in Din v Wandsworth London Borough Council [1983] 1 AC 657 under the Housing (Homeless Persons) Act 1977.
The homelessness legislation and its construction
It may be helpful to begin by summarising how the legislation in relation to homelessness, and its construction by the courts, have evolved, so that the decision in Din can be placed in its historical context.
The following summary, so far as concerned with the legislation, is largely borrowed from the speech of Baroness Hale of Richmond in Birmingham City Council v Ali [2009] UKHL 36; [2009] 1 WLR 1506 and the judgment of Lord Hodge in R (N) v Lewisham London Borough Council [2014] UKSC 62; [2014] 3 WLR 1548.
Following the Second World War, Part III of the National Assistance Act 1948 placed local authorities under a duty to provide temporary accommodation to persons who were in urgent need of it.
The 1977 Act replaced the provisions of the 1948 Act with a regime which also provided longer term accommodation for the homeless.
Important aspects of that regime survive in the 1996 Act.
In particular, the 1977 Act introduced the concept of priority need (section 2), the obligation of the authority to provide temporary accommodation while they make inquiries as to whether the applicant is homeless and in priority need and whether he or she became homeless intentionally (section 3), and the duties, depending on the results of that investigation, to provide advice and appropriate assistance, to provide temporary accommodation for a period to give a reasonable opportunity to secure other accommodation, or to secure that accommodation becomes available for occupation (section 4).
The 1977 Act was consolidated into wider housing legislation in Part III of the Housing Act 1985.
As I shall explain, that in turn was amended by the Housing and Planning Act 1986, so as to harmonise the definitions of homelessness and intentional homelessness.
The 1985 Act, as amended, was repealed by the 1996 Act, which in Part VII provides the current statutory regime for dealing with homelessness.
In particular, when an applicant applies for accommodation or assistance in obtaining accommodation (section 183), the local housing authority carry out inquiries to satisfy themselves whether he or she is eligible for assistance and, if so, what if any duty is owed (section 184).
There is an interim duty to accommodate under section 188.
If, following the section 184 inquiry, the local housing authority are satisfied that the applicant is homeless, eligible for assistance but homeless intentionally, section 190 applies: see section 190(1).
The authoritys duty, if the applicant has a priority need, is to secure that accommodation is available for a period to give a reasonable opportunity of securing accommodation for occupation, and to provide advice and assistance in attempts to secure accommodation: section 190(2).
If not satisfied that the applicant has a priority need, the authority's duty is confined to the provision of advice and assistance: section 190(3).
If the authority are satisfied that the applicant is homeless and eligible for assistance, not satisfied that he or she is intentionally homeless, but also not satisfied that he or she has a priority need, the duty is again to provide advice and assistance: section 192.
If, on the other hand, the authority are satisfied that the applicant is homeless, eligible for assistance and has a priority need and are not satisfied that he or she became homeless intentionally, section 193 applies: see section 193(1).
The authority are then under a duty to secure that accommodation is available for occupation by the applicant: section 193(2.).
The question in the present case is whether the appellant falls within the scope of section 190(1) or section 193(1).
The 1977 Act, Part III of the 1985 Act, and Part VII of the 1996 Act, have all given rise to numerous difficulties of interpretation.
In particular, the meaning attributed to some of the fundamental concepts employed, such as homeless and accommodation, has evolved over time as the result of judicial decisions and legislative amendment.
To summarise matters which I shall later discuss in greater detail, the case of Din, in 1981, concerned the definition of becoming homeless intentionally, in section 17(1) of the 1977 Act.
That definition required the authority to consider whether an applicant for assistance under the Act had ceased to occupy accommodation which was available for his occupation, and which it would have been reasonable for him to continue to occupy, in consequence of his own deliberate act or failure to act.
The House of Lords decided by a majority that the questions whether the accommodation was available, and whether it would have been reasonable to continue to occupy it, were to be considered as at the time when the applicant ceased to occupy it.
It followed that, if the definition was satisfied as at that time, it was irrelevant to that question to consider whether, if the applicant had not ceased to occupy the accommodation, it would have ceased to be available for his occupation by the time of the authoritys inquiry.
I can say at once that, in relation to those matters, the decision appears to me to have been correct and to remain good law.
That does not however resolve the issue in the present case, as I shall explain.
Importantly for present purposes, all the members of the House also considered that there must be a continuing causal connection between the deliberate conduct referred to in section 17(1) and the applicants homelessness at the time of the inquiry.
It will be necessary to return to the relevant passages in the speeches.
In relation to the nature of the causal link, Lord Lowry described the connection in terms of continuing homelessness.
On his approach, homelessness was a condition which necessarily continued unless and until non temporary or settled accommodation was obtained.
That approach was however disapproved by the House of Lords in the case of R v Brent London Borough Council, Ex p Awua [1996] AC 55, decided under the 1985 Act.
Applying the definition of homeless, a person could cease to be homeless even if he or she was not in settled accommodation.
It was confirmed that the necessary connection between the deliberate conduct required by the definition of becoming homeless intentionally and the applicants homelessness at the time of the inquiry was causal.
The current homelessness had to have been caused by the applicants earlier intentional conduct.
A causal connection would not exist where there had been an intervening period in settled accommodation, but the House of Lords reserved their opinion as to whether that was the only method by which the causal connection could be broken.
As I shall explain, in later cases in the High Court and the Court of Appeal a variety of other circumstances have been held to have broken the causal connection.
One of the questions arising in the present appeal is whether that is indeed possible.
Four other aspects of the evolution of the legislation require to be borne in mind when considering authorities decided under the earlier legislation, such as Din.
First, under the 1977 Act, a person was homeless if he had no accommodation which he and his family were entitled to occupy, by virtue of some interest, court order, express or implied licence or statutory right to occupy: section 1(1).
There was no reference in the definition of homelessness to whether or not it was reasonable for him to continue to occupy the accommodation to which he was entitled.
Thus in R v Hillingdon London Borough Council, Ex p Puhlhofer [1986] AC 484, the House of Lords decided that a family were not homeless within the meaning of the 1977 Act, however intolerable their living conditions were.
There was no requirement that their accommodation be appropriate or reasonable, as long as it could properly be described as accommodation and was available for them to occupy.
Parliament reacted to the Puhlhofer decision by inserting new provisions into the Housing Act 1985, Part III of which had replaced the 1977 Act.
Most importantly for present purposes, it was provided that a person shall not be treated as having accommodation unless it is accommodation which it would be reasonable for him to continue to occupy: section 58(2A) of the 1985 Act, as inserted by section 14(2) of the 1986 Act.
Equivalent provision is now made by section 175(3) of the 1996 Act.
As was observed in Awua at p 67, this produced symmetry between the concepts of homelessness and becoming homeless intentionally.
Secondly, in deciding whether it would have been reasonable for the applicant to continue to occupy accommodation, for the purpose of applying the definition of becoming homeless intentionally, the 1977 Act did not require the authority to take any particular matters into account, other than to have regard to guidance given by the Secretary of State (section 12).
They were also permitted to have regard to the general circumstances prevailing in relation to housing in the district (section 17(4)).
In Din, it was accepted that the authority were entitled to conclude that it would have been reasonable for the appellants to have continued to occupy the accommodation in question until the landlord obtained an order for possession, notwithstanding that the appellants could not afford the accommodation and had mounting arrears of rent and rates.
That concession was effectively endorsed by the majority of the House of Lords.
Under the 1996 Act, however, section 177(3) enables subordinate legislation to be made, specifying matters to be taken into account in determining whether it would have been reasonable for a person to continue to occupy accommodation.
Such legislation now specifies that account is to be taken of whether or not the accommodation is affordable for that person: Homelessness (Suitability of Accommodation) Order 1996 (SI 1996/3204).
Guidance issued by the Secretary of State also now makes it clear that the question whether an order for possession has been obtained should not be regarded as critical, where (put shortly) the landlord has given notice and there would be no defence to an application for a possession order: Department for Communities and Local Government, Homelessness Code of Guidance for Local Authorities (2006), para 8.32.
Thirdly, in Birmingham City Council v Ali the House of Lords considered the meaning of the requirement introduced after Puhlhofer, and now set out in section 175(3) of the 1996 Act (the definition of homelessness), that a person is not to be treated as having accommodation unless it is accommodation which it would be reasonable for him to continue to occupy: a form of words which also appears (subject to a change of tense) in the definition of becoming homeless intentionally in section 191(1).
The question arose in the Birmingham case whether what had to be considered was the reasonableness of continuing to occupy the accommodation for another night, or for the foreseeable future, or indefinitely.
The House of Lords held that both sections 175(3) and 191(1) looked to the future as well as to the present (para 36).
A person was homeless if he had accommodation which it was not reasonable for him to continue to occupy for as long as he would have to occupy it if the local authority did not intervene (para 37).
There would be cases where an applicant occupied accommodation which it would not be reasonable for him to continue to occupy on a long term basis, as he would have to do if the authority did not accept him as homeless, but which it would not be unreasonable to expect him to continue to occupy for a short period while the authority investigated his application and rights, and even thereafter while they looked for accommodation to satisfy their duty under section 193 (para 42).
Fourthly, the 1996 Act introduced, in section 202, the right to request a review of the authoritys decision.
This is a full review of the merits of the application, rather than a consideration of whether the original decision was flawed: Mohammed v Hammersmith and Fulham London Borough Council [2001] UKHL 57; [2002] 1 AC 547, para 26.
The review is conducted on the basis of the circumstances existing at the date of the review: Mohammed, para 25; Banks v Kingston upon Thames Royal London Borough Council [2008] EWCA Civ 1443; [2009] PTSR 1354, para 71.
With that overview of the legislation in mind, it is now necessary to consider in greater detail the provisions of the 1996 Act which are central to the appeal.
The 1996 Act
Section 193(1) provides: This section applies where the local housing authority are satisfied that an applicant is homeless, eligible for assistance and has a priority need, and are not satisfied that he became homeless intentionally.
In terms of that provision, the authority have to be satisfied of three matters: that the applicant is homeless, that he is eligible for assistance, and that he has a priority need.
They must also be not satisfied of one further matter: that the applicant became homeless intentionally.
Homelessness is defined by section 175, which provides: (1) A person is homeless if he has no accommodation available for his occupation, in the United Kingdom or elsewhere, which he (a) is entitled to occupy by virtue of an interest in it or by virtue of an order of a court, (b) has an express or implied licence to occupy, or (c) occupies as a residence by virtue of any enactment or rule of law giving him the right to remain in occupation or restricting the right of another person to recover possession. (2) A person is also homeless if he has accommodation but (a) he cannot secure entry to it, or (b) it consists of a moveable structure, vehicle or vessel designed or adapted for human habitation and there is no place where he is entitled or permitted both to place it and to reside in it. (3) A person shall not be treated as having accommodation unless it is accommodation which it would be reasonable for him to continue to occupy. (4) A person is threatened with homelessness if it is likely that he will become homeless within 28 days.
As I have explained, continue to occupy, in section 175(3), means continue to occupy for as long as he would have to occupy it if the local authority did not intervene: Birmingham City Council v Ali.
Becoming homeless intentionally is defined by section 191(1): (1) A person becomes homeless intentionally if he deliberately does or fails to do anything in consequence of which he ceases to occupy accommodation which is available for his occupation and which it would have been reasonable for him to continue to occupy. (2) For the purposes of subsection (1) an act or omission in good faith on the part of a person who was unaware of any relevant fact shall not be treated as deliberate. (3) A person shall be treated as becoming homeless intentionally if (a) he enters into an arrangement under which he is required to cease to occupy accommodation which it would have been reasonable for him to continue to occupy, and (b) the purpose of the arrangement is to enable him to become entitled to assistance under this Part, and there is no other good reason why he is homeless.
Given the symmetry between section 175 and section 191, it can be inferred that the words continue to occupy are intended to be interpreted so as to enable the provisions to operate harmoniously together.
They cannot however be interpreted in an identical manner in both contexts.
As Lady Hale explained in the Birmingham case at paras 37 40, there can be circumstances in which a person is homeless, within the meaning of section 175, because it would not be reasonable for him to continue to occupy his current accommodation, but in which it may nevertheless be reasonable for him to stay where he is while the authority consider his application and look for more suitable accommodation.
The question under section 191(1) is therefore whether it would have been reasonable for the person to continue to occupy the accommodation for as long as he would occupy it while the authority considered his application and, if appropriate, looked for more suitable accommodation.
As I have explained, the effect of the requirement in section 193(1), and its statutory predecessors, that the authority must not be satisfied that the applicant became homeless intentionally has caused difficulties of interpretation, linked to difficulties in construing the meaning of homelessness.
The purpose of the requirement is however not difficult to discern.
As was explained by Lord Lowry in Din (at p 679), and as counsel for the appellant emphasised in the present case, it is designed to prevent queue jumping by persons who, by intentionally rendering themselves homeless, would (in the absence of such a provision) obtain a priority in the provision of housing to which they would not otherwise be entitled.
Consistently with that rationale, it cannot be intended that an applicant is to be disqualified for accommodation if he has ever, at any time in his life, become intentionally homeless.
For example, an elderly man who becomes homeless when his care home is closed cannot be intended to be denied assistance merely because, 60 years earlier, he was evicted from his student digs for holding rowdy parties.
As counsel for the appellant submitted, the homelessness with which the words became homeless intentionally are concerned must be the homelessness which the authority have found to exist: is homeless and became homeless must refer to the same current state of being homeless.
It is therefore in relation to the current state of being homeless that the question has to be answered, did the applicant become homeless intentionally?
On the other hand, section 193(1) cannot be concerned only with the reason for the loss of accommodation which the applicant occupied immediately before he became homeless.
If that were its effect, the legal consequences of becoming homeless intentionally could readily be avoided by obtaining temporary accommodation, so that the applicant ceased for a time to be homeless, and then waiting to be evicted from it, so bringing about a state of homelessness consequent on the involuntary loss of that accommodation.
The aim of the provisions relating to intentional homelessness would then be circumvented.
Section 193(1) must therefore be understood as being concerned with the question whether the applicants current homelessness has been caused by intentional conduct on his part, in consequence of which he ceased to occupy accommodation which was available for his occupation and which it would have been reasonable for him to continue to occupy: either the accommodation which he was occupying immediately before he became homeless, or previous accommodation.
Whether the applicant became homeless intentionally thus depends in the first place on the application of the definition of becoming homeless intentionally in section 191(1): in short, on whether he deliberately did or failed to do anything in consequence of which he ceased to occupy accommodation meeting the requirements of that provision.
If that question is answered in the affirmative, the further question then arises under section 193(1) whether the applicants current homelessness was caused by that intentional conduct.
Dyson v Kerrier District Council
These two distinct causal questions were identified by Brightman LJ, delivering the judgment of the Court of Appeal, in Dyson v Kerrier District Council [1980] 1 WLR 1205, a decision which has been repeatedly endorsed by the House of Lords.
Referring to the predecessor provision of section 191(1) of the 1996 Act, namely section 17(1) of the 1977 Act, he said at pp 1214 1215: This subsection is dealing with cause and effect.
The subsection states the effect first.
The specified effect is the state of being homeless.
The subsection specifies that effect and then describes a particular cause which, if it exists, requires the effect to be treated as intentional.
The subsection therefore means a person becomes homeless intentionally if he deliberately has done or failed to do anything in consequence of which he has ceased to occupy accommodation which was available for his occupation and which it would have been reasonable for him to continue to occupy. (original emphasis)
So understood, two separate questions arise concerning causation.
One arises, under what is now section 191(1) of the 1996 Act, in respect of what Brightman LJ described as the cause: the persons ceasing to occupy accommodation which he could reasonably have continued to occupy must be the consequence of his deliberate act or omission.
The second arises, under what is now section 193(1), in respect of what Brightman LJ described as the effect: the homelessness which the authority have found to exist must be the consequence of that intentional conduct.
In other words, section 193(1) is to be construed as meaning: This section applies where the local housing authority are satisfied that an applicant is homeless, eligible for assistance and has a priority need, and are not satisfied that [he is homeless because] he became homeless intentionally.
The second causal question has to be understood as being implicit if absurd consequences are to be avoided.
The elderly man in my example, who is homeless after his care home closes, is undoubtedly someone who, in his student days, did something in consequence of which he ceased to occupy accommodation which was available for his occupation and which it would have been reasonable for him to continue to occupy.
The causal question arising under section 191(1) must therefore be answered in the affirmative.
But, if that were the only causal question which arose, the legislation would have absurd results.
Absurdity is avoided by asking the second question, which arises under section 193(1): the authority are satisfied that he is homeless following the closure of the home, but cannot be satisfied that he became homeless intentionally, since his homelessness was not caused by his holding rowdy parties in his student digs.
He would have been homeless following the closure of the home in any event.
On the other hand, in my example of the person who intentionally gave up his accommodation and moved into temporary accommodation and waited to be evicted, both questions would be answered in the affirmative.
He deliberately did something in consequence of which he ceased to occupy accommodation which was available for his occupation and which it would have been reasonable for him to continue to occupy.
The causal test under section 191(1) is therefore satisfied, even though he did not at that stage become homeless.
When he did become homeless, following his eviction from the temporary accommodation, he could properly be said under section 193(1) to have become homeless intentionally, since the effective cause of his homelessness was his previous intentional conduct, but for which he would not be homeless.
That conduct was a but for cause of his homelessness, and no unconnected event had intervened to break the causal connection.
These points are illustrated by the decision in Dyson v Kerrier District Council.
The case was one where the applicant had surrendered the tenancy of her flat in Huntingdon in October 1978 after taking a temporary let of a cottage in Cornwall.
Following the expiry of the let in March 1979, she was evicted from the cottage in May of that year.
The contention that she was unintentionally homeless, having been evicted from the cottage, was acknowledged to be a formidable argument on the literal wording of the statute.
As was pointed out in Awua, however, such a construction would enable people to jump housing queues by making themselves intentionally homeless at one remove.
That result was avoided by giving the legislation a purposive construction and asking whether the applicants current state of homelessness had been caused by conduct falling within the scope of what is now section 191(1).
Brightman LJ stated (p 1215): The district council were entitled to reach the conclusion that the plaintiff became homeless on May 25, 1979 [the date of her eviction], intentionally because she deliberately had done something (surrendered the Huntingdon tenancy) in consequence of which she ceased to occupy accommodation (the Huntingdon flat) which was available for her occupation and which it would have been reasonable for her to continue to occupy; and that, therefore, if she had not done that deliberate act she would not have become homeless on May 25.
It is to be noted that the court applied a but for test of causation: if she had not done that deliberate act she would not have become homeless.
Din v Wandsworth London Borough Council
A different type of situation was considered by the House of Lords in the case of Din v Wandsworth London Borough Council.
The appellants in that case fell into arrears of rent and rates as a consequence of the failure of their business, and left their flat in Wandsworth in August 1979 after a distress warrant for non payment of rates was served on them.
They obtained temporary accommodation in Upminster, where they lived for four months before being required to leave.
When they left the Wandsworth flat, they were not at that time threatened with eviction.
They would however have been evicted by December 1979, when they left the Upminster accommodation and applied for accommodation under the 1977 Act.
In considering the speeches in the House of Lords, it is relevant to note that, in a number of respects, the case was not approached in the way in which it would now be approached under the 1996 Act.
First, the appellants did not dispute that the authority were entitled to find that it would have been reasonable for them to continue to occupy the Wandsworth flat, notwithstanding that they could not afford it.
That concession presumably reflected the prevailing understanding at that time of the law then in force, although there are later decisions to the contrary effect, including R v Hillingdon London Borough Council, Ex p Tinn (1988) 20 HLR 205 and R v Camden London Borough Council, Ex p Aranda (1998) 30 HLR 76.
As I have explained, subordinate legislation made under section 177(3) of the 1996 Act now provides (read short) that in determining whether it would have been reasonable for a person to continue to occupy accommodation, account is to be taken of whether or not the accommodation is affordable for that person.
The likelihood of eviction within a few months would now be a further factor to be taken into account in considering whether it was reasonable for the appellants to continue to occupy the flat, following the Birmingham case; but that matter might well have been viewed differently prior to the amendments to the legislation which were made following Puhlhofer.
Secondly, the case was argued on the basis that there was an unbroken period of homelessness beginning when the appellants left the Wandsworth flat, since the accommodation in Upminster was intended from the outset to be temporary.
That was not a correct understanding of the law, as became particularly apparent after Awua.
As Lord Bridge of Harwich pointed out in Din at p 684, the appellants had at least an express or implied licence to occupy the Upminster accommodation, and therefore were not homeless as defined in section 1 of the 1977 Act.
In Lord Bridges words, the appeal was therefore decided on a basis accepted as common ground which involved an erroneous conclusion of law from undisputed facts (p 684).
The argument presented on behalf of the appellants, as reported, did not adopt the two stage approach to causation which the Court of Appeal had applied in Dyson.
Instead, it focused on the definition of becoming homeless intentionally in section 17(1) of the 1977 Act.
Following the approach adopted by Donaldson LJ in his dissenting judgment in the Court of Appeal (unreported), 23 June 1981; Court of Appeal (Civil Division) Transcript No 372 of 1981, it was argued that the necessity for a causal connection between leaving the Wandsworth flat and the appellants state of being homeless was implicit in the requirement under section 17(1) that it must have been reasonable to continue to occupy the flat.
Continue to occupy, it was argued, meant continue to occupy and still to occupy.
That construction of the words continue to occupy cannot, however, be reconciled with the terms of the provision.
The majority of the House of Lords approached the case on the basis of the arguments advanced.
Lord Wilberforce construed the relevant provisions of the 1977 Act as being concerned with the cause of the homelessness which was conceded to have arisen at the time when the appellants left their accommodation in Wandsworth and continued thereafter: If one takes the words of the statute, the council has to be satisfied that the applicants became homeless intentionally (section 17).
Under section 4(2)(b) their duty is limited to advice and assistance if they are satisfied . that [they] became homeless . intentionally.
The time factors here are clearly indicated: at the time of decision (the present), the local authority must look at the time (the past) when the applicants became homeless, and consider whether their action then was intentional in the statutory sense.
If this was the right approach there could only be one answer: when the Dins left 56, Trinity Road [the Wandsworth accommodation] their action was intentional within section 17, and the council was entitled to find that it would have been reasonable for them to continue to occupy 56, Trinity Road. (pp 666 667: original emphasis)
Lord Wilberforce gave a number of reasons at pp 667 668 for rejecting the appellants construction of section 17(1).
The first reason reflected the wording of the provision: To achieve the result desired by the appellants it is either necessary to distort the meaning of in consequence of which he ceases to occupy (section 17(1)) or to read in a number of words.
These are difficult to devise.
Donaldson LJ suggests adding at the end of section 17(1) and still to occupy: the appellants, as an alternative to the date of his application.
Both are radical and awkward reconstructions of the section.
The second reason was that such an interpretation of the words continue to occupy was not called for by any purposive approach.
The third reason was the following: The appellants interpretation adds greatly to the difficulties of the local authoritys task in administering this Act.
It requires the authority, as well as investigating the original and actual cause of homelessness, to inquire into hypotheses what would have happened if the appellants had not moved, hypotheses involving uncertain attitudes of landlords, rating authorities, the applicants themselves, and even intervening physical events.
The latter observations were a response to the mistaken argument that section 17(1) required the authority to determine not merely whether the applicants ceasing to occupy the accommodation was the consequence of his intentional action, but in addition whether he would otherwise have continued to occupy that accommodation until the time of the authoritys decision.
They were not concerned with causal issues properly arising under the legislation.
Lord Wilberforce accepted at p 667 that the authority had to investigate the actual cause of homelessness, and endorsed the decision in Dyson as an illustration of a causal connection.
Establishing such a connection involves asking in the first place, in Brightman LJs words, whether, if the applicant had not done that deliberate act, she would not have become homeless.
That might be described as inquiring into a hypothesis, but is inherent in the nature of an inquiry into causation.
It cannot therefore have been Lord Wilberforces intention to bar such an inquiry.
It would also be necessary to consider whether the chain of causation connecting the intentional action to the applicants homelessness had been broken by an intervening event, in circumstances where that was a live issue.
That approach is consistent not only with an ordinary understanding of causation but also with the rationale of the concept of intentional homelessness, namely to prevent a person from obtaining a priority in the provision of accommodation to which he would not otherwise be entitled.
In that regard, Lord Wilberforce accepted that the connection would be broken if the applicant obtained settled accommodation during the intervening period.
Lord Fraser of Tullybelton gave a concurring speech, in which he made clear his acceptance of the need for a continuing causal connection between the deliberate conduct resulting in the applicants ceasing to occupy accommodation which it would have been reasonable for him to continue to occupy, on the one hand, and his homelessness at the time of the inquiry, on the other hand.
Addressing the argument that, even if the Dins had not left the Wandsworth flat when they did, they would in any event have been evicted by the date of the authoritys inquiry, he stated: Be it so.
The fact remains that the appellant's homelessness in December 1979 was a consequence of his deliberate act of moving out on August 28.
I accept that for section 17(1) to be applicable there must be a continuing causal connection between the deliberate act in consequence of which homelessness resulted and the homelessness existing at the date of the inquiry.
Such a causal connection exists in this case, and that being so it is immaterial to inquire whether he might in other circumstances have been homeless then for other reasons. (emphasis supplied)
Given his conclusion on the facts, Lord Fraser must have considered that a causal connection between deliberate conduct falling within section 17(1) of the 1977 Act and the current state of homelessness was not affected by circumstances which might have occurred but did not in fact occur.
On the other hand, Lord Fraser evidently accepted that a causal connection could be interrupted by an event which actually occurred.
It is important to bear in mind Lord Frasers acceptance of the need for a continuing causal connection when considering an earlier passage in his speech: It is . irrelevant for an applicant who is homeless at the date of his application, and who became homeless intentionally, to show that he would have been homeless by that date in any event.
The material question is why he became homeless, not why he is homeless at the date of the inquiry.
If he actually became homeless deliberately, the fact that he might, or would, have been homeless for other reasons at the date of the inquiry is irrelevant.(p 671) This passage envisages a state of homelessness continuing between the time when the applicant became homeless intentionally and the date of the inquiry.
In order for the passage to be read consistently with the passage cited previously, it must also envisage a situation where nothing has occurred to break the continuing causal connection between the initial cause of homelessness and the homelessness existing at the date of the inquiry.
Granted those premises, what is said is uncontroversial.
Lord Lowry, in a further concurring speech, also accepted at p 676 the need for a causal nexus between the intentional action and the homelessness subsisting at the time of the inquiry.
He gave the example of the cessation of a period of homelessness following a deliberate act falling within section 17(1) and the later inception of another period of homelessness, following a period in non temporary (or settled) accommodation.
As he made clear at p 678, he considered section 17(1) to be concerned with occupation other than temporary occupation: in his view, a person continues to be homeless while he enjoys temporary occupation.
That aspect of his reasoning is however inconsistent with the later decision of the House of Lords in Awua.
Lord Russell of Killowen, in a dissenting speech, explained at p 673 the significance of the decision in Dyson: a case which, as he observed, was the opposite of the Dins case: If in the past he has become homeless intentionally and but for that he would not now be homeless (as in the Dyson case [1980] 1 WLR 1205) well and good: that is why he is homeless now.
But if on the facts as established in the present case he would be homeless now in any event, the past circumstances in which the homelessness originated appear to me to be no longer of any relevance: the past actions of the applicant are spent. (pp 673 674)
Lord Bridge, in his dissenting speech, identified the two different causal questions which arise in the application of the legislation.
Referring to the question of whether the applicant became homeless intentionally, he stated: Thus, on the true construction of sections 3 and 4 and in the application of section 17(1), the third question the housing authority must ask and answer may be expanded into the following form: Is the applicant's present homelessness the result of a deliberate act or omission on his part in consequence of which he ceased to occupy accommodation which was available for his occupation and which it would have been reasonable for him to continue to occupy? (p 681) As Lord Bridge explained, this construction does not require any words to be read into the legislation: Section 17 is simply concerned to define what is meant by becoming homeless intentionally.
But in construing the phrases whether he became homeless intentionally and that he became homeless intentionally in the context in which they are found in sections 3 and 4, it would be absurd to hold that the housing authority are at liberty to rely on any past act or omission on the part of the applicant which satisfies the section 17 formula but which is not causally related to the applicant's present state of homelessness. (p 681)
Later authorities on causation
There are a number of later authorities which indicate how the law relating to causation in this context has developed since Din: how, in particular, courts have applied the principle that there must be a continuing causal connection between the deliberate act in consequence of which the applicant ceased to occupy accommodation which it would have been reasonable for him to continue to occupy, and the homelessness existing at the date of the inquiry.
The more recent authorities also illustrate a range of circumstances in which it has been accepted that the causal nexus might be broken.
One group of cases, of only indirect relevance in the present context, concerns the causal connection, under section 191(1) of the 1996 Act and its predecessors, between the applicants deliberate act or omission and the cessation of occupancy of accommodation.
An example is the case of R v Hammersmith and Fulham London Borough Council, Ex p P (1989) 22 HLR 21, where the applicants had fled Belfast after being ordered to leave by the IRA, on pain of death, as a result of their anti social behaviour.
The court held that the authority were entitled to conclude that the applicants were intentionally homeless, since the threat by the IRA was a consequence of the applicants conduct, not a novus actus interveniens breaking the chain of causation between their conduct and their homelessness.
Other cases, of more direct relevance in the present context, have concerned the causal connection between the current state of being homeless and the deliberate act or failure to act in consequence of which there was a prior cessation of occupancy of settled accommodation.
First, the case of R v Basingstoke and Deane Borough Council, Ex p Bassett (1983) 10 HLR 125 concerned an applicant who had given up the tenancy of a house in Basingstoke when she and her husband decided to emigrate to Canada.
They moved to Canada, but their application to stay permanently was refused, and they had to return to England, where they lived in temporary accommodation in Bramley.
The marriage then broke down as a result of the husbands behaviour, and the applicant left the Bramley accommodation and applied for accommodation as a homeless person.
Taylor J, relying on Lord Frasers acceptance in Din of the need for a continuing causal connection, held that the applicant had not become homeless intentionally.
Her homelessness was not due to her having given up the secure accommodation in Basingstoke and moved into unsettled accommodation: it was due to the break up of her marriage.
Some clarification of the nature of the necessary causal connection was provided by the House of Lords in R v Brent London Borough Council, Ex p Awua, in a speech delivered by Lord Hoffmann with which the other members of the House agreed.
The principal point decided was that temporary accommodation was nonetheless accommodation within the meaning of the legislation, so that a person who was entitled to occupy temporary accommodation was not homeless.
In the Dyson case, therefore, Miss Dyson became homeless, as Brightman LJ recognised, when her temporary accommodation in the cottage in Cornwall ended, not when she surrendered the tenancy of her flat in Huntingdon.
The case had been correctly decided on the basis that her deliberately leaving the flat was the cause of her subsequent homelessness in Cornwall.
In the case of Din, Lord Lowry had been in error in considering that homelessness persisted until it was interrupted by obtaining a settled residence.
The other members of the House had analysed the case in terms of causation.
What persisted until the causal connection was broken was the intentionality, not the homelessness.
Lord Hoffmann accepted that the causal connection would be broken by the occupation of a settled residence, as opposed to what was known from the outset to be only temporary accommodation, but expressly reserved his opinion as to whether that was the only method by which the causal connection could be broken.
Another situation in which the causal connection might be broken had been accepted in Bassett.
Another was accepted in the case of R v Harrow London Borough Council, Ex p Fahia.
The case concerned an applicant who was found to have deliberately procured her own eviction from accommodation in Harrow of which she was the tenant.
She was then provided by the authority with temporary accommodation in a guest house, where she remained for over a year.
Her housing benefit was then reduced by half, on the basis that her rent was too high.
The landlord then told her that she would be evicted.
At first instance, Mr Roger Toulson QC, sitting as a Deputy Judge, held that the authority had erred in failing to consider whether the causal connection between the applicants deliberately procuring her eviction from her accommodation in Harrow, and her homelessness on being evicted from the guest house, had been broken by the reduction in her benefit: (1996) 29 HLR 94.
In his view, a good example of the causal connection being interrupted, other than by a period in settled accommodation, would be if the applicants accommodation in the guest house had been burned down; or if, in Dyson's case, the let of the cottage had been brought prematurely to an end by the cottage being destroyed by fire.
As the judge observed, Dysons case had been decided as it was because, when the let came to an end, the fact that Miss Dyson was thereafter homeless was caused by her initial conduct.
If, on the other hand, somebody went into a property for a three month period but lost it after 14 days because the premises were burnt down, then in the judges view, applying the ordinary common sense test of causation, one would say that the cause of the homelessness was the fire.
The judge considered Ex p Bassett to be another illustration of the same principle.
That decision was upheld by the Court of Appeal: (1997) 29 HLR 974.
Roch LJ, with whose judgment Aldous and Leggatt LJJ agreed, stated at pp 980 981 his agreement with the judge that the causal connection could be broken by events other than the acquisition of a settled residence, and that Bassett's case was an example of such a situation.
On a further appeal to the House of Lords, the point was conceded: [1998] 1 WLR 1396, 1401.
Another example is the case of R v Camden London Borough Council, Ex p Aranda (1997) 30 HLR 76.
The applicant and her husband surrendered their tenancy of a house in Camden and moved to Colombia, where they obtained accommodation.
On arrival in Colombia, the applicant was deserted by her husband.
With no prospect of employment in Colombia, and no entitlement to social security benefits, she returned to Camden and applied for housing.
It was held by the Court of Appeal that the causal connection between her deliberately giving up the accommodation in Camden, and her homelessness after leaving the accommodation in Colombia, had been broken by her husbands desertion.
A further example is the case of R v Hackney London Borough Council, Ex p Ajayi (1997) 30 HLR 473.
The applicant in that case left settled accommodation in Nigeria to come to the United Kingdom, where she lived in overcrowded short term accommodation.
She was given notice to leave after she became pregnant.
She challenged the authoritys decision that she had become homeless intentionally as a result of having left the accommodation in Nigeria, and argued that the true cause of her homelessness was her pregnancy.
Having reviewed the authorities, Dyson J stated at p 478 that the fundamental question was whether there was a continuous chain of causation between the loss of the last settled accommodation and the present state of homelessness.
He added at p 479: In some cases, the cause closest in point of time will be regarded as the effective cause.
A good example of this might well be the case discussed in Ex p Fahia (1996) 29 HLR 94, 102, of the premises occupied on a short letting which are burnt down, thereby rendering the occupant homeless.
In the particular circumstances of the case, the authority had been entitled, in the judges view, to decide that the effective cause of the applicants homelessness was her action in leaving Nigeria.
A final example is the case of Stewart v Lambeth London Borough Council [2002] EWCA Civ 753; [2002] HLR 747.
The applicant ceased to occupy his council flat when he was convicted of a drugs offence and sentenced to imprisonment.
While in prison, he was evicted from the flat for non payment of rent.
He had arranged with his sister that the rent should continue to be paid while he was in prison, but she failed to implement the arrangement.
It was held that the causal chain connecting his deliberate conduct in committing the offence to his homelessness on release from prison had not been broken.
It was accepted that the position might have been different if the arrangement had been implemented for a time but had then broken down.
The cases of Bassett, Fahia and Aranda are capable of being explained, as Lord Carnwath suggests, on the basis that the immediate cause of the applicants homelessness in each case was an event unconnected to the temporary nature of that accommodation.
That aspect of the cases is not however sufficient in itself to provide a satisfactory explanation of the decisions.
If, for example, an applicant deliberately gives up a secure tenancy, and takes on a short lease of temporary accommodation following which she is likely to be homeless, as in the case of Dyson, why should it necessarily be decisive whether her occupation of that accommodation comes to an end on the expiry of the lease, on the one hand, or one day earlier, as the result of marital breakdown, on the other hand? The importance of the marital breakdown, so far as the purposes of the legislation are concerned, is not that it resulted in a slightly earlier cessation of occupation of temporary accommodation than would otherwise have been the case.
It is important because it is an involuntary cause of homelessness which may be regarded in certain circumstances as interrupting the causal connection between the applicants current homelessness and her earlier conduct, for example in surrendering a secure tenancy.
One situation where that is so is where, applying the words of Brightman LJ in the case of Dyson which were cited in para 30 above, it cannot reasonably be said of the applicant that if she had not done that deliberate act she would not have become homeless.
Giving the legislation a purposive application, she has not therefore jumped the queue as a result of her earlier decision to surrender the tenancy.
That might be the position, for example, in a case where a marriage broke down at some point after the couple had left secure accommodation, if it appeared that the marriage would probably have broken down, and the applicant would have been rendered homeless, in any event.
The ordinary requirement that the cause of an event should be a sine qua non of that event would not then be satisfied.
Another situation where deliberate conduct in giving up earlier accommodation may not be regarded as the cause of current homelessness is where homelessness would probably not have occurred in the absence of some other, more proximate, cause, which arose independently of the earlier conduct: where, as it is sometimes put, there is a novus actus interveniens.
That is again consistent with the purpose of the provisions concerning intentional homelessness, which is to prevent queue jumping, not to deter people from moving out of secure accommodation.
As counsel for the appellant submitted, that purpose does not require the adverse treatment of those who move out of secure accommodation and are subsequently rendered homeless by an event which is unconnected to their own earlier conduct, and in the absence of which homelessness would probably not have occurred.
That was the position in Fahia, where the applicant had given up secure accommodation, but her subsequent eviction from temporary accommodation was the result of a reduction in housing benefit.
It was true, in relation to her giving up the secure accommodation, that if she had not done that deliberate act she would not have become homeless.
Nevertheless, she could have remained indefinitely in the temporary accommodation if her housing benefit had not been cut: an event which was unconnected to her earlier conduct.
Her giving up the secure accommodation was therefore properly regarded as a background circumstance, rather than as the cause of her homelessness.
The cases of Bassett and Aranda can also be explained on that basis.
In the case of Stewart, on the other hand, the proximate cause of the applicants homelessness the non payment of rent when he was in prison was connected to the conduct which brought about his imprisonment.
In Ajayi, the precariousness of the applicants accommodation after she left Nigeria appears to have been sufficient to maintain a connection between that conduct and her later homelessness.
Conclusions
As I have explained, the case of Din concerned a relatively narrow issue, namely the interpretation of the definition of becoming homeless intentionally, in section 17(1) of the 1977 Act.
The House of Lords decision that the elements of that definition were to be considered as at the time when the applicant ceased to occupy accommodation meeting the requirements of the definition appears to me to have been correct.
The decision as to the tempus inspiciendum remains good law in relation to the corresponding definition in section 191(1) of the 1996 Act.
It also remains true that, if the definition is satisfied as at that point in time, it is immaterial under section 191(1) to consider subsequent hypothetical events.
It is however necessary to note that, following the amendment of the legislation after Puhlhofer, and the interpretation of the amended legislation in Birmingham City Council v Ali, the length of time for which the accommodation would be available may be relevant to the question whether it would have been reasonable, at the time when the applicant ceased to occupy it, for him to have continued to occupy it.
It is also necessary to note that, following Awua, the applicant need not become homeless upon ceasing to occupy the accommodation with which the definition in section 191(1) is concerned.
The conclusion in Din that there must be a continuing causal connection between the deliberate act satisfying the definition now contained in section 191(1) and the homelessness existing at the date of the inquiry, also remains good law.
The question is whether that homelessness has been caused by conduct meeting the requirements of section 191(1), so that the applicant is to be regarded as having become homeless intentionally for the purposes of sections 190(1) and 193(1).
As counsel for the appellant submitted in the present case, the legislation is concerned with the applicants homelessness at the time of the authoritys inquiry, and therefore with the intentionality of that state of homelessness.
As counsel submitted, any consideration of intentional homelessness arises after it has been decided that a person is homeless, and looks backwards to determine the operative cause of that homelessness.
That approach is consistent with the object of the provisions concerning intentional homelessness, namely to prevent queue jumping by persons who, by intentionally rendering themselves homeless, would (in the absence of such a provision) obtain a priority in the provision of housing to which they would not otherwise be entitled.
It would not be consistent with that purpose to deny applicants a priority which had not been affected by their intentional conduct.
Din was an early case in the history of the law on this subject.
The decision on the facts reflected the concessions made and the state of the law at that time.
As I have explained, a case on similar facts would not now be approached in the same way.
Nevertheless, Din provided a foundation for the further development of the law.
Later case law has provided examples of a variety of events which might be capable of interrupting the causal connection between the deliberate act in consequence of which homelessness resulted, and the homelessness existing at the date of the inquiry: marital breakdown (Bassett; Aranda), a cut in housing benefit (Fahia), and the breakdown of an arrangement for the payment of rent (Stewart).
These examples all concern actual, not hypothetical, events.
These decisions are consistent with what was said about causation in Din, leaving out of account the aspect of Lord Lowrys reasoning which was disapproved in Awua.
As counsel for the appellant submitted, the decision whether an applicant is intentionally homeless depends on the cause of the homelessness existing at the date of the decision.
That has to be determined having regard to all relevant circumstances and bearing in mind the purposes of the legislation.
As I have indicated, a later event constituting an involuntary cause of homelessness can be regarded as superseding the applicants earlier deliberate conduct, where in view of the later event it cannot reasonably be said that, but for the applicants deliberate conduct, he or she would not have become homeless.
Where, however, the deliberate conduct remains a but for cause of the homelessness, and the question is whether the chain of causation should nevertheless be regarded as having been interrupted by some other event, the question will be whether the proximate cause of the homelessness is an event which is unconnected to the applicants own earlier conduct, and in the absence of which homelessness would probably not have occurred.
The present case
In the review decision letter, the writer began by identifying the appellants last settled accommodation, which he found was the room in the hostel.
He considered whether the accommodation remained available for her occupation when she gave it up, and found that it did.
He found that it would have been reasonable for her to continue to occupy it, notwithstanding her complaint about smells.
In response to representations by the appellants solicitors that the appellant could not have remained in the hostel after having her baby, the writer added that, although the appellant was pregnant and the accommodation was for single people, all that meant was that it would have been reasonable for her to occupy it until she gave birth.
He stated his conclusion by answering four questions: (1) Did the applicant deliberately do something or fail to do something? (2) Did the applicant cease to occupy the accommodation at [the hostel] in consequence of his (sic) deliberate act? (3) Was the accommodation at [the hostel] available for the applicant to occupy? (4) Was it reasonable for the applicant to continue to occupy the accommodation? These questions addressed the definition of becoming homeless intentionally in section 191(1) of the 1996 Act.
The review officers finding that it would have been reasonable for the appellant to continue to occupy the accommodation until she gave birth was presumably made on the footing that she could have sought assistance from the authority in the meantime, and remained in the hostel while suitable arrangements were made to accommodate her and her baby.
It is not apparent whether consideration was given to the question whether the authority could have considered an application and found suitable accommodation within the four months or so before the baby was due.
That has not however been made a ground of challenge: on the contrary, it was conceded that the review officer was right to accept that the accommodation was reasonable for the appellant to continue to occupy until she gave birth.
The decision was nevertheless deficient in the respect identified by those acting on behalf of the appellant, in that no consideration was given to the question whether the cause of her current state of homelessness was her surrender of her tenancy of the room in the hostel.
If that question had been asked, it appears to me that only one answer to it was reasonably possible on the undisputed facts.
As I have explained, the causal connection between an applicants current homelessness and her earlier conduct will be interrupted by a subsequent event where in the light of that event, applying the words of Brightman LJ in the case of Dyson, it cannot reasonably be said of the applicant that if she had not done that deliberate act she would not have become homeless.
That is the position in the present case.
The consequence of the appellants giving birth to her baby is that it cannot be said, in relation to her earlier conduct in leaving the hostel, that if she had not done that deliberate act she would not have become homeless.
Nor can it be said that the policy underlying the provisions as to intentional homelessness, namely to prevent queue jumping, was applicable to her case.
The birth of the baby meant that the appellant would be homeless, at the time when her case was considered, whether or not she had left the hostel when and for the reasons that she did.
She had not therefore jumped the queue as a result of her earlier decision to surrender the tenancy.
For these reasons I would allow the appeal.
LORD NEUBERGER:
At the conclusion of the oral argument, I was of the opinion that this appeal should be dismissed, because it seemed to me that we could only allow the appeal if we effectively departed from (in effect overruled) the decision of the House of Lords in Din (Taj) v Wandsworth London Borough Council [1983] 1 AC 657.
I am now persuaded by Lord Reeds analysis that this appeal can and should be allowed for the reasons which he gives, which do not involve departing from Din, albeit that I would accept that we are distinguishing it on a fairly fine basis.
The Boroughs case, which was accepted in both courts below, is based on the following propositions. (i) the appellant became homeless by vacating the flat in October 2011; (ii) she thereby became homeless intentionally, as found by the reviewing officer in the review letter of 31 January 2013; (iii) she should continue to be treated as having become intentionally homeless in October 2011; and (iv) she should only cease being so treated once she has been provided with permanent accommodation.
As the courts below observed, this line of argument appears to be consistent with the majority view expressed by Lord Wilberforce, Lord Fraser and Lord Lowry in Din (Taj) v Wandsworth London Borough Council [1983] 1 AC 657.
Din was a case concerned with the predecessor of Part VII of the 1996 Act, the Housing (Homeless Persons) Act 1977.
However, section 17(1) of the 1977 Act was effectively identical to section 191(1) of the 1996 Act; and sections 4(3) and 4(5) of the 1977 Act were respectively very similar to sections 190(1) and 193(1) of the 1996 Act, and contained the same centrally important words satisfied that he became homeless intentionally.
In those circumstances, I would agree with Lord Carnwath that, if this appeal could not be allowed without departing from Din, it should be dismissed.
It has not been suggested that the decision of the majority in Din was arrived at per incuriam, and, although it might appear to some people to have been a somewhat harsh outcome, which may (and I mean may) not have been reached by this court today, that does not provide sufficiently strong grounds for departing from the decision.
First, we should be very slow before departing from an earlier decision of this court or the House of Lords.
In Fitzleet Estates Ltd v Cherry (Inspector of Taxes) [1977] 1 WLR 1345, the House of Lords had to consider a contention that it should depart from one of its earlier decisions, which had been reached some eleven years earlier by a majority of three to two.
Lord Wilberforce (with whom Lord Salmon and Lord Keith agreed) said this at p 1349C F My Lords, in my firm opinion, the Practice Statement of 1966 was never intended to allow and should not be considered to allow such a course.
Nothing could be more undesirable, in fact, than to permit litigants, after a decision has been given by this House with all appearance of finality, to return to this House in the hope that a differently constituted committee might be persuaded to take the view which its predecessors rejected.
True that the earlier decision was by majority: I say nothing as to its correctness or as to the validity of the reasoning by which it was supported.
That there were two eminently possible views is shown by the support for each by at any rate two members of the House.
But doubtful issues have to be resolved and the law knows no better way of resolving them than by the considered majority opinion of the ultimate tribunal.
It requires much more than doubts as to the correctness of such opinion to justify departing from it.
Viscount Dilhorne took the same view at p 1350E H, saying that, even if he had thought the 1965 decision was wrong, I would not have departed from it, stressing the importance of the use of precedent as providing a degree of certainty and the orderly development of legal rules and the risk of differently constituted committees boxing and coxing (not his expression).
Lord Edmund Davies also agreed, pointing out at p 1352A that the appellant simply submitted that [the 1965 decision] was wrong when delivered and that nothing has since happened to make right today what was wrong in 1965, and made it clear that this was not nearly enough to justify departing from the 1965 decision.
Secondly, as Lord Hodge said in a very recent judgment in this court, with which Lord Clarke, Lord Wilson and Lord Toulson agreed, R (on the applications of ZH and CN) v London Borough of Newham and London Borough of Lewisham [2014] UKSC 62, [2014] 3 WLR 1548, para 53: [W]here Parliament re enacts a statutory provision which has been the subject of authoritative judicial interpretation, the court will readily infer that Parliament intended the re enacted provision to bear the meaning that case law had already established: Barras v Aberdeen Sea Trawling and Fishing Co Ltd [1933] AC 402, Viscount Buckmaster at pp 411 412.
Lord Carnwath seems to have taken the same view at paras 83 88 and 95 97, and Lady Hale referred to Barras without disapproval at para 167, although I was somewhat less enthusiastic about it see at paras 143 148.
As Mr Arden pointed out, the principle is also supported by Lord Lloyd speaking for the judicial committee in Lowsley v Forbes [1999] 1 AC 329, 340F G.
Turning to the facts of this case, it must, of course, be accepted that the initial cause of the appellants homelessness was her deliberate act of vacating the flat at Lea Bridge House.
If the issue had been whether the appellants homelessness at the date she vacated Lea Bridge House had been voluntary and deliberate, then that would be the end of the matter: no subsequent event, such as the birth of her daughter, could change the fact that it was.
However, as the issue is whether the appellants homelessness as at the date of the review, 31 January 2013, was caused by her own deliberate act, the issue is, or at least is capable of being, more subtle.
Once the appellant gave birth to her daughter, there could be said to have been a severing of what Lord Fraser of Tullybelton (who was in the majority in Din) characterised as a continuing causal connection between [her] deliberate act in consequence of which homelessness resulted and the homelessness existing at the date of the inquiry see Din at p 672.
That is because, by the date of the relevant inquiry in this case, namely 31 January 2013, the applicant would have had to vacate the flat at Lea Bridge House, and therefore would have been homeless anyway, because she had given birth to a daughter eleven months earlier, and her tenancy of that flat limited the number of occupants to one person.
In other words, even if the appellant had not voluntarily vacated the Lea Bridge House flat when she did, she would have been made homeless by 31 January 2013.
A new event had intervened, so that it can no longer be said that, but for the appellant vacating voluntarily, she would have been in occupation of the Lea Bridge House flat in January 2013: she would not.
This approach is consistent with the policy behind Part VII of the 1996 Act, as explained by Lord Lowry in Din at p 679.
That is because it would mean that an applicant who had initially become deliberately homeless would be treated as deliberately homeless, and therefore as not entitled to jump the homelessness queue, until such time as she could show that, in the light of a subsequent specific event or series of events, she would on the balance of probabilities have become involuntarily homeless anyway.
At that point she would no longer be treated as being deliberately homeless.
If she were to be treated thereafter as being deliberately homeless, that would involve penalising her.
Accordingly, I consider that the interpretation favoured by Lord Reed complies with the wording of the relevant provisions of, and with the purpose of, Part VII of the 1996 Act.
With rather more hesitation, I also agree that his analysis and conclusion do not involve departing from the reasoning of the majority in Din.
In this case, there is an undeniable later event which would have caused the applicant to become homeless anyway, namely the birth of her daughter, whereas in Din there was no such later causative event, merely a possibility that one might well have occurred.
That is a rather narrow ground for distinguishing the earlier decision in Din, but I consider that it is justifiable in the circumstances.
I have already mentioned that this conclusion is consistent with the policy of Part VII of the 1996 Act.
In addition, as is stated in para 62 above, the decision in Din was reached at a relatively early stage of the homelessness law, and in the light of subsequent developments (including the more recent cases cited by Lord Reed and the fact that much of Lord Lowrys reasoning in Din was disapproved in R v Brent London Borough Council, Ex p Awua [1996] AC 55), it does not seem inappropriate to constrict the application of the decision.
Thus, it is clear that a subsequent event such as permanent rehousing occurring after the deliberate homelessness can break the chain of causation, and it would seem inconsistent if an event such as what happened in this case did not have the same effect.
That point is reinforced by the cases discussed in paras 47 54 above, which provide good examples of other circumstances which can break or restart the chain of causation in this field.
Quite apart from all this, allowing this appeal on the ground explained by Lord Reed would, as already explained, be consistent with the correct test expressed in Din by Lord Fraser, who was one of the majority.
Accordingly, while I understand, and have considerable sympathy with, Lord Carnwaths view to the contrary, I am in agreement with Lord Reed.
LORD CARNWATH: (dissenting)
For more than 30 years the majority decision in Din v Wandsworth LBC [1983] 1 AC 657 has been accepted as authority at the highest level for the proposition that under the homeless persons legislation (in the words of the headnote): in deciding whether the (applicants) became homeless intentionally, the housing authority had to look to the time of their action in leaving the accommodation they occupied and a subsequent hypothetical cause of homelessness did not supersede the actual cause
represented by their action
That result was thought by the majority to follow from the wording of the relevant provisions, under which the scope of the authoritys duty turned on an inquiry whether the applicant is homeless but whether he became homeless intentionally (section 4).
As Lord Wilberforce said: The time factors here are clearly indicated: at the time of decision (the present), the local authority must look at the time (the past) when the applicants became homeless, and consider whether their action then was intentional in the statutory sense . (p 666H; see also p 671E per Lord Fraser, to like effect)
The emphasis on actual rather than hypothetical causes of homeless was most clearly stated by Lord Fraser it is . irrelevant for an applicant who is homeless at the date of his application, and who became homeless intentionally, to show that he would have been homeless by that date in any event.
The material question is why he became homeless, not why he is homeless at the date of the inquiry.
If he actually became homeless deliberately, the fact that he might, or would, have been homeless for other reasons at the date of the inquiry is irrelevant. (p 671G) The same approach was reflected in Lord Wilberforces concern that the alternative would pose problems for authorities, who would be required as well as investigating the original and actual cause of homelessness, to inquire into hypotheses what would have happened if the appellants had not moved (p 667F) It was reflected also in the way in which Lord Lowry, having accepted that the act of becoming intentionally homeless must be causally linked to the homelessness at the time of the application to the authority, characterised the appellants argument, which he rejected Their argument necessarily disregards this aspect of causation and concentrates on something else: what would have been the position if the deliberate act which caused the relevant homelessness had not occurred.
They then say that the real cause of their homelessness is not the act which caused it but something which did not cause it, namely the fact that they would have been homeless unintentionally by December if they had not already become homeless intentionally in August. (p 676D E) The contrary approach of the minority was put succinctly by Lord Russell: if on the facts as established in the present case he would be homeless now in any event, the past circumstances in which the homelessness originated appear to me to be no longer of any relevance: the past actions of the applicant are spent. (p 674A).
The majoritys approach may have seemed harsh at the time.
As applied to the facts of the case (involving mounting arrears of rent), it has been overtaken by statutory provisions.
In Din the appellant had conceded that he could not challenge the authoritys decision that it would have been reasonable for him to continue to occupy the accommodation in question, notwithstanding his keenness to avoid mounting debts, although Lord Fraser noted that the position might have been different in a part of the country under less housing pressure (p 671A B).
This problem has been addressed, not by substituting hypothetical for actual causes in the principal provision, but by defining the matters to be taken into account in deciding whether continued occupation is reasonable.
As Lord Reed points out (para 15), subordinate legislation under section 177(3), introduced in 1996 provides that in determining that issue account is to be taken of the applicants financial resources and the cost of the accommodation.
In the words of the Code of Guidance: one factor that must be considered in all cases is affordability (para 8.29).
The one area of possible disagreement between the members of the majority in Din was on a matter not essential to their decision, that is the interpretation of the decision in Dyson v Kerrier District Council [1980] 1 WLR 1205.
This concerned the correct approach to homelessness resulting from an intentional move from settled accommodation (in Huntingdon) followed by a limited period in temporary accommodation in a winter let in Cornwall.
The Court of Appeal had held that there was a sufficient causal link between the original decision and the subsequent homelessness to satisfy the statutory test.
In Din Lord Wilberforce thought the case was rightly decided: There (as here) the applicant intentionally surrendered available accommodation in order to go to precarious accommodation (a winter letting) from which she was ejected and so became homeless.
It was held (in my opinion, rightly) that she had become homeless in consequence of her intentional surrender.
This does not in any way support an argument that a subsequent hypothetical cause should be considered to supersede an earlier actual cause.
It merely decides that a disqualification for priority by reason of an intentional surrender is not displaced by obtaining temporary accommodation.
As pointed out by Ackner LJ in the Court of Appeal, it can be displaced by obtaining settled accommodation.
Lord Fraser agreed because on the facts of that case the original cause of her homelessness was still in operation at and after the time when she had to leave the winter let.
Lord Lowry alone expressed doubts about the correctness of the reasoning in Dyson.
He said: It could well be that the plaintiff, having become homeless intentionally when she left the Huntingdon flat, was continuously homeless during the temporary winter letting and therefore rightly lost her priority.
That is a result which I would understand and accept.
But that was not the basis of decision in Dyson .
That limited area of difference was resolved in 1995 by the House of Lords in R v Brent London Borough Council, Ex p Awua [1996] AC 215.
Lord Hoffmann acknowledged that in finding the necessary causal link the Court of Appeal in Dyson had stretched the literal wording, to avoid a construction which would enable people to jump housing queues by making themselves homeless at one remove.
In answer to the question what constitutes the causal link?, he cited with approval Lord Wilberforces explanation that the disqualification on the grounds of intentional homelessness was not displaced by obtaining temporary accommodation: The distinction between a settled residence and temporary accommodation is thus being used to identify what will break the causal link between departure from accommodation which it would have been reasonable to continue to occupy and homelessness separated from that departure by a period or periods of accommodation elsewhere.
This jurisprudence is well established (it was approved by this House in Dins case) and nothing I have said is intended to cast any doubt upon it, although I would wish to reserve the question of whether the occupation of a settled residence is the sole and exclusive method by which the causal link can be broken.
He rejected Lord Lowrys suggestion that Mrs Dyson had become homeless when she left the settled accommodation and remained so during the temporary let: of course Dysons case implies no such thing.
It decides only that her homelessness after eviction from the cottage in Cornwall is intentional because it was caused by her decision to leave the flat in Huntingdon.
Some support for a contrary view can be found in the speech of Lord Lowry in Dins case but this opinion was not shared by the other members of the House, who analysed the case solely in terms of causation.
What persists until the causal link is broken is the intentionality, not the homelessness.
Nothing in Awua casts any doubt on the principle, established by the majority in Din, that the definition of intentional homelessness is not concerned with hypothetical causes.
The law on these issues has thus been settled for some 20 years or more.
Although these cases were decided under the previous legislation, in terms of the wording of the relevant provisions of the 1996 Act, nothing has changed.
Section 190(1) includes precisely the same contrast of tenses as was found in section 4 of the 1977 Act, and was regarded as determinative in Din.
It applies where the authority are satisfied that the applicant is homeless, but became homeless intentionally.
To my mind this is a clear indication that Parliament intended the same approach to apply as under its predecessor.
Lord Reed has undertaken his own re analysis of Din in a way which had not suggested by the parties before us, nor (to my knowledge) by anyone else in the three decades since it was decided.
While he makes some interesting points, I find it hard with respect to accept that such a re analysis is desirable or necessary.
Lord Reed observes that these provisions have given rise to numerous difficulties of interpretation (para 8).
That may have been so in the past, but it seems all the more reason for leaving well alone an aspect of the law which was regarded as settled in the highest court at a relatively early stage.
As already noted, the limited difference between Lord Lowry and the other members of the majority on that issue was settled 20 years ago in Awua.
The reasoning of the review officer in the present case seems to me a perfectly orthodox reflection of the majority approach in Din as endorsed in Awua.
Miss Bretherton for the appellant has adopted a rather different approach.
She has not sought to re interpret the majority decision in Din, but she submits that developments in both the statutory framework and in the case law mean that the decision need no longer be treated as binding, or if necessary, justify overruling it.
As I understand her submissions, the principal developments on which she relies are: i) The 1996 Act involved a major restructuring of the law, not simply a consolidation, so that previous case law, though persuasive was no longer formally binding. ii) More particularly, the review procedure, introduced by section 202 of the 1996 Act, provides for a full merits review of the application on the basis of the facts at the date of the review.
The reviewing officer, in the words of Lord Slynn (Mohammed v Hammersmith and Fulham London Borough Council [2002] 1 AC 547 para 26) is not simply considering whether the initial decision was right on the material before it at the date it was made.
He may have regard to information relevant to the period before the first decision but only obtained thereafter and to matters occurring after the initial decision. iii) More recent cases have shown, as anticipated by Lord Hoffmann, that the causal link following an act of intentional homelessness may be broken by an occurrence other than the acquisition of settled accommodation, provided that it is unconnected with the temporary nature of the intervening accommodation, for example the breakdown of a marriage (R v Basingstoke and Deane Borough Council, Ex p Bassett (1983) 10 HLR 125), or a reduction in housing benefit (Ex p Fahia (1996) 29 HLR 94).
The same thinking should apply to the birth of the child in the present case, which would have led to the loss of the accommodation in any event.
I will take these points in turn.
For the reasons already given when commenting on Lord Reeds judgment, I do not consider that the 1996 Act was intended to alter in any way the concept of intentional homelessness, or gives any reason for departing from or questioning Din particularly having regard to its then recent reaffirmation in Awua.
It is true that the new review procedure allows consideration of new evidence, on those issues where the inquiry is directed to the present (such as local connection as in Mohamed).
However, that has no relevance in my view to the issue of intentionality, which remains specifically related to the past.
On Miss Brethertons last point, I do not see that her client can gain any help from cases such as Bassett and Fahia.
As she says, the effect of these, if correct, appears to be to create an exception to the Dyson approach where the intervening accommodation comes to an end due to a change of circumstances for reasons not directly linked to its temporary nature, such as a breakdown of marriage which leads to exclusion from the temporary home.
Another example, suggested by Toulson J in Fahia is where the temporary accommodation is destroyed by fire.
The key to these cases is that the new event is the direct cause of the eventual homelessness, and is treated as its operative cause, thus breaking the chain of causation from the (intentional) loss of the previous settled accommodation.
Neither the logic of the exception, nor its precise limits are entirely clear.
In R v Hackney London Borough Council, Ex p Ajayi (1997) 30 HLR 473, Dyson J upheld the authoritys refusal to treat the operative cause of homelessness as the applicants pregnancy, which was the immediate cause of her eventual homelessness.
He gave no clear explanation for the difference, other than that the issue was one for the authority to answer in a practical common sense way having regard to all relevant circumstances (p 479).
Those cases, whatever their precise rationale, do not support a departure from the Din principle that the focus is on actual not hypothetical causes.
Nor do they help the present claimant.
The birth of her child might have been, but was not, the actual cause of her loss of either the original or the temporary accommodation.
In conclusion, while I have much sympathy with the appellants arguments, I do not think we can properly accede to them.
I would therefore have dismissed the appeal.
| UK-Abs | The question in this case is whether the respondent local authority were entitled to be satisfied that the appellant, Ms Haile, became homeless intentionally.
If the authority were not satisfied that she became homeless intentionally (section 193(1) of the Housing Act 1996), then they were under a duty to secure that accommodation was available for her occupation (section 193(2)).
By section 191(1) of the 1996 Act: a person becomes homeless intentionally if he deliberately does or fails to do anything in consequence of which he ceases to occupy accommodation which is available for his occupation and which it would have been reasonable for him to continue to occupy.
The appellant surrendered her tenancy of a bedsit in a hostel on 25 October 2011.
She moved to temporary accommodation, which ended in November 2011 when she was asked to leave because of overcrowding.
She then applied to the respondent authority for accommodation as a homeless person.
On 15 February 2012 she had a baby daughter.
Had she still been living in the hostel, she would have had to leave, as only single persons were allowed to reside there.
On 1 August 2012 the authority decided that the appellant was homeless, eligible for assistance, and had a priority need, but that she became homeless intentionally.
On 31 January 2013, a decision to the same effect was made by a review officer.
The basis of the finding was that she had surrendered her tenancy of the room in the hostel and in consequence had ceased to occupy accommodation which was available for her occupation, and which it would have been reasonable for her to continue to occupy until she gave birth.
Her contention that she would have had to leave the hostel in any event when she gave birth was regarded as irrelevant.
Her appeal was dismissed by the County Court and the Court of Appeal.
Before the Supreme Court, she argued that the birth of her baby broke the chain of causation between her intentionally leaving the hostel, and her state of homelessness when her application was considered.
The appeal invited the court, if necessary, to depart from the House of Lords decision in Din v Wandsworth London Borough Council [1983] 1 AC 657.
The Supreme Court allows the appeal by a majority of 4 1 (Lord Carnwath dissenting).
Lord Reed gives the lead judgment, with which Lord Neuberger, Lady Hale, and Lord Clarke agree.
Lord Neuberger adds a concurring judgment.
Lord Reed reasons that the requirement in section 193(1) is meant to prevent queue jumping by persons who, by intentionally rendering themselves homeless, would obtain a priority in the provision of housing to which they would not otherwise be entitled.
It is in relation to the current state of being homeless that one asks, did the applicant become homeless intentionally? [22 24] Section 193(1) must therefore be understood as being concerned with whether the applicants current homelessness was caused by intentional conduct on his part.
This depends, first, on whether he deliberately did or failed to do anything in consequence of which he ceased to occupy accommodation meeting the requirements of section 191(1).
If yes, the further question arises under section 193(1) whether the appellants current homelessness was caused by that intentional conduct. [25, 28] Thus, section 193(1) is read as meaning the local authority are not satisfied that [the applicant is homeless because] he became homeless intentionally. [27] Din concerned the interpretation of the definition of becoming homeless intentionally in section 17(1) of the Housing (Homeless Persons) Act 1977.
The decision that the elements of that definition were to be considered as at the time when the applicant ceased to occupy accommodation meeting the requirements of the definition is still correct.
It also remains true that if the definition is satisfied at that point in time, subsequent hypothetical events are immaterial.
Finally, the conclusion in Din that there must be a continuing causal connection between the deliberate act satisfying the definition of intentional homelessness, and the homelessness existing at the date of the local authoritys inquiry, remains good law. [38, 40, 59 60] Later authorities applied that principle and provide examples of events interrupting the causal connection, such as marital breakdown. [44, 62] In the present case, the review officer did not consider whether the cause of Ms Hailes current state of homelessness was her surrender of her tenancy of the room in the hostel.
The birth of the baby meant that she would be homeless, at the time her case was considered, whether or not she had surrendered the tenancy.
She had not jumped the queue as a result of surrendering the tenancy. [66 67] Lord Neuberger agrees with Lord Reeds analysis, [69] and adds some reasons of his own.
Lord Carnwath, in his dissenting judgment, would have dismissed the appeal.
In his view the reasoning of the review officer was an orthodox reflection of the majority approach in Din. [89]
|
The issue raised by this appeal is the extent of an exclusive prescriptive right (ie an exclusive right obtained through a long period of use) to take cockles and mussels from a stretch of the foreshore on the east side of the Wash, on the west coast of Norfolk.
The factual and procedural background
An outline of the basic facts
The proprietor of the exclusive right in question is the second respondent, Mr Michael Le Strange Meakin, who is Lord of the Manors of Snettisham and Heacham (the Manors) and the owner of a substantial amount of land adjoining the east side of the foreshore.
The land, the right to fish and the Lordships have been in the ownership of the Le Strange family for many generations, and we shall refer to Mr Le Strange Meakin and his predecessors as the Estate.
In 1970, the Estate granted a lease of the exclusive right to the first respondent, Mr John Loose, who is still holding over under that lease.
The appellants are individuals and companies who operate fishing boats out of Kings Lynn in Norfolk.
During the summer of 2007, 13 of the appellants boats fished for cockles in locations claimed by the respondents to be within the area of the exclusive fishery vested in the Estate.
Some of the appellants fishing activities took place at or near an area known as Stubborn Sand, and some at or near an area known as Ferrier Sand.
Both Stubborn Sand and Ferrier Sand are now attached to the foreshore, but they had not been so attached in the past.
Although we were provided with a large number of detailed plans, the following summary of the position on the ground should suffice for present purposes.
The stretch of foreshore between Wolferton Creek to the south and Thornham Creek to the north (the Foreshore) is irregular in shape, but it can be treated as going from north to south, with the Wash to the west, and land (owned by the Estate) to the east.
There are a number of sandbanks which are separated from the Foreshore at low tide.
The evidence establishes that some sandbanks which are currently attached to the Foreshore at any rate at low tide had previously been separated from it.
The shifting nature of sandbanks is a feature of the shore on the eastern side of the Wash, and, at least in that part of the Wash with which this appeal is concerned, the trend over the past 400 years or more appears to have been for previously separated sandbanks to become joined to the Foreshore with the passage of time.
Examples include Stubborn Sand, which is now attached to the Foreshore but which was separated from it until sometime in the 18th century; Ferrier Sand, which only became attached to the Foreshore around 50 years ago; and Blackguard Sand, which only became attached within the past 20 years or so.
The attachment to the Foreshore of previously separated sandbanks appears to have occurred as a result of the gradual silting up of channels which had separated the sandbanks from the Foreshore.
It is also clear that the low water marks (ie the lines showing the edge of the sea at low water) of the Foreshore have moved significantly with the passage of time.
At least in recent periods the low water marks have, in very general terms, moved further west ie seaward, further away from the shore.
We refer to low watermarks in the plural because, of course, the extent of low water varies from time to time.
For present purposes, four different types of low water measurement should be mentioned. (i) Mean low tide, the average of neap and spring low waters, (ii) mean spring low tide, the average of spring low waters, (iii) mean neap low tide, the average of neap low waters, and (iv) the lowest astronomical tide, the most extreme neap low water, which occurs every 18.6 years. (Extreme low water was also referred to in oral argument, when it was said to be the same as lowest astronomical tide, but that was corrected subsequent to the hearing.
However, it did not feature in argument as a separate relevant measurement, save by way of explanation of a line on a chart).
There are, unsurprisingly, high water equivalents of these four low water measurements.
The breeding and other habits of cockles and mussels differ to some extent, but it is common ground that there is no need for present purposes to make any distinction between the two types of shellfish (and any reference to shellfish hereafter is to cockles and mussels).
Shellfish are to be found on the foreshore, but they are also to be found in the shallow seas.
At least in the past, shellfish were taken entirely from the foreshore at low tide by individuals coming by foot from the shore and gathering them by hand.
In recent times, however, with the development of more sophisticated and aggressive fishing techniques, in particular suction dredging, shellfish are increasingly gathered from vessels at a time when the foreshore is not exposed by the tide as was done recently by the appellants as referred to in para 3 above.
The issues between the parties
As mentioned above, it is accepted that the Estate is the owner by prescription of the exclusive right to take shellfish over part of the Foreshore (the Right), but what divides the parties is the extent of the area over which it can claim the Right (the Area).
The southern and northern boundaries of the Area are not in dispute: they are Wolferton Creek and Thornham Creek respectively.
The disputes involve (i) the location of the western, seaward, boundary and (ii) issues relating to former sandbanks near the eastern, landward, boundary.
The dispute over the western, seaward, boundary is whether the Estates Right extends to mean low tide, mean low water spring tide, lowest astronomical tide, or some other mark.
At first instance, Sir William Blackburne held that it was the mean spring low water, whereas the Court of Appeal concluded that it was the lowest astronomical tide mark.
The appellants primarily contend that the western boundary should be that shown in the Lynn Deeps Fishery Order 1872 (the 1872 Order), or alternatively mean low water, whereas the respondents support the conclusion reached by the Court of Appeal.
As to the issue relating to sandbanks, the appellants contend that, unless the respondents can establish that the Estates prescriptive Right extended to a sandbank before it became attached to the Foreshore, the Right cannot extend to such a sandbank simply because it becomes attached to the Foreshore.
The respondents contend that the Right can and does so extend, and in that connection they rely on two arguments.
The first is that the Right is a prescriptive right which applies to the Foreshore as it is constituted from time to time.
The second argument is that, if this first argument is wrong, the respondents are entitled to invoke the doctrine of accretion, so that a sandbank becomes, as it were, added to the Area the subject of the Right by operation of law, when it becomes attached to the Foreshore.
Sir William Blackburne and the Court of Appeal accepted both the respondents arguments.
The factual evidence and previous litigation
The evidence included a number of charts and maps going back to 1588, which, as mentioned, clearly establish that (i) the location of the low and high water marks moved significantly over time, and (ii) various sandbanks, which were initially separated therefrom, became attached to the Foreshore as channels became silted up.
The evidence also included a number of witness statements, which concentrated on both relatively recent events and analyses of the effect of earlier proceedings or deductions made from historic documents, some private and some public.
The private documents include a number of leases of exclusive fishing rights granted by the Estate between 1857 and 1970.
These leases describe the extent of the exclusive fishery in different terms.
For instance, the 1857 lease referred to the extreme low water mark of the sea, and the 1970 lease described the boundary as so far as may be worked without boats at extreme low water.
A 1903 lease identified the seaward boundary as the ordinary low water mark.
Other leases were less precise as to the boundary, some simply referring to the foreshore and another to the foreshore and so much of the seabed that belongs to [the lessor].
The 1857 lease was for a term of ten years, and, during its currency, a successful action for trespass at the Norfolk Summer Assize was brought, for some reason in the name of the Estate rather than the lessee, against a Mr Rowe who had taken mussels from the Foreshore between high and low water Le Strange v Rowe (1866) 4 F & F 1048.
In his direction to the jury in that case, Erle CJ said at p 1056 that there is evidence of what to my mind was a very strong act of ownership in respect to the taking of mussels.
The 1872 Order was the first of a number of orders regulating fishing in the eastern side of the Wash. It applied for 60 years.
The boundary of the exclusive fishery in the 1872 Order was described as the line of ordinary low water mark, by the western side of the Stubborn Sand.
The chart attached to the 1872 Order indicated that the seaward extent of the exclusive fishery vested in the Estate was at least as far seaward as mean spring low water (at least according to Bridge LJ in the judgment referred to in paras 22 and 23 below), and that that fishery included Stubborn Sand (which was by then joined to the Foreshore) but not Ferrier Sand (which was still separate from the Foreshore at that time).
The Estate was involved in the drafting of the 1872 Order (including the attached chart), which also established the Lynn Fisheries Committee.
The 1872 Order was made under the Sea Fisheries Act 1868 (31 & 32 Vict C45), which was enacted following a national review of fisheries, and was intended to bring some clarity to the existence and extent of coastal private fishing rights.
Section 48 of the 1868 Act specifically provided that that no order made under that Act shall take away or abridge any Right of Several [ie exclusive] Fishery enjoyed by any Person under Prescription or Immemorial Usage, without the consent of such Person.
In 1885, proceedings were brought by the Estate against the local authority, Lynn Corporation, with a view to establishing the southern boundary of the fishery Le Strange v Lynn Corporation.
The decision of Lord Coleridge CJ, in favour of the Estate, was only reported in a local newspaper, but we were shown a fairly full note of the judgments of the Divisional Court, who refused Lynn Corporations application for a new trial.
The propositions which this case supports for the purpose of the instant proceedings are limited, but may be summarised as follows: (i) the Estate claimed its exclusive Right extended over Stubborn Sand but not over Ferrier Sand or other unconnected sandbanks, (ii) the decision effectively established the northern and southern boundaries of the Area the subject of the Right, and (iii) the proceedings illustrate how the Estate has taken steps to protect the Right over the Area.
The most recent lease was granted in 1970 for a term of three years to Mr Loose, who continues to hold over 45 years later.
In 1971, a Mr Castleton took mussels from a location near Stubborn Sand, seaward of the mean low water mark, but landward of the mean low water springs mark.
This led to proceedings against him by Mr Loose for declaratory, injunctive and financial relief.
The proceedings were heard in the Kings Lynn County Court by His Honour Judge Moylan, who, in a judgment given in January 1977, found for Mr Loose.
He decided that the Estate, as the Lords of the Manors, had acquired the ownership of an exclusive fishery over the Foreshore by prescription, and that the western, seaward, boundary of the area concerned was at least as far from the shore as the mean spring low water mark (as Mr Loose claimed).
Judge Moylans decision was subsequently upheld by the Court of Appeal see Loose v Castleton (1978) 41 P & CR 19.
Judge Moylans judgment is only available in draft form, but it is clear and coherent, and shows that he had little hesitation in reaching his conclusion, saying that the evidence builds up to a very strong case that for nearly the last four centuries the Lords of the Manors have acted as the owners and possessors of the soil of the Foreshore and of a several fishery in the waters over that soil.
Some of the documents of title relating to each of the Manors included specific references to fisheries in the case of one of the Manors as long ago as the early 12th century and in the case of the other in the 16th century; and, while other documents of title did not specifically refer to fisheries, they included rights in general terms which could have extended to fisheries.
Judge Moylan also referred to acts of ownership, possession and user supporting the existence of the Right, on the part of the Lords of the Manors going back to the early 17th century, including acts against third parties who were fishing on the Foreshore, leases granted of the fishing rights claimed, and records of expenditure on preserving those fishing rights.
Judge Moylan went on to accept that, as the most successful mussel beds are found between mean low water and low water mean springs, the seaward boundary of the fishery is and always has been at least as far out as the line of low water mean springs wherever that may be from time to time, which is what the Estate had claimed.
The Court of Appeal upheld Judge Moylans decision for reasons given by Bridge LJ, with whom Megaw and Ormrod LJJ (both of whom gave short judgments) agreed.
The main issue on the appeal was whether the evidence of title relating to the two Manors was such as to undermine Judge Moylans conclusion.
In that connection, Bridge LJ said at p 30 that the evidence was sufficient to raise the presumption of a lost grant dating from some period before the end of the reign of Henry II.
At p 32, Bridge LJ rejected the contention that there was a rule of law that the seaward boundary was limited to the mean low water mark.
On the evidence, he agreed with Judge Moylan that the boundary was mean spring low water, but, as Judge Moylan made clear, Mr Looses case was that it was at least mean spring low water.
In concluding where the seaward boundary of the Area lay, Bridge LJs reasoning was controversial.
Having given two reasons which were each based on evidence of fact which had not been referred to, let alone specifically accepted, by Judge Moylan, Bridge LJ said this at p 33: perhaps most importantly of all, there was clear evidence that the best mussel grounds lay between the low water mark of ordinary tides and the low water mark of spring tides.
In the light of that evidence, one is entitled to ask oneself the question: is it really to be supposed that, when the Crown was granting to favoured subjects a valuable right such as a several fishery relating to shellfish , it was doing so by reference to an artificial line on a map mean low water at ordinary tides , and doing so in order to deny to the favoured subjects the primary benefit that one would suppose was intended to be conferred on them, namely the benefit of exploiting the fishery where it could best be exploited? The answer to this question is, obviously: no .
Successive Fishery Orders were made after the 1872 Order expired.
The most recent is the Wash Fishery Order 1992 (SI 1992/3038) (the 1992 Order), which was made pursuant to the Sea Fisheries (Shellfish) Act 1967.
So far as the legal effect of the 1992 Order is concerned for present purposes, it included in article 16 a statement that [n]othing in this Order shall affect prejudicially any right of [the Estate] and it also stated that nothing herein contained shall be deemed to be a consent to or be construed to recognise the existence of any right, power or privilege of the [Estate].
However, during the currency of the negotiations leading up to the 1992 Order, and relying on Loose v Castleton, the Estate successfully persuaded the relevant Fisheries Committee and the Crown Estate that certain sandbanks which were part of the foreshore but had previously been detached from it, including Ferrier Sand, should be excluded from their respective jurisdictions.
This caused resentment among the fishing community in the location, and this then led to the testing of this outcome by the appellants fishing in the areas described in para 3 above, and this in turn resulted in the instant proceedings.
The proceedings below
At the hearing before Sir William Blackburne, the appellants (unsurprisingly) accepted Judge Moylans finding that there was an exclusive, or several, fishery vested in the Estate, which had been let to Mr Loose.
However, they concentrated on (i) an aspect which was not conclusively determined in Loose v Castleton, namely the seaward boundary, and (ii) another aspect which appears to have been barely touched on in Loose v Castleton, namely the sandbanks which had formerly been separated from the Foreshore, but which had become attached thereto.
In relation to the formerly detached sandbanks, there was no suggestion by the respondents that the Estate had exercised an exclusive right to take shellfish over any of the sandbanks which, at least on the evidence currently available, had previously been separated from the Foreshore, with the sole exception of Stubborn Sand.
Thus, with the exception of Stubborn Sand, it was common ground that former sandbanks (such as Ferrier Sand and Blackguard Sand), so long as they were separated from the Foreshore, had not been treated as part of the exclusive fishery claimed by the respondents.
It was also accepted that they had been available to members of the public for fishing as of right, and, at least in the case of some of those sandbanks, that members of the public had actually taken shellfish from them within living memory.
The appellants contended at trial (i) that the seaward boundary of the Area was the mean low water mark, and (ii) that none of the formerly separated sandbanks (including Stubborn Sand) was subject to the Right.
In an instructive judgment, Sir William concluded that (i) mean spring low water marked the boundary of the Area, on pragmatic grounds but also following Loose v Castleton, and (ii) sandbanks, which were formally separated from the Foreshore, became part of the Area when they became joined to the Foreshore, on the alternative grounds that (a) the prescriptive right extended to the Foreshore as it was physically constituted from time to time, or (b) if the prescriptive right was limited to the foreshore in its original state, it nonetheless extended to previously separated sandbanks as they joined to the foreshore, pursuant to the doctrine of accretion [2013] EWHC 901 (Ch).
On the appellants appeal and the respondents cross appeal, the Court of Appeal held, for reasons given in a clear judgment by Moore Bick LJ, that (i) allowing the cross appeal, the seaward boundary of the Area was the lowest astronomical tide mark, and (ii) dismissing the appeal, Sir William was right about the former sandbanks being included in the Area for the reasons which he gave [2015] Ch 547.
On this appeal, the respondents adhere to their position below and contend that the Court of Appeal was right on both aspects, essentially for the reasons given by Moore Bick LJ.
The appellants, on the other hand, have changed their position, albeit only slightly.
As to the seaward boundary, the appellants contend that it should be as marked on the chart attached to the 1872 Order, or alternatively that it should be mean low water.
So far as the formerly separated sandbanks are concerned, while the appellants basic case remains as it was (namely that neither ground for accepting the respondents case is sustainable), they now accept that Stubborn Sand is included in the Area the subject of the Estates exclusive fishery, although they maintain their contention that Ferrier Sand, Blackguard Sand and any other sandbanks which have become joined to the foreshore within living memory, are not.
The Crown Estate Commissioners have since 1961 been responsible for managing the Crown Estate, and therefore have an obvious interest in the outcome of this case.
They intervene in this appeal, and support the appellants case on the issue of whether previously separated sandbanks, which have now attached to the foreshore, should be treated as subject to the Estates right, contending that they should not be so treated.
Prescription: the applicable legal principles
The right to fish on the foreshore
Piscary is the legal name of a right to catch and take away fish, and it is an example of a right over land known as a profit prendre (or, more simply, a profit), which is a right to go on to the land of another to remove items (eg gravel, timber, game).
Profits, like easements (a different category of rights over land, which include rights of way, rights of light and rights of water), are recognised in common law and statute as legal rights known as incorporeal hereditaments.
A right of piscary which does not limit the quantity of fish which can be taken to the requirements or benefit of neighbouring land, is in law known as a profit in gross, and, unlike a right of piscary which is so limited (or a right of way or a right to light), it is capable of surviving independently of any land owned by the grantee see Harris v Earl of Chesterfield [1911] AC 623.
Historically, it has long been accepted that the Crown is prima facie the owner of the bed of the sea, and of the foreshore so far as the tide flows and reflows.
Prima facie because there is nothing to prevent the Crown from alienating (ie transferring away its ownership of) any part of the foreshore or seabed, and it has done so in respect of much of the coast of England and Wales.
However, as Sir Matthew Hale wrote in De Jure Maris et brachiorum ejusdem (1888 ed), p 11, the common people of England have regularly a liberty of fishing in the sea or creeks or arms thereof, as a public common of piscary.
This is because, since time immemorial, the public has fished for fish and shellfish by right in those areas, but not in non tidal waters.
Nonetheless, as Hale went on to explain, the Crown could, by its prerogative, exclude the public from exercising that right, and grant the right of fishery to an individual or individuals exclusive of that common liberty.
It has been said on a number of occasions that this prerogative power was irrevocably lost in 1215 following the sealing of Magna Carta see per Blackstone, 2 Bl (Comm), p 59, and, more recently, per Willes J giving the unanimous advice of the judges in Malcolmson v ODea (1863) 10 HL Cas 593, 618, where he added that this did not affect rights which were made by Act of the Crown not later than the reign of Henry II, ie not later than 1189, when Richard I succeeded him.
This advice was held by Lord Blackburn in Neill v Duke of Devonshire (1882) 8 App Cas 135, 178 to settle the law, and it was described as unquestioned law by Viscount Haldane LC in Attorney General for the Province of British Columbia v Attorney General for the Dominion of Canada [1914] AC 153, 170.
It should also be mentioned that, while it is accepted that the Crown cannot create an exclusive fishery, there is no reason why Parliament cannot do so or authorise the executive to do so, and, as Sir William Blackburne explained at [2013] EWHC 901 (Ch), paras 15 26, it has done so in relation to many areas round the United Kingdom, including the Wash.
The grant of an exclusive fishery (whose technical description is, as already explained, somewhat confusingly, a several fishery) over a tidal area is not really a grant of the right to take fish from that area, as the grantee would presumably have that right in his capacity as a member of the public.
Rather, it is the grant of a right to exclude anyone else from fishing over that area.
Classically, such a right would be granted by deed, but, as with many rights over property, it can be acquired by long use ie by prescription.
Obtaining rights by prescription
As Lord Hoffmann said in R v Oxfordshire County Council, Ex p Sunningwell Parish Council [2000] 1 AC 335, 349, [a]ny legal system must have rules of prescription which prevent the disturbance of long established de facto enjoyment.
Given that a prescriptive right is based on long use, the nature and extent of a prescriptive right depends on the nature and extent of the long established use.
As Bovill CJ put it in Williams v James (1867) LR 2 CP 577, 580, [i]n all cases of this kind which depend upon user the right acquired must be measured by the extent of the enjoyment which is proved.
The quality of the use required in order to establish a prescriptive right to a profit or an easement is embodied in the expressions, which have been held to be synonymous in their meaning and effect, namely as of right and nec vi, nec clam, nec precario (ie not secretly, not by force, and not with permission).
As Lord Walker put it in R (Lewis) v Redcar and Cleveland Borough Council (No 2) [2010] 2 AC 70, para 30, persons claiming to have acquired a right by prescription 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.
The period for which use must be enjoyed to establish a prescriptive right to a profit or an easement depends on the nature of the right claimed.
The law in that connection is a mixture of inconsistent and archaic legal fictions, practical if sometimes haphazard judge made rules, and (in the case of easements and some profits but not profits in gross) well meaning but ineptly drafted statutory provisions.
The common law originally fixed the requisite prescription period as being from time immemorial.
In due course, this came to mean from before 1189, as discussed by Cockburn CJ in Bryant v Foot (1867) LR 2 QB 161, 179 182, and as explained by Lord Hoffmann in Sunningwell at pp 349 350.
Because of the impracticality of requiring evidence of use going back to the end of the 12th century, the judges developed the rule that use which can be shown to have been enjoyed as of right for 20 years continuously or else since before the time of living memory (ie there is no living witness who can speak to a period when it was not enjoyed) would suffice to establish a prescriptive right see eg Aynsley v Glover (1875) 10 Ch App 1023 and RCP Holdings Ltd v Rogers [1953] 1 All ER 1029.
However, such a claim could be defeated where it could be proved that the origin of the enjoyment must have been more recent than 1189 see Bury v Pope (1586) Cro Eliz 118 and Bowring Services Ltd v Scottish Widows Fund and Life Assurance Society [1995] 1 EGLR 158, 160.
Because even this somewhat more relaxed approach to common law prescription was regarded as imposing too rigid a test in some cases, the judges then developed the more flexible doctrine of lost modern grant, which can be relied on where there has been upward of 20 years uninterrupted enjoyment even if there is direct evidence that no such grant was in fact made per Buckley LJ in Tehidy Minerals Ltd v Norman [1971] 2 QB 528, 552.
However, as he also explained, the doctrine cannot be relied on if for some reason, such as incapacity on the part of [the putative grantor], the existence of the grant is impossible.
Meanwhile, after the judiciary had developed common law prescription and lost modern grant, the legislature intervened and enacted the notoriously poorly drafted Prescription Act 1832 (2 & 3 Will 4 c71).
The 1832 Act has not replaced the common law, but has added a further basis for claiming a right by prescription.
The Right in this case is based on the uncontested fact that the Estate (and their lessees and agents) have excluded the public from at least part of the area over which they claim to have established a right back to a period before the time of living memory, and there is no evidence to suggest that the Right could not have been granted before 1215.
No specific reliance has been placed by the respondents on the 1832 Act.
This may be because it is assumed that the present case involves a profit in gross (as, by virtue of the words the occupiers of the tenement in respect whereof the same is claimed in section 5, it appears that that statute does not extend to a profit in gross).
Or it may be because it is assumed that the 1832 Act does not take matters further than common law prescription, in the light of the effect of Magna Carta, as described in paras 33 and 34 above.
Lost modern grant was not relied on, presumably for this latter reason.
Accordingly, it is contended by the respondents (and not challenged by the appellants) that the Right is founded on common law prescription.
In the light of the arguments in this case, it is worth quoting another passage in the advice of Willes J in Malcolmson.
At p 618, he said that once a prescriptive right is established the result is, not that you say, this is a usurpation, for it is not traced back to the time of Henry II, but that you presume that the fishery being reasonably shown to have been dealt with as property, must have become such in due course of law, and therefore must have been created before legal memory.
In other words, because the several fishery is treated today as having been the subject of a valid grant at some point before living memory, the legal fiction that the right is treated as granted before 1189 should not be treated as more than a metaphor.
As Lord Mansfield said in Jones v Randall (1774) Lofft 384, 385, [t]he law would be a strange science if we must go to the time of Richard I and see what is law.
The extent of a prescriptive right
When considering the arguments relating to both the seaward boundary and the formerly separated sandbanks, it is vital to bear in mind that the basis upon which the Estate claims to have obtained its right of exclusive fishing is by prescription.
It is therefore appropriate to consider the precise nature of the inquiry involved in an exercise of establishing the nature and extent of a prescriptive right.
It is true that a prescriptive right can be said to be based on a notional grant, but that grant is not merely notional: it is fictional.
The essential point is that such a right is based not on an imagined document, but on actual use as of right, namely use which is such as to bring home to the landowner that a right is being asserted against him, as Lord Walker said in the Redcar and Cleveland Borough Council case at para 30.
In other words, in order to identify the nature and extent of the right obtained by prescription, one has to examine the actual use as of right upon which it is said to be based.
The correct question is therefore not what the notional grant would have been likely to be, let alone what would have been the intention of the notional grantor; it is what is the extent of the user as of right for the requisite period. (In many cases, of course, these questions will produce the same answer).
Thus, as is reflected by what was said by Bovill CJ in Williams v James, the general rule is accurately set out in Gale on Easements (19th ed (2012), para 9 03, discussing rights of way, but it is applicable to any right), namely where a right of way is acquired by user, the extent of the right must be measured by the extent of the user.
Having said that, the extent of the right obtained by prescription has to be established bearing in mind practical reality.
This is exemplified by the unum quid rule which was explained by Lord Blackburn (who said that it was as much the law in a Scotch as in an English Court) in Lord Advocate and the Trustees of the Clyde Navigation v Lord Blantyre (1879) 4 App Cas 770, 791 792 in these terms: [A]ll that tends to prove possession as owners of parts of the tract tends to prove ownership of the whole tract; provided that there is such common character of locality as would raise a reasonable inference that if the barons possessed one part as owners they possessed the whole, the weight depending on the nature of the tract, what kind of possession could be had of it, and what kind of possession was proved.
This was said in connection with possession and ownership of land, but it applies equally to rights over land.
Thus, the rule was specifically applied to a prescriptive claim for a several fishery in Neill v Duke of Devonshire, where at p 151, Lord Selborne LC said that [i]f the fishery of the whole river was what has sometimes been called a unum quid, there can be no doubt that evidence of acts of ownership and enjoyment in any part of it would be applicable to the whole.
As Lord OHagan emphasised at p 165, reflecting what Lord Blackburn had said in Blantyre, whether evidence of long enjoyment of fishing over one part of a river will extend to another part, or to other parts, must of course vary according to circumstances, and [w]hat may demonstrate it, in one case, may be quite inadequate for that purpose, in another.
A shifting prescriptive right
Another issue which should be mentioned in relation to both the seaward boundary and the sandbanks in the present case is whether the property over which a prescriptive right is established can change.
The concept of a conveyance of, or a grant of a right over, a shifting, or fluctuating, area of land is not offensive to any principle of property law, provided that the land in question can be ascertained at any time with reasonable precision.
As Sir Robert Megarry V C pointed out in Baxendale v Instow Parish Council [1982] Ch 14, 22, the contention that there cannot be such a thing as a shifting freehold is undermined by what is stated in no less an authority than Coke on Littleton see Co Litt 48b, p 494 which plainly supports the argument that what was conveyed by a particular deed was the foreshore as it existed from time to time.
As Sir Robert went on to hold, and as seems supported by at least the majority of the court in Scratton v Brown (1825) 4 B & C 485, when it comes to construing a conveyance of (or indeed a deed of grant over) the foreshore, it is a matter of interpretation whether what is conveyed (or granted) is the foreshore (or a right over the foreshore) at the time of the document or the foreshore as it exists from time to time.
If a right over land, the identity of which shifts, can be the subject of an express grant, then it appears to us to follow that, as has been assumed on all sides below, there is no reason why that should not apply equally to a right over land obtained by prescription.
Presumptions in the case of prescriptive rights against the Crown
It is well established that, unlike other instruments, grants by the Crown are not construed against the grantor (contra proferentem).
Crown grants are construed most strictly against the grantee and most beneficially for the Crown, so that nothing will pass to the grantee but by clear and express words per Lord Birkenhead LC in Viscountess Rhonddas Claim [1922] 2 AC 339, 353.
The reason for this is that the prerogatives of the Crown being conferred upon it for great purposes, and for the public use, it shall not be intended that such prerogatives are diminished by any grant, beyond what such grant by necessary and unavoidable construction shall take away per Sir William Scott in The Rebeckah (1799) 1 Ch Rob 227, 230.
This principle has been more recently recognised by Lewison J in Crown Estate Comrs v Roberts [2008] 2 P & CR 255, paras 78 80.
As the Court of Appeal rightly said, this rule has no part to play in a case such as this, where the right concerned was not granted by a document, but arises as a result of long use.
However, in our view, the principle upon which the rule is based can, for what it is worth, properly be prayed in aid by the Crown in relation to a claim based on prescription, and therefore by the appellants in this case.
It appears to us that that basic principle is that a court should not be too easily persuaded that the Crown has been deprived of a property or a right, given that the property or right is held for the public good.
Therefore, in cases where it would otherwise be quite unclear whether a prescriptive right obtained against the Crown extended to certain property or certain rights, the principle may properly be invoked to justify the conclusion that it does not so extend.
In the great majority of cases of prescription, as in most cases of express grant, this principle will take matters no further, as it is only where the extent of the right would otherwise be really unclear that the principle can come into play.
There is, we would add, some force in the point that this principle should be given particular weight in relation to a prescriptive several fishery, given the importance accorded to the public right to fish as long ago as 1215.
As Lewison J said in Roberts at para 115, [g]iven the importance of the fishing industry both in ancient times and also today several fisheries were not popular.
Conclusions on the issues in this appeal
Introductory
The appellants have been realistic in accepting that the Estate has a several fishery on the Foreshore, in the light of the findings and judgments in the earlier cases, as well as the leases and the oral evidence before Sir William Blackburne.
Both parties have been realistic in accepting that the location of the seaward boundary of the Area subject to the fishery has not been determined in previous proceedings (in Loose v Castleton, Mr Loose contended that it was at least as far out as the line of low water mean springs, which Judge Moylan accepted).
Equally, they have been realistic in accepting that the issue whether the fishery extended to previously unattached sandbanks was not decided in previous proceedings.
So far as the two issues on this appeal, the seaward boundary and the previously unattached sandbanks, are concerned, most of the relevant evidence had already been agreed before, or found by, Judge Moylan in Loose v Castleton.
However, there was further and more detailed evidence adduced before Sir William Blackburne, particularly relating to the location of the Estates fishery at different times, fishing methods and tidal movements.
The leases granted between 1857 and 1970 obviously support the Estates contention that it owned a several fishery, but, when it comes to identifying its eastern and western boundaries, they are imprecise and inconsistent.
The Fishery Orders are expressly not intended to determine private rights.
The maps and charts established facts described in paras 5 to 7 above, but are not of much further help.
As to the more recent factual evidence, there were occasions when the appellants or other fishermen negotiated with representatives of the Estate or Mr Loose to take cockles from Ferrier Sand.
However, the negotiations were quite insufficient in terms of frequency, period of time, and express terms to give rise to any arguable inference of a public acceptance of the existence of a several fishery over Ferrier Sand (and we doubt whether they could give rise to a several fishery in any event).
The seaward boundary: a fluctuating boundary?
As mentioned above, it is rightly common ground that the Estate has a prescriptive exclusive Right to take cockles and mussels within an Area of the foreshore between Wolferton Creek to the south and Thornham Creek to the north.
It is clear that the seaward, western, extent of the boundary of that Area must be a low water mark.
The first question is, logically, whether that boundary is a fixed boundary, or whether it is one which fluctuates with the relevant low mark.
The second question is which of the various suggested low water marks is the appropriate boundary.
So far as the first question is concerned, we consider that the assumption which was made below was correct, and that the seaward boundary of the Area the subject of the exclusive Right to take shellfish fluctuates with the passage of time as the low water mark moves.
The Estate has exercised a prescriptive exclusive Right to take shellfish from the foreshore for a substantial period, during which the low water mark fluctuated to a significant extent over time, in circumstances where the evidence clearly establishes that the only way in which the shellfish were gathered was by individuals walking from the land when the tide was out.
It is in those circumstances inherently very likely, indeed inevitable in terms of practical reality, that the putative Right would have been exercised over an area which was defined, or limited, by a shifting low tide mark.
Thus, based on the inherently probable nature and extent of the actual exercise of the putative Right to fish by or on behalf of the Estate, we conclude that the boundary of the Area would have been low water as it was from time to time.
This is not an application of the unum quid rule, but it involves an approach roughly akin to it.
The natural unit of property so far as the exercise of the Right is concerned is the stretch of foreshore between high water and low water, and, as the land comprised within that unit moves with the shifting tides, one would expect, at least in the absence of good reason to the contrary, the exercise of the putative right to move correspondingly.
As Sir Robert Megarry put it in Baxendale at p 25, one would expect sea grounds, oyster layings, shores and fisheries to follow the sea as it advances or retreats.
Further, and importantly, it is not as if the existence of such a fluctuating right would have detrimentally affected any other interests, and in particular any public interests, of any significant value.
We accept that the public would have enjoyed the right to take shellfish seaward of a low water mark boundary, and that right would be lost as, and to the extent that, the boundary shifted seaward.
However, such a right would have been of no value, as nobody could have got access to the shellfish below the low water mark on foot, and, as explained in para 8 above, access from the sea for that purpose is of comparatively recent origin.
In these circumstances, we cannot accept the appellants primary contention that the boundary of the Area is the low tidemark shown on the chart attached to 1872 Order, as this would mean a fixed seaward boundary to the Area.
In any event, as already mentioned, the 1872 Order was made under legislation which provided in terms that it was not intended to delimit the extent of private fisheries (even though it is fair to say that there is some evidence which could be said to suggest that the tidemark shown on the chart was understood by some people at the time to identify the boundary of the Right).
The seaward boundary: which low water mark?
As to the second issue, namely the identity of the low water boundary of the Area, it is well established that the landward limit of the foreshore is the mean high water mark.
In Attorney General v Chambers (1854) 4 De G M & G 206, 218, Lord Cranworth LC (who was assisted by Alderson B and Maule J) said that Lord Hale gives as his reason for thinking that lands only covered by high spring tides do not belong to the Crown, that such lands are for the most part dry and maniorable.
Lord Cranworth then said that the reasonable conclusion is, that the Crowns right is limited to land which is for the most part not dry or maniorable.
However, as is common ground between all parties to this appeal, there is no equivalent consensus as to where the seaward limit of the foreshore is located.
Further, the reasoning of Lord Cranworth in the passage just cited does not cast much, if any, light so far as the seaward limit of the foreshore is concerned.
Accordingly, the selection of the relevant low water mark which provides the boundary of the Area is a relatively open question.
Not without some hesitation, we have come to the conclusion that the most satisfactory low water mark to select as the appropriate seaward boundary of the Area the subject of the Right is the lowest astronomical tide.
That conclusion appears to us to produce the least arbitrary result and to be consistent with the unum quid principle (discussed in paras 46 and 47 above).
Selecting the most extreme low water mark means that all parts of the Foreshore which are at any time uncovered by the sea are included in the Area, whereas any other selection involves some of those parts being excluded from the Area.
And, as we see it, the unum quid principle would at least tend to suggest that one should assume, at least in the absence of good reasons to the contrary, that the Right was being exercised in respect of the whole of the Foreshore, as it was from time to time uncovered by the sea.
Further, the alternative marks proposed (whether mean spring low water, as the Judge selected, or mean low water as the appellants suggested) are mean low water marks.
As Moore Bick LJ said, unlike lowest astronomical tide, which is an actual (if rare) tide mark, they would therefore involve taking an artificial mark, although it is fair to say that it could be seen from a chart.
In addition, it seems to us that the lowest astronomical tide is consistent with the approach of Popham CJ in Sir John Constables Case and Sir Henry Constables Case as translated and discussed by Moore in A History of the Foreshore and the Law Relating Thereto (1888), pp 233 237.
The passage in the judgment, quoted at pp 235 237, suggests that the correct mark is where the sea does not ever ebb or the lowest ebb.
The two cases were respectively concerned with the extent of a manor and the right to take a wreck, so we would accept that they are only of indirect assistance.
We were initially impressed with the appellants point that lowest astronomical tide was an unattractive boundary to select, as it occurs only once in every 18.6 years, which significantly exceeds the average life of a cockle or mussel.
At first sight, at any rate, that renders the lowest astronomical tide a rather unrealistic mark to take.
However, it is important to bear in mind that, until recently, cockles and mussels could only be gathered from the shore when the tide was out, and could not be gathered from a ship.
Accordingly, nobody would have been able to take the cockles and mussels which were just on the shore side of lowest astronomical tide, except once every 18.6 years.
It is only with the advent of suction dredging and other similar techniques that anyone could gather such cockles and mussels.
We do not agree with the reasoning of Moore Bick LJ (which was understandably based on the likely notional grant, following the wrong approach in Loose v Castleton at p 33, rather than the probable actual use), but we agree with his conclusion that the seaward boundary of the Area subject to the Right is the lowest astronomical tide mark from time to time.
The previously separated sandbanks: prescription
We turn to the respondents contention that sandbanks, previously separated from the foreshore, and thus not forming part of the Area subject to the Right, nonetheless become part of the Area as a matter of prescription when they become attached to the foreshore.
In this connection, the respondents first argument is that, although the Estate did not gather cockles or mussels from sandbanks such as Ferrier Sand and Blackguard Sand, when they were separated from the Foreshore, the nature of the Estates prescriptive right is such that it automatically extended to those sandbanks as soon as they became attached to the Foreshore around 50 and 20 years ago respectively.
Given that the Estate is claiming a prescriptive Right, this argument must be based on the proposition that, over a long period, sandbanks which have been close to, but detached from, the Foreshore have from time to time become joined to the Foreshore as channels have become silted up, and, as and when this happened, the Estate effectively extended the collecting of shellfish to that former sandbank.
The Court of Appeal accepted this argument, on the basis of assessing the likely terms of the hypothetical grant which would have been made (applying Bridge LJs faulty analysis in Loose v Castleton at p 33) see para 26 of Moore Bick LJs judgment.
However, as already explained the proper basis for establishing the nature or extent of a prescriptive right is not by assessing the likely terms of a fictional notional grant, but by assessing the extent of the actual use of the putative right established by the evidence.
The respondents maintain that the Court of Appeals conclusion was nonetheless correct and, at any rate at first sight, they can derive substantial support for their argument from the reasoning in paras 58 60 above, which justifies the conclusion that the seaward boundary of the Area fluctuates.
Although we acknowledge that that argument has some force in the present context, we have reached the conclusion that the evidence does not establish that the Estates prescriptive exclusive Right extends to sandbanks which were not previously joined to the Foreshore, as and when they become so attached.
For present purposes, there are two distinctions of significance between the notion that the low tide mark boundary of the Foreshore fluctuates and the notion that attaching sandbanks become part of the Foreshore.
First, the low tide mark will, presumably, at least normally, shift relatively gradually, whereas, although the silting up of the channel concerned will be gradual, the attachment of the whole of a previously detached sandbank to the Foreshore will happen at one moment.
It is true that a channel between a sandbank and the foreshore will silt up gradually, but the question whether a sandbank has become joined to the foreshore must surely be tested by reference to a particular point in time, and we would have thought that it would be when the tide has receded past the point where the sandbank has or could become joined to the foreshore ie low tide.
In that connection, it was implicitly accepted by the respondents that there would be a specific point at which a former sandbank would become joined to the foreshore: they did not suggest, for instance, that the prescriptive right would attach to a sandbank at low tide but not at high tide.
Secondly, and particularly importantly in this context, the public will have had the right to take fish (including shellfish) from such a sandbank, at least until the moment when it becomes attached to the Foreshore.
In those circumstances, at least in the absence of any specific evidence that the Estate in fact took shellfish and excluded the public from doing so, as of right from sandbanks as they became attached to the Foreshore, we do not think that it would be right to assume that the Estate did in fact behave in this way.
Unlike the position in relation to the fluctuating low tide mark, it is by no means plain or obvious that, once a sandbank became attached to the Foreshore, the Estate would have exercised an exclusive Right to take shellfish from that former sandbank.
After all, up to that moment, the public had had a right, and, at least in some cases, had exercised the right, to take shellfish from that sandbank.
In the absence of any evidence that such a thing had ever happened, it appears to us wrong in principle to assume that what the Estate contends might have happened would have happened, let alone that it did happen.
Indeed, given that, over at least the past 150 years or so, members of the public took shellfish from the Area which was subject to the Right (at least on the occasions giving rise to these and the earlier proceedings), it appears to us unlikely that local fishermen would have been prepared to accept the Estate maintaining (or, as they would have seen it, extending) its exclusive Right to fish over former sandbanks which were previously subject to a public right to fish just because they had become attached to the Foreshore.
It is also relevant to mention that in his case in Loose v Castleton Mr Loose did not contend that Ferrier Sand was included within the Area.
The respondents argue that the fact that it is common ground that the Estates several fishery extends to Stubborn Sand is inconsistent with this conclusion.
We do not agree.
For instance, it may be that, throughout the period during which the Estate has been taking shellfish from the Area, that activity extended to Stubborn Sand, even before it became attached to the Foreshore.
Over and above this, if, as seems to have been the case, Stubborn Sand has been joined to the Foreshore since before the time of living memory, it would, as we see it, appear to follow that the Estate would have acquired the right to take cockles and mussels from Stubborn Sand by prescription in any event.
Thus, in summary, we consider that the courts below were wrong on this point.
We accept that there is force in the respondents contention that, as a sandbank becomes attached to the Foreshore, it should be treated as part of the Area subject to the Right in accordance with the notion that the foreshore is a shifting piece of property in effect a unum quid.
However, it appears to us that the existence of a public right to fish over that sandbank, a highly relevant circumstance, serves to negative the respondents contention, at least in the absence of further supportive evidence and there is none.
The previously separated sandbanks: accretion
The alternative basis upon which the respondents rest their contention that previously unattached sandbanks become incorporated within the Area the subject of the Estates prescriptive exclusive Right is through the process of accretion.
Thus, given (as we have just indicated) that the nature of the prescriptive Right is not such as to extend automatically to those sandbanks, the argument is that they are, as a matter of law, nonetheless added to the Area as a result of the doctrine of accretion.
Whether one is concerned with the ownership of, or rights over, land, the principle that land can increase (or indeed decrease) as a result of accretion is well established.
In the Privy Council, Lord Wilberforce described accretion in Southern Centre of Theosophy Inc v State of South Australia [1982] AC 706, 716 as: a doctrine which gives recognition to the fact that where land is bounded by water, the forces of nature are likely to cause changes in the boundary between the land and the water.
Where these changes are gradual and imperceptible (a phrase considered further below), the law considers the title to the land as applicable to the land as it may be so changed from time to time.
This may be said to be based on grounds of convenience and fairness.
Except in cases where a substantial and recognisable change in boundary has suddenly taken place (to which the doctrine of accretion does not apply), it is manifestly convenient to continue to regard the boundary between land and water as being where it is from day to day or year to year.
To do so is also fair.
If part of an owners land is taken from him by erosion, or diluvion (ie advance of the water) it would be most inconvenient to regard the boundary as extending into the water: the landowner is treated as losing a portion of his land.
So, if an addition is made to the land from what was previously water, it is only fair that the landowners title should extend to it.
The doctrine of accretion, in other words, is one which arises from the nature of land ownership from, in fact, the long term ownership of property inherently subject to gradual processes of change.
The respondents argue that accretion applies to the former sandbanks in this case, because the channels formerly separating those sandbanks from the Foreshore only gradually and imperceptibly became silted up, and it was as a result of such gradual silting up that they became attached to the Foreshore.
Although that argument was accepted by Sir William Blackburne and the Court of Appeal, we consider that it is wrong.
In a nutshell, the argument relies on the gradual and imperceptible process pursuant to which the boundary of the further land allegedly changes, whereas the doctrine of accretion only applies where the actual change to the boundary is gradual and imperceptible.
As explained in para 71 above, it seems to us clear that there is a specific moment in time when the whole of a sandbank becomes attached to the foreshore, and therefore the addition of the sandbank is not gradual and imperceptible as that expression was used by Lord Wilberforce.
We believe that this follows from what he said in the passage quoted above, especially in his reference to changes in the boundary which are gradual and imperceptible, and his specific exclusion of cases where a substantial and recognisable change in boundary has suddenly taken place.
The issue was specifically addressed in the judgment of Griffith CJ in the High Court of Australia in a passage in his judgment in Williams v Booth (1910) 10 CLR 341, 350, with which we agree: I do not think that any case of accretion is made out.
The law as stated by Blackstone (2 Bl Com, p 262), is that if this gain be by little and little, by small and imperceptible degrees, it shall go to the owner of the land adjoining.
For de minimis non curat lex.
But, if the alluvion or dereliction be sudden or considerable, in this case it belongs to the King; for, as the King is Lord of the sea, and so owner of the soil while it is covered with water, it is but reasonable he should have the soil, when the water has left it dry.
The word imperceptible refers to the slowness of the additions to the soil.
Assuming, then, that a moment has arrived at which the mouth of the lagoon became permanently closed, the suggested accretion is not an addition of an imperceptible quantity of soil to the plaintiffs land, but of an area of many acres occurring at the moment of permanent closure, so that, according to the plaintiffs contention, on one day the land belonged to the King as Lord of the sea and on the next to the plaintiff.
This is a sudden and considerable alluvion or dereliction, and does not operate to confer a title by accretion.
In other words, there is a difference in kind between the gradual extension of one recognised bank and the joining up of two formerly distinct banks.
It is true that the two cases just referred to were concerned with ownership of land rather than prescriptive rights over land, but we can see no reason in principle or practice why the rules relating to accretion should not apply equally to rights over land as they do to ownership of land: one would expect them to march together.
Such a view derives support from Mercer v Denne [1905] 2 Ch 538, especially per Sterling LJ at p 582.
We were pressed by the respondents with the argument that, if we held that accretion did not apply to Ferrier Sand and other formerly separated sandbanks, the corollary must be that land forming part of the original Foreshore which becomes detached as a separate sandbank would nonetheless remain part of the Area subject to the Estates Right of several fishery.
We accept that is indeed the corollary, but we see nothing surprising about it.
As Ladd J pithily said in an Iowan case Holman v Hodges 84 NW (1901) 950, 952 (a decision cited with approval in the Iowan Supreme Court in State v Sorensen 436 NW 2d 358 (1989) and albeit on a different point by Brennan J in the US Supreme Court decision in Nebraska v Iowa 406 US 117 (1972)): There is no more reason for saying the state loses title to an island when connected by accretions to the shore than to say title to an islet formed at one side of the thread in an unnavigable stream is lost when connected with anothers land on the opposite side.
Conclusion
In these circumstances, we would dismiss the appellants appeal in so far as it relates to the seaward, western, boundary of the Area, but we would allow their appeal in relation to previously detached sandbanks.
It would be helpful if we were able to define the precise extent of the Area over which the Estates several fishery should be enjoyed.
However, we suspect that that would only be possible if the parties were able to agree it following receipt of this judgment.
In the absence of agreement, there may be issues such as the precise identification of the boundary between Stubborn Sand and Ferrier Sand.
Accordingly, if agreement cannot be reached, it appears to us, at least as at present advised, that we should remit the proceedings to Sir William Blackburne, or another judge of the Chancery Division, to enable the precise extent of the Area to be identified.
| UK-Abs | The Le Strange family (the Estate) is the owner of a substantial amount of land adjoining the east side of the foreshore (the Foreshore) on the east side of the Wash, on the west coast of Norfolk (the Wash), as well as holding an exclusive right to take cockles and mussels from the Foreshore (the Right).
In 1970, the Estate granted a lease of the Right to Mr John Loose, who is still holding over under that lease.
The appellants operate fishing boats out of Kings Lynn in Norfolk.
During the summer of 2007, 13 of the appellants boats fished for cockles in locations claimed by the respondents to be within the area of the exclusive fishery vested in the Estate (the Area).
Mr Loose and the Estate (the respondents) subsequently brought a claim in the Chancery Division of the High Court, alleging that the appellants had infringed the Right.
The parties accepted that the Estate is the owner by prescription of the Right, but were in dispute as to two issues relating to the extent of the Area.
The first issue was which of the low water measurements should determine the location of the western, seaward, boundary of the Area.
Four different types of low water measurement were contended for: (i) mean low tide; (ii) mean spring low tide; (iii) mean neap low tide; and (iv) the lowest astronomical tide, the most extreme neap low water, which occurs every 18.6 years.
At first instance, the High Court held that the mean spring low water represented the location of the western, seaward boundary of the Area; whereas the Court of Appeal concluded that it was the lowest astronomical tide mark.
The second issue between the parties was whether the Right extended to sandbanks which, having been previously separated from the Foreshore, became attached to it as a result of the gradual silting up of channels separating the banks and the Foreshore.
The appellants contended that the respondents must establish that the Right extended to the relevant sandbanks before they became part of the foreshore; whereas the respondents contended that either the Right applied to the Foreshore as it was constituted from time to time, or, by the doctrine of accretion, the sandbanks were treated in law as added to the Area when it became attached to the Foreshore.
The High Court and the Court of Appeal accepted both the respondents arguments on this issue.
The Supreme Court unanimously (i) dismisses the appeal regarding the seaward boundary, finding that the boundary is determined by the lowest astronomical tide, and (ii) allows the appeal in relation to the second issue, holding that the Estates right to fish does not extend to the sandbanks which attach to the Foreshore as and when they become so attached.
Lord Neuberger and Lord Carnwath give a joint judgment, with which the other Justices agree.
There are two important principles which apply to both issues.
The first principle is that unless it is taken away from them, the public have the right to gather fish and shellfish from the foreshore and since Magna Carta it has not been possible for the Crown, the owner of the foreshore, to grant a private fishery (
ousts the public right) [32 35].
The second principle is that, in order to establish that he has obtained a fishery (as with any right) by prescription, a person must establish that he has physically enjoyed the fishery as of right for the requisite period, so the extent of the right must be determined by the extent of the actual or probable use in the past, not by inquiring into the mind of the notional grantor [44 47].
The first issue: the seaward boundary Resolving the first issue involves answering two questions.
The first is whether the western boundary is fixed or whether it fluctuates with the relevant low mark, because, over time, the low water marks, marking the edge of the sea at low water had moved further seaward [57].
The Court concludes that it is a fluctuating boundary.
The evidence clearly establishes that during the substantial period during which the prescriptive Right to take shellfish from the Foreshore was exercised, the only way in which the shellfish were gathered was by individuals walking from the land when the tide was out [58].
In those circumstances, it was very likely that the putative Right would have been exercised over an area which was defined or limited by a shifting low tide mark [58].
It is not as if the existence of such a fluctuating right would have detrimentally affected any other interests of any significant value [60].
The second question is which of the suggested low water marks is the appropriate boundary [57].
The Court concludes that the most satisfactory low water mark is the lowest astronomical tide, as this means that all parts of the Foreshore which are at any time uncovered by the sea are included in the Area, whereas any other selection involves some of those parts being excluded from the Area [64].
The second issue: the previously separated sandbanks As to the respondents first argument, the evidence does not establish that the Estates prescriptive Right extends to sandbanks which were not previously joined to the Foreshore as and when they become so attached [70].
There are two distinctions between the change in the Foreshore and the fluctuation of the low tide mark boundary.
First, (while the silting up of channels which leads to the attachment is gradual), the actual attachment of sandbanks to the Foreshore itself will happen at one moment, whereas the shifting of the low tide mark will normally be gradual [71].
Second, and of particular significance, the public will have had the right to take fish, including shellfish, from such a sandbank.
Unlike the position in relation to the fluctuating low tide mark, and notwithstanding the respondents contention to the contrary, it is by no means plain or obvious that, once a sandbank became attached to the Foreshore, the Estate would have exercised an exclusive Right to take shellfish from that former sandbank [72 73].
In fact, it appears unlikely that local fisherman would have been prepared to accept the Estate maintaining its exclusive Right to fish over former sandbanks which became attached to the Foreshore [73].
The fact that it is common ground between the parties that one of the sandbanks, Stubborn Sand, falls within the Area, is not inconsistent with the Courts conclusion [74].
As to the Respondents second argument, based on accretion, the doctrine of accretion is concerned with gradual and imperceptible changes in a boundary; in the present case, however, there is a specific moment in time when the whole of a sandbank becomes attached to the Foreshore [78].
There is a difference in kind between the gradual extension of one recognised bank and the joining up of two formerly distinct banks.
There is no room for the doctrine of accretion in relation to the sandbanks which became connected to the foreshore in the present case [80].
Conclusion The Court would only be able to define the precise extent of the Area if the parties were able to agree it following receipt of the Courts judgment.
In the absence of agreement, the Court considers that the best course of action would be to remit the proceedings to the Chancery Division to enable the precise extent of the Area to be identified [83].
This summary is provided to assist in understanding the Courts decision.
It does not form part of the reasons for the decision.
The full judgment of the Court is the only authoritative document.
Judgments are public documents and are available at: http://supremecourt.uk/decided cases/index.html
|
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.
| UK-Abs | 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].
|
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.
| UK-Abs | 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].
|
The issue raised by this appeal is whether the respondents to this appeal, the Secretary of State for Foreign and Commonwealth Affairs and the Secretary of State for Defence, are required to hold a public inquiry (or other similar investigation).
The inquiry which is sought would relate to a controversial series of events which began on 11 and 12 December 1948, when a Scots Guards patrol shot and killed 24 unarmed civilians in the village of Batang Kali, in Selangor.
At that time, Selangor was a British Protected State in the Federation of Malaya, but it is now of course a state within the independent federal constitutional monarchy of Malaysia.
The decision not to hold a public inquiry was taken by the respondents pursuant to section 1(1) of the Inquiries Act 2005 (the 2005 Act).
That section provides that [a] minister may cause an inquiry to be held in relation to a case where it appears to him that certain conditions are satisfied including (a) particular events have caused, or are capable of causing, public concern and (b) there is public concern that particular events may have occurred.
The appellants, who are closely related to one or more of the victims (and some of whom were children in the village at the time), contend that the killings on 11/12 December 1948 (the Killings) amounted to unjustified murder, and that the United Kingdom authorities have subsequently wrongly refused to hold a public inquiry, and have sometimes deliberately kept back relevant evidence.
The appellants contend that a public inquiry is required on three different grounds.
First under article 2 of the European Convention on Human Rights (the Convention), which came into force for the United Kingdom on 3 September 1953, and was extended by the United Kingdom under article 56 of the Convention to the Federation of Malaya on 23 October 1953; secondly under the common law by virtue of its incorporation of principles of customary international law; and thirdly under the common law through the medium of judicial review.
These three grounds each raise a number of issues, sometimes overlapping.
However, there is also a jurisdiction issue, given that the events in question occurred in what was then a different jurisdiction and is now also a wholly independent state.
I will first set out the relevant facts, and after mentioning the jurisdiction issue, I will deal with the three grounds raised by the appellants, taking them in the order in which they have been just set out, which is the same order in which they were raised by Mr Fordham QC in the course of his excellent written and oral arguments on behalf of the appellants.
The facts
Background
In the first half of the 20th century, the country which is now Malaysia was part of the British Empire.
In 1941, during the course of the Second World War, it was invaded and occupied by the Japanese.
It was subsequently re taken by the British in 1945, the year in which the Second World War ended.
Shortly thereafter, there was an insurgency, which became known as the Malayan Emergency, and in which members of what had been the communist Malayan Peoples Anti Japanese Army took a leading part.
Several British planters and businessmen were killed and there were violent incidents within a number of states, including Selangor.
In June 1948, the Colonial Secretary approved the use of emergency powers in Malaya, and the High Commissioner declared a state of emergency on 12 July 1948 for the entire Federation, and three days later he issued Emergency Regulations.
United Kingdom ministers agreed to send a brigade of the British army to Malaya by the end of August 1948.
The cost was to be borne by the Treasury.
Many of the troops sent were national servicemen, with only limited training in relation to operations of this kind.
Part of the brigade comprised the Second Battalion of the Scots Guards.
They arrived in Singapore in October 1948 and after three weeks training, and they were sent to areas of the Federation where bandit activity had been reported.
G Company of the Second Battalion was based at Kuala Kubu Bahru where they underwent training for jungle warfare, apparently for the first time.
The events of 11 and 12 December 1948
Batang Kali is located approximately 45 miles northwest of Kuala Lumpur in the district of Ulu Selangor.
It was then a village consisting of families who inhabited kongsi residential huts, which are wooden longhouses raised from the ground with a veranda entrance.
The village was within a rubber plantation owned by a Scotsman, Thomas Menzies, the chairman of the Selangor Estates Owners Association, and most of the villagers worked on the estate.
G Company of the Second Battalion of the Scots Guards was based at Kuala Kubu Bahru.
The senior police officer for the district asked Captain Ramsey (the second in command of the Company) to send patrols to two separate areas, to ambush a party of insurgents expected to arrive the following day.
Captain Ramsey commanded one of the patrols, and Lance Sergeant Charles Douglas led the other because there was no other available commissioned officer.
Lance Sergeant Thomas Hughes was Douglass second in command, and the patrol included a Lance Corporal and 11 guardsmen (almost all of whom were undertaking National Service).
A Malay Special Constable (Jaffar bin Taib) acted as a guide and they were accompanied by two police officers, Detective Sergeant Gopal and Detective Constable Woh.
Early in the evening of 11 December 1948, the patrol took control of the village.
Fifty adult villagers and some children, including two of the appellants, were detained.
The villagers, who were a range of ages, were not wearing uniforms and had no weapons.
The men were separated from the women and children by the patrol.
They were all detained in custody overnight in the kongsi huts.
Interrogation of the villagers then took place, and there were simulated executions to frighten them, which caused trauma to some.
A young man was shot dead by the patrol in the village that evening, and he has now been identified as Loh Kit Lin, the uncle of the second appellant.
During the interrogations, the police officers secured information from one of the men, Cheung Hung, the first appellants father, about armed insurgents who occasionally visited the village to obtain food supplies.
This information was passed to the patrol.
On the morning of 12 December, Lim Tian Sui, who was the kepala (village headman), and the father of the third appellant, arrived in the village by lorry, which was searched and found to contain some rice.
Lim Tian Sui was detained.
The women and children and one traumatised man were then ordered onto the lorry.
It was driven a little way from the kongsi huts.
Those aboard were guarded by members of the patrol before being driven away from the plantation.
The kongsi hut with 23 men was then unlocked by other members of the patrol.
Within minutes all 23 were shot dead by the patrol.
The kongsi huts were then burned down.
The patrol then returned to its base.
The immediate aftermath
The first known document to describe the Killings was a confidential telegram sent by the High Commissioner, to the Colonial Office on 13 December 1948.
It stated that 26 bandits have been shot and killed by police and military in the Kuala Kubu area of Selangor and that one bandit had been wounded and captured.
Also on 13 December 1948, a journalist working for The Straits Times, Harry Miller, drove to the Scots Guards base at Kuala Kubu Bahru.
He interviewed Sergeant Douglas who said that all those shot on 11 and 12 December 1948 had been trying to escape when about to be taken to the companys base for interrogation.
He also said that a large quantity of ammunition had been found under a mattress.
This account was published in The Straits Times on 13 December 1948 and, four days later, the General Officer Commanding Malaya, Major General Sir Charles Boucher, stated at a press conference that this was an extremely accurate description of what had occurred.
On 17 December 1948, a Far Eastern Land Forces British Army Report on relevant incidents was compiled setting out the actions that had been taken to combat the insurgency.
In relation to the incident in question it noted that a patrol had captured 26 male bandits who had been detained for a night in kongsi huts and that, following a successful ambush of a lorry, the bandits attempted mass escape. 25 killed.
One recaptured.
The official War Office report of 22 December 1948 repeated this summary, and referred to the event as a very successful action.
This official account was not universally accepted.
The families of those killed appealed for help to various organisations and the Chinese Consul General requested an inquiry, suggesting that the Killings were unjustified given that all the deceased were unarmed.
Claims appeared in the Chinese press that there had been a massacre.
On 22 December 1948, Mr Menzies stated publicly that all those killed were his employees with records of good conduct, and that there had been no strikes or other problems.
On 24 December 1948, The Straits Times called for an inquiry.
Sir Stafford Foster Sutton, the Attorney General of the Federation and a Federal counsel, Mr Shields, then conducted an investigation, which seems to have taken a matter of days.
Although the file (together with many other files relating to law and order issues during the Malayan Emergency) was destroyed in 1966, Sir Stafford spoke about this inquiry in 1970 to the Metropolitan Police and to a BBC news programme.
He said that the inquiry originated as a result of public disquiet and a complaint from the owner of the rubber estate where it occurred.
Statements (not on oath) had been taken from each member of the patrol which were given to him by the police.
No inquiries were made of inhabitants of the village for a very good reason, because they were most unlikely to talk and, if they did talk, to tell the truth.
He had visited the scene, met the sergeants and the two detectives, examined the burnt down huts and found shell cases that had exploded during the fire and were illegally there.
He had been told by the sergeants that they believed that the men they had arrested were bandits, and that, when those men had been taken for interrogation, they had made a dash for it and the Guards then opened fire.
After cross examining the sergeants and the police officers who had accompanied the patrol, he said that he had been absolutely satisfied a bona fide mistake had been made.
Accordingly, he had been satisfied of the bona fides of the patrol and there had not been anything that would have justified criminal proceedings and had reported his findings to the High Commissioner.
It seems that there were separate investigations by the police and the army, although scant and contradictory information survives as regards the detail and the extent of these undertakings.
For instance, Sir Charles Boucher told the press on 5 January 1949 that he had instigated an investigation immediately after he heard about the incident, but no details have been uncovered.
The only contemporaneous statements that have been found are from Detective Sergeant Gopal, Detective Constable Chia Kam Woh, and two statements from Cheung Hung.
Officers Gopal and Woh indicated that Cheung Hung had told them about visits by bandits in order to obtain food.
Cheung Hung told the police that this was common knowledge but the villagers were afraid to inform the authorities.
The officers stated that they separated Cheung Hung, and that they were in the area of the store when the 23 men were shot.
Cheung Hung, who has given somewhat differing accounts over the years, indicated that he had been in a yam patch at the time of the shooting.
He had not seen any attempted escape but instead the men were shot when they were being walked away from the huts.
Part of a telegram headed Incident at Batang Kali from the High Commissioner, Sir Henry Gurney, to the Colonial Office dated 1 January 1949 has survived.
It stated that the soldiers who had been posted with object of protecting the clearing from external attack did everything that it was possible for them to do to stop the escaping Chinese before resorting to force.
It also pointed out that: [W]hen persons are picked up by the security forces under such circumstances until they are screened at headquarters it is impossible for the security forces to know whether they may be members of killer squads or to what extent they are involved.
Furthermore although some of the killed were rubber tappers it is our experience that such persons are frequently rubber tappers part time and bandits the rest of the time and that their arms are normally hidden in the neighbourhood and not found with them.
Moreover, we feel that it is most damaging to the morale of the security forces to feel that every action of theirs, after the event, is going to be examined with the most meticulous care.
A further document from the High Commission headed Supplementary Statement was released to the local press on 3 January 1949, and published the following day in The Straits Times, and The Times in London.
After setting out some background information, and explaining how some arms and ammunition had been discovered in the village, it went on to say this: [Some] Chinese men found in the clearing were placed in a room in one of the kongsi houses for the night, under guard.
The following morning they were brought out of the room by two sentries who were on the verandah of the kongsi house in which the room was situated.
The only other soldier in sight was the sergeant in command who was standing on the ground a little beyond the kongsi house, ready to receive the Chinese as they came off the verandah.
When all the Chinese had reached the ground from the verandah, one of them shouted and they thereupon split up into three groups and made a dash for the three entrances to the jungle.
There is no doubt that they were under the impression that the only troops that they had to compete with were the two soldiers on the verandah of the kongsi house and the sergeant.
The attempted escape was obviously pre arranged because there was no hesitation in the formation of the three groups and the shout was no doubt the pre arranged signal for putting the plan into effect.
The sergeant and the two soldiers on the verandah immediately shouted calling upon them to halt.
They could not use their arms because to do so would have endangered the lives of their comrades who were posted out of sight but in the line of fire.
The men in the three groups covering the entrances heard shouting but did not know what was happening until they saw the Chinese running through the bush and jungle past where they were posted.
They thereupon shouted the Malay word for halt to which no attention was paid by the escaping Chinese.
The men of the three groups gave chase, continuing calling upon them to halt and, as they failed to so, the soldiers opened fire.
At a press conference on 5 January 1949, Sir Alec Newboult, Chief Secretary of the Federation of Malaya, said, I have no doubt at all that these men made an attempt to escape from legal custody, and having made that attempt they had to stand the consequences.
He went on, Let us be absolutely fair with the security forces.
The point at issue is that, in starting the attempt to escape, the men were warned and continued to make their escape and the patrol opened fire.
Sir Charles Boucher added: I think the public should know that troops and police are trained never to open fire unless it is necessary, but when they have to fire, the fire is always intended to kill.
It cannot be anything else.
On 26 January 1949, the Colonial Secretary Mr Creech Jones gave a written answer to a Parliamentary Question about the incident.
This stated: The Chinese in question were detained for interrogation under powers conferred by the Emergency Regulations.
An inquiry into this incident was made by the civil authorities and, after careful consideration of the evidence and a personal visit to the place concerned, the Attorney General was satisfied that, had the Security Forces not opened fire, the suspect Chinese would have made good an attempt at escape which had been obviously pre arranged.
A full statement was issued in Kuala Lumpur on 3 January.
Demands were made for a public inquiry conducted by a High Court judge, but they were rejected.
Events in 1969 and 1970
In late 1969, some 12 years after Malaysia achieved independence, one of the Scots guardsmen, William Cootes, provided a sworn statement to the newspaper, The People, which stated that the victims at Batang Kali had been massacred in cold blood.
Sworn affidavits were thereafter taken from three other guardsmen who were part of the patrol that went to Batang Kali: Alan Tuppen, Robert Brownrigg and Victor Remedios.
They alleged that the deceased had been massacred on the orders of the two sergeants on the patrol, and it was suggested by some of the deponents that they had been ordered to give the false explanation that the victims had been killed when trying to escape.
A further guardsman, George Kydd (who did not provide a written statement) told a reporter on The People that the Killings were sheer bloody murder []. [T]hese people were shot down in cold blood.
They were not running away.
There was no reason to shoot them.
In the next few days, two of the soldiers, Alan Tuppen and Victor Remedios, gave interviews on British national television and radio confirming an account of unlawful killing.
Sir Stafford Foster Sutton was also interviewed on the BBC News.
All of the transcripts are available.
Sir Stafford repeatedly described the killings as a bona fide mistake and made it clear that anyone who knew anything about it at the time entirely agreed that it was a bona fide mistake.
Alan Tuppen confirmed that in his own mind the killings were tantamount to murder.
For their part, Sergeant Douglas (by then a Regimental Sergeant Major) and former Sergeant Hughes reiterated the account given in 1948 by Sergeant Douglas, that all those shot on 11 and 12 December 1948 had been trying to escape when about to be taken to the companys base for interrogation.
An official of the Ministry of Defence was present when Sergeant Douglas was interviewed.
He commented that the interview was absolutely fair and correct in all respects.
A reporter from The People then interviewed Cheung Hung who was still living in Malaysia.
He said that the troops had separated the women and children from the men, divided the men who did not attempt to escape into groups and shot them.
The Straits Times interviewed one of the guides, Inche Jaffar bin Taib, who said that, shortly before the Killings took place, a sergeant told him not to look at the male detainees.
After he had turned his back he heard a burst of gunfire, and when he turned round he saw dead bodies everywhere.
The sergeant told him that he would be jailed if he breathed a word about what had happened.
The UK government issued a press statement indicating that it was taking the matter very seriously.
Internal memoranda noted that a three year limitation period prevented prosecutions under the Army Act 1861 but given the view was taken that prosecutions in the civilian courts remained a possibility, a decision on whether to institute criminal proceedings necessarily came before the government could resolve whether to hold an inquiry.
The Director of Public Prosecutions, Sir Norman Skelhorn QC, received advice on 27 February 1970 from a prosecution lawyer, with which he and the Attorney General agreed, that the Metropolitan Police should investigate what had occurred.
It was proposed that this inquiry into the facts was to include interviewing all the guardsmen, the police officers who accompanied the patrol, the interpreter and the sole survivor.
Sergeants Douglas and Hughes were to be interviewed last.
On 18 March 1970 the DPP informed the Ministry of Defence that he would extend the inquiry beyond the United Kingdom if he considered this to be a necessary step.
On 13 April 1970 the Malaysian Government offered to assist the investigation.
Responsibility for the investigation was given to the Metropolitan Police, and the lead officer, Detective Chief Superintendent Williams, contemplated taking two months to interview the guardsmen in the United Kingdom before providing an interim report to the DPP.
If authority was given to pursue investigations in the Far East, he envisaged needing six weeks to interview 36 witnesses in Malaysia.
He also had in mind the possibility of exhuming the bodies.
The sergeants were to be interviewed as the last stage before he submitted his report to the DPP.
He expected that the entire process would take approximately six months.
Four guardsmen, William Cootes, Alan Tuppen, Robert Brownrigg and George Kydd, were interviewed under caution.
They each admitted that Sergeant Hughes had ordered them to shoot the men, who had not attempted to escape, as suspected bandits or sympathisers.
None of the guardsmen had taken the option that was offered of not participating.
A further guardsman (whose record of interview is not available), Keith Wood, also admitted when interviewed that the men were murdered.
Victor Remedios did not answer the officers questions, but did not withdraw his earlier admission of murder.
Additionally, Robert Brownrigg and George Kydd said that they had been instructed by the army to provide the false explanation that the men had been trying to run away.
Two lance corporals, George Porter and Roy Gorton, said that the men had been shot whilst attempting to escape.
The sergeants were not interviewed because the inquiry was terminated.
DCS Williams spoke to the two reporters and he was critical of their methods, including the fact that William Cootes had been paid 1,500 for his initial statement to The People, and the fact that it appeared that the journalists may have given incorrect information concerning the possibility of a prosecution.
Meanwhile, in the spring of 1970, the High Commissioner in Kuala Lumpur and the Foreign and Commonwealth Office were expressing concern that the Malaysian Government may come under pressure to open their own inquiry or press HMG, that the investigation might revive local feeling, and cause political difficulties.
A letter of 19 May 1970 from the High Commission to the FCO expressed the view that the presence and activities of an investigating team would be given close and embarrassing attention.
It was considered extremely doubtful if a villagers recollections of an incident which happened 22 years ago could ever be accurate, especially as the terrain has since changed beyond recognition.
The letter went on to state that We quite realise the political importance of allowing justice to be seen to be done over Batang Kali, but it is worth bearing the limitations in mind.
On 2 June 1970 Mr P J Sullivan from South West Pacific Department at the FCO wrote to the office of the DPP.
Having referred to the likely publicity that the arrival of a British police team in Malaysia would cause, especially if the team wished to take evidence in the area of Batang Kali itself, he expressed doubts about the reliability of any evidence which was given, in the light of the passage of time and also because of the possible incentive of compensation.
On 12 June 1970 the DPP was provided by one of his officials with a minute which concluded: I am satisfied that on the evidence we have there is no prospect of criminal proceedings.
But there are at least five persons who say this was murder.
It seems to me inquiries must be pursued in Malaysia otherwise the inquiry will only be half done.
Furthermore there are a number of witnesses out there who claim to have seen what took place, including Cheung Hung.
The various statements by this man are inconsistent and we want to pin him down.
It appears also that a number of persons who say they saw what happened (women on the lorry) could not have been in a position to do so.
I feel that this should be cleared up.
I am of the opinion that, if we do not go through to the bitter end, we will lay ourselves open to attack by the newspapers and by the anti military brigade.
The DPPs endorsement of that minute was in these terms: I have nothing to add to my minute of 5/6/70.
Having embarked on this inquiry, must we now go as far as we can? Perhaps however the Malaysian Government will refuse entry to the investigating team, which will save any further expenditure of time and money on this unrealistic inquiry.
Following the General Election on 18 June 1970, the new Attorney General, Sir Peter Rawlinson QC, indicated at a meeting with the DPP on 26 June 1970 that it was unlikely that sufficient evidence would be obtained to support a prosecution and therefore the investigation should go no further.
This decision was communicated to the Ministry of Defence by the DPP on 29 June 1970, with a fairly full explanation, which concluded that, in the light of the passage of time and the inconsistent statements which had been made: I am satisfied that the institution of criminal proceedings would not be justified on the evidence so far obtained.
Further in my view the prospect of obtaining any sufficient additional evidence by further police investigation in Malaysia are so remote that this would not be warranted.
Accordingly, I do not propose to ask the police to pursue the inquiry and the Attorney General agrees with my views.
On 30 July 1970, DCS Williams produced a report on his investigation to date.
It stated: Cootes, Tuppen (with solicitor), Brownrigg and Kydd admitted in statements, after caution, that murder had been committed.
Woods, in the presence of a solicitor, verbally admitted that murder had been committed, after he had been cautioned.
Remedios, in the presence of a solicitor, refused to comment on, or add anything to his original sworn statement.
Porter and Gorton made statements denying the allegations.
At the outset this matter was politically flavoured and it is patently clear that the decision to terminate inquiries in the middle of the investigation was due to a political change of view when the new Conservative Government came into office after the General Election of 18 June 1970.
Meanwhile, the Ministry of Defence decided not to hold an inquiry into the Killings.
Events from 1992 to 1997
The deaths at Batang Kali next gained significant public prominence when the BBC broadcast a documentary on 9 September 1992 about the Killings, entitled In Cold Blood.
This was based on a range of materials, which included interviews with Cheung Hung and a number of other Malaysians who were related to the men who had been killed or who had been present in Batang Kali when these events occurred.
This was the first time many of them had been interviewed.
One of the officers involved in the 1970 Metropolitan Police investigation, Detective Sergeant Dowling, and three guardsmen who had not been on the patrol were also interviewed and some of the statements made during the 1970 police interviews with the guardsmen were read out.
It was said they stood by their accounts but refused to appear.
The Ministry of Defence declined an invitation to participate.
In correspondence with the BBC, it simply confirmed the account given in 1948 and in 1949.
On 15 September 1992, immediately following the broadcast, Ministers were briefed by Richard Suckling, a senior government legal adviser.
The briefing described the BBC documentary.
It noted that a fact which had not been referred to in the programme was the substantial conflict of evidence between the soldiers who had been present and had given statements.
It also referred to the possible differences between what may have been thought to be acceptable in 1948 and in 1992.
Following the broadcast, the Crown Prosecution Service reviewed whether any further steps should be taken.
In a draft note of the review dated 26 March 1993, Jim England of the Services War Crimes Unit observed: What the documentary does show is that in 1970 there probably were a number of people with relevant information to give if the police had gone to Malaysia.
Even though it now seems almost certain that Chong Fongs account is fictional, I do not consider that it would be fair to say that all the surviving villagers were inherently unreliable.
It seems to me that they were never given an official opportunity to tell their side of the story due to fear of what they would say.
However, Mr England said that he was certain in [his] own mind that it would be pointless now to re open this investigation, partly because if anyone was charged they would, in view not only of the long and what must be regarded as a consequentially prejudicial delay but also because the termination of inquiries in 1970, have an unassailable abuse of process argument so as to avoid conviction.
It would appear that no consideration was given to holding an inquiry rather than pursuing a criminal prosecution.
Meanwhile, on 8 July 1993, Foo Moi, the wife of one of the men who had been shot, and Cheung Hung, the first appellants father, presented a Petition to the Queen through the British Embassy in Kuala Lumpur requesting the British government to reopen the investigations, prosecute those responsible for the deaths and to pay compensation.
No such action was taken and a telegram from the High Commission to the FCO of 7 February 1994 observed: we see no case for pushing ahead with an answer to the petition while air services and Bosnia remain such sensitive issues.
Even if we were [put under pressure by the MCA or the Malaysian Government] we would be able to resist it by taking the line that a suitably thorough examination of the relevant papers in the UK was necessarily taking time.
A letter from the High Commission to the FCO of 6 April 1994 commented: It remains in our interests to play this affair long I therefore recommend that the MCAs petition is submitted to the Queen as soon as possible.
This would buy us a bit more time in which to consider the terms of our reply to the petition (I will telegraph separately with further advice on this).
By April 1994 the Petition had been submitted to the Palace with a draft response which was described as essentially non committal, while not closing the door to further action if sufficient new evidence is forthcoming.
In December 1994, the High Commissioner responded to the Malaysian Chinese Association who inquired as to the progress of the response to the Petition that he was looking into the matter.
However, a response to the 1993 Petition was never forthcoming.
Meanwhile, on 14 July 1993, the Royal Malaysian Police began investigating the Killings locally in response to a report of the massacre as a crime made that day by three surviving family members: Foo Moi, and the first appellants father and mother, Cheung Hung, and Tham Yong.
The Malaysian Police took statements from them and a number of others who were either related to the men who had been killed or who had been in the village at the time, as well as three retired police officers.
Contrary to his statement of 14 December 1948, Detective Constable Chia Kam Woh denied being present at Batang Kali on the day.
Having been made aware of the petition and Royal Malaysian Police investigation, on 2 February 1994, Mr England sent his report on the 1970 Metropolitan Police Force evidence and the In Cold Blood documentary to the FCO.
His covering letter stated: As you will appreciate, the role of the CPS is limited to assessing the quality of evidence and making decisions on the question of criminal proceedings.
The Petition from the villagers raises other matters of compensation which are not within our remit.
He also stated that no further action was envisaged: although this does not preclude you from asking the CPS to examine any further evidence which may emerge from present investigations in Malaysia so that your Ministers may be advised whether any grounds exist for requesting further investigations.
The FCO replied on 15 March 1994 stating: I am very sorry that other events have prevented me from acknowledging before now the very helpful paper enclosed with your letter of 2 February.
I copied it at the time to our High Commission in Kuala Lumpur.
Their recommendation was that, since we were under no particular pressure from the Malaysians to produce an answer, we should not take further action on the Petition while certain sensitive issues in our relations with Malaysia remained unresolved.
Events since then tend to reinforce that case, and I therefore propose to leave the papers on the file for the moment.
I will reassess in due course.
I will let you know before moving again.
An interim Royal Malaysian Police report of 31 May 1995 concluded that further inquiries were necessary, including obtaining the views of the chief pathologist as to examining the bodies and taking statements from the Scots Guards.
A request was made through Interpol for British help which was passed to the Metropolitan Police War Crimes Unit.
This included a request for the names of the Scots Guards on the patrol.
It took until 31 July 1996 to send the names.
The addresses were then sought by the Royal Malaysia Police, but nothing further seems to have been supplied.
Officers involved in the investigation planned to visit the United Kingdom to pursue their inquiries here.
However, this never took place.
The Royal Malaysia Police file was closed on 30 December 1997, it would appear due to a lack of evidence to support criminal charges.
More recent events
In 2008, a campaign group called the Action Committee Condemning the Batang Kali Massacre was formed.
On 25 March that year it sent a second petition to the Queen seeking an apology and compensation.
In October, the appellants solicitors wrote to the Foreign Secretary requesting a response to the petition.
On 12 December 2008, a supplementary petition was presented seeking additional relief including a public inquiry.
On 21 January 2009, the High Commissioner gave a response that was subsequently withdrawn following pre action correspondence from the appellants solicitors: In view of the findings of the two previous investigations that there was insufficient evidence to pursue prosecutions in this case, and in the absence of new evidence, regrettably we see no reason to re open or start a fresh investigation.
A barrister, Dr Brendan McGurk, was then instructed to review the available material on the Killings for the respondents.
On 21 August 2009, the appellants solicitors were sent a provisional decision based on this review refusing to establish an inquiry or to investigate.
They were invited to comment.
Before doing so, they secured access to view the police files that Dr McGurk had seen and to some of the CPS material.
They provided copies of a book that had just been published about the killings, Slaughter and Deception at Batang Kali by Ian Ward, the former Daily Telegraph War Correspondent, and Norma Miraflor.
With their representations, they forwarded material from the 1993 1997 Malaysian Police file that had been supplied to them by a journalist that had not been seen by Dr McGurk or the British authorities.
They also made the respondents aware of the views of archaeologist Professor Sue Black from the Centre of Anatomy and Human Identification at the University of Dundee, as to the prospects of disinterment revealing new evidence and the extent of the process required.
On 29 November 2010 the Treasury Solicitor wrote to the appellants solicitor communicating the respondents decision to refuse to hold an inquiry into the Killings, and setting out their reasons.
The instant proceedings
The instant proceedings were issued on 25 February 2011 by way of an application for judicial review.
The Scots guardsmen involved in the patrol who were known to be alive and could be traced were served as interested parties but did not participate.
Permission was granted on 31 August 2011 by Silber J.
On 4 November 2011 the Treasury Solicitor sent a letter to the appellants solicitor stating that the respondents had reviewed and confirmed their decision not to hold an inquiry following a submission from officials addressing an argument concerning the adequacy of the previous investigations.
Upon the appellants application for disclosure of documents by the Metropolitan Police, on 1 May 2012, Sir John Thomas P made an order stating: I cannot be satisfied that these documents are documents that must be disclosed, but the pragmatic solution to the issue is for the documents to be made available to the claimants solicitors, who can then apply to put those which are relevant (and only those) in due course before the court.
The Divisional Court (Sir John Thomas P and Treacy J) dismissed the claim for reasons given in a judgment given on 4 September 2012 [2012] EWHC 2445 (Admin).
The appellants appeal to the Court of Appeal was dismissed for reasons given in a judgment of the court (Maurice Kay, Rimer and Fulford LJJ) given on 19 March 2014 [2014] EWCA Civ 312, [2015] QB 57.
The appellants now appeal to this court.
The Jurisdiction issue
The first issue which it is appropriate to address is whether the present claim is properly brought against the United Kingdom at all.
That submission appears to apply to all three of the bases upon which the appellants rest their case, but it was principally developed in argument by reference to the first basis, article 2 of the Convention (article 2).
In so far as the claim is brought under article 2, this issue is encapsulated in the question whether the appellants complaint relates to alleged failures by the United Kingdom to secure to everyone within [its] jurisdiction, within the meaning of article 1 of the Convention, any of the rights and freedoms defined in article 2, so as to make the United Kingdom potentially responsible for breach of the Convention Rights as incorporated into domestic law by the Human Rights Act 1998 (the 1998 Act).
On this issue, I have read in draft the judgment of Lord Mance.
I agree with his conclusion that, in so far as the respondents case is based on lack of jurisdiction, it should be rejected for the reasons which he gives.
The appellants case based on article 2 of the Convention
Introductory
Article 2.1 provides that everyones right to life shall be protected by law and that no one shall be deprived of his life intentionally save pursuant to a court order.
According to well established Strasbourg jurisprudence, this article has given rise to what is now recognised as a separate and autonomous duty to carry out an effective investigation into any death which occurs in suspicious circumstances see the Grand Chamber judgment in ilih v Slovenia (2009) 49 EHRR 996, para 159.
The respondents in this case unsurprisingly do not argue that, at least if one ignores the fact that they occurred in 1948, the Killings would not fall within this principle.
However, the respondents contend that the appellants claim, in so far as it is based on article 2, is barred for what may be characterised as temporal or procedural reasons.
The respondents first argument has two strands and is based on the fact that the Killings occurred (i) before the Convention came into existence, and indeed (ii) before the 1998 Act came into force.
Although the Strasbourg court has somewhat finessed the strict rule that the Convention cannot apply retrospectively, the respondents contend that the finessing cannot assist the appellants.
The respondents second argument is that, even if the first argument is wrong, the appellants are too late, as their article 2 right (if any) to seek an inquiry is time barred.
I shall take those arguments in turn.
The contention that there is no right under the Convention
The Killings took place in December 1948 and the Convention was only finally agreed in November 1950.
In those circumstances, at any rate at first sight, it might be thought that no right, however fundamental or important, could arise under the Convention in relation to facts which occurred before the Convention came into force.
Indeed, in accordance with article 28 of the Vienna Convention on the Law of Treaties 1969, that is the normal rule in relation to the application of the Convention see Blei v Croatia (2006) 43 EHRR 1038, paras 45 72 and ilih at para 140.
However, the law on this aspect has been interpreted by the Strasbourg court, specifically in relation to the duty to investigate suspicious deaths, in what may be characterised as a more nuanced way.
The law was developed in a number of cases of which ilih was of particular importance.
In that case, as already mentioned, the Grand Chamber held in para 159 of its judgment that the duty to investigate suspicious deaths had evolved into a separate and autonomous duty on a state, which was a detachable obligation arising out of article 2 capable of binding the state even when the death took place before the [date when the Convention was binding on the state].
However, the guidance which the court then gave as to how it was to be decided whether that separate and autonomous duty had arisen was subject to substantial criticism (not least in the concurring opinion of Judge Lorenzen and the dissenting opinion of Judges Bratza and Turmen in ilih itself).
No doubt it was at least in part for that reason that the law on the point was relatively recently clarified by the Grand Chamber in Janowiec v Russia (2013) 58 EHRR 792, from which almost all the applicable principles can be taken for present purposes.
In para 128 of Janowiec, the Grand Chamber confirmed that the provisions of the Convention do not bind a Contracting Party in relation to any act or fact which took place or any situation which ceased to exist before the date of the entry into force of the Convention with respect to that Party (the critical date).
The issue in this case which requires consideration of judgments other than Janowiec is whether the critical date is the date on which the state in question signed up to the Convention or the date on which that state gave its citizens the right to petition the Strasbourg court in relation to any alleged infringement of their Convention rights.
Apart from that, however, as the Grand Chamber explained in Janowiec, Strasbourg jurisprudence has established that the general principle that the Convention is not retrospective does not necessarily mean that a state has no duty to investigate a suspicious death simply because it occurred before the critical date.
As the Grand Chamber put it in para 141 of Janowiec, in such a case, there are three relevant applicable requirements: First, where the death occurred before the critical date, the courts temporal jurisdiction will extend only to the procedural acts or omissions in the period subsequent to that date.
Secondly, the procedural obligation will come into effect only if there was a genuine connection between the death as the triggering event and the entry into force of the Convention.
Thirdly, a connection which is not genuine may nonetheless be sufficient to establish the courts jurisdiction if it is needed to ensure that the guarantees and the underlying values of the Convention are protected in a real and effective way.
In other words, in the case of a death before the critical date, two criteria must be satisfied before the article 2 investigation duty can arise, namely (i) relevant acts or omissions after the critical date, and (ii) a genuine connection between the death and the critical date.
However the second criterion may be finessed where it is necessary to underpin the underlying values of the Convention.
Turning to the first criterion, on the face of it at any rate, the appellants have, at the very least, a powerful case for saying that there have in this case been relevant acts and omissions since the critical date.
The clearest basis for this contention arises from the information that came to light in the period 1969 1970, which, on any view, was after the critical date.
Until the sworn statement of William Cootes was published in The People in late 1969, there was no specific evidence, at any rate in the public domain, from anyone in the patrol that the Killings had been unlawful.
In the ensuing months further formal and informal statements to the same effect were made by other members of the patrol.
At para 144 of its judgment in Janowiec, the Grand Chamber explained that a relevant omission would occur if no investigation had occurred and: a plausible, credible allegation, piece of evidence or item of information comes to light which is relevant to the identification and eventual prosecution or punishment of those responsible.
Should new material emerge in the post entry into force period and should it be sufficiently weighty and compelling to warrant a new round of proceedings, the court will have to satisfy itself that the respondent state has discharged its procedural obligation under article 2 in a manner compatible with the principles enunciated in its case law.
In the light of this approach, it appears to me that the appellants have established that the first criterion identified in para 141 of Janowiec is satisfied.
The crucial components of my reasoning are that (i) prior to 1970, there had been no prior full or public investigation of the Killings, (ii) until 1969, there had been no publicly available evidence from any member of the patrol to suggest that the Killings had been unlawful, (iii) the evidence which first came to light in late 1969 and early 1970 plainly suggested that the Killings were unlawful, and (iv) that evidence appears to have been weighty and compelling, although by no means conclusive in the light of the other evidence.
I turn to the second criterion identified in para 141 of Janowiec, the genuine connection requirement.
In that connection, the Grand Chamber said this at para 146: [T]he lapse of time between the triggering event and the critical date must remain reasonably short if it is to comply with the genuine connection standard.
Although there are no apparent legal criteria by which the absolute limit on the duration of that period may be defined, it should not exceed ten years.
Even if, in exceptional circumstances, it may be justified to extend the time limit further into the past, it should be done on condition that the requirements of the Convention values test have been met.
It is in relation to this issue that it is necessary to look outside Janowiec in order to resolve a centrally important dispute between the parties, namely whether, for this purpose, the critical date, from which the ten years referred to in para 146 of Janowiec runs back, is (i) the date on which the Convention came into force in the relevant territory, or (ii) the date on which the relevant state first recognised the right of every individual citizen to petition the Strasbourg court in relation to alleged infringements of their Convention rights (the right to petition).
The appellants argue for date (i), whereas the respondents contend that date (ii) is correct (although they did not take this point in the courts below, where they accepted what is now the appellants case on this issue).
The date when the Convention came into force in the United Kingdom was 3 September 1953, although, if the appellants are right, the more relevant date would very probably be that on which the UK extended the application of the Convention to the Federation of Malaya, 23 October 1953.
It does not matter which is correct for present purposes, as the Killings took place less than ten years before either date.
On the other hand, if the critical date is that on which the United Kingdom first recognised the right to petition, it would be 14 January 1966, as that was the date on which the UK accorded the right to its citizens to petition the Strasbourg court in relation to any act or decision occurring or any facts or events arising subsequently to the 13 January 1966.
If that is the correct date, then the appellants must fail as the Killings occurred considerably more than ten years before that date.
At first sight, this point may appear to have been disposed of by the Grand Chamber in Janowiec, given the definition of critical date at para 128 as the date of the entry into force of the Convention with respect to that Party.
However, that statement was made in a case where the Party, ie the state concerned, Russia, had accorded the right to petition on the same date as it acceded to the Convention.
It is therefore plainly not dispositive of the issue.
In my view, the position is made clear in two Grand Chamber judgments in 2009.
In ilih, para 140, the Grand Chamber said this: The court reiterates that the provisions of the Convention do not bind a contracting party in relation to any act or fact which took place or any situation which ceased to exist before the date of the entry into force of the Convention with respect to that party or, as the case may be, prior to the entry into force of Protocol No 11, before the date on which the respondent party recognised the right of individual petition, when this recognition was still optional (the critical date).
This is an established principle in the courts case law based on the general rule of international law embodied in article 28 of the Vienna Convention (emphasis added).
It is very hard to accept the appellants submission that the reference in that passage to the date of the right to petition was an oversight or mistake.
This passage is also said by the appellants to be inconsistent with what the Grand Chamber had said in para 70 of Blei.
I do not agree.
First, that paragraph was well in the courts mind in ilih, as it was specifically cited to support what was said in para 140.
Secondly, para 70 of Blei is expressed in the negative: it merely says that a contracting party cannot be liable in respect of any act or fact which took place or any situation which ceased to exist before the date of the entry into force of the Convention with respect to that party.
That is not the same thing as saying that a contracting party is always liable in respect of any act or fact which took place, or any situation which only ceased to exist, after that date.
Further, if the Grand Chamber in the subsequent decision in Janowiec had considered that what was said in para 140 of ilih was wrong, it would surely have said so.
In addition, there is Varnava v Turkey (Application Nos 16064 16066/90 and 16068 16073/90), (unreported) given 18 September 2009, which was concerned with Turkeys alleged failure to investigate the disappearance of individuals in Northern Cyprus in 1974.
Turkey had ratified the Convention in 1954, but had only recognised the right of petition in 1987.
The Grand Chamber at para 133 said that the court is not competent to examine any complaints by these applicants against Turkey so far as the alleged violations are based on facts having occurred before January 1987.
Two points can be made, about that decision.
First, the claims nonetheless succeeded, as the court held that, unlike killings, disappearances carried with them an ongoing obligation to investigate (see para 148, and the distinction was confirmed in Janowiec at para 134).
Secondly, there was no argument in Varnava based on the contention that there had been any relevant acts or omissions on the part of Turkey since 1974.
However, it does not appear to me that either of those points detract from the point that the reasoning of the Grand Chamber in Varnava is difficult to reconcile with the appellants case on the critical date issue.
In addition to these two Grand Chamber judgments, there are the admissibility decisions of the First Section of the Court in akir v Cyprus (Application No 7864/06), (unreported) given 29 April 2010 and of the Third Section in Dorado v Spain (Application No 30141/09), (unreported) given 27 March 2010, and the judgment of the First Section in Jeli v Croatia (Application No 57856/11) (unreported) given 12 June 2014.
Like Varnava, akir was concerned with events in Cyprus in 1974, but, unlike Varnava and like this case, it involved allegations of failure to investigate allegedly unlawful killings rather than disappearances.
At p 5, the court repeated the Grand Chambers formulation of the relevant law in para 140 of ilih and para130 of Varnava, and then pointed out that the killings in question occurred more than 14 years before Cyprus accorded the right to petition on 1 January 1989.
It is fair to say that the decision that the claim in that case was inadmissible was not specifically based on the point that the killings occurred more than ten years before the date on which the right to petition was granted by Cyprus.
However, the essential point is that the court relied on more than one occasion on the proposition that the critical date was that date, rather than the date on which Cyprus acceded to the Convention (see at pp 6, 7 and 8).
In Dorado at para 32, the court stated that the provisions of the Convention do not bind a contracting party in relation to any act or omission which took place before the date of the entry into force of the Convention in respect of that party.
That is, strictly speaking, neutral, as it is not inconsistent with the respondents case here.
In any event, the application was inadmissible on any view.
In Jeli, the court discussed Varnava, ilih and Janowiec, and, at para 55, acknowledged that in ilih, the proximity in time of the death of the applicants son to the acceptance by Slovenia of the right of individual petition established the temporal competence of the court in respect of the procedural obligation under article 2 of the Convention.
Quite apart from Strasbourg jurisprudence, I consider that the respondents contention as to the critical date accords better with principle.
The rule that one cannot, at least normally, go back more than ten years relates to the jurisdiction of the Strasbourg court, as is clear from the way in which the court expressed itself in para 144 in Janowiec.
One would therefore expect it to be linked to the date on which the courts jurisdiction could be expected to be invoked.
Further, the rule is to a substantial extent based on practicalities, and it would therefore be rather odd if its applicability was related to the date on which the Convention first applied rather than the date on which it could first be invoked.
Finally, given that time starts to run under article 35 of the Convention against a citizens right to complain to the Strasbourg court from the date on which the right arose (as to which see the next section but one of this judgment), it would seem consistent if the ten year rule applied in the same way.
In these circumstances, I conclude that, subject to the third criterion identified in para 141 of Janowiec, involving Convention values, the present claim does not meet the genuine connection requirement in the second criterion.
The third criterion was considered by the Grand Chamber in paras 149 151 of Janowiec, and, while it was accepted that it applied where the triggering event was of a larger dimension than an ordinary criminal offence, the court concluded that a Contracting Party cannot be held responsible under the Convention for not investigating even the most serious crimes under international law if they predated the Convention.
Accordingly, the third criterion cannot assist the appellants.
It therefore follows that, in so far as the appellants claim is based on article 2, it fails because the Strasbourg court would rule it inadmissible as the Killings occurred more than ten years before UK citizens had the right to petition the Strasbourg court.
Although Lady Hale and Lord Kerr reach the same conclusion in relation to the appellants claim based on article 2, they do so for somewhat different reasons.
Lady Hale takes a different view of the critical date, as, unlike me, she regards the Strasbourg jurisprudence as unclear and considers that logic favours the date on which the Convention came into force.
Lord Kerr considers that the proper approach to this issue is somewhat more nuanced than I do.
I readily understand the attraction of his approach, but in my view it is important that parties know where they are in this area of jurisprudence, and it seems to me that his approach would leave the law being in a somewhat unpredictable state.
As Lady Hale rightly says, we do not have to follow Strasbourg jurisprudence slavishly, but I would be reluctant to depart from it on this point in this appeal for two reasons.
First, the appeal was argued on both sides on the basis that we should follow Strasbourg jurisprudence on this issue.
Secondly, this is a topic on which clarity and consistency is highly desirable, and, unless the guidance from Strasbourg seemed unclear, incoherent or unworkable, I would be reluctant not to follow and apply it.
Having permitted a degree of retroactivity, I believe that the Strasbourg court has rightly imposed some pretty clear rules with a view to ensuring a degree of clarity and consistency in this area.
Particularly in the absence of any invitation to do so, I consider that, at least in this case, this is an area on which we should follow, but go no further than Strasbourg jurisprudence.
Although I have concluded that the claim under article 2 should fail for the reason summarised in para 89 above, it is worth examining, albeit not with a detailed exegesis, the other two grounds raised against the appellants article 2 case by the respondents.
The contention that there is no right under the 1998 Act
The respondents contend that, even if (contrary to the conclusion which I have reached) the Strasbourg court would have held that the appellants would have had a valid claim for an inquiry into the Killings under article 2, their claim under that head should be dismissed because a UK court would have no jurisdiction to entertain it.
This contention is based on the proposition that the jurisdiction of a UK court to entertain the claim arises not (at least directly) from the Convention, but from the 1998 Act, and, as that Act only took effect on 2 October 2000, it cannot be invoked in order to give the court jurisdiction in respect of an event which occurred before that date.
At least on the face of it, that seems a very powerful contention.
It is clear from section 22(4) that the 1998 Act was not intended to have retrospective effect.
And the contention is supported by opinions given by all five members the House of Lords in In re McKerr [2004] UKHL 12, [2004] 1 WLR 807, a case concerned with the duty to hold an inquiry or inquest into a suspicious death: see paras 20 23, 48, 67, 79 81 and 88 89 per Lord Nicholls, Lord Steyn, Lord Hoffmann, Lord Rodger and Lord Brown respectively.
This, Lord Hoffmann explained that the House of Lords had decided on a number of occasions that the [1998] Act was not retrospective, and that accordingly there was, at least domestically, no ancillary right to an investigation of [a] death [of] a person who died before the Act came into force.
However, in the light of the Grand Chamber judgment in ilih, some members of this court adopted a somewhat modified position in the subsequent case of In re McCaughey (Northern Ireland Human Rights Commission intervening) [2011] UKSC 20, [2012] 1 AC 725.
In that case, by a majority of six to one, the Supreme Court held that, at least where there had been a decision to hold an inquest into a death which had occurred before 2 October 2000, the 1998 Act could be invoked to require the inquest to comply in all procedural aspects with the requirements of the Convention. (And I can see no reason why the same reasoning would not apply where the decision was to hold an inquiry into a death which had occurred before 2 October 2000.)
However, Lord Phillips went a little further in McCaughey at paras 61 63, where he indicated that, if in a particular case the Strasbourg court would hold that there was, after 1 October 2000 an article 2 obligation to investigate a suspicious death before that date, then, contrary to the conclusion in McKerr, he would have been inclined to hold that that obligation would also arise in domestic law under the 1998 Act.
While he found the reasoning in ilih difficult to understand (para 46), he seems to have formed the opinion that it would probably justify departing from McKerr, although he did not express a concluded view.
Lord Kerr (who at paras 216 219 was also critical of the reasoning in ilih) and Lord Dyson both appear to have concluded that the effect of the Grand Chambers reasoning in ilih was that the conclusion reached in McKerr was no longer sound, and that, if the Strasbourg court would hold that the UK had an article 2 duty after 1 October 2000 to investigate a death before that date, then that duty would also arise domestically under the 1998 Act see paras 110 114 and 132 137 respectively.
Lord Hope (who at para 73 was similarly unhappy about the lack of clarity of the guidance in ilih) took a different view, and at para 75 said that he saw no reason to disagree with the views expressed in McKerr.
He explained in the following paragraphs that it was only because there had been a decision to have an inquest in that case that the requirements of article 2 could be invoked.
Lord Rodger of Earlsferry, who dissented, certainly favoured following McKerr.
Given that the issue did not need to be determined, neither Baroness Hale nor Lord Brown addressed the question whether the reasoning in McKerr remained good law, although they proceeded on the assumption that it did.
In the light of this rather unsatisfactory state of affairs, there would be much to be said for our deciding the issue of whether McKerr remains good law on this point.
However, given that it is unnecessary to resolve that issue in order to determine this appeal, we ought not to decide it unless we have reached a clear and unanimous position on it.
We have not.
On the one hand, the respondents case is supported by the unanimous decision of a five judge court in McKerr, whose ratio is clear and simple to apply, but it could lead to undesirable conflicts between domestic and Strasbourg jurisprudence.
On the other hand, the appellants case derives significant support from two, and arguably three, of the judgments in the subsequent seven judge court in McCaughey, and, while it involves applying Strasbourg jurisprudence which has been criticised for lack of clarity, it would ensure that domestic and Strasbourg jurisprudence march together.
Accordingly, I would leave open the question whether, if the Strasbourg court would have held that the appellants were entitled to seek an investigation into the Killings under article 2, a UK court would have been bound to order an inquiry pursuant to the 1998 Act.
The contention that the appellants article 2 claim is out of time
The respondents case that the appellants article 2 claims are in any event brought too late rests on article 35 of the Convention and section 7(5) of the 1998 Act.
Under article 35, the Strasbourg court only has jurisdiction in a case where an application is brought after all domestic remedies have been exhausted and within a period of six months from the date on which a final decision was taken.
Under section 7(5), a complaint of infringement under the 1998 Act must normally be brought within one year beginning with the date on which the act complained of took place.
For present purposes, it does not matter which of these time limits apply or whether both of them do.
However, I am inclined to think that only section 7(5) applies, as it is solely the jurisdiction of the domestic court which the appellants are seeking to invoke, even though their case inevitably relies heavily on Strasbourg jurisprudence.
The appellants contend that time only started to run with the decision of 29 November 2010 to refuse an inquiry, and if that is right, the instant application would plainly have been in time.
The respondents primarily contend that time started to run in 1970, when the vital fact that a number of the soldiers in the patrol stated that the Killings were unlawful first became publicly known, and it was decided not to hold an inquiry.
Alternatively, the respondents say that time started to run by 1997 when it became clear that, despite the renewed publicity in the television film shown in 1992 and the presentation of a petition for an inquiry in 1993, there would be no inquiry.
In Varnava at para 162, the Grand Chamber said that, in a case of a suspicious death, [t]he lack of progress or ineffectiveness of an investigation will generally be more readily apparent, and, [a]ccordingly, the requirements of expedition may require an applicant to bring such a case before Strasbourg within a matter of months, or at most, depending on the circumstances, a very few years after events.
At para 158, the Grand Chamber also made the point that where a death has occurred, applicant relatives are expected to take steps to keep track of the investigations progress, or lack thereof, and to lodge their applications with due expedition once they are, or should have become, aware of the lack of any effective criminal investigation.
However, as the appellants contend, there are observations from the Strasbourg court that the article 2 duty to hold an investigation can arise as a result of fresh evidence.
Indeed, that point arose in the Strasbourg courts judgment in McKerr v United Kingdom (2002) 34 EHRR 553, which was a precursor to McKerr.
The reasoning in McKerr v United Kingdom was cited in the admissibility decision in Hackett v United Kingdom (Application No 34698/04), (unreported) given 10 May 2005, where the Fourth Section said at p 5 that later events or circumstances may arise which cast doubt on the effectiveness of the original investigation and trial or which raise new or wider issues and an obligation may arise for further investigations to be pursued.
To similar effect, in Brecknell v United Kingdom (2007) 46 EHRR 957, para 66, the Strasbourg court said that it may be that sometime later, information purportedly casting new light on the circumstances of the death comes into the public domain and that [t]he issue then arises as to whether, and in what form, the procedural obligation to investigate is revived.
It then gave examples including deliberate concealment of evidence which only subsequently comes to light, or later items of evidence which cast doubt on the effectiveness of the original investigation and trial.
However in para 70 the court accepted that it was not right to say that any assertion or allegation can trigger a fresh investigative obligation under article 2, but emphasised that state authorities must be sensitive to any information or material which has the potential either to undermine the conclusions of an earlier investigation or to allow an earlier inconclusive investigation to be pursued further.
Despite their reliance on these cases, and despite the views of Lord Kerr to the contrary, I would reject the appellants argument that there were events or revelations occurring after 1970, and, even more, after 1997, which justify the argument that, in effect, their article 2 right to an investigation into the Killings revived, and could be pursued in 2009.
The respondents realistically accept that the new evidence which came to light in 1969 and 1970 was of such significance that it revived such article 2 right to an investigation into the Killings as the appellants may have had.
As already explained, that evidence for the first time involved clear and public statements from soldiers involved with the Killings which cast serious doubt on the correctness of the consistent public position of the UK government that the Killings had been lawful.
The new evidence was a classic example of the type of new information which the courts in Brecknell and Hackett would have had in mind as justifying an investigation if none had been held before, or even, perhaps, if one had been held before.
However, the same cannot be said about the evidence or information which came out subsequent to 1970, particularly when one bears in mind that the matter must primarily be assessed by reference to the evidence available to the applicant concerned.
The only arguably significant new evidence which was available to the appellants after 1970 was (i) in the contents of the 1992 television programme In Cold Blood and (ii) in the 2009 book, Slaughter and Deception at Batang Kali and (iii) the contents of some further statements.
Both the programme and the book gave the Killings some publicity and no doubt caused many people to undergo feelings of outrage and concern.
However, although they each contained some new evidence in the form of, or as a result of, interviews with relatives of the victims of the Killings, neither the television programme nor the book contained much new revelatory evidence over and above that which had been available in 1970.
The same thing may be said of any statements which were taken after 1970.
In other words, any item of evidence which could be said to have been new after 1970 did not really add anything to the basic point, which had become quite apparent in 1970, namely that there were considerable reasons for doubting whether the official UK government line on the Killings was correct, and that there were strong grounds which suggested that the Killings were unlawful.
As for any further investigations carried out in the three or four years following the broadcasting of the television programme, the same may be said about them: they did not take matters further in terms of revelatory information.
Similarly, the investigations in 2008/2009 involved little more than reviewing information which had long been available.
In these circumstances, although it may seem somewhat harsh on the facts of this case, I am of the view that, if the appellants case, in so far as it is properly based on article 2, were held to have been brought within time, it would make the strict time limits in section 7(5) and in article 35 something of a paper tiger in many cases where there is a claim that a death should be investigated.
I would therefore hold that even if, contrary to my view, the appellants case would otherwise be made out under article 2, it would still have to be rejected on the ground that it has been brought too late.
It is right to add that a further argument which was touched on in oral submissions, but not developed in much detail, is that, as the purpose of the proposed inquiry is, at least in the main, to establish historical truth, the appellants cannot rely on article 2.
In Janowiec at para 143, the Grand Chamber observed that the obligation to conduct investigations under articles 2 and 3 is in connection with criminal, civil, administrative or disciplinary proceedings which are capable of leading to the identification and punishment of those responsible or to an award of compensation to the injured party, not other types of inquiries that may be carried out for other purposes, such as establishing a historical truth.
There is obvious force in the point that an inquiry after 2010 into events in 1948 must at least to a substantial extent be to establish the truth, and it is unlikely that any criminal, civil, administrative or disciplinary proceedings would result even if it was concluded that the Killings amounted to a war crime.
However, as the point was not debated very much, and as it is unnecessary to rule on it, I shall say no more about it (although a similar point arises in connection with the common law claim see para 132 below).
The appellants case based on customary international law
Introductory
The second basis for the appellants claim for an inquiry into the Killings is embodied in the argument that customary international law requires the UK government to investigate the Killings, particularly in the light of the evidence now available to support the notion that they were unlawful and may have amounted to a war crime, and that the common law would recognise, and give effect to, this aspect of international law.
I would reject that contention for two reasons.
First, the cases and textbooks to which we have been taken do not establish that, by 1948, when the Killings occurred, international law had developed to the extent of requiring a formal public investigation into a suspicious death, even if there were strong reasons for believing that they constituted a war crime.
Secondly, and quite apart from that, even if international law required such an investigation, the requirement cannot be implied into the common law.
Customary international law
So far as my first reason is concerned, it appears to be common ground that it is only within the past 25 years that international law recognised a duty on states to carry out formal investigations into at least some deaths for which they were responsible and which may well have been unlawful.
Thus, the earliest document to which the appellants have made reference in this connection is in UN General Assembly Resolution 60/147 of 16 December 2005 on The Basic Principles and Guidelines on the Right to a Remedy and Reparation for Victims of Gross Violations of International Human Rights Law and Serious Violations of International Humanitarian Law.
Article 3(b) provides that [t]he obligation to ensure respect for and implement international human rights law and international humanitarian law as provided for under the respective bodies of law, includes, inter alia, the duty to [i]nvestigate violations effectively, promptly, thoroughly and impartially and, where appropriate, take action against those allegedly responsible in accordance with domestic and international law.
The first case in which the Strasbourg court suggested that there was such a duty was in 1995 in McCann v United Kingdom (1995) 21 EHRR 97.
And, as the respondents point out, Lord Steyn in McKerr at para 52, suggested that it was probably unrealistic to suggest that what he called the procedural obligation, namely the duty to investigate unlawful deaths was already part of customary international law in 1982.
However, the appellants argue that, given that it is now part of customary international law that suspected unlawful killings, and in particular war crimes, should be formally investigated, the fact that the Killings took place before this was part of customary international law no longer presents them with a problem.
In the absence of any treaty provisions, clear case law or authoritative academic support for this proposition, I would reject that argument.
The appellants argument thus involves a fresh duty being imposed on a state, sometime between 1990 and 2005 by customary international law, to investigate any war crime, indeed any suspicious death, which amounts to a violation of human rights law or of humanitarian law, which may have occurred within its jurisdiction in the past.
I regard it as unlikely that such a duty has been imposed by customary international law, but, even if it has been, it must be subject to a cut off date.
Otherwise, the duty would extend to deaths which occurred literally centuries ago.
In the unlikely event that a fresh retrospective duty was imposed sometime after 1995, it seems to me that the furthest that such a duty could go would be ten years back which would be an unprincipled but arguably practical solution, which has the merit of having been adopted by the Strasbourg court, as already explained.
On any view, I regard it as inconceivable that any such duty could be treated as retrospective to events which occurred more than 40 years earlier, or could be revived by reference to events which took place more than 20 years before that.
Incorporation into the common law
Even if this conclusion turned out to be wrong, and it is now a principle of customary international law that a state must investigate deaths such as the Killings, even though they occurred as long ago as 1948, it would not be right to incorporate that principle into the common law.
Parliament has expressly provided for investigations into deaths (i) through the coroners courts in the Coroners and Justices Act 2009, and its predecessors, and (ii) through inquiries in the 2005 Act, and its subject specific predecessor statutes.
It has also effectively legislated in relation to investigations into suspicious deaths through the incorporation of article 2 in the 1998 Act.
In those circumstances, it appears to be quite inappropriate for the courts to take it onto themselves, through the guise of developing the common law, to impose a further duty to hold an inquiry, particularly when it would be a duty which has such potentially wide and uncertain ramifications, given that it would appear to apply to deaths which had occurred many decades even possibly centuries ago.
This conclusion receives strong support from four of the five opinions given in McKerr, whose authority on this point has in no way been diminished by any of the judgments in McCaughey.
At para 30, Lord Nicholls, with whom Lord Rodger agreed, said that he had grave reservations about the appropriateness of the common law now fashioning a free standing positive obligation of this far reaching character, namely a common law obligation to arrange for an effective investigation into [a suspicious] death, simply because it was required by article 2.
However, he specifically rejected the notion of such a common law obligation on the ground that it would create an overriding common law obligation on the state, corresponding to article 2 in an area of the law for which Parliament has long legislated, namely coroners inquests.
At para 71, Lord Hoffmann, with whom Lord Rodger also agreed, as did Lord Brown, rejected the notion that there was a broad common law principle equivalent to article 2 against which the whole of the complex set of rules which governed the earlier investigations can be tested and by which they can be found wanting and be ordered to be rerun under different rules.
He added that the very notion of such a principle, capable of overriding detailed statutory and common law rules, is alien to the traditions of the common law.
Lord Brown also rejected the notion that the court should condemn as contrary to the common law a series of procedures long since properly concluded in accordance with well established domestic laws and never challenged save by reference to a substantially later European Court decision.
Lord Steyns position was a little different.
At para 51, he referred to the fact that it would be necessary to take into account the fact that inquests were dealt with by statute.
However, he considered that it was inappropriate for the common law to extend the law on investigating suspicious deaths given that the right to life is comprehensively protected under article 2 as incorporated in our law by the 1998 Act.
However, he did then suggest that [t]he impact of evolving customary international law on our domestic legal system is a subject of increasing importance.
However, the views of the other four Lords of Appeal were clear, and strongly supportive of the conclusion I have reached on this issue.
In these circumstances, I would reject the contention that customary international law, through the medium of the common law, requires the UK government to hold an inquiry into the Killings.
I also agree with the more general remarks made by Lord Mance in paras 144 151 of his judgment in connection with the extent to which the common law incorporates principles of customary international law.
I should add that it may well be that the appellants argument on this basis should also be rejected on the ground of delay: the issue was briefly canvassed in the respondents written case, but it did not feature significantly in oral argument, and it is unnecessary to rule on it.
The appellants case based on common law
Introductory
The appellants final point is that, given that the respondents had a discretion under section 1 of the 2005 Act as to whether to order an inquiry into the Killings, the court should decide that they should have ordered an inquiry, and they should now be directed to do so.
In their first and principal decision letter, that of 29 November 2010, the respondents explained why they had decided not to order an inquiry into the Killings.
In summary form, this letter made the following points: a) Under section 2 of the 2005 Act an inquiry was not permitted to determine criminal or civil liability; b) Establishing the truth is more likely to be important in relation to recent events; c) The Killings took place against a different legal backdrop, both domestically and internationally, and any conclusions about the training and command structure of the Scots Guards in 1948 were unlikely to be of practical value today, unlike other recent public inquiries into suspicious deaths; d) Although the documentary burden would probably be relatively light, collecting evidence in Malaysia was likely to be costly and there would be other running costs; e) An inquiry would face obvious difficulties as there was a conflict of evidence, those directly involved had mostly died, and the survivors were in their 80s, and witnesses would have difficulty in recalling events over 60 years ago; f) An inquiry would, as the appellants contended, need to consider the extent to which race was a factor in the Killings and subsequent events, but any conclusion that those events were tainted by race prejudice would be unlikely to assist in eliminating discrimination now; g) An investigation could be good for race relations but internal Malaysian relations are primarily for the Malaysian Government and any possible benefit to UK Malaysian race relations was not a sufficient basis for the holding of an inquiry; h) There was no reliance on the sufficiency of any previous criminal investigations, or the availability of civil remedies.
The subsequent letter of 4 November 2011 was written following the respondents consideration of further arguments from the appellants solicitor, largely arguing that an inquiry was required to investigate the shortcomings of previous investigations.
The respondents considered that the inadequacies of the previous investigations were not themselves sufficient reason to hold an inquiry now.
Apart from reiterating many of the points in the earlier letter, the respondents pointed out that inquiring into the earlier investigations would involve yet more expense, and added that it was doubtful whether much light could be thrown on the earlier investigations, given how long ago they had been undertaken.
The appellants argue that, although the respondents had a discretion under section 1 of the 2005 Act as to whether to order an inquiry in 2010/2011 into the Killings (and the subsequent events), the discretion is subject, in principle, to challenge in court, and that, on the facts of this case, the decision in question was wrong in law and should accordingly be quashed.
There is no more fundamental aspect of the rule of law than that of judicial review of executive decisions or actions.
Where a member of the executive, such as the respondents in this case, is given a statutory discretion to take a particular course or action, such as ordering an inquiry under section 1 of the 2005 Act, the court has jurisdiction to overrule or quash the exercise of that discretion.
However, the exercise of that jurisdiction is circumscribed by very well established principles, which are based on the self evident propositions that the member of the executive is the primary decision maker, and that he or she will often be more fully informed and advised than a judge.
The area covered by judicial review is so great that it is impossible to be exhaustive, but the normal principle is that an executive decision can only be overruled by a court if (i) it was made in excess of jurisdiction, (ii) it was effected for an improper motive, (iii) it was an irrational decision, or, as it is sometimes put, a decision which no rational person in the position of the decision maker could have taken, or (iv) the decision maker took into account irrelevant matters or failed to take into account relevant matters.
An attack on an executive decision based on such grounds is often known as a Wednesbury challenge (see Associated Provincial Picture Houses Ltd v Wednesbury Corpn [1948] 1 KB 223).
If one or more of these grounds (which often overlap to some extent) is or are satisfied, the court may (but need not in every case) quash the decision.
If none of these grounds is satisfied, then the decision will almost always stand.
The argument based on rationality
In what was an impressive and otherwise full judgment, the Court of Appeal gave this argument of the appellants very short shrift, saying at [2015] QB 57, para 118: The case for the claimants is that the reasoning set out in the two decision letters cannot survive a Wednesbury challenge.
We totally disagree.
We are satisfied that the Secretaries of State considered everything which they were required to consider; did not have regard to any irrelevant considerations; and reached rational decisions which were open to them.
Indeed, when considered in the domestic legal context of discretion, we do not think that any other Secretaries of State would have been likely to reach a different conclusion at this stage.
With the exception of the last sentence of that paragraph (as to which I would prefer to express no opinion), I agree with that analysis.
The respondents clearly considered the request for an inquiry seriously and rejected it for reasons which are individually defensible and relevant, and which cumulatively render it impossible to characterise their conclusion as unreasonable, let alone irrational.
There is no suggestion that the decision not to hold an inquiry was tainted in any other way, and accordingly, applying classic judicial review principles, I consider that the decision cannot be impugned.
The appellants point out that there has been no quantification of the likely cost of an inquiry, but that does not meet the point that it will clearly cost a significant amount of money, especially bearing in mind the likelihood of live evidence and argument, visits to Malaysia, and exhuming and examining the bodies of the victims.
Indeed, I strongly suspect that preparing a budget for such an enterprise would be difficult and the result very unreliable.
The appellants point out in this connection that some preliminary work has been done through previous investigations, but that appears to us to cut both ways: it may mean that some preliminary investigations have been made, it also means that there will be more material to process, to compare with other evidence, and to put to witnesses.
The appellants also suggest that the inquiry would have little difficulty in reaching a conclusion that the Killings were unlawful, but, as the Divisional Court said at para 142, it is no longer permissible to conclude on the evidence available at the present time that the 24 men were shot when trying to escape.
Equally, as the court immediately went on to say, in the light of the evidence which has come to light since 1969, [n]or can the conclusion now be reached that the 24 men were deliberately executed.
There is evidence that supports both accounts.
The argument based on proportionality
The appellants raise the argument that the time has come to reconsider the basis on which the courts review decisions of the executive, and in particular that the traditional Wednesbury rationality basis for challenging executive decisions should be replaced by a more structured and principled challenge based on proportionality.
The possibility of such a change was judicially canvassed for the first time in this jurisdiction by Lord Diplock in Council of Civil Service Unions v Minister for the Civil Service [1985] AC 374, 410E, and it has been mentioned by various judges in a number of subsequent cases often with some enthusiasm, for instance by Lord Slynn in R (Alconbury Developments Ltd) v Secretary of State for the Environment, Transport and the Regions [2001] UKHL 23, [2003] 2 AC 295, para 51.
In other words, the appellants contend that the four stage test identified by Lord Sumption and Lord Reed in Bank Mellat v HM Treasury (No 2) [2013] UKSC 39, [2014] AC 700, paras 20 and 74 should now be applied in place of rationality in all domestic judicial review cases.
It would not be appropriate for a five Justice panel of this court to accept, or indeed to reject, this argument, which potentially has implications which are profound in constitutional terms and very wide in applicable scope.
Accordingly, if a proportionality challenge to the refusal to hold an inquiry would succeed, then it would be necessary to have this appeal (or at any rate this aspect of this appeal) re argued before a panel of nine Justices.
However, in my opinion, such a course is unnecessary because I consider that the appellants third line of appeal would fail even if it was and could be based on proportionality.
The move from rationality to proportionality, as urged by the appellants, would appear to have potentially profound and far reaching consequences, because it would involve the court considering the merits of the decision at issue: in particular, it would require the courts to consider the balance which the decision maker has struck between competing interests (often a public interest against a private interest) and the weight to be accorded to each such interest see R (Daly) v Secretary of State for the Home Department [2001] UKHL 26, [2001] 2 AC 532, para 27, per Lord Steyn.
However, it is important to emphasise that it is no part of the appellants case that the court would thereby displace the relevant member of the executive as the primary decision maker as to which see per Lord Sumption and Lord Reed in Bank Mellat (No 2) at paras 21 and 71 respectively.
Furthermore, as the passages cited by Lord Kerr from Kennedy v Charity Commission (Secretary of State for Justice intervening) [2014] UKSC 20, [2015] AC 455, paras 51 and 54, and Pham v Secretary of State for the Home Department (Open Society Justice Initiative intervening) [2015] UKSC 19, [2015] 1 WLR 1591, paras 96, 113 and 115 show, the domestic law may already be moving away to some extent from the irrationality test in some cases.
As those cases suggest, even if the appellants attack on rationality as the correct yardstick were to succeed, it may be that the position would be more nuanced than this cursory discussion of the appellants argument might suggest.
The answer to the question whether the court should approach a challenged decision by reference to proportionality rather than rationality may depend on the nature of the issue see for instance the discussion by Gertrude Lbbe Wolff in The Principle of Proportionality in the Case Law of the German Federal Constitutional Court (2014) 34 HRLJ 12.
Turning to this case, the reasons for not holding an inquiry are as set out in the two letters, whose contents are summarised in paras 124 and 125 above.
The reasons advanced on behalf of the appellants in favour of having an inquiry are that it is appropriate to explore the evidence publicly and seek to identify the truth, and to grant to the survivors and relatives a form of closure to this matter that would be enormously valuable.
They suggest that an inquiry would be the only way of testing the official version of what happened on 11/12 December 1948, and of address[ing] this injustice which has endured for decades and will rightly not go away.
They further argue that an inquiry could lead to a correction of the official record, a public apology, a public memorial, and active consideration of some ex gratia compensation.
It is impossible not to sympathise with these sentiments.
But in my opinion, these understandable reasons for holding an inquiry do not justify a court concluding that the respondents decision to refuse an inquiry for the reasons summarised in paras 124 and 125 above was disproportionate.
The desire to discover historical truth is understandable, particularly in a case where it involves investigating whether a serious wrong, indeed a war crime, may have been committed.
However, not only is this a case where neither article 2 nor customary international law would require such an investigation.
It is also a case where the relevant members of the executive have given coherent and relevant reasons for not holding an inquiry, including expressing a justifiable concern that the truth may not be ascertainable, and a justifiable belief that, even if the appellants expectations to the contrary were met, there would be little useful that could be learned from an inquiry so far as current actions and policies were concerned.
The notion that there is a positive common law duty to investigate the Killings in the present case, even though they took place nearly 70 years ago, simply in order to establish historical truth would, at least without more, open the door to demands that all suspicious deaths, however long ago, would have to be investigated.
The notion that the duty is owed to those whose relatives were killed or may remember the incident has more force, but that is not a powerful enough reason, in my view, to enable the court to say that, despite the reasons advanced by the respondents for not holding an inquiry, it was disproportionate to refuse to do so.
It is not as if the appellants have got nowhere: in these proceedings, the Divisional Court, the Court of Appeal and now this court have all said in terms that the official UK Government case as to the circumstances of the Killings may well not be correct and that the Killings may well have been unlawful.
And the events of 1969 1970, at least to large extent, speak for themselves.
As for the argument that an inquiry is justified because of what is said, in effect, to be a cover up, I see the force of the argument in relation to the immediate aftermath of the Killings and the decision in 1970 not to proceed with the investigation.
However, it seems to me that the appellants reliance on the events of those two periods suffers from the same sorts of problems as an inquiry into the Killings themselves.
There would be obvious difficulty, given the passage of time, at arriving at the truth or, perhaps more accurately, at any more of the truth than the documents already show.
And the value of any further information or analysis of the events of the aftermath or in 1969 1970 in terms of lessons for the present day must be limited at best.
In addition, the benefits for the survivors and the relations of the victims would be limited.
So far as the events after 1990 are concerned, I am unconvinced that there is anything to look into.
The concerns about the value of an inquiry currently raised by the respondents would have largely applied then.
It is the respondents who have the primary role of deciding under section 1 of the 2005 Act whether to have an inquiry into the Killings, and if not why not, and it is not for the court to substitute its view for that of the respondents.
What the court, on the instant hypothesis, must do is to decide whether, bearing in mind the reasons for and against holding an inquiry, the respondents refusal to hold an inquiry was disproportionate.
In my view, it was not.
The respondents did not specifically raise the argument that the appellants common law claim was in difficulty for the additional reason of delay.
It is nonetheless worth mentioning that, for the reasons discussed in paras 105 107 above, there may well be a powerful case for saying that, if the appellants wished the respondents to hold an inquiry into the Killings, they could and should have requested it in 1970 or 1971.
Accordingly, it may be that the fact that the appellants can be said to have delayed for 40 years before seeking an inquiry and have only then judicially reviewed the respondents refusal to hold one, is a strong factor against now granting them any relief in that connection.
However, given that the point was not developed in argument by the respondents, it would be unfair on the appellants to rely on the point, and I say no more about it.
Conclusion
For these reasons, I would dismiss this appeal.
LORD MANCE: (with whom Lord Neuberger, Lady Hale, Lord Kerr and Lord Hughes agree on the jurisdiction issue)
I have read and agree generally with the reasoning and conclusions in the judgment given by Lord Neuberger.
This judgment adds a footnote (in paras 144 151 below) to his observations in paras 112 122 on the incorporation of customary international law into the common law, and, more substantively, addresses (in paras 152 202 below) the issue of jurisdiction, to which Lord Neuberger refers in para 65.
As to whether the refusal to direct an inquiry should be reviewed in terms of proportionality, Lord Kerr quotes views which I have already expressed in the context of the issues in Kennedy v Charity Commission (Secretary of State for Justice intervening) [2014] UKSC 20; [2015] AC 455 and Pham v Secretary of State for the Home Department (Open Society Justice Initiative intervening) [2015] UKSC 19; [2015] 1 WLR 1591.
In the context of, and in order to decide this appeal, all that is necessary to say is that I agree with Lord Neuberger and Lord Kerr that there is no ground for treating the refusal of an inquiry as either Wednesbury unreasonable or disproportionate.
Incorporation of customary international law into common law
The basis and extent to which customary international law (CIL) is received into common law was not examined in great detail in the parties submissions before us.
The appellants described obligations on the United Kingdom under CIL as a source of domestic law.
Both the appellants and the respondents referred in their cases to Lord Denning MRs description of the doctrine of incorporation which he went on to endorse in Trendtex Trading Corp v Central Bank of Nigeria [1977] QB 529, 553: the rules of international law are incorporated into English law automatically and considered to be part of English law unless they are in conflict with an Act of Parliament.
Lord Denning was clearly only speaking of CIL, not treaty law which raises quite different considerations.
However, as the appellants went on to recognise at least this further qualification exists in relation to CIL, beyond that stated by Lord Denning, namely that: The recognition at common law must itself not abrogate a constitutional or common law value, such as the principle that it is Parliament alone who recognises new crimes: R v Jones (Margaret) [2006] UKHL 16, [2007] 1 AC 136 at para 29.
Even that principle was only one of the reasons why the House held in R v Jones (Margaret) that the international crime of aggression could not form part of English law.
The second reason, expressed in the speech of Lord Hoffmann with which all other members of the House agreed, was the constitutional reason that a domestic court could not adjudicate upon the question whether the state of which it formed part had acted unlawfully in the course of exercising the Crowns discretionary powers in the making of war and disposition of the armed forces: paras 63 67.
The position is therefore somewhat more nuanced than Lord Denning MRs statement might suggest.
Common law judges on any view retain the power and duty to consider how far customary international law on any point fits with domestic constitutional principles and understandings.
Thus, in a number of other cases prior to R v Jones (Margaret), courts have rejected suggestions that CIL had expanded the ambit of domestic criminal law: see eg R v Keyn (1876) 2 Exch Div 63, 202, et seq and Chung Chi Cheung v The King [1939] AC 160.
Although both cases involved criminal liability, neither case highlighted this as a critical distinction when discussing whether CIL should be regarded as part of domestic law.
Thus, in the latter case, Lord Atkin said simply at p 168: The courts acknowledge the existence of a body of rules which nations accept amongst themselves.
On any judicial issue they seek to ascertain what the relevant rule is, and, having found it, they treat it as incorporated into the domestic law, so far as it is not inconsistent with rules enacted by statutes or finally declared by their tribunals.
In Trendtex, Lord Denning was addressing a distinction between two doctrines, according to which CIL is seen as becoming part of domestic law either by incorporation or by transformation.
Lord Denning adopted the former view.
He went so far as to say that, unless the doctrine of incorporation applied, I do not see that our courts could ever recognise a change in the rules of international law: p 554C D.
That seems an unduly, and coming from its speaker perhaps surprisingly, restrictive view of the developmental authority of common law judges.
But the background against which Lord Denning uttered it was reasoning of the majority (from which Lord Denning had dissented) in the prior Court of Appeal decision of Thai Europe Tapioca Service Ltd v Government of Pakistan, Directorate of Agricultural Supplies [1975] 1 WLR 1485, suggesting that CIL rules incorporated into domestic law by decisions of a domestic court were subject to the ordinary rules of stare decisis.
On that basis, once they had been recognised at Court of Appeal level (as the rules of state immunity have been), they would be capable of alteration only by the House of Lords.
Several points may be made about Lord Dennings adoption of the doctrine of incorporation.
First, it needs qualification as stated in paras 144 145 above.
Second, even as regards civil aspects of CIL, Lord Wilberforce in I Congreso del Partido [1983] 1 AC 244, 261G 262A expressly avoided commitment to more of the admired judgment of Lord Denning MR than was necessary.
Similarly, in R v Jones (Margaret), at para 59, Lord Hoffmann, with whom all other members of the House agreed, and I, at para 100, also expressly left open the basis on which CIL is relevant under domestic law.
Third, nearly 40 years after Trendtex and in an era where precedent is unlikely to be seen as so great an obstacle to reconsideration of domestic law in the light of international developments, the difference in effect of the two doctrines is unlikely to be as significant as it may have seemed in 1977.
Even in 1977 Stephenson LJ made a similar point: p 569D although it is right to add that he was the one member of the court who regarded the prior Court of Appeal authority of Thai Europe as precluding any relaxation of the existing rules of state immunity.
A similar observation to Stephenson LJs is found in Nulyarimma v Thompson [1999] FCA 1192 in para 109 of the judgment of Merkel J (whose disagreement as to whether the CIL crime of genocide was to be regarded as a domestic crime does not affect the judgments general force).
When and if it is ever necessary to consider further the precise basis on and extent to which CIL may become part of domestic law, all three judgments on this point in Nulyarimma v Thompson will repay study.
It is clear that there are different views, even though the differences may prove more apparent than real.
As at present advised, and without having heard argument on the point, there seems likely to be wisdom in Wilcox Js statements in para 25 that it is difficult to make a general statement covering all the diverse rules of international customary law and in para 26, after distinguishing civil and criminal cases as different classes, that Perhaps this is only another way of saying that domestic courts face a policy issue in deciding whether to recognise and enforce a rule of international law.
Speaking generally, in my opinion, the presumption when considering any such policy issue is that CIL, once established, can and should shape the common law, whenever it can do so consistently with domestic constitutional principles, statutory law and common law rules which the courts can themselves sensibly adapt without it being, for example, necessary to invite Parliamentary intervention or consideration.
However, in the present case and for the reasons given by Lord Neuberger in para 112, it would be inappropriate for English courts to import the suggested CIL principle regarding the holding of an inquiry in respect of events in 1948 into domestic law, because Parliament has effectively pre empted the whole area of investigations into historic deaths.
Domestic courts cannot or should not in such circumstances recognise or import a principle which would be wider and would extend to cover events further back in time than would be covered by the inquiries provided by such legislation and/or by the Human Rights Convention.
Jurisdiction
The issue of jurisdiction has two strands: the first, whether the United Kingdom can be said to have been responsible for whatever happened in Batang Kali on 11/12 December 1948; the second, whether it can be held responsible for not holding an inquiry now.
These strands are relevant under the Convention rights, as incorporated into domestic law, to the question whether there were failures by the United Kingdom to secure to everyone within [its] jurisdiction, within the meaning of article 1 of the Convention, any of the rights and freedoms defined in article 2 of the Convention, so as to make the United Kingdom potentially responsible for breach of the Convention Rights as incorporated into domestic law by the Human Rights Act 1998.
But both strands are also potentially relevant to the claims that an inquiry should now be held by reference to international law and/or under common law principles of judicial review.
As to the first strand, the respondents case is that, while the Scots Guards were on active service in Selangor, they were acting under the aegis of the constitutional arrangements in force in the Federation of Malaya or, alternatively, in the State of Selangor, and that any acts on their part were always attributable either to His Majesty in right of the Federation or to The Sultan as the Ruler of the State of Selangor, rather than to His Majesty in right of the United Kingdom.
In drawing this distinction, the respondents rely on R (Quark Fishing Ltd) v Secretary of State for Foreign and Commonwealth Affairs [2005] UKHL 57; [2006] 1 AC 529.
As to the second strand, the respondents case is that any liabilities or obligations which the Crown in right of the United Kingdom may have had prior to 1957 passed in that year to the new independent Federation and/or that the Crown cannot now have come under any duty to hold an inquiry in relation to the Killings which had occurred in Selangor in 1948.
In support of this second strand of their submissions, the respondents rely on the Federations independence since 1957 and/or on article 167 of the Federal Constitution of 1957.
Constitutional arrangements of and in relation to Malaya and Selangor
To consider these submissions, it is necessary to analyse the constitutional arrangements which existed in Malaya at the relevant times.
At the date of the deaths in December 1948, Selangor was a state ruled by its Sultan whose relations with His Majesty King George VI were governed by the Selangor Treaty of 21 January 1948.
Also on 21 January 1948, it had become one of nine Malay States which, together with two British colonies (Malacca and Penang) constituting the Straits Settlements, were party to the Federation of Malaya Agreement made between the Sultans of the Malay States and His Majesty.
The Selangor Treaty, along with similar treaties with the Sultans of the other eight Malay States, and the Federation of Malaya Agreement were the subject of The Federation of Malaya Order in Council 1948 (SI 1948/108) made on 26 January 1948, laid before the United Kingdom Parliament on 27 January 1948 and coming into force on 1 February 1948.
The Order scheduled the Treaties with the Sultans of Selangor and the other Malay States and the Federation Agreement.
The Selangor Treaty provided by clause 3(1) that: His Majesty shall have complete control of the defence and of all the external affairs of the State of Selangor and His Majesty undertakes to protect the Government and State of Selangor and all its dependencies from external hostile attacks and for this and other similar purposes His Majestys Forces and persons authorised by or on behalf of His Majestys Government shall at all times be allowed free access to the State of Selangor and to employ all necessary means of opposing such attacks.
By clause 4, the Sultan undertook to receive a British Adviser to advise on all matters connected with the government of the state other than matters relating to the Muslim Religion and the Custom of the Malays, and undertakes to accept such advice.
The Treaty also contemplated expressly the entry into force of the Federation of Malaya Agreement.
The Federation of Malaya Agreement recited that it had been represented to His Majesty that fresh arrangements should be made for the peace, order and good government of the Malay States in the form of the Federation, which was to take effect on such day as His Majesty may, by Order in Council, appoint .
Clause 3 established the Federation, while clause 4 provided that: His Majesty shall have complete control of the defence and of all the external affairs of the Federation and undertakes to protect the Malay States from external hostile attacks and for this and other similar purposes, His Majestys Forces and persons authorised by or on behalf of His Majestys Government shall at all times be allowed free access to the Malay States and to employ all necessary means of opposing such attacks.
Clause 7 provided for a High Commissioner in and for the Federation to be appointed by Commission under His Majestys Sign Manual and Signet, while clause 8 provided that: Their Highnesses the Rulers undertake to accept the advice of the High Commissioner in all matters connected with the government of the Federation save as excepted in clause 5 of this Agreement [that is, matters relating to the Muslim Religion or the Custom of the Malays]: Provided that nothing in this clause shall in any way prejudice the right of any of Their Highnesses to address His Majesty through a Secretary of State, if any of Their Highnesses so desires.
Clause 13 provided: His Majesty may from time to time give to the High Commissioner Instructions, either under His Majestys Sign Manual and Signet, or through a Secretary of State, for the due performance, or the proper exercise of the powers, duties and rights of the High Commissioner under, and in conformity with, this Agreement; but no law made under this Agreement shall be void or inoperative by reason of anything contained in such Instructions.
With regard to executive authority, the Agreement provided: Extent of executive authority. 16.
Subject to the provisions of this Agreement, and in particular without prejudice to the provisions of clauses 18, 86 and 110 thereof, the executive authority of the Federation shall extend to all matters set out in the first column of the Second Schedule to this Agreement.
Exercise of executive authority. 17.
The executive authority of the Federation shall be exercised by the High Commissioner either directly or through officers subordinate to him, but nothing in this clause shall prevent the Legislative Council from conferring functions upon persons or authorities other than the High Commissioner within the powers given to it by this Agreement.
Delegation of executive authority. 18.
Notwithstanding anything in this Agreement, the High Commissioner may entrust, either conditionally or unconditionally, to the government of any Malay State with the consent of His Highness the Ruler of that state, or to the government of a Settlement, or to their respective officers, functions in relation to any matter to which the executive authority of the Federation extends.
Special responsibilities. (1) In the exercise of his executive authority, the High 19.
Commissioner shall have the following special responsibilities, that is to say: (a) the protection of the rights of any Malay State or any Settlement and of the rights, powers and dignity of Their Highnesses the Rulers; (b) the prevention of any grave menace to the peace or tranquillity of the Federation or any Malay State or Settlement comprised therein;
Clause 48 further provided: Subject to the provisions of this Agreement, it shall be lawful for the High Commissioner and Their Highnesses the Rulers, with the advice and consent of the Legislative Council, to make laws for the peace, order and good government of the Federation with respect to the matters set out in the Second Schedule to this Agreement and subject to any qualifications therein.
Under clause 52, the High Commissioner could if he considered it expedient in the interests of public order, public faith or good government force through any law which the Legislative Council had failed to enact.
The matters set out in the first column of the Second Schedule, in respect of which the High Commissioner had executive authority under clauses 16 and 17 of the Federation Agreement and the Federal Legislature had power to make laws under clause 48, included Defence and External Affairs: DEFENCE AND EXTERNAL AFFAIRS 1(a).
All matters relating to defence including (a) naval, military or air forces of His Majesty; local forces, any armed forces which are not forces of His Majesty but are attached to or operating with any of His Majestys forces within the Federation 2.
External Affairs CIVIL AND CRIMINAL LAW AND PROCEDURE, EQUITY, EVIDENCE, COURTS, CORPORATIONS, EMERGENCY POWERS 15.
Emergency powers, emergency legislation; trading with the
enemy; enemy property
Under the powers contained in clause 48 read with the Schedule 2 paragraph 15, the High Commissioner and the Rulers with the advice and consent of the Legislative Council on 7 July 1948 enacted the Emergency Regulations Ordinance, No 10 of 1948 to confer on the High Commissioner power to make regulations on occasions of emergency or public danger.
The High Commissioner declared a state of emergency on 12 July 1948, and, in pursuit of the powers contained in the Ordinance, issued Emergency Regulations on 15 July 1948.
Regulation 21 authorised any police officer of or above the rank of Sub Inspector without warrant and with or without assistance to enter and search any premises and to stop and search any vessel, vehicle or individual, whether in a public place or not.
Regulation 24 authorised a police officer to arrest and detain any person who on being questioned failed to satisfy the officer as to the purposes for which he was where he was found and who the officer suspected had acted or was about to act in any manner prejudicial to the public safety and the maintenance of public order.
Regulation 27 provided that: The powers conferred upon police officers by Regulations 21, 22(1)(a) and 23 may be exercised by any member of His Majestys Naval, Military or Air Forces or of any Local Forces established under any written law of or above the rank of Warrant Officer, and the powers conferred by Regulations 22(1)(b): and 24(1) may be exercised by any member of His Majestys Naval, Military or Air Forces or of any Local Forces established under any written law.
The Order in Council made on 26 January 1948 started with these recitals: Whereas by the Foreign Jurisdiction Act 1890, it was, amongst other things, enacted that it should be lawful for His Majesty to hold, exercise and enjoy any jurisdiction which His Majesty then had or might at any time thereafter have within a foreign country in the same and as ample a manner as if His Majesty had acquired that jurisdiction by the cession or conquest of territory: And whereas His Majesty has full power and jurisdiction within the Malay States of Johore, Pahang, Negri Sembilan, Selangor, Perak, Kedah, Perils, Kelantan and Trengganu (hereinafter referred to as the Malay States):
The Order in Council went on to provide by section 4 that In pursuance of the Federation Agreement there shall be established a Federation . , by section 5 that The provisions of the Federation Agreement shall have the force of law throughout the territories comprised in the Federation and by section 6 that: The High Commissioner is hereby empowered and commanded to do all things belonging to his Office in accordance with this Order, the Federation Agreement, such Commission as may be issued to him under His Majestys Sign Manual and Signet and such Instructions as may from time to time be given to him by His Majesty under His Sign Manual and Signet or through a Secretary of State, and in accordance with such laws as may from time to time be in force in the Federation or any part thereof.
Detailed instructions were on 26 January 1948 passed under the Royal Sign Manual and Signet to the High Commissioner relating to matters including the legislative council contemplated by the Federation Agreement.
According to Notifications published in the Federation of Malaya Government Gazette dated 28 November 1949, His Majesty had for the better co ordination of measures for the maintenance and protection of the interests in South East Asia of our Government in the United Kingdom at some point before mid 1948 appointed a Commissioner General to advise Our said Government concerning such matters in respect of Burma, Siam, French Indo China and the Netherlands East Indies (hereinafter referred to as the Foreign Territories) , while from May 1946, Malcolm MacDonald had been Governor General in and over the Malayan Union (now the Federation of Malaya), the Colony of Singapore .
By Commission passed under the Royal Sign Manual and Signet on 10 August 1948 His Majesty appointed Malcolm MacDonald as Commissioner General in South East Asia to discharge the functions hitherto discharged by the said Governor General and to extend the area of his authority to embrace the Federation of Malaya, the Colonies of Singapore, Sarawak, North Borneo, the Protected State of Brunei, and such other territories, being parts of Our dominions or under Our protection, as We may direct , and to exercise such authority and perform such duties as might be specified in such instructions as he might receive from Us under our Sign Manual and Signet or through one of Our Principal Secretaries of State or as may be prescribed by law.
Prior to the Commission dated 10 August 1948, exchanges between the Commissioner General for South East Asia and London dated 26 June and, 8 and 12 July 1948 show the Commissioner General reporting on the nature and dimensions of the present internal security problem and the measures necessary to combat it as agreed by the Defence Co ordination Committee held on 24 June with the Governor of Singapore and the High Commissioner of the Federation attending.
These included references to police action with military support, the military support being at that stage, it appears, two battalions of the Malay Regiment and one squadron of the Royal Air Force Regiment (Malay).
The Commissioners communication dated 12 July 1948 recorded that: There is a very close liaison and co ordination between the police and military at all levels and in each state and settlement the Chief Police Officer retains final decision of responsibility for law and order.
In most affected areas in the Federation troops are taking a very big share in evacuation operations, but we are maintaining the principle that military are acting in aid of civil power.
Except in static guard duties troops operate with an element of police presence whenever possible.
There is excellent understanding between police and military staffs in both the Federation and Singapore and no difficulties seems to be arising regarding their respective roles.
By telegram on 9 August 1948, the Defence Co ordination Committee recommended the dispatch of a brigade of the British Army to Malaya as reinforcements, saying that: In arriving at this conclusion we have taken into account (i) the vital need from the point of view of British prestige, civil morale, and the maintenance of the economy of the Federation of bringing the operations in Malaya to a successful conclusion as early as possible.
At a Cabinet meeting on 13 August 1948 it was resolved to proceed urgently with this.
The decision was taken after the Chief of Imperial General Staff, Field Marshal Viscount Lord Montgomery of Alamein, said that: In Malaya the trouble was not only of local origin, but was instigated by Chinese Communists and kept going by communist reinforcements from across the Siamese border .
Moreover our own nationals were being killed.
We could not stand this nor could we afford to lose Malaya to Communism.
His conclusion was that we should send immediate help to the Far East.
The brigade, part of which comprised the Second Battalion of the Scots Guards, duly arrived in Singapore in October 1948, and after three weeks training was sent to areas of the Federation where bandit activity was reported, including in the case of G Company of the Second Battalion, Kuala Kubu Bahru.
The establishment and existence of the British army was authorised by the Army Act, which was brought into force annually by a more specific Act and recited at the relevant times that:
The Kings Regulations 1940 provided inter alia: Whereas the raising or keeping of a standing army within the United Kingdom in time of peace, unless it be with the consent of Parliament, is against law: And whereas it is adjudged necessary by His Majesty and this present Parliament that a body of land forces should be continued for the safety of the United Kingdom and the defence of the possessions of His Majestys Crown 71.
His Majesty may make regulations as to the persons to be invested as officers, or otherwise, with command over His Majestys forces and as to the mode in which such command is to be exercised. 6.
The government of the Army is vested in the Crown.
The command of the Army is placed in the bands of the Army Council, who are also responsible for the administration of the regular forces. 28.
The governor of a colony, protectorate or mandated territory is the single and supreme authority responsible to and representative of His Majesty.
He is, by virtue of his commission, and the letters patent, entitled to the obedience and assistance of all military and civil officers, but, although bearing the title of captain general or commander in chief, and although he may be a military officer, senior in rank to the OC the forces, he is not, except on special appointment from His Majesty, invested with the command of His Majestys forces in the colony, protectorate or mandated territory.
He is not, therefore, entitled to take the immediate direction of any military operations,
The European Convention on Human Rights came into force for the United Kingdom on 3 September 1953, and was under article 56 extended by the United Kingdom to the Federation of Malaya on 23 October 1953.
In 1957 the Federation of Malaya became an independent sovereign country within the Commonwealth.
The arrangements for this were made by the Federation of Malaya Independence Act 1957 and the Federation of Malaya Independence Order in Council No 1933 of 1957.
The Act provided: 1. (1) Subject to the provisions of this section, the approval of Parliament is hereby given to the conclusion between Her Majesty and the Rulers of the Malay States of such agreement as appears to Her Majesty to be expedient for the establishment of the Federation of Malaya as an independent sovereign country within the Commonwealth. (2) Any such agreement as aforesaid may make provision (a) for the formation of the Malay States and of the Settlements of Penang and Malacca into a new independent Federation of States under a Federal Constitution specified in the agreement, and for the application to those Settlements, as states of the new Federation, of State Constitutions so specified; (b) for the termination of Her Majestys sovereignty and jurisdiction in respect of the said Settlements, and of all other Her power and jurisdiction in and in respect of the Malay States or the Federation as a whole, and the revocation or modification of all or any of the provisions of the Federation of Malaya Agreement, 1948, and of any other agreements in force between Her Majesty and the Rulers of the Malay States.
The Order in Council gave effect as from 31 August 1957 to a new Federal Constitution contained in the First Schedule, and revoked the Federation of Malaya Orders in Council 1948 to 1956.
Article 167(1) of the Constitution provided: Rights, liabilities and obligations. 167. (1) Subject to the provisions of this article, all rights, liabilities and obligations of (a) Her Majesty in respect of the government of the Federation, and (b) the government of the Federation or any public officer on behalf of the government of the Federation, shall on and after Merdeka [Independence] Day be the rights, liabilities and obligations of the Federation.
On and as from independence, the United Kingdoms notification declaring that the European Convention on Human Rights applied to the Federation of Malaya as a territory for whose international relations it was responsible was withdrawn and no longer applied.
Analysis
Against this background, I consider the two strands of the respondents submissions which I have summarised above.
By the first strand, the respondents argue that the British army was not acting in right of the United Kingdom in relation to any of the killings.
The respondents acknowledged in their skeleton argument before the Court of Appeal that the Scots Guards were deployed to the Far East in right of the United Kingdom, but they submitted then, and they repeat the submission now, that what matters is the legal regime under which the Scots Guards acted while in Malaya (para 33).
This regime is, they contend, to be found in the reservation to the Crown of complete control over the defence and external affairs of Selangor as well as of the Federation, pursuant to which the Crown not only undertook to protect Selangor and the Malay States from external hostile attacks, but authority was also given for this and other similar purposes for His Majestys Forces to be allowed free access to the [Malay States] and to employ all necessary means of opposing such attacks.
More specifically, the activities of the Scots Guards were also authorised under Federation law by the Emergency Regulations (paras 151 152 above).
Alternatively, they contend that, if the Scots Guards were not deployed in Selangor for such purposes, then they were deployed for internal purposes, necessarily in aid of the Sultan, who was obliged to follow the advice of the British resident adviser on such a matter: see clause 4 of the Selangor Treaty of 1948 (para 157 above).
The appellants endorse the respondents primary contention, that the British Army forces were deployed in Malaya to protect against external hostile attacks or for other similar purposes (written case, para 4.14).
It also appears to accord with the reality.
The Malayan insurgency was part of an external threat, and British forces were sent to assist in order to protect the Federation and its component parts against that threat or for similar purposes.
The parties differ however in their analysis of the constitutional implications of this conclusion.
The respondents, invoking reasoning of Lord Bingham, Lord Hoffmann and Lord Hope in Quark, submit that there is a distinction between Crown action taken in right of the United Kingdom and in right of, or under the constitutional regime applicable in, Malaya or alternatively Selangor.
They argue that the Crowns authority over defence and external affairs was exercised or mediated through the High Commissioner, exercising his powers in that regard under the Federation Agreement, and that the Scots Guards were acting under the constitutional authority of the Executive Government of the Federation and exercising the emergency powers provided by the Emergency Regulations of 15 July 1948.
The appellants submit that there was no need for any such mediation.
The Crown was in right of the United Kingdom simply entitled to deploy its forces in the Federation to protect against external hostile attacks or for similar purposes.
Although this was not fully explored before us, both the distinction which the respondents draw in reliance on reasoning in Quark, and its applicability, are open to a number of questions.
It can readily be accepted that, in relation to fully self governing countries where the Queen remains Head of State, the Queen when acting for example on the advice of her local ministers acts in right of her position as Head of State of the relevant country, not as Head of State in the United Kingdom.
But (despite the width of the recitals in the Order in Council dated 26 January 1948) the King was not the Head of State of either Selangor or the Malayan Federation.
Hence, no doubt, the respondents argument that the Crowns intervention was mediated through the High Commissioner as executive authority of the Federation or was undertaken on behalf of the Sultan of Selangor.
But even in situations where the Crown is the Head of State the distinction drawn in Quark calls for further consideration.
Quark concerned South Georgia and South Sandwich Islands (SGSSI), a British Overseas Territory acquired originally by settlement, with a constitution governed by an order in council, which provided for a Commissioner, who was, in similar fashion to the High Commissioner of the Malayan Federation, bound under section 5(1) to act according to such instructions, if any, as Her Majesty may from time to time see fit to give him through a Secretary of State.
By the Fishing (Maritime Zone) Area Order 1993 and the Fisheries (Conservation and Management) Ordinance 1993, the Commissioner declared, and introduced a licensing scheme controlling fishing within, a maritime zone extending 200 nautical miles from SGSSI.
He further appointed a Director of Fisheries who was under his direction.
The Secretary of State instructed the Commissioner (who was in turn required to direct the Director) to give two fishing licences in a way which precluded the grant to the claimant of a renewed licence.
The claimant relied on article 1 of Protocol 1 (A1P1) of the European Convention on Human Rights to claim damages.
A1P1 had not been extended to SGSSI by any notification under article 56 of the Convention.
The claimant failed.
Lord Bingham, Lord Hoffmann and Lord Hope endorsed as one reason a submission (advanced as here by counsel for the Secretary of State) that the Queen must be treated as having given the instructions through the Secretary of State in right of SGSSI, rather than in right of the United Kingdom.
Lord Nicholls and Baroness Hale did not endorse this reasoning, and they and Lord Hoffmann and Lord Hope all concurred in a second reason, which was that both in Strasbourg and under the Human Rights Act the absence of any notification extending A1P1 to SGSSI under article 56 meant that the claim could not involve any failure by the United Kingdom to secure to everyone within [its] jurisdiction any Convention right within the meaning of article 1 of the Convention.
The fact that United Kingdom ministers had in reality control over the grant or refusal of fishing licences in SGSSI was, in the absence of any such notification, not capable of bringing the claim within article 1.
It was this alternative line of reasoning which, when Quark took their complaint to the European Court of Human Rights, led that court unanimously to declare the application inadmissible: see Quark Fishing Ltd v United Kingdom (Application No 15305/06) (unreported) given 19 September 2006.
The reasoning of Lord Bingham, Lord Hoffmann and Lord Hope in Quark was the subject of a sharp critique by Professor John Finnis in a University of Oxford Faculty of Law Legal Studies Research Paper, Common Law Constraints: Whose Common Good Counts?, which was in turn considered by Lord Hoffmann in the Houses later decision in R (Bancoult) v Secretary of State for Foreign and Commonwealth Affairs (No 2) [2008] UKHL 61; [2009] AC 453, paras 37 49.
Professor Finniss thesis was that The United Kingdom and its dependent territories within Her Majestys dominions form one realm having one undivided Crown and that, in contradistinction to the position of self governing colonies, in respect of any dependency of the United Kingdom (that is, of any British overseas territory), acts of Her Majesty herself are performed only on the advice of the United Kingdom Government both quotations from Halsburys Laws of England, 4th ed re issue (2003) vol 6 para 716, specifically approved in Tito v Waddell (No 2) [1977] Ch 106, 231, per Megarry V C and R v Secretary of State for Foreign and Commonwealth Affairs, Ex p Indian Association of Alberta [1982] QB 892, 921 922, per Kerr LJ.
Bancoult concerned the ability of a British court judicially to review an order in council relating to the British Indian Overseas Territory (BIOT), notwithstanding the provisions of the Colonial Laws Validity Act 1865.
Having read Professor Finniss paper, Lord Hoffmann said in Bancoult, paras 48 49, that he was inclined to think that the reason which I gave for dismissing the cross appeal in [Quark] that is that A1P1 had no application in the absence of any notification under article 56 was rather better than the reason I gave for allowing the Crowns appeal that is that the Crown had through the Secretary of State given the instructions in right of SGSSI, not the United Kingdom and that on this Lord Nicholls was right.
Lord Hoffmann also analysed the relevant order in council not simply as part of the local law of BIOT but, as Professor Finnis says, as imperial legislation made by Her Majesty in Council in the interests of the undivided realm of the United Kingdom and its non self governing territories(para 40).
The latter aspect of its amphibious nature, as he put it, took it outside the scope of the Colonial Laws Validity Act and made it capable of being reviewed judicially in the British courts.
Lord Hoffmanns revised views about the Crowns position when exercising powers on the advice of United Kingdom ministers in relation to dependent territories and his views about the potentially amphibious nature of an order in council relating to such a nature reinforce my conclusion that there is no reason to attempt to justify the Crowns military involvement in the Federation of Malaya in 1948 solely in terms of the Federations Constitution.
The case for not doing so in the present context is in fact a fortiori to that which, in the light of Professor Finniss paper and Lord Hoffmanns revised view, existed in relation to SGSSI and BIOT.
The Crown was, as I have pointed out, sovereign in SGSSI and BIOT.
The Crown was not sovereign in the Federation of Malaya or in any of the nine Malay States including Selangor.
It had powers in respect of external affairs, defence and the deployment of the British army which were granted it under Treaty with each Malay State and were reflected in the Federation Agreement.
Those powers must have been given to the King wearing the Crown of, and in the interests of, the United Kingdom.
There is no reason not to treat them as having simply been exercised in that capacity and for that purpose, on the advice of United Kingdom ministers.
All the indications are that this is the basis on which they were exercised.
While on active service in Malaya, the Scots Guards remained His Majestys forces and under the command of the Crown exercised through the Army Council in accordance with the Kings Regulations: see para 164 above.
There was no question of their secondment to any other authority.
Neither the Commissioner General in South East Asia nor the High Commissioner for the Federation appears actually to have had any right of command over them.
The fact that their members may not have served under any contract of service is irrelevant to the present issue whether the appellants complaints relating to their alleged activities in Selangor involve alleged failure by the United Kingdom to secure to everyone within [its] jurisdiction the rights and freedoms in article 2 of the Convention.
By 1953 the Convention was in force and had been extended by notification under article 56 to the Malayan Federation.
Once the Convention came into force and was so extended, the second strand of reasoning in Quark, based on the absence of any such notification, can no longer directly apply.
The fact of notification, coupled with the United Kingdoms control over its armed forces on active service in Selangor, mean that the deaths in December 1948 occurred in circumstances within the United Kingdoms jurisdiction, within the meaning involved in article 1 of the Convention, if and to the extent that that article applies.
Those who died were at the time within the British Armys control, and this would continue to be so, even if they were fired upon as they were seeking to escape.
Under the Convention, the question next arising is one of timing: can the United Kingdom be regarded as responsible for failure to hold an inquiry into deaths which occurred in December 1948 before the Convention was in force at all, let alone extended to the Federation? I have concluded that the deaths in December 1948 would have occurred within the United Kingdoms jurisdiction within the meaning of article 1, had the Convention been in force in Malaya in 1948.
On that basis, and because the gap in time between the deaths and the extension to the Malayan Federation of the Convention, was less than ten years, a sufficient temporal link exists between the deaths and the critical date to satisfy the test laid down in the Strasbourg case law, particularly Janowiec v Russia (2013) 58 EHRR 792.
Under international law, there would arise a parallel, though relatively unexplored, issue of timing, which Lord Neuberger mentions in para 117 but which it is unnecessary to resolve on this appeal.
As a matter of purely common law judicial review, the length of time since the deaths is a relevant discretionary factor.
That brings me to the second strand of the issue of jurisdiction, which arises from the Federations achievement of full independence in 1957.
As at and from that date, it was provided by article 167(1) of the Federal Constitution, given effect by the Federation of Malaya Independence Order in Council No 1933 of 1957 that all rights, liabilities and obligations of Her Majesty in respect of the government of the Federation shall on and after [Independence] Day be the rights, liabilities and obligations of the Federation: see paras 166 167 above.
The United Kingdom also ceased to have any right of intervention in the face of external threats or in respect of defence and the notification under article 56 of the Convention extending the Convention to the Federation ceased to apply.
The respondents contend on this basis that the United Kingdom cannot after 1957 have come under any duty to hold an inquiry into what occurred in December 1948.
Perhaps unsurprisingly, we were shown little material to guide us on the resolution of this strand of the overall issue.
But I am not persuaded by the respondents submission that the grant of full independence in 1957 relieved the United Kingdom of any potential obligation, otherwise arising towards alleged victims of alleged pre 1957 misconduct by the United Kingdom army, to hold an inquiry into such misconduct.
A first question is whether any potential liability or obligation to hold an inquiry into the deaths in December 1948 can be said to be in respect of the government of the Federation at all.
I have considerable doubt whether it can be.
Once it is concluded that the British army was in Malaya in the service of His Majesty and in the interests of the United Kingdom, I have difficulty in regarding it as acting in respect of the government of the Federation, even though it was there to protect Selangor and the Malay States from external hostile attacks or for similar purposes: see paras 170 171 and 178 above.
However, I need not rest my conclusions on this sole basis.
Assuming that the conduct of the British army in Malaya was in respect of the government of the Federation, and any potential duty to hold an inquiry into such conduct likewise, the question is whether and how the constitutional arrangements made between the Federation and the United Kingdom on the Federations independence can affect any domestic law duty which the United Kingdom would otherwise have towards victims to hold an inquiry into or, in appropriate circumstances, to pay compensation in respect of prior misconduct by the British army.
I do not see how they could, even if the deaths can be regarded as occurring during the course of governmental activities which were in 1948 the responsibility of the United Kingdom but were transferred in 1957 to the Malayan Federation.
State succession is an area of international law which is neither easy nor well covered by authority.
Brownlies Principles of Public International Law 8th ed (2012), p 442 summarises the position as follows: The preponderance of authority is in favour of a rule that responsibility for an international delict is extinguished when the responsible state ceases to exist either by annexation or voluntary cession.
Such liability is considered personal to the responsible state and remains with the state if it continues to exist after the succession.
This reasoning is, however, less cogent in relation to voluntary merger or dissolution.
Nor does it apply when a successor state accepts the existence of succession.
In the Lighthouses Arbitration [(1956) 23 ILR 81] it was held in connection with one claim that Greece had by conduct adopted an unlawful act by the predecessor state and recognised responsibility.
The principle stated in the first sentence is illustrated in domestic law by West Rand Central Gold Mining Co v The King [1905] 2 KB 391, in which the Kings Bench Divisional Court held that there was no principle of international law by which, after annexation or conquest, a conquering state could become liable, absent express contrary stipulation, to discharge the financial liabilities of the conquered state incurred before the outbreak of war.
The principle of acceptance or adoption, referred to in the last two sentences of the passage in Brownlie, also appears in Mwandingi v Ministry of Defence, Namibia [1991] 1 SA 851 (Nm).
The High Court of Namibia there held the Ministry of Defence of Namibia liable for the alleged wrongful shooting of the claimant by the South African Defence Force prior to Namibian independence.
It based its decision on article 140 of the Constitution of Namibia, providing that everything done by the government of South Africa should be deemed to have been done by the government of Namibia.
If the conduct of the British army in December 1948 can be regarded as being in respect of the government of the Federation, it might be said to have been adopted by the Federation by article 167(1) of the 1957 Constitution.
But I do not see how or why adoption by the Federation as a successor state should at the same time release the United Kingdom in domestic, or even international, law vis vis the victims of such conduct.
Apart from adoption, the general rule which appears is that state liability for a death remains with the state responsible for the deaths, so long as that state exists, and does not pass to a successor state which takes over the relevant territory or activities.
Different arrangements made as between the United Kingdom and the Federation should not on any view affect the rights which victims otherwise have against the United Kingdom domestically, whether such domestic rights arise by reference to the Convention rights, international law or pure common law principles.
Assuming that the deaths in December 1948 were and remain the United Kingdoms responsibility domestically, responsibility for any inquiry now called for into them must prima facie also remain with the United Kingdom.
It is true that the inquiry is claimed by persons who are now clearly not within the United Kingdoms control, in relation to an incident in a place which is now equally clearly outside the United Kingdoms jurisdiction; and, further, that much of the evidence and material which could or would be relevant is and is only in Malaysia, which is outside the jurisdiction.
But any inquiry would relate to the deaths of persons who were at the time under United Kingdom control, and to the conduct of the British army which was and is within United Kingdom jurisdiction.
More specifically it would relate to the conduct of Scots Guards who were under United Kingdom command and within United Kingdom jurisdiction (and one or two of whom are still alive and understood to be within such jurisdiction).
When a death of a person under British military control occurs abroad, any subsequent inquiry will often involve seeking information from sources in different jurisdictions at the date of the inquiry.
So far as concerns the Convention, any duty on the part of the United Kingdom under article 2 to hold an inquiry in accordance with the principles in Janowiec is an independent duty.
This is so although it requires a triggering event, such as a death occurring at a time when the individual complainants could rely on the Convention or within a short period (with a maximum of ten years) prior to whenever that became possible.
In either case, the duty to hold an inquiry may arise from or, in the language of Janowiec, be revived by the discovery of relevant new matter, whereupon a claim to an inquiry may be pursued, within the appropriate time limit for making such a claim after the duty has arisen or revived.
For there to be a Convention duty to hold an inquiry, this must be necessary to secure to [some]one within [the United Kingdoms] jurisdiction the rights and freedoms defined in article 2.
But this cannot and does not mean that the beneficiaries of the inquiry must be within the jurisdiction when the inquiry is sought.
The focus must be on whether the inquiry relates to an incident involving someone within the United Kingdoms jurisdiction.
In the light of my conclusions on the first strand of the overall issue of jurisdiction, that was and is here the case.
As to the problem that the subject matter of any inquiry would be the conduct of British troops in what is now a fully independent country, that is no new phenomenon, having regard to the United Kingdoms experience in Iraq and Afghanistan.
Dividing and tailoring of a Convention obligation to secure Convention rights relevant to an individual was recognised as possible in Al Skeini v United Kingdom (2011) 53 EHRR 589, para 137, when a state, through its agents, exercises control and authority over an individual, and thus jurisdiction.
If other conditions were satisfied, I see no reason why the United Kingdom should not be required to hold an inquiry under article 2 in respect of the events in Selangor in December 1948, on the basis that the inquiry could and would be tailored and limited to what was feasible, having regard inter alia to such co operation as might be obtained from the Malaysian authorities.
Similarly, if an inquiry were required by reference to international law and/or as a matter of purely common law judicial review, the United Kingdom could not be expected to do more than was feasible.
For these reasons, I would reject the respondents case on both strands of the issue of jurisdiction, and hold that, had the other conditions for ordering an inquiry been satisfied, there would be no jurisdictional obstacle to doing so.
LORD KERR:
The response that the law ought to make to a claim that an historical wrong should be legally recognised and redressed involves a recurring and multi faceted challenge.
That challenge can arise in a myriad of contexts the prosecution of sexual offences perpetrated years or even decades before proceedings come to court; the quashing of convictions long after they were first made against a person whose innocence is established by subsequently obtained evidence; and the holding of an inquest into someones death years after it occurred, when new evidence touching on the death has come to light.
These are but a few examples of cases where the law has had to confront the need to revisit disputes which had been considered settled or which were said to have occurred too long ago to countenance their revival.
This appeal involves precisely such a challenge.
The shocking circumstances in which, according to the overwhelming preponderance of currently available evidence, wholly innocent men were mercilessly murdered and the failure of the authorities of this state to conduct an effective inquiry into their deaths have been comprehensively reviewed by Lord Neuberger in his judgment and require no further emphasis or repetition.
It is necessary to keep those circumstances and that history firmly in mind, however, in deciding how our system of law should react to the demand of the relatives of those killed that the injustice that has been perpetrated should be acknowledged and accepted.
Three possible gateways to the vindication of the appellants claim have been dealt with by Lord Neuberger: via article 2 of the European Convention on Human Rights and Fundamental Freedoms (ECHR); under customary international law, as incorporated into the common law; and by the invocation of the principle of proportionality as a basis for judicial review in the municipal law of this country.
Article 2
It would be a mistake, I believe, to view the applicability of article 2 solely in terms of whether it has retrospective effect.
This provision carries with it a duty, complementary to the obligation to protect life, of investigating any death occurring in suspicious circumstances.
That duty does not arise as a matter of retroactive obligation.
If article 2 applies, the obligation to investigate the death is a current imperative.
As Lord Neuberger has observed (para 66) the respondents accept that, if article 2 applies to these deaths, there is an existing obligation to carry out an inquiry that meets its requirements.
That duty has been variously described as separate, autonomous or detachable from the primary obligation under article 2.
It has an existence which is distinct from that primary obligation.
The assertion that an article 2 inquiry is not required does not rest, therefore, on the claim that no contemporary duty exists but on the essentially pragmatic basis that, for procedural reasons, it is not appropriate that an inquiry be held.
This is important.
In principle an inquiry into the deaths that is compliant with article 2 should be held.
But it is claimed that that prima facie position should give way because a bright line rule is required to restrict the backward reach of article 2.
The foundation of that claim is, as I have said, pragmatic rather than principled.
That consideration should form the background to an examination of the Strasbourg jurisprudence in this area.
The detachable nature of the duty to investigate; the fact that this is not inextricably bound up with the primary duty to protect the right to life, underlay the ECtHRs decision in ilih v Slovenia (2009) 49 EHRR 996.
This is fundamental to a proper understanding of the correct approach to take to the trilogy of issues which arise: the critical date on which a member state will be considered bound by its treaty commitments; the relevant acts and omissions after the critical date; and the genuine connection between the death and the critical date.
On one view, these are no more than arbitrarily selected standards which might rather than must inform consideration of whether a member state should be required to conduct an article 2 compliant inquiry into a death which occurred before the Strasbourg court acquired formal temporal jurisdiction.
There is no inescapable point of principle, for instance, which requires the adoption of a ten year period as the absolute limit on the period between the death and the critical date.
The desirability of a rule, whether it be described as a bright line rule or a rule of thumb, is obvious, however.
Where feasible, states should have some indication from the ECtHR as to when their article 2 duty is likely to arise.
And there has to be some limit on how far back that duty extends.
Practicability of inquiry must play a part in the evaluation.
Before turning to consider in detail the particular decisions of the ECtHR in this area, a general observation may be made.
It is not appropriate, in my opinion, to seek to derive from the Strasbourg jurisprudence rigid rules that might be supposed to provide infallible answers to the questions that arise as to whether deaths occurring before the critical date should be subject to an article 2 inquiry.
The evolutionary development of the procedural right under article 2 is alone sufficient to establish the inaptness of such an approach.
Convention rights do not generally lend themselves to the application of inflexibly prescriptive rules.
This is especially true of article 2 rights.
The critical date
Although the respondent adumbrated four possible dates that might qualify as the critical date (i) the date of signing the Treaty establishing ECHR, (1950); (ii) the date of ratification, (1951); (iii) the date of entry into force in the United Kingdom of the Convention, (1953); and (iv) the date on which individual petition was granted, (1966), on the hearing of the appeal, the dispute concerning the critical date issue centred on two possibilities.
The first of these was the date on which the Convention came into force in the United Kingdom, 3 September 1953, (or when it was extended to the Confederation of Malaya, 23 October 1953).
The second possibility was the date on which the United Kingdom gave its citizens the right of personal petition to the Strasbourg court 14 January 1966.
Lord Neuberger has decided that the case law of the ECtHR favours the latter date and I can understand how that view can be reached in light of some of the statements made by the ECtHR.
There are some contrary indications to be found in other statements and, in the light of these, I have concluded that Strasbourg case law does not point indisputably in the direction of the date of personal petition being the critical date.
There is reference in the Strasbourg jurisprudence which can be interpreted as supporting the view that the date on which the United Kingdom became bound by the Convention (1953) should be regarded as the critical date.
What does the coming into force of treaty obligations such as those contained in ECHR entail? In the case of the United Kingdom it must surely involve this countrys acceptance that it is bound by and agrees to abide by the terms of the Convention.
The date on which the Convention came into force in the United Kingdom must be the date when this country formally accepted that it was bound to comply with the rights enshrined in ECHR including those contained in article 2.
Now that it is recognised that that duty comprehends a freestanding obligation to conduct an inquiry into suspicious deaths, in 1953, on the coming into force of the Convention, the United Kingdom was, as a matter of international law, bound to conduct an inquiry into the deaths involved in these appeals.
Can it be said, in those circumstances, that the critical date did not arrive for another 12 years?
In my view, there is no clear and constant line of jurisprudence emerging from the Strasbourg court that would support the notion that, although the United Kingdom had, from 1953, an international obligation to conduct an article 2 inquiry into these deaths, the Strasbourg courts temporal jurisdiction did not come into existence until 1966.
Before the Court of Appeal the respondents did not argue that the critical date was 1966.
On the contrary, at para 13 of the skeleton argument submitted by the respondents for the Court of Appeal hearing it is stated, the critical date would be in a Strasbourg case the date on which the United Kingdom ratified the ECHR.
That the respondents did not espouse 1966 as the critical date is not surprising in light of the Strasbourg jurisprudence and, incidentally, observations made by this court In re McCaughey [2011] UKSC 20; [2012] 1 AC 725 see paras 62, 78, 101, 112.
One may begin the review of ECtHR case law with Blei v Croatia (2006) 43 EHRR 1038.
In considering statements made in that case about the temporal jurisdiction of the Strasbourg court it is to be remembered that the decision was given before the detachable duty to investigate suspicious deaths had been recognised.
Leaving that aside, however, it is clear that support for either of the contended for critical dates can be discerned from the courts discussion about its temporal jurisdiction.
Thus in para 70 the court said: in accordance with the general rules of international law, the provisions of the Convention do not bind a contracting party in relation to any act or fact which took place or any situation which ceased to exist before the date of the entry into force of the Convention with respect to that party. (emphasis added)
But in para 71 the court referred to declarations made under former articles 25 and 46 of the Convention by which Croatia recognised the competence of the Convention organs to deal with individual petitions based on facts occurring after the Convention and its Protocols had come into force in respect of Croatia which might appear to suggest that the critical date was that on which the right of an individual to present a personal petition was recognised. (This was, of course, the same date as the ratification of the Convention by Croatia.)
Lord Neuberger has relied on the statement in para 140 of the Grand Chambers judgment in ilih in support of his conclusion that the critical date is the grant of the right of individual petition (paras 80 and 81 above).
Two observations may be made about this.
Firstly, the Grand Chamber in para 140 canvassed two possible candidates for the critical date the coming into force of the Convention or the entry into force of Protocol No 11, whereby the right of individual petition was recognised.
The Grand Chamber did not say that the critical date was necessarily the later of these possibilities.
Often, as in the case of Slovenia, these dates coincide.
It is, to my mind, therefore, by no means clear that the Grand Chamber in para 140 purported to lay down a general rule that if the grant of the right of individual petition post dated the coming into force of the Convention, it was the later event that must be regarded as marking the critical date.
The Grand Chamber had no need to address that issue since the two events (the coming into force of the Convention and the grant of a right to individual petition) occurred at the same time.
Secondly, later statements in ilih are consistent with the view that the critical date is in fact the date of entry into force of the Convention rather than the date of the grant of the right of individual petition.
Thus in para 165, the Grand Chamber said, the court notes that the death of the applicants son occurred only a little more than a year before the entry into force of the Convention in respect of Slovenia and in para 166, The court notes and the government did not dispute that the applicants procedural complaint essentially related to judicial proceedings which were conducted after the entry into force of the Convention (emphasis added in both instances).
I accept that the Grand Chambers decision in Varnava v Turkey (Application Nos 16064 16066/90 and 16068 16073/90) (unreported) given 18 September 2009, represents a rather more forthright endorsement of the grant of the right of individual petition as the critical date.
In paras 132 134 the court said: 132.
Turkey ratified the Convention on 18 May 1954; it accepted the right of individual petition on 28 January 1987 and the jurisdiction of the old court on 22 January 1990.
Protocol No 11, which brought the new court into existence, came into force on 11 January 1998. 133.
Turkey was accordingly bound by the provisions of the Convention from 18 May 1954.
However, its acceptance of the right of individual petition was limited to facts taking place after the date of the declaration to that effect on 28 January 1987.
When the old court ceased to function in 1998, this courts jurisdiction became obligatory and ran from the acceptance by a Contracting State of the right of individual petition.
It follows that the court is not competent to examine any complaints raised by these applicants against Turkey in so far as the alleged violations are based on facts having occurred before 28 January 1987 (see Cankocak v Turkey (Application Nos 25182/94 and 26956/95), para 26, 20 February 2001, and Demades v Turkey (just satisfaction) (Application No 16219/90), para 21, 22 April 2008). 134.
On that basis, any complaints by the applicants asserting the responsibility of the Contracting State for factual events in 1974 are outside the courts temporal jurisdiction.
In so far as any complaints are raised concerning acts or omissions of the Contracting State after 28 January 1987, the court may take cognisance of them.
It notes in this respect that the applicants specified that their claims related only to the situation pertaining after January 1987, namely the continuing failure to account for the fate and whereabouts of the missing men by providing an effective investigation.
The Grand Chambers statement that the court's jurisdiction became obligatory and ran from the acceptance by a Contracting State of the right of individual petition is not supported by any analysis.
And, as Lord Neuberger has acknowledged, that statement is incidental to the decision in the case because the court found that the nature of the procedural obligation to investigate disappearances was such that, potentially, it persisted as long as the fate of the person who had disappeared was unaccounted for; the ongoing failure to provide the requisite investigation was therefore regarded as a continuing violation.
Interestingly, an argument deployed by the government of Cyprus (an intervener in Varnava) which was recorded at para 128 of the judgment does not appear to have been dealt with by the Grand Chamber.
It was to the effect that the applications could not be said to concern Turkeys responsibility for acts or omissions at a time when it had not accepted the Convention.
The disappearances had occurred in 1974 and from 1954 onwards Turkey could have been subject to proceedings begun by other contracting parties.
If this argument is right (and I cannot see any reason that it is not) it illustrates the true nature of the correct date concept.
It should be seen as a gateway that is concerned principally with the backward reach of article 2, not simply with the enforceability of an individual right under that provision.
On one view, it would be anomalous that a countrys failure to conduct an article 2 inquiry would come within the Strasbourg courts temporal jurisdiction at the suit of another member state but that it should not be amenable to that jurisdiction on an application by the next of kin of the person whose death was the subject of the application.
As against that, however, it might be thought to be incongruous that ECtHR should be able to assume jurisdiction to adjudicate in a dispute between citizen and state before the right of individual petition had even been conferred.
An example of the choice of the entry into force alternative can be found, however, in the case of Dorado v Spain (Application No 30141/09) (unreported) given 27 March 2012.
The Convention entered into force in Spain on 4 October 1979.
The right of individual petition became applicable to that country on 1 July 1981.
Notwithstanding this, the Third Section of the ECtHR in held that the critical date was the entry into force of the Convention.
At para 32 the court said: The court emphasises that the provisions of the Convention do not bind a Contracting Party in relation to any act or omission which took place or any situation which ceased to exist before the date of the entry into force of the Convention with respect to that Party (the critical date see Blei v Croatia [GC] (Application No 59532/00), para 70, ECHR 2006 111; ilih v Slovenia [GC], (Application No 71463/01), para 140, 9 April 2009; and Varnava and Others v Turkey [GC], (Application Nos 16064/90, 16065/90, 16066/90, 16068/90, 16069/90, 16070/90, 16071/90, 16072/90 and 16073/90), para 130, ECHR 2009 . ). (emphasis added)
Significantly, the court included Varnava among the decisions which, it suggested, supported the proposition that the Convention was binding at the date of its entry into force in the relevant member state.
And, lest it be thought that the failure to identify the time of the grant of the right to individual petition as the critical date was inadvertent, it should be noted that the two dates (coming into force and right of individual petition) were expressly referred to in paras 34 and 39 of the judgment.
In Janowiec v Russia (Application Nos 55508/07 and 29520/09) (2013) 58 EHRR 792, the Grand Chamber again considered the question of the temporal jurisdiction of the court.
The statement in para 128 of the courts judgment, quoted by Lord Neuberger at para 71 above, that the provisions of the Convention do not bind a Contracting Party in relation to any act or fact which took place or any situation which ceased to exist before the date of the entry into force of the Convention with respect to that Party (the critical date) is expressed in unqualified terms.
Lord Neuberger has said that, despite these seemingly clear words, the issue is not disposed of by the judgment in Janowiec because Russia had acceded to the Convention on the same date that it gave its citizens the right of personal petition to Strasbourg.
But if the choice between the two possible candidates for the critical date is a stark one (and it has been so portrayed throughout this appeal), then the fact that the two events occurred on the same day cannot explain why the court chose to identify the entry into force of the Convention as the critical date.
If it was clear that the grant of the right to individual petition marked the critical date, why has the court in Janowiec omitted to say so? Why should it state that the critical date was the time of the entry into force of the Convention, if this was merely an incidental circumstance?
The point has been made that if the Grand Chamber in the subsequent decision in Janowiec had considered that what was said in para 140 of ilih was wrong, it would surely have said so.
This, of course, depends on ones view of the import of that paragraph.
For the reasons given at paras 206 and 207 above, I do not accept that the court in ilih decided that the date of the grant of the right to an individual petition was the critical date.
There was no need, therefore, for the court in Janowiec to make any adverse observation on para 140 of ilih.
In akir and others v Cyprus (Application No 7864/06), (unreported) given 29 April 2010, an admissibility decision, the court referred on a number of occasions to the date on which Cyprus accorded the right of individual petition as the critical date.
Lord Neuberger regarded this as highly significant, pointing out in para 84 of his judgment that this was the date that had been chosen by the court rather than the date on which Cyprus had acceded to the Convention.
In the section of the judgment entitled The Law, however, the court said: The court emphasises that the provisions of the Convention do not bind a Contracting Party in relation to any act or omission which took place or any situation which ceased to exist before the date of the entry into force of the Convention with respect to that Party or, as the case may be, before the date on which the respondent Party recognized the right of individual petition (the critical date see Blei v Croatia [GC], (Application No 59532/00), para 70, ECHR 2006 III; ilih v Slovenia [GC], (Application No 71463/01), para 140, 9 April 2009; and Varnava and others v Turkey [GC], (Application Nos 16064/90, 16065/90, 16066/90, 16068/90, 16069/90, 16070/90, 16071/90, 16072/90 and 16073/90), para 130, ECHR 2009 . ). (emphasis added)
Again, therefore, the decision in akir does not unmistakably endorse the time of the grant of personal petition as the only possible critical date.
In my view, the least that can be said of the relevant ECtHR case law is that it certainly does not provide unequivocal support for the view that the critical date is in every instance the date on which the right to present an individual petition to the Strasbourg court has been granted by a member state.
What then should this courts conclusion on the critical date be? Two interrelated issues must be addressed in order to answer this question.
The first concerns the significance which should attach to the absence of clear guidance from Strasbourg on whether the critical date should be the date of entry into force of the Convention or the date of the grant of the right of individual petition.
The second issue is whether the approach to the backward reach of the Convention obligation should be approached in the same way by a national court as it is by the ECtHR, in light of the fact that this court must deal with the question as a matter of domestic law.
Part, at least, of the interrelationship between these two issues stems from the fact that national courts in this country give effect to (or refuse to give effect to) Convention rights as a matter of domestic law.
The Human Rights Act 1998 introduced to the law of the United Kingdom the European Convention on Human Rights and Fundamental Freedoms.
But it did so by making the Convention part of national law so that the rights became domestic rights.
Because the rights are domestic, they must be given effect according to the correct interpretation of the domestic statute.
As Lord Hoffmann said In re G (Adoption: Unmarried Couple) [2008] UKHL 38; [2009] AC 173, para 34, [the courts] first duty is to give effect to the domestic statute according to what they consider to be its proper meaning, even if its provisions are in the same language as the international instrument which is interpreted in Strasbourg.
There are, of course, sound practical and policy reasons that our national courts should follow decisions of the ECtHR.
Perhaps the most important of these was touched on by Lord Hoffmann in para 35 of In re G: The best reason is the old rule of construction that when legislation is based upon an international treaty, the courts will try to construe the legislation in a way which does not put the United Kingdom in breach of its international obligations.
If Strasbourg has decided that the international Convention confers a right, it would be unusual for a United Kingdom court to come to the conclusion that domestic Convention rights did
Lord Hoffmann mentioned what Lord Bingham had said in the earlier case of R (Ullah) v Special Adjudicator [2004] UKHL 26; [2004] 2 AC 323.
In para 20 of his speech in that case Lord Bingham had uttered the fateful line that has become the source of much judicial controversy, The duty of national courts is to keep pace with the Strasbourg jurisprudence as it evolves over time: no more but certainly no less.
This gave life to the so called mirror principle whereby the content and character of rights in the UK national sphere should precisely match Strasbourg pronouncements.
The sentence is much quoted as is, what has been described as, the characteristically stylish twist that was put on it by Lord Brown in R (Al Skeini) v Secretary of State for Defence (The Redress Trust intervening) [2007] UKHL 26; [2008] AC 153, para 106 where he said that the sentence could as well have ended: no less, but certainly no more.
In Ullah Lord Bingham was careful to refer to the interpretation of the Convention (as opposed to the interpretation of HRA) but his opinion in that case has been used in a number of subsequent judgments to support the proposition that the content of domestic rights under HRA should not, as a matter of principle, differ from those pronounced by Strasbourg.
Indeed, his judgment has been construed as indicating that, unless the ECtHR has given clear guidance on the nature and content of a particular Convention right, the national courts of the UK should refrain from recognising the substance of a claimed entitlement under ECHR.
So, for instance, in Al Skeini Lord Brown suggested that where the ECtHR had not spoken, our courts should hold back, explaining that, if it proved that Convention rights have been denied by too narrow a construction, the aggrieved individual can have the decision corrected in Strasbourg.
And in R (Smith) v Oxfordshire Assistant Deputy Coroner (Equality and Human Rights Commission intervening) [2010] UKSC 29; [2011] 1 AC 1 Lord Phillips followed a similar line.
I have expressed my disagreement with that approach in Ambrose v Harris Procurator Fiscal [2011] UKSC 43; [2011] 1 WLR 2435 but must immediately acknowledge that mine was the sole dissenting judgment in that case.
Since then, however, judgments have been given in which a departure from a rigid application of the mirror principle is discernible.
In Rabone v Pennine Care NHS Foundation Trust (INQUEST intervening) [2012] UKSC 2, [2012] 2 AC 72 it was held that there was a positive obligation to protect the life of a mentally ill young woman who had been admitted to hospital informally because of serious attempts to take her own life.
This decision was reached notwithstanding the fact that there was no authority from the ECtHR to that effect.
In Surrey County Council v P (Equality and Human Rights Commission intervening) [2014] UKSC 19; [2014] AC 896, para 62 Lord Neuberger said that where there was no Strasbourg authority which dealt precisely with the issues before this court, this court could rely on principles expressed by the ECtHR, even if only indirectly relevant, and apply them to the cases which it had to decide.
At para 86 of that case, I reiterated my view (first expressed in Ambrose) that this court had a duty to determine whether a claim that a Convention right had been breached should be accepted, even if Strasbourg had not yet pronounced upon it.
And in Moohan v Lord Advocate (Advocate General for Scotland intervening) [2014] UKSC 67; [2015] AC 901 Lord Wilson suggested that there had been a retreat from the Ullah principle which had led the court to substantially modify it.
At para 105 he said: where there is no directly relevant decision of the ECtHR with which it would be possible (even if appropriate) to keep pace, we can and must do more.
We must determine for ourselves the existence or otherwise of an alleged Convention
If there is no clear guidance from Strasbourg on which of the alternatives should be chosen as the critical date, in my view, this court should not be deterred from forming its own judgment as to which is appropriate.
I acknowledge, however, that where the national court is required, as part of its decision on a Convention issue, to address directly the question of what Strasbourg would decide (as opposed to what the national court itself should decide), there is a need for caution, where there is no or no clear guidance from the ECtHR on the question.
This does not, however, relieve the national court of its duty under section 6 of HRA to resolve the dispute as to whether there has been a breach of a Convention right.
The decision in this case as to which date is to be preferred partakes of a two pronged inquiry.
First, what the Strasbourg court would decide on the question of its temporal jurisdiction, if presented with a stark choice between the date on which the right of personal petition was granted by the member state and the date of entry into force of the Convention.
Secondly, whether this court should be influenced in its decision as to its jurisdiction under the Human Rights Act by what it considers the Strasbourg court would decide.
This is the second issue identified in para 227 above.
One can recognise the force of the point made by Lord Neuberger at para 84 that, as a matter of first principle, the critical date, so far as the Strasbourg court is concerned, should be linked to the date on which it is invested with the jurisdiction by a member state to entertain personal petitions from that states citizens.
As against that, it seems to me that, from the date of entry into force of the Convention in a member state, since it then assumed an international duty to abide by the terms of ECHR, that duty was enforceable by another member state.
Article 33 of ECHR (previously article 24) provides for inter state applications.
In order to invoke this procedure, it is not necessary for the complainant state to have been a victim.
Rights could be violated and inter state enforcement actions could be taken long before the right of individual petition was recognised in some member states.
In light of this, as I have said at para 220 above, it might be regarded as anomalous that the individual actually affected by an alleged violation should not have the right to enforce his or her right while another state could apply to the court for redress.
But it may be that this is an anomaly which simply must be accepted.
Whichever of the alternatives is chosen (the date of entry into force or the date of the personal petition) it is clear that this is not to be regarded as an immutable point from which no departure can be made.
In the first place, as Lord Neuberger has explained, it is well settled in Strasbourg case law that a connection between the triggering event and the critical date can, in certain circumstances, warrant extending the temporal jurisdiction of the Strasbourg court back to that event.
As the ECtHR has made clear in, among other cases Janowiec, there must be relevant acts or omissions after the critical date and the period between the triggering event and the critical date must remain reasonably short [and while there was no] absolute limit on the duration of that period it should not exceed ten years (para 146).
If Strasbourg is willing to contemplate a backward reach of up to ten years between the triggering event and the critical date, is it certain that ECtHR would not be prepared to back date the reach of the Convention to the date of its entry into force in a particular member state? In my view, it is not.
But it is by no means certain that the court would be prepared to do so.
Because of the need for caution, to which I have adverted (in para 235 above), but not without some hesitation on my part, I am not prepared to say that ECtHR would hold that the critical date was the entry into force of the Convention or that the backward reach of the Convention should be extended to that date.
In the event, therefore, although Lord Neuberger and I are not in precise agreement as to what Strasbourg would find, that disagreement does not signify in terms of the present appeal.
Either Strasbourg would find that the critical date was the date on which the right to individual petition was conferred or it is not clear that it would not so find.
The consequence is the same in both scenarios.
A further matter requires to be considered, however.
At para 149 of Janowiec the Grand Chamber accepted that there may be extraordinary situations which do not satisfy the genuine connection standard but where the need to ensure the real and effective protection of the guarantees and the underlying values of the Convention would constitute a sufficient basis for recognising the existence of a connection.
The type of extraordinary situation in contemplation here was explained by the court in para 150: the Grand Chamber considers the reference to the underlying values of the Convention to mean that the required connection may be found to exist if the triggering event was of a larger dimension than an ordinary criminal offence and amounted to the negation of the very foundations of the Convention.
This would be the case with serious crimes under international law, such as war crimes, genocide or crimes against humanity, in accordance with the definitions given to them in the relevant international instruments.
At para 151, however, the court said this: The court nonetheless considers that the Convention values clause cannot be applied to events which occurred prior to the adoption of the Convention, on 4 November 1950, for it was only then that the Convention began its existence as an international human rights treaty.
Hence, a Contracting Party cannot be held responsible under the Convention for not investigating even the most serious crimes under international law if they predated the Convention.
Although the court is sensitive to the argument that even today some countries have successfully tried those responsible for war crimes committed during the Second World War, it emphasises the fundamental difference between having the possibility to prosecute an individual for a serious crime under international law where circumstances allow it, and being obliged to do so by the Convention.
In light of this passage, I agree with Lord Neuberger that, so far as the Strasbourg court is concerned, the Convention values argument cannot assist the appellants in their claim that a genuine connection between the triggering event and the critical date should be recognised.
The claim under HRA
What then of the claim based on HRA? Is there any reason that a national court should adopt the same approach to the question of critical date as that of the Strasbourg court? If not, what should the backward reach of HRA, if any, be? Three possibilities must be considered.
The first is that the date of the coming into force of the Act itself should mark the date on which a right under HRA arises.
The second is that the right under HRA should be coterminous with the temporal jurisdiction of the ECtHR.
Finally, it is necessary to consider whether the Convention values dimension could exceptionally provide a link to the Killings in 1948, when that dimension is considered under HRA rather than under ECHR.
By way of preamble to consideration of these alternatives, and with particular reference to the second of them, it should be emphasised that the temporal jurisdiction of the Strasbourg court derives from provisions that applied or apply exclusively to that court.
Article 25 of ECHR provided that the European Commission of Human Rights could receive petitions from any person claiming to be the victim of a violation of his or her Convention rights, provided that the member state against which the complaint was made had declared that it recognised the competence of the Commission to receive such petitions.
Article 46 contained a similar provision in relation to the court.
Since 1994, it has been compulsory for member states of the Council of Europe to accept the right to petition the Strasbourg court.
Not only do these provisions not apply to claims under HRA, they have nothing to say on the issue of the temporal jurisdiction of this court under that Act.
The right of individual petition is a specific, procedural question which applies only to the Strasbourg court.
Should the date on which a claim under HRA is possible, be the date of coming into force of that Act?
The House of Lords In re McKerr [2004] UKHL 12, [2004] 1 WLR 807, unanimously held that HRA did not have retrospective effect.
On that account, the argument that there was a duty to conduct an article 2 compliant investigation into a death which had occurred before 2 October 2000 (the date on which HRA came into force) was dismissed.
In McCaughey some modification (as Lord Neuberger has put it) of that position was inevitable.
McKerr had been decided before the detachable nature of the procedural requirement to investigate a suspicious death was recognised.
But it is important to understand that McCaughey did not challenge the conclusion in McKerr that HRA did not have retrospective effect.
It was because the procedural obligation under article 2 was a continuing one that an article 2 compliant inquest in the latter case was required see Lord Phillips at paras 51 52 and 61; Lord Hope at para 76; Lady Hale at para 90; Lord Brown at para 100; my own judgment at paras 110 111; and Lord Dyson at para 134.
Lord Neuberger has commented (at para 95 above) that Lord Phillips in McCaughey was inclined to hold that a departure from McKerr was warranted because domestic law should follow the jurisprudence of the Strasbourg court in recognising an article 2 obligation to investigate a suspicious death after the coming into force of HRA.
He has also suggested that Lord Dyson (in paras 132 137) and I (in paras 110 114) also favoured this conclusion.
It may be that Lord Phillips was of the view that McKerr should be departed from solely because Strasbourg had expressed a different view about the retrospective potential of the Convention and that this should be applied as a matter of automatic consequence to the HRA.
I do not consider, however, that this was the purport of Lord Dysons or my judgment.
It was because the detachable nature of the procedural duty under article 2 was clearly recognised for the first time in ilih that the decision in McKerr could no longer be followed.
It was not because it was considered that the pronouncements in that case about the non retroactive effect of the HRA were wrong.
What ilih showed was that the assertion in McKerr that all the obligations arising under article 2 were to be treated as parts of a single whole could no longer stand.
Of course, it was theoretically open to this court in McCaughey to refuse to follow the finding in ilih that the procedural duty under article 2 to investigate suspicious deaths was detachable, but, absent such a decision, the need to revise McKerr (without rejecting it in its entirety) was clear.
I agree with Lord Neuberger, therefore, that it is not necessary for this court to reach a conclusion on whether McKerrs central thesis (that HRA is not retroactive) was wrong.
Rather, what this court must do is decide whether, in light of the states detachable duty to investigate suspicious deaths, there is an existing duty to conduct an article 2 compliant inquiry into the deaths which are the subject of this appeal.
On that basis it is impossible to say that, simply because HRA came into force on 2 October 2000, ipso facto, there is no such duty.
I would therefore dismiss the first of the possibilities outlined in para 243 above.
Should the right under HRA be coterminous with the temporal jurisdiction of the ECtHR?
In para 74 of their printed case, the respondents argue that if the appellants do not have a valid claim in Strasbourg under article 2, they cannot have such a claim under the HRA because the Act gives effect to Convention rights within the United Kingdom and does not purport to expand them beyond what Strasbourg has recognised.
This argument fails to address the different sources of jurisdiction for Strasbourg and the municipal courts of this country.
Constraints on the temporal jurisdiction of the ECtHR, insofar as they derived from articles 25 and 46 of ECHR and, latterly, derive from article 6 of Protocol 11, did not and do not apply to national courts.
Moreover, recognition of the jurisdiction of this court to decide whether there is a procedural duty to investigate the deaths does not involve an expansion of the nature and content of that duty as they have been expressed by Strasbourg.
The duty remains the same in both instances.
The issue is whether, by reason of the different sources of jurisdiction, it should be regarded as arising in domestic law if it does not arise in international law.
When a domestic court, applying the HRA, considers the scope of the Convention, the date of the recognition of the right of individual petition to ECtHR is not relevant.
One can recognise that it has, at least potentially, some relevance for the Strasbourg court since it marks the beginning of the period when that court has been formally invested with jurisdiction to hear individual complaints.
But the domestic courts are in a different position.
They must ask first whether the facts constitutive of the alleged violation fall within the temporal scope of the Convention, and they must then ask whether the autonomous article 2 investigative duty lies within the temporal scope of the HRA.
The ECtHR asks a different question, namely, whether the matter falls within the temporal jurisdiction of the court, which is regulated by either the date of the entry into force of the Convention in the member state or the recognition of the right of individual petition.
My unequivocal answer, therefore to the question, should the temporal jurisdiction of the national court under the HRA be coterminous with that of ECtHR is that it should not be.
Just because the Strasbourg court does not have temporal jurisdiction, it should not be regarded as automatic that the national court does not.
But the perceived need for legal certainty which prompted ECtHRs decision about the limits on the backward reach of the Convention applies, by parity of reasoning, to the decision as to the national courts jurisdiction.
As the Grand Chamber said in Janowiec in para 133, having regard to the principle of legal certainty, the temporal jurisdiction as regards compliance with the procedural obligation of article 2 in respect of deaths that occur before the critical date is not open ended.
Likewise, the backward reach of HRA and the recognition of a continuing duty under article 2 to investigate cannot be open ended.
Some limit must be applied.
That is not to say that there are no countervailing considerations which militate against the fixing of a rigid limit.
The role of national courts is to interpret and apply the Convention and thereby provide effective human rights protection to individuals.
Indeed, the requirement that all member states of the Council of Europe must confer the right of individual petition on their citizens reflects the growing consensus that international human rights law is about ensuring justice for individual citizens rather than being a matter of relationships between governments.
Notwithstanding these considerations, the need for some temporal connection between the triggering event and the animation in the domestic law sphere of the duty to investigate is undeniable.
Otherwise the backward reach of HRA would be potentially limitless or, as it was put in Janowiec, open ended.
Should the limit be, as in the ECtHR jurisprudence, a short period and no longer than ten years? There is no reason in principle that the periods should be the same in the national law order as in Strasbourg case law.
The need for some limit in both instances is unavoidable, however.
The choice of the appropriate period must be, in the final analysis, arbitrary.
To fix it at the point of the coming into force of HRA would be antithetical to the concept of a continuing duty to investigate a suspicious death when inquiries into that death were begun or should have been continued after the coming into force of the Act.
But to extend the duty backwards without any limit simply because an adequate investigation has not yet been undertaken would be significantly out of step with the Strasbourg approach.
It would also be, in many instances, wholly impractical.
However unsatisfactory it may be in terms of principle, a limit must be set which is essentially arbitrary but which accords with what is, in most cases, practically possible.
It may well be that the ten year period chosen by Strasbourg is as good as any.
However the limit is fixed, I have concluded that it cannot be extended to cover the some 52 years from the date of coming into force of HRA and the Killings in 1948.
The need to avoid erosion of Convention values
The triggering event involved in this case, the killing of 24 apparently innocent men, is clearly of a larger dimension than an ordinary criminal offence and could well be said to be the negation of the very foundations of the Convention.
If it is established that the men were not trying to escape when they were killed and that there was no justification for opening fire on them, this would constitute a serious crime under international law.
All these elements of the killings, if shown to have existed, would strike at the heart of the guarantees and the underlying values of the Convention.
Should that circumstance operate to provide, for the purposes of HRA, the exceptional form of connection contemplated by ECtHR in para 150 of Janowiec?
The Strasbourg court considered that the question of erosion of Convention values did not arise in the pan European context in relation to events which occurred before the Convention was adopted on 4 November 1950.
Although it professed to be sensitive to the argument that there were contemporary examples of some countries having prosecuted those responsible for war crimes committed during the Second World War, it suggested that there was a fundamental difference between accepting that such prosecutions were possible and their being mandated by the Convention.
Should the same considerations obtain in deciding whether the need to protect Convention values ought to prompt a finding that HRA should be applied in a way that would require recognition of a current obligation to investigate killings which occurred almost 67 years ago?
For my part, I doubt if the question whether prosecution of historical offences should be a matter of compulsion or discretion bears directly on the issue of what is required to protect Convention values.
I consider, however, that the need to preserve those values cannot provide the basis of an exceptional link.
I have reached that view for the prosaic reason that those values take their life from the Convention.
They are not eroded by events which took place before the Convention itself, and the values and guarantees which it embodies, came into existence.
I have concluded, therefore, that the protection of Convention values dimension does not provide a link to an existing duty to conduct an article 2 compliant inquiry into the Killings.
Revival of the duty to investigate
Since no link to the triggering event has been established on any of the bases advanced by the appellants, the question of revival of the duty to investigate does not arise.
Had that been a live issue in the case, I confess that I would have found it less easy to resolve than does Lord Neuberger.
The official account of the Killings given shortly after they occurred in 1948 was affirmed in 1970 (in the House of Commons in a reply by the Attorney General, Sir Peter Rawlinson) and on 21 January 2009 in a letter from the British High Commissioner in which he said, In view of the findings of two previous investigations that there was insufficient evidence to pursue prosecutions in this case, and in the absence of any new evidence, regrettably we see no reason to reopen or start a fresh investigation.
As late as 2009, therefore, the British Government was maintaining the stance that there was nothing to challenge, much less gainsay the original official version of the Killings.
If the appellants had accepted that assertion, could they have been faulted for doing so? Surely not.
And, if not, can it be said that nothing new has subsequently emerged that would have warranted a decision to no longer accept the governments claim?
In fact, a number of new developments took place after January 2009.
In June 2009 the book, Slaughter and Deception was published.
Lord Neuberger has said that this did not contain much new revelatory evidence.
That depends on how one views the state of the evidence and the attitude that might reasonably have been taken to it before publication.
If a decision to accept the governments steadfast denials of the need for an inquiry could not be condemned, it is difficult to see how the appellants failure to challenge them can be faulted.
The least that Slaughter and Deception did was to collate material from various sources which supported the appellants case that the governments claim that no further inquiry was necessary could not be sustained.
Significantly, at a meeting held on 3 July 2009 and attended by members of the Batang Kali action committee with their lawyers and representatives of the Ministry of Defence and the Foreign and Commonwealth Office, it was disclosed that the government was reconsidering the January 2009 decision not to hold a further inquiry.
This is significant in two aspects.
First, it indicates that the government believed that there was new material which called for fresh consideration.
Secondly, it sounds on the reasonableness of the stance of the appellants in failing to take action to challenge the decision not to hold a new inquiry.
Lord Neuberger has said that in 1970 there were already considerable reasons for doubting whether the official United Kingdom Government line on the killings was correct, and that there were strong grounds which suggested that the killings were unlawful (para 107 above).
This assessment is very much a matter of individual judgment and it is not easy to avoid the influence of hindsight in making it.
In any event, it must be set against the statement in Parliament by a senior member of the government, the Attorney General, endorsing what he implied was an independent decision of the Director of Public Prosecutions not to ask the police to pursue the inquiry into the killings.
In fact, as the report of Detective Superintendent Williams revealed, he was of the view that this decision was one secured by a political change of view.
This did not come to the attention of the appellants until 2009.
Thereafter, the government was considering the representations made by the appellants as to whether a new inquiry would be held.
It has not been suggested (nor could it be) that the appellants should have challenged the failure to hold an inquiry before the outcome of the governments deliberations was known nor that they failed to act with sufficient speed after it was disclosed to them.
In the context of what is required to revive a duty to investigate, the question of what new material will be sufficient to give rise to such a revival should be approached broadly.
In Brecknell v United Kingdom (2007) 46 EHRR 957 the Strasbourg court found that a renewed investigation into a 1975 murder was necessary in order to evaluate the link between a number of previously closed cases involving fresh allegations of state collusion.
It emphasised that there could always be situations after the closure of cases where information purportedly casting new light on the circumstances of the death comes into the public domain para 66.
And in para 70, while pointing out that the revival of the duty to investigate would not be prompted by any allegation, the court said that given the fundamental importance of [article 2], the state authorities must be sensitive to any information or material which has the potential either to undermine the conclusions of an earlier investigation or to allow an earlier inconclusive investigation to be pursued further.
Clearly, therefore, it is not necessary that the new material take the form of hard evidence.
Allegations, provided they are credible and have the potential to undermine earlier findings, will suffice.
A reassessment of already existing evidence, if it is plausible and enjoys the same potential, will also be sufficient.
While, therefore, it may be true to say that nothing substantial in the way of hard evidence was revealed in Slaughter and Deception or by the appellants lawyers obtaining access to the files of the Metropolitan Police and those of the Malaysian Police, the material that they collectively provided cast an entirely new light on the decision not to hold an inquiry.
The impact of that new material was neatly and comprehensively stated in para 82 of the Court of Appeals judgment: Whilst developments since our critical date have been intermittent, they have yielded material which, to put it at its lowest, may cast doubt on the original account.
The confessions which arose in 1969 1970 were of potential significance and remain so, not least because the investigation within which they emerged was brought to an abrupt halt.
They have never been tested or discredited.
The sum of knowledge has been significantly increased by the work of the Royal Malaysian Police 20 years ago but they were unable to secure meaningful co operation from the United Kingdom authorities.
Importantly, significant material from the Metropolitan Police in the 1970s and a considerable amount of potentially relevant material accumulated during the Royal Malaysian Police investigation in the 1990s has only come to the notice of the claimants in the course of, and as a result of, these proceedings.
It includes statements made many years later by some of the children who were at Batang Kali at the time of the shootings.
It is not suggested that the material which has emerged since the critical date and which, if true, discredits the official version is all inherently incredible.
The fact is that it has never been tested independently.
Nor has it been brought together for a singular independent assessment.
Moreover, there is reason to suppose that, even now, it could be supplemented by significant pathological expert evidence following exhumation.
Professor Sue Black of the University of Dundee has so opined.
I agree with this summary and, if a link to the triggering event had been established, I would have held that the duty to conduct an article 2 compliant inquiry had been revived.
Customary international law
I agree with Lord Neuberger that the appellants cannot succeed by recourse to customary international law because, at the time of the killings, the duty to investigate suspicious deaths had not been recognised as a precept of that system of law.
As the Divisional Court in the present case said ([2012] EWHC 2445 (Admin), at para 105), Any duty under customary international law must be judged at the time of the occurrence of the act about which an inquiry is sought.
I would be less sanguine about accepting in its entirety Lord Neubergers second reason for rejecting the appellants case on this ground.
He relies strongly on four of the five opinions in the House of Lords in McKerr to support his conclusion that a rule of customary international law which decreed that deaths occurring as long ago as 1948 should be investigated ought not to be incorporated into the common law.
The basis on which those opinions were expressed is that it would be inappropriate to do so where, in the words of Lord Nicholls, this would create an overriding common law obligation on the state, corresponding to article 2 in an area of the law for which Parliament has long legislated.
One can quite understand how it would be inapt to construct a common law duty to investigate which was, in effect, parallel to the statutory obligation to investigate suspicious deaths occurring within the national courts jurisdiction.
But suppose that the deaths had occurred at a time when the United Kingdom had jurisdiction over the territory in which they had occurred but, at that time, there was no article 2 duty to investigate nor, when an inquest was subsequently sought, was there any statutory requirement to investigate the deaths because, for instance, United Kingdom had by then relinquished jurisdiction over the country in which they had occurred.
If there was a duty to investigate under customary international law, which was current at the time that the deaths occurred, it seems to me that there would be a strong argument that such a duty should find expression in the common law.
But those supposed facts are far removed from the circumstances of the present case and I need say nothing further about the matter.
Proportionality
Lord Neuberger has said that it would not be appropriate for a five member panel of this court to reach a final conclusion on the question whether proportionality should supplant rationality as a ground of judicial review challenge at common law.
I tend to agree, although I suspect that this question will have to be frankly addressed by this court sooner rather than later.
As Lord Neuberger has said, it is possibly a matter of some constitutional importance, although it is perhaps not as great as many commentators believe.
Lord Neuberger also suggested that a change from irrationality to proportionality had implications which might be very wide in applicable scope.
This could very well be true but I believe that some of these have been overestimated in the past.
Indeed, the very notion that one must choose between proportionality and irrationality may be misplaced.
Without rehearsing all the arguments which swirl around this issue and keeping in mind the perils of over simplification, it is important to start any debate on the subject with the clear understanding that a review based on proportionality is not one in which the reviewer substitutes his or her opinion for that of the decision maker.
At its heart, proportionality review requires of the person or agency that seeks to defend a decision that they show that it was proportionate to meet the aim that it professes to achieve.
It does not demand that the decision maker bring the reviewer to the point of conviction that theirs was the right decision in any absolute sense.
It should also be understood that the difference between a rationality challenge and one based on proportionality is not, at least at a hypothetical level, as stark as it is sometimes portrayed.
This was well expressed by Lord Mance in Kennedy v Charity Commission (Secretary of State for Justice intervening) [2014] UKSC 20; [2015] AC 455.
At para 51 he said: The common law no longer insists on the uniform application of the rigid test of irrationality once thought applicable under the so called Wednesbury principle: see Associated Provincial Picture Houses Ltd v Wednesbury Corpn [1948] 1 KB 223.
The nature of judicial review in every case depends on the context.
The change in this respect was heralded by Lord Bridge of Harwich in R v Secretary of State for the Home Department, Ex p Bugdaycay [1987] AC 514, 531 where he indicated that, subject to the weight to be given to a primary decision makers findings of fact and exercise of discretion, the court must be entitled to subject an administrative decision to the more rigorous examination, to ensure that it is in no way flawed, according to the gravity of the issue which the decision determines.
Developing this theme and touching on the subject of the innate superiority of proportionality as a tool of review, Lord Mance continued at para 54: Both reasonableness review and proportionality involve considerations of weight and balance, with the intensity of the scrutiny and the weight to be given to any primary decision makers view depending on the context.
The advantage of the terminology of proportionality is that it introduces an element of structure into the exercise, by directing attention to factors such as suitability or appropriateness, necessity and the balance or imbalance or benefits and disadvantages.
Lord Mance returned to the same theme in Pham v Secretary of State for the Home Department (Open Society Justice Initiative intervening) [2015] UKSC 19; [2015] 1 WLR 1591 where he said, at para 96: In short, proportionality isas Professor Dr Lbbe Wolff (former judge of the Bundesverfassungsgericht which originated the terms modern use) put it in The Principle of Proportionality in the Case Law of the German Federal Constitutional Court (2014) 34 HRLJ 12, 6 17a tool directing attention to different aspects of what is implied in any rational assessment of the reasonableness of a restriction, just a rationalising heuristic tool.
She went on, at p 16: Whether it is also used as a tool to intensify judicial control of state acts is not determined by the structure of the test but by the degree of judicial restraint practised in applying it.
Whether under EU, Convention or common law, context will determine the appropriate intensity of review: see also Kennedy v Information Comr [2015] AC 455, para 54.
Lord Sumption in the same case expressed not entirely dissimilar views, saying at para 105 that although English law has not adopted the principle of proportionality generally, it has for many years stumbled towards a concept which is in significant respects similar, and over the last three decades has been influenced by European jurisprudence even in areas of law lying beyond the domains of EU and international human rights law.
Lord Reed, on the other hand, was not disposed to assimilate the tests of proportionality and rationality.
At para 115 of Pham he said: That is not to say that the Wednesbury test, even when applied with heightened or anxious scrutiny, is identical to the principle of proportionality as understood in EU law, or as it has been explained in cases decided under the Human Rights Act 1998.
In R (Daly) v Secretary of State for the Home Department [200l] 2 AC 532, Lord Steyn observed at para 26, with the agreement of the other members of the House of Lords, that there was a material difference between the Wednesbury and Smith grounds of review and the approach of proportionality in cases where Convention rights were at stake.
In Brind, the House of Lords declined to accept that proportionality had become a distinct head of review in domestic law, in the absence of any question of EU law.
This is not the occasion to review those authorities.
As in Pham so, probably, in the present appeal, it is not the occasion to review the authorities.
Final conclusions on a number of interesting issues that arise in this area must await a case where they can be more fully explored.
These include whether irrationality and proportionality are forms of review which are bluntly opposed to each other and mutually exclusive; whether intensity of review operates on a sliding scale, dependent on the nature of the decision under challenge and that, in consequence, the debate about a choice between proportionality and rationality is no longer relevant; whether there is any place in modern administrative law for a pure irrationality ground of review ie one which poses the question, could any reasonable decision maker, acting reasonably, have reached this conclusion; and whether proportionality provides a more structured and transparent means of review.
In the present case, the appellants must present their case for a proportionality review of the decision not to hold an inquiry in a context where they cannot assert that there has been interference with their right to have such an inquiry.
Conventionally, of course, interference with a fundamental right has been the setting where proportionality has most frequently been considered recently see, for instance, R (Aguilar Quila) v Secretary of State for the Home Department [2011] UKSC 45; [2012] 1 AC 621, para 45; Bank Mellat v HM Treasury (No 2) [2013] UKSC 39, [2014] AC 700, paras 20 and 74; and R (Nicklinson) v Ministry of Justice (CNK Alliance intervening) [2014] UKSC 38, [2015] AC 657, paras 80, 167 168, 310, 337.
As Lord Reed pointed out in Pham at para 113, it is necessary to distinguish between proportionality as a general ground of review of administrative action, confining the exercise of power to means which are proportionate to the ends pursued, from proportionality as a basis for scrutinising justifications put forward for interferences with legal rights.
Lord Neuberger has suggested in para 131 above that the appellants have contended that the four stage test identified by Lord Sumption and Lord Reed in Bank Mellat at paras 20 and 74 should now be applied in place of rationality in all domestic judicial review cases.
If this is the appellants position I question its feasibility.
In the first instance there is no legislative objective and no interference with a fundamental right; secondly, it is difficult to see how the least intrusive means dimension could be worked into a proportionality exercise where the decision did not involve interfering with a right.
I envisage a more loosely structured proportionality challenge where a fundamental right is not involved.
As Lord Mance said in Kennedy, this involves a testing of the decision in terms of its suitability or appropriateness, necessity and the balance or imbalance of benefits and disadvantages.
In the present case, such a proportionality challenge would require the court to assess whether the government has struck the right balance between two incommensurate values: protecting the public purse from the substantial expenditure that would inevitably be involved, with (from its perspective) little tangible or practical benefit, as opposed to exposing historic crimes by the British forces, with the associated vindication of the appellants long fought and undeniably worthy campaign.
I have been reluctantly driven to the conclusion that, without an identifiable fundamental right in play, it is difficult to say that the decision not to hold an inquiry is disproportionate.
Jurisdiction
I agree with all that Lord Mance has had to say on this subject.
Conclusion
With regret, I have concluded that the appeal cannot succeed.
This is an instance where the law has proved itself unable to respond positively to the demand that there be redress for the historical wrong that the appellants so passionately believe has been perpetrated on them and their relatives.
That may reflect a deficiency in our system of law.
It certainly does not represent any discredit on the honourable crusade that the appellants have pursued.
LADY HALE: (dissenting)
The claimants want the United Kingdom Government at long last to hold a proper inquiry into how it was that 24 unarmed rubber plantation workers were shot dead by British soldiers on 11 and 12 December 1948 during the emergency in Malaya.
They want the decisions taken by the Secretaries of State on 29 November 2010 and 4 November 2011 not to hold such an inquiry or to make any other form of reparation quashed.
They make their challenge under both the Human Rights Act 1998 and the common law.
The Human Rights Act challenge
The Human Rights Act challenge has always been ambitious.
The events in question took place before the European Convention on Human Rights was adopted in 1950; before it was ratified by the United Kingdom in 1951; before it gained sufficient ratifications to come into force in 1953; before the United Kingdom accepted the right of individuals to petition the European Court of Human Rights about alleged violations in 1966; and before the Human Rights Act 1998 turned the Convention rights into rights which are binding, not only in international law, but also in United Kingdom law.
The claimants seek to build two bridges.
The first is to carry them from the killings which took place in 1948 into the temporal scope of the Convention which came into force in 1953.
They say that 1953 is the critical date for this purpose and that the killings took place sufficiently close to that date for there still to have been an obligation to investigate them after it.
The second bridge must carry them from that internationally enforceable obligation into a domestically enforceable obligation under the Human Rights Act.
They say that such an obligation arises because of new information which has come to light since the Act came into force.
It is a tribute to the skill of the claimants legal team that these arguments have to be taken seriously.
They rely crucially on the Grand Chamber decision in Janowiec v Russia (2013) 58 EHRR 792, which clarified the courts earlier decision in ilih v Slovenia (2009) 49 EHRR 996.
Janowiec concerned what is generally known as the Katyn massacre in 1940, when more than 21,000 Polish prisoners of war were summarily executed by officers of the Soviet NKVD, the predecessor of the KGB.
The court might have disposed of the case on the ground that these deaths all took place long before the ECHR had been dreamt of, let alone adopted.
But it did not.
It acknowledged that it only had jurisdiction to examine acts or omissions taking place after the entry into force of the Convention.
But it posited two circumstances in which that jurisdiction might arise even though the deaths themselves had pre dated the critical date.
The first was where there was a genuine connection between the death and the entry into force of the Convention.
This had two components, both of which must be satisfied.
First, the period of time between the death as the triggering event and the entry into force of the Convention [was] reasonably short, and [second] a major part of the investigation [had] been carried out, or ought to have been carried out, after the entry into force (para 148).
The court had previously said that the period should be no more than ten years (para 146), although it appears that this was a maximum which might not apply in all cases.
The second circumstance was if the triggering event was of a larger dimension than an ordinary criminal offence and amounted to the negation of the very foundation of the Convention (para 150).
The examples given were war crimes, genocide or crimes against humanity.
But this Convention values obligation could not arise where the deaths had taken place before the adoption of the Convention, for it was only then that the Convention began its existence as an international human rights treaty (para 151).
It would have been much simpler for us all if the Grand Chamber had applied the same logic to the genuine connection test.
But it did not.
As to the first part of the genuine connection test, the lapse of a reasonably short period of time since the deaths, it seems unrealistic and artificial that so much should depend upon whether the critical date is the entry into force of the Convention in 1953, or the acceptance of the right of individual petition in 1966.
As Lord Kerr has demonstrated, the jurisprudence of the Strasbourg court does not point convincingly one way or the other.
But logic points strongly in favour of the former.
The United Kingdom was bound by treaty to observe the Convention from 3 September 1953 and in relation to Malaya from 23 October 1953.
It could thereafter have been taken to the Strasbourg court by any other member state for an alleged violation.
There was no requirement that the member state or its citizens be a victim.
It is difficult to see why the additional possibility of being taken to the court by an individual victim should make any difference to the obligations of the United Kingdom in international law.
Left to myself, therefore, I would not have been prepared to reject this claim on the ground that the critical date was 1966 rather than 1953.
We do not have slavishly to follow the Strasbourg jurisprudence.
Lord Binghams famous dictum in R (Ullah) v Special Adjudicator [2004] UKHL 26; [2004] 2 AC 323, para 20, does not require us to do so.
Thus far, it is possible to discern four broad propositions from our own case law.
First, if it is clear that the claimant would win in Strasbourg, then he will normally win in the courts of this country.
This is because it would negate the purpose of the Human Rights Act for the claimant to have to bring a claim in Strasbourg.
But this is subject to the well known qualifications set out in Manchester City Council v Pinnock (Secretary of State for Communities and Local Government intervening) [2010] UKSC 45, [2011] 2 AC 104, para 48 (and recently reaffirmed in R (Chester) v Secretary of State for Justice [2013] UKSC 63, [2014] AC 271, para 26): that the clear and constant line of Strasbourg authority is not inconsistent with some fundamental substantive or procedural aspect of our law, and whose reasoning does not appear to overlook or misunderstand some argument or point of principle.
Second, if it is clear that the claimant would lose in Strasbourg, then he will normally lose here too: R (Al Skeini) v Secretary of State for Defence (The Redress Trust intervening) [2007] UKHL 26, [2008] AC 153 is an example where the House of Lords thought that the answer was clear.
Strasbourg had drawn a line in the sand jurisdiction was territorial, with only a very few narrowly defined exceptions, which did not apply to civilians killed in the course of military operations in Iraq.
As it happened, the House was wrong about that (see Al Skeini v United Kingdom (2011) 53 EHRR 589), but that does not affect the principle.
Third, there are cases where it is clear that Strasbourg would regard the decision as one within the margin of appreciation accorded to member states.
Then it is a question for the national courts by which organ of government the decision should be taken: R (Nicklinson) v Ministry of Justice (CNK Alliance Ltd intervening) [2014] UKSC 38, [2015] AC 657 is an example of this, in which this court was divided on where responsibility lay for deciding whether the outright ban on assisting suicide was justified.
Fourth, there are cases on which there is as yet no clear and constant line of Strasbourg jurisprudence.
We do not have to wait until a case reaches Strasbourg before deciding what the answer should be.
We have to do our best to work it out for ourselves as a matter of principle: Rabone v Pennine Care NHS Foundation Trust (INQUEST intervening) [2012] UKSC 2, [2012] 2 AC 72 is an example of this (an example which, as it happened, was swiftly followed by a Strasbourg decision which is wholly consistent with it: see Reynolds v United Kingdom (2012) 55 EHRR 1040).
There may be other situations in which the courts of this country have to try to work out for themselves where the answer lies, taking into account, not only the principles developed in Strasbourg, but also the legal, social and cultural traditions of the United Kingdom.
As to the second part of the genuine connection test, that a significant part of the investigation did take place, or should have taken place, after the critical date, this depends upon whether there was an omission to act after that date.
That depends upon whether a plausible, credible allegation, piece of evidence or item of information comes to light which is relevant to the identification and eventual prosecution or punishment of those responsible.
Such new material must be sufficiently weighty and compelling to warrant a new round of proceedings (Janowiec, para 144, citing Dorado v Spain (Application No 30141/09), (unreported) given 27 March 2012, akir v Cyprus (Application No 7864/06), (unreported) given 29 April 2010, and Brecknell v United Kingdom (2007) 46 EHRR 967, paras 66 72).
Quite obviously, new material did come to light in 1970 when five of the soldiers admitted under caution that the villagers had not been running away but had been shot in cold blood and a sixth did not retract the sworn statement he had earlier given to the same effect.
The critical question, however, is whether further new material came to light after the Human Rights Act came into force.
That question is critical because the second bridge, from the Convention to the Human Rights Act, depends upon it.
The claimants might well have been able to complain to the Strasbourg court after the 1970 investigation was abandoned.
But it is now far too late for them to do that.
The time limit for complaining to Strasbourg is long gone.
An individual can only make a claim under the Human Rights Act if he or she could complain to Strasbourg after exhausting the remedies available domestically.
It was established in In re McCaughey [2011] UKSC 20, [2012] 1 AC 725 that where the death took place before the Human Rights Act came into force but a significant part of the investigation was to take place after that date, then the investigation had to comply with the requirements of the Convention.
The claimants argue that the obligation also arises if, after the Act came into force, significant new information comes to light which undermines or casts doubt upon the effectiveness of the original investigation or investigations (a possibility recognised in McCaughey, for example at para 93).
The claimants also argue that this point was decided in their favour in the Court of Appeal.
The original investigation by the UK authorities in 1948 1949 was seriously defective, not least because none of the surviving villagers were interviewed, and was rightly criticised by the Divisional Court and Court of Appeal.
The criminal investigation begun in 1970 as a result of the guardsmens confessions in 1969 1970 was halted prematurely, before the Metropolitan Police could complete their inquiries by interviewing the Malaysian witnesses.
The Malaysian Police conducted their own investigations from 1993 to 1996 but were unable to complete their inquiries by interviewing the British witnesses.
Much of the material was first brought together and put into the public domain in the book, Slaughter and Deception at Batang Kali, by Ian Ward and Norma Miraflor, published in June 2009.
It is unclear just how much the British authorities knew about the Malaysian Police inquiries until then, but it is clear from the prcis of the book prepared for the Secretaries of State by Dr Brendan McGurk in 2009, that the authors had seen statements made to the Malaysian Police which had not been seen in either Ministry.
As Lord Kerr has shown, in January 2009, the Secretaries of State were still maintaining the stance that there was nothing to gainsay the original official version of the killings, but something caused them to reconsider their decision in the course of 2009.
As the Court of Appeal held, significant material from the Metropolitan Police in the 1970s and a considerable amount of potentially relevant material accumulated during the Royal Malaysian Police investigation in the 1990s has only come to the notice of the claimants in the course of, and as a result of, these proceedings (para 82).
Amongst that material was Detective Chief Superintendent Williams report, which revealed his view that the decision to halt the inquiry was secured by a political change of view.
Against that, the Secretaries of State argue that the Court of Appeal was not there deciding that there was new information sufficient to revive the investigative obligation.
They also argue that the essentials of the villagers accounts had been reported to the Metropolitan Police in 1970 and included in DCS Williams report.
Thus, although that inquiry had not been completed, the British authorities did know all the essential points of dispute.
Further, although the claimants only got access to the files in the course of the proceedings, they too knew about the soldiers confessions from press reports and from a television documentary In Cold Blood, broadcast in 1992.
Thus, save for minor details, there was nothing new about what each side was saying had taken place.
In common with Lord Kerr, I find this a much more difficult issue to resolve than does Lord Neuberger.
Clearly, the soldiers confessions in 1969 1970 were indeed significant new material which cast doubt on the effectiveness of the original inquiry and were sufficient to revive the obligation to investigate.
It is also possible that the results of the Malaysian Police inquiries in the 1990s produced sufficient new material to revive the obligation.
It is one thing for survivors to give their accounts to journalists and quite another thing to give them to the police in the course of an official inquiry.
But what is meant by new material and coming to light? It appears from the reference in Janowiec to an allegation, piece of evidence or item of information that new material must be construed broadly.
It is true that the bare bones of the allegations and counter allegations were known in 1970, but there had then been no proper investigation in Malaya.
Effectively there have been two separate investigations, each of one half of the picture only.
They were not properly brought together until the publication of Slaughter and Deception at Batang Kali in June 2009.
In Harrison v United Kingdom (2014) 59 EHRR SE1, coming to light was equated with coming into the public domain (para 51).
The findings of the Hillsborough Independent Panel constituted new evidence and information which cast doubt on the effectiveness of the original inquest and criminal investigations (para 53).
Those findings were based on all the available documentation which now included newly disclosed documents held by government departments.
Thus, whatever else coming to light may mean, it must encompass the revelation of material which was previously known only to the relevant authorities.
Hence I agree with Lord Kerr that the material collectively provided by the publication of the book and the access gained to the Metropolitan and Royal Malaysian Police files cast an entirely new light on the decision not to hold an inquiry (para 265).
But I cannot agree with him that this is not a live issue in these proceedings.
In their written submissions, the claimants clearly state that they cross the second bridge, the bridge into the Human Rights Act, because the current position is that relevant and weighty material has recently come to light, requiring investigation to discharge the article 2 procedural obligation (para 2.2).
But that question only arises if the first part of the genuine connection test is established and that depends upon the critical date.
In my view, therefore, principle dictates that the critical date is the date upon which the United Kingdom became bound in international law to observe the guarantees of human rights and fundamental freedoms laid down in the Convention; the triggering events were less than five years earlier; and significant new material has recently come to light which, to say the least, casts doubt on the effectiveness of the original inquiry and later criminal investigations.
My reservations about the human rights claim are different.
The first is whether what the claimants want falls within the procedural obligation in article 2 at all.
In Janowiec, the court observed that the procedural acts which took place or ought to have taken place after the entry into force of the Convention referred to acts undertaken in the framework of criminal, civil, administrative or disciplinary proceedings which are capable of leading to the identification and punishment of those responsible or to an award of compensation to the injured party (citing Labita v Italy (2000) 46 EHRR 50, at para 131 and McCann v United Kingdom (1995) 21 EHRR 97, at para 161).
The claimants do indeed seek reparation, but this is not by way of an ordinary civil action (which would have been time barred a very long time ago) and not from the actual perpetrators, and it is now quite unrealistic to expect that anyone could be prosecuted for their part in what took place.
What the claimants really and rightly want is a proper, full and fair inquiry, which will establish the truth, so far as it is possible to do so, vindicate their deceased relatives and lead to a retraction of the official account of what took place.
Yet in Janowiec, the court went on to say that This definition operates to the exclusion of other types of inquiries that may be carried out for other purposes, such as establishing a historical truth (para 143).
My second reservation is that the logic of refusing to apply the Convention values test to deaths which took place before the Convention was adopted could equally well be applied to the genuine connection test.
How can it be said that there is a genuine connection between the obligations in the Convention and the triggering event, if that event took place before those obligations were given expression in the Convention and adopted by enough states to make it potentially binding in international law? Just like the Convention values, those obligations take their life from the Convention.
They are not eroded by events which took place before the Convention itself, and the values and guarantees which it embodies, came into existence (to quote Lord Kerr, at para 258).
That to my mind is a more logical, sensible and practical solution to the question of whether there is an obligation to investigate such historic events than arid debates about the critical date.
It is for that reason that I would dismiss the Human Rights Act claim.
The common law claims
There are three bases for the common law claims: customary international law, proportionality, and irrationality or Wednesbury unreasonableness.
I agree that it has not been shown that, when these killings took place, customary international law had recognised a duty to investigate deaths of this sort.
That is sufficient to dispose of this part of the claim and it is unnecessary to express a view on whether, in any event, such an obligation should not be recognised as part of the common law because of the long history of legislative activity governing the investigation of suspicious deaths.
Much of the argument before us (but not in the courts below) was devoted to whether the time had now come to recognise proportionality as a further basis for challenging administrative actions, a basis which, if adopted, would be likely to consign the Wednesbury principle to the dustbin of history.
The claimants principal argument (relying in particular on the work of Professor Paul Craig) was that proportionality should be adopted as the basis of challenge for all administrative decisions.
An alternative argument was that it should now be openly adopted by this court in a human rights context (relying again on those commentators, including Professor Craig, who suggest that it already applies in the context of fundamental rights).
This is indeed a complex issue, but I agree with Lord Kerr (para 283) that it is one thing to apply a proportionality analysis to an interference with, or limitation of, a fundamental right and another thing to apply it to an ordinary administrative decision such as whether or not to hold some sort of inquiry.
The recent observations of this court on the relevance of a proportionality analysis, in Pham v Secretary of State for the Home Department (Open Society Justice Initiative intervening) [2015] UKSC 19, [2015] 1 WLR 1591, were in the context of stripping the claimant of his British nationality and all that goes with it, which is clearly a grave invasion of a fundamental right.
The context here is, of course, the killing of unarmed civilians by British soldiers.
The right to life of those civilians was undoubtedly engaged by whatever took place.
Two of the four claimants were present at the scene, but the women and children were separated from the men overnight, and loaded onto a lorry to be driven away from the scene the following day.
The claim of all four is as relatives of the deceased.
The right which they claim is to a proper investigation and a retraction of the official explanation of what took place.
But, for the reasons given earlier, that is not a right recognised by the common law or under the Human Rights Act.
But that still leaves the Wednesbury challenge.
I do not think that, by concentrating on the proportionality argument, it was intended to abandon the more conventional challenge.
Issue 2 identified in the Statement of Facts and Issues was whether the refusal to hold an inquiry or otherwise investigate can be justified by the applicable standard.
If not proportionality that must be Wednesbury unreasonableness or irrationality.
The decisions in question were contained in the principal decision letter of 29 November 2010 and confirmed, after these proceedings had begun, on 4 November 2011.
The reasons given for deciding not to hold an inquiry are summarised by Lord Neuberger at paras 124 and 125 and it is unnecessary for me to repeat them.
I would only add that those reasons were focussed upon a statutory inquiry under the Inquiries Act 2005; but the Secretaries of State also concluded that the reasons against such an inquiry also militate against the establishment of any other form of inquiry or investigation.
The Divisional Court dealt with this issue in some detail: [2012] EWHC 2445 (Admin), paras 124 to 176.
The court considered five possible purposes of an inquiry, derived from Lord Howes evidence to the Select Committee on Government by Inquiry in 2004 2005: (a) establishing the facts, (b) learning from events and preventing a recurrence, (c) catharsis and improving understanding of what happened, (d) providing reassurance and rebuilding public confidence, and (e) accountability.
To this they added (vi) promoting good race relations, as required by section 71 of the Race Relations Act 1976.
But the courts assessment of how an inquiry might achieve all of these purposes was heavily influenced by its conclusion that it would appear to be very difficult at this point in time to establish definitively whether the men were shot trying to escape or whether these were deliberate executions (para 159).
Thus the facts could not definitely be found (paras 160, 161); catharsis could not be achieved (para 165); reassurance could not be given or public confidence rebuilt (para 168); accountability could not be determined (para 169); and it could not be said whether there would be negative or positive consequences in race equality terms (para 172).
In addition, times had changed so much that it was very questionable how much could be learnt (para 164); and the costs, even of a stream lined inquiry, which is all the court thought necessary, were a material factor (paras 174 175).
Hence the Secretaries of State had taken into account the relevant factors and reached a decision which was plainly open to them to reach (para 176).
The Court of Appeal was critical of the approach of the Divisional Court: [2014] EWCA Civ 312, [2015] QB 57.
The difficulties of reaching definitive conclusions lay at the heart of its reasoning but this was to impose too high a threshold (para 109).
Recent public inquiries, including the Shipman, Bloody Sunday and Baha Mousa inquiries, had adopted a lower and more flexible standard.
Moreover, the Secretaries of State had expressly not assumed that it was unlikely that an inquiry could reach firm conclusions.
Nevertheless, they took into account the evidential difficulties; considered that establishing the truth is especially important when it can cast light on systemic or institutional failings, which can then be corrected, and this is more likely where the events are relatively recent; and doubted the contemporary relevance of any findings, given how much had changed since 1948.
The costs would be considerable.
Overall, the conclusion was that the benefits to be gained would not justify the costs.
The Court of Appeal was satisfied that the Secretaries of State had considered everything which they were required to consider; did not have regard to any irrelevant considerations; and reached rational decisions which were open to them (para 118).
One of the reasons given by the claimants for adopting proportionality instead of Wednesbury unreasonableness or irrationality is Professor Craigs view that cast in its correct terms it could almost never avail claimants (Administrative Law, 7th ed (2012), para 21 027) and that it is difficult to think of a single real case in which the facts meet this standard (The Nature of Reasonableness (2013) 66 CLP 131, 161).
This case is an excellent opportunity to test whether that proposition is correct.
Any rational decision maker would take into account, at the very least, the following salient points about the background history: (1) The enormity of what is alleged to have taken place.
If the guardsmen did indeed kill innocent and unarmed villagers in cold blood, then even by the different standards of the time, this was a grave atrocity which deserves to be acknowledged and condemned. (2) The inadequacy of the initial investigation.
There were many people present at the scene who could have been asked for their accounts.
It was totally unacceptable to assume that the guardsmen and their police escorts were telling the truth but that survivors and civilian eye witnesses would not do so. (3) The weight which should be accorded to the confessions made in 1970.
Although originally given to a newspaper, four were repeated under caution to the police.
They were enough to cast serious doubt on the official account and to prompt a serious police inquiry. (4) The premature termination of that inquiry, which was obviously being conscientiously conducted by DCS Williams, and his view that this was a political decision, unsurprising given that it happened very shortly after the change of government in 1970. (5) The evidence obtained from the Royal Malaysian Police inquiry in the 1990s.
Although some of the relatives and survivors had previously given their accounts to others, this evidence had only recently come to light. (6) The petering out of that inquiry, in the face, it would appear, of an unhelpful attitude of the British authorities when the Malaysian Police wished to pursue their inquiries here. (7) The thorough analysis of all the available evidence in Slaughter and Deception at Batang Kali.
The authors did have a particular point of view, being determined to undermine the official account, but they collected together a great deal of information and analysed it in great detail. (8) The evidence from the archaeologist, Professor Black, as to what exhuming and examining the bodies of the deceased could show and how it would help in determining the facts. (9) The persistence and strength of the injustice felt by the survivors and families of the men who were killed, which has led them twice to petition the Queen and to launch these proceedings.
Bearing all that in mind, a rational decision maker would then consider the advantages of some sort of inquiry, in summary: (1) The very real possibility that, despite the difficulties, conclusions could be drawn about what is most likely to have happened. (2) The importance of the British authorities, at long last, seeking to make good the deficiencies of the past inquiries and the very real benefits this could bring in terms of catharsis, accountability and public confidence, whether or not firm conclusions could be reached.
If firm conclusions could be drawn, the huge importance of acknowledging what had gone wrong and setting the record straight.
Against those advantages, a rational decision maker would set the following disadvantages: (3) (1) The passage of time, the death of so many of the participants and witnesses, and the conflict of evidence, which would make finding the facts more difficult. (2) The changes which have taken place in the organisation and training of the army, the climate of law and public opinion, such that it is unlikely that practical lessons could be learned about how better to handle such situations today. (3) The cost of even a stream lined inquiry, which would be not inconsiderable, involving as it would have to do inquiries to be made in Malaysia, which would depend upon the co operation of the Malaysian authorities.
The reasons given by the Secretaries of State focussed on what might now be learned of contemporary relevance, either to the organisation and training of the army or to promoting race relations, from conducting an inquiry.
They did not seriously consider the most cost effective form which such an inquiry might take.
They did not seriously consider the bigger picture: the public interest in properly inquiring into an event of this magnitude; the private interests of the relatives and survivors in knowing the truth and seeing the reputations of their deceased relatives vindicated; the importance of setting the record straight as counsel put it, balancing the prospect of the truth against the value of the truth.
The Strasbourg court expressed this well in Harrison, at para 58: Even where no article 2 procedural obligation exists, it is in the interests of governmental transparency and of justice in the wide sense for a government to arrange for a further review in connection with a national tragedy in response to concerns of victims or their families who are not satisfied with the results of the terminated investigations carried out in accordance with national law, notwithstanding that the tragedy has occurred many years earlier.
If the Divisional Court had not set the bar to establishing the truth so high, it might well have concluded that the value of establishing the truth, which would serve all the beneficial purposes which it identified, was overwhelming.
In my view, the Wednesbury test does have some meaning in a case such as this.
The Secretaries of State did not take into account all the possible purposes and benefits of such an inquiry and reached a decision which was not one which a reasonable authority could reach.
I would have allowed this appeal.
| UK-Abs | This appeal concerns the decision of the respondent Secretaries of State for Foreign Affairs and Defence to refuse to hold a public inquiry into events which took place while the UK was the colonial power in the former Federation of Malaya (now Malaysia).
The UK government sent troops to the Federation in 1948 in response to an insurgency.
On 11 12 December 1948, a patrol of Scots Guards killed 23 unarmed civilians in the village of Batang Kali in Selangor, one of the states of the Federation.
The Appellants are related to one or more of the victims.
Following the incident, the UK government characterised the events as killings of bandits who had attempted to escape.
There were subsequent calls for an investigation and, following statements by participants in the operation that the deceased had been massacred on orders and that those killed had not been fleeing, the Metropolitan Police began an investigation in 1969.
This investigation was subsequently terminated in 1970.
Allegations of unlawful killing resurfaced in 1992 with the broadcast of a BBC documentary.
An investigation was started by the Royal Malaysian Police in July 1993 but subsequently closed in 1997.
On 12 December 2008, a campaign group called The Action Committee Condemning the Batang Kali Massacre presented a petition seeking a public inquiry from the British government.
The Respondents informed the Appellants by letter on 29 November 2010 and 4 November 2011 of their decision to refuse to hold an inquiry into the killings.
The Appellants applied for judicial review of the refusal to hold a public inquiry, arguing that a public inquiry was required on three different grounds: (i) under Article 2 (right to life) of the European Convention on Human Rights (ECHR); (ii) under the common law by virtue of its incorporation of principles of customary international law; and (iii) under the common law by judicial review of the Respondents exercise of their discretion under section 1 of the Inquiries Act 2005.
The Respondents cross appealed contending that the issues were not within the jurisdiction of the UK courts.
The Supreme Court unanimously rejects the Respondents jurisdiction argument, but unanimously dismisses the appeal on grounds (i) and (ii) and dismisses the appeal on ground (iii) by a majority of 4 1 (Lady Hale dissenting).
Lord Mance gives a judgment, with which the other Justices agree, holding that the Court has jurisdiction; on the three grounds of appeal, Lord Neuberger rejects them in a judgment, with which Lord Mance and Lord Hughes agree, Lord Kerr gives a concurring judgment, and Lady Hale gives a dissenting judgment.
Preliminary issue: Jurisdiction The issue of jurisdiction has two strands: (i) whether the UK can be said to have been responsible for the killings; and (ii) whether the UK can be held responsible for not holding an inquiry now [152].
As to the first strand, the Respondents contended that, as the Scots Guards were operating within the constitutional framework of Selangor and the Federation, their acts were not attributable to the UK government.
This argument is rejected.
The Scots Guards were in the Federation in the service of His Majesty and in the interests of the United Kingdom.
The powers of the British government in the Federation were not solely referable to the domestic arrangements in the Federation [187].
Those who were killed were within the British armys control at the time, whether they were seeking to escape or not [189].
Had the ECHR been in force in 1948, the killings would have occurred within the United Kingdoms jurisdiction for the purposes of article 1 of the ECHR [189 90].
As to the second strand, the Respondents contended that any liabilities or obligations which the UK may have had prior to 1957 passed that year to the newly independent Federation by virtue of article 167(1) of the Federal Constitution [154].
This argument is rejected.
It is not at all clear that the actions of the UK government fell within article 167(1) as they are more properly characterised as being carried out in the interests of the UK rather than being rights, liabilities and obligations in respect of the government of the Federation as required by article 167(1) [192].
In any event, the UK governments duty to hold an inquiry, whether under domestic or international law, could not be released on the basis that the independent Federation had been a successor state to the UK as a matter of international law, even if this were the case [197].
Ground (i): Article 2 The ECHR came into force for the UK on 3 September 1953 and was extended to the Federation of Malaya on 23 October 1953.
The UK recognised the right of an individual to petition the European Court of Human Rights (ECtHR) on 14 January 1966.
The Respondents argued that the Appellants had no article 2 claim because the killings occurred before the ECHR came into force in the UK.
Article 2 creates a separate and autonomous duty on a state to carry out an effective investigation into any death which occurs in suspicious circumstances [69].
While the general principle is that the ECHR is not retrospective, article 2 could create obligations for a state to investigate a death which occurred before the date of the entry into force of the ECHR (the critical date) where there exist: (i) relevant acts or omissions after the critical date; and (ii) a genuine connection between the death and the critical date [71 72].
The first criterion was satisfied in the present appeal because there had been no prior full or public investigation of the killings and no publicly available evidence from any member of the patrol to suggest that the killings had been unlawful prior to 1969 and 1970, and the evidence which subsequently came to light in 1969 and 1970 appears to have been compelling and suggests that the killings were unlawful [75].
As to the second criterion, in order for there to be a genuine connection, the lapse of time between the death triggering the investigative duty and the critical date must remain reasonably short, and should not exceed ten years [76].
As to the question of whether the critical date is the date of the coming into force of the ECHR or the date when the right of petition was recognised by the UK, the majority holds that it was the date when the right of petition was recognised that is the relevant critical date [81, 87].
On this basis, as the killings occurred more than ten years before the critical date, there is no genuine connection and the article 2 claim must fail [88 89].
Lord Kerr and Lady Hale come to the same conclusion but for different reasons.
Lord Kerr considers that, as there was no clear guidance from the ECtHR as to which of the two dates was the relevant critical date, the Court could not say that the ECtHR would have concluded that the date of the coming into force of the ECHR is the critical date [239].
Lady Hale considers that the critical date is
the date that the ECHR came into force [290 291, 299] but would dismiss the article 2 claim, because (i) the inquiry is sought for the purposes of establishing historical truth rather than legal liability [300]; and (ii) as a matter of principle, there is a difficulty in finding that there could be a genuine connection between killings which occurred before the coming into effect of the ECHR and obligations imposed by the ECHR [301].
Ground (ii) Duty to hold an inquiry under the common law by virtue of incorporation of principles of customary international law It is only within the last 25 years that international law has recognised a duty on states to carry out formal investigations into at least some deaths for which they were responsible and which may have been unlawful.
The fact that the killings took place before this requirement became a part of customary international law means that the duty could not be relied upon [115], even where there are strong reasons for believing that a war crime had occurred [112, 268].
Further, even if a duty existed, such a requirement could not be implied into the common law [112].
Parliament has expressly provided for investigations into deaths through the coroners courts, the Inquiries Act 2005 and the incorporation of article 2 of the ECHR through the Human Rights Act 1998.
In these circumstances, it would be inappropriate for the courts to take it upon themselves to impose a further duty, particularly one with such potentially wide and uncertain ramifications [117, 151].
Ground (iii) Judicial review of the Respondents failure to hold an inquiry under section 1 of the Inquiries Act 2005 Applying the ordinary principles of judicial review, the majority considers that the grounds for the decision contained in the Respondents letters to the Appellants informing them of the Respondents decision not to hold an inquiry were not unreasonable and thus not open to challenge [129].
Had the decision not to hold an inquiry been reviewed on the standard of proportionality, the conclusion would have been the same, namely that the decision was not disproportionate [139, 143, 283].
Lady Hale (dissenting) considers that the decision of the Respondents was one which no reasonable authority could reach [313], because the Respondents did not consider the public interest in properly inquiring into an event of this magnitude, the private interests of the relatives and survivors in knowing the truth and the importance of setting the record straight [312].
In this case, the value of establishing the truth was, in her view, overwhelming [313].
|
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).
| UK-Abs | 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].
|
The appellant Shaun Docherty fell to be sentenced in the Crown Court for offences of serious violence.
He was on any view a high risk of further, and perhaps worse, serious violence.
At the time when he was sentenced the statutory scheme for the sentencing of offenders who represent a future public danger was in the course of change.
The scheme provided for by the Criminal Justice Act 2003 (the CJA 2003), as amended, was being replaced by a different one under the Legal Aid, Sentencing and Punishment of Offenders Act 2012 (LASPO).
The transitional provisions made by the Commencement Order for LASPO preserved the old scheme sentences if the conviction was before the prescribed commencement date.
Docherty was convicted before that date and was accordingly sentenced, after it, to an indeterminate sentence of imprisonment for public protection (IPP) under the scheme of the CJA 2003, although that form of sentence was in the course of being abolished for the future.
In his appeal against sentence he contended that the Commencement Order containing the transitional provisions was, to the extent that it preserved IPP for him, unlawful.
He submitted that this was so for one or more of three reasons: (a) because the new scheme was less severe than the earlier one, and therefore to apply the earlier was unlawful as contrary to an international principle of lex mitior, which is binding on the English court via article 7 of the European Convention on Human Rights (ECHR), as explained by the Strasbourg court in Scoppola v Italy (No 2) (2010) 51 EHRR 12 (Scoppola); or (b) because the purpose of LASPO was to remove IPP from the armoury of sentencing, and therefore transitional provisions which preserved it to any extent were outside the authority given by that statute; or (c) because to impose an IPP on him, but not on a person convicted after the LASPO commencement date, amounted to unlawful discrimination against him, contrary to article 14 of the ECHR, read with article 5.
The facts
Docherty was born in April 1978.
By the time he came to be sentenced in December 2012 on the occasion now under scrutiny he was 34 years of age.
He had been convicted on 16 previous occasions of some 28 offences.
There was a clear pattern of aggressive offending, usually fuelled by alcohol, supplemented in some cases by cannabis.
His offences included affray, other public order offences, criminal damage and, most significantly, violent offences causing injury to others.
In 1997 he was convicted of two violent offences, one of unlawful wounding (section 20 Offences against the Person Act 1861) and the other of causing grievous bodily harm with intent (section 18 of the same Act).
They were separate incidents.
In the first, he had punched and kicked another man to the head and body.
In the second, he had forced his way into the flat of his stepfather in what he later said was a punishment expedition in revenge for suggested misbehaviour by that man towards Dochertys mother.
He had broken the others jaw in two places and inflicted cuts to his head.
For these two offences he was sentenced to five years imprisonment.
On 12 July 2012 he started an altercation with two drinking companions, Cook and Lord.
He persisted although Lord avoided confrontation.
He slapped Cook in the face.
When the other two sought to leave, he went and fetched a vegetable paring knife and, on his return, stabbed Cook in the back of the neck, the back and chest, some of the wounds inflicted as Cook tried to crawl away.
There were at least six stab wounds in all and the knife was left embedded in his chest.
Lord had tried to protect Cook, but Docherty stabbed him also in the face and head.
Cooks kidneys were damaged and he was in hospital for four days.
Lord sustained a deep penetrating wound to the scalp together with other injuries to the head, arms and hands.
Both victims were significantly affected by what had happened to them.
These events gave rise to two counts of wounding with intent to do grievous bodily harm, contrary to section 18 Offences against the Person Act 1861.
In due course Docherty admitted them and pleaded guilty in the Crown Court.
Between release from the five year sentences imposed in 1997 and the commission of these new and more serious offences, he had been either convicted or cautioned for drunken disorder or violence in 2004 (twice), 2005, 2006 (twice), 2007, 2009 and 2010, and then on four different occasions between late May and the beginning of July of 2012.
Two of these incidents were relatively minor, involving arriving very drunk at the police station either threatening that he would knock someone out if not taken home or reporting that he had broken a number of windows.
The police domestic violence unit had, however, also been called out to three further incidents of drunken aggression on his part.
Reports from the probation officer and a consultant forensic psychiatrist confirmed that what lay behind this pattern of behaviour was long standing alcohol abuse.
There was no mental health disability.
Docherty was aware of his alcohol problem, and from time to time expressed remorse.
His sister had written a letter supportive of him and expressing faith in his underlying goodness of heart.
But it was clear that he was not in control of himself.
Moreover, the probation officers assessment was that he tended to use violence as a means to gain compliance from others and to solve problems.
So his was a case of injuries thus far inflicted which were grave and it was largely a matter of chance that they had not been graver, or indeed fatal.
He posed the risk of further attacks, with similar or worse consequences; the probation officer described that risk as very high.
The statutory maximum sentence for the offences of which Docherty was convicted is, and has been for well over a century, life imprisonment.
The judge passed a sentence of IPP on 20 December 2012.
He specified five years and four months as the period which had to pass before the Parole Board could consider release on licence.
That was done under the rules for the construction of an IPP sentence which are set out in para 9 below.
The sentence meant that Docherty will be eligible for consideration for parole after five years and four months, thus in 2018, but before such release on licence can occur the Parole Board will have to be satisfied that it is no longer necessary for the protection of the public that he be detained.
There is no complaint that, if IPP was available, the sentence was either excessive or incorrectly calculated.
The change in the law
The CJA 2003 had introduced a new scheme of preventive sentencing for dangerous offenders, there defined as those who are convicted of specified offences and who present a significant risk to the public of serious harm (death or serious personal injury) from further serious offending.
That Act was by no means the first to address the sentencing of offenders posing a future risk.
An early example was a system of preventive detention for habitual criminals (section 10 of the Prevention of Crime Act 1908), and different provisions were made by statute from time to time thereafter.
Immediately before 2003, the solution adopted to the problem was the authorisation of determinate sentences for the dangerous which were longer than commensurate, ie longer, on grounds of future risk, than would be appropriate simply to the facts of the current offence (section 2(2)(b) Criminal Justice Act 1991).
The CJA 2003 removed that power and substituted a new scheme.
It consisted, for dangerous adult offenders, of a menu of three possible sentences alongside ordinary determinate or non custodial sentences: (1) life imprisonment where the offence creating section provided that as the maximum available, (2) IPP and (3) an extended sentence.
There were broadly equivalent sentences for those under 18.
IPP was a new form of sentence.
The judge was required to specify a minimum period before which there could be no eligibility for parole.
In effect he had to identify what the hypothetical determinate sentence for the offence would have been if commensurate, that is calculated purely by reference to the gravity of the offence and the responsibility of the offender, without consideration of future risk.
Then the judge had to specify half that term as the period before parole was possible (half, because the hypothetical prisoner sentenced to a determinate sentence would, under the CJA 2003, serve half his term in prison and the second half on licence).
After the specified minimum period had been served, the IPP prisoner was eligible for release providing that the Parole Board was satisfied that it was no longer necessary for the protection of the public that he be detained.
These release provisions were for most practical purposes the same as (although not quite identical to) those which applied and still apply to life sentences: see R v Lang [2005] EWCA Crim 2864; [2006] 2 Cr App R (S) 3, at para 8.
But IPP was available, if the offender met the statutory test of serious danger to the public, for those specified offences which did not otherwise carry life imprisonment as well as for those which did.
The extended sentence provided for by the CJA was broadly similar to previous forms of sentence with the same name.
It consisted of a commensurate determinate term plus an elongated period of licence beyond that which would normally attend that length of sentence.
As is now well documented, there ensued considerable difficulty in the administration of IPP sentences.
As originally framed, the CJA 2003 created a presumption of dangerousness and made the sentence mandatory.
This led to a large number of IPP sentences being passed, including many for offences which did not otherwise carry life imprisonment.
Some IPP sentences, passed according to the statutory rules, had quite short specified minimum periods.
All those thus sentenced had to be treated in prison in the same way as those sentenced to life imprisonment, because the test for release was the same.
There were far too many IPP prisoners for the rehabilitative systems of the prisons to cope with.
This resulted in decisions both domestically and in the Strasbourg court that the duty to provide reasonable facility to the prisoner to reform himself and to demonstrate that he was no longer a public danger was too often not discharged: see James, Lee and Wells v United Kingdom (2013) 56 EHRR 12, R (James, Lee and Wells) v Secretary of State for Justice [2009] UKHL 22; [2010] 1 AC 553, and R (Kaiyam) v Secretary of State for Justice [2014] UKSC 66; [2015] AC 1344.
The prison administration of life prisoners was distorted.
From 2008, modifications were made by the Criminal Justice and Immigration Act of that year to the conditions for imposing an IPP sentence, which reduced the numbers.
But in due course the decision was made to abolish altogether that form of sentence for the future, and this was accomplished by Parliament in LASPO.
By section 123 of LASPO the sections of the CJA 2003 providing for both IPP and the 2003 model of extended sentence (and for their equivalents for those under 18) were repealed.
LASPO did not, however, simply remove IPP from the sentencing armoury.
It substituted one menu of preventive sentencing for another, just as previous legislation had done.
Insofar as it is new, the scheme has been inserted into the CJA 2003 as new sections of that Act.
Overall, it comprises three elements. (i) A life sentence, where that is the statutory maximum for the offence committed, if the court is of the opinion that there is a significant risk to members of the public of serious harm occasioned by the commission by the defendant of further offences specified in Schedule 15 and the gravity of the offence(s) is such as to call for such a sentence section 225(2); this part of the scheme is unaltered from the 2003 regime. (There might be cases where a discretionary life sentence is justified for an offence outside Schedule 15 if its gravity and the danger presented by the defendant are sufficient see the discussion in R v Saunders [2013] EWCA Crim 1027; [2014] Cr App R (S) 258, para 11 it is not necessary to discuss this possibility in the present case). (ii) A new obligatory life sentence, unless its imposition would be unjust in the circumstances, if the defendant is now convicted for a second time of one of a defined group of violent or sexual offences (Schedule 15B), where both the previous and current offences have been met by, or would call for, determinate terms of ten years or more, or their equivalent section 224A.
This is entirely new.
If the conditions are met, it may, even if not frequently owing to the levels of determinate term required, lead to the passing of a life sentence for offences which otherwise have a statutory maximum well below life imprisonment examples include several forms of sexual offence, contrary to sections 9 12 and 48 50 of the Sexual Offences Act 2003, and offences of child pornography contrary to section 1 of the Protection of Children Act 1978, all of which are listed in Schedule 15B. (iii) A new form of extended sentence under section 226A.
Although the expression is not used in the statute, the Ministry of Justice appears to have adopted the label Extended Determinate Sentence (EDS) for this latest model of extended sentence, and this is certainly a convenient means of distinguishing it from its predecessors.
For similar reasons the CJA 2003 model of extended sentence, as amended in 2008 and now abolished by LASPO, has had bestowed on it the label EPP (extended sentence for public protection).
The new EDS is discretionary and, like the former EPP, consists of a commensurate determinate term plus an additional period of licence beyond the usual licence for the remainder of the custodial term which follows early release.
The superficial similarity of the two conceals, however, significant differences between them.
EPP (as amended from 2008 onwards) and EDS share the following features. (a) The basic condition for the imposition of both is that the defendant is being dealt with for a specified offence, which means one contained in Schedule 15 to the CJA 2003 (section 224), and that he presents a significant risk to the public of serious harm through the commission of further such offences; (b) Both are constructed of custodial term and extension of licence period; (c) In both cases the total of those two periods must fall within the statutory maximum for the offence; (d) For both, the custodial term is measured by what would be the commensurate determinate term if an extended sentence were not being passed; (e) It is a condition for the imposition of both that the custodial term is four years or more or that there is a qualifying previous conviction (though not identical in each case: see para 14(ii) below); (f) For both, the extension periods have a maximum of five years for violent offences and eight years for sexual offences; and (g) For both, the criterion by which the length of the extension period is to be fixed is the period (within the maximum) required for the purpose of protecting the public from serious harm occasioned by the commission of further specified offences.
But there are significant differences between the two. (i) EPP could be imposed only for an offence committed after the commencement of the CJA 2003 (4 April 2005), but EDS is expressly made available by section 226A(1) for an offence whenever committed.
EDS but not EPP is thus available when sentencing so called historic cases, especially those of sexual abuse, which are often uncovered many years after the event. (ii) EPP was available only (unless the custodial term would be at least four years) where the defendant has previously been convicted of an offence listed in Schedule 15A to the CJA 2003, but EDS is available when he has previously been convicted of one listed in Schedule 15B.
Those two lists are not the same, and neither is the same as Schedule 15.
The EDS list in Schedule 15B is appreciably wider and covers many offences for which EPP was not available.
These include many sexual offences (sections 7, 9, 10, 11, 14, 15, 25, 26, 48 and 49 Sexual Offences Act 2003), a number of terrorist offences, of which there are none in the EPP list in Schedule 15A, the very common offence of possessing (etc) indecent photographs of children contrary to section 1 Protection of Children Act 1978 and an entirely new category of offence consisting of abolished offences which amounted to the same as listed ones (no doubt inserted because of point (i) above); moreover two of the sexual offences which are listed in both Schedules (sections 4 and 47 Sexual Offences Act 2003) are, for the purposes of EPP, confined to cases where the defendant would be eligible for life imprisonment, but that restriction is removed from the EDS list in Schedule 15B.
In short, EPP and EDS are not available for the same offences. (iii) An EDS extension period must be for at least one year (for offences committed after the commencement of amendments brought about by the Offender Rehabilitation Act 2014 on 1 February 2015), but there was no minimum length for an EPP extension period. (iv) Within the sentence imposed, there are very significant differences in the rules for early release.
For EPP (as amended in 2008) release was automatic at half the custodial term.
By new section 246A, the rules for EDS are that there can be no early release before two thirds of the custodial term has been served, and if either the offence was a Schedule 15B offence or the custodial term was ten years or more, (and, after 13 April 2015, in all cases: section 4 of the Criminal Justice and Courts Act 2015) there can be early release only on the recommendation of the Parole Board.
Thus an EDS prisoner must serve two thirds in prison and may have to serve the whole of the custodial term imposed by the court.
It follows that the temptation to summarise the effect of LASPO as replacing IPP with EDS ought to be resisted.
IPP, if it is replaced by anything, is replaced by the new obligatory life sentence under section 224A, but this latter is available for a very much more restricted group of defendants and offences.
EDS is similarly constructed to EPP, but different in availability and effect.
Meanwhile, there remains, unaltered, for offences where the statutory maximum sentence is life imprisonment, that sentence (section 225(2)).
It is, however, clearly true that the wider availability of EDS, in comparison with EPP, is premised on the disappearance of IPP and the narrower availability of the new obligatory life sentence.
That is an illustration of the necessity to consider the CJA 2003 and LASPO schemes as a whole in each case.
The reality is that no sentence is a direct replacement for a former one.
The 2003 regime as a whole has been replaced by the LASPO regime as a whole.
When the question arises which sentence, if any, of the ones newly prescribed, will fit a particular offence, it will not be answered by referring back to the previous regime, but must be tackled afresh.
One example of this proposition is afforded by the guideline decision of the Court of Appeal (Criminal Division) in Attorney Generals Reference No 27 of 2013 (Burinskas) [2014] EWCA Crim 334; [2014] 1 WLR 1409.
This makes it clear that courts may well have to consider life sentences in future (where the offence carries such a sentence) in cases where previously the necessity to do so did not in practice arise because an IPP sentence was virtually indistinguishable from it: see in particular paras 15 to 18 and the example provided by the different statutory context of R v DP [2013] EWCA Crim 1143, discussed in Burinskas at 21.
In both Burinskas and the earlier case of Saunders successive Lords Chief Justice were at pains to emphasise that EDS cannot be regarded simply as a replacement for IPP.
LASPO: commencement and transitional provisions
The general rule of English law, not confined to the criminal law, is that a statute is prospective rather than retrospective in effect unless it distinctly says otherwise: see for example the discussion in a very different context in Wilson v First County Trust Ltd (No 2) [2003] UKHL 40; [2004] 1 AC 816 at 19, 98, 152 and 186.
The presumption against retrospective operation applies equally to repeals.
Section 16 of the Interpretation Act 1978, re enacting a provision which was formerly contained in section 38 of the Interpretation Act 1889, provides: (1) where an Act repeals an enactment, the repeal does not, unless the contrary intention appears, (b) affect the previous operation of the enactment repealed or anything duly done or suffered under that enactment; (c) affect any right, privilege, obligation or liability acquired, accrued or incurred under that enactment; (d) affect any penalty, forfeiture or punishment incurred in respect of any offence committed against that enactment; (e) affect any investigation, legal proceeding or remedy in respect of any such right, privilege, obligation, liability, penalty, forfeiture or punishment; and any such investigation, legal proceeding or remedy may be instituted, continued or enforced, and any such penalty, forfeiture or punishment may be imposed, as if the repealing Act had not been passed.
As to the operative date, ordinarily thus for prospective effect, it is standard practice for UK statutes either to prescribe a commencement date in the body of the Act or, more frequently, to provide for such date(s) to be appointed by the Secretary of State by order, that is to say by delegated legislation.
This standard practice is recognised by, inter alia, section 4 of the Interpretation Act.
It is particularly necessary where a single statute legislates on a range of unconnected topics, as LASPO does.
Section 151 of LASPO contains this standard form of provision.
By section 151(5), also in standard form, different dates may be appointed for different purposes and the Order may make transitional, transitory or saving provision.
The commencement order in question here is Number 4 (SI 2012/2906), made on 17 November 2012.
Some of the provisions of LASPO contain explicit statements as to the chronology of events to which they apply.
One of them is the new section 226A, inserted into the CJA 2003, which creates the EDS sentence: 226A Extended sentence for certain violent or sexual offences: persons 18 or over (1) This section applies where (a) a person aged 18 or over is convicted of a specified offence (whether the offence was committed before or after this section comes into force) [emphasis supplied] The new section 226A may be contrasted with the new section 224A (which creates the new obligatory life sentence).
The latter says: 224A Life sentence for second listed offence (1) This section applies where a person aged 18 or over is convicted of an (a) offence listed in Part 1 of Schedule 15B, (b) comes into force, and [emphasis supplied] the offence was committed after this section The obvious reason for the difference is to be found in article 7 ECHR (see below) or an analogous principle well established in English legislative practice.
Section 224A (new obligatory life) creates for some offenders (those whose offence does not otherwise carry a maximum of life imprisonment) a sentence which may be heavier than was available under the old CJA 2003 regime, since life is, technically at least, heavier than IPP.
By contrast, section 226A (EDS) does not, for although the mechanics of EDS operate more severely on offenders than those of EPP did, still EDS is not more severe than was available under the old regime; in particular it is not more severe than IPP or (where the offence carries it) life.
Moreover, the release conditions applied to a sentence are not part of the penalty for the purposes of article 7: R (Uttley) v Secretary of State for the Home Department [2004] 1 WLR 2278 and Uttley v UK in Strasbourg, Application No 36946/03, and see para 47 below.
This is thus an example of invariable English practice conforming to article 7 ECHR.
Both the new sections distinguish events according to whether they fall before or after this section comes into force.
The Commencement Order then supplied the dates.
By article 2 of that Order much of the Act, including, by 2(e), the part which deals with the sentencing of dangerous offenders (Chapter 5 of Part 3), was brought into force on 3 December 2012.
By articles 3 4 a number of sentencing provisions outside Chapter 5 were, however, stipulated not to come into force in relation to offences committed, or breaches of community orders occurring, before that date.
These sentencing provisions are all ones by which the court is given somewhat more severe powers than it had under the previous legislation.
So, by article 3, sections 65, 71, 72 and 81 are not commenced in relation to offences prior to 3 December 2012; these are provisions for new aggravating factors affecting sentence or for new restrictive orders such as curfew requirements to be added to sentences.
Similarly a new power to extend the length of a community order is, by article 5, to apply only to orders first made after the commencement date.
These are again plainly provisions designed to ensure, in compliance with article 7 ECHR, that no greater punishment is imposed than was available at the time of the offence.
Article 6 of the Commencement Order (2012 No 2906 (c 114)) is directly in point in this case.
It provides: Saving provision in relation to persons convicted before 3 December 2012. 6.
The coming into force of the following provisions of the Act is of no effect in relation to a person convicted before 3 December 2012 section 123 (abolition of certain sentences for (a) dangerous offenders); [equivalent provisions for offenders under 18 and for those subject to armed service law]
The effect of article 6(a) is clear: IPP and EPP disappear from the judicial armoury on 3 December 2012 except for anyone already convicted but not yet sentenced.
The effect of section 224A is also clear: the new obligatory life sentence is only available where the offence (and thus inevitably the conviction) falls after 3 December 2012.
There was a dispute between the parties as to the effect of section 226A(1)(a).
The appellant and the Secretary of State submitted that it clearly meant that EDS became available for anyone convicted after 3 December 2012, whenever the offence was committed, but was not available for someone convicted before that date even if his sentencing was, in the ordinary course of court process, adjourned until after that date, for example for reports.
This approach reads is convicted in section 226A(1)(a) as is hereafter convicted.
By contrast, the Crown Prosecution Service advanced the submission that the section could be read as making EDS available to anyone sentenced after the commencement date, whenever convicted.
This involves reading is convicted in section 226A(1)(a) as has been convicted or stands convicted.
It may be true that, taken alone, the words is convicted could, as a matter merely of grammar, sustain either sense.
But there is not much doubt that the ordinary meaning is the former.
If has been convicted had been meant, it would have been more natural to use those words.
Next, the Act like any other is forward looking.
To adopt the CPS reading would give the statute a retrospective element despite the absence of any explicit provision to that effect, contrary to the ordinary approach to statutory construction.
Moreover, section 226A(1) contains an express provision making it applicable whatever the date of the offence.
If it was also meant to apply whatever the date of conviction, one would have expected it to say so: expressio unius, exclusio alterius.
The suggested construction would also, perhaps more importantly, involve reading the same words is convicted in a different sense in adjacent provisions of the same statute.
The same expression is convicted appears in several other places in LASPO, and indeed in other statutes.
Within LASPO, in section 224A(1) those words can only mean is hereafter convicted because the offence has to come after commencement, and hence also the conviction.
The same is true of section 142 which creates two new public order offences of carrying offensive weapons aggravated by an immediate risk of serious harm.
In the case of both, a custodial sentence is ordinarily then required where a person is convicted (of the offence).
Similarly, section 146 amends the Scrap Metals Act 1964 which in turn by section 4 gives the court power where a person is convicted of offences, to impose an hours restriction on his trading; LASPO creates a new offence and uses the same expression to extend that power to conviction also for it.
The fact that in those sections the Secretary of States and appellants meaning is compelled by the context does not alter the consequence that, on the CPS argument, the same words would mean different things in different places.
Nor does it displace the force of the point that when LASPO means to speak of convictions hereafter to come it is is convicted which is the expression used.
It is also true that in the course of a debate in the House of Lords on the bill which became LASPO, Lord McNally, speaking for the Government, incorporated in responses to proposed amendments the following: The Government took the view from an early stage that IPPs must be replaced, and we have brought forward proposals in the Bill to do so.
Once those provisions are commenced, no further IPPs can be imposed, even for previous offending.
That is a major step forward.
We are now concerned with those who have or will receive an IPP sentence prior to abolition (Committee stage: House of Lords Debates 9 February 2012 at col 443, emphasis added) This passage is, however, of no legitimate help in construing section 226A(1).
The minister was not considering the clause which became that section, nor any question of commencement date.
He was responding to pleas by various members of the House to incorporate extra provisions converting past IPP sentences into some other form.
Understandably, in rejecting retrospective conversion, he drew attention to the prospective nature of the abolition of IPP.
His words do not come near to meeting the conditions in which a ministerial statement can be invoked as an aid to statutory construction under Pepper v Hart [1993] AC 593.
Once the introduction of EDS was, by section 226A(1)(a), made to apply only to those convicted after the commencement of LASPO, the provisions of article 6(a) of the Commencement Order follow.
The old regime was continued for the doubtless very small cohort of offenders, of whom Docherty is one, who had been convicted before the commencement date and had still to be sentenced when that date arrived.
The combined effect of section 224A, 226A and article 6(a) is thus, for a person convicted as the appellant was of an offence carrying life imprisonment: if offence, conviction and sentence are all before 3 December 2012 (i) the old regime applies; Life, IPP and EPP are available; (ii) if offence and conviction were before 3 December 2012, but sentence comes after that date, there are available: life, IPP and EPP but not section 224A obligatory life nor EDS; this is the appellants category; if the offence was before 3 December 2012, but both conviction and (iii) sentence come after that date, neither IPP nor EPP, nor section 224A obligatory life are available; but life and EDS are; (iv) if offence (and therefore conviction and sentence) all come after 3 December 2012, the old regime of IPP and EPP is not available, and all three elements of the new are, thus life, section 224A obligatory life, and EDS.
In addition of course, for all categories, a determinate sentence and non custodial sentences are or were available.
In summary, the timetable so far as is relevant to the present issues, was: 1 May 2012 (but commencement to be LASPO Royal Assent: prescribed by Order) 12 July 2012 Offences: Conviction (guilty plea entered): 13 November 2012 17 November 2012 Commencement Order made: Commencement date: 3 December 2012 20 December 2012.
Sentence passed:
The appellants argument in the present case essentially accepts that article 6(a) and section 226A(1)(a) were designed to go together.
His case is, however, that it was unlawful for the Commencement Order to preserve IPP and EPP for those convicted before 3 December 2012.
Article 6(a), he says, should be struck down.
His first and principal basis for that argument is article 7 ECHR as interpreted by the Strasbourg court in Scoppola v Italy (No 2) [2010] EHRR 12, to which it is now necessary to turn.
Article 7: lex gravior and lex mitior
Article 7(1) ECHR provides: No punishment without law (1) No one shall be held guilty of any criminal offence on account of any act or omission which did not constitute a criminal offence under national or international law at the time when it was committed.
Nor shall a heavier penalty be imposed than the one that was applicable at the time the criminal offence was committed.
The language follows closely that of article 11(2) of the Universal Declaration of Human Rights, adopted by the General Assembly of the United Nations in 1948.
As pointed out by the minority judgment at O 111 in Scoppola (see below), it reflects a fundamental principle of criminal law: Nullum crimen nulla poena sine praevia lege poenali: no one is to be convicted or punished without a pre existing criminal law in force.
The second sentence of article 7(1) gives effect to the so called lex gravior principle (no heavier penalty).
Quite separate is a principle termed lex mitior.
This is conveniently stated in article 15 of the UN International Covenant on Civil and Political Rights (ICCPR) (Treaty Series No 6 of 1977).
Article 15 is in the same terms as article 7 ECHR but contains an additional sentence: If, subsequent to the commission of the offence, provision is made by law for the imposition of a lighter penalty, the offender shall benefit thereby.
As pointed out in the dissenting judgment of the minority in Scoppola (No 2) at O 111, this represents a norm of a different order from the principle of no punishment without law.
Whilst the lex gravior principle is a fundamental and essential condition of freedom, lex mitior expresses a choice that reflects the development of a social process in the context of criminal law.
It circumscribes the scope of criminal law by preserving benefits accruing to defendants as a result of substantive laws subsequent to the commission of the offence and applicable while the case was pending.
The difference between the two principles is underlined by the fact that whereas lex gravior prohibits applying to a case a rule which was not the law when the acts under judgment were committed, lex mitior, when it operates, actually requires such a rule to be applied.
An additional sentence containing this lex mitior principle (benefit of a more lenient penalty) was considered and rejected when article 7 ECHR was adopted in 1950.
As far as appears from the material before us, article 15 of the ICCPR was the first international instrument to give it formal effect, in 1966.
Subsequently similar wording appeared in article 9 of the American Convention on Human Rights (adopted on 22 November 1969, and coming into force on 18 July 1978); and also much later (in December 2000) in article 49 of the Charter of Fundamental Rights of the European Union, which applies when EU law is in question, although it does not insert the second sentence into the general domestic law of member states.
Notwithstanding these international developments, in 1978, in X v Germany Application No 7900/77, the European Commission of Human Rights declared inadmissible a claim that article 7 guaranteed the right to a more lenient penalty provided for in a law subsequent to the offence.
It rejected an argument that article 7 should be treated as containing the principle derived from the equivalent article of the ICCPR.
The Court reached the same conclusion on the same arguments in Petit v UK Application No 35574/97, 5 December 2000 and Zaprianov v Bulgaria Application No 41171/98, 6 March 2003.
As recorded in the dissenting judgment in Scoppola at O 117, the court held categorically in Zaprianov that Article 7 does not guarantee the right to have a subsequent and favourable change in the law applicable to an earlier offence.
In 2005 the subject was considered by the Court of Justice of the European Communities in the case of Berlusconi, (Joined Cases C 387/02, C 391/02 and C 403/02) [2005] ECR I 3565, in the context of Italian laws on the publication of annual company accounts.
Charges had been laid alleging the deliberate falsification of accounts.
The offences were alleged to have taken place at a time in the 1980s or 1990s when the prescribed punishment on conviction was one to five years.
By an Italian presidential decree of 2002 the penalty was very greatly reduced; the minimum disappeared and a maximum of 18 months was imposed.
There were also alterations to the definitions of the offences, and to the limitation periods, which were very favourable to the defendants, to the extent that it might not be possible to prosecute at all.
The Tribunale in Milan had felt able to describe the new penalties as derisory.
The issue referred to the CJEU was whether the new, much more lenient, rules failed to meet the requirements of the relevant European Directives on the subject, under which penalties had to be appropriate in the sense of providing effective sanction and dissuasion.
The Italian Criminal Code contained an express lex mitior provision: if the law in force when an offence was committed differed from later law, the applicable law was that which was more favourable to the accused.
Lex mitior was raised by the defendants as a barrier to any decision that the new regime failed to comply with European law.
The short answer of Advocate General Kokott (paras AG162 and 165) was that it was no such barrier; the principle is based upon fairness and it cannot prevail against the obligation of the state under the Directives to provide effective penalties.
The court, however, declined (at para 71) to answer that question because it held (paras 72 73) that a Directive cannot be relied upon directly against an individual to increase the penalty to which he is liable.
En route to her advice, the Advocate General recognised at paras AG 156 157 that the principle of retroactive application of more lenient penalties is recognised not only nationally, in Italy and elsewhere in the EU, but also internationally.
She recorded, at note 129, that so far as she had been able to ascertain, lex mitior was not expressly recognised either in the UK or Ireland, although it was in all other EU states.
In its turn, the court accepted (at para 68) that such principle represented part of the constitutional tradition common to member states.
It did not consider either the content of such principle nor how general the tradition was, given the reservation which the Attorney General had expressed, but, on its conclusion, lex mitior did not arise.
In Scoppola (No 2) the majority of the Grand Chamber at Strasbourg held that article 7 ECHR is now to be read as if it contained the additional sentence providing for lex mitior.
It so held notwithstanding the drafting history and the previous decisions of commission and court to the contrary.
In para 107 it held that article 7 does not exclude inserting the addition, which plainly it does not.
In para 109 it went further and held that a lex mitior principle is implicit in that article.
The latter is a more difficult proposition; if it were wholly accurate none of the debate at the time of drafting would have been necessary.
However, in substance, the majority founded its change of view upon the proposition (at para 106) that: since the X v Federal Republic of Germany decision a consensus has gradually emerged in Europe and internationally around the view that application of a criminal law providing for a more lenient penalty, even one enacted after the commission of the offence, has become a fundamental principle of criminal law.
It is also significant that the legislation of the respondent state had recognised that principle since 1930.
At paras 103 and 105, the Court cited as evidence of such a consensus the ICCPR, the American Convention on Human Rights, the Charter of Fundamental Rights of the European Union, the statute of the International Criminal Court, the practice of the Court for former Yugoslavia and the French Cour de Cassation, and it referred to the decision of the CJEU in Berlusconi.
Scoppola had murdered his wife and injured a son on 2 September 1999.
At the time of the murder, the offence carried life imprisonment, it would seem as a mandatory penalty rather than as a maximum.
In December 1999 Italy introduced a new abbreviated procedure, for which a defendant could elect; it involved fewer procedural rules from which he might otherwise benefit, but if he chose to elect for it the prescribed penalty became 30 years instead of life.
He did elect for it, was convicted on 24 November 2000, and was sentenced accordingly to 30 years.
That same day, although coming into effect only after the sentencing was over, a further change in the sentencing law was made, as a result of which someone in the position of the defendant was liable to life imprisonment, albeit without daytime isolation, on the grounds that there were cumulative or continuous offences.
There ensued an appeal by the prosecution and such a sentence was substituted.
The issue was whether that entailed an infringement of his Convention rights.
The court held unanimously that there had been an infringement of article 6, because when he elected for the summary procedure Scoppola had foregone rights which otherwise he would have had in return for the limitation on punishment; accordingly it was a breach of article 6 to go back on that quid pro quo.
The sentence of life imprisonment was accordingly a Convention breach independently of the article 7 point.
Nevertheless, the latter was an equally central part of the decision of the court.
The court explained the rationale for lex mitior in para 108.
It is that it is wrong to impose a penalty which the state by later legislation has recognised to be excessive.
The court said this: 108.
In the courts opinion, it is consistent with the principle of the rule of law, of which article 7 forms an essential part, to expect a trial court to apply to each punishable act the penalty which the legislator considers appropriate.
Inflicting a heavier penalty for the sole reason that it was prescribed at the time of the commission of the offence would mean applying to the defendants detriment the rules governing the succession of criminal laws in time.
In addition, it would amount to disregarding any legislative change favourable to the accused which might have come in before the conviction and continuing to impose penalties which the state and the community
represents now consider excessive
However, some of what the court went on to say in both that paragraph and the ensuing paras 109 and 119 might suggest at least a possibility that the principle should have the effect of requiring a court not only to apply a more lenient penalty currently recognised as appropriate to the crime, but also to select, from all the penalty rules which have existed over the period from the commission of the crime to the date of sentencing, the one most favourable to the defendant.
In para 108 the court continued: The court notes that the obligation to apply, from among several criminal laws, the one whose provisions are the most favourable to the accused is a clarification of the rules on the succession of criminal laws, which is in accord with another essential element of article 7, namely the foreseeability of penalties. [emphasis supplied] In para 109 it said: 109.
In the light of the foregoing considerations, the court takes the view that it is necessary to depart from the case law established by the Commission in the case of X v Federal Republic of Germany and affirm that article 7(1) of the Convention guarantees not only the principle of non retrospectiveness of more stringent criminal laws but also, and implicitly, the principle of retrospectiveness of the more lenient criminal law.
That principle is embodied in the rule that where there are differences between the criminal law in force at the time of the commission of the offence and subsequent criminal laws enacted before a final judgment is rendered, the courts must apply the law whose provisions are most favourable to the defendant. [emphasis supplied] And in para 119 it said of Scoppola himself: It follows that the applicant was given a heavier sentence than the one prescribed by the law which, of all the laws in force during the period between the commission of the offence and delivery of the final judgment, was most favourable to him. [emphasis supplied]
There is a very clear difference between (1) a principle which prevents a court from imposing a penalty above and outside the range currently provided for by the State as appropriate to the crime and (2) a principle which requires the court to seek out and apply the most favourable rule which has existed at any intervening time since the offence was committed, even if it has since been abandoned.
The first would fall within the rationale of confining the court to a range currently considered appropriate for the offence; the latter would not.
The difference between the two is not adverted to, still less explored, in the judgment in Scoppola.
It is, accordingly, by no means clear that the court intended to expand its incorporation of lex mitior into article 7 by including the latter proposition.
The arguably wider statements just described need to be read in the Italian domestic context in which they arose.
The eventual sentence under question (passed on appeal) might not have been more severe than would have been applicable at the time the offence was committed (both were life imprisonment), but it was more severe than was provided for by the law in force at the time of his trial and sentence.
The Italian Criminal Code contains, as noted in Berlusconi, an express lex mitior provision couched in terms which would give a defendant in the position of Scoppola the benefit of (at least) the law operative at the time of trial and sentence.
As will be seen below, there could be no question of English law adopting, between trial and appeal, a new more severe penalty regime.
However that may be, there is no discussion in Scoppola of the difference between the two principles identified in para 40 above.
Clearly, on this point, Berlusconi is of no assistance, since lex mitior was not applicable to the decision and the question of its extent therefore did not arise.
Lex mitior: English practice
As Advocate General Kokott correctly noted in Berlusconi English law does not identify a rule by the name of lex mitior.
Nor, although that principle appears in a few constitutional instruments in the common law world, such as the Canadian Charter, the New Zealand Bill of Rights and the State of Victorias Charter of 2006, can it be said that it is recognised by name generally in jurisdictions based on the common law.
It is clearly adopted only piecemeal in the USA, whilst being wholly rejected by some 22 states see Western, University of Michigan Public Law and Legal Theory Research Paper No 455, March 2015.
But Englands longstanding common law practice is to recognise the principle, at least in the narrower form justified in Scoppola as abstaining from imposing a sentence now recognised as excessive.
English criminal courts sentence according to the law and practice prevailing at the time of sentence, whenever the offence was committed, subject only to scrupulous observance of the lex gravior principle of article 7, namely that no sentence must be imposed which exceeds that to which the defendant was exposed at the time of committing the offence.
The Scottish practice is the same.
With the exception of the mandatory life sentence for murder, the sentence for English criminal offences is not prescribed by statute.
The statute prescribes the maximum.
Sentence within that maximum is a matter for the judgment of the judge according to the individual aggravating and mitigating factors relating to the offence and to the offender.
Nor, with very few exceptions, does the statute prescribe a minimum sentence.
English sentencing statutes do not, as many laws in other countries do, fix a range between top and bottom points within which a sentence must fall.
Guidance is given as to the assessment of the gravity of offences, and as to the likely range of sentence, by both the Court of Appeal (Criminal Division) when hearing individual appeals, and, now, by the Sentencing Council, which publishes general guidelines.
But the judge remains the arbiter of when justice requires him to depart from the guidelines: see for example the explicit provision to that effect in the legislation relating to Sentencing Council guidelines, by way of section 125(1) of the Coroners and Justice Act 2009.
Thus: (a) if the maximum sentence has been increased by statute since the offence was committed, the English court cannot sentence beyond the maximum which applied at the time of the offence, because that is the sentence to which the defendant was at that time exposed (lex gravior); (b) if the maximum sentence has been reduced by statute since the offence was committed, the English court will sentence within the now current maximum; in R v Shaw [1996] 2 Cr App R (S) 278 the statute reducing the maximum sentence (for theft) was held as a matter of construction to apply to past as well as to future offences, but in R v H (J) (Practice Note) [2011] EWCA Crim 2753; [2012] 1 WLR 1416, a guideline case dealing principally with the sentencing of cases of historic sexual abuse, Lord Judge CJ stated the general approach at para 47(b): Similarly, if maximum sentences have been reduced, as in some instances, for example theft, they have, the more severe attitude to the offence in earlier years, even if it could be established, should not apply. (c) if sentencing practice as to the assessment of the gravity of an offence has moved downwards since the offence was committed, the court should sentence according to the now current view, and if it did not do so the sentence would be vulnerable to reduction by the Court of Appeal on the grounds that it was manifestly excessive; (d) if a new sentencing option which is arguably less severe is added by statute or otherwise to the menu of available sentences after the commission of the offence but before the defendant falls to be sentenced, that new option will be available to the court in his case, unless the statute expressly otherwise directs; in the Canadian case of The Queen v Johnson 2003 SC 46 the menu of sentencing options for those presenting a future risk had had added to it a new, and for some offenders a possibly less severe, option of post custody supervision in the community; this was applied to the defendant although his offence had been committed before the change in the law; if such circumstances were to occur in England the result would be the same. (e) appeals against sentence to the Court of Appeal are not conducted as exercises in re hearing ab initio, as is the rule in some other countries; on appeal a sentence is examined to see whether it either erred in law or principle or was manifestly excessive, and those questions are determined by reference to the law and practice obtaining at the time that the sentence was passed by the trial judge: see R v Graham [1999] 2 Cr App R (S) 312 and R v Boakye [2012] EWCA Crim 838 discussed at para 53 below; accordingly the situation which arose in Scoppola out of a change in the law between sentence and appeal could not raise a similar difficulty here; (f) moreover, except in very limited cases the Court of Appeal has no power to increase a sentence on appeal (Criminal Appeal Act 1968 section 11(3)); in the exceptional case where it can do so on the application of the Attorney General, its power is limited to putting itself in the position of the trial judge and asking whether on the rules then applying he passed an unduly lenient sentence; for this reason also if the circumstances of Scoppola were to occur in England there could be no question of the trial judges 30 year sentence being replaced on appeal by a life sentence; (g) similarly, in the separate case of sentences for minor offences which are appealable from the Magistrates Court to the Crown Court, an appeal lies only at the suit of the defendant; although the Crown Court re sentences ab initio and can thus pass a more severe sentence than did the magistrates, the practice, if such a step is contemplated, is to give notice of this risk to enable the defendant to abandon his appeal if he wishes; once again therefore the kind of sequence of events which obtained in Scoppola would not occur.
English practice does not, however, attempt to examine all intervening rules or practices which have obtained over the period between the offence and the sentencing process with a view to finding whether at any time there has been a more favourable practice.
To that extent it does not accord with any wider expression of lex mitior, if such was indeed suggested in Scoppola by the second half of para 108, the last sentence of 109 and the words of 119 (see para 38 above).
Nor is there any reason for such an extension.
Sentencing legislation and practice may well go up and down as public policy is held by legislators to change, or current responsible views on particular offending are perceived by courts to develop.
But there is no injustice to a defendant to be sentenced according either to the law as it existed at the time of his offence or, if more lenient, according to the law as it exists when he is convicted and sentenced.
To insist that a defendant should not be sentenced on a basis now authoritatively regarded as excessive is one thing.
It is quite another to say that he should be sentenced according to a practice which did not obtain when he committed the offence and does not obtain now, merely because for some time in the interim, however short, a different practice was adopted which has now been abandoned as wrong.
This can be illustrated by a provision of the Criminal Justice Act 1991.
Parliament having, by section 2(2)(a) of that Act, introduced the concept of the commensurate sentence measured only by the seriousness of the offence, went on to provide by section 29, controversially, that an offence could not be considered to be more serious than otherwise it would by reason either of the defendants previous offending or his failure to respond to past sentences.
Consistently with the English practice explained above, that provision, which operated to the advantage of most defendants, was applied immediately to all those coming before the courts, whenever their offences had been committed.
But the rule was rapidly found to be unrealistic and wrong, requiring habitual criminals such as sexual predators or fraudsters to be treated as if they were first offenders.
Parliament reversed it by section 66 of the Criminal Justice Act 1993.
It is not English law that every defendant whose offence was committed before the commencement of section 29 of the 1991 Act is now entitled to be sentenced on the basis that, however often he had done the same thing before, his crime has to be treated as if it were a first offence, simply because for the two years 1991 1993 that section had been in force.
The sections brief stay on the statute book after the offence was committed can have had no conceivable impact on such a defendant and should have nothing to do with his sentencing in 2016.
It seems unlikely that the Strasbourg court, which was not in Scoppola considering any such scenario, would hold otherwise.
The lex mitior principle should not be held to extend to such a proposition.
The well settled aspects of English legislative and judicial practice set out above in relation to the penalties provided for need to be distinguished from the exercise of the sentencing judges discretion within the maximum permitted at any time.
The sentence to which a defendant was exposed, at the time of his offence, is, by English law, a sentence up to the maximum then permitted.
It is well recognised that the multifarious factors which fall to be considered when fixing a sentence will inevitably vary in weight as time passes.
New aggravating or mitigating factors will be recognised from time to time, or the weight accorded to such factors will alter.
The long term damage to victims of sexual abuse, for example, is very much better understood now than it was 30 years ago.
Very large numbers of crimes of persistent sexual abuse committed many years ago are now coming before the courts, principally because victims are belatedly feeling able to reveal them.
New investigation techniques, such as DNA testing, may also identify various types of offender, by no means only sexual offenders, years after the event.
The discovery of a recent offence may not infrequently lead to the revelation that the offender has been committing similar offences for many years.
Although a court sentencing today for an offence committed many years ago must confine itself within the maximum which was available by statute at the time of the offence, it is not required, nor should it be, to apply an outdated assessment to the gravity of the conduct.
Nor, if the impact of the offending on the victim has been greatly increased by years of suppression in consequence of the manner of abuse, should the court ignore that fact.
The basic rule, as carefully explained by Lord Judge CJ in R v H (supra) is that the applicable maximum is that in force at the time of the offence, but it is positively wrong for a court in 2016 to attempt to evaluate the particular offence by hypothesising that it is sitting in (say) 1984.
That it is the maximum sentence which matters to lex gravior is the approach which has been consistently adopted.
In Coeme v Belgium [2000] ECHR 250, considering the lex gravior rule in article 7, the Strasbourg court held (at para 145) that article 7 required that it be shown that when the offenders act was done there was in force a legal provision making it punishable and that the punishment imposed did not exceed the limits fixed by that provision. (emphasis supplied).
That was the meaning of the expression penalty applicable in article 7.
In R (Uttley) v Secretary of State for the Home Department [2004] 1 WLR 2278 the House of Lords applied the same approach.
All the law lords expressly rejected the contention that that article is concerned with the penalty which the court could in practice have been expected to impose.
As Lord Rodger pointed out at para 42, that would involve speculative excursions into the realm of the counterfactual.
What matters is the maximum penalty permitted.
The same approach was expressly adopted by the Strasbourg court when application was made to it in that same case: Uttley v UK Application 36946/03.
This learning is confirmed in Scoppola.
At para 95 the court held, citing Coeme: The court must therefore verify that at the time when an accused person performed the act which led to his being prosecuted and convicted there was in force a legal provision which made that act punishable, and that the punishment imposed did not exceed the limits fixed by that provision. [emphasis supplied] And at para 98 it reiterated the rule that the court, like the Commission before it, draws a distinction between a measure that is in substance a penalty and a measure, such as one relating to the regime for early release, which concerns the execution or enforcement of the penalty.
In countries, unlike England, where sentencing laws prescribe a range between a minimum and a maximum, the raising of the minimum has an effect comparable to the raising of the maximum: both constrain the court by creating a more severe regime, thus engaging the rule against lex gravior.
Such a situation came before the Strasbourg court in Maktouf v Bosnia & Herzegovina (2014) 58 EHRR 11.
The effect of the change was to alter the range for the defendant Maktouf (an accomplice) from 1 15 to 5 20 years.
For the defendant Damjanovich (a principal) the range was altered from 5 15 to 10 20.
Maktouf was expressly sentenced to the new minimum of five years, but the court could not go below that figure as previously it could have done.
Damjanovich was sentenced to 11 years, just one year above the new minimum, and the Court was satisfied that if the old range had been treated as governing the case he might well have received less.
Accordingly there were breaches of the lex gravior rule in article 7, although it did not follow that lower sentences ought to have been imposed: that was a matter for the sentencing court.
What the Strasbourg court appears to have been contemplating was the possibility that in order to maintain the differential between Damjanovicj and someone else who had committed the same offence but in a less grave manner, the court might have had to raise his sentence a little above the new minimum, thus to leave room below it for the less grave example of similar offending.
It was not suggesting that the revision of the minimum prevented a contemporaneous assessment of the gravity of his offence.
There was no reason why that assessment should not have been undertaken according to the practice at the time of sentencing, as it appears that it was, and as would occur in England.
Thus the ECtHR was concerned with altered statutory constraints operating on the sentencing court, of which one, the new minimum, might have (but had not necessarily) prevented the court from sentencing as it otherwise would have done.
Similar considerations might apply in the present case if IPP was not legitimately available to the judge (as to which see below).
But there is nothing in this which is inconsistent with the English practice in relation to historic offences as explained in R v H (J), and no question of either the lex gravior or the lex mitior principles requiring the court to undertake the hypothetical exercise of imagining itself sentencing many years ago.
That exercise would be both artificial and unjust.
Phased commencement and anticipation
New legislation frequently calls for carefully planned and phased commencement.
That is a fact by no means confined to sentencing legislation, but that field is certainly no exception.
New sentencing regimes may require quite extensive administrative adjustments, for example to the organisation of the probation service or the prisons.
They may also, and in England and Wales often do, entail complex adjustments to the associated rules for early release, as do the new EDS provisions in LASPO.
Phased introduction of sentencing changes is perfectly sensible.
The decision about what to introduce when can be complex and may well admit of more than a single solution, but there is nothing unlawful about leaving it to the minister charged by the statute with making the necessary commencement orders.
Some sentencing changes may be relatively simple.
A change in the maximum sentence may be one.
The Canadian case of The Queen v Johnson is an example of a more sophisticated change of regime, and would no doubt have entailed putting in place new offender management administrative arrangements; it was nevertheless comparatively simple because the existing options remained with a fresh one added.
That may be contrasted with a case such as the present.
If regime A, consisting of options 1, 2 and 3, is to be replaced by regime B, consisting of options 1, 4 and 5, and the new options are positively inconsistent with the old, commencement and transition are likely to require careful handling.
The wish to provide for lex mitior may collide with the greater imperative not to impose lex gravior.
If one or more of the new options cannot be brought into force in relation to past offences, in order to avoid infringement of lex gravior, it may be necessary to defer repeal of one or more of the old options until there is a coherent scheme in place.
The objects of sentencing include of course fairness to the offender, but they also include proper punishment, the deterrence of crime and, most significantly, the protection of the public from dangerous offenders.
In the transition from the scheme of the CJA 2003 to that of LASPO several of these difficulties arose.
First, the new obligatory life sentence was more severe for some offenders than what went before.
Second, the new EDS, despite its nominal similarity to EPP, affected different offenders.
EDS and EPP could not sensibly co exist, and not simply because the prospect of the court having to consider two possible regimes is alarming.
There would be an unacceptable risk of unfairness and of arbitrariness.
For example, a great many sexual offences can be charged under several different sections of the Sexual Offences Act 2003.
The same act of sexual abuse of a child under 13 can easily fall within both sections 7 and 8.
But whilst if charged under section 8 it qualifies for both an EPP and an EDS, if charged under section 7 EPP would not be available but EDS would.
Two defendants, differently charged for essentially the same behaviour, might have to be sentenced differently, whilst a single defendants sentencing regime would vary for the same conduct according to which charge had been preferred.
Even if it were possible to postulate a rule that the more lenient sentence had to be applied, this would not solve the problem of potentially unfair differential between similar defendants where either only one sentence is available for each, or one defendant could be subject to both, and another to only one.
The reality is that all changes in sentencing law or practice have to start somewhere.
It is perfectly rational, indeed sensible, for a date to be fixed and for the sentencing of any offender which takes place after that date to be governed by the new rule/practice, whenever the offence was committed, in accordance with the usual English approach and subject only to avoiding lex gravior.
That is the practice now adopted by the Sentencing Council when promulgating new guidelines.
Such guidelines are issued on the explicit basis that they are to become applicable from a stated date, as soon after publication as it is practicable for courts and practitioners to be equipped with and digest copies.
The new guidelines are made applicable to any sentence passed after that date, whenever the offence was committed.
In 2012 a guideline for drug offences included the recommendation that the offences of some couriers from abroad, where they were vulnerable and exploited by others, ought not to be treated as quite so grave as other drug importation cases.
The guideline was stated to operate for sentences from 27 February 2012, whenever the offence had been committed.
It had been preceded in the usual way by a public consultation, in which this change, like others, had been canvassed as a possibility.
A number of previously sentenced defendants who said they were in this category (although they were not) abstained from appealing their sentences until after the new guideline was published.
Their offences and sentences had been between 2008 and 2011; all the appeals were very much beyond the time limit.
In R v Boakye [2012] EWCA Crim 838 the Court of Appeal held that even if these cases had been within the new assessment of gravity, it was not possible retrospectively to re visit unappealed sentences.
That was to apply well established law: see R v Graham [1999] 2 Cr App R (S) 312, where the court had considered a reference to the court by the Criminal Cases Review Commission long after sentence and following a change in sentencing practice.
Rose LJ had there said, at p 315: A defendant sentenced lawfully, in accordance with the prevailing tariff, and when all factors relevant to sentence were known to the sentencing judge, can, in our view, hardly be described as the victim of [a miscarriage of justice].
Secondly, an alteration in the statutory maxima or minima penalty between sentence and reference cannot, in our view, give rise to legitimate grievance.
Whilst a court will faithfully give effect to a change in a sentencing regime from the time that it is introduced, it is not permissible for it to anticipate its commencement.
That way lies chaos.
Sometimes, indeed, changes which are legislated for in statute are never brought into force.
That was the case with a raft of new provisions for intermittent custody enacted by the Criminal Justice Act 2003.
The present appeal amounts to a claim by Docherty to anticipate the commencement of the change of regime, to the extent that he wishes the disappearance of IPP to be effective for him before the Commencement Order (by article 6(a)) abolishes it.
He can no more do that than it would be possible for him to contend that IPP should be treated as unavailable for every court from the day that LASPO received the Royal Assent on 1 May 2012.
Anticipation of a change which is yet to take effect is no part of lex mitior.
Lex mitior, as explained in Scoppola at para 108, prevents the imposition of a sentence which the system has now adjudged, by a change of law, to be excessive.
But if the change has yet to be made, that judgment has not yet been given effect; it is in prospect only.
The fixing of the date for the change is part of the change itself.
If a conscious decision has been made not yet to commence the new law/practice, it cannot yet be said that society now considers excessive the old.
And it may well consider, rationally, that a penalty shall be regarded as excessive for the future but not for the past.
Conclusion: lex mitior
There are real difficulties in interpreting the decision in Scoppola, both with the insertion of a new sentence into article 7 when such was deliberately left out at the time of drafting, and with its extent if it is to be considered inserted.
As to the first, the decision is the considered view of the Grand Chamber.
It is not necessary to revisit the controversy because English practice recognises lex mitior in its ordinary form, namely the principle that an offender should be sentenced according to the law and practice prevailing at the time of his sentence, subject to not exceeding the limits (ie in England normally the maximum) provided for at the time the offence was committed.
If it were necessary to investigate the second difficulty, and the possibility that a defendant is entitled to insist on being sentenced according to any more favourable law or practice which has at any time obtained between the commission of the offence and the passing of sentence, that extended rule is not clearly adopted by the Grand Chamber, appears not to be within the stated rationale for the principle of lex mitior, and would entail unwarranted consequences.
Such an extended concept of the principle should, with great respect, not be applied.
Given these conclusions, the various other examples, to which we were referred, of express inclusions in national and international instruments of an additional sentence stating the lex mitior rule, do not take the matter any further forward.
Unlike ECHR article 7 they are not part of domestic English law.
They do not in any event shed any light on the second question examined above, as to the extent of the lex mitior principle, assuming it is to be read into article 7.
Application to the present case
If the new LASPO regime had been commenced for a defendant in Dochertys position at the time he fell to be sentenced, then in accordance with English practice, it would have been applicable to him, notwithstanding that his offence had been committed before the change in the law.
But the new regime was not in force for his case.
It was the subject of legitimate phased introduction.
For the reasons set out in para 54 above, lex mitior does not entitle Docherty to anticipate the statutory commencement of LASPO.
The case made on his behalf was, both in the Court of Appeal [2014] EWCA Crim 1197; [2014] 2 Cr App R 76, and before this court, that he ought to have been sentenced to EPP.
That exposes the flaw in the argument, for it would seek to insist on the benefit of (accelerated) removal of one part of the old regime (IPP) whilst at the same time claiming the preservation of another part of it (EPP).
The Court of Appeal also upheld the sentence of IPP on an additional basis.
It accepted that the principle of lex mitior should be followed, without needing to resolve the possible debate as to its extent.
But it adverted to the fact that Dochertys offences were punishable by a maximum of life imprisonment.
It correctly rejected the conclusion that that maximum was, by itself, enough to show that no question of lex mitior arose.
It by no means follows that every case which would have been met by IPP will now be met by a life sentence: see for example the case of Smith dealt with in Burinskas at para 138 of the transcript at [2014] EWCA Crim 334.
But the Court of Appeal went on to hold that the lex mitior principle did not apply if there was a reasonable possibility that, had IPP not been legitimately applicable, Docherty would have been sentenced to life.
Since there was the real possibility that such a sentence would have been passed, that was held to constitute a further reason for dismissing the appeal.
The Court of Appeal was plainly right that the judge might, if IPP had not been available, have passed a life sentence.
He said that he did not need to do so, because IPP was available to him, and he expressly remarked that the position may well change with the changes in the law.
Burinskas (para 16 above) has since shown that to have been a far sighted observation.
But if lex mitior had meant that IPP, although technically available, should not have been passed, the sentence of IPP passed would fall to be quashed as wrong in principle or manifestly excessive unless in its absence a life sentence would have been the correct sentence and thus lex mitior could not have availed Docherty.
On this hypothesis, whether or not a life sentence would, absent IPP, have been the correct sentence would fall to be determined by the Court of Appeal itself.
It would not be sufficient that life might well have been the judges sentence.
This did not, however, arise.
Article 6(a) ultra vires?
The appellants alternative argument is that once the decision had been made, for good reasons, to abandon IPP as a form of sentence, it was unlawful, as contrary to the clear purpose of LASPO, to preserve it for anyone who had yet to be sentenced after that Act was commenced.
For that reason, he contends, article 6(a) of the Commencement Order, at least insofar as it preserved IPP, was not properly made within the purpose for which such an order can be made under the power given by LASPO.
It offends the Padfield principle (Padfield v Minister of Agriculture, Fisheries and Food [1968] AC 997).
This alternative argument founders on the same rock as the argument from lex mitior.
There is nothing irrational, and therefore nothing contrary to the statutory purpose, in phased commencement.
It is no more permissible for the appellant to use this argument to anticipate the planned commencement of LASPO than it is to deploy lex mitior to do so.
Discrimination
The suggested discrimination is said to arise as between a defendant in the position of the appellant, and a defendant who committed an identical offence on a similar date, but who was convicted on 4 December 2012.
It is certainly true that the effect of the Commencement Order is that IPP is available to be imposed in the case of the appellant but not in the case of that comparator.
The appellant submits that this discriminates objectionably against him on grounds of other status, namely either (i) his status as a convicted person prior to 3 December or (ii) his status as a prisoner who is subject to an indeterminate sentence.
Assuming for the sake of argument that status as a prisoner subject to a particular regime can in some circumstances amount to sufficient status to bring article 14 into question (Clift v UK [2010] ECHR 1106), it cannot do so if the suggested status is defined entirely by the alleged discrimination; that was not the case in Clift.
For that reason, the second suggested status cannot suffice.
As to the first, even if it be assumed in the appellants favour that the mere date of conviction can amount to a sufficient status, which is doubtful, the differential in treatment is clearly justified.
All changes in sentencing law have to start somewhere.
It will inevitably be possible in every case of such a change to find a difference in treatment as between a defendant sentenced on the day before the change is effective and a defendant sentenced on the day after it.
The difference of treatment is inherent in the change in the law.
If it were to be objectionable discrimination, it would be impossible to change the law.
There are any number of points which may be taken as triggering the change of regime.
The point of conviction is clearly one, and the point of sentence is another.
Neither is, by itself, irrational or unjustified.
Disposal
It follows that the several challenges to the sentence of IPP fail and the appeal must be dismissed.
| UK-Abs | The appellant Shaun Docherty was convicted on 13 November 2012 of serious violent offences under s.18 of the Offences against the Person Act 1861.
He had displayed a clear pattern of aggressive offending and posed a high risk of serious further violence.
The nature of Dochertys offences was such that he fell under the scheme of preventative sentencing for dangerous offenders, defined by the Criminal Justice Act 2003 (CJA 2003) as those who are convicted of specified offences and who present a significant risk to the public of serious harm from further serious offending.
The statutory maximum sentence for the offences of which Docherty was convicted is, and has been for well over a century, life imprisonment.
The scheme under the CJA 2003 included inter alia a possible indeterminate sentence of imprisonment for public protection (IPP).
This required the judge to specify a minimum period to be served before the IPP prisoner could be eligible for release on licence, providing that the Parole Board was satisfied that it was no longer necessary for the protection of the public that he be detained.
The CJA 2003 also provided a form of extended sentence known as an extended sentence for public protection (EPP).
That scheme was later replaced by the Legal Aid, Sentencing and Punishment of Offenders Act 2012 (LASPO), which introduced new discretionary and mandatory life sentences and a new form of extended determinate sentence (EDS), while abolishing IPP and EPP.
A Commencement Order specified the commencement date as 3 December 2012 for the new scheme, and included transitional provisions that IPP and EPP would still be available for anyone convicted but not yet sentenced before 3 December 2012, as in the case of the Appellant.
The Appellant was sentenced to IPP on 20 December 2012, with a specified minimum period of five years and four months.
The Appellant contended that he ought to have been sentenced instead to EPP, and that the Commencement Order was unlawful to the extent that its transitional provisions preserved IPP for him.
He argued the Order was unlawful for three reasons.
Firstly, the new scheme was less severe, so to apply the harsher, earlier scheme was contrary to an international principle of lex mitior binding on English courts by virtue of article 7 of the European Convention on Human Rights (ECHR).
Secondly, because the purpose of LASPO was to remove IPP as a sentencing option, preserving it to any extent was outside the authority given by LASPO.
Thirdly, it was unlawful discrimination contrary to Article 14 ECHR to impose IPP on him but not on a person convicted after the specified commencement date.
The Court of Appeal dismissed all of the Appellants arguments and the Appellant appealed to the Supreme Court.
The Supreme Court unanimously dismisses Mr Dochertys appeal.
Lord Hughes gives the judgment, with which the rest of the Court agrees.
The Commencement Order setting out transitional provisions for the introduction of LASPO was lawful.
It did not breach Article 7 ECHR, it was legitimately made and was rational, and if it was discriminatory (which was doubtful) then it was justifiably so.
With the exception of a mandatory life sentence for murder, English criminal sentencing is a matter for the judge.
Statute prescribes the statutory maximum, within which the judge may sentence, taking into account the relevant guidelines.
The judge must sentence according to the law and practice prevailing at the time of sentence, regardless of when the offence was committed.
Thus if the maximum sentence has been reduced by statute since the offence was committed, the court will sentence within that now current maximum, or if sentencing practice has moved downward, the court should sentence in line with that.
Article 7 ECHR requires that there be no punishment without law.
This has always said, explicitly, that no sentence may be imposed which exceeds that to which the defendant was exposed at the time of committing the offence (lex gravior).
Since the statutory maximum for the Appellants offences was the same at the time of offence and sentence, the principle of lex gravior is not offended.
The principle of lex mitior, in contrast, is that if provision is made by law for a lighter penalty, subsequent to the commission of the offence, the offender shall benefit from that lighter penalty.
The Strasbourg court has held in 2010 in Scoppola v Italy (No 2) (2010) 51 EHRR 12 that Article 7 also requires compliance with this principle.
There are some difficulties in establishing the exact meaning which the court gave to lex mitior, but it is not necessary to resolve them because it is clear that the English practice of sentencing according to current law and practice, subject to the statutory maximum obtaining at the time of the offence (if lower) complies with it.
The Strasbourg court cannot have meant that it is necessary to examine all intervening rules or practices between the offence and the sentencing process, and to sentence according to whichever is the most favourable.
That would not accord with good reason or with the rationale of lex mitior, or with the English practice.
Lex mitior is in any event of no assistance to Docherty because it does not involve anticipating the commencement of a new and more favourable sentencing scheme [42 49].
The reading of the provisions of the Commencement Order, together with the provisions of LASPO is clear: IPP and EPP disappear from the sentencing armoury on 3 December 2012, except for anyone already convicted but not yet sentenced, as in the case of the Appellant.
There was no breach of Article 7 ECHR.
In any event, the Appellants argument that he should benefit from the accelerated removal of IPP from the old scheme but claim the preservation of another part of it (EPP) is inconsistent [58].
Further, there was nothing contrary to LASPOs statutory purpose in the Commencement Orders transitional provisions. s.151 of LASPO enables such an order to be made, and that it may make transitional provisions.
The phased commencement of the new sentencing scheme was both legitimate and rational.
The Appellants discrimination argument also fails.
It is doubtful whether being subjected to a different sentencing regime to another prisoner, due to a different date of conviction, could amount to a sufficient status to bring it within the anti discrimination provision of Article 14 ECHR.
Even if it could, the differential treatment is clearly justified by the need for all sentencing changes to start somewhere [61 63].
|
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).
| UK-Abs | 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].
|
The principle of open justice is one of the most precious in our law.
It is there to reassure the public and the parties that our courts are indeed doing justice according to law.
In fact, there are two aspects to this principle.
The first is that justice should be done in open court, so that the people interested in the case, the wider public and the media can know what is going on.
The court should not hear and take into account evidence and arguments that they have not heard or seen.
The second is that the names of the people whose cases are being decided, and others involved in the hearing, should be public knowledge.
The rationale for the second rule is not quite the same as the rationale for the first, as we shall see.
This case is about the second rule.
There is a long standing practice that certain classes of people, principally children and mental patients, should not be named in proceedings about their care, treatment and property.
The first issue before us is whether there should be a presumption of anonymity in civil proceedings, or certain kinds of civil proceedings, in the High Court relating to a patient detained in a psychiatric hospital, or otherwise subject to compulsory powers, under the Mental Health Act 1983 (the 1983 Act).
The second issue is whether there should be an anonymity order on the facts of this particular case.
The facts
The appellant is now 46 years old.
He has had mental health problems for much of his life and in his twenties these became so severe that he was compulsorily admitted to a psychiatric hospital under section 2 of the 1983 Act.
There he met and formed a relationship with another patient but it did not last.
Shortly after his release from a second period in hospital he murdered her and her new boyfriend.
It was a particularly savage killing which must have caused untold suffering to the victims and has continued to cause great grief to their families.
In January 1997 he was convicted of murdering them both, the jury rejecting his defence of diminished responsibility, a verdict at which the trial judge expressed himself astonished.
His first conviction was set aside on appeal, in the light of fresh evidence as to his mental condition; but when he was retried in November 1998 he was again convicted of murder, the jury again rejecting his defence of diminished responsibility.
He was sentenced to life imprisonment, with a tariff originally set at 15 years but reduced on review to 11 years.
The reviewing judge commented that the outstanding feature of the case is the obvious sub normality or mental abnormality of the defendant.
This tariff expired in May 2007.
But in August 2000 the appellant had been transferred to a high security psychiatric hospital, pursuant to a direction of the Secretary of State under section 47 of the 1983 Act.
This permits the Secretary of State to transfer a person serving a sentence of imprisonment to be detained in hospital for psychiatric treatment if the grounds for doing so exist.
The effect of an ordinary transfer is the same as the effect of an ordinary hospital order made in criminal proceedings under section 37 of the 1983 Act (section 47(3)).
However, the Secretary of State may couple a transfer direction with a restriction direction under section 49 of the 1983 Act and did so in this case.
This means that if the grounds for detaining the patient in hospital no longer exist, the Secretary of State may return the patient to prison to serve the remainder of his sentence (section 50(1)(a)).
While the patient is in hospital, however, a transfer with restrictions has the same effect as a restriction order imposed by a court under section 41 of the 1983 Act (section 49(2)).
This means, among other things, that the usual power of the patients responsible clinician to grant him leave of absence from the hospital under section 17 of the 1983 Act, and the power of the hospital managers to transfer him to another hospital under section 19 of the Act or the regulations made thereunder, and the power of the responsible clinician or the hospital managers to discharge him from hospital under section 23 of the Act, can only be exercised with the consent of the Secretary of State (section 41(3)(c)).
The Secretary of State also has his own powers, to lift the restrictions if they are no longer required to protect the public from serious harm (section 42(1)), or to discharge the patient, either absolutely or conditionally (section 42(2)), and to recall a conditionally discharged patient to hospital (section 42(3)).
But if a transferred prisoner is no longer suitable for hospital treatment, the Secretary of State may, instead of returning him to prison, exercise the same powers of releasing him on licence or subject to supervisions as he could have exercised had the patient been remitted to prison (section 50(1)(b)).
In August 2007, the appellant was transferred from the high security hospital to a private sector medium secure psychiatric hospital, where he remained until October this year.
From 2008, he had unescorted leave within the hospital grounds (which does not require the consent of the Secretary of State).
From 2009, he also had escorted leave in the community, where he did voluntary work.
In July 2012, his responsible clinician applied to the Secretary of State for consent for the appellant to have unescorted leave in the community.
It is uncontroversial that unescorted leave in the community is usually an important component in assessing a patients suitability for discharge from hospital.
That consent was refused by letter dated 13 December 2012.
Patients subject to restriction orders or directions may apply annually to the First tier Tribunal under section 70 of the 1983 Act.
The Tribunal has a duty, under section 73 of the Act, to discharge a patient who is subject to a restriction order, either absolutely or conditionally, if the grounds for detaining him in hospital no longer exist.
But if the patient is subject to a restriction direction, the Tribunal has no power to discharge him.
Instead, under section 74(1), the tribunal must: (a) notify the Secretary of State whether in its opinion, the patient would, if subject to a restriction order, be entitled to be absolutely or conditionally discharged under section 73; and (b) if the tribunal notifies him that the patient would be entitled to be conditionally discharged, may recommend that in the event of his not being discharged under this section he should continue to be detained in hospital.
Where (a) applies, the Tribunal shall direct the absolute or conditional discharge of the patient if, within 90 days of the notification, the Secretary of State informs the Tribunal that it may do so (section 74(2)).
On 25 April 2013, the First tier Tribunal, having heard the appellants case, notified the Secretary of State that he would have been entitled to a conditional discharge.
In their view, he was not then suffering from mental disorder of a nature or degree which made it appropriate for him to be detained in hospital for medical treatment; it was not necessary for his own health or safety or for the protection of other persons that he should receive such treatment, provided that his discharge was conditional; and appropriate medical treatment was available for him, provided that the discharge was conditional and subject to the conditions they proposed, which included supervision, supported accommodation and further treatment.
The Tribunal also recommended, pursuant to section 74(1)(b), that if he were not discharged he should remain in hospital.
The Secretary of State could have sought to appeal that decision but did not do so.
Instead, he followed his policy that the release of persons sentenced to life imprisonment should be determined by the Parole Board.
Accordingly he referred the case to the Parole Board.
Section 74(5A) of the 1983 Act provides that applications and references to the Parole Board may be made in respect of a patient subject to a restriction direction where the Tribunal has recommended that a patient who would otherwise be entitled to a conditional discharge should remain in hospital if not discharged.
Following the Tribunals decision, the appellants responsible clinician again applied for the Secretary of States consent for him to have unescorted community leave.
Consent was again refused in a letter dated 11 July 2013.
In October the Secretary of State agreed to retake that decision, but in a letter dated 18 October 2013, consent was again refused.
The claimant applied for judicial review of that decision in November 2013; in December 2013, the High Court ordered that the appellant be anonymised in the proceedings; this was continued at the end of December when permission to apply for judicial review was granted.
The claim was heard by Cranston J in January 2014: [2014] EWHC 167 (Admin).
He rejected the appellants challenge to the lawfulness of the Secretary of States decision.
He had earlier invited the parties submissions on whether the appellant should remain anonymous.
In response, the responsible clinician wrote to the judge to request that the anonymity order remain in force for the following reasons: 1.
The hospital is a secure mental health hospital which provides care and treatment for a large number of patients with various offences and who continue to pose risks to staff and others. 2.
Naming the hospital would lead to enhanced procedural, physical and relational security having to be put in place. 3.
The hospital staff would need to be vigilant to monitor the safety of the individual in terms of the media interests and the impact this may have on [the patient] and on other patients who are detained in hospital with him and their attitude to him. 4.
High profile nature of the case which would attract media interest leading to contact with the hospital and consequences of managing this interest on a daily basis. 5.
Distress caused to relatives of the victims in this case.
Impact of media interest on [the patients] care, 6. treatment and progress at the hospital. 7. patient] if his whereabouts were made public.
Previous concerns in relation to the safety of [the
Cranston J dealt with the issue in a single paragraph (para 35): previous proceedings about this claimant are publicly available and I cannot see the justification for anonymity: the public have a right to know what I have decided about his claim for judicial review: R (M) v Parole Board [2013] EWHC 1360 (Admin), [2013] EMLR 23, paras 47 49.
However, Dr H has written requesting that the hospitals identity and that of the staff be concealed, to protect both the claimant and the other patients from potential intrusion.
That is a reasonable request and there be an order of anonymity to that extent.
The claimant was refused permission to appeal in relation to the dismissal of his claim but granted it in relation to the refusal of anonymity.
The Court of Appeal dismissed his appeal.
The original anonymity order has, however, remained in force pending the determination of his appeal to this court.
To bring the history up to date, in September 2015, the Parole Board directed the release of the appellant on life licence.
It explained that the Risk Management Plan which is put forward is robust, that your risks of causing serious harm in the community are now minimal and that any increase in risk is highly likely to be detected before any danger arises, that your risks can be safely managed in the appropriate community setting which is now proposed and that the point has been reached at which it is no longer necessary for the protection of the public that you should continue to be detained.
Hence his release was conditional upon a place being available at a particular care home which specialises in rehabilitation services.
The Parole Board also imposed a number of conditions in addition to the standard conditions contained in all life licences.
These included a requirement to comply with the conditions in a protocol governing his residence in the care home.
Both the Parole Board and the care home required him to continue to undertake psychiatric treatment under a psychiatrist, a psychologist and a community psychiatric nurse.
He also agreed to change his name: I understand that my case has received a high level of media attention, and in order to facilitate my successful reintegration into the community, changing my name may protect me and those around me from unwanted media attention which could undermine the effectiveness of my placement and its aims.
I agree to arrive at [the care home] using my intended new name and change my name by deed poll in the first week of arrival.
I will then manage all my affairs under this name from the point of discharge.
The appellant was in fact released from hospital in October 2015.
The Civil Procedure Rules
These are civil proceedings in the High Court, governed by the Civil Procedure Rules, rule 39.2.
Rule 39.2(1) to (3) deal with the publicity of the hearing.
It is worth quoting these in full, although the publicity of the hearing is not the issue in this case: (1) The general rule is that a hearing is to be in public. (2) The requirement for a hearing to be in public does not require the court to make special arrangements for accommodating members of the public. (3) A hearing, or any part of it, may be in private if (a) publicity would defeat the object of the hearing; it involves matters relating to national security; (b) (c) it involves confidential information (including information relating to personal financial matters) and publicity would damage that confidentiality; (d) interests of any child or protected party; it is a hearing of an application made without (e) notice and it would be unjust to any respondent for there to be a public hearing; a private hearing is necessary to protect the (f) it involves uncontentious matters arising in the administration of trusts or in the administration of a deceased persons estate; (g) interests of justice. the court considers this to be necessary, in the A protected party is a party, or intended party, who lacks capacity, within the meaning of the Mental Capacity Act 2005, to conduct the proceedings (CPR rule 21.1(c) and (d)).
Some compulsory patients lack this capacity and some do not.
Rule 39.2(4) deals with anonymity: (4) The court may order that the identity of any party or witness must not be disclosed if it considers non disclosure necessary in order to protect the interests of that party or witness.
The rationale for a general rule that hearings should be held in public was trenchantly stated by Lord Shaw of Dunfermline in the leading case of Scott v Scott [1913] AC 417, at 477.
He quoted first from Jeremy Bentham: In the darkness of secrecy, sinister interest and evil in every shape have full swing.
Only in proportion as publicity has place can any of the checks applicable to judicial injustice operate.
Where there is no publicity there is no justice.
Publicity is the very soul of justice.
It is the keenest spur to exertion and the surest of all guards against improbity.
It keeps the judge himself while trying under trial.
The security of securities is publicity.
He also quoted the historian Henry Hallam: Civil liberty in this kingdom has two direct guarantees; the open administration of justice according to known laws truly interpreted, and fair constructions of evidence; and the right of Parliament, without let or interruption, to inquire into, and obtain redress of, public grievances.
Of these, the first is by far the most indispensable; nor can the subjects of any state be reckoned to enjoy a real freedom, where this condition is not found both in its judicial institutions and in their constant exercise.
This longstanding principle of the common law is reflected in article 6(1) of the European Convention on Human Rights: In the determination of his civil rights and obligations or of any criminal charge against him, everyone is entitled to a fair and public hearing within a reasonable time by an independent and impartial tribunal established by law.
Judgment shall be pronounced publicly but the press and public may be excluded from all or part of the trial in the interest of morals, public order or national security in a democratic society, where the interests of juveniles or the protection of the private life of the parties so require, or to the extent strictly necessary in the opinion of the court in special circumstances where publicity would prejudice the interests of justice.
It has been held acceptable to provide that a whole class of hearings, such as those relating to children, should normally be held in private: B v United Kingdom (2002) 34 EHRR 19.
As the right is that of the litigant, this provision has normally become relevant in cases where the court proposes, in pursuance of one the exceptions to the normal rule, to sit in private, but the litigant wishes the case to be heard in public.
However, in many, perhaps most cases, the important safeguards secured by a public hearing can be secured without the press publishing or the public knowing the identities of the people involved.
The interest protected by publishing names is rather different, and vividly expressed by Lord Rodger in In re Guardian News and Media Ltd [2010] UKSC 1; [2010] 2 AC 697, para 63: Whats in a name? A lot, the press would answer.
This is because stories about particular individuals are simply 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.
The judges [have recognised] 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.
Of course, there are now many more ways of disseminating information, through the electronic media, to which that last comment does not apply.
However, Lord Rodger also pointed out that the identities of claimants may not matter particularly to the judges.
But the legitimate interest of the public is wider than the interests of judges qua judges or lawyers qua lawyers (para 38).
Furthermore, the fact that the parties have agreed to anonymity cannot absolve the court from balancing the interests at stake for itself.
Indeed that is when there is the greatest need for vigilance (para 2).
It is now trite law that restrictions on publicity involve striking a balance between the right to respect for the private life of the individuals concerned, protected by article 8 of the European Convention on Human Rights, and the right to freedom of expression, protected by article 10 of the Convention: In re S (A Child) (Identification: Restrictions on Publication) [2004] UKHL 47, [2005] 1 AC 593; In re British Broadcasting Corp [2009] UKHL 34; [2010] 1 AC 145; In re Guardian News and Media Ltd, above.
There are even cases where anonymity is required because of the risk of death or really serious ill treatment, in violation of the rights protected by articles 2 and 3 of the Convention: A v British Broadcasting Corp (Secretary of State for the Home Department intervening) [2014] UKSC 25; [2015] AC 588.
The arguments
It is necessary to draw a distinction between ordinary civil proceedings in which a mental patient may be involved, whether as claimant or defendant, and proceedings which are about the compulsory powers of detention, care and treatment under the 1983 Act.
It is a striking fact that none of the experienced counsel in this case could remember a case of this nature in which the patient had not been granted anonymity, except where the patient himself wished his name to be published (as, for example, in R (Von Brandenburg) v East London and The City Mental Health NHS Trust [2003] UKHL 58; [2004] 2 AC 280).
If this be so, it is not difficult to understand why.
Patients detained in hospital, or otherwise subject to compulsory powers, under the 1983 Act have the right to make periodical applications to the First tier Tribunal (Health, Education and Social Care Chamber) for their release.
Section 78(1)(e) of the 1983 Act, in its original form, permitted the Lord Chancellor, when making procedural rules for Mental Health Review Tribunals, to make provision for enabling a tribunal to exclude members of the public, or any specified class of members of the public, from any proceedings of the tribunal, or to prohibit the publication of reports of any such proceedings or the names of any persons concerned in such proceedings.
When the First tier Tribunal took over the jurisdiction of Mental Health Review Tribunals in England (but not in Wales) under the Tribunals, Courts and Enforcement Act 2007, that Act permitted the Tribunal Rules Committee to make rules about whether hearings should be in private or in public and imposing reporting restrictions (section 22 and Schedule 5, paragraphs 7(b) and 11(2)).
Accordingly, rule 38(1) of the Tribunal Procedure (First tier Tribunal) (Health, Education and Social Care Chamber) Rules 2008 (SI 2008/2699) provides that all hearings in mental health cases must be held in private unless the Tribunal considers that it is in the interests of justice for the hearing to be held in public.
Rule 14(7) provides that Unless the Tribunal gives a direction to the contrary, information about mental health cases and the names of any persons concerned in such cases must not be made public.
When the 1983 Act was passed, the only way of challenging the decision of a Mental Health Review Tribunal was either by asking the Tribunal to state a case for the determination of the High Court of any question of law arising before them (under section 78(8) of that Act) or by way of judicial review (which became the more common practice).
After the 2007 Act, an appeal lies on a point of law to the Upper Tribunal.
Rule 37(1) of The Tribunal Procedure (Upper Tribunal) Rules 2008 (SI 2008/2698) provides that all hearings must be in public, with some exceptions, which include the Tribunals power, in rule 37(2), to direct that a hearing, or part of it, is to be held in private.
However, rule 14(7) repeats the rule in the First tier Tribunal that Unless the Upper Tribunal gives a direction to the contrary, information about mental health cases and the names of any persons concerned in such cases must not be made public.
There is thus a presumption of anonymity in both tiers of the tribunal system.
The issue for them, therefore, is whether to make an exception if the patient wants to waive his anonymity: see the principles helpfully discussed in AH v West London Mental Health Trust [2010] UKUT 264 (AAC) and [2011] UKUT 74 (AAC).
The other specialist jurisdiction dealing with people with mental disorders or disabilities is the Court of Protection.
This decides whether or not, because of mental disorder, a person lacks the capacity to make certain kinds of decision for himself and if so, how such decisions are to be taken on his behalf.
These include decisions about his care and treatment.
Rule 90(1) of the Court of Protection Rules 2007 (SI 2007/1744) lays down the general rule that hearings are to be held in private.
If the hearing is in private, the court may authorise the publication of information about the proceedings (rule 91(1)).
The court may also direct that the whole or part of any hearing be in public (rule 92(1)).
But in either case the court may impose restrictions on publishing the identity of the person concerned or anyone else or any information which might lead to their identification (rules 91(3) and 92(2)).
The starting point in the Rules, therefore, is both privacy and anonymity.
However, from January 2016, there will be a six month transparency pilot, in which the court will generally make an order that any attended hearing will be in public; but at the same time it will impose restrictions on reporting to ensure the anonymity of the person concerned and, where appropriate, other persons.
Thus, in all the other jurisdictions dealing with the detention, care and treatment of people with mental disorders and disabilities, the starting point is usually privacy and always anonymity, although either or both may be relaxed.
This reflects the long standing practice of the High Court in what were then called lunacy proceedings.
In the leading case of Scott v Scott [1913] AC 417, it was acknowledged that proceedings relating to wards of court and to lunatics were different from ordinary civil and criminal proceedings.
Viscount Haldane LC explained the position thus (p 437): The case of wards of court and lunatics stands on a different footing.
There the judge who is administering their affairs, in the exercise of what has been called a paternal jurisdiction delegated to him from the Crown through the Lord Chancellor is not sitting merely to decide a contested question.
His position as an administrator as well as a judge may require the application of another and overriding principle to regulate his procedure in the interest of those whose affairs are in his charge.
In the two cases of wards of court and of lunatics the court is really sitting primarily to guard the interests of the ward or the lunatic.
It may often be necessary, in order to attain its primary object, that the court should exclude the public.
The broad principle which ordinarily governs it therefore yields to the paramount duty, which is the care of the ward or the lunatic.
The Earl of Halsbury did not consider these two acknowledged cases as true exceptions to the general rule, for neither of these, for a reason that hardly requires to be stated, forms part of the public administration of justice at all (p 441 2).
Earl Loreburn referred to the parental jurisdiction regarding lunatics or wards of court (p 445).
Lord Atkinson similarly referred to the judges as representatives of the Sovereign as parens patriae exercising on his behalf a paternal and quasi domestic jurisdiction over the person and property of the wards for the benefit of the latter (p 462).
Lord Shaw of Dunfermline, the most vehement exponent of the principle of open justice, added (p 483) that, in this parens patriae jurisdiction, The affairs are truly private affairs; the transactions are transactions truly intra familiam; and it has long been recognised that an appeal for the protection of the court in the case of such persons does not involve the consequence of placing in the light of publicity their truly domestic affairs.
Maurice Kay LJ cited these passages in his judgment in the Court of Appeal, but dismissed them on the ground that they were not dealing with the same sort of decisions as this: The sort of statutory powers with which we are concerned did not exist at the time and public law litigation of this kind was virtually unknown. ([2014] EWCA Civ 1009, para 7).
It is correct that the Judge and Masters in Lunacy, when dealing with the affairs of a person found lunatic by inquisition, were usually concerned with the protection and administration of his property.
But the parens patriae jurisdiction extended to both the person and the property of the lunatic, until the Mental Health Act 1959 came into force.
By that Act, the jurisdiction of the Court of Protection over the property and affairs of a person who lacked the capacity to manage them for himself was placed on a statutory footing.
The procedure for finding a person lunatic by inquisition was no longer thought necessary and the royal warrant under the sign manual delegating the parens patriae powers of the Crown to the judges was revoked (see B Hoggett, The Royal Prerogative in relation to the Mentally Disordered: Resurrection, Resuscitation or Rejection?, in MDA Freeman (ed), Medicine, Ethics and the Law (1988)).
However, the Mental Capacity Act 2005 has now extended the jurisdiction of the Court of Protection to cover the care and welfare of persons who lack capacity, including whether they should be deprived of their liberty in their own best interests.
Nor is it correct that there were no statutory powers of the sort with which we are now concerned at the time of Scott v Scott.
The Secretary of States power to transfer a prisoner to hospital is clearly descended from similar powers in the Criminal Lunatics Act 1884, while the contemporary predecessors to other compulsory powers in the 1983 Act can be discerned in the Lunacy Act 1890 and the Mental Deficiency Act 1913.
The judicial safeguards for patients in those Acts were conducted in private.
However, it is correct that there is a difference between cases where a court or tribunal is administering the property, care or treatment of a patient in his own best interests and cases which are concerned with the proper management of a patient who has in the past been dangerous.
In R (M) v Parole Board (Associated Newspaper Ltd intervening) [2013] EWHC 1360 (Admin); [2013] EMLR 23, the Divisional Court discharged an anonymity order made in favour of a prisoner convicted of murder who had brought judicial review proceedings challenging the decision of the Parole Board not to recommend his transfer to open conditions.
There was a public interest in knowing how such decisions were made.
However, the court accepted that there might well come a time when the claimants identity and whereabouts would have to be protected in order to secure his safety and to facilitate his re entry into society (para 49).
That case concerned a prisoner, not a psychiatric patient, and there was no significant interference with his article 8 rights (para 53).
The closer analogy in this case, therefore, is with the position in the First tier and Upper Tribunals, but Maurice Kay LJ also dismissed this on the basis that they will often be deciding essentially medical issues (para 10) whereas the issues in judicial review cases of this type are quite different and involve the assessment of risk.
With respect, that too is not correct.
The Tribunal is concerned with essentially three questions: is the patient suffering from mental disorder or mental disorder of a nature or degree which makes it appropriate for him to be liable to be detained in a hospital for treatment; is it necessary for the health and safety of the patient or for the protection of other persons that he should receive such treatment; and is appropriate treatment available for him (section 72(1)(b)(i), (ii), (iia))? In the case of restricted patients there is a fourth question: is it appropriate for the patient to remain liable to be recalled to hospital for further treatment (section 73(1)(b))? In the case of transferred prisoners such as the appellant, there is a fifth question: if the patient would otherwise be entitled to be conditionally discharged, should he continue to be detained in hospital if he is not discharged (section 74(1)(b))? Thus the Tribunals are very much concerned with risk as well as with diagnosis.
In R (Mersey Care NHS Trust) v Mental Health Review Tribunal [2004] EWHC 1749 (Admin); [2005] 1 WLR 2469, para 14, Beatson J quoted with approval the Tribunals reasons for finding that their privacy rules were a proper and proportionate departure from the principle of open justice and thus compatible with article 6 of the European Convention on Human Rights: By definition the issues which the mental health review tribunal has to deal with involve personal and clinical confidential information affecting individuals who are often very vulnerable and not always in a position to make an informed decision as to what may or may not be in their best interests.
Questions of capacity may frequently arise and clinical progress may be affected by the consequences of publicity.
Decisions on whether a restricted patient should be allowed leave of absence or transferred to another hospital also involve a mixture of clinical and risk factors.
The two are often inseparable.
Both community leave and transfer to a less secure hospital serve a mixture of therapeutic and risk assessment aims.
They obviously aim to improve the patients mental health, overall well being and level of functioning.
But they are also important components in assessing how well the patient has progressed, whether he can safely be managed in the community, and how close he is to being fit for discharge.
They inevitably involve examination of confidential medical information about the patient.
Judicial review of the Secretary of States decisions is no different, as is amply demonstrated by the substantive judgment of Cranston J in this case.
There is a further factor, which could be called the chilling effect of a risk of future disclosure.
This has at least two aspects.
First, it is important in all medical treatment, but perhaps particularly in the treatment of mental disorder, that a relationship of trust is established between the patient and the doctors, therapists and nurses who are looking after him.
If a patient fears that his confidence may have to be breached in the course of legal proceedings about his future care and treatment, he may be less inclined to be as open and frank as he should be in his dealings with them.
Openness is an important component, not only in his treatment, but also in the assessment of risk.
Second, it may inhibit him from bringing proceedings with a view to relaxing the very significant deprivation of liberty involved in compulsory admission to hospital for medical treatment, which brings with it, not only the power to detain potentially indefinitely, but also the power to impose medical treatment without consent.
As such it is only compatible with the right to liberty, protected by article 5 of the Convention (and much treasured by the common law), if subject to regular independent review.
There is, as already explained, no real risk that the patients confidence will be breached against his will in the course of proceedings either in the First tier and Upper Tribunals or in the Court of Protection.
The real risk arises if a case reaches the High Court or Court of Appeal.
This risk will apply to compulsory patients of all kinds, whether detained under the civil compulsory powers in Part II of the 1983 Act or under the criminal powers in Part III, should a case concerning them reach the Court of Appeal on appeal from the Upper Tribunal by either side.
It will also apply to all restricted patients, whether detained under restriction orders or restriction directions, whose cases reach the Administrative Court by way of challenge to the Secretary of States decisions.
Conclusion in principle
The question in all these cases is that set out in CPR 39.2(4): is anonymity necessary in the interests of the patient? It would be wrong to have a presumption that an order should be made in every case.
There is a balance to be struck.
The public has a right to know, not only what is going on in our courts, but also who the principal actors are.
This is particularly so where notorious criminals are involved.
They need to be reassured that sensible decisions are being made about them.
On the other hand, the purpose of detention in hospital for treatment is to make the patient better, so that he is no longer a risk either to himself or to others.
That whole therapeutic enterprise may be put in jeopardy if confidential information is disclosed in a way which enables the public to identify the patient.
It may also be put in jeopardy unless patients have a reasonable expectation in advance that their identities will not be disclosed without their consent.
In some cases, that disclosure may put the patient himself, and perhaps also the hospital, those treating him and the other patients there, at risk.
The publics right to know has to be balanced against the potential harm, not only to this patient, but to all the others whose treatment could be affected by the risk of exposure.
Application in this case
This was a horrendous crime which caused incalculable distress to the families of the victims.
All victims have certain rights under the Domestic Violence, Crime and Victims Act 2004, mediated through the providers of probation services.
When a transfer direction is given in relation to an offender sentenced for a sexual or violent offence, the provider must take all reasonable steps to find out whether the victims wish to make representations about the conditions to which the offender should be subject if discharged and to be provided with information about the conditions to be imposed if he is discharged (section 42).
If they do, the Secretary of State must inform the probation provider if he is considering lifting the restriction, discharging the patient or varying the conditions of a conditional discharge.
The Tribunal must inform the provider if an application or reference is made to it.
The probation provider must forward any representations made by the victims to the Secretary of State or Tribunal (section 43).
The Secretary of State or the Tribunal have to inform the provider of the outcome.
If a victim has expressed a wish to be informed, the provider must take all reasonable steps to inform him (a) whether or not the offender is to be subject to any conditions in the event of his discharge, (b) if he is, of the details of any condition relating to contact with the victim or his family, (c) the date on which any restriction direction is to cease to have effect, and (d) such other information as the provider considers appropriate in all the circumstances of the case (section 44).
These rights, though limited, should enable the providers to reassure the victims families in this case that the arrangements made for the discharge of the patient will not put them at risk in any way.
The public too have an interest is knowing how difficult and sensitive cases of this sort are decided, both by the Secretary of State and by the court.
But that public oversight is protected by holding the hearing in public, so that the kinds of evidence and arguments considered are known, even if the identity of the patient concerned is not.
Understandably, the Secretary of State has adopted a neutral stance on this appeal.
It is the media interest, so vividly described by Lord Rodger in In re Guardian News and Media, with which we are principally concerned.
In favour of anonymity are all the general considerations about harm to the patients health and well being, the chilling effect of a risk of disclosure, both upon his willingness to be open with his doctors and other carers, and upon his willingness to avail himself of the remedies available to challenge his continued deprivation of liberty, long after the period deemed appropriate punishment for his crimes has expired.
Added to those are the specific risk elements in this case identified in the letter from his responsible clinician (see para 9 above).
The existence of a risk to the appellant from members of the public is also acknowledged in the letters of the Secretary of State and reflected in the Parole Boards requirement that he change his name.
He is much more likely to be able to lead a successful life in the community if his identity is not generally known.
The risk of jigsaw identification, of people putting two and two together, will remain despite the change of name.
Putting all these factors into the balance, I conclude that an anonymity order is necessary in the interests of this particular patient.
His regime before he left hospital, involving escorted leave in the community, demonstrated the need for anonymity and the case is even stronger now (as foreseen in R (M) v Parole Board).
Without it there is a very real risk that the progress he has made during his long years of treatment in hospital will be put in jeopardy and his re integration in the community, which was an important purpose of his transfer to hospital, will not succeed.
I would therefore allow this appeal and maintain the anonymity order in place.
| UK-Abs | The issues in the appeal were (1) whether there should be a presumption of anonymity in civil proceedings in the High Court relating to a patient detained in a psychiatric hospital or otherwise subject to compulsory powers under the Mental Health Act 1983 (the MHA 1983) and (2) whether there should be an anonymity order on the facts of this particular case.
The appellant, C, who had a history of severe mental health problems, was convicted of murdering his former girlfriend and her partner in 1997.
He was sentenced to life imprisonment with a tariff subsequently set at 11 years.
During his imprisonment he was transferred to a high security psychiatric hospital on the direction of the Secretary of State for Justice under the MHA 1983 for psychiatric treatment, with a restriction order which meant that the appellant could not be granted leave of absence, transferred to another hospital, or discharged without the consent of the Secretary of State.
In July 2012 the appellants responsible clinician applied unsuccessfully for consent for the appellant to have unescorted leave in the community to assess his suitability for discharge.
The appellant applied for discharge to the Firsttier tribunal.
On 25 April 2013 the tribunal notified the Secretary of State that conditional discharge (subject to supervision, supported accommodation and further treatment) would be suitable for the appellant, but that if he was not conditionally discharged he should remain in hospital.
The Secretary of State referred the case to the Parole Board.
The appellants responsible clinician then made a further application for consent for the appellant to have unescorted community leave, which the Secretary of State refused on 18 October 2013.
The appellant applied for judicial review of that decision.
In December 2013 the High Court ordered that the appellant be anonymised in the proceedings and granted permission to bring the claim.
The claim was rejected by Cranston J, who also refused an application for the anonymity order to remain in force.
The appellant appealed in relation to the refusal of anonymity, but the Court of Appeal upheld the judges order.
The appellant brought a further appeal on the anonymity issue to the Supreme Court.
In the meantime the Parole Board approved the appellants conditional release on life licence and he was released from hospital in October 2015.
The Supreme Court unanimously allows the appeal against the refusal to maintain the anonymity order protecting the appellant.
It finds that there is no presumption of anonymity and the question in High Court proceedings relating to the compulsory powers under the MHA 1983 is whether an order for
anonymity is necessary in the interests of the patient.
Such an order was necessary in the appellants interests in this case.
Lady Hale gives the only substantive judgment.
The rules governing privacy and anonymity in all civil proceedings in the High Court are found in rule 39.2 of the Civil Procedure Rules [15].
The general rule that hearings should be held in public is subject to established exceptions in relation to whole classes of hearings such as those relating to children, which should normally be heard in private [17].
Most of the important safeguards secured by a public hearing can be achieved without the press publishing or the public knowing the identities of the people involved, but it is for the court and not the parties to balance the interests at stake [18].
It is necessary to distinguish between ordinary civil proceedings in which a mental patient may be involved, and proceedings concerning the compulsory powers under the MHA 1983 [21].
For the latter there is a presumption of privacy and anonymity in the rules governing applications to the First tier and Upper tribunals [24].
Similar rules providing for anonymity are in place for the Court of Protection, the other specialist jurisdiction dealing with people with mental disorders or disabilities [25].
As regards the High Court, it was recognised by the House of Lords in the leading case of Scott v Scott [1913] AC 417 that the principle of open justice did not extend to proceedings relating to wards of court and to lunatics.
The Court of Appeal in the present case wrongly treated this exception as limited to private law litigation concerned with the protection and administration of property, when in fact there were already statutory powers similar to the compulsory powers under the MHA 1983 at the time of the decision of the House of Lords, and the judicial safeguards for patients under those statutes were also conducted in private [29].
The closest analogy with the present case was with proceedings in the tribunals, which were concerned with risk as well as diagnosis when considering applications in respect of transferred prisoners and restricted patients [31].
The privacy rules in the tribunals were a proper and proportionate departure from the principle of open justice [32], as the hearings inevitably involved examination of confidential medical examination about the patient.
Judicial review of the Secretary of States decisions as to discharge of such patients was no different [33].
Fear of disclosure of confidential information might inhibit a patient from frank dealings with his medical team and from bringing proceedings to challenge his detention or treatment [34].
The question in all these cases was that set out in CPR 31.2(4), namely whether anonymity was necessary in the interests of the patient.
There should not be a presumption in favour of anonymity in every case but a balance should be struck between the public right to information about decisions in respect of notorious criminals and the potential harm to the patient and all others whose treatment could be affected by the risk of exposure [36].
The present case concerned a horrendous crime which caused incalculable distress to the families of the victims, who have statutory rights to be informed about the arrangements made for the discharge of the appellant should they so wish [37].
The public interest in knowing how difficult and sensitive cases of this sort were decided was protected by holding a public hearing, even if the identity of the patient concerned was not disclosed [38].
In this case there was a risk to the appellant from members of the public.
He was much more likely to lead a successful life in the community if his identity was not generally known [39].
Putting all these factors into the balance an anonymity order was necessary in the interests of the appellant, without which there was a real risk that his long years of treatment and reintegration into the community would not succeed [40].
|
The disciplinary panels of bodies which regulate professional conduct conventionally have power to suspend a professionals right to practise for a specified period.
They do so by directing that the entry of his (or her) name on the professional register be suspended for the specified period.
Usually that power is accompanied by a power (but occasionally by a duty) of a panel to conduct a later review of the suspension in order to determine whether to direct its continuation beyond the specified period or to make some other direction.
This appeal concerns the ambit of the inquiry which, in the case of one of these disciplinary panels, should be undertaken in the course of a review.
In 2002 Mr Khan was registered as a pharmacist.
He practised in Glasgow.
In 2012 the General Pharmaceutical Council (the council), by its registrar, referred to its Fitness to Practise Committee (the committee) an allegation that his fitness to practise as a pharmacist was impaired by reason of criminal convictions which had been recorded against him.
On 27 June 2013 the committee found that the impairment of his fitness to practise was established.
When it turned to identify the sanction which would properly reflect the gravity of the misconduct for which he had been convicted, the committee rejected the option of suspending his right to practise.
Instead it directed that his entry in the register of pharmacists be altogether removed.
On 10 July 2014 the Extra Division of the Inner House, Court of Session, allowed his appeal against the direction for removal.
The court (comprising Lord Eassie, Lord Drummond Young and Lord Wheatley) quashed the direction and remitted the case to the committee for it to determine the appropriate sanction in the light of its Opinion, which was delivered by Lord Drummond Young.
In the course of its Opinion the Extra Division noted that: the committee had exercised its power under article 54(2)(c) of the (a) Pharmacy Order 2010, SI 2010 No 231, (the Order), which has effect in Scotland as well as in England and Wales, to direct that the entry in the Register of the person concerned be removed; (b) article 57(2)(a) of the Order would disable Mr Khan from applying for the restoration of his entry in the register before the expiry of five years from the date of its removal; (c) the power under article 54(2)(d) of the Order to suspend a persons entry in the register was limited to suspension for such period not exceeding 12 months as may be specified in the direction; and (d) the committee had concluded (and, so the court impliedly held, had reasonably concluded) that suspension of Mr Khans entry for no longer than 12 months would be insufficient to mark the gravity of his misconduct.
At that point, however, the Extra Division observed that, in considering and rejecting the option of suspending Mr Khans entry in the register, the committee had made no mention of its power under article 54(3)(a)(ii) of the Order to conduct a review following a direction for suspension and thereupon to direct that the suspension of the entry be extended for such further period not exceeding 12 months as may be specified in the direction, starting from the time when the period of suspension would otherwise expire.
A review can be conducted at any time but will ordinarily take place towards the end of the period of suspension; and it is usual for a committee which imposes a period of suspension to direct that a review should take place.
In relation to the power to conduct a later review, the Extra Division then proceeded to make statements of law which precipitate the councils appeal to this court.
It held that: (a) there was a middle way between suspension for 12 months, which the committee had considered to be insufficient, and removal, which, as it had acknowledged, perhaps appeared harsh; (b) those two choices therefore represented a false dichotomy; (c) in the light of the power to conduct a later review, and indeed to conduct even later reviews, it had been reasonably incidental to the original committees power of suspension for 12 months for it to indicate that it considered that the suspension should be extended thereafter, for a further 12 months or longer as the case might be; the later Committee will be obliged to respect the indication and if it (d) although the indication of the original committee would not bind the review committee, it must be assumed that the later Committee will act in a reasonable manner and will respect the decision and findings of the earlier Committee; and (e) departs from it will be expected to give reasons for doing so.
So the question raised by the appeal surrounds the ambit of a review hearing following suspension.
It asks specifically: can the power of a review committee to direct suspension beyond the year of the original suspension be so exercised as to reflect a conclusion that the gravity of the registrants misconduct demanded a longer period of suspension than that of one year which could not have been exceeded in the direction given by the original committee?
To this specific question the council invites the court to answer: no.
This courts conclusion will directly inform the ambit of a review following a direction of suspension only when it is conducted under article 54(3)(a) of the Order.
But the regulatory systems relating to professions other than that of pharmacy make similar provisions for review following suspension.
If the detail of their provisions were to disclose relevant differences from those set out in the Order, this courts judgment would not be applicable to them without adjustment.
In the absence of relevant differences, however, todays judgment will carry persuasive authority in relation to them.
Recognition of its potentially wider significance has prompted two interventions in the appeal to this court.
The first intervener is the General Medical Council (the GMC).
Under subsection (2)(b) of section 35D of the Medical Act 1983 the Medical Practitioners Tribunal (as it is now called), upon finding that a practitioners fitness is impaired, may direct that his registration shall be suspended for such period not exceeding 12 months as it may specify; under subsection (4A) the tribunal may attach a direction that a review of the direction of suspension be conducted prior to its expiry; and under subsection (5)(a) the tribunal which conducts the review may direct that the period of suspension be extended, albeit not, save exceptionally, for more than 12 months at a time.
The provisions for review of suspension therefore appear similar to those in the Order.
The first intervener joins the council in inviting the court to answer the specific question: no.
The second intervener is the Health and Care Professions Council, which regulates about 350,000 people in 16 different health and care professions, now including social workers in England.
Under article 29(5)(b) of the Health and Social Work Professions Order 2001, SI 2002 No 254, its Conduct and Competence Committee, upon finding that a registrants fitness to practise is impaired, may direct suspension of his registration for a period not exceeding one year; and under article 30(1)(a) and (5) the committee is required to review the direction prior to expiry of the suspension and can then extend it but by no more than a year at a time.
Apart from its mandatory nature, the provisions for a review of suspension therefore appear similar to those in the Order.
The second intervener describes its approach to the appeal as nuanced.
At first it seemed almost elusive.
By the end of the hearing, however, its submission became clear, namely that the Extra Divisions analysis of the ambit of the power of a review committee had been essentially correct; and in this submission it was joined by the Advocate to the Court.
Mr Khan appears in person albeit with the considerable assistance of Mr Edwards.
He seeks to defend the Extra Divisions analysis, which he himself had urged upon it; but, in case the councils appeal were to succeed, he mounts a cross appeal to the effect that in any event the committees direction for his removal from the register was, in the light of the nature of his misconduct to which I will now turn, disproportionate.
B: THE MISCONDUCT
Mr Khans misconduct related to the breakdown of his marriage, which has since been dissolved.
On 20 July 2010 Mr Khan kicked his wife when she was lying in bed; grabbed her hair; punched her in the face; dragged her off the bed; and again struck her in the face.
Mr Khan was thereupon charged with having assaulted his wife and placed on bail, conditions of which were that he should neither return to the matrimonial home nor contact her.
On 8 March 2011, in breach of the conditions, he returned there and contacted her.
On 13 May 2011, having pleaded guilty to the assault, Mr Khan was fined 400, ordered to compensate his wife in the sum of 500 and admonished for the breach of the conditions.
On 9 March 2012 Mr Khan returned to the home; found the door locked against him; demanded entry; banged on the door; and shouted and swore at his wife so as to put her in fear.
On 30 March 2012 Mr Khans wife left their two children, aged nine and two, at home in the care of her mother and sister while she went out.
He arrived with another relation.
They tricked the wifes sister into opening the door, whereupon he walked in.
He unhooked pictures from the wall; kicked a hole in the wall; kicked a door; kicked over a shoe rack; swore at the sister that he was going to kill her, his wife and the whole family; and, with that other relation, removed the children.
The police later went to his home, arrested him, recovered the children and restored them to the care of his wife.
On 8 May 2012 Mr Khan pleaded guilty to having behaved threateningly and abusively on 9 and 30 March and, on the latter occasion, to having wilfully or recklessly damaged property belonging to his wife.
On 8 June 2012 he was sentenced for these offences to a community payback order, which comprised supervision for 18 months and requirements to complete 180 hours of unpaid work within six months and to attend for six months at a domestic violence programme called Change.
C: THE COMMITTEES DETERMINATION
Before the committee Mr Khan admitted the misconduct set out above; accepted that it had been wholly inappropriate; apologised for it; and acknowledged that the effect on public confidence of it, and of the criminal convictions referable to it, was such that his fitness to practise was impaired.
The committee accepted reports that he had diligently completed the 180 hours of unpaid work and had successfully attended the Change programme, in which, in the course of cognitive behavioural therapy, he had learnt skills which had enabled him to communicate reasonably with his wife.
The committee accepted that he had genuinely learnt the error of his past conduct; that his social worker had assessed him as at low risk of re offending; that his misconduct had in no way affected his professional performance; that his clinical skills were not in issue; and that his patients were not at risk.
It noted, however, that the period of supervision was still continuing.
Under article 54(1) of the Order the committee was required first to decide for itself whether Mr Khans fitness to practise was impaired.
In this regard it recited Rule 5 of the General Pharmaceutical Council (Fitness to Practise and Disqualification etc) Rules 2010 (the Rules), which are scheduled to the General Pharmaceutical Council (Fitness to Practise and Disqualification etc Rules) Order of Council 2010, SI 2010 No 1615.
Rule 5 required the committee to decide whether, in the light of his conduct, a registrant was fit to practise by having regard to four criteria including, at para (2)(b), whether his conduct had brought the profession of pharmacy into disrepute.
The committee decided that Mr Khans conduct had done so; that indeed it would shock the public; and that he had been right to acknowledge that it had impaired his fitness to practise because any other conclusion would undermine public confidence in the profession.
The committees determination of the impairment of Mr Khans fitness to practise enabled it to turn, under article 54(2) of the Order, to consider the appropriate sanction.
It reminded itself that the purpose was not to punish Mr Khan.
It noted the councils submission that nothing less than either suspension or removal of his registration would suffice.
The committee observed that: it could not direct suspension for more than 12 months; following a direction for removal there could be no restoration to the (a) (b) register within five years; (c) his conduct; (d) removal; (e) (f) of sanction available to it. suspension for 12 months would be insufficient to mark the gravity of the maintenance of public confidence demanded nothing less than removal might appear harsh; and
a harsh direction might in part be a consequence of the limited choice
Under article 59 of the Order a direction for removal does not take effect pending any appeal but the committee exercised its power under article 60(2) to direct that Mr Khans entry on the register be suspended forthwith, pending the coming into force of the direction.
The direction for removal has been under appeal ever since so Mr Khans interim suspension has also continued ever since, in other words for almost three and a half years.
The period of interim suspension would not count towards the period of five years after which Mr Khan could apply for restoration to the register because the latter would begin only on the date of removal.
D: THE ALLEGED MIDDLE WAY
There is, as Mr Edwards submits, a quantum leap between the original committees power of suspension which can be for no more than one year and its power of removal which must endure for at least five years.
The council suggests that the limit on the period of suspension, introduced in 2007 when the power to suspend was itself introduced, in particular reflected concern that a registrant suspended for a period longer than a year would be likely to lose his skills.
It also appears that the temporal limit on the registrants ability to apply for restoration to the register following removal, also introduced in 2007, in particular reflected concern about inappropriately early applications for restoration which were regarded as inconsistent with the imposition of the ultimate sanction of removal.
The powers of the review committee following the original committees direction for a registrants suspension are fully set out in article 54(3)(a) of the Order.
But no indication is there given about the way in which the powers should be exercised; and in that regard only limited assistance can be derived from the Rules.
Rule 34(4) requires the representative of the council to inform the review committee of the background to the case and the sanction previously imposed and to direct its attention to any relevant evidence, including transcripts of previous hearings; and paras (4) and (5) permit both parties to adduce evidence in relation to the person concerneds fitness to practise.
Para (6), however, provides that, following a direction for suspension, the review committee must receive further evidence although the subject of it is not identified.
It certainly seems that the reference to the registrants fitness to practise relates to his fitness at the time of the review hearing.
Greater assistance is, however, to be collected from the Indicative Sanctions Guidance which the Fitness to Practise Committee approved on 13 May 2011 and which was intended to explain its approach to decision making.
Although the guidance has now been replaced by other guidance, entitled Good decision making: fitness to practise hearings and sanctions guidance and published by the council in July 2015, it is the earlier guidance which applies to Mr Khans case.
reviews of suspension.
It stated: In para 17 of the Indicative Sanctions Guidance the committee addressed In some cases it may be self evident that following a short period of suspension, there will be no value in a review hearing.
In most cases however, where a period of suspension is imposed the Committee will need to be reassured that the registrant is fit to resume practice either unrestricted or with conditions or further conditions.
The Committee will also need to satisfy itself that the registrant has fully appreciated the seriousness of the relevant breach(es), has not committed any further breaches of the Councils Standards of conduct, ethics and performance, has maintained his or her skills and knowledge up to date and that the public will not be placed at risk by resumption of practice or by the imposition of conditional registration.
The current guidance is in similar terms.
The guidance therefore makes clear that the focus of a review is upon the current fitness of the registrant to resume practice, judged in the light of what he has, or has not, achieved since the date of the suspension.
The review committee will note the particular concerns articulated by the original committee and seek to discern what steps, if any, the registrant has taken to allay them during the period of his suspension.
The original committee will have found that his fitness to practise was impaired.
The review committee asks: does his fitness to practise remain impaired?
It is worthwhile to look across at the recent work of the three UK Law Commissions in this area.
In April 2014 they published a report entitled Regulation of Health Care Professionals, Regulation of Social Care Professionals in England, Law Com No 345, Scot Law Com No 237, NILC 18 (2014), Cm 8839, together with a draft Bill.
Their work was born of public concern that professional regulation in the health care sector across the UK, and in the social care work sector in England, had grown piece meal over more than a century and had become inconsistent, incoherent and cumbersome.
Their remit was to review the rules which governed nine regulatory bodies, including the council, the GMC and the Health and Care Professions Council; and, following extensive consultation, their recommendation was to confine the regulatory functions of the nine bodies within a single legal framework, set out in the draft Bill.
In January 2015 the government published a response to the report, in which it accepted most of the Commissions recommendations and expressed a commitment to introduce legislation in due course.
What is of interest for present purposes is that in para 9.123 of their report the Commissions suggest that greater consistency is appropriate in the conduct of review hearings and that, in their draft Bill, they propose the following: 161 Review of suspension orders: disposals by fitness to practise panel (1) (2) If the panel determines that the registered professionals (3) fitness to practise is no longer impaired, the panel (a) must revoke the suspension order (4) If the panel determines that the registered professionals (5) fitness to practise is impaired, the panel may dispose of the case as described in any of the following subsections So the proposal of the Commissions is that the review committee should ask whether the registrants fitness to practise is no longer impaired or is impaired.
In other words it should address changes relevant to his impairment which have or have not occurred since the date of the original committees direction.
It is also noteworthy that in the fifth report of the Shipman Inquiry, 9 December 2004, Cm 6394, Dame Janet Smith, Chairman, when referring to reviews under section 35D(5) of the Medical Act 1983, stated at para 27.267: Review hearings are extremely important.
They are the teeth behind the sanctions other than erasure and should focus the doctors mind on the need to undertake any necessary remediation.
The Extra Divisions conception is that a review committee has a role in determining the sanction appropriate to the circumstances by reference to which the original committee found that the registrants fitness to practise was impaired; that, in particular where the original committee has directed suspension for one year, the review committee can look back at those circumstances and determine whether, although one year was the maximum period of suspension open to the original committee, its direction was insufficient to mark their gravity; that, while that determination falls to be made by the review committee, it should afford great respect to any indication by the original committee that its direction was indeed insufficient to mark their gravity; and that, if determining that the direction was insufficient, the review committee should exercise its power of extension under article 54(3)(a)(ii) of the Order.
The Extra Divisions conception is alien to the generally accepted conception of a review as a vehicle for monitoring the steps taken by the registrant towards securing professional rehabilitation.
Indeed there is authority, unfortunately not cited to the Extra Division, which expressly holds that the conception which it favoured is misplaced.
It is Taylor v General Medical Council [1990] 2 AC 539.
Before the Judicial Committee of the Privy Council was an appeal by a medical practitioner against a direction by (as it was then called) the Professional Conduct Committee of the GMC to extend for a second time the period of one year which had been specified in its original direction for suspension.
The doctor, who had previously received a suspended sentence of imprisonment for making false statements in order to enable persons to obtain passports, had been found guilty of serious professional misconduct in having irresponsibly issued prescriptions for methadone to about 70 patients.
Upon directing suspension for one year, the committee had intimated the need for a later review, at which the period was extended for a year and the same intimation was given.
The doctors appeal was brought against the direction made at the second review, which was for extension for one further but final year.
The submission of counsel for the GMC, set out at pp 540 and 542, was that the committee must have considered that three years was the proper period of suspension in view of the doctors serious misconduct; that its initial direction for suspension could not have been for more than a year; and that it had not been wrong for the two years to be added at the two successive reviews.
By a judgment delivered by Lord Bridge of Harwich, the committee allowed the doctors appeal.
It held at p 545: It can never be a proper ground for the exercise of the power to extend the period of suspension that the period originally directed was insufficient to reflect the gravity of the original offence or offences.
And it concluded at p 547: the only explanation for the committees decision to direct a third such period was that they regarded the original decision to direct suspension instead of erasure as having been too lenient the direction was wrong in principle.
The decision in the Taylor case has never been questioned save now, unwittingly, by the Extra Division.
Take, for example, the case of Obukofe v General Medical Council [2014] EWHC 408 (Admin).
A medical practitioner appealed against the direction of (as it was then called) a Fitness to Practise Panel of the GMC to extend for one year the period, also of one year, for which he had originally been suspended from practice.
He had received suspended sentences of imprisonment following convictions for sexual assault on two junior members of staff at the hospital where he had worked.
Popplewell J dismissed his appeal.
One of the grounds of appeal was that the direction for extension violated the principle of double jeopardy.
The judge said: 48.
This is to misunderstand the nature and effect of a suspension which is subject to review 49.
The imposition of a further sanction by way of an extension of the period of suspension depends upon an assessment of his fitness to practise at that later stage.
No question of double jeopardy arises.
In summary, the Extra Division was too ingenious.
There was no middle way.
It was wrong to remit the case to the committee for disposal on that basis.
But Mr Khan had argued in the alternative that, irrespective of whether that basis for remission existed, the direction of his removal from the register was disproportionate.
He now cross appeals against the Extra Divisions implicit rejection of that alternative argument.
E: THE CROSS APPEAL
An appellate court must approach a challenge to the sanction imposed by a professional disciplinary committee with diffidence.
In a case such as the present, the committees concern is for the damage already done or likely to be done to the reputation of the profession and it is best qualified to judge the measures required to address it: Marinovich v General Medical Council [2002] UKPC 36, para 28.
Mr Khan is, however, entitled to point out that (a) the exercise of appellate powers to quash a committees direction or to substitute a different direction is somewhat less inhibited than previously: Ghosh v General Medical Council [2001] UKPC 29, [2001] 1 WLR 1915, para 34; (b) on an appeal against the sanction of removal, the question is whether it was appropriate and necessary in the public interest or was excessive and disproportionate: the Ghosh case, again para 34; and (c) a court can more readily depart from the committees assessment of the effect on public confidence of misconduct which does not relate to professional performance than in a case in which the misconduct relates to it: Dad v General Dental Council [2000] 1 WLR 1538, pp 1542 1543.
Mr Khan was guilty of three incidents of domestic violence, of which the first and third were particularly serious.
In the third he even involved the children of the family.
His conduct betrayed a gross loss of control and his purpose was, directly and indirectly, to hurt his wife.
Mitigation on his behalf in the Sheriff Court would have been hard to articulate.
Inevitably the convictions attracted at first a significant fine and later a substantial community penalty.
There, however, lay the punishment.
The focus for the committee was different: its task, not easy, was to judge the effect of the conduct on public confidence in the profession and to identify a sanction proportionate to its judgement.
Mr Khans conduct did not relate to his professional performance.
No patient had been, or was likely to be, put at risk.
The committee fairly recited several further features of the case which militated against the removal of his registration, such as his genuine acknowledgement of fault and the positive reports of his response to the requirements of the community payback order, as set out in para 19 above.
Rule 31(14)(a) required the committee to have regard to the Indicative Sanctions Guidance when determining sanction.
It duly referred to para 14 of the guidance, entitled Cases where removal from the Register may be appropriate, and it picked out two of the cases there described, albeit in arrestingly general terms, namely Behaviour is fundamentally incompatible with registration and Public confidence in the profession demands no lesser sanction.
But the committee might also usefully have referred to para 8 of the guidance, entitled Mitigating Features General and, had it done so, it would have picked out (a) no prior disciplinary history; (b) genuine insight into misconduct; (c) open admissions at an early stage; (d) no actual or potential harm to patients or the public; (e) genuine expression of remorse to committee; and (f) steps taken to prevent recurrence.
The committee itself acknowledged that its direction for removal might appear harsh.
It was indeed harsh.
It was unnecessary.
It was disproportionate.
The sanction proportionate to the disrepute into which Mr Khans conduct had brought, or was likely to bring, the profession of pharmacy was suspension of his registration, which, at the time of the committees determination, should no doubt have been for a period of a year.
F: CONCLUSION
instead of the committees direction for his removal from the register, (a) the councils appeal should be allowed; (b) the Extra Divisions interlocutor should be recalled; (c) Mr Khans cross appeal should also be allowed; (d) a direction for his suspension from it should be substituted; (e) in the light of the length of his interim suspension since the date of the committees direction, the period of his suspension should be four months; (f) attached to the direction for his suspension for four months should be a direction for a review committee to conduct a review prior to its expiry; and (g) the review committee should be invited to have regard in particular to any report upon him by his supervisor following the expiry of his period of supervision; to any evidence relating to the risk that he has lost necessary skills since the date of the committees determination and therefore to any efforts on his part to retain them; and, generally, to any relevant occurrence since that date.
It was for the above reasons that, at the end of the hearing, Lord Neuberger, the President of the court, announced its unanimous conclusion, which was that
| UK-Abs | In 2002 Mr Khan was registered as a pharmacist.
Between 2010 and 2012 Mr Khan pleaded guilty to three incidents of domestic violence.
In 2012 the General Pharmaceutical Council referred to its Fitness to Practise Committee (original committee) an allegation that Mr Khans fitness to practise as a pharmacist was impaired by reason of his misconduct.
On 27 June 2013 the original committee found that the impairment of his fitness to practise was established.
When it turned to identify the sanction in article 54(2)(d) of the Pharmacy Order 2010 (the Order) which would properly reflect the gravity of Mr Khans misconduct, the original committee rejected the option of suspending his right to practise for 12 months on the basis that this sanction would be insufficient to mark the degree of gravity of Mr Khans misconduct.
Instead it directed that his entry in the register of pharmacists be altogether removed.
The Extra Division of the Court of Session allowed Mr Khans appeal against the direction for removal and remitted the case to the original committee for it to determine the appropriate sanction in light of its Opinion.
It found that the original committee had made no mention of its power under article 54(3)(a)(ii) of the Order to conduct a review following a direction for suspension and to direct that the suspension of the entry be extended for such further period not exceeding 12 months as may be specified in the direction.
In its view there was therefore a middle way between suspension for 12 months, which the original committee has considered to be insufficient, and removal, which the original committee had acknowledged perhaps appeared harsh.
In light of the original committees power to conduct later reviews, it had been reasonably incidental to its power of suspension for 12 months for it to indicate that it considered that the suspension should be extended thereafter, for a further 12 months or longer.
Although this indication would not bind the review committee, the Extra Division reasoned that it must be assumed that the later committee will be obliged to respect the indication and if it departs from it will be expected to give reasons for doing so.
The General Pharmaceutical Council appealed the decision of the Extra Division.
Its appeal concerns whether a review committee may impose a further suspension to reflect the original committees conclusion that the gravity of the registrants misconduct demanded a longer period of suspension than the 12 months it was permitted to imposed.
Mr Khan cross appealed against the Extra Divisions implicit rejection of his argument that in any event his removal from the register was disproportionate.
The Supreme Court unanimously allows both the General Pharmaceutical Councils appeal and Mr Khans cross appeal.
Lord Wilson gives the judgment, with which the other Justices agree.
The Appeal The powers of the review committee following the original committees direction for a registrants suspension are set out in article 54(3)(a) of the 2010 Order.
That article does not indicate how the powers should be exercised, and only limited assistance may be derived from the General Pharmaceutical Council (Fitness to Practise and Disqualification etc) Rules 2010.
Rule 34(4) requires the representative of the council to inform the review committee of the background to the case and sanction previously imposed and to direct its attention to any relevant evidence.
Rule 34(4) and (5) permit both parties to adduce evidence in relation to the person concerns fitness to practice.
Rule 34(6) provides that, following a direction for suspension, the review committee must receive further evidence although the subject of it is not identified.
It certainly seems that the reference to the registrants fitness to practise relates to his fitness at the time of the review hearing [24].
Greater assistance is collected from the Indicative Sanctions Guidance which makes clear that the focus of the review is upon the current fitness of the registrant to resume practice, judged in the light of what he has, or has not, achieved since the date of suspension.
The review committee asks: does his fitness to practise remain impaired [27].
The recent work of the three UK Law Commissions in this area proposes that the review committee should address changes relevant to impairment which have or have not occurred since the date of the original committees direction [28].
It is also noteworthy that in the fifth report of the Shipman Inquiry, the Chairman stated that review hearings should focus the doctors mind on the need to undertake any necessary remediation [29].
The Extra Divisions conception is alien to the generally accepted conception of a review as a vehicle for monitoring the steps taken by the registrant towards securing professional rehabilitation [31].
Taylor v General Medical Council [1990] 2 AC 539, not cited to the Extra Division, expressly holds that the conception favoured by the Extra Division is misplaced [32].
In Taylor the court held that it can never be a proper ground for the exercise of the power to extend the period of suspension that the period originally directed was insufficient to reflect the gravity of the original offence [33].
The Extra Division was too ingenious.
There was no middle way.
It was wrong to remit the case to the committee on that basis [35].
The Cross Appeal The original committee itself acknowledged that its direction for removal might appear harsh.
Serious though Mr Khans misconduct certainly was, the sanction appropriate to the disrepute into which Mr Khans conduct had brought, or was likely to bring, the profession of pharmacy was suspension of his registration, which, at the time of the committees determination, should no doubt have been for a period of a year [40].
A direction for suspension should be substituted in place of the original committees direction for removal from the register.
In light of Mr Khans interim suspension since the date of the original committees direction, the period of his suspension should be four months and a review committee should conduct a review prior to the expiry of this period [41].
|
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.
| UK-Abs | 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].
|
The appellants, Sustainable Shetland, are an unincorporated association concerned in the protection of the environment of the Shetland Islands.
By these proceedings they challenge a consent granted on 4 April 2012 by the Scottish Ministers for the construction of a windfarm.
The consent was under section 36 of the Electricity Act 1989, and was accompanied by a direction that separate planning permission was not required (Town and Country Planning (Scotland) Act 1997 section 57(2)).
Although the appellants objections in earlier exchanges had related to the impact of the development on the environment generally, the focus of their challenge in the courts has related to the alleged failure of the ministers to take proper account of their obligations under the Birds Directive, in respect of the whimbrel, a protected migratory bird.
Their challenge was upheld by the Lord Ordinary (Lady Clark of Calton) on other grounds which are no longer in issue, but she indicated that she would if necessary have upheld the challenge also under the directive.
The ministers appeal was allowed unanimously by the Inner House.
The proposed windfarm was on a very large scale.
In its amended form it would have had 127 turbines (reduced from 150), located in three areas (Delting, Kergord and Nesting), covering a total area of some 50 square miles, of which some 232 hectares would be physically affected.
Associated infrastructure would include 104 km of access tracks, and anemometer masts, and borrow pits.
The original application was made in May 2009.
It was accompanied by an Environmental Statement, as required by the Electricity Works (Environmental Impact Assessment) (Scotland) Regulations 2000 (SSI 2000/320).
The whimbrel population of the Shetlands is highly significant in national terms, representing (at 290 pairs on the basis of a 2009 survey) around 95% of the total UK population.
Of this some 56 pairs breed in the central mainland area, where the windfarm would be sited, 23 pairs within the development site. 31 pairs breed in the Fetlar Special Protection Area.
Between 72 and 108 adult whimbrel from the Shetlands die annually from existing causes.
The 2009 survey showed a decline in the Shetlands region over the previous 20 years of 39% overall, but with wide variations across the region; the decline in Central Mainland was only 6%, compared to between 54% and 80% in the Fetlar SPA.
The potential impact on the whimbrel population emerged as an important issue in early objections from, among others, Scottish Natural Heritage (SNH).
There followed a series of detailed exchanges between SNH and the developers on both the assessment of the likely impact of the development on the whimbrel population and mitigation measures.
It is unnecessary to do more than summarise some of the main points.
In response to SNH objection, the developers revised their Environmental Statement by submitting a new Addendum, including a chapter A 11 Ornithology, which dealt in detail with the likely effects on whimbrel.
It was said to be based on more than eight years of study, which gave considerable confidence in the robustness of these assessments.
It was acknowledged that the population processes of Shetland whimbrel were poorly understood, and that, in the absence of previous windfarm developments in areas with breeding whimbrel, the likely impact had to be inferred from knowledge of responses of other related wader species, such as the curlew.
It predicted that operational disturbance would result in the long term displacement of 1.8 pairs, which might be able to resettle elsewhere; and a collision mortality rate of 2.1 whimbrel per year.
The Addendum included a Habitat Management Plan (HMP), which contained detailed assessment of the factors affecting the whimbrel population, and proposed habitat management actions.
For example, the single most important action to increase whimbrel breeding success was said to be the control of the likely main nest predator, the hooded crow, over sufficiently large areas during the nesting season.
The HMP was said to have a high likelihood of more than off setting any adverse effects of the windfarm and a reasonable likelihood of causing the Shetland whimbrel population to partially and possibly fully recover over the lifetime of the Viking Wind Farm.
Although the revised proposals led SNH to withdraw some of their objections to the proposals, those in respect of whimbrels were maintained.
In their letter of 11 February 2011 they referred to a high likelihood of a significant adverse impact of national interest .
They made specific reference to the EU Birds Directive: Whimbrel are subject to certain general provisions of the EU Birds Directive which apply to all naturally occurring birds in the wild.
These include articles 2, 3(1), 3(2)(b) and the last sentence of article 4(4).
Achieving and maintaining favourable conservation status of the national population is in line with these provisions and obligations.
In this case our advice is that the proposed Viking wind farm is highly likely to result in a significant adverse impact on the conservation status of the national population of whimbrel.
They expressed doubts as to the likely success of the HMP, given the unproven and experimental nature of some of the proposed mitigation measures, and the scale and location of the project which were not comparable to other mainland restoration sites.
In later correspondence they described the ornithological assessment as associated with a high degree of uncertainty in several critical respects.
They disagreed with the predicted collision mortality rate, which they put at 4.2 for 127 turbines, or 3.7 if the Delting turbines were removed.
They welcomed the HMP as offering the possibility of significant biodiversity benefits and as an excellent opportunity to explore various habitat management methods as yet untested in the Shetlands; but advised that it contained a qualitative assurance which cannot be relied on with certainty to significantly mitigate these impacts.
They regretted that in spite of the significant efforts made in cooperation with the developers they had been unable to resolve all their concerns.
The Scottish Ministers gave their decision by letter dated 4 April 2012.
They recorded the representations of various consultees, statutory and non statutory (including those of SNH and RSPB, relating to effects on birds).
They also noted the receipt of a total of 3881 public representations, of which 2772 were objections and 1109 were in support of the development; the objections raised concerns on a number of subjects including habitat, wildlife, visual impact and infrastructure.
In view of the apparently insurmountable aviation issues associated with the 24 turbines in the Delting area, it would not be appropriate for those to be included in any consent, but there remained the option of granting consent for the remaining 103 turbines.
The letter stated that the ministers had had regard to their obligations under EU environmental legislation and to the potential for impact on the environment, in particular on species of wild birds.
It noted that the peatland ecosystem was in serious decline, and that the restoration proposed by the Habitat Management Plan would offer benefits to a whole range of species and habitats.
It was far more ambitious and expansive than plans accompanying previous windfarm proposals encompassing an area in total of 12,800 hectares, and had been welcomed by SNH as offering the possibility of significant biodiversity benefits.
In a section headed Whimbrel the letter discussed the respective submissions and the supporting evidence on this subject.
The estimate of 3.7 collision deaths per year was regarded as very small when considered in the context of the 72 108 annual deaths from other causes.
Of the view of SNH and others that the development would result in a significant impact of national interest, the letter commented: Ministers are not satisfied that the estimated impact of the development on whimbrel demonstrates such a level of significance.
In addition, Ministers consider that the potential beneficial effects of the Habitat Management Plan (HMP) can reasonably be expected to provide some counterbalancing positive benefits.
It was accepted that the beneficial effects of the HMP could not be predicted with certainty, for the reasons given by SNH, but the letter continued: Ministers note that the HMP will take one third of the UK population of whimbrel under active management, and will target some 100 whimbrel hotspots.
Based on the detailed environmental information provided in the environmental statement and addendum, Ministers are satisfied that the measures proposed by the HMP are likely to have a positive value to the conservation status of the whimbrel.
These measures include a variety of management techniques, including predator control, habitat restoration, protection and management.
Ministers are satisfied that an HMP which includes significant predator control from the outset, as well as ongoing habitat restoration, protection and management, is likely to counteract the relatively small estimated rate of bird mortality.
Further reassurance is gained from the commitment to ongoing development and improvement built into the HMP as understanding of its effect improves, and from the fact that this commitment will be required by condition.
In any case, if, despite the implementation of the HMP, the estimated negative impact on the species were to remain, Ministers consider that the level of impact on the conservation status of the whimbrel is outweighed by the benefits of the project, including the very substantial renewable energy generation the development would bring and the support this offers to tackling climate change and meeting EU Climate Change Targets.
The whimbrel is in decline on Shetland.
Ministers consider that the HMP represents an opportunity currently the sole opportunity to try to improve the conservation status of the species.
Without the Viking Windfarm HMP, there currently appears to be no prospect of any significant work being undertaken to reverse the decline of the whimbrel in the UK.
It was considered that conditions on the consent would ensure comprehensive monitoring of the effects of the development and the success or otherwise of the mitigation measures, which work would also inform ongoing initiatives for the conservation of whimbrel .
The letter went on to consider other issues, under the headings Landscape and visual, Economic and renewable energy benefits, and Other considerations; before concluding that environmental impacts will for the most part be satisfactorily addressed by way of mitigation and conditions, and that the residual impacts are outweighed by the benefits the development will bring, and that consent should therefore be granted.
Statutory requirements and the Birds Directive
By paragraph 1 of Schedule 9 of the Electricity Act 1989, developers are required in formulating their proposals to have regard to the desirability of conserving flora, fauna and geological or physiographical features of special interest , to do what (they) reasonably can to mitigate any effect which the proposals would have on such flora, fauna or features; and, in considering their proposals, the ministers are required to have regard to the extent of compliance with those duties.
There is no allegation in this appeal of non compliance with these duties by the developers or the ministers.
In addition, as is common ground, the ministers were required to take due account so far as relevant of the obligations of the United Kingdom under the Birds Directive.
The directive currently in force, which dates from 2009 (2009/147/EC), was a codification of provisions originally found in the 1979 directive (79/409/EEC) with subsequent amendments.
As such they have been discussed in a number of cases in the European Court of Justice.
Detailed analysis can be found in the opinions of Advocate General Fennelly in C 44/95 R v Secretary of State for the Environment, Ex p Royal Society for the Protection of Birds [1996] ECR I 3805 (the Lappel Bank case) and C 10/96 Ligue Royale Belge pour la Protection des Oiseaux ASBL v Rgion Wallonne [1996] ECR I 6775.
As has been seen, SNH drew particular attention to articles 2, 3(1), 3(2)(b) and the last sentence of article 4(4).
To understand the arguments here and in the courts below, it is necessary to set these in their context.
By article 1 the directive applies to the conservation of all species of naturally occurring birds in the wild state in the European territory of the Member States to which the Treaty applies By article 2 Member States shall take the requisite measures to maintain the population of the species referred to in article 1 at a level which corresponds in particular to ecological, scientific and cultural requirements, while taking account of economic and recreational requirements, or to adapt the population of these species to that level.
Article 3.1 requires member states in the light of the requirements referred to in article 2 to take the requisite measures to preserve, maintain or re establish a sufficient diversity and area of habitats for all the species of birds referred to in article 1; such measures to include (article 3.2(b)): (b) upkeep and management in accordance with the ecological needs of habitats inside and outside the protected zones;
Article 4.1 requires special conservation measures to be taken in respect of the species mentioned in annex I of the directive, in order to ensure their survival and reproduction in their area of distribution, and requires member states to classify in particular the most suitable territories in number and size as special protection areas for the conservation of these species.
Article 4.2 requires similar measures for regularly occurring migratory species not listed in annex I.
It is common ground that whimbrel, though not listed in annex I, are subject to the requirement for similar measures for migratory species under article 4(2).
The Fetlar SPA was designated pursuant to this duty.
It was established by the European Court in the Lappel Bank case that, notwithstanding the reference in article 2 to economic and recreational requirements, such factors were not relevant in choosing or defining special
protection areas under article 4.
The precise relevance of such factors to the
scope of the duties under article 2 is a matter of debate.
In Commission v Belgium C 247/85 [1987] ECR 3029, para 8, the European Court observed: article 2 of the directive requires the Member States to take the requisite measures to maintain the population of all bird species at a level, or to adapt it to a level, which corresponds in particular to ecological, scientific and cultural requirements, while taking account of economic and recreational requirements and from which it is therefore clear that the protection of birds must be balanced against other requirements, such as those of an economic nature . (emphasis added) However, in the later Lappel Bank case, the Advocate General (para 57) took the view that this balance was relevant under article 2, not to the level at which the population of the particular species was to be maintained, but only to the measures required to achieve it.
The court did not express a view on that point, confining itself to ruling on article 4.
Article 4.4, to the last sentence of which SNH referred, provides: 4.
In respect of the protection areas referred to in paragraphs 1 and 2, Member States shall take appropriate steps to avoid pollution or deterioration of habitats or any disturbances affecting the birds, in so far as these would be significant having regard to the objectives of this article.
Outside these protection areas, Member States shall also strive to avoid pollution or deterioration of habitats.
In the same passage SNH made reference to the aim of achieving favourable conservation status for a relevant species.
This expression does not appear in the Birds Directive itself.
The concept is taken from the Habitats Directive (92/43/EEC), and is of direct application to the obligations of states in relation to the European network of special areas of conservation under article 3 of that directive (Natura 2000).
For this purpose, article 1(i) defines the conservation status of a species as the sum of the influences acting on the species concerned that may affect the long term distribution and abundance of its populations within the territory .
Conservation status is taken as favourable when: population dynamics data on the species concerned indicate that it is maintaining itself on a long term basis as a viable component of its natural habitats, and the natural range of the species is neither being reduced nor is likely to be reduced for the foreseeable future, and there is, and will probably continue to be, a sufficiently large habitat to maintain its populations on a long term basis.
There are links between the two directives.
By article 3 of the Habitats Directive, special protection areas designated under article 4 of the Birds Directive were also included in the Natura 2000 network, and (by article 7) such areas were subject to the same obligations in respect of conservation measures as defined by article 6 of the Habitats Directive.
However, there appears to be nothing in either directive to link the concept of favourable conservation status as such to the general obligations under article 2 of the Birds Directive, which apply to all wild birds, not just those defined for special protection under article 4 or otherwise.
The courts below
On 24 September 2013, the Lord Ordinary gave judgment reducing the ministers decision on the grounds (apparently first raised by the court itself) that in the absence of a licence granted under section 6 of the Electricity Act the ministers had no power to grant consent.
That ground of decision was not supported by these appellants or any other party to the present proceedings, and it was not followed by Lord Doherty in a later case: Trump International Golf Club Scotland Ltd v Scottish Ministers [2014] SLT 406.
The Inner House (para 19) agreed with his reasoning.
It is unnecessary to consider the point further.
The Lord Ordinary held in the alternative that the ministers had failed to take proper account of their obligations under the Birds Directive.
She criticised the ministers for failing to address explicitly legal issues arising out of the [directive] and explain their approach to decision making (para 239).
In a long section (paras 245 291) she undertook her own detailed interpretation of provisions of the directive, followed by a discussion of their application to the facts of the case.
Without disrespect, I hope it is sufficient to highlight what appear to be the key points in the discussion.
She identified what she understood to be the respective positions of the parties: [258] In summary, the fundamental dividing line between the interpretation put forward by the petitioners compared with that advanced on behalf of the respondents and interested party is that the petitioners maintain that article 2 sets down a common standard which requires to be met that the population of the species, in this case whimbrel, are to be maintained at a level which corresponds in particular to ecological, scientific and cultural requirements and that obligation rests on the State.
There is discretion in how article 2 is to be implemented but not discretion as to whether it is to be implemented or not. [259] In contrast, the respondents submit that the reference to maintaining the population in article 2 is subject to other considerations (which) at a minimum included economic and recreational requirements.
It is a balancing exercise The final position of the respondents was to say in effect that wind farm energy production contributing to climate change targets out balanced or outweighed the obligation of maintaining the population of whimbrel to the level specified in article 2.
In resolving that issue she attached particular weight to the opinion of Advocate General Fennelly in the Lappel Bank case (see above) as to the limited role of economic and recreational requirements even under article 2 (paras 260 264).
She also attached weight to the obligation of the state in respect of migratory species under article 4(2).
The accepted position was that, despite the existence of the Fetlar SPA, whimbrel were not in favourable conservation status in the Shetlands or the United Kingdom.
This raised the question whether the designation of that area was fulfilling the obligations of the United Kingdom under that article, and if not what the implications of that were for the decision making in this case.
It was necessary for the decision maker to give some indication that they have addressed the issues as envisaged in the Directive.
Taking account of the problems with the existing conservation status of whimbrel, there was no reasoning to explain why the Fetlar SPA site provided sufficient protection and exhausted their obligation under article 4(2) of the directive (para 272).
As to the HMP, there was no explanation as to why the ministers, departing from the view of SNH, and in a situation where it is not disputed that the reasons for the whimbrel decline are not known and the habitat management plan is untried and untested in Shetland in relation to whimbrel, were able to conclude that the HMP would provide some unspecified level of mitigation (para 285).
Further, in her view, there was the fundamental difficulty that the ministers had failed to take the directive as the starting point for consideration of the facts.
Article 2 imposed an obligation to take requisite measures to maintain whimbrel at an appropriate level, which, in her opinion, would involve addressing the issue of what is required by article 2 in respect of whimbrel in this case.
These were not pure questions of fact, but matters of mixed fact and law.
The ministers had failed to address these issues, except by way of a balancing exercise taking account of the benefits of the project in relation to meeting EU climate change targets an exercise which in her view was not permitted by the directive (paras 286 289).
On appeal, the approach of First Division was radically different.
In the single opinion of the court, delivered by Lord Brodie, they criticised the Lord Ordinary for addressing the wrong question: The question which should have been the focus of the Lord Ordinarys attention was whether the grant of consent by the Scottish Ministers had been a lawful decision, once due account was taken of, inter alia, the Wild Birds Directive.
Instead, the Lord Ordinary applied herself to the rather different question as to whether the Scottish Ministers, in their decision letter, had demonstrated that they had fully understood and complied with their on going obligations under the Directive in respect of the United Kingdom population of whimbrel, irrespective of the likely effect on it of a consent to the development. (para 26)
Whether the development was likely to have a materially adverse effect on the bird populations protected by the directive was an entirely factual question for the ministers to determine.
They had concluded that increased mortality was unlikely but in any event were not satisfied that, even without mitigation by virtue of the HMP, the impact was of significance in relation to the conservation of the species.
In the view of the court: Once that conclusion was arrived at, the Wild Birds Directive, and any associated problems of interpretation and application, fell out of the picture as far as this proposal was concerned. (para 27) Although the decision letter had not referred expressly to the directive, it was clear to an informed reader that the decision had been made having regard to
The issues in the appeal
SNHs assessment which referred to specific provisions of the directive (para 29).
The Lord Ordinarys criticism of the ministers reasoning in relation to their duties under article 4(2) reflected the erroneous view that they were required to satisfy themselves as to their performance of those duties as a preamble to consideration of the application (para 30).
Once they had decided that the development would have no significant adverse impact, and might possibly be beneficial, the issue of what was required by article 2 in respect of the whimbrel was one that it was unnecessary to explore. (para 31) In this court, the appellants submit that the ministers approached the whimbrel on the wrong basis in law.
In summary they make the following main points: i) The ministers considered the impact of the development on the whimbrel, but failed to take account of their positive obligations not merely to maintain the current level of the whimbrel population, but to adapt it to the appropriate level under article 2 in effect to bring the whimbrel up to favourable conservation status. ii) More particularly, in the light of the detailed information made available in connection with the application, they should have appreciated that the mainland territory now appeared to be the most suitable territory for classification as a special protection area under article 4(2); and they should have considered what further special conservation measures were required, for example the closing down of the windfarm during whimbrel migratory or breeding months. iii) They acknowledge that SNH had made no reference to article 4(2), but this was an error which could not excuse the ministers failure to have regard to the obligation imposed on them by that provision. iv) In so far as the ministers relied under article 2 on balancing considerations relating to climate change benefits or other economic considerations, these were not relevant in law. v) Any doubts about the interpretation of the directive should be resolved by a reference to the CJEU.
Discussion
The first two points reflect the principal difference between the courts below, which lay in their respective assessments of the role of the ministers in considering a proposal of this kind.
The Lord Ordinary treated it as requiring them in effect to conduct a full review of their functions under the Birds Directive, with a view to considering how the present proposal would contribute to or fit in with those functions, and in particular the objective of bringing the whimbrel up to favourable conservation status.
The Inner House took a more limited view.
The directive was but one of a number of material considerations to be taken into account in reaching a lawful decision whether to grant consent under the Electricity Act 1989.
In principle, in my view, the Inner House were clearly right.
The ministers functions in this case derived, not from the directive, but from their statutory duty to consider a proposal for development under the Electricity Act 1989.
The range of issues potentially relevant was apparent from their summary of the large number of representations for and against the proposal.
As has been seen, the Act contained specific reference to conservation of wildlife (fauna) and mitigation of any adverse effects of a development.
The Ministers were also required by the relevant regulations to take account of the information provided by the environmental assessment.
The directive did not in terms impose any specific requirements in respect of this particular development proposal, but it was rightly accepted as part of the legal background against which its effects needed to be considered.
In considering those matters the ministers would be expected to attach weight to the views of statutory consultees such as SNH, and other expert bodies such as the RSPB, but (as is accepted) they were not bound by their advice.
I agree with the Inner House that although the decision letter did not mention the directive as such, the detailed consideration given to the advice of SNH, with specific reference to its provisions, leaves no serious doubt that it was taken into account, as part of the obligations under EU environmental legislation to which the letter referred.
I would not therefore agree with the Lord Ordinary that the starting point for consideration of this proposal was to establish the precise scope of the duties imposed by article 2, and for that purpose to determine an appropriate level for the whimbrel population.
That was not the issue facing the ministers in the context of their consideration of this proposal under the Electricity Act 1989.
Their duty was to determine whether to grant consent to a particular development proposal, taking account of all material considerations for or against, of which the directive formed part.
On the other hand, it does not follow that, once it had been decided that the impact on whimbrel population was not of significance, the directive (in the words of the Inner House) fell out of the picture.
If there had been evidence that the proposal, while having no significant effect in itself on the whimbrel population, might prejudice the fulfilment of the ministers duties under the directive, that would have been a potential objection which required consideration.
That in effect is the substance of the appellants second point in the summary above, relying on the more specific obligations under article 4(2).
Their difficulty is that their suggestions are unsupported speculation, and were not raised by anyone in the representations on this proposal whether by the expert bodies or anyone else.
As the appellants acknowledge, it was the investigations conducted in connection with this proposal, as reported in the environmental statement and its addendum, which highlighted the present status of the whimbrel in the area of the proposed windfarm and elsewhere in the islands.
It appears to be the case, perhaps paradoxically, that one of the areas which has seen the largest decline has been the Fetlar special protection area itself, as compared to a smaller decline in the mainland area in which the proposal is situated.
The reasons for that may be open to debate, but they were not in issue in this statutory process.
If SNH (or indeed the appellants) had thought it necessary or appropriate to call for designation of further areas or other special measures under article 4(2), they could have raised that as an issue, and the developers would have had an opportunity to address it.
There is no reason to think that SNHs omission to do so reflected, as the appellants imply, any misunderstanding of the law or the material facts.
It is clear in any event that the ministers did have regard to the desirability of improving the conservation status of the whimbrel on the islands in general, rather than simply avoiding significant loss due to this proposal.
They were entitled to attach weight to the fact that the HMP would result in one third of the whimbrel population of the UK being taken under active management, and to regard it as an exceptional opportunity to improve understanding of the species and its habitat and of the measures necessary to conserve it.
This is not, as the appellants submit, to rely on their own failure to fulfil their obligations under the Birds Directive as a reason for allowing the wind farm.
There is no evidence of any allegation, by SNH or any other responsible body, of a failure by the UK to comply in this respect with its obligations under article 4(2).
We have been shown post decision correspondence of the Shetland Bird Club with ministers and with the European Commission, which shows that the status of SPAs in the Shetland Islands is under continuing review, but it contains no suggestion that the present position was or is regarded as having involved any breach of the directive.
In any event,
as I have said, the performance of the UKs duties under the directive was not in issue.
In summary, the ministers were entitled to regard the limited anticipated impact on the whimbrel population, combined with the prospect of the HMP achieving some improvement to their conservation status more generally, as a sufficient answer to the objections under this head.
The fourth point raised by the appellants relates to the ministers reliance on balancing considerations renewable energy and climate change benefits to override any objections under the directive.
The relevance in law of that balance was identified by the Lord Ordinary as a primary issue between the parties, which she determined in favour of the appellants.
Although the parties have maintained their positions in this court, the ministers primary submission, as I understood Mr Thomson, was that it is unnecessary for the court to determine that issue if they succeed on the other issues.
It is clear, he submits, from the context of that passage in the letter that the balancing considerations there referred to represented a fall back position which would only come into play if the primary reasoning were not to be accepted.
As environment related benefits, they in turn were distinguished from the more general economic benefits properly relied on in a later part of the letter as outweighing the remaining landscape and visual impacts of the development.
I agree with this interpretation of the letter, and its consequences for the appeal.
As the Inner House accepted, the interpretation of article 2 raises some difficulties, one of which is the precise role of the economic factors there referred to.
Another is the obligation of member states in relation to setting an appropriate level for the maintenance of different species, which the Lord Ordinary identified as the starting point.
Since article 2 applies to wild birds of all kinds, regardless of their scarcity or vulnerability, it seems unlikely that it was intended to require an equally prescriptive approach in all cases, by contrast for example with the more specific measures required for the particular species protected by article 4.
Although some guidance is provided by the existing European jurisprudence, the need for a further reference may arise in an appropriate case in which the resolution of these issues is necessary for a decision.
This is not such a case.
In those circumstances it is better to leave further discussion in this court until then.
Conclusion
Inner House.
For these reasons I would dismiss the appeal and confirm the order of the
| UK-Abs | Sustainable Shetland (SS) challenged a consent for a large windfarm in the Central Mainland of Shetland granted under s.36 of the Electricity Act 1989 on 4 April 2012 by the Scottish Ministers.
SS alleged that the Ministers had failed to take proper account of the Birds Directive (2009/147/EC) (particularly articles 2 and 4(2)) in respect of the whimbrel, a protected migratory bird.
By Article 2 Member States must take measures to maintain the population of wild birds species at a level which corresponds in particular to ecological, scientific and cultural requirements, while taking account of economic and recreational requirements, or adapt them up to that level.
Article 4(1) requires special conservation measures to be taken in respect of species mentioned in Annex I of the Directive and Article 4(2) requires similar measures for regularly occurring migratory species not listed in Annex I, which includes whimbrel.
Pursuant to this duty the Fetlar Special Protection Area (SPA) had been designated.
Under Article 4(4), in respect of SPAs Member States shall take appropriate steps to avoid pollution or deterioration of habitats or disturbances of the birds, and outside SPAs they shall also strive to avoid pollution or deterioration of habitats.
The whimbrel in Shetland represent around 95% of the UK population and a 2009 survey showed they are in decline.
The application was accompanied by an Environmental Statement (ES).
Scottish National Heritage (SNH) made objections, including on impact on the whimbrel.
In response the developers submitted a new Addendum to the ES dealing in detail with likely effects on whimbrel.
It included a Habitat Management Plan (HMP) with proposed habitat management actions e.g. to control predators.
The SNH maintained their objections in respect of whimbrel, specifically referencing the Birds Directive.
In their decision letter the Scottish Ministers considered various representations (including from SNH) and stated that they had had regard to their obligations under EU environmental legislation and to the potential for environmental impact in particular on species of wild birds.
In a section headed Whimbrel the letter discussed the respective submissions on the subject.
The estimate of 3.7 annual collision deaths was regarded as very small in the context of 72 108 annual deaths from other causes.
The Ministers were not satisfied that the estimated impact of the development on whimbrel was significant, and considered that the potential beneficial effects of the HMP could reasonably be expected to provide counterbalancing positive benefits.
In any case if, despite the HMP, the estimated negative impact on the species were to remain, the Ministers considered that the level of impact was outweighed by the benefits of the project, e.g. tackling climate change.
The letter also stated that the HMP represented currently the sole opportunity to try to improve the species conservation status and that without the windfarm there currently appears to be no prospect of any significant work being undertaken to reverse the decline of the whimbrel in the UK.
Conditions on the consent would ensure monitoring of the effects of the development and the success of mitigation measures.
SSs challenge was upheld by the Lord Ordinary on other grounds but she indicated that, if necessary, she would have upheld the challenge under the Directive.
The Inner House unanimously allowed the Ministers appeal.
The Supreme Court unanimously dismisses the appeal.
Lord Carnwath gives the only substantive judgment, with which the other members of the court agree.
The Ministers concluded that even without mitigation the impact on whimbrel was not significant. [27] Although the decision letter did not mention the Directive as such, the detailed consideration given to SNHs advice leaves no serious doubt that it was taken into account.
In the context of this proposal the Ministers duty was not to establish the precise scope of Article 2 duties to determine an appropriate level for the whimbrel but to determine whether to grant consent, taking account of all material considerations, of which the Directive formed part. [30 32] If there had been evidence that the development might prejudice the fulfilment of the Ministers duties under the Directive that would have required consideration.
However, the appellants suggestions were unsupported by the evidence, and had not been raised by anyone (including SNH) in their representations on this proposal.
The investigations conducted in connection with the windfarm proposal had highlighted the present status of the whimbrel.
There was no reason to think that SNHs omission to call for designation of further SPAs or other special measures under article 4(2) reflected any misunderstanding of the law or material facts. [33 35] In any event the Ministers did have regard to improving the conservation status of the whimbrel, and were entitled to have regard to the limited anticipated impact of the proposal, combined with the prospect of the HMP improving their conservation status. [36] It is clear from the context of the relevant passage that reference to the benefits of the project as balancing considerations was a fall back position which would only come into play if the primary reasoning were not accepted.
Interpretation of Article 2 raises some difficulties, one of which is the precise role of the economic factors there referred to.
Another is the obligation of member states in relation to setting an appropriate level for the maintenance of different species.
Since Article 2 applies to wild birds of all kinds it seems unlikely that it was intended to require an equally prescriptive approach in all cases, by contrast with the more specific measures required for the particular species protected by Article 4.
The need for a reference to the CJEU may arise in a case in which the resolution of these issues is necessary for a decision; this is not such a case. [38 39]
|
It is the aim of an award of damages in the law of tort, so far as possible, to place the person who has been harmed by the wrongful acts of another in the position in which he or she would have been had the harm not been done: full compensation, no more but certainly no less.
Of course, there are some harms which no amount of money can properly redress, and these include the loss of a wife or husband.
There are also harms which it is difficult to assess, especially those which will be suffered in the future, but the principle of full compensation is clear.
The issue in this case is whether the current approach to assessing the financial losses suffered by the dependant of a person who is wrongfully killed properly reflects the fundamental principle of full compensation, and if it does not whether we should depart from previous decisions of the House of Lords.
The facts
The appellant is the widower of Mrs Knauer, who died from mesothelioma in August 2009 at the age of 46.
It is now accepted that she contracted the disease as a result of exposure to asbestos during the course of her employment by the respondent as an administrative assistant at Her Majestys Prison, Guys Marsh.
The respondent had initially denied such exposure but liability was eventually admitted in December 2013, when judgment was entered for the appellant with damages to be assessed.
The damages hearing took place before Bean J in July 2014.
Many items of damage were agreed and he resolved those which remained in issue.
This included the annual figure for the value of the income and services lost as a result of her death (the multiplicand).
There is no appeal against any of those findings.
The issue is whether the number of years by which that figure is to be multiplied (the multiplier) is to be calculated from the date of death or from the date of trial.
The parties are agreed that in this case the difference between the two approaches is 52,808.
The trial judge held (as had Nelson J in White v ESAB Group (UK) Ltd [2002] PIQR Q6) that he was bound to follow the approach adopted by the House of Lords in Cookson v Knowles [1979] AC 556 and Graham v Dodds [1983] 1 WLR 808 and to calculate the multiplier from the date of death.
Freed from that authority, however, he would have preferred the approach which had been recommended by the Law Commission, in their report on Claims for Wrongful Death (1999) (Law Com No 263), of calculating the multiplier from the date of trial.
He granted a certificate under section 12 of the Administration of Justice Act 1969 to enable the case to come directly to this court, leapfrogging the Court of Appeal.
The issue of principle which this court is asked to decide is whether the date of death or the date of trial is the proper approach.
But if the answer to that question is the date of trial then the subsidiary issue is whether it is open to or proper for this court to depart from the approach laid down by Lord Diplock and Lord Fraser of Tullybelton in Cookson v Knowles and by Lord Bridge of Harwich in Graham v Dodds or whether the defect in the present law is one which should be left to Parliament to cure.
The principle
Mr Gerard McDermott QC, who appeared for the respondent, very properly conceded that the appellants case on the issue of principle was a good one.
The normal approach is to calculate the losses up to the date of trial and award a lump sum in respect of those.
Future losses are calculated on the multiplier/multiplicand approach.
The multiplier reflects the normal life expectancy of the victim, based on actuarial tables which include a discount to take account of the risk of an earlier death (frequently referred to as the vicissitudes of life).
But there is also a discount to reflect the value to the claimant of receiving a lump sum now to cater for future losses which would have been suffered over a number of years in the future.
Without such a discount, there would be over compensation.
The object is that, at the end of the period in question, the damages will have been exhausted in compensating the victim.
The victim should not gain a profit from the compensation.
That is the way in which damages for personal injury falling short of death are assessed.
Calculating damages for loss of dependency upon the deceased from the date of death, rather than from the date of trial, means that the claimant is suffering a discount for early receipt of the money when in fact that money will not be received until after trial.
The appellant accepts that the sum calculated to reflect the loss which has been suffered up to the date of trial should contain a discount to reflect the risk that, had there been no tort, the deceased might have died between her actual date of death and the date of trial.
There may also be a risk that the support or services provided for a dependant might have stopped or reduced, for example because of the deceaseds accident, illness or loss of job or the dependency ceasing, for example because a child grows up.
In most cases any discount would be a modest one, although of course there will be cases in which the risk was far from negligible and where a larger discount would be appropriate.
But, as the figures in this case show, the effect of the discount for the non existent early receipt of the money is far from negligible.
It results in under compensation in most cases.
This has become clear now that the calculation of financial losses is based upon the actuarial tables produced by the Ogden Working Party.
The current approach in fatal accident cases involves taking a multiplier as at the date of death and then deducting from it the time which has elapsed between the death and the trial.
This is to mix up a calculation based on properly considered actuarial principles with an arbitrary arithmetical deduction.
As Hooper LJ confessed in Fletcher v A Train and Sons Ltd [2008] EWCA Civ 413; [2008] 4 All ER 699, para 42, I do not understand why chronological years are deducted from the multiplier.
The trial judge in that case had awarded interest on the whole sum, in order to make up for the under compensation, an approach which the Court of Appeal had to overturn.
There have been other examples of courts seeking to get round the problem by adopting a distorted approach: see ATH v MS [2003] QB 965 and Corbett v Barking, Havering and Brentwood Health Authority [1991] 2 QB 408.
The temptation to react to a rule which appears to produce an unjust result by adopting artificial or distorted approaches should be resisted: it is better to adopt a rule which produces a just result.
The Law Commission, in their report on Claims for Wrongful Death, said this: 4.7 In the majority of cases it is the life expectancy of the deceased, and hence the period for which he or she would have continued to provide benefits to any dependants, which will govern the multiplier.
It was in this context that the date of death rule was adopted, on the basis that everything that might have happened to the deceased after that date remains uncertain. 4.8 It is true that where the multiplier is controlled by the life expectancy of the deceased, the only information which will usually be relevant to that calculation is that which was known about the deceased at the time of death.
On the other hand, it is possible to imagine facts on which matters emerging as certain after the deceaseds death do affect the period for which it is estimated that he or she would have continued to provide benefits.
For example, the deceased might have suffered from a life shortening medical condition which could not be treated in his or her lifetime.
If by the time of trial it is known that, within a year of his death, a treatment for the condition had been developed, this would inevitably affect the accuracy of any multiplier calculated at the date of death.
Thus, even in cases where the deceaseds life expectancy controls the multiplier, we do not agree with Lord Frasers assertion that the multiplier should inevitably be selected once and for all as at the date of death.
They recommended that, as in personal injury cases, actuarially calculated multipliers should be used for calculating future losses in fatal accident cases from the date of trial.
For pre trial losses the only difference from non fatal cases would be that there would have to be a small deduction to take account of the possibility that the deceased might in any event have died or given up work before trial (para 4.17).
They expressed this policy, not in the simple proposition that the multiplier should be calculated from trial, not death, but more precisely as a multiplier which has been discounted for the early receipt of the damages shall only be used in the calculation of post trial losses (para 4.18).
They also recommended that the Ogden Working Party should consider, and explain more fully, how the existing tables should be used, or amended to produce accurate assessments of damages in fatal accident cases, based upon their preferred approach (para 4.23).
If this is now so obvious, why did the House of Lords reach a different conclusion in Cookson v Knowles and Graham v Dodds? The short answer is that both cases were decided in a different era, when the calculation of damages for personal injury and death was nothing like as sophisticated as it now is.
In particular, the courts discouraged the use of actuarial tables or actuarial evidence as the basis of assessment, on the ground that they would give a false appearance of accuracy and precision in a sphere where conjectural estimates have to play a large part.
Hence [t]he experience of practitioners and judges in applying the normal method is the best primary basis for making assessments: Lord Pearson in Taylor v OConnor [1971] AC 115, 140.
Rather like the assessment of the tariff in criminal cases, the answer lay in the intuition of the barristers and judges who appeared in these cases.
This was wholly unscientific.
Counsel in the current case were agreed that, when they started at the Bar, the conventional approach to deciding upon the multiplier was to halve the victims life expectancy and add one year, with a maximum of 16 to 18 years.
This is an approach which depends upon being in the know rather than reality.
In Cookson v Knowles the main issue was whether interest should have been awarded on the whole sum of damages awarded, as the trial judge had done.
Both the Court of Appeal and the House of Lords held that it should not.
The damages should be split into pre trial and post trial losses and interest (at half rate) should be awarded on the former but not on the latter.
Lord Fraser also dealt with the date from which the multiplier should be calculated and held that, in a fatal accident case, it should be the date of death, whereas in a non fatal personal injury case, it was the date of trial.
He justified the distinction on this basis at p 576: In a personal injury case, if the injured person has survived until the date of trial, that is a known fact and the multiplier appropriate to the length of his future working life has to be ascertained as at the date of trial.
But in a fatal accident case the multiplier must be selected once and for all as at the date of death, because everything that might have happened to the deceased after that date remains uncertain.
It seems clear that he was thinking of the multiplier in terms of taking account of the vicissitudes of life rather than in terms of accelerated receipt.
The only other substantial speech was that of Lord Diplock, who did not question the propriety of assessing the multiplier as at the date of death (although for the purpose of awarding interest, it had to be divided into the pre and post trial periods).
In Graham v Dodds, the majority of the Court of Appeal in Northern Ireland took the view that Lord Diplock and Lord Fraser had expressed opposite and irreconcilable opinions (p 814), Lord Diplock favouring the date of trial and Lord Fraser the date of death.
The court preferred what they took to be Lord Diplocks view.
In the House of Lords, Lord Bridge (with whom all the other members of the appellate committee, including Lord Diplock, agreed) held that Lord Fraser and Lord Diplock had not disagreed.
Lord Bridge agreed with the reason given by Lord Fraser for distinguishing between fatal and non fatal cases and added that choosing the later date would lead to the highly undesirable anomaly that in fatal accident cases the longer the trial of the dependants claims could be delayed the more they would eventually recover (p 815).
Once again, the emphasis was on the uncertainties of life, the difficulty of knowing what would have happened to the deceased between death and the date of trial, and not upon the question of accelerated payment.
The Ogden Tables did not exist when these two cases were decided.
The working party under the chairmanship of Sir Michael Ogden QC produced the first edition of Actuarial Tables with Explanatory Notes for use in Personal Injury and Fatal Accident Cases in 1984.
Since then they have become a staple of personal injury and fatal accidents practice, the current edition being the 7th in 2011.
Any doubts about using them in the courts were laid to rest in the landmark case of Wells v Wells [1999] 1 AC 345, where Lord Lloyd of Berwick said this at p 379F G: I do not suggest that the judge should be a slave to the tables.
There may well be special factors in particular cases.
But the tables should now be regarded as the starting point, rather than a check.
A judge should be slow to depart from the relevant actuarial multiplier on impressionistic grounds, or by reference to a spread of multipliers in comparable cases especially when the multipliers were fixed before actuarial tables were widely used.
Following publication of the Law Commissions report, the tables have included fatal accident calculations based on the Law Commissions recommended approach, although at present they cannot be used.
Of the two reasons given by Lord Bridge for the present approach, it is now clear that there is a perfectly sensible way of addressing his uncertainty point, which would remove the current distinction between fatal and non fatal cases.
The twin brothers mentioned in argument in Cookson v Knowles, one of whom was injured and the other of whom was killed in the same accident, would both be dealt with in the same way.
If his first concern can thus be dealt with, his second concern, any incentive for claimants to delay the trial, is a little harder to understand.
If it were valid, it would apply equally to non fatal personal injury claims.
Further, if the present approach leads to under compensation, it could be said that it creates an incentive for defendants to delay the trial.
The reality is that this is another respect in which the litigation landscape has been transformed since 1984.
Under the Civil Procedure Rules 1998, the court is now in a position to set timetables and insist that parties keep to them.
In any event, the proper use of the Ogden Tables makes the concern irrelevant.
The dependants will get that which reflects their probable loss on an actuarial calculation based on the facts known at the date of trial.
There is no injustice either way.
Departing from previous House of Lords decisions
The question for us is not simply the identification of the date as at which the multiplier should be assessed.
Before we can decide that that date should be the date of trial rather than the date of death, we also have to be satisfied that we should depart from the established law as laid down by the House of Lords in Cookson v Knowles and Graham v Dodds.
For the appellant, Mr Frank Burton QC contended that a determination that the appropriate date is the trial date would not involve a departure from those previous decisions, and therefore did not require the appellant to rely on the Practice Statement (Judicial Precedent) [1966] 1 WLR 1234, whereby the House of Lords declared that it could depart from its previous decisions.
This contention rested on the basis that we are merely being asked by the appellant to change a judicial guideline, rather than to depart from any earlier decision.
We do not accept that contention, which appears to fly in the face of the reasons given by Lord Bridge for reaching the conclusion which he did in Graham v Dodds.
He stated that the selection of the date of trial date would be clearly contrary to principle and would give rise to a highly undesirable anomaly (p 815).
However much we may doubt those observations for the reasons already given, they demonstrate that he was deciding the issue as a matter of legal principle, and not merely giving non binding guidance.
Furthermore, it is important not to undermine the role of precedent in the common law.
Even though it appears clear that both the reasoning and conclusion on the point at issue in Cookson v Knowles and Graham v Dodds were flawed, at least in the light of current practice, it is important that litigants and their advisers know, as surely as possible, what the law is.
Particularly at a time when the cost of litigating can be very substantial, certainty and consistency are very precious commodities in the law.
If it is too easy for lower courts to depart from the reasoning of more senior courts, then certainty of outcome and consistency of treatment will be diminished, which would be detrimental to the rule of law.
In our view, therefore, the issue is whether this is a case where this Court should apply the 1966 Practice Statement.
In that connection, it is well established that this Court should not refuse to follow an earlier decision of this Court or the House of Lords merely because we would have decided it differently see per Lord Bingham of Cornhill in Horton v Sadler [2007] 1 AC 307, para 29.
More than that is required, not least because of the desirability of certainty in the law, as just discussed.
However, as Lord Bingham said in the same passage, while former decisions of the House are normally binding too rigid adherence to precedent may lead to injustice in a particular case and unduly restrict the development of the law.
This Court should be very circumspect before accepting an invitation to invoke the 1966 Practice Statement.
However, we have no hesitation in concluding that we ought to do so in the present case.
At least in the current legal climate, the application of the reasoning in the two House of Lords decisions on the point at issue is illogical and their application also results in unfair outcomes.
Further, this has encouraged courts to distinguish them on inadequate grounds (to quote Lord Hoffmann in A v Hoare [2008] AC 844, para 25), which means that certainty and consistency are being undermined.
Above all, the fact that there has been a material change in the relevant legal landscape since the earlier decisions, namely the decision in Wells v Wells and the adoption of the Ogden Tables, when taken with the other factors just mentioned, gives rise to an overwhelming case for changing the law.
As already noted, Mr McDermott very fairly acknowledged the strength of the appellants case for a change of approach.
His only substantive answer to the contention that we should change the law was to point out that the system should be seen as a whole and that there are respects in which the current legislation requires that claimants be over compensated.
One example is section 3(3) of the Fatal Accidents Act 1976, which requires the court to ignore, not only the prospect but the actual remarriage of the claimant, but another is section 4, which requires that benefits which will or may accrue to any person as a result of the death shall be disregarded.
These are, of course, examples of over compensation.
They result from legislative choices and not (unlike the principles with we are concerned in this case) from judicial decisions.
The Law Commission recommended that they be modified by legislation.
But none of this is an answer to the basic question under consideration here.
The present claimant should not be deprived of the compensation to which on ordinary principles he would be entitled because some other claimants, as a result of understandable legislative choices made by Parliament, receive more than they would receive on those ordinary principles.
It would be wrong to preserve what is now known to be a flawed practice affecting most claimants in order to counteract those choices.
Because those matters are dealt with in the 1976 Act itself, the solutions must lie with Parliament.
Finally, it was also suggested that, rather than this Court changing the law, we should leave it to the legislature to do so (as has happened in Scotland, where the Scottish Parliament has enacted section 7(1)(d) of the Damages (Scotland) Act 2011, following the recommendation of the Scottish Law Commission in their Report on Damages for Wrongful Death (2008) (Scot Law Com No 213), to the effect that the multiplier should be fixed as at the date of trial).
We would reject that suggestion.
The current law on the issue we are being asked to resolve was made by judges, and, if it is shown to suffer from the defects identified above, then, unless there is a good reason to the contrary, it should be corrected or brought up to date by judges.
That is, after all, the primary principle which lies behind the 1966 Practice Statement.
Of course, there may be cases where any proposed change in the law is so complex, or carries with it potential injustices or wider implications that the matter is better left to the legislature, but this is not such a case.
Furthermore, in England and Wales, questions relating to the assessment of damages are and always have been very much for the courts, rather than for the legislature (although there are exceptions, to which we have already alluded).
In relation to the point at issue on this appeal, that was recognised by the Law Commission in paras 4.19 4.22 of their 1999 report, where it is said that legislation is probably neither necessary nor appropriate to change the law on this point, on the ground that there was room for judicial manoeuvre without legislation.
Conclusion
For these reasons, we would allow this appeal, and refuse to follow Cookson v Knowles and Graham v Dodds, on the basis that the correct date as at which to assess the multiplier when fixing damages for future loss in claims under the Fatal Accidents Act 1976 should be the date of trial and not the date of death.
| UK-Abs | Mrs Knauer was employed by the Ministry of Justice as an administrative assistant at Her Majestys Prison, Guys Marsh.
In the course of her employment, she contracted mesothelioma, from which she died in August 2009.
Her husband, Mr Knauer, made a claim for future loss of dependency under the Fatal Accidents Act 1976.
The Ministry of Justice admitted liability for Mrs Knauers death in December 2013.
In a hearing before Bean J in July 2014, the parties agreed the annual figure for the value of the income and services lost as a result of Mrs Knauers death, the multiplicand.
A dispute arose between the parties as to whether the number of years by which that figure is to be multiplied, the multiplier, should be calculated from the date of death or from the date of trial.
The trial judge held that he was bound to follow the approach adopted by the House of Lords in the cases of Cookson v Knowles [1979] AC 556 and Graham v Dodds [1983] 1 WLR 808 and to calculate the multiplier from the date of death.
The trial judge made it clear that, absent that authority, he would have preferred to calculate the multiplier from the date of trial in line with the approach recommended by the Law Commission in their report Claims for Wrongful Death (1999, Law Com No 263).
Bean J granted a certificate under section 12 of the Administration of Justice Act 1969 to enable Mr Knauer to appeal direct to the Supreme Court.
The Supreme Court unanimously allows Mr Knauers appeal.
Lord Neuberger and Lady Hale give a joint judgment, with which the other Justices agree.
Calculating damages for loss of dependency from the date of death, rather than the date of trial, means that the claimant suffers a discount for early receipt of the money when in fact that money will not be received until after trial, a discount that results in under compensation in most cases [7].
A ruling that damages should be assessed from the date of trial would involve departing from the established law as laid down by the House of Lords in Cookson v Knowles [1979] AC 556 and Graham v Dodds [1983] 1 WLR 808.
Therefore, the question is whether this is a case in which the Court should apply the 1966 Practice Statement and depart from precedent [19 22].
The Court has no hesitation in concluding that it should do so in the present case [23].
In the current legal climate, the application of the reasoning in the two House of Lords decisions is illogical and its application also results in unfair outcomes.
The most important reason for coming to that view is that there has been a material change in the relevant legal landscape [23].
Cookson v Knowles [1979] AC 556 and Graham v Dodds [1983] 1 WLR 808 were decided in a different era, when the calculation of damages for personal injury and death was nothing like as sophisticated as it is now and the use of actuarial evidence or tables was discouraged [12].
Lord Bridge, in Dodds, outlined two concerns which were said to justify the rule.
First, adopting the date of death reduced the need to deal with uncertainties around what would have happened to the deceased between the death and the date of trial.
Secondly, were the date of trial to be adopted, this would lead to the anomaly that, the longer the trial were delayed, the more a claimant would be able to recover [13 15].
The Ogden Tables were produced in 1984 and endorsed by the House of Lords in the landmark case of Wells v Wells [1999] 1 AC 354.
As the Ogden Tables include fatal accident calculations based on the recommendations of the Law Commission, there is now a perfectly sensible way of addressing the first of Lord Bridges concerns [16 17].
As to the second of Lord Bridges concerns, this is less of an issue due to the respect in which the litigation landscape has been transformed since 1984; under the Civil Procedure Rules 1998, the court is now in a position to set timetables and insist that the parties keep to them.
In any event, the proper use of the Ogden Tables makes the concern irrelevant [18].
Another reason why the Court should depart from Cookson and Dodds is that the unfair effect of the rule as set out in those cases, has led courts to distinguish them on inadequate grounds, which means that certainty and consistency are being undermined [8 9, 23].
|
No court will lend its aid to a man who founds his cause of action upon an immoral or an illegal act.
So spoke Lord Mansfield in Holman v Johnson (1775) 1 Cowp 341, 343, ushering in two centuries and more of case law about the extent and effect of this maxim.
He stated that the reason was one of public policy: 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 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.
Illegality has the potential to provide a defence to civil claims of all sorts, whether relating to contract, property, tort or unjust enrichment, and in a wide variety of circumstances.
Take the law of contract.
A contract may be prohibited by a statute; or it may be entered into for an illegal or immoral purpose, which may be that of one or both parties; or performance according to its terms may involve the commission of an offence; or it may be intended by one or both parties to be performed in a way which will involve the commission of an offence; or an unlawful act may be committed in the course of its performance.
The application of the doctrine of illegality to each of these different situations has caused a good deal of uncertainty, complexity and sometimes inconsistency.
Holman v Johnson involved a claim for the price of goods which the plaintiff sold to the defendant in Dunkirk, knowing that the defendants purpose was to smuggle the goods into England.
The plaintiff was met with a defence of illegality.
The defence failed.
Lord Mansfield held that knowledge on the part of the plaintiff that the defendant intended to smuggle the goods did not affect the plaintiffs entitlement to recover the price of the goods, since he was not himself involved in the smuggling.
By contrast, in Pearce v Brooks (1866) LR 1 Ex 213 a claim by a coachbuilder against a prostitute for the hire of what was described in the law report as an ornamental brougham was held to be unenforceable for illegality after the jury found that the defendant hired it for the purpose of prostitution and that the plaintiff knew that this was her purpose.
It would seem that the difference between Holman v Johnson and Pearce v Brooks had to do with the type of goods supplied, because in both cases the plaintiff knew that the defendant was entering into the contract for an illegal or immoral purpose.
In JM Allan (Merchandising) Ltd v Cloke [1963] 2 QB 340, 348, Lord Denning MR endeavoured to rationalise the authorities by saying that active participation debars, but knowledge by itself does not.
However, the Law Commission commented in its discussion of the subject in its Consultation Paper on Illegal Transactions: the Effect of Illegality on Contracts and Trusts, LCCP 154 (1999) that the case law lacks clear guidance on what amounts to participation in this context.
It is unclear to what extent the doctrine of illegality applies to a contract whose object includes something which is in some respect unlawful, or the performance of which will involve some form of illegality, but not in a way which is central to the contract.
In St John Shipping Corpn v Joseph Rank Ltd [1957] 1 QB 267, 288, Devlin J said: If a contract has as its whole object the doing of the very act which the statute prohibits, it can be argued that you can hardly make sense of a statute which forbids an act and yet permits to be made a contract to do it; that is a clear implication.
But unless you get a clear implication of that sort, I think that a court ought to be very slow to hold that a statute intends to interfere with the rights and remedies given by the ordinary law of contract.
Caution in this respect is, I think, especially necessary in these times when so much of commercial life is governed by regulations of one sort or another, which may easily be broken without wicked intent.
As to illegality in the manner of performance of a contract, Mance LJ observed in Hall v Woolston Hall Leisure Ltd [2001] 1 WLR 225, 246, that the conceptual basis on which a contract not illegal nor prohibited at the time of its formation may become unenforceable due to the manner of its performance is open to debate.
In Anderson Ltd v Daniel [1924] 1 KB 138 a claim for the price of goods was held to be unenforceable because the seller had failed to give the buyer an invoice containing details which the seller was required to give him by statute.
In the St John Shipping case Devlin J rejected the interpretation that the claim in Anderson Ltd v Daniel failed because in the course of performing a legal contract the plaintiff had done something illegal.
The correct interpretation, he said, was that the way in which the contract was performed turned it into the sort of contract that was prohibited by the statute: [1957] 1 QB 267, 284.
In the St John Shipping case the claim was for freight under a charter party.
In the course of taking on bunkers the vessel was overloaded and the master thereby committed an offence, for which he was prosecuted and fined 1,200.
The extra freight earned by the overloading was 2,295 and to that extent the ship owners stood to profit from their wrong.
The cargo owners refused to pay that part of the freight.
Devlin J rejected their defence.
He held that since the goods had been delivered safely, the ship owners had proved all that they needed.
He was not prepared to construe the statute as having the effect of making the contract prohibited.
If it had been otherwise, the ship owners would not have been entitled to any freight and would therefore have suffered an additional penalty, much greater than that provided for by Parliament, for conduct which might have been unintentional.
In Ashmore, Benson, Pease and Co Ltd v Dawson [1973] 1 WLR 828 the Court of Appeal adopted a different approach.
Manufacturers of heavy engineering equipment entered into a contract of carriage with road hauliers.
There was nothing illegal in the formation of the contract, but the hauliers overloaded the vehicles which were to transport the load, in breach of road traffic regulations, and one of the lorries toppled over during the journey as a result of the drivers negligence.
The manufacturers transport manager was present when the goods were loaded and was aware of the overloading.
A claim by the manufacturers for the cost of repair of the damaged load was rejected on grounds of illegality.
The Court of Appeal did not perform the same analysis as had Devlin J in the St John Shipping case.
They held simply that the manufacturers participated in the illegal performance of the contract and were therefore barred from suing on it.
These and other cases led the Law Commission to describe the effect that unlawful performance has on the parties contractual rights as very unclear. (Consultative Report on the Illegality Defence, LCCP 189 (2009), para 3.27.)
In this case the issue is whether Lord Mansfields maxim precludes a party to a contract tainted by illegality from recovering money paid under the contract from the other party under the law of unjust enrichment (to use the term now generally favoured by scholars for what used previously to be labelled restitution and, before that, quasi contract).
On one side it is argued that the maxim applies as much to such a claim as to a claim in contract, and that the court must give no assistance to a party which has engaged in any form of illegality.
On the other side it is argued that such an approach would not advance the public policy which underlies Lord Mansfields maxim, once the underlying policy is properly understood.
Structure of this judgment
With that introduction I turn to the facts of Mr Patels claim and how it was decided in the courts below: see paras 11 16.
A central part of their judgments, and of Mr Mirzas argument, concerns the doctrine of reliance applied by the House of Lords in Tinsley v Milligan [1994] 1 AC 340: see paras 17 20.
That decision led to the Law Commission conducting a comprehensive review of the law of illegality and making proposals for addressing what the Commission perceived to be its unsatisfactory features: see paras 21 49.
Paras 33 39 concern European law and its potential impact on our domestic law.
The approach adopted in Australia, Canada and the USA is considered at paras 50 66.
Paras 67 81 address developments since the Law Commissions report, including three recent decisions of this court which laid bare a division of opinion about the framework for deciding issues of illegality.
Paragraphs 82 94 contain a section entitled The law at a crossroads.
This leads to the critical part of the judgment, which considers the way forward and ends in a summary and proposal for the disposal of this appeal: paras 95 121.
The reader who is more interested in what the judgment has to say about the future than the past will no doubt wish to concentrate on the final section.
Mr Patels claim
The essential facts can be shortly told.
Mr Patel transferred sums totalling 620,000 to Mr Mirza for the purpose of betting on the price of RBS shares, using advance insider information which Mr Mirza expected to obtain from RBS contacts regarding an anticipated government announcement which would affect the price of the shares.
Mr Mirzas expectation of a government announcement proved to be mistaken, and so the intended betting did not take place, but Mr Mirza failed to repay the money to Mr Patel despite promises to do so.
Mr Patel thereupon brought this claim for the recovery of the sums which he had paid.
The claim was put on various bases including contract and unjust enrichment.
A fuller account of the facts is given in the judgments of the courts below and in the judgment of Lord Neuberger.
The agreement between Mr Patel and Mr Mirza amounted to a conspiracy to commit an offence of insider dealing under section 52 of the Criminal Justice Act 1993.
In order to establish his claim to the return of his money, it was necessary for Mr Patel to explain the nature of the agreement.
A defendants enrichment is prima facie unjust if the claimant has enriched the defendant on the basis of a consideration which fails.
The consideration may have been a promised counter performance (whether under a valid contract or not), an event or a state of affairs, which failed to materialise. (See Professor Andrew Burrows A Restatement of the English Law of Unjust Enrichment, 2012, p 86, para 15).
In Sharma v Simposh Ltd [2013] Ch 23, at para 24, the Court of Appeal cited with approval Professor Birks summary of the meaning of failure of consideration in his revised edition of An Introduction to the Law of Restitution (1989), p 223: Failure of the consideration for a payment means that the state of affairs contemplated as the basis or reason for the payment has failed to materialise or, if it did exist, has failed to sustain itself.
For Mr Patel to show that there was a failure of consideration for his payment of moneys to Mr Mirza, he had to show what the consideration was, and that required him to establish the nature of their agreement.
Applying the reliance principle stated in Tinsley v Milligan [1994] 1 AC 340, the judge held that Mr Patels claim to recover the sum paid was unenforceable because he had to rely on his own illegality to establish it, unless he could have brought himself within the exception of the doctrine known, misleadingly, as locus poenitentiae; and that he could not bring himself within that exception since he had not voluntarily withdrawn from the illegal scheme.
In the Court of Appeal the majority agreed with the judge on the reliance issue, but disagreed with him on the application of the locus poenitentiae exception.
They held that it was enough for the claim to succeed that the scheme had not been executed.
Gloster LJ agreed with the majority that Mr Patels claim should succeed but she took a different approach to it.
She began her thoughtful analysis with a cri de coeur (para 47): As any hapless law student attempting to grapple with the concept of illegality knows, it is almost impossible to ascertain or articulate principled rules from the authorities relating to the recovery of money or other assets paid or transferred under illegal contracts.
In summary, she rejected the view that Tinsley v Milligan was to be taken as laying down a rule of universal application that the defence of ex turpi causa must apply in all circumstances where a claim involves reliance on the claimants own illegality.
It was necessary in her view to consider whether the policy underlying the rule which made the contract illegal would be stultified by allowing the claim.
In addressing that issue, relevant factors included the degree of connection between the wrongful conduct and the claim made, and the disproportionality of disallowing the claim to the unlawfulness of the conduct.
She identified the mischief at which the offence of insider trading was aimed as market abuse by the exploitation of unpublished price sensitive information obtained from a privileged source.
If no such activity occurred, Gloster LJ said that it was hard to see on what basis public policy should bar the return of money which had previously been intended to be used for that purpose.
Mr Patel was not seeking to make a benefit from wrongdoing, and she did not consider that such an outcome would be just and proportionate.
On the issue of reliance, Gloster LJ did not consider it necessary for Mr Patel to establish that the intended betting on RBS shares was to be done with the benefit of insider information; it would have been enough for him to establish that the funds had been paid for the purpose of a speculation on the price of the shares which never took place.
If, however, she were wrong on that issue, she agreed with the other members of the court on the locus poenitentiae issue.
The reliance principle and Tinsley v Milligan
The facts of Tinsley v Milligan are well known.
Miss Tinsley and Miss Milligan each contributed to the purchase of a home.
It was vested in Miss Tinsleys sole name, but on the mutual understanding that they were joint beneficial owners.
It was put in her sole name so as to assist Miss Milligan to make false benefit claims from the Department of Social Security (DSS), which she did over a number of years with Miss Tinsleys connivance.
The money obtained from the DSS helped them to pay their bills, but it played only a small part in the acquisition of the equity in the house.
Eventually Miss Milligan confessed to the DSS what she had done and made terms with it, but the parties fell out.
Miss Tinsley gave Miss Milligan notice to quit and brought a claim against her for possession.
Miss Milligan counterclaimed for a declaration that the property was held by Miss Tinsley on trust for the parties in equal shares.
The Court of Appeal by a majority decided in favour of Miss Milligan by applying the test whether it would be an affront to the public conscience to grant the relief claimed by her.
The House of Lords unanimously rejected the public conscience test, but by a three to two majority upheld the Court of Appeals decision.
The leading speech was given by Lord Browne Wilkinson.
His starting point was that title to property can pass under an unlawful transaction; but he held that the court would not assist an owner to recover the property if he had to rely on his own illegality to prove his title.
The Court of Appeal had recognised that distinction in Bowmakers Ltd v Barnet Instruments Ltd [1945] KB 65 in a case concerning personal property, referred to in more detail at para 111 below, and Lord Browne Wilkinson held that the same applied to real property in which the claimant had a beneficial interest.
Lord Browne Wilkinson held that it was enough for Miss Milligan to show that she had contributed to the purchase of the property and that there was a common understanding that the parties were joint owners.
She did not have to explain why the property had been put into Miss Tinsleys sole name.
If the relationship between them had been that of daughter and mother, and each had contributed to the purchase of a property in the daughters name, the result would have been different, because there would then have been a presumption of advancement in the daughters favour.
The mother would in those circumstances have had to rely on the illegal nature of the transaction to rebut the presumption, and her claim would therefore have been defeated by the doctrine of illegality.
Lord Browne Wilkinson acknowledged the procedural nature of this approach at [1994] 1 AC 340, 374: The effect of illegality is not substantive but procedural.
The question therefore is, In what circumstances will equity refuse to enforce equitable rights which undoubtedly exist.
Lord Goff, in the minority, held at p 356 that if A puts property in the name of B intending to conceal As interest for a fraudulent or illegal purpose, neither law nor equity will allow A to recover the property, and equity will not assist him in asserting an equitable interest in it.
It made no difference whether As case could be advanced without reference to the underlying purpose.
He recognised, at p 363, the resulting hardship and said that he did not disguise his unhappiness at the result, but he did not regard it as appropriate for the courts to introduce a discretion.
He considered, at p 364, that reform should be instituted only by the legislature, after a full inquiry by the Law Commission, which would embrace not only the advantages and disadvantages of the present system, but also the likely advantages and disadvantages of a discretionary system.
He added that he would be more than happy if a new system could be evolved which was both satisfactory in its effect and capable of avoiding the kind of result which in his judgment flowed from the established rules in cases such as Tinsley v Milligan.
Tinsley v Milligan has been the subject of much criticism in this and other jurisdictions, for its reasoning rather than its result, but this is the first time in this jurisdiction that its reasoning has been directly called into question.
Two decades have since passed since the decision and it is right to trace the developments which have occurred in that period.
Law Commission
After the decision in Tinsley v Milligan the Law Commission included the illegality defence in its Sixth Programme of Law Reform (1995) (Law Com 234).
It undertook a full inquiry of the kind which Lord Goff envisaged.
It published its first consultation paper, Illegal Transactions: The Effect of Illegality on Contracts and Trusts (LCCP 154), in 1999.
The responses, and developments in the case law, led the Commission to re consider the problems and its proposals for reform.
In 2009 it issued a further public consultation paper, The Illegality Defence: A Consultative Report (LCCP 189).
In 2010 it issued its final confirmatory report, The Illegality Defence (Law Com 320).
In relation to trust law, it proposed statutory reform and it produced a draft bill.
In relation to the law of contract and unjust enrichment, the Commission considered that there were serious problems but that they were capable of being, and could best be, tackled by the process of judicial development.
In 2012 the government announced that it did not intend to take forward the Commissions recommendation for statutory reform of the law relating to trusts, because it did not consider reform of this area of the law to be a pressing priority for the government.
From its study of the case law and academic writing, the Commission identified the principal policy rationales for the illegality doctrine as 1) furthering the purpose of the rule infringed by the claimants behaviour, 2) consistency, 3) prevention of profit from the claimants wrongdoing, 4) deterrence and 5) maintaining the integrity of the legal system.
It observed that these rationales were not mutually exclusive but overlapped to a greater or lesser degree.
A sixth possible rationale, punishment, was controversial.
The large majority of consultees considered that punishment was a matter for the criminal courts (to which one might add regulators) and should not be invoked in determining parties civil disputes. (LCCP 189, paras 2.5 2.31.)
The conclusion that the illegality defence presented serious problems represented the overwhelming view of academic commentators and consultees generally.
The Commission analysed the problems under four heads complexity, uncertainty, arbitrariness and lack of transparency.
It did not suggest that the problems resulted generally in unsatisfactory outcomes, but it was critical of the way in which they were reached.
It said that, on the whole, the case law illustrated the judges threading a path through the various rules and exceptions in order to reach outcomes which for the most part would be regarded as fair between the parties involved, although there were instances of results which the Commission considered to be unduly harsh, for example in unlawful employment cases.
Generally, the courts managed to avoid unnecessarily harsh decisions either by creating exceptions to the general rules or by straining the application of the relevant rules on the particular facts so as to meet the justice of the case.
Seldom was there an open discussion in the judgments of the considerations which led the court to its decision. (LCCP 189, paras 3.50 3.60.)
The Commission considered that Tinsley v Milligan, and cases following it, exemplified the problems of arbitrariness, uncertainty and potential for injustice.
The rule applied in that case was arbitrary in that the question whether the illegality affected the recognition or enforcement of the trust depended not on the merits of the parties, nor the policies underlying the illegality defence, but on a procedural issue.
Moreover the effect of applying the reliance principle in cases involving the presumption of advancement gave that presumption an overriding importance which it was never intended to have.
It led to uncertainty because there was much confusion over what exactly amounted to reliance, particularly when the claimant was seeking to establish an equitable interest under a constructive trust.
It had the potential to force the court into unjust decisions because, by focusing on procedural matters, the reliance principle precluded the court from paying attention to the policies that justified the existence of the defence, or taking into account such matters as the seriousness of the illegality and the value of the interest at stake. (Law Com 320, paras 2.13 2.15.)
The Commission examined the law in other jurisdictions, European law and European human rights law.
In its first consultation paper in 1999 the Commissions proposed recommendation was to introduce statutory reform on the lines of the New Zealand model.
The New Zealand Illegal Contracts Act 1970, section 7, provides that the court may grant to any party to an illegal contract such relief by way of restitution, compensation, variation of the contract, validation of the contract in whole or part or for any particular purpose, or otherwise howsoever as the court in its discretion thinks just.
In its 2009 consultative report the Commission noted that the operation of this provision had been widely heralded as a success; that it had not created the deluge of litigation that was feared by some commentators; and that this model of reform, with slight variations, had been recommended by the law reform bodies of several other Commonwealth jurisdictions (LCCP 189, para 3.81).
Nevertheless, in its 2009 consultative report and in its final report the Commission did not recommend statutory change (except in relation to trusts) for a combination of reasons.
Although the proposal for statutory reform in the 1999 consultation paper had been supported by a majority of consultees, a minority had made critical comments which persuaded the Commission that judicial reform was a better way forward, and the Commission found difficulties in drafting a satisfactory statutory model.
Most importantly, developments in the case law and the critical responses of consultees led the Commission to conclude that it was open to the courts to develop the law in ways that would render it considerably clearer, more certain and less arbitrary.
Among domestic authorities, the Commission referred to the decisions of the House of Lords in Bakewell Management Ltd v Brandwood [2004] 2 AC 519 and Gray v Thames Trains Ltd [2009] AC 1339.
Bakewell bought an area of land registered as a common.
Owners of neighbouring properties had for years driven across the land to reach the public highway.
Bakewell brought an action to prevent them from continuing to do so.
The defendants claimed to have acquired rights of way by prescription, but by driving across the land without the owners consent they had committed offences under the Law of Property Act 1925.
So to establish their property rights the defendants had to rely on conduct which was criminal.
This, Bakewell submitted, they were not entitled to do.
Its argument was rejected.
The House of Lords held that public policy did not prevent the defendants from acquiring an easement where the landowner could have made a grant which would have removed the criminality of the user.
Lord Walker, with whom Lord Bingham and Lady Hale agreed, said at para 60: I do not see this as reintroducing the public conscience test which this House disapproved in Tinsley v Milligan [1994] 1 AC 340.
It is merely a recognition that the maxim ex turpi causa must be applied as an instrument of public policy, and not in circumstances where it does not serve any public interest: see for instance National Coal Board v England [1954] AC 403, 419.
Gray v Thames Trains Ltd was a case in tort.
Mr Gray developed post traumatic stress disorder through being involved in a major railway accident, which caused him to suffer depression and a substantial personality change.
He was previously of unblemished character but two years after the accident, and while under medical treatment, he pursued and stabbed to death a man who had stepped in front of his car.
His plea of guilty to manslaughter on the ground of diminished responsibility was accepted and he was ordered to be detained in a mental hospital.
He sued the train operator for negligence and liability was admitted.
His claim for damages included compensation for his loss of liberty, damage to reputation and loss of earnings during his detention.
The House of Lords held that public policy precluded him from recovering damages under those heads.
The leading opinion was given by Lord Hoffmann, with whose reasoning Lord Phillips (subject to certain additional observations) and Lord Scott agreed.
Lord Hoffmann observed, at paras 30 32, that the maxim ex turpi causa expresses not so much a principle but a policy based on a group of reasons, which vary in different situations.
The courts had therefore evolved varying rules to deal with different situations.
Because questions of fairness and policy were different in different cases and led to different rules, one could not simply extrapolate rules applicable to one situation and apply them to another.
It had to be assumed that the sentence was what the criminal court regarded as appropriate to reflect Mr Grays personal responsibility for the crime he had committed.
It was therefore right to apply the rule that he could not recover damages for the consequences of the sentence, reflecting an underlying policy based on the inconsistency of requiring someone to be compensated for a sentence imposed because of his personal responsibility for a criminal act.
It was also to right to apply a wider rule that you cannot recover damage which is the consequence of your own criminal act, reflecting the idea that it is offensive to public notions of the fair distribution of resources that a claimant should be compensated (usually out of public funds) for the consequences of his own criminal conduct.
Lord Phillips said, at para 15, that he would reserve judgment as to whether the ex turpi causa maxim should apply if it were clear from the judges sentencing remarks that the claimants offending behaviour played no part in the decision to impose a hospital order, or, where the claimants criminal act demonstrated a need to detain him both for his own treatment and for the protection of the public, if the judge made it clear that he did not believe that the claimant should bear significant personal responsibility for his crime.
Lord Brown agreed with Lord Phillips reservations.
Lord Rodger said, at paras 78 83, that the civil court must assume that the order made by the criminal court was appropriate to reflect Mr Grays personal responsibility for the crime he had committed.
The right approach on the facts of the case was that the court must cleave to the same policy as the criminal court.
However, he considered that the approach might well be different if the offence of which he had been convicted was trivial but revealed that he was suffering from a mental disorder, due to the defendants fault, which made a hospital order appropriate.
The Law Commission drew from the various judgments a readiness on the part of the judges to examine the policy reasons which justified the application of the illegality defence and to explain why those policies applied to the facts of the case.
The Commission also considered the question how far illegal conduct may deprive claimants of rights under European Union law (LCCP 189, paras 3.82 3.89).
Some contractual rights are now derived from EC directives.
For example, the right to equal pay granted by the Equal Pay Directive (directive 75/117/EEC) is implied as a term into the employment contract.
In other cases, such as the Sale of Consumer Goods Directive (directive 99/44/EC), EU law provides remedies that depend on the existence of a contract.
The issue may therefore arise whether a national illegality doctrine which prevents a party from enforcing a contract is compatible with the EU law from which the contractual right arose.
In the 1990s various breweries let pubs to tenants on terms containing beer ties.
These were found to be unenforceable because they breached article 81 (previously article 85) of the European Community Treaty.
The issue then arose whether the fact that the tenant had been party to an illegal contract precluded him from claiming damages from the brewery.
In Gibbs Mew plc v Gemmell [1999] 1 EGLR 43, 49 the Court of Appeal held that this was so, because English law does not allow a party to an illegal agreement to claim damages from the other party for loss caused to him by being a party to the illegal agreement (per Peter Gibson LJ).
In Courage Ltd v Crehan (Case C 453/99) [2002] QB 507, the Court of Appeal referred the question to the European Court of Justice, which took a different view.
Advocate General Mischo expressed the view, at paras 38 43, that although the individuals protected by article 81 were primarily third parties (consumers and competitors), a rule which automatically excluded a party to the agreement from the protection of article 81 was too formalistic and does not take account of the particular facts of individual cases; and that a party which was too small to resist the economic pressure imposed on it by the more powerful undertaking had more in common with a third party than with the author of the agreement. (The potential parallel with the relationship in some cases between an employer and an employee is obvious.)
The court agreed with the Advocate General.
It held that where a contract was liable to restrict or distort competition, community law did not preclude a rule of national law from barring a contracting party from relying on his own illegal actions, if it was established that that party bore significant responsibility for the distortion of competition.
In that context the matters to be taken into account by the national court included the respective bargaining power and the conduct of the parties to the agreement in the economic and legal context in which they found themselves.
It was for the national court to ascertain whether the party who claimed to have suffered loss through concluding such a contract was in a markedly weaker position than the other party, such as seriously to compromise or even eliminate his freedom to negotiate the terms of the contract.
An absolute bar to an action being brought by a party to a contract which violated the competition rules would not advance the full effectiveness of the prohibition contained in the Treaty, but rather the reverse.
The effect of the courts decision was not to treat article 81 as intended for the protection of parties who infringed it, as a class, but to treat it as a matter for the national court to determine whether on the facts of a particular case a party should be regarded as sinned against rather than sinning, and therefore entitled to damages for the consequences of the offending provision of the agreement.
The potential impact of European law was referred to, obiter, by Mance LJ in Hall v Woolston Hall Leisure Ltd [2001] 1 WLR 225.
The claimant was dismissed from her employment as a chef when her employer became aware that she was pregnant.
She brought a claim in the industrial tribunal for compensation under the Sex Discrimination Act 1975.
The Act pre dated the Equal Treatment Directive (76/207/EEC) but gave effect to its provisions.
Mrs Hall succeeded on liability, but it emerged during the remedies hearing that her employer was defrauding the Inland Revenue by falsely pretending that her net salary of 250 per week was her gross salary.
She was aware of the fraud, because she was given pay slips which showed her gross pay as 250, deductions of 63.35 and net pay of 186.65.
She knew that this was untrue, but when she raised the matter with her employer she was told that this was the way in which they did business.
The tribunal held that the contract was tainted by illegality and that she had no right to compensation under the Act.
Its decision was upheld by the appeal tribunal but reversed by the Court of Appeal, which held that her acquiescence in the employers conduct was not causally linked with her sex discrimination claim and that public policy did not preclude her from enforcing her statutory claim.
Mance LJ observed additionally that the Act should as far as possible be read as providing the same scope of protection as the Directive.
Mrs Halls position fell within the wording and purpose of the Directive despite the tribunals finding of her knowledge of the fraud on the Inland Revenue.
That case did not involve the direct enforcement of a contractual obligation, but in cases where European Union rights depend on the existence of a contract (for example, in the consumer context), the Law Commission doubted whether the Court of Justice would be content with a system of domestic illegality rules which were formalistic and did not allow room for a proportionate balancing exercise to be carried out on the basis of clear principles of public policy (LCCP 189, para 3.89).
Where the terms or performance of a contract involve breach of a legislative provision, it is rare (as the Commission noted) for the statute to state expressly what are to be the consequences in terms of its enforceability. (For an example of an express statutory unenforceability provision, see section 127(3) of the Consumer Credit Act 1974, which arose for consideration in Wilson v First County Trust Ltd (No 2) [2004] 1 AC 816.) It is to be noted that in the present case, as Gloster LJ pointed out, section 63(2) of the Criminal Justice Act 1993 stipulated that No contract shall be void or unenforceable by reason only of section 52, presumably because of a concern that if a contract which involved insider dealing contrary to section 52 were void, there could be undesirable consequences for parties down the line.
The question whether a statute has the implied effect of nullifying any contract which infringes it requires a purposive construction of the statute, as illustrated by the decision of the Court of Appeal in Hughes v Asset Managers plc [1995] 3 All ER 669 which the Commission commended.
If a contract involving prohibited conduct is not void as a matter of statutory construction, the Commission recommended that in deciding whether a claim arising from it should be disallowed by reason of illegality, the court should have regard to the policies that underlie the doctrine.
It stressed that it was not advocating a general discretion, but a principled evaluation recognising (as Lord Walker put it in the Bakewell case, at para 60) that the maxim ex turpi causa must be applied as an instrument of public policy and not in circumstances where it would not serve the public interest.
The Commission identified a number of potentially relevant factors: most importantly, whether allowing the claim would undermine the purpose of the rule which made the relevant conduct unlawful, and, linked to that question, the causal connection between the illegality and the claim (including how central the illegality was to the contract), the gravity of the conduct of the respective parties and the proportionality of denying the claim. (LCCP 189, para 3.142) The Commission recommended a broadly similar approach to the maxim ex turpi causa in cases of unjust enrichment, tort and enforcement of property rights.
The Commission considered that it was within the power of the courts to develop the law in that direction and that there were signs of willingness to do so.
The underlying principles were already to be found in the case law and courts were in practice influenced by them in reaching their decisions, in some cases more openly than in others.
In relation to the application of the illegality defence to claims of unjust enrichment, the Commission carried out a detailed review in its 1999 consultation paper (LCCP 154, paras 2.32 2.56) and a further review in its 2009 consultative report (LCCP 189, paras 4.1 4.62).
An unjust enrichment claim may simply be to unwind the transaction by repayment of moneys paid and restoration of the parties to their original position, or it may take the form of a claim for recompense for benefits provided by one party to the other (a quantum meruit claim).
The Commission observed that one might have expected to find that illegality has little role to play as a defence to a claim for unjust enrichment, since the claimant is not seeking to execute the contract.
However, after a more liberal start, the courts adopted a much tougher stance, applying the ex turpi causa maxim to such claims unless the claimant could bring himself within certain recognised exceptions.
These were a) duress, b) possibly ignorance of a fact or law that rendered the contract illegal, c) possibly membership of a vulnerable class protected by statute and d) locus poenitentiae.
The locus poenitentiae exception has given rise to difficult and conflicting case law, which was meticulously analysed in the judgments of the courts below in the present case with different conclusions.
I do not propose to repeat their analysis because I do not consider it necessary to do so.
The topic has only acquired importance because of the strictness of the basic rule which the courts have applied.
Not every case, however, has received such strict treatment.
In Mohamed v Alaga & Co [2000] 1 WLR 1815 the Court of Appeal took a more flexible approach.
The plaintiff, a Somali translator and interpreter, sued the defendant solicitors for breach of a contract by which he was to introduce Somali refugees to the firm, and assist in the preparation and presentation of their asylum claims, in consideration for a half share of the legal aid fees received by the firm.
Alternatively, he claimed payment for his professional services as a translator and interpreter on a quantum meruit.
His claim was struck out on the ground that the alleged fee sharing contract contravened rules which had statutory force under the Solicitors Act 1974 and that he was therefore precluded by the doctrine of illegality from claiming payment for services provided under the contract.
The Court of Appeal restored the claim for payment on a quantum meruit.
Lord Bingham CJ (with whom the other members of the court agreed) differentiated between the claims for breach of contract and quantum meruit.
As to the former, he held that the purpose of the prohibition in the statutory rules was the protection of the public, and that it would defeat the purpose of the prohibition if a non solicitor party to the agreement could invoke the courts aid to enforce the agreement.
As to the quantum meruit claim, Lord Bingham acknowledged that on one view of the case the plaintiff was seeking to recover part of the consideration payable under an unenforceable contract.
But he preferred to view it as a claim for a reasonable reward for professional services rendered.
He considered it relevant (obviously to the question of the public interest in permitting or disallowing the claim) that the parties were not equal in blameworthiness.
The firm could be assumed to know the rules and the likelihood was that it had acted in knowing disregard of them.
By contrast, Lord Bingham had no difficulty in accepting that the plaintiff was unaware of any reason why the firm should not make the agreement, which was a common type of agreement in other commercial fields.
Mr Matthew Collings QC for Mr Mirza submitted in this case that Mohamed v Alaga & Co was a one off case and either represents an exception, peculiar to its particular facts, to the general rule that a party is not entitled to payment for services rendered under an illegal contract or was wrongly decided.
The Commission considered that the policies which underlie the illegality defence are less likely to come into play where parties are attempting to undo, rather than carry out, an illegal contract.
As in the case of contractual enforcement, it recommended that a decision on disallowing a particular restitutionary claim for illegality should be based openly on the policies underlying the defence, taking into account the same sort of factors (such as the relative conduct of the parties and the proportionality of denying the claim).
I have said that the Commission examined the law of other jurisdictions.
Before considering developments in domestic law since the Commissions final report, it is convenient at this stage to refer to the law in Australia, Canada and the USA.
Australia
In Nelson v Nelson [1995] HCA 25; (1995) 184 CLR 538, the High Court of Australia considered essentially the same issues as in Tinsley v Milligan, which it declined to follow.
As the widow of a mariner who had served in World War 1, Mrs Nelson was eligible under the Defence Service Homes Act 1918 to buy a house with the benefit of a subsidy from the Commonwealth of Australia, provided that she did not own or have a financial benefit in another house.
She provided the money to buy a house in Bent Street, Sydney, but the transfer was taken in the names of her son and daughter.
Their common intention was that Mrs Nelson should be the beneficial owner of the house.
The reason for putting the Bent Street property in the names of her children was to enable her to buy another property with the benefit of a subsidy under the Act.
This she did.
One year later the Bent Street property was sold.
By this time Mrs Nelson and her daughter had fallen out, and a dispute arose as to who was entitled to the sale proceeds.
Mrs Nelson and her son brought proceedings against the daughter for a declaration that the proceeds were held by the son and daughter in trust for their mother.
The daughter opposed the claim and sought a declaration that she had a beneficial interest.
Under Tinsley v Milligan the daughter would have succeeded, because the illegal purpose of the parties in arranging for the property to be transferred into the names of the children would have prevented Mrs Nelson from rebutting the presumption of advancement in their favour.
The High Court unanimously rejected that approach.
The majority (Deane, McHugh and Gummow JJ) held that the court should use its equitable jurisdiction to grant the declaration sought by Mrs Nelson, with the proviso that it should be subject to terms designed to ensure that the benefit wrongly obtained on the purchase of the second property should be repaid to the Commonwealth.
The minority (Dawson and Toohey JJ) would have made the declaration without any such proviso, since the Commonwealth was not a party to the proceedings and should in their view be left to decide what action, if any, it wished to take.
Toohey J said at pp 595 597: Once we are in the realm of public policy we are in a rather shadowy world.
It is perhaps the more shadowy here because Mrs Nelson is not asking the court to enforce a contract but rather to give effect to the resulting trust which would ordinarily arise once the presumption of advancement has been rebutted.
To allow the result in such a situation to be determined by the procedural aspects of a claim for relief is at odds with the broad considerations necessarily involved in questions of public policy.
Although the public policy in discouraging unlawful acts and refusing them judicial approval is important, it is not the only relevant policy consideration.
There is also the consideration of preventing injustice and the enrichment of one party at the expense of the other (St John Shipping Corpn v Joseph Rank Ltd [1957] 1 QB 267, 288 289, per Devlin J).
McHugh J, at p 609, described as unsatisfactory a doctrine of illegality that depended upon the state of the pleadings.
He said at p 611: The doctrine of illegality expounded in Holman was formulated in a society that was vastly different from that which exists today.
It was a society that was much less regulated.
With the rapid expansion of regulation, it is undeniable that the legal environment in which the doctrine of illegality operates has changed.
The underlying policy of Holman is still valid today the courts must not condone or assist a breach of statute, nor must they help to frustrate the operation of a statute However, the Holman rule, stated in the bald dictum: No court will lend its aid to a man who founds his cause of action upon an immoral or an illegal act is too extreme and inflexible to represent sound legal policy in the late twentieth century even when account is taken of the recognised exceptions to this dictum.
McHugh J went on to suggest that except in a case where a statute made rights arising out of a particular type of transaction unenforceable in all circumstances, a court should not refuse to enforce legal or equitable rights on the ground of illegality if to do so would be disproportionate to the seriousness of the conduct or if it would not further the purpose of the statute.
He said at 612 613: It is not in accord with contemporaneous notions of justice that the penalty for breaching a law or frustrating its policy should be disproportionate to the seriousness of the breach.
The seriousness of the illegality must be judged by reference to the statute whose terms or policy is contravened.
It cannot be assessed in a vacuum.
The statute must always be the reference point for determining the seriousness of the illegality.
McHugh Js approach was cited with approval by a majority of the High Court in Fitzgerald v F J Leonhardt Pty Ltd [1997] HCA 17; (1997) 189 CLR 215.
Noting the criminal sanctions which were available under the Act (imprisonment for up to two years) and the ability of the Commonwealth to recover any payments wrongly obtained by Mrs Nelson, the court did not consider that it should impose a further sanction by refusing to enforce her equitable rights, particularly when such a refusal would result in a penalty out of all proportion to the seriousness of her conduct (pp 570 571 per Deane and Gummow JJ, 590 591 per Toohey J and 616 617 per McHugh J).
Canada
In Hall v Hebert [1993] 2 SCR 159 the owner of a car allowed a passenger to drive it in the knowledge that he had drunk a large amount of beer during the course of the evening.
The car overturned and the driver suffered head injuries.
The Supreme Court held that the drivers claim against the owner in negligence was not barred by illegality, but that there should be a reduction in damages for contributory negligence.
The judgment of the majority was given by McLachlin J.
She held that the courts should be allowed to bar recovery in tort on the ground of the plaintiffs illegal or immoral conduct only in very limited circumstances.
The basis of the power lay in the duty of the courts to preserve the integrity of the legal system and it was exercisable only where that concern was in issue.
It was in issue where a damage award in a civil suit would allow a person to profit from illegal or wrongful conduct, or would permit an evasion or rebate of a penalty prescribed by the criminal law.
In such instances the law refused to give by its right hand what it took away by its left hand.
McLachlin J emphasised the importance of defining what was meant by profit when speaking of the plaintiff profiting from his or her own wrong.
It meant profit in the narrow sense of a direct pecuniary award for an act of wrongdoing.
Compensation for something other than wrongdoing, such as for personal injury, would not amount to profit in that sense.
Compensation for the plaintiffs injuries arose not from the illegal character of his conduct, but from the damage caused to him by the negligent act of the owner in letting him drive.
It represented only the value of, or substitute for, the injuries he had suffered by the fault of another.
He would get nothing for being engaged in illegal conduct.
McLachlin J accepted that there might be cases where a claim should be barred from tort recovery which did not fall within the category of profit, in order to prevent stultification of the criminal law or the evasion of a criminal penalty, but the underlying principle was that the use of the power to deny recovery on the ground of illegality was justified only where the claim would introduce inconsistency into the fabric of the law.
In Still v Minister of National Revenue (1997) 154 DLR (4th) 229 an American citizen lawfully entered Canada and applied for permanent residence status.
Pending consideration of her application, acting in good faith, she accepted employment but did so without obtaining a work permit as required by the Immigration Act 1985.
She was subsequently laid off and submitted a claim for benefits under the Unemployment Insurance Act 1985.
Her claim was rejected on the ground that the employment on which she relied in order to found her claim was prohibited under the Immigration Act.
She appealed successfully to the Federal Court of Appeal.
The judgment of the court was given by Robertson JA.
The court accepted that her employment without a work permit was expressly prohibited by the Immigration Act.
It acknowledged that under what it described as the classical model of the illegality doctrine, the fact that the applicant acted in good faith was irrelevant; her employment under an illegal contract could not constitute insurable employment for the purposes of the Unemployment Insurance Act.
However, it said at para 24 that in recognition of the rigidity and oft times unfair application of the classical illegality doctrine, the courts had developed several ways in which a party may be relieved of the consequences of illegality where appropriate.
The difficulty with those exceptions arose from the legal manoeuvring that must take place to arrive at what is considered a just result.
The court examined, at paras 25 36, a line of authorities of the Ontario courts which showed the courts turning from the classical model towards a modern approach.
It expressed the view, at para 42, that the classical model had lost its persuasive force, and was now honoured more in the breach than in its observance through the proliferation of so called judicial exceptions to the rule.
The new approach involved an examination of the purpose underlying the relevant prohibition, and its rationale was explained by McLachlin J in Hall v Hebert.
After citing McLachlin Js judgment in Hall v Hebert, the court said at para 49: As the doctrine of illegality rests on the understanding that it would be contrary to public policy to allow a person to maintain an action on a contract prohibited by statute, then it is only appropriate to identify those policy considerations which outweigh the applicants prima facie right to unemployment insurance benefits.
While on the one hand we have to consider the policy behind the legislation being violated, the Immigration Act, we must also consider the policy behind the legislation which gives rise to the benefits that have been denied, the Unemployment Insurance Act.
The court proceeded to consider the objectives underlying each of the two Acts.
As to the policy consideration that a person should not benefit from his or her own wrong, the court regarded it as a critically significant fact that she had not deliberately broken the law but acted in good faith, and it noted that during her employment both the applicant and her employer had contributed to the unemployment insurance fund.
Taking account of the objectives underlying each Act and the facts of the case, it concluded that denial of the application was not required in order to preserve the integrity of the legal system and would be disproportionate to the breach involved in failing to have obtained a work permit.
The American Law Institutes Restatement (2nd) of Contracts (1981) states at para 178(1): A promise or other term of an agreement is unenforceable on grounds of public policy if legislation provides that it is unenforceable or the interest in its enforcement is clearly outweighed in the circumstances by a public policy against the enforcement in such terms.
Nizamuddowlah v Bengal Cabaret Inc (1977) 399 NYS 2d 854 provides a practical example in the case of a devious and oppressive employer.
The central defendant (the effective owner of the company named as first defendant) met the plaintiff in Bangladesh and offered to employ him at the defendants restaurant in New York City.
The plaintiff was to work for an initial period of three months without payment, after which he was to be paid a waiters salary.
The plaintiff accepted the offer.
The defendant arranged for the plaintiffs travel and entry to the USA on a visitors visa, and he also promised to obtain a resident visa or green card for him.
The plaintiff worked for the defendant for 20 months, but he received no payment despite several demands.
He also made repeated inquiries about his green card, but the defendant persistently stalled him.
The plaintiff eventually managed to obtain a green card through his own efforts and sued the defendant to recover wages under the Minimum Wage Act.
The defendant sought the dismissal of the action on the ground that the contract was illegal.
By working in the USA before he obtained a green card the plaintiff violated the immigration laws, and the judge was not prepared to accept his plea of ignorance, since he was warned in his application form for a visitors visa that gainful employment would constitute a breach of his visa conditions.
The judge concluded that he had willingly fallen in with the defendants proposal because of his strong desire to emigrate to the USA.
The judge identified the public harm liable to result from the type of conduct exposed by the case: employment of aliens such as the plaintiff in times of high unemployment deprived citizens and legally admitted aliens of jobs; their employment on substandard terms could depress wages and working conditions; and it could diminish the effectiveness of labour unions.
However, the judge found that the defendant was the main perpetrator, intent on evading and taking advantage of the immigration laws.
He said that knowing about the immigration laws, and aware that a party to an illegal contract could not ask a court to help him to carry out his illegal objective, the defendant ran his enterprise without fairly compensating his employees.
The judge concluded that the equitable course was that the plaintiff should be paid on the basis of unjust enrichment, and he calculated the amount of the award by reference to the statutory minimum wage.
The New York Supreme Court, Appellate Division, upheld the judgment at (1979) 415 NYS 2d 685.
Observing that the Minimum Wage Act contained no indication of a legislative intent to protect only American workers, the court said: Even illegal aliens have the right to pursue civil suits in our courts, and the practice of hiring such aliens, using their services and disclaiming any obligation to pay wages because the contract is illegal is to be condemned.
The law provides penalties for aliens who obtain employment in breach of their visa obligations, but deprivation of compensation for labor is not warranted by any public policy consideration involving the immigration statutes.
Developments since the report of the Law Commission
The Court of Appeal supported and followed the approach of the Law Commission in Les Laboratoires Servier v Apotex Inc [2012] EWCA Civ 593, [2013] Bus LR 80 and ParkingEye Ltd v Somerfield Stores Ltd [2013] QB 840.
In the latter case ParkingEye contracted to provide a system of automated monitoring of car parking at Somerfields supermarkets.
The system recorded vehicle registration numbers and customers would be charged for staying beyond a set period.
The contract was to be for an initial term of 15 months and ParkingEyes remuneration was to come from the charges levied over that period.
Overstayers were to be sent letters of demand in a standard form agreed between the parties in advance of the conclusion of the contract.
If the first demand did not result in payment, it was to be followed by a series of further demands in stronger terms.
The third pro forma letter was deceptive because it falsely represented that ParkingEye had the authority and intention to issue proceedings against the customer if payment was not made within a stipulated period.
Six months into the contract Somerfield repudiated it for reasons unconnected with the letters of demand.
By that time the monitoring system had been installed at 17 of its stores.
ParkingEyes claim for damages was met with a defence which included a plea of illegality based on the intended use of deception in the performance of the contract.
The trial judge rejected the defence and awarded ParkingEye damages of 350,000 for loss of profits caused by Somerfields repudiatory breach.
The Court of Appeal upheld his decision.
The legally objectionable letter was only a small part of the intended performance of the contract and was not essential to it.
The judge had found that ParkingEye did not appreciate that the letter would be legally objectionable when the parties agreed on its form, and that, if someone had pointed the matter out, the letter would have been changed.
When its objectionable nature occurred to Somerfield, the proper and reasonable course would have been for Somerfield to raise the matter with ParkingEye and continue to honour the contract, so long as ParkingEye made the necessary alteration and performed the contract in a lawful manner, as it would have done.
The court held that denial of ParkingEyes claim was not justified by the policies underlying the doctrine of illegality and would have led to a disproportionate result.
In that case I said at paras 52 53: Rather than having over complex rules which are indiscriminate in theory but less so in practice, it is better and more honest that the court should look openly at the underlying policy factors and reach a balanced judgment in each case for reasons articulated by it. 53.
This is not to suggest that a list of policy factors should become a complete substitute for the rules about illegality in the law of contract which the courts have developed, but rather that those rules are to be developed and applied with the degree of flexibility necessary to give proper effect to the underlying policy factors.
On the relevance of ParkingEyes state of mind, I referred at para 66 to Waugh v Morris (1873) LR 8 QB 202.
The case arose from a charter party under which a cargo of hay was to be shipped from Trouville to London.
On arrival in London the master learned that a few months before the conclusion of the contract an order had been published under the Contagious Diseases (Animals) Act 1869 making it illegal to land hay brought from France.
The master refrained from landing the cargo and, after some delay, the charterer transhipped and exported it.
Meanwhile the contractual laydays had expired and the owner claimed for detention.
The charterer resisted the claim on the ground that the contract was void for illegality, because its purpose was the delivery of the consignment to London, which was prohibited by law.
The defence was rejected.
Giving the judgment of the court, Blackburn J said that all that the owner had bargained for was that on the ships arrival in London the freight should be paid and the cargo unloaded.
He contemplated that it would be landed and thought that this would be legal; but if he had thought of the possibility of the landing being prohibited, he would probably and rightly have expected that the charterer would not violate the law.
Blackburn J said at 208: We quite agree, that, where a contract is to do a thing which cannot be performed without a violation of the law it is void, whether the parties knew the law or not.
But we think, that in order to avoid a contract which can be legally performed, on the ground that there was an intention to perform it in an illegal manner, it is necessary to show that there was the wicked intention to break the law; and, if this be so, the knowledge of what the law is becomes of great importance.
Since the decisions of the Court of Appeal in Les Laboratoires Servier v Apotex Inc and the ParkingEye case, there have been three decisions by the Supreme Court involving the doctrine of illegality.
The first was Hounga v Allen [2014] 1 WLR 2889, a case with features similar to Nizamuddowlah v Bengal Cabaret Inc. Miss Hounga was a 14 year old Nigerian.
Mr and Mrs Allen offered to employ her as a home help in the UK in return for schooling and 50 per month.
With their help she entered the UK on false identity documents and obtained a six months visitors visa.
The plan was masterminded by Mrs Allens brother who lived in Lagos.
He drafted an affidavit for Miss Hounga to swear, giving her surname as that of Mrs Allens mother and a false date of birth.
The affidavit led to the issue of a passport in that name.
Mrs Allens family then arranged for Miss Hounga to be taken to the British High Commission in Lagos, where she produced a document purporting to be an invitation from Mrs Allens mother pretending to invite her granddaughter to visit her in the United Kingdom.
The High Commission was duped into issuing her with entry clearance.
Mrs Allens brother then bought a ticket for Miss Hounga to travel to England.
On arrival at Heathrow Miss Hounga confirmed to an immigration officer that the purpose of her visit was to stay with her grandmother.
Subsequently a psychologist reported that Miss Hounga, who was illiterate, had low cognitive functioning, a learning disability and a developmental age much lower than her chronological age.
Nevertheless she knew that she had entered the UK on false pretences, that it was illegal for her to remain beyond six months and that it was illegal for her to take employment in the UK.
After her arrival Miss Hounga lived at the Allens home, looking after their children and doing housework.
She was not enrolled in a school or paid any wages.
She was told by Mrs Allen that if she were found by the police she would be sent to prison.
This caused her extreme concern.
Mrs Allen also subjected her to serious physical abuse.
After 18 months an incident occurred in which Mrs Allen beat Miss Hounga, threw her out of the house and poured water over her.
Miss Hounga slept that night in the Allens garden in wet clothes.
Next day they refused to let her back in, and she made her way to a supermarket car park, where she was found and taken to the social services department of the local authority.
Miss Hounga brought claims against the Allens in the employment tribunal for unfair dismissal, breach of contract and unpaid wages.
They were dismissed on the ground that her contract of employment was unlawful.
She appealed unsuccessfully to the appeal tribunal and she did not seek to appeal further.
Neither the Court of Appeal nor the Supreme Court therefore had occasion to consider whether she was entitled to be paid for the services which she rendered on a quantum meruit (by analogy with cases such as Mohamed v Alaga & Co and Nizamuddowlah v Bengal Cabaret Inc et al).
Miss Hounga also claimed to have been the victim of the statutory tort of unlawful discrimination under the Race Relations Act 1976, section 4(2)(c), in relation to her dismissal.
The tribunal found that she had been dismissed because of her vulnerability consequent upon her immigration status.
She was therefore the victim of unlawful discrimination and she was awarded compensation for her resulting injury to feelings.
The tribunals order was set aside by the Court of Appeal, which held that the claim was tainted by the illegal nature of her employment and that for the court to uphold it would be to condone the illegality, but it was restored by the Supreme Court.
The leading judgment was given by Lord Wilson, with whom Lady Hale and Lord Kerr agreed.
Lord Wilson did not consider that the solution of the case lay either in asking whether Miss Allen needed to rely on an illegal contract or in asking whether there was an inextricable link between the illegality to which she was a party and her claim.
At the heart of the judgment Lord Wilson set out his approach in para 42: The defence of illegality rests on the foundation of public policy.
The principle of public policy is this said Lord Mansfield by way of preface to his classic exposition of the defence in Holman v Johnson (1775) 1 Cowp 341, 343.
Rules which rest on 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 the application of the defence would run counter?
On the first question, drawing on the judgment of McLachlin J in Hall v Hebert, Lord Wilson addressed the policy consideration of preserving the integrity of the legal system and not allowing persons to profit from their illegal conduct.
He concluded that an award of compensation for damage to Miss Houngas feelings was not a form of profit from her employment; it did not permit evasion of a penalty prescribed by the criminal law; and it did not compromise the integrity of the legal system.
Conversely, he said that application of the defence could encourage those in the situation of Mrs Allen to believe that they could discriminate against people like Miss Hounga with impunity and could thereby compromise the integrity of the legal system.
On the second question, Lord Wilson said that the Court of Appeals decision ran strikingly counter to the public policy against forms of people trafficking and in favour of the protection of its victims.
Weighing the policy considerations, he concluded that insofar as any public policy existed in favour of applying the illegality defence, it should give way to the public policy to which its application would be an affront.
Hounga v Allen was a case in tort, but Lord Wilsons approach to the illegality defence was applied by the Court of Appeal in R (Best) v Chief Land Registrar [2016] QB 23, where the issue was whether a claim to be registered under the Land Registration Act 2002 (LRA) as the proprietor of a residential building by adverse possession was barred by illegality.
The circumstances were that part of the relevant period of possession involved the commission of trespass which constituted a criminal offence under section 144 of the Legal Aid, Sentencing and Punishment of Offenders Act 2012 (LASPOA).
Sales LJ (with whom McCombe LJ agreed) expressed the view, at para 51, that the best guidance on the relevant analytical framework was to be found in Lord Wilsons judgment (from which he quoted para 42 and the passage which followed it).
Applying that guidance, he examined the public policy considerations underlying the provisions of the LRA governing acquisition of title to land and the public policy considerations underlying section 144 of LASPOA.
He concluded that the mischief at which section 144 was aimed was far removed from the intended operation of the law of adverse possession and that public policy did not preclude the claim for registration.
After Hounga v Allen came the decision of the Supreme Court in Les Laboratoires Servier v Apotex Inc [2015] AC 430.
The issue of illegality arose in the context of a claim to enforce a cross undertaking in damages given as a condition of an interlocutory injunction in proceedings which ultimately failed.
The claim was therefore akin to a claim in contract.
The facts were somewhat complicated but do not matter for present purposes.
The court held unanimously that the Court of Appeal had reached the right result, but the majority of this court expressed the view, at para 21, that the Court of Appeals decision could not possibly be justified by the considerations put forward by that court, which had in broad terms followed the approach commended by the Law Commission.
I expressed a different view, at para 62, observing that the Court of Appeal had adopted a similar approach to that taken by this court in Hounga v Allen.
After Les Laboratoires Servier v Apotex Inc came Bilta (UK) Ltd v Nazir (No 2) [2016] AC 1.
There was a sharp division of opinion about the proper approach to the defence illegality between, on the one hand, a strictly rule based approach and, on the other hand, a more flexible approach by which the court would look at the policies underlying the doctrine and decide whether they militated in favour of the defence, taking into account a range of potentially relevant factors.
The majority did not consider it necessary to resolve the difference in that case, since it did not affect the result, but Lord Neuberger said at para 15 that it needed to be addressed as soon as appropriately possible.
The law at a crossroads
In his Restatement of the English Law of Contract (Oxford University Press, 2016), pp 221 222, Professor Andrew Burrows explained the difficulty of attempting to state the law in relation to illegality: Leaving aside the law on what one can loosely label statutory illegality [cases where a statute makes a contract or a contract term unenforceable by either or one party] the law on the effect of illegality in contract (which one may loosely refer to as the common law of illegality) is in a state of flux Traditionally, two Latin maxims have often been referred to without greatly illuminating the legal position: ex turpi causa non oritur actio (no action arises from a disgraceful cause) and in pari delicto potior est conditio defendentis (where both parties are equally in the wrong the position of the defendant is the stronger).
As previously understood, illegality in the law of contract as developed from those Latin maxims was governed by a series of rules which tended to distinguish, for example, between illegality in formation and illegality in performance.
Unfortunately, commentators and courts have found it very difficult to state those rules with confidence and precision.
Hence the textbook treatments not only differ from each other but are characterised by long winded attempts to explain the law.
Sharp propositions when offered by the courts or the books have to be qualified by reference to cases or hypothetical examples that do not fit those rules; and convincing justifications of those rules have proved elusive.
More recently, therefore, and in line with a similar trend in respect of illegality as a defence in tort, some courts have favoured greater flexibility culminating in a range of factors approach aimed at achieving a proportionate response to contractual illegality in preference to the traditional rule based approach.
Since the law was at a crossroads, Professor Burrows set out alternative possible formulations of a rule based approach and a range of factors approach.
One possible version of a rule based approach, at p 224, which Tinsley v Milligan and Les Laboratoires Servier v Apotex Inc could be interpreted as supporting, would be a single master rule based on reliance: If the formation, purpose or performance of a contract involves conduct that is illegal (such as a crime) or contrary to public policy (such as a restraint of trade), a party cannot enforce the contract if it has to rely on that conduct to establish its claim.
An alternative rule based formulation, at p 225, saw the reliance rule as only one of a number of rules and essentially confined to the creation of property rights.
On this approach a formulation of the rules might be: Rule 1.
A contract which has as its purpose, or is intended to be performed in a manner that involves, conduct that is illegal (such as a crime) or contrary to public policy (such as a restraint of trade) is unenforceable (a) by either party if both parties knew of that purpose or intention; or (b) by one party if only that party knew of that purpose or intention.
Rule 2.
If rule 1 is inapplicable because it is only the performance of a contract that involves conduct that is illegal or contrary to public policy, the contract is unenforceable by the party who performed in that objectionable way but is enforceable by the other party unless that party knew of, and participated in, that objectionable performance.
Rule 3.
Proprietary rights created by a contract that involves conduct that is illegal or contrary to public policy will not be recognised unless the claimant can establish the proprietary rights without reliance on that conduct.
Professor Burrows identified six criticisms of those rules and, more generally, of a rule based approach to illegality.
First, the difficulty with the Tinsley v Milligan reliance rule, whether as a master rule or as a rule restricted to cases involving the assertion of proprietary rights, was that it could produce different results according to procedural technicality which had nothing to do with the underlying policies.
The decision of the Court of Appeal in Collier v Collier [2002] EWCA 1095; [2002] BPIR 1057 provides a good illustration.
A father granted a lease of property to his daughter to hold on trust for him in order to deceive creditors.
His claim to beneficial title was rejected on the ground of illegality, because it was held that he needed to rely on the illegal purpose in order to rebut the presumption of illegality which arose in favour of the daughter.
Mance LJ considered at paras 105 106 what appeared to be the distinction introduced by Tinsley v Milligan between a beneficial interest which could be established by some objectively provable and apparently neutral fact and a beneficial interest arising only from an agreement made for an unlawful purpose.
He described the effect as little more than cosmetic where the court was perfectly well aware of the close involvement of both parties in the illegality.
Tempted as he was to adopt a severely limited view of the meaning of reliance (encouraged by the judgment of Dawson J in Nelson v Nelson), he rightly did not consider that it was open to the Court of Appeal on the authorities to do so.
He expressed strong sympathy with the criticisms of the law expressed by the Law Commission, and he concluded at para 113 that he had no liking for the result which the court was compelled to reach.
Second, the difficulties with rule 1 were illustrated by the ParkingEye case.
The illegality in that case went to the contract as formed, because from the outset it was intended to send out to customers a form of letter of demand which contained some deliberate inaccuracies.
The rule as stated did not permit differentiation between minor and serious illegality or between peripheral and central illegality.
To have deprived ParkingEye of what would otherwise have been a contractual entitlement to damages of 350,000 would have been disproportionate.
Moreover, as Sir Robin Jacob pointed out in that case, at paras 33 34, there was something odd about a rule which differentiated according to whether the intention was formed before or after the contract was made.
Third, as with the criticism of rule 1, the reference in rule 2 to performance that involved illegal conduct drew no distinction between serious criminality and relatively minor breach of a statutory regulation.
Fourth, although a purported advantage of firm rules is greater certainty, the cases do not always fit the rules because courts have often sought ways around them when they do not like the consequence.
The flexible approach would not only produce more acceptable results, but would in practice be no less certain than the rule based approach.
Fifth, although Lord Mansfield made it clear in Holman v Johnson that the illegality defence operates as a rule of public policy and is not designed to achieve justice between the parties, that does not mean that any result, however arbitrary, is acceptable.
The law should strive for the most desirable policy outcome, and it may be that it is best achieved by taking into account a range of factors.
Sixth, although it may be argued that if there are deficiencies in the traditional rules, the way forward is to refine the rules to remove the deficiencies by appropriate exceptions, that task is one which has never been satisfactorily accomplished.
The reason is that there are so many variables, for example, in seriousness of the illegality, the knowledge and intentions of the parties, the centrality of the illegality, the effect of denying the defence and the sanctions which the law already imposes.
To reach the best result in terms of policy, the judges need to have the flexibility to consider and weigh a range of factors in the light of the facts of the particular case before them.
suggested, at pp 229 230, that a possible formulation would read as follows: If the formation, purpose or performance of a contract involves conduct that is illegal (such as a crime) or contrary to public policy (such as a restraint of trade), the contract is unenforceable by one or either party if to deny enforcement would be an appropriate response to that conduct, taking into account where relevant If a range of factors approach were preferred, Professor Burrows (a) how seriously illegal or contrary to public policy the conduct was; (b) whether the party seeking enforcement knew of, or intended, the conduct; (c) how central to the contract or its performance the conduct was; (d) how serious a sanction the denial of enforcement is for the party seeking enforcement; (e) whether denying enforcement will further the purpose of the rule which the conduct has infringed; (f) whether denying enforcement will act as a deterrent to conduct that is illegal or contrary to public policy; (g) whether denying enforcement will ensure that the party seeking enforcement does not profit from the conduct; (h) whether denying enforcement will avoid inconsistency in the law thereby maintaining the integrity of the legal system.
Professor Burrows noted that the final factor is capable of a wider or narrower approach, depending on what one understands by inconsistency.
The reference to what is an appropriate response brings to the surface the moral dimension underlying the doctrine of illegality, which inevitably influences the minds of judges and peeps out in their judgments from time to time.
Tinsley v Milligan caused disquiet to Lord Goff and others precisely because its reasoning jarred with their sense of what was just and appropriate.
The way forward
In Yarmouth v France (1887) 19 QBD 647, 653, Lord Esher MR said: I detest the attempt to fetter the law by maxims.
They are almost invariably misleading: they are for the most part so large and general in their language that they always include something which really is not intended to be included in them.
In Lissenden v C A V Bosch Ltd [1940] AC 412, 435, Lord Wright quoted Lord Eshers words and added: Indeed these general formulae are found in experience often to distract the courts mind from the actual exigencies of the case, and to induce the court to quote them as offering a ready made solution.
The maxims ex turpi causa and in pari delicto are no exception.
It is interesting that, according to Professor JK Grodecki, Lord Mansfield himself was conscious that if the brocard in pari delicto was to be a beneficial rule of jurisprudence it should not be allowed to become rigid and inflexible: In pari delicto potior est conditio defendentis (1955) 71 LQR 254, 258.
Professor Grodecki gave examples including Smith v Bromley (1760) 2 Doug KB 696n; 99 ER 441 and Walker v Chapman (1773) Lofft 342, 98 ER 684.
In Smith v Bromley (the earliest case in which the maxim in pari delicto appears to have been used) Lord Mansfield granted recovery to the plaintiff of money paid by the plaintiff to procure her brothers discharge from bankruptcy, which was an illegal consideration.
As he explained, Lord Mansfield, at p 698, regarded it as in the public interest that the plaintiff should be repaid notwithstanding the illegal purpose of the payment: Upon the whole, I am persuaded it is necessary, for the better support and maintenance of the law, to allow this action; for no man will venture to take, if he knows he is liable to refund.
In Walker v Chapman the defendant, who was a page to the King, offered to take a bribe of 50 from the plaintiff in return for securing him a place in the Customs.
The bribe was paid but the plaintiff did not obtain the appointment and so he sued for the return of his money.
It was argued for the defendant that no action would lie, the plaintiff being party to an iniquitous contract, and that the law would not suffer a party to draw justice from a foul fountain.
Lord Mansfield rejected the defence, distinguishing between a claim to overturn an illegal contract and a claim to obtain benefit from it.
Later judges have taken a different and stricter approach.
Looking behind the maxims, there are two broad discernible policy reasons for the common law doctrine of illegality as a defence to a civil claim.
One is that a person should not be allowed to profit from his own wrongdoing.
The other, linked, consideration is that the law should be coherent and not self defeating, condoning illegality by giving with the left hand what it takes with the right hand.
Lord Goff observed in the Spycatcher case, Attorney General v Guardian Newspapers Ltd (No 2) [1990] 1 AC 109, 286, that the statement that a man shall not be allowed to profit from his own wrong is in very general terms, and does not of itself provide any sure guidance to the solution of a problem in any particular case.
In Hall v Hebert [1993] 2 SCR 159 McLachlin J favoured giving a narrow meaning to profit but, more fundamentally, she expressed the view (at 175 176) that, as a rationale, the statement that a plaintiff will not be allowed to profit from his or her own wrongdoing does not fully explain why particular claims have been rejected, and that it may have the undesirable effect of tempting judges to focus on whether the plaintiff is getting something out of the wrongdoing, rather than on the question whether allowing recovery for something which was illegal would produce inconsistency and disharmony in the law, and so cause damage to the integrity of the legal system.
That is a valuable insight, with which I agree.
I agree also with Professor Burrows observation that this expression leaves open what is meant by inconsistency (or disharmony) in a particular case, but I do not see this as a weakness.
It is not a matter which can be determined mechanistically.
So how is the court to determine the matter if not by some mechanistic process? In answer to that question I would say that one cannot judge whether allowing a claim which is in some way tainted by illegality would be contrary to the public interest, because it would be harmful to the integrity of the legal system, without a) considering the underlying purpose of the prohibition which has been transgressed, b) considering conversely any other relevant public policies which may be rendered ineffective or less effective by denial of the claim, and c) keeping in mind the possibility of overkill unless the law is applied with a due sense of proportionality.
We are, after all, in the area of public policy.
That trio of necessary considerations can be found in the case law.
The relevance of taking into account the purpose of the relevant prohibition is self evident.
The importance of taking account of the relevant statutory context is illustrated by Hardy v Motor Insurers Bureau [1964] 2 QB 745.
The Road Traffic Act 1960 required a motorist to be insured against the risk of causing death or personal injury through the use of a vehicle on a road, but a line of authorities established that a contract to indemnify a person against the consequences of a deliberate criminal act is unenforceable.
The plaintiff, a security officer at a factory, was injured when he was trying to question the driver of a van, who drove off at speed and dragged him along the road.
The driver was convicted of unlawfully causing grievous bodily harm.
The driver being uninsured, the plaintiff sued the defendant under an agreement between the defendant and the Minister of Transport, by which the defendant agreed to satisfy any judgment against a motorist for a liability required to be covered under a motor insurance policy.
The defendant relied on the maxim ex turpi causa, arguing that a contract purporting to insure the driver against his own deliberate criminal conduct would have been unlawful.
The defence was rejected.
Diplock LJ said at p 767: The rule of law on which the major premise is based ex turpi causa non oritur actio is concerned not specifically with the lawfulness of contracts but generally with the enforcement of rights by the courts, whether or not such rights arise under contract.
All that the rule means is that the courts will not enforce a right which would otherwise be enforceable if the right arises out of an act committed by the person asserting the right (or by someone who is regarded in law as his successor) which is regarded by the court as sufficiently anti social to justify the courts refusing to enforce that right.
He observed that the purpose of the relevant statutory provision was the protection of persons who suffered injury on the road by the wrongful acts of motorists.
This purpose would have been defeated if the common law doctrine of illegality had been applied so as to bar the plaintiffs claim.
Hounga v Allen and R (Best) v Chief Land Registrar are illustrations of cases in which there were countervailing public interest considerations, which needed to be balanced.
As to the dangers of overkill, Lord Wright gave a salutary warning in Vita Food Products Inc v Unus Shipping Co Ltd [1939] AC 277, 293: Nor must it be forgotten that the rule by which contracts not expressly forbidden by statute or declared to be void are in proper cases nullified for disobedience to a statute is a rule of public policy only, and public policy understood in a wider sense may at times be better served by refusing to nullify a bargain save on serious and sufficient grounds.
To similar effect Devlin J questioned whether public policy is well served by driving from the seat of judgment everyone who has been guilty of a minor transgression in St John Shipping Corpn v Joseph Rank Ltd [1957] 1 QB 267, 288 289.
In Saunders v Edwards [1987] 1 WLR 1116, 1134, Bingham LJ said Where issues of illegality are raised, the courts have (as it seems to me) to steer a middle course between two unacceptable positions.
On the one hand it is unacceptable that any court of law should aid or lend its authority to a party seeking to pursue or enforce an object or agreement which the law prohibits.
On the other hand, it is unacceptable that the court should, on the first indication of unlawfulness affecting any aspect of a transaction, draw up its skirts and refuse all assistance to the plaintiff, no matter how serious his loss nor how disproportionate his loss to the unlawfulness of his conduct.
In considering whether it would be disproportionate to refuse relief to which the claimant would otherwise be entitled, as a matter of public policy, various factors may be relevant.
Professor Burrows list is helpful but I would not attempt to lay down a prescriptive or definitive list because of the infinite possible variety of cases.
Potentially relevant factors include the seriousness of the conduct, its centrality to the contract, whether it was intentional and whether there was marked disparity in the parties respective culpability.
The integrity and harmony of the law permit and I would say require such flexibility.
Part of the harmony of the law is its division of responsibility between the criminal and civil courts and tribunals.
Punishment for wrongdoing is the responsibility of the criminal courts and, in some instances, statutory regulators.
It should also be noted that under the Proceeds of Crime Act 2002 the state has wide powers to confiscate proceeds of crime, whether on a conviction or without a conviction.
Punishment is not generally the function of the civil courts, which are concerned with determining private rights and obligations.
The broad principle is not in doubt that the public interest requires that the civil courts should not undermine the effectiveness of the criminal law; but nor should they impose what would amount in substance to an additional penalty disproportionate to the nature and seriousness of any wrongdoing.
ParkingEye is a good example of a case where denial of claim would have been disproportionate.
The claimant did not set out to break the law.
If it had realised that the letters which it was proposing to send were legally objectionable, the text would have been changed.
The illegality did not affect the main performance of the contract.
Denial of the claim would have given the defendant a very substantial unjust reward.
Respect for the integrity of the justice system is not enhanced if it appears to produce results which are arbitrary, unjust or disproportionate.
The courts must obviously abide by the terms of any statute, but I conclude that it is right for a court which is considering the application of the common law doctrine of illegality to have regard to the policy factors involved and to the nature and circumstances of the illegal conduct in determining whether the public interest in preserving the integrity of the justice system should result in denial of the relief claimed.
I put it in that way rather than whether the contract should be regarded as tainted by illegality, because the question is whether the relief claimed should be granted.
I agree with the criticisms made in Nelson v Nelson and by academic commentators of the reliance rule as laid down in Bowmakers and Tinsley v Milligan, and I would hold that it should no longer be followed.
Unless a statute provides otherwise (expressly or by necessary implication), property can pass under a transaction which is illegal as a contract: Singh v Ali [1960] AC 167, 176, and Sharma v Simposh Ltd [2013] Ch 23, paras 27 44.
There may be circumstances in which a court will refuse to lend its assistance to an owner to enforce his title as, for example, where to do so would be to assist the claimant in a drug trafficking operation, but the outcome should not depend on a procedural question.
In Bowmakers [1945] 1 KB 65 the claim was for conversion of goods which had been obtained by the plaintiffs and supplied to the defendant under transactions which were assumed to be tainted by illegality.
The Court of Appeal rightly said, at p 71, that a mans right to possess his own chattels will as a general rule be enforced against one who, without any claim of right, is detaining them or has converted them to his own use, even though it may appear either from the pleadings, or in the course of the trial, that the chattels in question came into the defendants possession by reason of an illegal contract between himself and the plaintiff, but it added the qualifying words provided that the plaintiff does not seek, and is not forced, either to found his claim on the illegal contract or to plead its illegality in order to support his claim.
The objections to the proviso have already been identified.
It makes the question whether the court will refuse its assistance to the claimant to enforce his title to his property depend on a procedural question and it has led to uncertain case law about what constitutes reliance.
The court ended its judgment, at p 72, by saying: We are satisfied that no rule of law, and no considerations of public policy, compel the court to dismiss the plaintiffs claim in the case before us, and to do so would be, in our opinion, a manifest injustice.
That conclusion, rather than the answer to a procedural question, should have been the end of the illegality defence, since it is based on public policy.
In Tinsley v Milligan, even if Miss Milligan had not owned up and come to terms with the DSS, it would have been disproportionate to have prevented her from enforcing her equitable interest in the property and conversely to have left Miss Tinsley unjustly enriched.
Critics of the range of factors approach say that it would create unacceptable uncertainty.
I would make three points in reply.
First, one of the principal criticisms of the law has been its uncertainty and unpredictability.
Doctrinally it is riven with uncertainties: see, for example, paras 4 8 above.
There is also uncertainty how a court will in practice steer its way in order to reach what appears to be a just and reasonable result.
Second, I am not aware of evidence that uncertainty has been a source of serious problems in those jurisdictions which have taken a relatively flexible approach.
Third, there are areas in which certainty is particularly important.
Ordinary citizens and businesses enter into all sorts of everyday lawful activities which are governed by well understood rules of law.
Lord Mansfield said in Vallejo v Wheeler (1774) 1 Cowp 143, 153: In all mercantile transactions the great object should be certainty: and therefore, it is of more consequence that a rule should be certain, than whether the rule is established one way or the other.
Because speculators in trade then know what ground to go upon.
The same considerations do not apply in the same way to people contemplating unlawful activity.
When he came to decide cases involving illegality, Lord Mansfield acted in accordance with his judgment about where the public interest lay: see paras 96 98.
In Tinsley v Milligan Lord Goff considered that if the law was to move in a more flexible direction, to which he was not opposed in principle, there should be a full investigation by the Law Commission (which has happened) and that any reform should be through legislation.
Realistically, the prospect of legislation can be ignored.
The government declined to take forward the Commissions bill on trusts because it was not seen to be a pressing priority for government (a phrase familiar to the Commission), and there is no reason for optimism that it would take a different view if presented with a wider bill.
In Clayton v The Queen (2006) 231 ALR 500, para 119, Kirby J said that waiting for a modern Parliament to grapple with issues of law reform is like waiting for the Greek Kalends.
It will not happen and that Eventually courts must accept this and shoulder their own responsibility for the state of the common law.
The responsibility of the courts for dealing with defects in the common law was recently emphasised by this court in R v Jogee [2016] 2 WLR 681, para 85, and Knauer v Ministry of Justice [2016] 2 WLR 672, para 26.
In each of those cases the court decided that it should depart from previous decisions of the House of Lords.
That is never a step taken lightly.
In departing from Tinsley v Milligan it is material that it has been widely criticised; that people cannot be said to have entered into lawful transactions in reliance on the law as then stated; and, most fundamentally, that the criticisms are well founded.
In the present case I would endorse the approach and conclusion of Gloster LJ.
She correctly asked herself whether the policy underlying the rule which made the contract between Mr Patel and Mr Mirza illegal would be stultified if Mr Patels claim in unjust enrichment were allowed.
After examining the policy underlying the statutory provisions about insider dealing, she concluded that there was no logical basis why considerations of public policy should require Mr Patel to forfeit the moneys which he paid into Mr Mirzas account, and which were never used for the purpose for which they were paid.
She said that such a result would not be a just and proportionate response to the illegality.
I agree.
It seems likely that Lord Mansfield would also have agreed: see Walker v Chapman.
Mr Patel is seeking to unwind the arrangement, not to profit from it.
It is not necessary to discuss the question of locus poenitentiae which troubled the courts below, as it has troubled other courts, because it assumed importance only because of a wrong approach to the issue whether Mr Patel was prima facie entitled to the recovery of his money.
In place of the basic rule and limited exceptions to which I referred at para 44 above, I would hold that a person who satisfies the ordinary requirements of a claim in unjust enrichment will not prima facie be debarred from recovering money paid or property transferred by reason of the fact that the consideration which has failed was an unlawful consideration.
I do not exclude the possibility that there may be particular reason for the court to refuse its assistance to the claimant, applying the kind of exercise which Gloster LJ applied in this case, just as there may be a particular reason for the court to refuse to assist an owner to enforce his title to property, but such cases are likely to be rare. (At para 110 I gave the example of a drug trafficker.) In Tappenden v Randall (1801) 2 Bos & Pul 467, 471, 126 ER 1388, 1390, a case of a successful claim for the repayment of money paid for an unenforceable consideration which failed, Heath J said obiter that there might be cases where the contract may be of a nature too grossly immoral for the court to enter into any discussion of it: as where one man has paid money by way of hire to another to murder a third person.
The case was mentioned by the Law Commission (LCCP 189, para 4.53), but there is a dearth of later case law on the point.
This is hardly surprising because a person who takes out a contract on the life of a third person is not likely to advertise his guilt by suing.
But as a matter of legal analysis it is sufficient for present purposes to identify the framework within which such an issue may be decided.
No particular reason has been advanced in this case to justify Mr Mirzas retention of the monies beyond the fact that it was paid to him for the unlawful purpose of placing an insider bet.
In support of his argument that this purpose was sufficient to disentitle Mr Patel from obtaining the return of his money, Mr Collings relied on cases such as Parkinson v College of Ambulance Ltd [1925] 2 KB 1.
In that case the plaintiff made a donation to a charity to secure a knighthood.
When the honour failed to materialise he sued for the return of his money.
The claim was rejected.
Bribes of all kinds are odious and corrupting, but it does not follow that it is in the public interest to prevent their repayment.
There are two sides to the equation.
If today it transpired that a bribe had been paid to a political party, a charity or a holder of public office, it might be regarded it as more repugnant to the public interest that the recipient should keep it than that it should be returned.
We are not directly concerned with such a case but I refer to it because of the reliance placed on that line of authorities.
Since criticism was made of the Court of Appeals decision in Mohamed v Alaga and Co, I would affirm its correctness and reject the view that it should somehow be confined to its own peculiar facts.
With hindsight, it is perhaps unfortunate that this court did not have the opportunity of considering a claim by Miss Hounga for a quantum meruit.
Summary and disposal
The essential rationale of the illegality doctrine is that it would be contrary to the public interest to enforce a claim if to do so would be harmful to the integrity of the legal system (or, possibly, certain aspects of public morality, the boundaries of which have never been made entirely clear and which do not arise for consideration in this case).
In assessing whether the public interest would be harmed in that way, it is necessary a) to consider the underlying purpose of the prohibition which has been transgressed and whether that purpose will be enhanced by denial of the claim, b) to consider any other relevant public policy on which the denial of the claim may have an impact and c) to consider whether denial of the claim would be a proportionate response to the illegality, bearing in mind that punishment is a matter for the criminal courts.
Within that framework, various factors may be relevant, but it would be a mistake to suggest that the court is free to decide a case in an undisciplined way.
The public interest is best served by a principled and transparent assessment of the considerations identified, rather by than the application of a formal approach capable of producing results which may appear arbitrary, unjust or disproportionate.
A claimant, such as Mr Patel, who satisfies the ordinary requirements of a claim for unjust enrichment, should not be debarred from enforcing his claim by reason only of the fact that the money which he seeks to recover was paid for an unlawful purpose.
There may be rare cases where for some particular reason the enforcement of such a claim might be regarded as undermining the integrity of the justice system, but there are no such circumstances in this case.
I would dismiss the appeal.
LORD KERR: (agrees with Lord Toulson)
For the reasons given by Lord Toulson, with which I completely agree, I consider that this appeal should be dismissed.
The approach commended by Lord Toulson does not involve engaging with an open and unsettled range of factors Lord Mance at para 192 of his judgment.
On the contrary, as I see it, Lord Toulsons judgment outlines a structured approach to a hitherto intractable problem.
It is an approach, moreover, which, if properly applied, will promote, rather than detract from, consistency in the law.
And it has the added advantage of avoiding the need to devise piecemeal and contrived exceptions to previous formulations of the illegality rule.
Central to Lord Toulsons analysis is the trio of considerations which he identified in para 101 of his judgment.
The first of these involves an examination of the underlying purpose of the prohibition which has been transgressed.
By this, I understand Lord Toulson to mean the reasons that a claimants conduct should operate to bar him or her from a remedy which would otherwise be available.
That such reasons should be subject to scrutiny is surely unexceptionable.
Whether in order to preserve the integrity of the legal system (per McLachlin J in Hall v Hebert [1993] 2 SCR 159 at 169) or to allow a proper understanding of the true nature of the public policy imperative for recognising a defence of illegality, the purpose of the denial of a remedy to which the claimant would otherwise be entitled should be clearly understood.
As it happens, McLachlin J disagreed with Cory Js suggestion that the doctrine of ex turpi causa non oritur actio should be replaced with a power vested in the courts to reject claims on considerations of public policy p 168.
But what is the preservation of the integrity of the legal system, if not a public policy consideration? Moreover, the underpinning of the preservation of that integrity (which McLachlin J said was that a person in a civil suit should not be permitted to profit from illegal or wrongful conduct or to benefit from an evasion or rebate of a penalty prescribed by the criminal law) is par excellence a public policy consideration.
And McLachlin J seemed to acknowledge as much when she said (at p 169) that the principle could be described by an old fashioned Latin name or by the currently fashionable concept of public policy.
It is doubtful that a public policy consideration in the context of the defence of illegality could now be properly described as a currently fashionable concept.
Indeed, in a number of cases that I will refer to briefly below, the maxim ex turpi causa has been recognised in this country as an expression of policy, rather than a principle.
And in Canada it appears to be accepted that the weighing of public policies is the proper approach to take in order to determine whether a defence of illegality should be allowed to prevail.
In Still v Minister of National Revenue (1997) 154 DLR (4th) 229 (which is discussed by Lord Toulson in paras 58 et seq of his judgment) the Federal Court of Appeal considered that the doctrine of illegality now rests on the understanding that it would be contrary to public policy to allow a person to maintain an action on a contract prohibited by statute (emphasis supplied).
On that basis, Robertson JA, who delivered the judgment of the court, said that it was necessary to identify the policy considerations which outweighed the applicants right to a remedy.
Although this was said in relation to competing policy goals in two items of legislation, there is no reason not to adopt the same approach in evaluating rival policy considerations in the non statutory context.
To take this case as an example, why should Mr Mirzas wrongful retention of Mr Patels money not be weighed against the undoubted illegality on the part of Mr Patel in entering an agreement to wrongly benefit from Mr Mirzas claimed ability to obtain access to insider information? If one concentrates on the illegal nature of the contract to the exclusion of other considerations, an incongruous result in legal and moral terms may be produced.
This can be avoided by taking into account and giving due weight to the second and third of Lord Toulsons considerations viz countervailing public policies which would be wrongly discounted by denial of the claim and the proportionality of refusing to acknowledge its legitimacy.
It is, of course, possible to reach the same outcome that a weighing of the competing policy considerations produces by treating this case as one of unjust enrichment which warranted returning the parties to the position that they occupied before the transaction.
This is on the basis that the court is not required to give effect to the illegal contract in order to find that Mr Mirza should not be allowed to retain Mr Patels money.
It would simply return the parties to the status quo ante where they should always have been.
Lord Sumption at para 268.
That seems to me, however, to be a much more adventitious and less satisfactory route to the proper disposal of the case than that represented by a rounded assessment of the various public policy considerations at stake.
Moreover, if the ex turpi causa axiom is itself no more than an expression of policy, the taking into account of countervailing policy considerations, in order to decide whether to give effect to it in a particular instance, is the only logical way to proceed.
That it is, in truth, a policy based rule has been clearly recognised.
In Gray v Thames Trains Ltd [2009] UKHL 33; [2009] AC 1339, para 30, Lord Hoffmann said that the maxim expressed, not so much a principle as a policy and that it did not have a single basis of justification but was rather based on a group of reasons which vary in different situations.
And in Stone and Rolls Ltd v Moore Stephens [2009] UKHL 39; [2009] AC 1391, para 25 Lord Phillips expressly endorsed what Lord Hoffmann had said about the public policy nature of ex turpi causa, observing that it was necessary to consider the policy underlying it, in order to decide whether the defence of illegality was bound to defeat a claim.
Finally, in Les Laboratoires Servier v Apotex Inc [2012] EWCA Civ 593; [2013] Bus LR 80, after referring (in para 66) to the Law Commissions recommendation in its 2010 Report (Law Com 320) to the effect that the illegality offence should be allowed where its application could be firmly justified by one or more of the rationales underlying it existence, Etherton LJ said, at para 73: It is clear, then, that the illegality defence is not aimed at achieving a just result between the parties.
On the other hand, the court is able to take into account a wide range of considerations in order to ensure that the defence only applies where it is a just and proportionate response to the illegality involved in the light of the policy considerations underlying it.
Lord Sumption has said in para 262(iii) of his judgment in this case that this court in Les Laboratoires Servier [2015] AC 430 had overruled the view expressed by the Court of Appeal that an illegal act might nevertheless found a cause of action if it was not as wicked as all that.
That may be so, but I do not understand the judgment of this court in Les Laboratoires Servier to have expressly rejected the notion that whether the defence should be available depends on an examination of the policy considerations which underlie it in any particular instance and those which militate against it.
At para 61 of his judgment in Les Laboratoires Servier Lord Toulson quoted with approval the statement of Lord Wilson in Hounga v Allen [2014] 1 WLR 2889 at para 42 to the effect that, in considering whether to allow a defence of illegality, 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? The decision in Hounga was not mentioned in the judgment of the majority in Les Laboratoires Servier.
Lord Sumption did refer to Hounga, however, in the later case of Bilta (UK) Ltd v Nazir (No 2) [2016] AC 1.
He sought to explain the decision in Hounga on the basis that Ms Hounga did not rely, and did not need to rely, on the circumstances in which she had entered the United Kingdom (she had entered illegally).
This is correct but she did need to rely on the fact of her employment in advancing a claim for unlawful discrimination in her dismissal from that employment.
Since the employment was not legally sanctioned, she was therefore confronted with the illegality defence and, indeed, the Court of Appeal had held that the illegality of the contract of employment formed a material part of Ms Houngas complaint and that to uphold it would be to condone the illegality.
It was held in Hounga that the appellants claim was not inextricably linked to her illegal conduct.
On that account her action could not be defeated on the basis that her contract of employment was illegal.
But Lord Wilsons discussion of the manner in which competing public policy considerations should be viewed, in calculating whether a defence of illegality should be permitted to defeat an otherwise viable claim, unquestionably forms part of the ratio of the decision.
The way is now open for this court to make its choice between, on the one hand, cleaving to the rule based approach exemplified by Tinsley v Milligan [1994] 1 AC 340 and, arguably, the decision of the majority in Les Laboratoires Servier, and, on the other, a more flexible approach, taking into account the policy considerations that are said to favour recognising the defence of illegality, those which militate against such recognition and the proportionality of allowing the defence to prevail.
In Bilta (UK) Ltd Lord Neuberger said that the proper approach to the defence of illegality needed to be addressed by this court as soon as appropriately possible para 15.
This case unmistakably presents us with the opportunity to address the question and for the reasons given by Lord Toulson, I believe that the approach which he commends is plainly to be preferred.
A rule based approach to the question of the effect of illegality on the availability of a remedy has failed to deliver on what some have claimed to be its principal virtues viz ease of application and predictability of outcome.
This case exemplifies the point.
There was a sharp but perfectly respectable difference of view in the judgments of the Court of Appeal as to whether the necessary ingredient of reliance on the illegal aspect of the agreement between Mr Mirza and Mr Patel was present.
This is hardly surprising.
In many situations in which transactions between parties are tainted by some form of illegality, it is not always easy to decide what it is that needs to be relied on when an unravelling of those transactions or some means of dealing with their failure is sought.
On the question of unravelling or unpicking an agreement, I do not consider that Tinsley is an example of the court conducting an unravelling exercise or of its returning the parties to the status quo ante.
This much is clear from the speech of Lord Browne Wilkinson at 376F of the report: Miss Milligan established a resulting trust by showing that she had contributed to the purchase price of the house and that there was common understanding between her and Miss Tinsley that they owned the house equally.
She had no need to allege or prove why the house was conveyed into the name of Miss Tinsley alone, since that fact was irrelevant to her claim: it was enough to show that the house was in fact vested in Miss Tinsley alone.
The illegality only emerged at all because Miss Tinsley sought to raise it.
Having proved these facts, Miss Milligan had raised a presumption of resulting trust.
There was no evidence to rebut that presumption.
Therefore, Miss Milligan should succeed. (original emphasis)
In effect, in Tinsley the majority gave effect to rather than unravelled the illegal agreement made between the parties.
The agreement was that the ownership of the house should be shared equally between Miss Milligan and Miss Tinsley, and that they should represent to the Department of Social Security that it was owned solely by Miss Tinsley.
It was because Miss Milligan did not need to rely on the illegal component of the agreement (that they make the false representation to the department) that she was able to succeed.
This was not, therefore, a case of unravelling the agreement or restoring the parties to the status quo ante.
To the contrary, it was an instance of segregating the illegal part of the agreement from that which, it was considered, could be enforced.
Reference to or reliance on the objectionable part could thereby be avoided.
To claim that such a contrivance produces a predictable, much less a certain, outcome, for such arrangements is, I believe, extremely far fetched.
Even if the claim to predictability of outcome for the reliance test could be made good, however, it is questionable whether particular weight should be given to this consideration in circumstances where a claimant and defendant have been parties to an agreement which is plainly illegal.
Certainty or predictability of outcome may be a laudable aim for those who seek the laws resolution of genuine, honest disputes.
It is not a premium to which those engaged in disreputable conduct can claim automatic entitlement.
For the reasons I have given, however, I do not believe that outcomes are easier to forecast on a rule based approach.
Quite apart from the difficulty in predicting whether a claimant has to rely on the illegal dimension of an agreement in order to advance his claim, there is something unattractive and contrived about the means by which attempts have to be made in order to avoid the spectre of reliance.
Professor Burrows in his Restatement of the English Law of Contract (Oxford University Press) outlined what he described as his single reliance master rule at p 224 in this way: If the formation, purpose or performance of a contract involves conduct that is illegal (such as a crime) or contrary to public policy (such as a restraint of trade), a party cannot enforce the contract if it has to rely on that conduct to establish its claim.
In this case the formation of the contract, its purpose and its performance all involved illegality.
Under the single reliance master rule, it is said that all of this can be ignored because it is not necessary to rely on the terms of the agreement, other than to demonstrate that there was no legal basis for the payment of the money to Mr Mirza.
So, the looming presence of illegality does not require to be confronted at all.
The issue is side stepped and avoided.
This cannot be the correct way in which to deal with the impact of illegality in fact, under this approach, illegality is not addressed at all.
It is surely better and more principled to examine why illegality should or should not operate to deny Mr Patel a remedy.
Returning the parties to the status quo ante likewise side steps the issue of illegality.
This approach proceeds on the basis that the transaction should simply never have taken place or that the parties should be returned to the condition that they ought always to have occupied.
The contract is unpicked because it should not have been made.
Mr Mirza is deprived of the money because it is unjust enrichment.
No examination of the effect that the illegality has is warranted; recognition that there has been unjust enrichment is all that is required.
This is objectionable not only because it effectively ignores the illegality that surrounded the making of the contract but also because it produces an inconsistent result with that which is founded on a breach of contract claim.
This leads to what Professor Peter Birks, in an article entitled, Recovering Value Transferred under an Illegal Contract (2000) 1 TIL 155, describes as self stultification.
Entitlement to restitution of money paid on foot of an illegal contract on the basis of unjust enrichment makes a nonsense, he says, of refusal to enforce the contract and, at p 160, it is important that the law as stated in one area should not make nonsense of the law as stated in another.
Self stultification can be avoided by adoption of the approach suggested by Lord Toulson.
His mode of analysis requires examination of the justification for the defence of illegality in whatever context it arises, not a decision to circumvent the defence because of the type of remedy that is claimed.
That appears to me to be a much more principled approach than one which avoids having to engage with the merits of the defence at all.
Not having to engage with the merits on the basis that one does not have to rely on the illegality is a matter of fortuity.
Because of that incidental circumstance an avenue to an equivalent outcome to that which would result from enforcement of the contract opens up.
An examination of the impact of the illegality becomes irrelevant.
That this should be a matter of happenstance is deeply unsatisfactory.
Lord Toulsons solution to this question also permits readier access to investigation of the traditional justifications for the ex turpi causa maxim preservation of the integrity of the legal system and preventing profit from wrongdoing.
If, on examination of the particular circumstances of the case, these can be shown to weigh heavily in the balance, it is more likely that the defence will be upheld.
Carving out an exception to the application of the defence on the basis that it does not affect a claim for unjust enrichment where the illegality of the claimant does not require to be relied on does nothing to directly protect or uphold these values.
For these reasons and those given by Lord Toulson, I would dismiss the appeal.
LORD NEUBERGER:
The present appeal concerns a claim for the return of money paid by the claimant to the defendant pursuant to a contract to carry out an illegal activity, and the illegal activity is not in the event proceeded with owing to matters beyond the control of either party.
The specific issue on this appeal
In such a case, the general rule should in my view be that the claimant is entitled to the return of the money which he has paid.
In the first place, such a rule (the Rule) is consistent with the law as laid down in the 18th century by two eminent judges, one of whom is regarded as the founder of many aspects of the common law, including illegality; in addition it has support from some more modern cases.
Secondly, the Rule appears to me to accord with policy, which is particularly important when illegality arises in the context of a civil claim.
Thirdly, the Rule renders the outcome in cases in one area of a very difficult topic, that of contracts involving illegality, and the maxim ex turpi causa non oritur actio (ie that no claim can be based on an illegal or immoral arrangement), relatively clear and certain.
I turn first to the authorities.
In Smith v Bromley (1760) 2 Doug KB 696n, the Court of Kings Bench permitted a plaintiff to recover money she had paid to someone who had agreed to procure her brothers discharge from bankruptcy, which was an illegal consideration.
Lord Mansfield CJ said at p 698 in the course of his judgment that, although the payment had been made for an illegal purpose: Upon the whole, I am persuaded it is necessary, for the better support and maintenance of the law, to allow this action; for no man will venture to take, if he knows he is liable to refund.
Lord Mansfield subsequently followed this approach in Walker v Chapman (1773) Lofft 342, where a bribe to the defendant to secure a job for the plaintiff in Government service was held recoverable, in circumstances where the job was not in fact obtained.
In Neville v Wilkinson (1782) 1 Bro CC 543, 547 Lord Thurlow LC approved this approach, and declared his opinion that: [I]n all cases where money was paid for an unlawful purpose, the party, though particeps criminis, might recover at law; and that the reason was, that if courts of justice mean to prevent the perpetration of crimes, it must be not by allowing a man who has got possession to remain in possession, but by putting the parties back to the state in which they were before.
In the following century, the same approach was adopted in Taylor v Bowers (1876) 1 QBD 291 (which involved transfer of goods rather than of cash).
Cockburn CJ said at first instance at p 295 that it was well established that where money has been paid, or goods delivered, under an unlawful agreement, but there has been no further performance of it, then the party paying the money or delivering the goods may repudiate the transaction, and recover back his money or goods.
The Court of Appeal agreed, and at p 300 Mellish LJ, with whom Baggallay JA and Grove J agreed, said this: To hold that the plaintiff is enabled to recover does not carry out the illegal transaction, but the effect is to put everybody in the same situation as they were before the illegal transaction was determined upon, and before the parties took any steps to carry it out .
It is true that the actual decision in that case can be justified on the ground that property in the goods concerned had never passed (which was the basis of James LJs judgment), but it seems to me that the reasoning of Mellish LJ, like that of Cockburn CJ, reflects the proposition found in the 18th century judgments I have quoted.
It is also fair to say that Fry LJ doubted the correctness of Mellish LJs dictum in Kearley v Thomson (1890) 24 QBD 742, 746, and that in some subsequent cases the principle has not been applied.
An obvious example is Parkinson v College of Ambulance [1925] 2 KB 1, where a donor was held to be disentitled from recovering a gift to a charity obtained by the charitys illegal (and dishonest) promise to obtain an honour for the donor.
I consider that that case was wrongly decided.
It seems to me that the judgment in that case got close to representing what Bingham LJ described as the court on the first indication of unlawfulness affecting any aspect of a transaction, draw[ing] up its skirts and refus[ing] all assistance to the plaintiff, no matter how serious his loss nor how disproportionate his loss to the unlawfulness of his conduct (which he considered to be unacceptable) Saunders v Edwards [1987] 1 WLR 1116, 1134.
I agree with the view that the decision in Parkinson represented a new and regrettable extension of the scope of the maxim of ex turpi causa (to quote from Professor Grodeckis article (1955) 71 LQR 254, 263), and I consider that it should be overruled.
The Rule also derives some support from the Court of Appeals decision in Tribe v Tribe [1996] Ch 107, where the plaintiff was held to be entitled to recover shares which he had transferred to his son in order deceptively to improve his negotiating position in relation to an anticipated claim by his landlord, which in the event did not materialise.
The question for the Court of Appeal was whether, following the controversial decision of the House of Lords in Tinsley v Milligan [1994] 1 AC 340 (the details of which are set out in paras 17 19 above), the father could rebut the presumption of advancement by giving evidence of his illegal purpose, to quote from Millett LJs judgment at pp 129H 130A.
It was held that he could, on the basis that [t]he transferor can lead evidence of the illegal purpose whenever it is necessary for him to do so provided that he has withdrawn from the transaction before the illegal purpose has been wholly or partly carried into effect per Millett LJ at pp 134G H.
There is some support in the cases for the notion that different considerations should apply depending whether the claimants claim for return of money or property paid pursuant to an unperformed illegal contract is based on a common law claim or a claim in equity (compare the Privy Council decisions in Singh v Ali [1960] AC 167 and Chettiar v Chettiar [1962] AC 294).
I do not consider that such a distinction is appropriate (and it may be that in that connection I differ from Millett LJ in Tribe at p 129G although see at p 130E).
I agree with Lord Browne Wilkinsons observation in Tinsley at p 371, where he said that [i]f the law is that a party is entitled to enforce a property right acquired under an illegal transaction, the same rule ought to apply to any property right so acquired, whether such right is legal or equitable.
That proposition is supported, as I see it, by the second reason supporting the Rule, namely policy.
As Millett LJ said in Tribe at p 133F, the justification for this rule [which precludes the court from lending its assistance to a man who founds his cause of action on an illegal or immoral act] is not a principle of justice but a principle of policy, citing Lord Mansfield in Holman v Johnson (1775) 1 Cowp 341, 343.
That approach is also supported by Lord Hoffmann in Gray v Thames Trains Ltd [2009] AC 1339, para 30, where he went on to say that the policy is not based upon a single justification but on a group of reasons, which vary in different situations.
Similarly, in Bakewell Management Ltd v Brandwood [2004] 2 AC 519, para 60, Lord Walker said that the maxim ex turpi causa must be applied as an instrument of public policy, and not in circumstances where it does not serve any public interest.
More broadly, it appears to me that policy supports the Rule, in part for the simple reasons given in the passages cited in para 147 above.
Further, as Lord Mance points out, there is obvious attraction in the notion that, if all transfers made pursuant to an unexecuted illegal contract are re transferred, then the parties are back in the position that they were, ie as if there had been no illegal contract, which again would seem to comply with policy.
It also appears to me that the Rule is consistent with the approach adopted in McLachlin Js analysis in the Canadian Supreme Court case Hall v Hebert [1993] 2 SCR 159, 176.
She explained that the basic justification for refusing relief to a plaintiff who relied on an illegal contract was that to allow recovery would be to allow recovery for what is illegal.
It would put the courts in the position of saying that the same conduct is both legal, in the sense of being capable of rectification by the court, and illegal.
It would, in short, introduce an inconsistency in the law.
Later at pp 179 180, she suggested that the courts power to refuse relief in a claim where illegality is involved is a limited one and that the use of the power is justified where allowing the plaintiffs claim would introduce inconsistency into the fabric of the law, either by permitting the plaintiff to profit from an illegal or wrongful act, or to evade a penalty prescribed by criminal law.
This approach (which is more fully analysed by Lord Mance) finds an echo in Lord Rodgers observation in Gray, para 82, that the civil court should cleave to the same policy as the criminal court.
For some time, it was assumed that the Rule could be invoked not merely when the anticipated illegal purpose not been proceeded with at all, but with the super added requirement that it had not done so because of the repentance of the plaintiff who was seeking to get his money back.
Like Millett LJ in Tribe at p 135D E, I would reject that notion.
As he said, [j]ustice is not a reward for merit, and in any event the notion that repentance is needed could lead to bizarre results.
Further, a claimants repentance may be born of, or combined with, self interest, in which case, if repentance is the essential factor, the court would face a real difficulty.
In my opinion, the notion that the application of a rule should depend on whether or not the claimant has repented typifies the inappropriately moralistic approach of some courts when they have to deal with claims based in some way on illegality, which was rightly criticised by Bingham LJ in Saunders [1987] 1 WLR 1116, 1134.
Rather, the courts should adopt a more objective and analytical approach like that of McLachlin J in Hall.
Quite apart from principle, it appears to me that the Rule would establish, or maintain, a degree of clarity and certainty in relation to one aspect of the law on the vexed topic of the effect of illegality on contractual claims.
One thing which is clear from reading only some of the large number of judgments on the law on that topic over the past 350 years is the inconsistency of reasoning and outcome in different cases.
Those responsible for making and developing the law in any area must strive to achieve as much clarity and as much certainty as are consistent with principle and practicality.
There is, I acknowledge, some attraction in the point that the need for certainty in this area is diminished by the fact that parties to an arrangement which is illegal have less cause for complaint if the law is uncertain.
However, criminals are entitled to certainty in the law just as much as anyone else.
In any event, third parties are often affected by the enforceability of rights acquired or lost under contracts, and innocent third parties, it could be said with force, are in a particularly strong position to expect certainty and clarity from the law.
Quite apart from this, there is a general public interest in certainty and clarity in all areas of law, not merely because it is a fundamental aspect of the rule of law, but also because the less clear and certain the law on any particular topic, the more demands there are on the services of the courts.
That leaves open two issues.
First, the issue of what constitutes an illegal contract for the purpose of the Rule.
In my view, as a general proposition, the rule would apply to any contract where the illegality would result in the court (if it could otherwise do so) not being able to order specific performance of the contract or damages for its breach.
It would thus normally apply to any contract whose performance would inevitably involve the commission of a crime (i) because the whole purpose of the contract was the commission of a crime (eg a contract killing), or (ii) because it was a contract whose essential ingredient was the commission of a crime (the present case is an example), or (iii) because the contract could not be performed without the commission of a crime.
In practice, of course, category (iii) would cover the other two categories, but setting out the three categories may help to illustrate the extent of the application of the rule.
As to category (iii), I have difficulties in seeing how a court could order specific performance of a contract which necessarily involved one or other of the parties committing a crime (even a minor crime).
Requiring the contract to be performed would involve the court ordering a party to act illegally: that cannot be a course open to a court.
For the same reason I have difficulties in seeing how a court could normally award damages for breach of such a contract.
Conceptually, damages are a substitute for non performance, and performance is not something the court can award; and it seems inconsistent with the courts function to penalise a defendant in damages for not doing something illegal or to compensate a claimant for not having a benefit which would have required either or both of the parties doing something illegal.
For the court to make an order for specific performance or damages in such cases would seem to infringe the principle of consistency discussed in the judgment of McLachlin J in Hall.
The second issue is foreshadowed by the fact that I have described the Rule as being generally applicable.
That is because the need for certainty must, particularly given the importance of policy, yield to the fact that, in this difficult and potentially multi faceted area, there will inevitably be exceptions.
Experience and common sense both suggest that any attempt to lay down a clear and inflexible rule on even one aspect of the topic of illegality in the context of contractual claims will lead to difficulties. (Both the majority and the minority reasoning in Tinsley are a good example of this).
Indeed, the very fact that the approach of the courts in cases on this topic is based on policy suggests that strict immutable rules are inappropriate.
Nonetheless, that does not negate any attempt to identify principles such as that suggested by McLachlin J and general rules such as that described in the cases mentioned in paras 147 and 148 above.
The fact that the approach of the law to contracts with an illegal aspect is based on policy does not discharge judges from the normal duty of ensuring that the law on any topic is as clear and certain as it can be.
By way of example, I would mention two possible exceptions.
First, where one of the parties, especially the defendant, is in a class which is intended to be protected by the criminal legislation involved, it may well be inappropriate to invoke the Rule.
Secondly, there could well be no recovery (or only partial recovery) by a plaintiff where the defendant was unaware of the facts which gave rise to the illegality especially if he had received the money and had altered his position so that it might be oppressive to expect him to repay it.
There will no doubt be other exceptions, but I do not think that that undermines the usefulness of having the Rule as the prima facie or presumptive approach. (I discuss in paras 172 175 below with the test for determining whether it is appropriate to apply the Rule in any particular case).
In the present case, Mr Patel paid 620,000 to Mr Mirza pursuant to a contract, under which Mr Mirza was to use the money to trade in RBS shares with the benefit of inside information for their common benefit.
That was a contract whose agreed fundamental purpose was illegal.
In fact, the anticipated inside information was not forthcoming and the contract effectively lapsed.
I can see no good reason on these simple facts for not applying the Rule and accordingly I consider that Mr Patel is entitled to the return of the 620,000.
Venturing further
The majority, and indeed Lord Mance and Lord Sumption, would go wider in their judgments on this appeal, by laying down some wider and more general principles or rules relating to the effect of illegality on contracts.
There is considerable attraction in doing so, not least because the law is in a state of uncertainty.
The reasoning of the majority in the most recent decision of the House of Lords, Tinsley, is generally thought to be unsatisfactory: for a convincing analysis see the judgments in the decision of the High Court of Australia in Nelson v Nelson (1995) 184 CLR 538 (discussed more fully in paras 50 54 above).
And the result arrived at by the minority in Tinsley is plainly unsatisfactory.
I fear that the different approaches adopted by members of this court in the recent cases of Hounga v Allen [2014] 1 WLR 2889, Les Laboratoires Servier v Apotex Inc [2015] AC 430 and Bilta (UK) Ltd v Nazir (No 2) [2016] AC 1 have left the law on the topic in some disarray.
As I said in Bilta, para 15, 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.
Nonetheless, there are arguments for not looking more widely at the issue of illegality in the contractual context.
Thus, in all three recent Supreme Court cases (as in the present one), while there are some fairly sharp differences of opinion as to the proper approach, there is no real dispute as to the outcome.
More broadly, the common law traditionally develops on a case by case basis, and there are self evident dangers for a court to paint on an unnecessarily broad canvas, particularly bearing in mind that it is proceeding by reference to the facts of one particular case.
And that can be said to be particularly true in the area of illegal contracts, where, as already mentioned, experience has shown that it is a topic fraught with difficulties, as is evidenced by the fact that the reasoning and outcomes in a number of cases concerning contracts affected by illegality over the past 300 years are hard to reconcile.
Reading those cases also shows that it would be impossible to envisage, and therefore to cater for, every type of problem which might arise in this field.
Nonetheless, it seems to me right to venture further in this case, essentially for the reasons summarised in para 164 above.
The first general point I should make is that, in my view, even where the contemplated illegal activity has been performed in part or in whole, it would be right to apply the Rule in appropriate cases.
Thus, in the case of an illegal contract where money is paid by the claimant to the defendant, and the contract is then partly or wholly performed by the defendant paying a lesser sum to the claimant, I do not see why, at least in the absence of good reasons to the contrary, the court should not order that the claimant should recover the money that he paid the defendant, albeit reduced by the lesser sum which the claimant subsequently received from the defendant.
Similarly, where the contract is wholly performed.
In effect, the reasons supporting the application of the Rule in cases where the illegal activity has not occurred, apply for the same reasons to contracts where the contemplated illegal activity has been wholly or partly performed.
And there is the added reason of consistency with a case where the contract has not been performed.
Thus, in my view, if the defendant in this case had only been able to purchase just a few shares on inside information and had accounted to the claimant for the proceeds of sale of those shares in the sum of, say 10,000, the contract would have been partly performed, but I consider that the claimant could have successfully sued to recover the 620,000 he had paid, less the 10,000 which he had received.
There are, I think, three arguments against such a conclusion.
The first is that there are a number of judgments, including those in and Taylor v Bowers 1 QBD 291, Kearley v Thomson 24 QBD 742 and Tribe v Tribe [1996] Ch 107, where it has been expressly stated that the Rule only applies where the illegal purpose has [not] been wholly or partly performed to quote from Millett LJ in Tribe at p 124E.
However, perhaps particularly once one strips away the notion that repentance is irrelevant, I can see no good reason for not extending the rule to partly or even wholly performed contracts where restitutio in integrum can be achieved in practical terms and would be consistent with policy and proportionality.
In the present case, for example, it would seem to be penal on the claimant that he could be deprived of 610,000 (and by the same token it would seem absurdly gratuitous that the defendant could benefit to the tune of 610,000) simply because the contract had been performed to a small extent.
Secondly, it may be argued that, once the contract has been partly performed, the basis for restitutio in integrum has gone.
But that argument is only right if the basis of the Rule is total failure of consideration.
In my view, that is not necessarily the correct analysis (unless the illegal consideration for which the money was paid is treated in law as no consideration, because it is illegal).
Indeed, in the end, the correct analysis is not the centrally important issue, given that the question as to how the court deals with illegal contracts is ultimately based on policy.
The ultimate function of the courts in common law and equity is to formulate and develop rules of a clear and practical nature.
Now that the judiciary (rightly) pay more attention than we did to legal books and articles, we judges can look to legal academics not only to identify what they think are judicial inconsistencies and errors, but also to develop and modify their analyses of legal principles when we consider it necessary to change, develop or clarify the law.
Thirdly, it may be said that application of the Rule would result in the court sometimes getting precious close to enforcing an illegal contract a course which the court most certainly cannot take, as already mentioned.
I accept that application of the Rule would sometimes involve the court making an order whose effect in practice is similar to performance of the illegal contract.
But there is nothing in that point.
If a particular outcome is correct, then the mere fact that the same outcome could have been arrived at on a wrong basis does not make it the wrong outcome.
Indeed, it is worth noting that the outcome in Tribe was precisely what it would have been if the contract in question had been enforced.
The father had transferred the shares on the basis that it would help him avoid a threatened claim and that they would be transferred back when the claim was no longer threatened; he sought an order for the retransfer after the threat had gone away, and application of the rule resulted in that order.
That, of course, leaves open what would constitute an appropriate case for the application of the Rule and good reasons to the contrary for these purposes.
The exceptions which I have referred to in para 162 above would be examples of where it might not be appropriate to invoke the Rule.
However, it seems to me to be clear that there could be many other circumstances where application of the Rule would not be appropriate in circumstances where the illegal activity has been wholly or partly put into effect.
In that connection, some assistance can be obtained from the guidance given by McLachlin J. Beyond that, it may be that some or all of the factors identified by Professor Burrows in the passage quoted by Lord Toulson in para 93 above could be relevant depending on the facts and issues in any particular case.
However, I am not convinced that it is helpful to list all the potentially relevant factors and say that it is a matter for the court in each case to decide which of those factors apply in that case and what weight to give them.
Once a judge is required to take into account a significant number of relevant factors, and the question of how much weight to give each of them is a matter for the judge, the difference between judgment and discretion is, I think, in practice pretty slight.
I have come to the conclusion that the approach suggested by Lord Toulson in para 101 above provides as reliable and helpful guidance as it is possible to give in this difficult field.
When faced with a claim based on a contract which involves illegal activity (whether or not the illegal activity has been wholly, partly or not at all undertaken), the court should, when deciding how to take into account the impact of the illegality on the claim, bear in mind the need for integrity and consistency in the justice system, and in particular (a) the policy behind the illegality, (b) any other public policy issues, and (c) the need for proportionality.
I must admit that I was initially not attracted by this approach because it seemed close to giving a discretion to judges when it comes to deciding how to deal with a claim based on a contract with an illegal element.
However, on further reflection, it appears to me that, unlike the multi factorial approach proposed by Professor Burrows, the structured approach proposed by Lord Toulson is not akin in practice to a discretion, and, in any event, it is the best guidance that can sensibly be offered at the moment.
Experience shows that it is simply not possible to identify a more helpful or rigorous test.
When considering whether it is possible to give more specific or firm guidance, I have considered some examples, which ultimately have helped to persuade me that greater clarity, strictness or specificity is simply not possible, at any rate at this stage, and they have served to conform the aptness of the approach set out in para 101 above.
A simple example is a case where the consideration for which the claimant paid or owed money was inherently illegal, rather than happening to involve an illegal act in order to be achieved.
In such cases, it seems to me that considerations of certainty and policy indicate that the claimant should generally be able to refuse to pay any money which is due under the contract and, indeed, to recover the money he had paid.
Thus, if the claimant paid a sum to the defendant to commit a crime, such as a murder or a robbery, it seems to me that the claimant should normally be able to recover the sum, irrespective of whether the defendant had committed, or even attempted to commit, the crime.
If the defendant had not attempted the crime, the Rule would generally apply.
If he had actually succeeded in carrying out the crime, he should not be better off than if he had not done so.
I suppose one could justify that conclusion on the ground that the law should not regard an inherently criminal act as effective consideration.
That example might appear to suggest that more specific guidance could be given.
However, even in relation to cases of the type described in para 176, there could be exceptions such as those mentioned in para 162 above.
And, bearing in mind the enormous number of different crimes and different factual circumstances which could arise, it would be little short of foolhardy to imagine that there could not be other cases of this type where it would be inappropriate to apply the Rule.
Further, different considerations would often, I suspect very often, apply where the contract was not inherently illegal, but necessarily involved an illegal action.
An extreme case might be where an employer employed a builder to carry out construction work which they both knew would inevitably require the builder to park illegally say on a double red line.
As already explained in para 160 above, if the defendant refused to carry out the work, the contract could not be enforced prospectively by the employer, but he would be entitled to recover any money he had paid.
However, if the builder carried out the work, the employer would not be able to avoid liability to pay in full: the fact that the defendant could not perform his obligations under the contract without committing a relatively technical and incidental crime would not deprive him of the right to payment in full for such performance.
However, greater problems and uncertainties could arise in other cases eg where the nature of the criminal activity was more serious and/or more central to the activity involved, where the illegal activity was expressly included in the contract, or where one of the parties did not know or intend that the activity in question to be carried out was illegal but the other did, or where the proceedings arose out of the fact that such a contract had only been partly performed.
Further, where a claimant has performed his part of a contract which was inherently lawful but was unlawful for some other reason, there is real room for debate in any particular case whether he should be entitled to claim payment on a quantum meruit basis, even though he cannot enforce his right to contractual payment compare Mohamed v Alaga & Co [2000] 1 WLR 1815 and Taylor v Bhail [1996] CLC 377.
While it would be possible to lay down a general rule as to whether or not a claimant could recover in such a case, it seems to me to be more satisfactory for the outcome to turn on the factors mentioned in para 174 above.
Similarly, it seems to me that the justification for the decision of the majority in Tinsley was, as Lord Toulson says, that it would have been disproportionate to have refused to enforce Miss Milligans equitable interest in the relevant property on the grounds of her illegal activity, and the policy behind the law making the activity in question illegal was not infringed by acceding to her claim.
It is also worth referring back to the two examples set out in para 162 above.
If the purpose of rendering an activity illegal is to protect a class of persons which includes only one of the parties to the contract, then, absent any other argument based on policy or proportionality, it would seem appropriate that that party should not be disadvantaged by the illegality, and/or should be entitled to rely on the fact that the activity is illegal, as against the other party.
And, if a claimant seeks recovery of money paid to a defendant under a contract which can only be performed illegally, and has not been performed, proportionality and policy may well justify the court refusing repayment if the defendant has spent the money and was unaware of the facts giving rise to the illegality at the time he spent it.
I would make three concluding points.
First, quite apart from being persuaded by the reasons which justify the approach I have summarised in para 174 above, I consider that the fact that it is consistent with judgments of the courts in Australia and Canada, as explained by Lord Toulson in paras 50 61 above is a good reason for adopting the approach.
When considering how to characterise, or whether to develop, any fundamental principle of the common law, it is normally sensible for a judge to consider how the principle has been approached in other common law jurisdictions, and it is desirable, if not always achievable, that all common law jurisdictions adopt the same approach.
Secondly, I should briefly address the fact that the criminal law and the Proceeds of Crime Act 2002 (POCA) may inevitably have some impact on the rights and duties of parties who have entered into contracts with an illegal connection.
The involvement of the criminal law played a very important part in the judgment of McLachlin J in Hall v Hebert.
It seems to me to have two main components.
First, it is for the criminal law, not the civil law, to penalise a party or parties for entering into and/or performing a contract with an illegal component.
Secondly, in so far as the civil law is fashioned by judges in a particular case, they must ensure that it is not inconsistent with the criminal law.
So far as POCA is concerned, it enables the courts, through statutory powers, to do that which a common law judge cannot do, and which many might think was the best outcome in many of the more serious cases involving illegality, namely to ensure that the proceeds of crime are retained by neither party, but are paid over to the Government.
This is not the occasion to discuss the effect of POCA, save to say that I would take some persuading that the common law should be influenced by the fact that POCA is or is not being invoked in any particular case, although the civil courts should not make any order, or at least permit the enforcement of any order, if its effect would run counter to the provisions of POCA or to any step which was being contemplated under POCA by the relevant authorities.
Finally, I should say that, although my analysis may be slightly different from that of Lord Toulson, I do not think that there is any significant difference between us in practice.
I agree with his framework for arriving at an outcome, but I also consider that there is a prima facie outcome, namely restitution in integrum.
LORD MANCE:
That the law of illegality, particularly as it results from Tinsley v Milligan [1994] 1 AC 340, merits at the highest level the consideration now being given to it, I would be among the first to accept.
I indicated as much as a party to the unsatisfying decision which the Court of Appeal had to reach in Collier v Collier [2002] BPIR 1057: see in particular para 106.
Whether it is, however, appropriate to abandon basic principles going back nearly 250 years, resting on the sound appreciation of as a great a judge as Lord Mansfield CJ and approved and elucidated by the Supreme Court of Canada in an authoritatively reasoned judgment in 1993, is a different matter.
The basic problem, identified clearly and succinctly by Lord Mansfield in Holman v Johnson (1775) 1 Cowp 341, is that there are at least three potential interests when questions of illegality arise for consideration: those of two parties and the public interest.
It is, as he said, for reasons of public interest that an otherwise good cause of action may sometimes fail, where there has been illegality.
In the absence of any relevant statutory power, the court has no direct power to mediate between these three interests, by for example requiring the public interest to be satisfied by a payment to the public purse.
It does not even have the power, conferred by statute in New Zealand, to vary or validate an illegal contract in part or otherwise howsoever (New Zealand Illegal Contracts Act 1970, section 7).
The application of the principle stated by Lord Mansfield was expanded in scope after his day (notably by Lord Eldon in Muckleston v Brown (1801) 6 Ves 52 as described by Lord Browne Wilkinson in Tinsley v Milligan at p 372F.
But, more recently it has diminished, Tinsley v Milligan being itself actually an example of this, in so far as it confirmed both that legal title to property could pass under an illegal contract and that equitable title was capable of recognition.
The courts recognition of the equitable title was, however, made subject to the (problematic) pre condition that the claimant could avoid reliance on illegality by relying on a procedural presumption.
The court was able, in Tinsley v Milligan, to derive this presumption from the objectively demonstrable contribution made by Miss Milligan to the cost of acquiring the property.
At the same time the court was prepared to ignore the fact, perfectly well known to it, of the parties illegal intentions.
In common with Lord Toulson (paras 100 101), I consider that valuable insight into the appropriate approach to the significance of illegality under todays conditions is found in the judgment of McLachlin J (as she was) writing for the majority the Supreme Court of Canada in Hall v Hebert [1993] 2 SCR 159.
The case concerned a claim in tort by a passenger against the owner of a car, who lost the keys when they fell out of the ignition when the car stalled and who decided in these circumstances that his passenger (who he knew to have drunk 11 or 12 bottles of beer) should drive while he tried to push start the car.
Unsurprisingly, the manoeuvre led to the passenger losing control, the car turning over and the passenger being injured.
The Canadian Supreme Court upheld the passengers claim, subject to contributory negligence.
The majority in the Canadian Supreme Court rightly regarded the case as one of great importance.
A number of points emerge with great clarity from McLachlin Js judgment: i) First, rejecting Cory Js suggestion that a power to reject claims on considerations of public policy should replace the maxim ex turpi causa non oritur action, McLachlin J expressed her concern that public policy would provide no clear guidance as to when judges could exercise this draconian power and upon what grounds.
She went on: I fear that unless placed upon a firm doctrinal foundation and made subject to clear limits, this general power to invalidate actions on grounds of public policy might prove more problematic than has the troubled doctrine of ex turpi causa non oritur actio.
We would be trading one label for another without coming to grips with the fundamental problem. (p 169) ii) Second, she saw tort, not contract, as the real problem area in relation to illegality, expressing the view that: The use of the doctrine of ex turpi causa to prevent abuse and misuse of the judicial process is well established in contract law and insurance law, where it provokes little controversy.
The same cannot be said for tort. (p 171) iii) Third, after examining authorities where the maxim applied to prevent claimants from profiting or obtaining exemplary damages in circumstances of illegality, she identified its rationale in todays world, in terms which have equal relevance to contract and tort: The narrow principle illustrated by the foregoing examples of accepted application of the maxim of ex turpi causa non oritur actio in tort, is that a plaintiff will not be allowed to profit from his or her wrongdoing.
This explanation, while accurate as far as it goes, may not, however, explain fully why courts have rejected claims in these cases.
Indeed, it may have the undesirable effect of tempting judges to focus on the issue of whether the plaintiff is getting something out of the tort, thus carrying the maxim into the area of compensatory damages where its use has proved so controversial, and has defeated just claims for compensation.
A more satisfactory explanation for these cases, I would venture, is that to allow recovery in these cases would be to allow recovery for what is illegal.
It would put the courts in the position of saying that the same conduct is both legal, in the sense of being capable of rectification by the court, and illegal.
It would, in short, introduce an inconsistency in the law.
It is particularly important in this context that we bear in mind that the law must aspire to be a unified institution, the parts of which contract, tort, the criminal law must be in essential harmony.
For the courts to punish conduct with the one hand while rewarding it with the other, would be to create an intolerable fissure in the laws conceptually seamless web: Weinrib [Illegality as a Tort Defence (1976) 26 UTLJ 28], at p 42.
We thus see that the concern, put at its most fundamental, is with the integrity of the legal system. (pp 175 176) iv) Fourth, McLachlin J said that such compensatory damages as were claimed in Hall v Hebert are not properly awarded as compensation for an illegal act, but only as compensation for personal injury.
Such damages accomplish nothing more than to put the plaintiff in the position he or she would have been in had the tort not occurred.
No part of the award which compensates injury can be said to be the profit of, or the windfall from, an illegal act. (p 176) In substance, McLachlin J can in this passage be said to have been applying a reliance test in tort.
To establish a right to compensation, all that the plaintiff had to rely on was the tortious conduct, consisting of the causing of injury by negligent driving. v) Finally, she concluded that: there is a need in the law of tort for a principle which permits judges to deny recovery to a plaintiff on the ground that to do so would undermine the integrity of the justice system.
The power is a limited one.
Its use is justified where allowing the plaintiffs claim would introduce inconsistency into the fabric of the law, either by permitting the plaintiff to profit from an illegal or wrongful act, or to evade a penalty prescribed by criminal law.
Its use is not justified where the plaintiffs claim is merely for compensation for personal injuries sustained as a consequence of the negligence of the defendant. (pp 179 180)
In my opinion, what is called for is a limited approach to the effect of illegality, focused on the need to avoid inconsistency in the law, without depriving claimants of the opportunity to obtain damages for wrongs or to put themselves in the position in which they should have been.
This will offer the opportunity of resolving such problems as have, rightly, been identified in the present law, without replacing it wholesale with an open and unsettled range of factors.
The latter might, in McLachlin Js words, prove more problematic than has the troubled doctrine of ex turpi causa itself.
McLachlin Js emphasis on the admissibility of compensatory claims leads me to the principle traditionally addressed under the head of locus poenitentiae.
This principle in fact had a relevant role in the Tinsley v Milligan in so far as it was recognised as demonstrating that the effect of illegality is not to prevent a proprietary interest in equity from arising or to produce a forfeiture of such right: the effect is to render the equitable interest unenforceable in certain circumstances: per Lord Browne Wilkinson, p 374D.
But its true significance is considerably greater.
Where it applies, it fulfils a not dissimilar function to a claim for damages in tort.
It puts the parties back in the position that they should have been in, in this case but for the entry into of the contract which was or became affected and unenforceable by reason of the illegality.
In early authorities the principle was put in wide terms.
Smith v Bromley (1760) 2 Doug KB 696n was a case where the plaintiff was able to recover money she had paid to procure her brothers discharge from bankruptcy, which was an illegal payment.
The primary reason was that the law making it illegal was for the protection of bankrupts and their families (so that the plaintiff and the defendant were non in pari delictu).
An editors footnote (F7) on p 697 gives this as one of two exceptions to the principle that, in a case of illegality, matters are left to lie where they fall (potior est conditio defendentis).
But Lord Mansfield CJ reinforced this reason by the more general consideration at p 698, that, although the payment had been made for an illegal purpose: Upon the whole, I am persuaded it is necessary, for the better support and maintenance of the law, to allow this action; for no man will venture to take, if he knows he is liable to refund.
The other exception identified in the footnote was that where the contract is not excecuted, there is a locus poenitentiae, the delictum is incomplete, and the contract may be rescinded by either party.
In Neville v Wilkinson (1782) I Bro Ch 543, 547, Lord Thurlow LC approved this approach, and declared his opinion that: [I]n all cases where money was paid for an unlawful purpose, the party, though particeps criminis, might recover at law; and that the reason was, that if courts of justice mean to prevent the perpetration of crimes, it must be not by allowing a man who has got possession to remain in possession, but by putting the parties back to the state in which they were before.
In Taylor v Bowers (1876) 1 QBD 291 possession of goods had been passed by the plaintiff, their owner, to A, in exchange for fictitious bills of exchange, in order to deceive creditors.
But no compromise was achieved with creditors, the illegal transaction was not carried out, and it wholly came to an end (p 300).
In these circumstances, the plaintiff successfully sought recovery of the goods: To hold that the plaintiff is enabled to recover does not carry out the illegal transaction, but the effect is to put everybody in the same situation as they were before the illegal transaction was determined upon, and before the parties took any steps to carry it out. (p 300) The plaintiff was not seeking to enforce the illegal transaction, but, on the contrary, setting it aside and not setting up his own fraud in order to make a title, but repudiating the fraud and setting up his own prior rightful title as owner of the goods (p 301).
Like Lord Sumption (paras 245 252), I see this principle of rescission as having become unduly limited with time, particularly in 20th century authority, and I consider that it should be restored to its former significance and generalised.
Further, I consider that there is no reason why rescission should necessarily be restricted, as it was even in these earlier authorities, by reference to a test of execution or carrying out of the illegal purpose.
The logic of the principle is that the illegal transaction should be disregarded, and the parties restored to the position in which they would have been, had they never entered into it.
If and to the extent that the rescission on that basis remains possible, then prima facie it should be available.
In addition, as at present advised, I would not see any necessary objection to permitting rescission after part performance, by making, where possible, appropriate adjustments for benefits received.
Equally, picking up points in Lord Neubergers judgment (para 162) which I have read since writing the bulk of this judgment, I would not as at present advised see an imbalance or lack of parity of delict between the parties as a necessary or even probable bar to rescission, though I would agree that, in accordance with general principle, factors such as change of position could well preclude rescission.
Complications may also arise in a context where a benefit received under an illegal transactions is capable of forfeiture under the Proceeds of Crime Act 2002.
We did not hear submissions on the position in such circumstances, and I express no opinion on it.
On the above basis, reliance on illegality remains significant as a bar to relief, but only in so far as it is reliance in order to profit from or otherwise enforce an illegal contract.
Reliance in order to restore the status quo is unobjectionable.
The result is, as I see it, not dissimilar to that which (leaving aside the potential effects of section 7) results under section 6(1) of the New Zealand Illegal Contracts Act 1970, providing that: Notwithstanding any rule of law or equity to the contrary, but subject to the provisions of this Act and of any other enactment, every illegal contract shall be of no effect and no person shall become entitled to any property under a disposition made by or
pursuant to any such contract
The approach I adopt avoids unsatisfactory results such as that reached in Collier v Collier, where it would have been entirely possible to achieve rescission even though the illegal scheme had been in some measure executed or carried out.
The father there could require the restoration of the property of which he had for an illegal purpose allowed his daughter to have the legal title.
Similarly, in a situation like that in Tinsley v Milligan, it should be possible to avoid reliance on the artificial procedural concept of a presumption of a resulting trust.
Such a presumption was available in that case to give effect to (though without necessarily referring to) the parties actual intentions regarding equitable ownership or the reason (although the court was well aware of it) for structuring the transactions as they were.
But, as Collier v Collier demonstrates, an artificial procedural presumption of this nature cannot be relied upon to be available in every case.
In future, Miss Milligan should simply be able to reverse the effect, as between herself and Miss Tinsley, of the property transactions which they arranged for the illegal purpose, which they carried out, of deceiving public authorities.
Because the court would be reversing, rather than enforcing the illegal transactions, the court could take into account both the objective fact of joint contributions and the parties actual and, by itself, legal purpose of joint ownership.
Setting on one side the transactions by which they sought to achieve their illegal purpose, the underlying equitable interests, which they shared based on their contributions and intentions, would be enforceable as such.
The court could on that basis order the property to be registered in the joint names of Miss Tinsley and Miss Milligan.
It follows from what I have so far said that I cannot accept Lord Toulsons view (para 116) that it is unnecessary to consider the scope of locus poenitentiae.
The underlying concept behind locus poenitentiae is restitutionary.
It recognises that neither an admission of nor reliance on illegality is a bar to relief involving the reversal of an illegal transaction.
In the full restitutionary sense I have discussed, the concept must be seen as an integral part of the overall principle governing illegality, and as the corollary of McLachlin Js limited rationalisation of that principle.
Understood in that sense, free of early 20th century moralising, it restores the position to what it would and should have been, without any illegality.
It avoids windfall benefits and disproportionate losses, without involving the positive enforcement of or the recovery of profits based on illegal bargains.
No doubt, however, it would be desirable to avoid the moral undertones of the Latin brocard, and to encapsulate the full width of the modern principle, by referring in future simply to parties normal entitlement to reverse the effects of an illegal transaction, where possible, even though the transaction may have been wholly or in part executed or carried into effect.
It also follows that in the present case I consider that no problem exists about recognising that Mr Patel is entitled to require Mr Mirza to return the stake which Mr Patel put up for the illegal purpose of use by Mr Mirza to make profits for their joint benefit by misuse of inside information.
The claim does not seek to enforce or profit by the illegality.
It seeks merely to put the position back to where it should have been, and would have been had no such illegal transaction ever been undertaken.
I add that, having written the above and read Lord Neubergers judgment in draft, it seems to me that, thus far, my analysis is essentially the same as that which Lord Neuberger describes in his judgment as the Rule.
Before leaving the case, I must however return to the suggestion, unnecessary in my view for the resolution of this appeal, that the law of illegality should be generally rewritten.
The new approach is advocated primarily by Lord Toulson, but Lord Neuberger appears, unless I have misunderstood him, to suggest that it could serve both as a potential modification or qualification of the Rule and as an approach to be adopted to claims positively to enforce a contract, and to claims for damages for breach of contract or a quantum meruit for services rendered under an illegal contract (see his paras 174 175 and 178 180).
The new approach is ostensibly based by Lord Toulson on Hall v Hebert, but it is transmuted by the statement (by Lord Toulson in para 101) that: one cannot judge whether allowing a claim which is in some way tainted by illegality would be contrary to the public interest, because it would be harmful to the integrity of the legal system, without a) considering the underlying purpose of the prohibition which has been transgressed, b) considering conversely any other relevant public policies which may be rendered ineffective or less effective by denial of the claim, and c) keeping in mind the possibility of overkill unless the law is applied with a due sense of proportionality.
We are, after all, in the area of public policy.
That trio of necessary considerations can be found in the case law.
Under consideration c), it is then indicated (paras 107 and 108) that: 107.
In considering whether it would be disproportionate to refuse relief to which the claimant would otherwise be entitled, as a matter of public policy, various factors may be relevant.
Professor Burrows list is helpful but I would not attempt to lay down a prescriptive or definitive list because of the infinite possible variety of cases.
Potentially relevant factors include the seriousness of the conduct, its centrality to the contract, whether it was intentional and whether there was marked disparity in the parties respective culpability. 108.
The integrity and harmony of the law permit and I would say require such flexibility.
The reference to Professor Burrows list is to the list which Lord Sumption sets out and analyses in his paras 259 and 260.
What is apparent is that this approach, would introduce not only a new era but entirely novel dimensions into any issue of illegality.
Courts would be required to make a value judgment, by reference to a widely spread mlange of ingredients, about the overall merits or strengths, in a highly unspecific non legal sense, of the respective claims of the public interest and of each of the parties.
But courts could only do so, by either allowing or disallowing enforcement of the contract as between the two parties to it, unless they were able (if and when this was possible) to adopt the yet further novelty, pioneered by the majority of the Australian court in Nelson v Nelson [1995] HCA 25, (1995) 184 CLR 538, of requiring the account to the public for any profit unjustifiably made at the public expense, as a condition of obtaining relief.
Although other jurisdictions are invoked, it is notable how slender the basis for doing so is.
It comes down to the New Zealand statute and the Australian authorities of Nelson v Nelson and Fitzgerald v F J Leonhardt Pty Ltd [1997] HCA 17, (1997) 189 CLR 215.
We have no idea or information as to whether or not the approach there has proved unproblematic for the profession or the courts.
What we do however have is an authoritative decision of the Canadian Supreme Court in Hall v Hebert, which does not in any way support the wholesale abandonment of a clear cut test, but rather explains and redefines the principle ex turpi causa in a manner which (consistently with the way in which the common law usually develops) offers every prospect of avoiding the evident anomalies which an over formalistic approach has in the past evidenced.
Lord Toulson also starts his judgment with a series of paragraphs (1 to 9) instancing what are supposed to be problems existing under the present law.
I would only say as to Holman v Johnson (1775) 1 Cowp 341 and Pearce v Brooks (1866) LR 1 Ex 213 that the question what constitutes knowing participation sufficient to render a contract unenforceable is a discrete problem, which is unlikely to be resolved any more simply under the range of factors approach now advocated.
Likewise, the St John Shipping case [1957] 1 QB 267 and Ashmore Benson Pease & Co Ltd v A V Dawson Ltd [1973] 1 WLR 828 arose in areas where the purpose and effect of statutory provisions were central to the decision (as it was in cases such as Hall v Woolston Hall Leisure Ltd [2001] 1 WLR 225, Still v Minister of National Revenue (1997) 154 DLR (4th) 229 and Nizamuddowlah v Bengal Cabaret Inc (1977) 399 NYS 2d 854, mentioned by Lord Toulson in paras 6, 58 61 and 63 66).
Questions as to the effect of collateral or minor illegality (such as parking on a double red line, instanced by Lord Neuberger in para 178) on the enforceability of contractual rights have not, I believe, led to real difficulty in achieving just solutions under these and other authorities (compare also McLachlin Js view cited in para 191(ii) above) and certainly not to such difficulty as to justify tearing up the existing law and starting again.
Again, the new approach now advocated, with its wide range of additional factors, over and above statutory purpose and effect, would be unlikely to avoid similar analysis of statutory policy and similarly nice issues.
More importantly, these are problems in areas far removed from the present, and do not to my mind throw any light on the issues we have to decide on this appeal.
For the reasons I have given, which correspond with those given by Lord Clarke and Lord Sumption, I would dismiss this appeal.
LORD CLARKE:
As I see it, there is no disagreement between members of the court as to the correct disposal of this appeal.
It is that the appeal must be dismissed because Mr Patel is entitled to restitution of the 620,000 that he paid to Mr Mirza on the basis that otherwise Mr Mirza would be unjustly enriched.
As it seems to me, the application of orthodox principles of unjust enrichment, rescission and restitutio in integrum leads to this conclusion.
Those principles are consistently set out by Lord Mance and Lord Sumption.
Although Lord Sumption sets out a broader statement of principle, he agrees with Lord Mance and vice versa.
As it seems to me, there is no difference between their approach and the application by Lord Neuberger of what he calls the Rule, which he defines in paras 145 and 146, as the right to return of money paid by the claimant to the defendant pursuant to a contract to carry out an illegal activity and the illegal activity is not in the event proceeded with owing to matters beyond the control of either party.
Lord Sumption, at para 252, emphasises that the Rule arises automatically and by operation of law; a right to restitution that in principle follows from the legal ineffectiveness of the contract .
I do not understand Lord Neuberger or Lord Mance to disagree with that.
As Lord Neuberger says in para 146, the Rule is consistent with authority and with policy and renders the outcome in cases of contracts involving illegality and the maxim ex turpi causa non oritur action relatively clear and certain.
As Lord Neuberger says at para 154, in agreement with Lord Mance, there is obvious attraction in the notion that, if all transfers made pursuant to an unexecuted illegal contract are re transferred, then the parties are back in the position they were, ie as if there had been no illegal contract, which would seem to comply with public policy.
This approach does not require any balancing of a series of different factors.
It simply applies the principles derived from the authorities to the facts of the case.
Lord Neuberger, Lord Mance and Lord Sumption have referred in detail, and (so far as I can see) consistently, to the authorities over very many years.
None of them supports a balancing of the kind suggested by Lord Toulson.
To my mind the most important sources are the judgments of Lord Mansfield CJ in Holman v Johnson (1775) 1 Cowp 341 and McLachlin J (now CJ) in Hall v Hebert [1993] 2 SCR 159.
Lord Mance sets out in para 191 what he calls a number of points which emerge with great clarity from McLachlin Js judgment.
I will not repeat those passages here.
The critical point for present purposes is that she stressed the importance of having a firm doctrinal foundation for what she described as a narrow principle.
She was concerned, at p 169, that public policy would provide no clear guidance as to when judges could exercise this draconian power and upon what grounds.
The draconian power was a power to reject claims on considerations of public policy.
On the facts of Hall v Hebert she concluded that such compensatory damages as were claimed in that case were not properly to be regarded as awarded as compensation for an illegal act but only as compensation for personal injury.
Then, as Lord Mance says, finally she concluded that: there is a need in the law of tort for a principle which permits judges to deny recovery to a plaintiff on the ground that to do so would undermine the integrity of the justice system.
The power is a limited one.
Its use is justified where allowing the plaintiffs claim would introduce inconsistency into the fabric of the law, either by permitting the plaintiff to profit from an illegal or wrongful act, or to evade a penalty prescribed by criminal law.
Its use is not justified where the plaintiffs claim is merely for compensation for personal injuries sustained as a consequence of the negligence of the defendant.
I entirely agree with that approach.
I have always thought that the power of the court to deny recovery on the ground of illegality should be limited to well defined circumstances.
I agree with Lord Mance in para 192 that, in the absence of such circumstances, claimants should not be deprived of the opportunity to obtain damages for wrongs or to put themselves in the position in which they should have been.
As I see it, there is no need to replace that approach with what he calls an open and unsettled range of factors.
I agree with Lord Sumptions opinion in this regard.
As he puts it at para 257, the search for principle which led McLachlin J to identify consistency as the foundation of this area of the law was a response to Cory J, who had favoured a more flexible approach which would have depended upon whether the relevant public policy required that result on the facts of each case.
The majority, including McLachlin J, did not agree.
In para 258 Lord Sumption draws attention to the similar opinion of Lord Goff in Tinsley v Milligan [1994] 1 AC 340 at 358E F, where he objected to the public conscience test adopted in the Court of Appeal, under which the court must weigh, or balance, the adverse consequences of respectively granting or refusing relief.
Lord Goff added that that was little different, if at all, from stating that the court has a discretion whether to grant or refuse relief and that it was very difficult to reconcile with the principle of policy stated by Lord Mansfield in Holman v Johnson.
As Lord Sumption observes, on this point Lord Goff was supported by the whole of the Appellate Committee.
Between paras 259 and 265 Lord Sumption considers what he calls the range of factors approach and gives his reasons for rejecting it.
I agree with him, and will not repeat his reasoning here, save for the following passage at para 262(iv): The range of factors test discards any requirement for an analytical connection between the illegality and the claim, by making the nature of the connection simply one factor in a broader evaluation of individual cases and offering no guidance as to what sort of connection might be relevant.
I have already observed that the reliance test is the narrowest test available.
If it is no longer to be decisive, the possibility is opened up of an altogether wider ambit for the illegality principle, extending to cases where the relevant connection was remote or non existent but other factors not necessarily involving any connection at all, were thought to be compelling.
In short, such a test does not apply the principles laid down in the cases, and is inconsistent with the approach in Tinsley v Milligan and, in particular, the reliance test.
In para 265 Lord Sumption says that he cannot agree with the conclusion of Lord Toulson (at para 109) that the application of the illegality principle should depend on the policy factors involved and the nature and circumstances of the illegal conduct, in determining whether the public interest in preserving the integrity of the justice system should result in the denial of the relief claimed.
I agree with Lord Sumption that this is far too vague and potentially far too wide to serve as the basis on which a person may be denied his legal rights.
As he says, it converts a legal principle into an exercise of judicial discretion, in the process exhibiting all the vices of complexity, uncertainty, arbitrariness and lack of transparency which Lord Toulson attributes to the present law.
The illegality defence deprives claimants of their legal rights.
The correct response for us is not to leave the problem to a case by case evaluation by the lower courts by reference to a potentially unlimited range of factors, but to address the problem by supplying a framework of principle which accommodates legitimate concerns about the present law.
Lord Mance expresses much the same conclusion in paras 204 to 207, with which I also agree.
It is to my mind noteworthy that Lord Toulson puts his conclusion thus in para 109: The courts must obviously abide by the terms of any statute, but I conclude that it is right for a court which is considering the application of the common law doctrine of illegality to have regard to the policy factors involved and to the nature and circumstances of the illegal conduct in determining whether the public interest in preserving the integrity of the justice system should result in denial of the relief claimed.
I put it in that way rather than whether the contract should be regarded as tainted by illegality, because the question is whether the relief claimed should be granted.
The striking feature of that approach is as I see it that it puts the question, not whether the contract should be regarded as tainted by illegality but whether the relief claimed should be granted.
That seems to me to be essentially a question of discretion, or at least a consideration of all the relevant factors in order to decide where the balance should be struck.
As I see it, there is no support in any of the authorities for that approach and it is directly contrary to many of the cases referred to by Lord Sumption and Lord Mance, in particular the reasoning of the majority in Hall v Hebert and of the House of Lords in Tinsley v Milligan, where it was expressly rejected by Lord Goff.
It would be close to reviving the public conscience test.
In my opinion the question posed in para 109 is the wrong question.
I recognise that common law principles develop from time to time.
Two such developments are relevant here.
The first is this.
Lord Sumption and Lord Mance both focus on the scope of the principle of restitutio in integrum, as does Lord Neuberger.
For example, Lord Neuberger first sets out the basis of the Rule, which seems to me to be consistent with the principles identified by Lord Sumption and Lord Mance.
Thus in much of his judgment, notably in paras 145 to 160, Lord Neuberger stresses that the Rule supports the importance of certainty in the law.
He then gives some examples of possible extensions of the Rule.
So, for example, he says in paras 167 to 169 that the Rule may apply where the illegal contract is wholly or partly performed by the plaintiff paying a lesser sum to the defendant.
I agree, but that is on the basis that it is essentially ordering restitution so far as appropriate in accordance with the underlying principle embodied in the Rule.
As Lord Neuberger puts it in para 169, there is no good reason for not extending the Rule to partly or even wholly performed contracts where restitutio in integrum can be achieved in practical terms and would be consistent with policy and proportionality.
As I read his judgment, save at the very end his approach is orthodox and contemplates a development of the legal principles identified by Lord Sumption and Lord Mance.
The second relevant development is this.
It is now recognised that some of the reasoning in Tinsley v Milligan can no longer stand: see in particular Lord Sumption at paras 236 to 239 and Lord Mance at paras 199 to 201.
It is I think now accepted on all sides that, if Collier v Collier [2002] BPIR 1057 came before the courts today it would be decided differently.
That is not however because the court will adopt the proposals of Lord Toulson but because the relevant legal principles have developed in a normal way.
Finally, I should note that it is not in dispute that the appeal should be dismissed on conventional principles.
I recognise that Lord Neuberger has expressed some support for the approach of Lord Toulson but I am not persuaded by his reasoning that it is appropriate.
LORD SUMPTION: (with whom Lord Clarke agrees)
Two questions arise on this appeal.
The first is whether the contract between these parties is affected by the principle of public policy ex turpi causa non oritur actio (the illegality principle, as I shall call it).
The second is whether, if so, Mr Patel is entitled to restitution of the 620,000 that he paid to Mr Mirza.
The first question has divided the courts below.
The Deputy Judge (David Donaldson QC) and the majority of the Court of Appeal (Rimer LJ and Vos LJ) thought it plain that Mr Patels claim was founded on an illegal agreement and could not be sustained unless he could invoke a special exception for executory agreements.
They considered that there was such an exception.
Gloster LJ on the other hand declined to see the problem in terms of rule and exception.
At the risk of a rather crude summary of her thoughtful analysis, I would summarise her reasons as follows.
Her first and main point (paras 67, 69 70, 72, 79 80) was that the rationale of the illegality rule did not require Mr Patel to be denied restitutionary relief, because it did not involve enforcing his contract with Mr Mirza or enabling him to derive any benefit from it.
Mr Patels right to restitution was, she considered, collateral.
Second, that Mr Mirza and Mr Patel were not equally blameworthy because Mr Mirza was a finance professional while Mr Patel was not, and would not necessarily have known that insider dealing was illegal.
Third, section 63(2) of the Criminal Justice Act 1993 provided that no contract should be void or unenforceable by reason of the prohibition of insider dealing in section 52.
The fourth was that Mr Patel did not need to rely on the illegal character of his agreement with Mr Mirza in order to recover the money.
It was enough that he had paid it for a speculation that never occurred.
The illegality principle and its rationale
The present appeal exposes, not for the first time, a long standing schism between those judges and writers who regard the law of illegality as calling for the application of clear rules, and those who would wish address the equities of each case as it arises.
There are recent statements of this court in support of both points of view: see Les Laboratoires Servier v Apotex Inc [2015] AC 340 and Hounga v Allen [2014] 1 WLR 2889, paras 44 45.
It also raises one of the most basic problems of a system of judge made customary law such as the common law.
The common law is not an uninhabited island on which judges are at liberty to plant whatever suits their personal tastes.
It is a body of instincts and principles which, barring some radical change in the values of our society, is developed organically, building on what was there before.
It has a greater inherent flexibility and capacity to develop independently of legislation than codified systems do.
But there is a price to be paid for this advantage in terms of certainty and accessibility to those who are not professional lawyers.
The equities of a particular case are important.
But there are pragmatic limits to what law can achieve without becoming arbitrary, incoherent and unpredictable even to the best advised citizen, and without inviting unforeseen and undesirable collateral consequences.
Ancient as it is, the classic statement of the principle as it has traditionally been understood remains that of Lord Mansfield CJ in Holman v Johnson (1775) 1 Cowp 341: The objection, that a contract is immoral or illegal as between plaintiff and defendant, sounds at all times very ill in the mouth of the defendant.
It is not for his sake, however, that the objection is ever allowed; but it is founded in general principles of policy, which the defendant has the advantage of, contrary to the real justice, as between him and the plaintiff, by accident if I may so say.
The principle of public policy is this; ex dolo malo non oritur actio.
No court will lend its aid to a man who founds his cause of action upon 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 he has no right to be assisted.
There was a time when the courts approached the application of the illegality principle on the footing that a court should not be required to sully its hands by dealing with criminal ventures.
In Everet v Williams (1725), noted at (1893) LQR 197, the notorious case in which two highwaymen sought an account of the division of their profits, the court not only dismissed the action but fined the plaintiffs solicitors for the indignity visited upon it.
There are periodic echoes of this attitude in later cases, notably Parkinson v College of Ambulance Ltd [1925] 2 KB 1, 13, in which Lush J thought that no adjudication on a contract to procure an honour could be undertaken with propriety or decency.
This notion has sometimes been thought to derive support from Lord Mansfields reference to the court withholding its aid.
But the truth is that it has rarely risen above the level of indignant judicial asides.
There are many purposes for which courts must necessarily inquire into the illegal acts of litigants.
There are principled exceptions to the illegality principle, which may entitle a party to base a claim on an illegal act.
There are statutory schemes of apportionment which may require liability for dishonest acts to be distributed among the wrongdoers.
The notion of judicial abstention could never be unqualified, nor has it been historically.
The law, as Bingham LJ observed in Saunders v Edwards [1987] 1 WLR 1116, 1134, must steer a middle course between two unacceptable positions.
On the one hand it is unacceptable that any court of law should aid or lend its authority to a party seeking to pursue or enforce an object or agreement which the law prohibits.
On the other hand, it is unacceptable that the court should, on the first indication of unlawfulness affecting any aspect of a transaction, draw up its skirts and refuse all assistance to the plaintiff, no matter how serious his loss nor how disproportionate his loss to the unlawfulness of his conduct.
In its consultative report of 2009, The Illegality Defence (LCCP 189), at para 2.5, the Law Commission identified six policy rationales for the rule, which could be found in the case law and the academic literature.
They were: (1) furthering the purpose of the rule which the claimant's illegal behaviour has infringed; (2) consistency; (3) the need to prevent the claimant profiting from his or her own wrong; (4) deterrence; (5) maintaining the integrity of the legal system; and (6) punishment.
By maintaining the integrity of the legal system (rationale (5)), the Law Commission meant sparing the judiciary from involvement in serious wrongdoing: see para 2.24.
I have given my reasons for rejecting this rationale.
The Law Commission itself (paras 2.28 2.29) rejected rationale (6), punishment, on the ground that although rules of civil law might have a punitive effect, this was no part of their purpose.
With very limited exceptions, such as certain rules of causation in fraud cases or the rare occasions for awarding punitive damages, I think that this is correct.
The other four rationales overlap.
All of them to my mind are subsumed in no (2), the principle of consistency.
The most influential statement of that principle is to be found in the much admired judgment of McLachlin J delivering the judgment of the majority of the Supreme Court of Canada in Hall v Hebert [1993] 2 SCR 159, 169: Whether we describe the principle under which judges are allowed to deny recovery to a plaintiff by an old fashioned Latin name or by the currently fashionable concept of public policy, the underlying problem remains the same: under what circumstances should the immoral or criminal conduct of a plaintiff bar the plaintiff from recovering damages to which he or she would otherwise be entitled.
My own view is that courts should be allowed to bar recovery in tort on the ground of the plaintiffs immoral or illegal conduct only in very limited circumstances.
The basis of this power, as I see it, lies in duty of the courts to preserve the integrity of the legal system, and is exercisable only where this concern is in issue.
This concern is in issue where a damage award in a civil suit would, in effect, allow a person to profit from illegal or wrongful conduct, or would permit an evasion or rebate of a penalty prescribed by the criminal law.
The idea common to these instances is that the law refuses to give by its right hand what it takes away by its left hand.
After examining cases in which damages were refused when they represented a loss of benefits which would have been derived from an illegal contract or activity, she observed, at p 176: A more satisfactory explanation for these cases, I would venture, is that to allow recovery in these cases would be to allow recovery for what is illegal.
It would put the courts in the position of saying that the same conduct is both legal, in the sense of being capable of rectification by the court, and illegal.
It would, in short, introduce an inconsistency in the law.
It is particularly important in this context that we bear in mind that the law must aspire to be a unified institution, the parts of which contract, tort, the criminal law must be in essential harmony.
For the courts to punish conduct with the one hand while rewarding it with the other, would be to create an intolerable fissure in the laws conceptually seamless web.
Her conclusion, at pp 179 180, was that: there is a need in the law of tort for a principle which permits judges to deny recovery to a plaintiff on the ground that to do so would undermine the integrity of the justice system.
The power is a limited one.
Its use is justified where allowing the plaintiffs claim would introduce inconsistency into the fabric of the law, either by permitting the plaintiff to profit from an illegal or wrongful act, or to evade a penalty prescribed by criminal law.
Hall v Hebert was a tort case, and the implications of illegality are not in all respects the same in the law of tort as in they are other branches of law.
I shall return to this point below.
But, as McLachlin J pointed out in the passage cited, the law is a unified institution.
At the most fundamental level of policy, its internal coherence requires that contract, tort and criminal law should be in harmony.
In practice the illegality principle has almost invariably been raised as a defence to a civil claim based on a breach of the criminal law.
In Les Laboratoires Servier v Apotex Inc [2015] AC 430, this court held that with immaterial exceptions the defence is available only in such cases.
This conclusion tends to reinforce the significance of the principle of consistency as a rationale.
The civil courts of the state cannot coherently give effect to legal rights founded on criminal acts which are contrary to the states public law.
There is no reason to regard this as any less important according to whether the civil claim lies in contract or tort.
The English courts have taken a broader view than McLachlan J did of what constitutes profiting from an illegal act, but that is by the way.
Her rationalisation of the illegality principle as being based on the consistency and internal coherence of the law has been consistently adopted in England in tort and contract cases alike by this court and by the Appellate Committee of the House of Lords before it: see R v Islam [2009] AC 1076, para 38 (Lord Mance); Stone and Rolls Ltd v Moore Stephens [2009] 1 AC 1391, paras 128 (Lord Walker), 226 (Lord Mance); Hounga v Allen [2014] 1 WLR 2889, para 43 (Lord Wilson); Les Laboratoires Servier v Apotex Inc [2015] AC 430, para 24 (Lord Sumption); Bilta (UK) Ltd v Nazir (No 2) [2016] AC 1, para 172 (Lord Toulson and Lord Hodge).
In Gray v Thames Trains [2009] 1 AC 1339, Lord Hoffmann (with whom the rest of the Appellate Committee agreed) put forward the principle of consistency as the rationale of what he called the narrower rule precluding the recovery of damages representing loss directly arising from the sentence of a criminal court.
He was inclined to think that the wider rule that a person cannot recover for damage which is the consequence of his own criminal act was based on a different principle concerned with public notions of the fair distribution of resources: para 51, and cf Lord Rodger at para 84.
Certainly, the inconsistency of awarding damages representing loss arising from a criminal sentence is more obvious and direct than it is when the claimant is claiming other damages causally flowing from his commission of a crime.
But it seems to me, as it did to McLachlan J and those who have adopted her approach more generally, that the internal coherence of the law is also the reason why it will not give effect in a civil court to a cause of action based on acts which it would punish in a criminal court.
As Lord Hughes put it in Hounga v Allen (para 55), a dissenting judgment but not on this point, the law must act consistently; it cannot give with one hand what it takes away with another, nor condone when facing right what it condemns when facing left.
When is a civil claim founded on an illegal act?
The starting point is that the courts exist to provide remedies in support of legal rights.
It is fundamental that any departure from that concept should have a clear justification grounded in principle, and that it should be no more extensive than is required by that principle.
The underlying principle is that for reasons of consistency the court will not give effect, at the suit of a person who committed an illegal act (or someone claiming through him), to a right derived from that act.
The test which has usually been adopted for determining whether this principle applies is the reliance test.
The question is whether the person making the claim is obliged to rely in support of it on an illegal act on his part.
The reliance test is implicit in Lord Mansfields statement of principle, which assumes that the plaintiffs action is founded on his illegal act.
But the modern origin of the test is the decision of the Court of Appeal in Bowmakers Ltd v Barnet Instruments Ltd [1945] 1 KB 65, which concerned a hire purchase agreement illegal under wartime regulations.
When the hirer disposed of the goods, the owner was held entitled to damages for conversion notwithstanding the illegality, because his right of action was based on his ownership.
He could establish that without relying on the illegal hire purchase agreement.
The reliance test was subsequently approved by the Privy Council in Singh v Ali [1960] AC 167 and Chettiar v Chettiar [1962] AC 294 and by the House of Lords in Tinsley v Milligan [1994] 1 AC 340.
All of these decisions, were about title to property, real or personal.
But in Clunis v Camden and Islington Health Authority [1998] QB 978 the Court of Appeal applied it to a claim in tort.
In St John Shipping Co Ltd v Joseph Rank Ltd [1957] 1 QB 267, 291 292, Devlin J had applied it to a claim for freight under a contract of carriage.
In Hewison v Meridian Shipping Services PTE Ltd [2003] ICR 766, the Court of Appeal applied it to a concurrent claim for damages in contract and tort in which the measure of damages depended on the terms of a contract.
The claimants action for damages against his employer for an injury at work failed because in order to prove his loss of earnings he had to show that he would have continued to deceive his employer about his fitness to operate machinery, as he had in the past.
There is, as these decisions suggest, nothing about the reliance test that limits its relevance to certain causes of action.
But the test may apply in different ways, depending on what it is that the law regards as illegal.
In a tort case or a property case it is generally enough to identify the illegal act and demonstrate the dependence of the cause of action upon the facts making it illegal.
In a contract case, the position is less straightforward.
A contract may be affected by illegality because terms lawful in themselves are intended to be performed in an illegal way or for an illegal purpose not apparent from the contract itself.
This does not mean that contracts vitiated by this circumstance can be enforced simply by putting the case without reference to the illegal purpose or proposed mode of performance.
It is enough to give rise to the defence that the claimant must rely on a contract which is in fact illegal, whether that is apparent from the terms or not.
The problem about the reliance test is not so much the test itself as the way in which it was applied in Tinsley v Milligan.
The facts of that case are well known.
Ms Tinsley and Ms Milligan contributed in approximately equal shares to the cost of buying a house in which both of them intended to live and run their lodging rooms business.
They decided that it would be conveyed into the sole name of Ms Tinsley so as to enable Ms Milligan to defraud the Department of Social Security by pretending that she did not own her home and paid rent.
Ms Tinsley claimed an order for possession on the footing that she was the sole owner.
The Appellate Committee held by a majority that Ms Milligan was entitled to assert a 50% interest in the house notwithstanding the illegal purpose for which it had been conveyed into Ms Tinsleys sole name.
There were two stages in the reasoning of Lord Browne Wilkinson, who delivered the leading speech for the majority.
The first was that where property is transferred for an illegal purpose, the transferee nevertheless obtains a good title, notwithstanding that the transaction being illegal it would not have been specifically enforced.
This is so whether the title in question is legal or equitable.
The decision of the majority on this point settled a question on which there had been inconsistent authorities dating back to the beginning of the 19th century.
It did so in a way which reflected the laws traditional reluctance to disturb settled titles.
The result represents a notable difference between the law relating to the creation of legal or equitable titles and the law relating to contractual obligations generally.
It means that although a contract may be vitiated by its illegal purpose or the illegal way in which it was intended to be performed, this is not true of title to property.
It followed in that case that Ms Tinsley had a good title to the disputed property.
The second stage of the reasoning was that an equitable interest in the property would also be recognised, provided that the person claiming it was not forced to plead or rely on the illegality (p 376E).
In Ms Milligans case, equity presumed a resulting trust in her favour by virtue only of her contribution to the purchase price.
She did not therefore have to plead or prove the reasons why the property had been conveyed into Ms Tinsleys sole name.
It followed that she could make good her claim to an interest.
The problem about this is that it makes the illegality principle depend on adventitious procedural matters, such as the rules of pleading, the incidence of the burden of proof and the various equitable presumptions.
If Ms Tinsley had been a man and Ms Milligan had been his daughter, the decision would have gone the other way because the presumption of resulting trust would have been replaced by a presumption of advancement.
She would have had to rebut it by reference to the actual facts.
This is what the Privy Council decided in Chettiar v Chettiar [1962] AC 294 and the Court of Appeal in Collier v Collier [2002] BPIR 1057, in both of which property was gratuitously transferred for an illegal purpose by a father to his son or daughter.
The father was accordingly unable to establish his interest.
Yet the distinction between these cases and Tinsley v Milligan is completely arbitrary.
This is because the equitable presumptions operate wholly procedurally, and have nothing to do with the principle which the court is applying in illegality cases.
In Nelson v Nelson (1995) 184 CLR 538, the majoritys analysis in Tinsley v Milligan was criticised on this ground in the High Court of Australia: see pp 579 580 (Dawson J), 592 593 (Toohey J), 609 610 (McHugh J).
In my opinion, these criticisms are justified, although I would not go as far as McHugh did in Nelson v Nelson.
He, alone among the judges of the High Court of Australia, would have jettisoned the reliance test altogether.
What then is the true principle? In property cases, as the House held in Tinsley v Milligan, title is not vitiated by an antecedent illegal arrangement.
An equitable interest in property may accordingly arise from a tainted scheme.
Whether an equitable interest exists depends on the intentions of the parties.
The true principle is that the application of the illegality principle depends on what facts the court must be satisfied about in order to find an intention giving rise to an equitable interest.
It does not depend on how those facts are established.
Ms Milligan was entitled to the interest which she claimed in the property because she paid half of the price and there was no intention to make a gift.
That was all that the court needed to be satisfied about.
Likewise, if Collier v Collier were to come before the courts today, the result should be the same notwithstanding that the equitable presumption went the other way.
Mr Collier leased his property to his daughter for an illegal purpose, namely to deceive his creditors in the event that he became insolvent.
He had an equitable interest in the property because the lease was gratuitous and there was no intention to make a gift.
It would make no difference to the recognition of that interest that the purpose of the transaction was illegal.
Why he chose to organise his affairs in that way would no doubt emerge in the course of the evidence, but would be irrelevant to the facts which founded his claim.
The point was well made by Dawson J in Nelson v Nelson, at p 580: There may be an illegal purpose for the transfer of the property and that may bear upon the question of intention, but it is the absence of any intention to make a gift upon which reliance must be placed to rebut the presumption of advancement.
Intention is something different from a reason or motive.
The illegal purpose may thus be evidentiary, but it is not the foundation of a claim to rebut the presumption of advancement.
Shorn of the arbitrary refinements introduced by the equitable presumptions, which in any event apply only in property cases, the reliance test accords with principle.
First, it gives effect to the basic principle that a person may not derive a legal right from his own illegal act.
Second, it establishes a direct causal link between the illegality and the claim, distinguishing between those illegal acts which are collateral or matters of background only, and those from which the legal right asserted can be said to result.
Third, it ensures that the illegality principle applies no more widely than is necessary to give effect to its purpose of preventing legal rights from being derived from illegal acts.
The reliance test is the narrowest test of connection available.
Every alternative test which has been proposed would widen the application of the defence as well as render its application more uncertain.
This last objection applies in particular to the main alternative test which has been proposed in the case law, namely that the facts relied upon should be inextricably linked with the illegal act.
The difficulty about inextricable linkage as a test of connection is that it is far from clear what it means.
On the face of it, the only link between the illegal act and the claim which is truly inextricable, is a link based on causation and necessary reliance.
So far as the test of inextricable linkage broadens the required connection more widely, it seems to me to be contrary to principle.
Its vices may be illustrated by reference to the decision in Cross v Kirkby [2000] EWCA Civ 426, The Times 5 April 2000, where it was first proposed by Beldam LJ.
The facts were that a hunt saboteur started a fight with a hunt follower at a meet and came out of it worst.
He ended up with a fractured skull, and sued the hunt follower for damages occasioned by his injuries.
The main issue was whether the hunt follower had defended himself with excessive force.
Beldam LJ held that he had not.
But in case he was wrong about that, he held that the saboteurs injuries were inextricably linked with the fact that he had started the fight, so that his claim was barred by the illegality principle.
Otton LJ agreed generally with Beldam LJ, but Judge LJ agreed only on the primary ground.
To my mind, Beldam LJs alternative ground was unprincipled.
It only arose if the hunt follower responded to the attack with excessive force, and on that footing it was irrelevant who started the fight.
The illegality principle served simply to deprive the plaintiff of a proper claim arising from the unlawful use of excessive force against him.
The case illustrates the tendency of any test broader than the reliance test to degenerate into a question of instinctive judicial preference for one party over another.
Exceptions
To the principle that a person may not rely on his own illegal act in support of his claim, there are significant exceptions, which are as old as the principle itself and generally inherent in it.
These are broadly summed up in the proposition that the illegality principle is available only where the parties were in pari delicto in relation to the illegal act.
This principle must not be misunderstood.
It does not authorise a general enquiry into their relative blameworthiness.
The question is whether they were legally on the same footing.
The case law discloses two main categories of case where the law regards the parties as not being in pari delicto, but both are based on the same principle.
One comprises cases in which the claimants participation in the illegal act is treated as involuntary: for example, it may have been brought about by fraud, undue influence or duress on the part of the defendant who seeks to invoke the defence.
The best known example is Burrows v Rhodes [1899] 1 QB 816, where the illegality consisted in the plaintiff having enlisted in the defendants private army for the Jameson raid, contrary to the Foreign Enlistment Act 1870.
The illegality principle was held not to arise because he had been induced to do so by the defendants fraudulent misrepresentation that the raid had the sanction of the Crown, which if true would have made it legal.
Cases in which the illegality consisted in the act of another for which the claimant is responsible only by virtue of a statute imposing strict liability, fall into the same category: see Osman v J Ralph Moss Ltd [1970] 1 Lloyds Rep 313; Les Laboratoires Servier v Apotex [2015] AC 430, para 29.
In such cases, however, the construction and purpose of the statute in question will call for careful attention.
The other category comprises cases in which the application of the illegality principle would be inconsistent with the rule of law which makes the act illegal.
The paradigm case is a rule of law intended to protect persons such as the plaintiff against exploitation by the likes of the defendant.
Such a rule will commonly require the plaintiff to have a remedy notwithstanding that he participated in its breach.
The exception generally arises in the context of acts made illegal by statute.
In Browning v Morris (1778) 2 Cowp 790, 792, Lord Mansfield expressed the point in this way: Where contracts or transactions are prohibited by positive statutes for the sake of protecting one set of men from another set of men, the one, from their situation and condition being liable to be oppressed or imposed upon by the other, there the parties are not in pari delicto; and in furtherance of these statutes, the person injured, after the transaction is finished and completed, may bring his action and defeat the contract.
The classic modern illustration is Kiriri Cotton Co Ltd v Dewani [1960] AC 192, in which a tenant was held entitled to recover an illegal premium paid to the landlord, notwithstanding that his payment of it involved participating in a breach of an ordinance regulating tenancies.
Lord Denning, delivering the advice of the Privy Council, observed at p 205 that: The duty of observing the law is firmly placed by the Ordinance on the shoulders of the landlord for the protection of the tenant.
Hounga v Allen [2014] 1 WLR 2889 on its facts illustrates the same principle.
The claimant had been illegally trafficked into the United Kingdom by her employer.
Her vulnerability on that account enabled her employer to exploit and ultimately to dismiss her.
An attempt to bar her claim for unlawful discrimination on account of her participation in her own illegal trafficking failed.
There was no claim under the employment contract itself, which was illegal, but it may well be that a claim for a quantum meruit for services performed would have succeeded on the same ground.
There is New York authority for such a result: see Nizamuddowlah v Bengal Cabaret Inc (1977) 399 NYS 2d 854.
Protective statutes are the plainest examples of rules of law which implicitly exclude the operation of the illegality principle, but they are not the only ones.
Some statutes, on their proper construction, are inconsistent with the application of the illegality principle even if they are in no sense protective.
The statutory prohibitions against the overloading of ships are wholly directed to the operational safety of ships and their crews.
On that ground, among others, Devlin J held in St John Shipping Corpn v Joseph Rank Ltd [1957] 1 QB 267 that a breach of the Merchant Shipping (Safety and Load Line Conventions) Act 1932 did not justify shippers and bill of lading holders in defending an action for freight.
For the same reason, the illegality principle has been held to have no application to claims to contribution under the Civil Liability (Contribution) Act 1978.
The reason is that this would be inconsistent with the scheme of the Act: K v P [1993] Ch 140.
In Stone and Rolls Ltd v Moore Stephens [2009] AC 1391, three members of the Appellate Committee, Lord Phillips, Lord Scott and Lord Mance, regarded the application of the illegality principle to an auditors negligence as turning on the purpose of the auditors statutory functions, although they reached different conclusions about what that purpose was.
Restitution and loci poenitentiae
The next question is whether the illegality principle bars an action for the recovery of the money which Mr Patel paid under the contract.
English law does not have a unified theory of restitution.
Failure or absence of basis, which supplies such a theory in most civil law systems, was rejected as the overarching rationale of the law of restitution in Woolwich Equitable Building Society v Inland Revenue Comrs [1993] AC 70, 172 (Lord Goff).
For the moment, therefore, as Lord Hoffmann observed in Deutsche Morgan Grenfell Group plc v Inland Revenue Comrs [2007] 1 AC 558, para 21, the claimant has to prove that the circumstances in which the payment was made come within one of the categories which the law recognizes as sufficient to make retention by the recipient unjust.
It is nonetheless true that failure of basis is the reason (or at least a reason) why the retention of a benefit is treated in some categories of case as unjust.
One of these is the category of case in which a money benefit is conferred on the recipient under or in anticipation of a contract and the basis for that transfer has failed, for example by frustration, total failure of consideration or want of contractual capacity or vires on the part of one of the parties.
As a general rule, benefits transferred under a contract which is void or otherwise legally ineffective are recoverable: Westdeutsche Landesbank Girozentrale v Islington London Borough Council [1994] 4 All ER 890 (Hobhouse J), approved (obiter) on appeal to the House of Lords [1996] AC 669, 681 682 (Lord Goff), 714 (Lord Browne Wilkinson), 723 (Lord Woolf).
In Guinness Mahon & Co Ltd v Kensington and Chelsea Royal London Borough Council [1999] QB 215, the Court of Appeal held that the ineffectiveness of the transaction was a ground of restitution independent of total failure of consideration, and therefore available even if the contract had been partly performed.
The reason, as Morritt LJ observed (p 230) is that: The bank did not get in exchange for that performance all it expected, for it did not get the benefit of the contractual obligation.
One would expect the same reasoning to apply where the contract is unenforceable for illegality.
In fact, however, the courts have not said this.
The reason is that they have treated restitution as being available only where the payer was entitled to a locus poenitentiae in which to withdraw from the transaction.
The breadth of this locus has varied with judicial fashion, but for much of the 20th century it was very narrowly interpreted indeed.
This approach is not consistent with the recognition of a general right to the restitution of money paid under an illegal contract, in spite of the close analogy with other cases of ineffective contracts.
In one sense, the contract between these parties may be said to have been frustrated by the failure of the inside information to materialise, or to have resulted in a total failure of consideration because as a result the shares were never purchased.
But that cannot be an adequate explanation of the reason why someone in Mr Patels position may be entitled to restitution even on the limited basis which the concept of a locus poenitentiae allows.
That concept permits the recovery of money paid even before (indeed, especially before) the time for performance has arrived, and therefore in many cases before the contract was frustrated or the question of failure of consideration could arise.
The ground of restitution in these circumstances can only be that the contract was illegal and that the basis for the payment had failed.
Of course, in order to demonstrate that the basis for the payment had failed, Mr Patel must say what that basis was, which would necessarily disclose its illegality.
In my opinion, the reason why the law should nevertheless allow restitution in such a case is that it does not offend the principle applicable to illegal contracts.
That principle, as I have suggested above, is that the courts will not give effect to an illegal transaction or to a right derived from it.
But restitution does not do that.
It merely recognises the ineffectiveness of the transaction and gives effect to the ordinary legal consequences of that state of affairs.
The effect is to put the parties in the position in which they would have been if they had never entered into the illegal transaction, which in the eyes of the law is the position which they should always have been in.
The judges who first formulated the modern law of illegality at the end of the 18th century had no difficulty about this.
In Smith v Bromley (1760) 2 Doug 696n, 697, one of Lord Mansfields earliest statements on this area of law, he thought that restitution of an illegal consideration was necessary for the better support and maintenance of the law.
In Neville v Wilkinson (1782) Lord Chancellor Thurlow referred to this statement and declared his opinion, that, in all cases where money was paid for an unlawful purpose, the party, though particeps criminis, might recover at law; and that the reason was, that if courts of justice mean to prevent the perpetration of crimes, it must be not by allowing a man who has got possession to remain in possession, but by putting the parties back to the state in which they were before.
This was the basis on which relief was granted, at any rate by Mellish LJ and Bagallay LJ, in Taylor v Bowers (1876) 1 QBD 291 traditionally regarded as the leading case, and by Lord Atkinson delivering the advice of the Privy Council in Petherpermal Chetty v Muniandi Servai (1908) LR 35 Ind App 98, 103.
In the course of the twentieth century, the law took a different and to my mind less satisfactory turn.
The courts began to treat the right of restitution as depending on the moral quality of the plaintiffs decision to withdraw.
They reasoned that if the object of allowing restitution was to encourage withdrawal from an illegal venture, it ought to be withheld if the claimant had withdrawn involuntarily, for example because the other party withdrew first or the venture became impossible or failed for some reason other than his genuine regret.
Although there are earlier traces of this notion, it is first overtly expressed in Parkinson v College of Ambulance [1925] 2 KB 1, 16, where Lush J suggested that there was no locus poenitentiae if there was no penitence.
It may be said to have reached its high point in the three decisions in Alexander v Rayson [1936] 1 KB 169, Berg v Sadler & Moore [1937] 2 KB 158 and Bigos v Bousted [1951] 1 All ER 92.
The concept of penitential withdrawal leads to difficult distinctions and suggests an enquiry into a partys state of mind of a kind which the law rarely contemplates.
It was rejected, rightly to my mind, by Millett LJ in Tribe v Tribe [1996] Ch 107, 135 Justice is not a reward for merit, he said: restitution should not be confined to the penitent.
I agree.
But for the same reason I would reject the suggestion that Millett LJ went on to make that the right to restitution should still depend on the voluntary character of the plaintiffs withdrawal.
As with the notion of penitence, this is to put a moral gloss on a principle that depends simply on the right to restitution that in principle follows from the legal ineffectiveness of the contract under or in anticipation of which the money was paid.
The courts view about when the right of restitution ceases to be available has closely reflected the way in which they have analysed that right.
At the outset, and throughout the 19th century, they held that the right of restitution ceased in contract cases once the contract had been executed at least in part.
The reason for this was that they viewed the right of restitution as arising from a principle analogous to rescission for mistake or misrepresentation.
They therefore applied to it the then current doctrine that an executed contract could not be rescinded at law except for fraud.
In Lowry v Bourdieu (1780) 2 Doug 468, 471, Buller J observed that in this context there was a sound distinction between contracts executed and executory; and if an action is brought to rescind a contract, you must do it while the contract continues executory.
Lord Mansfield, who sat in that case, presumably agreed, for he had expressed the same view less expansively in Browning v Morris (1778) 2 Cowp 790.
Later, when the courts came to regard the locus poenitentiae as depending on the moral quality of the plaintiffs reason for resiling, they reframed the proposition so as to suggest that the right of restitution ceased to be available when the illegal purpose of the venture had been carried out.
This might be the same as the point of time when the contract was executed.
But it might be later, as in the numerous cases where a person nominally transferred his property to another with a view to defrauding his creditors.
This test seems to me to be practically unworkable.
Are we to distinguish between cases where the relevant representation was never made to the creditors and cases where it was but they did not believe it? More fundamentally, it proceeds from the same spurious moral gloss on the legal principle as the notion that the claimants withdrawal must have been voluntary or penitent.
The rule against rescinding executed contracts has now gone, and the limitation to cases in which the unlawful purpose has not been carried out never was sound.
The rational rule, which I would hold to be the law, is that restitution is available for so long as mutual restitution of benefits remains possible.
In most such cases, the same facts will give rise to a defence of change of position.
I would also reject the dicta, beginning with Tappenden v Randall (1801) 2 B&P 467, 470 and Kearley v Thomson (1890) 24 QBD 742, 747, to the effect that there may be some crimes so heinous that the courts will decline to award restitution in any circumstances.
There are difficulties about distinguishing between degrees of illegality on what must inevitably be a purely subjective basis.
But the suggestion is in any event contrary to principle.
If I pay 10,000 to a hitman to kill my enemy, he should not kill my enemy and should not have 10,000.
The fact that when it comes to the point he is unwilling or unable to kill my enemy does not give him any legal or moral entitlement to keep the 10,000.
If he does kill him, the rational response is the same.
He should be convicted of murder, but he should never have received the money for such a purpose and by the same token should not be allowed to retain it.
Of course, in practice, this is all rather artificial.
In a case involving heinous crimes, both parties would be exposed to confiscation orders under the Proceeds of Crime Act 2002.
St Thomas Aquinas thought the ideal solution to such a conundrum was that neither party should have the money, which should be paid to charity: Summa Theologica II.2, Q 62, para 5.
The courts have no power to order that, but statute has now intervened to produce something like the same result.
I say nothing about cases in which an order for restitution would be functionally indistinguishable from an order for enforcement, as in a case of an illegal loan or foreign exchange transaction.
The traditional view is that if the law will not enforce an agreement it will not give the same financial relief under a different legal label: Boissevain v Weil [1950] AC 327.
I am inclined to think that the principle is sound, but I should prefer not to express a concluded view on the point.
It is not the position here.
The rule based approach and the range of factors approach
I can now return to the judicial schism to which I referred at the outset of this judgment.
A convenient starting point is the Supreme Court of Canadas decision in Hall v Hebert, to which I have already referred.
It is important to remember that the search for principle which led McLachlin J to identify consistency as the foundation of this area of law was a response to the judgment of Cory J in the same case.
He had favoured a more flexible test for applying the illegality principle, which would have depended on whether the relevant public policy required that result on the facts of each case: see p 205.
That approach was not accepted by the rest of the court.
Part of McLachlin Js concern about it arose from the absence of clear guidance as to when judges could exercise this draconian power and upon what grounds.
I fear that unless placed upon a firm doctrinal foundation and made subject to clear limits, this general power to invalidate actions on grounds of public policy might prove more problematic than has the troubled doctrine of ex turpi causa non oritur actio.
We would be trading one label for another without coming to grips with the fundamental problem. (p 169)
In Tinsley v Milligan [1994] 1 AC 340, a similar view was taken by Lord Goff.
I have cited extensively from this part of his speech in my judgment in Les Laboratoires Servier v Apotex Inc [2015] AC 430, para 16, and the exercise need not be repeated here.
In summary, Lord Goff objected to a test for applying the illegality principle which would require the court to weigh, or balance, the adverse consequences of respectively granting or refusing relief (p 358E F).
The adoption of such a test, he considered, at p 363, 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.
On this point, Lord Goff was supported by the whole of the Appellate Committee.
For many years, the chief critic of this approach was the Law Commission, which at one stage proposed legislation along the lines of the New Zealand Illegal Contracts Act 1970 to make the application of the illegality principle subject to a broad judicial discretion.
More recently, Professor Burrows has proposed that the same solution should be adopted by judicial decision, in his Restatement of the Law of Contract (2016).
He would make the application of the illegality principle dependent, at any rate in contract cases, on a range of factors approach.
This would require the judge to assess whether to deny a remedy would be an appropriate response to the claimants conduct, taking account where relevant of eight factors.
These factors are for the most part derived from the Law Commissions Consultative Report (paras 8.3, 8.11).
They are: (a) how seriously illegal or contrary to public policy the conduct was; (b) whether the party seeking enforcement knew of, or intended, the conduct; (c) how central to the contract or its performance the conduct was; (d) how serious a sanction the denial of enforcement is for the party seeking enforcement; (e) whether denying enforcement will further the purpose of the rule which the conduct has infringed; (f) whether denying enforcement will act as a deterrent to conduct that is illegal or contrary to public policy; (g) whether denying enforcement will ensure that the party seeking enforcement does not profit by the conduct; (h) whether denying enforcement will avoid inconsistency in the law, thereby maintaining the integrity of the legal system.
Lord Toulson, in his judgment on the present appeal, supports this approach while suggesting that yet further factors may also be relevant.
With the arguable exception of (a) and (d) all of the considerations identified by Professor Burrows have been influential factors in the development of the rules of law comprised in the illegality principle as it stands today.
Thus (b) is reflected in the requirement that, except where the making of the contract was itself illegal, there should have been some degree of participation by the claimant in the illegal act.
It is also reflected in the exception for cases in which he was liable for the acts of another by virtue only of a rule imposing strict liability.
As to (c), the purpose of the reliance test is to confine the illegality principle to cases in which the illegal act was truly central.
Factor (e) is the basis of the exception discussed earlier in this judgment for cases in which the application of the illegality principle would be inconsistent with the legal rule which makes the act illegal, for example because its object is the protection of someone in the position of the claimant.
It is also the basis on which claims are allowed for the restitution of money paid under an illegal contract.
As to (f) and (g), there can be no doubt that historically the hope of deterring illegal conduct and depriving those responsible of any benefit arising from it have been important factors in the development of the illegality principle, although I personally doubt whether any but the best advised litigants have enough knowledge of the law to be deterred by it.
Factor (h), as I have suggested, is the most widely accepted rationale for the illegality principle in the modern law.
The real issue, as it seems to me, is whether the range of factors identified by the Law Commission and Professor Burrows are to be regarded (i) as part of the policy rationale of a legal rule and the various exceptions to that rule, or (ii) as matters to be taken into account by a judge deciding in each case whether to apply the legal rule at all.
As matters stand, the former approach represents the law.
The latter would require the courts to weigh, or balance, the adverse consequences of respectively granting or refusing relief on a case by case basis, which was the very proposition that the House of Lords unanimously rejected in Tinsley v Milligan.
We are entitled to change the law, but if we do that we should do it openly, acknowledging what we are doing and assessing the consequences, including the indirect consequences, so far as we can foresee them.
In my opinion, it would be wrong to transform the policy factors which have gone into the development of the current rules, into factors influencing an essentially discretionary decision about whether those rules should be applied.
Neither party contended for such a result, and their reticence was in my view entirely justified.
It would be unprincipled and uncertain, and far from confining the ambit of the illegality principle to its essential minimum, it could only broaden it beyond its proper limits.
Perhaps most important of all, justice can be achieved without taking this revolutionary step.
The reason why the application of the range of factors test on a case by case basis is unprincipled is that it loses sight of the reason why legal rights can ever be defeated on account of their illegal factual basis.
It is I think right to make four points: i) Whatever rationale one adopts for the illegality principle, it is manifestly designed to vindicate the public interest as against the interests and legal rights of the parties.
That is why the judge is required to take the point of his own motion even if the parties have not raised it, as the deputy judge did in this case.
The operation of the principle cannot therefore depend on an evaluation of the equities as between the parties or the proportionality of its impact upon the claimant. ii) The range of factors test largely devalues the principle of consistency, by relegating it to the status of one of a number of evaluative factors, entitled to no more weight than the judge chooses to give it in the particular case.
The criminal law, which is in almost every case the source of the relevant illegality, is a critical source of public policy.
It is the prime example of the positive law (Lord Mansfields phrase) which has always moulded the law of illegality in civil proceedings.
The courts cannot consistently or coherently recognise legal consequences for an act which the law treats as punishable.
Gloster LJ, for example, thought it relevant that there was no finding that Mr Patel knew that insider dealing was illegal.
Yet that would have been of no relevance in a criminal court, and it is difficult to see why it should be any more relevant in a civil one.
Professor Burrows factor (f) (whether denying enforcement will ensure that the party seeking enforcement does not profit by the conduct) is surely fundamental to the principle of consistency, and not just a factor to be weighed up against others. iii) The main justification for the range of factors test has always been that it enables the court to avoid inflicting loss on the claimant disproportionate to the measure of his badness.
This was the instinct that led the Court of Appeal in Euro Diam Ltd v Bathurst [1990] 1 QB 1 to propose that the illegality principle should be applied only where the alternative would be shocking to the public conscience.
That concept was rejected in Tinsley v Milligan.
Since then, it has been suggested that there may be cases at the opposite end of the spectrum of gravity, in which the offence was too trivial to engage the illegality principle: see Gray v Thames Trains Ltd, at para 83 (Lord Rodger).
One would expect most if not all such offences to be covered by the exception for cases in which the application of the illegality principle would be inconsistent with the legal rule which makes the act illegal.
But, extremes apart, it is difficult to reconcile with any kind of principle the notion that there may be degrees of illegality, as Professor Burrows factor (a) seems to envisage.
If the application of the illegality principle is to depend on the courts view of how illegal the illegality was or how much it matters, there would appear to be no principle whatever to guide the evaluation other than the judges gut instinct.
This was why this court recently rejected the view expressed by the Court of Appeal in Les Laboratoires Servier v Apotex Inc [2013] Bus LR 80 that an illegal act might nevertheless found a cause of action if it was not as wicked as all that. iv) The range of factors test discards any requirement for an analytical connection between the illegality and the claim, by making the nature of the connection simply one factor in a broader evaluation of individual cases and offering no guidance as to what sort of connection might be relevant.
I have already observed that the reliance test is the narrowest test available.
If it is no longer to be decisive, the possibility is opened up of an altogether wider ambit for the illegality principle, extending to cases where the relevant connection was remote or non existent but other factors not necessarily involving any connection at all, were thought to be compelling.
The reason why the adoption of a range of factors test on a case by case basis would be uncertain is obvious in the light of these considerations.
An evaluative test dependent on the perceived relevance and relative weight to be accorded in each individual case to a large number of incommensurate factors leaves a great deal to a judges visceral reaction to particular facts.
Questions such as how illegal is illegality would admit of no predictable answer, even if the responses of different judges were entirely uniform.
In fact, it is an inescapable truth that some judges are more censorious than others.
Far from resolving the uncertainties created by recent differences of judicial opinion, the range of factors test would open a new era in this part of the law.
A new body of jurisprudence would be gradually built up to identify which of a large range of factors should be regarded as relevant and what considerations should determine the weight that they should receive.
No one factor would ever be decisive as a matter of law, only in some cases on their particular facts.
The size of the authorities bundles in this and other recent appeals to this court on the illegality principle is testimony to the volume of litigation which the principle has generated in every period of its history.
I do not suppose that those who are about to enter into an illegal transaction are in the habit of studying the decisions of the courts on the point, but those who advise them after the event do, and the resultant uncertainty is likely to generate a great deal of wasteful and unnecessary litigation.
I would readily accept that certainty is not the only value, or even necessarily the most important.
But we are concerned in this case with the law of contract, an area in which the value of certainty is very great.
It is one thing to say that a legal right may be overridden by a rule of law.
It is another thing altogether to make a legal right, and particularly a contractual right, dependent on a judges view about whether in all the circumstances it ought to be enforced.
Finally, I would point out that the adoption of such a revolutionary change in hitherto accepted legal principle is unnecessary to achieve substantial justice in the great majority of cases.
The unsatisfactory features of the illegality principle as it has traditionally been understood have often been overstated, in part because of the way in which they were emphasised by Lord Goff in Tinsley v Milligan.
It was, he said, not a principle of justice; it is a principle of policy, whose application is indiscriminate and so can lead to unfair consequences as between the parties to litigation (p 355B C).
That observation, however, reflected his view that no equitable interest in property could ever be claimed where the legal title had been vested in another for dishonest purposes.
The law had been stated in this way by Lord Eldon at the beginning of the 19th century: see Muckleston v Brown (1801) 6 Ves 52 and Curtis v Perry (1802) 6 Ves 739.
But Lord Eldons approach, although adopted by Lord Goff, was rejected by the majority of the Committee.
When the law of illegality is looked at as a whole, it is apparent that although governed by rules of law, a considerable measure of flexibility is inherent in those rules.
In particular, they are qualified by principled exceptions for (i) cases in which the parties to the illegal act are not on the same legal footing and (ii) cases in which an overriding statutory policy requires that the claimant should have a remedy notwithstanding his participation in the illegal act.
Properly understood and applied, these exceptions substantially mitigate the arbitrary injustices which the illegality principle would otherwise produce.
At the same time, the wider availability of restitutionary remedies which will result from the present decision will do much to mitigate the injustices which have hitherto resulted from the principle that the loss should lie where it falls.
For these reasons, I regret that I cannot agree with the conclusion of Lord Toulson (para 109) that that the application of the illegality principle should depend on the policy factors involved and the nature and circumstances of the illegal conduct, in determining whether the public interest in preserving the integrity of the justice system should result in the denial of the relief claimed.
In my opinion, this is far too vague and potentially far too wide to serve as the basis on which a person may be denied his legal rights.
It converts a legal principle into an exercise of judicial discretion, in the process exhibiting all the vices of complexity, uncertainty, arbitrariness and lack of transparency which Lord Toulson attributes to the present law.
I would not deny that in the past the law of illegality has been a mess.
The proper response of this court is not to leave the problem to case by case evaluation by the lower courts by reference to a potentially unlimited range of factors, but to address the problem by supplying a framework of principle which accommodates legitimate concerns about the present law.
We would be doing no service to the coherent development of the law if we simply substituted a new mess for the old one.
Application to the present case
Against that background it is in my view entirely clear that the transaction into which these parties entered was affected by the illegality principle.
The agreement pleaded, and found by the deputy judge to have been made, was not simply that Mr Mirza would place bets on movements of RBS shares for the joint account of himself and Mr Patel, but that he would do so with the benefit of inside information.
Subject to immaterial exceptions, section 52 of the Criminal Justice Act 1993 makes it an offence for a person in possession of inside information to deal or encourage another person to deal in securities, including contracts for differences.
This was accordingly an agreement for Mr Mirza to commit a criminal offence.
It was also a criminal conspiracy to that end.
Section 63(2) of the 1993 Act provides that: No contract shall be void or unenforceable by reason only of section 52.
The contracts affected by section 52 are contracts by way of dealing in securities.
It follows that if Mr Mirza had placed the spread bets with IG Index, as he had conditionally promised to do, the contract would have been enforceable as between himself and IG Index.
But Mr Patel could not have obtained specific performance of the distinct contract between himself and Mr Mirza or damages for breach of it.
This is because, first, he would have had to rely on the contract, which provided as one of its terms that the dealing should be carried out with the benefit of inside information.
Mr Patel could not have avoided this result by simply characterising it as an agreement to speculate in RBS shares without referring to the basis on which it was agreed that that should happen.
Secondly, none of the possible exceptions apply.
The parties were on the same legal footing.
Both would be liable to conviction for conspiracy in a criminal court, and any difference in the degree of their fault would be relevant only to the sentence.
Section 52 of the Criminal Justice Act 1993 is not a statute designed to protect the interests of persons entering into an agreement to commit the offence of insider dealing, and there is no other overriding statutory policy which requires their participation in the offence to be overlooked when it comes to determining its civil consequences.
However, restitution still being possible, none of this is a bar to Mr Patels recovery of the 620,000 which he paid to Mr Mirza.
The reason is simply that although Mr Patel would have to rely on the illegal character of the transaction in order to demonstrate that there was no legal basis for the payment, an order for restitution would not give effect to the illegal act or to any right derived from it.
It would simply return the parties to the status quo ante where they should always have been.
The only ground on which that could be objectionable is that the court should not sully itself by attending to illegal acts at all, and that has not for many years been regarded as a reputable foundation for the law of illegality.
This was Gloster LJs main reason for upholding Mr Patels right to recover the money.
Although my analysis differs in a number of respects from hers, I think that the distinction which she drew between a claim to give effect to a right derived from an illegal act, and a claim to unpick the transaction by an award of restitution, was sound.
In the circumstances, Mr Mirzas only arguable defence was that he had paid the money to Mr Georgiou, the intermediary who had proposed the deal.
But the judge declined to make a finding to this effect, and rejected a defence of change of position on the ground that even if it was true, Mr Mirza had had no reason to repay the money to anyone but Mr Patel from whom he had received it.
The Court of Appeal gave judgment for Mr Patel for 620,000 with interest.
For the reasons which I have given, which correspond to those given by Lord Mance and Lord Clarke, I would dismiss the appeal against that order.
| UK-Abs | Mr Patel gave Mr Mirza 620,000 to place bets on a banks share prices with the benefit of insider information.
Mr Mirza expected his contacts to inform him of a government announcement about the bank.
Mr Mirzas expectation was not fulfilled and the intended betting did not take place.
But Mr Mirza did not return the money to Mr Patel.
Mr Patel brought a claim against Mr Mirza for the money and Mr Mirza contended that the claim should fail because of the illegality of the arrangement with Mr Patel.
The issue was when involvement in illegality bars a claim.
Mr Patel succeeded in the Court of Appeal and Mr Mirza was required to repay the money.
Mr Mirza appealed to the Supreme Court.
The Supreme Court unanimously dismisses Mr Mirzas appeal.
Mr Patel is entitled to restitution of the 620,000 which he paid to Mr Mirza.
Lord Toulson (with whom Lady Hale, Lord Kerr, Lord Wilson and Lord Hodge agree) gives the lead judgment.
Lord Neuberger, Lord Mance, Lord Clarke and Lord Sumption concur in the result, but by different processes of reasoning.
Lord Mansfield said in Holman v Johnson (1775) 1 Cowp 341, 343 that no court will lend its aid to a man who founds his cause of action upon an immoral or an illegal act [1].
Behind this maxim, there are two broad policy reasons for the common law doctrine of illegality as a defence to a civil claim.
First, a person should not be allowed to profit from his own wrongdoing.
Second, the law should be coherent and not self defeating, condoning illegality by giving with the left hand what it takes with the right hand [99].
The reliance test expressed in Tinsley v Milligan [1994] 1 AC 340 bars the claimant if he/she relies on the illegality in order to bring the claim.
This test has been criticised and Tinsley should no longer be followed [110].
The essential rationale of the illegality doctrine, as explained by the Supreme Court of Canada in Hall v Hebert [1993] 3 RCS 159, 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 to consider a) the underlying purpose of the prohibition which has been transgressed and whether that purpose will be enhanced by
denial of the claim, b) any other relevant public policy on which the denial of the claim may have an impact and c) whether denial of the claim would be a proportionate response to the illegality.
Various factors may be relevant, but the court is not free to decide a case in an undisciplined way.
The public interest is best served by a principled and transparent assessment of the considerations identified, rather by than the application of a formal approach capable of producing results which may appear arbitrary, unjust or disproportionate [120].
In considering whether it would be disproportionate to refuse relief to which the claimant would otherwise be entitled, as a matter of public policy, various factors may be relevant.
Potentially relevant factors include the seriousness of the conduct, its centrality to the contract, whether it was intentional and whether there was marked disparity in the parties respective culpability [107].
A claimant, such as Mr Patel, who satisfies the ordinary requirements of a claim for unjust enrichment, should not be debarred from enforcing his claim by reason only of the fact that the money which he seeks to recover was paid for an unlawful purpose.
There may be rare cases where for some particular reason the enforcement of such a claim might be regarded as undermining the integrity of the justice system, but there are no such circumstances in this case [121].
Lord Kerr writes a concurring judgment elaborating on aspects of Lord Toulsons judgment.
Lord Kerr identifies that there is a choice of approaches between a rule based approach on the one hand and on the other a more flexible approach, taking into account the policy considerations that are said to favour recognising the defence of illegality [133].
A rule based approach to the question has failed to lead to the predictability it sought.
Further, it is questionable whether particular weight should be given to predictability where a claimant and defendant have been parties to an illegal agreement [137].
Lord Neuberger [143, 163], Lord Mance [197 199], Lord Clarke [210] and Lord Sumption [250, 253] all conclude there is no inconsistency in the law in permitting a party to an illegal arrangement to recover any sum paid under it, so long as restitution is possible.
An order for restitution simply returns the parties to the positon in which they would and should have been, had no such illegal arrangement been made.
Lord Neuberger goes on however to express the further view that, in relation to other issues involving illegal arrangements, the approach suggested by Lord Toulson provides as reliable and helpful guidance as it is possible to give [174, 186].
Lord Mance, Lord Clarke and Lord Sumption, in separate judgments expressing general agreement with each other, consider that, with the above clarification of the operation of restitution, there is no basis for substituting for the clear cut principle identified in Holman v Johnson and Hall v Hebert, founded on the need to maintain the integrity of the law, a mix of factors as advocated by Lord Toulson, which would not offer the same coherence or certainty [206 207, 216 219 and 259 265].
|
The United Kingdom was an occupying power in Iraq from May 2003, and a mandatory power acting in support of the Iraqi government from June 2004 until her withdrawal in 2011.
She was a mandatory power in Afghanistan between December 2001 and her withdrawal early in 2015.
In both countries, the United Kingdoms international status depended throughout on successive resolutions of the United Nations Security Council.
Substantial numbers of British troops were engaged in both theatres as part of separate multi national forces, primarily in southern Iraq and in the Afghan province of Helmand.
They were required to deal with exceptional levels of violence by organised armed groups.
In the course of their operations, prisoners were taken and detained in British military facilities for varying periods of time.
These two appeals arise out of actions for damages brought against the United Kingdom government by detainees, alleging unlawful detention and maltreatment by British forces.
They are two of several hundred actions in which similar claims are made.
In both cases, the claim is based in part on article 5(1) of the European Convention on Human Rights, which provides that no one shall be deprived of his liberty except in six specified cases and in accordance with a procedure prescribed by law.
They also rely on article 5(4), which requires that the detainee should be entitled to take proceedings by which the lawfulness of his detention may be tested.
The appeals have been heard together with a view to resolving one of the more controversial questions raised by such actions, namely the extent to which article 5 applies to military detention in the territory of a non Convention state in the course of operations in support of its government pursuant to mandates of the United Nations Security Council.
Abd Ali Hameed Ali Al Waheed was captured by HM forces at his wifes home in Basrah on 11 February 2007 during a search.
The Secretary of State contends that components for improvised explosive devices (IEDs) and explosive charges and various other weaponry were found on the premises.
He was held at a British army detention centre for six and a half weeks.
He was then released after an internal review had concluded that a successful prosecution was unlikely, as there was no evidence that he had personally handled the explosives.
At a pre trial review before Leggatt J, it was common ground that so far as Mr Al Waheeds claim was based on detention in breach of article 5(1) of the Convention, the judge and the Court of Appeal would be bound to dismiss it by the decision of the House of Lords in R (Al Jedda) v Secretary of State for Defence [2008] AC 332.
The Appellate Committee had held in that case that article 5(1) was displaced by the United Nations Security Council Resolutions authorising military operations in Iraq.
The judge was therefore invited to dismiss the claim under article 5(1) by consent and grant a certificate for a leap frog appeal directly to the Supreme Court.
A limited number of facts have been agreed, but there are no findings.
Serdar Mohammed, whom I shall refer to as SM, was captured by HM forces in Afghanistan on 7 April 2010.
The Secretary of State contends that he was captured in the course of a planned operation involving a firefight lasting ten hours in which a number of men were killed or wounded, and that he was seen to flee from the site, discarding a rocket propelled grenade launcher and ammunition as he went.
He was brought into Camp Bastion at Lashkar Gah, which was the joint operating base of the British army in Helmand.
Intelligence is said to have identified him shortly afterwards as a senior Taliban commander who had been involved in the large scale production of IEDs and was believed to have commanded a Taliban training camp in 2009.
SM was detained for a period of three and a half months in British military holding facilities until 25 July 2010, when he was transferred to the Afghan authorities.
He was subsequently convicted by the Afghan courts for offences relating to the insurgency and sentenced to ten years imprisonment.
In his case, the procedural history is more complicated.
Leggatt J directed three preliminary issues to be determined on the assumption that the circumstances of SMs capture and detention, as pleaded in the Secretary of States defence, were true.
One of the preliminary issues concerned the relationship between article 5 of the Convention and the international law governing detention in the course of armed conflict.
In the result, the judge held that in Afghanistan HM forces had no power, either under the relevant Security Council Resolutions or under customary international law, to detain prisoners for any longer than was required to hand them over to the Afghan authorities, and then for no more than 96 hours.
He also found that they had no greater power under the domestic law of Afghanistan.
On that footing, he considered that in detaining SM the United Kingdom was in breach of article 5(1) and (4) of the Convention: see [2014] EWHC 1369 (QB).
The Court of Appeal, although differing from some aspects of the judges reasoning, reached the same conclusion: see [2016] 2 WLR 247.
These decisions, and the reasoning behind them, have significant implications for the Ministry of Defence and for British troops deployed to Iraq or Afghanistan and indeed other theatres to which they may be deployed under UN mandates.
The Secretary of State formulated eight grounds on which he sought leave to appeal to the Supreme Court in Serdar Mohammed.
He received permission to appeal, either from the Court of Appeal or from the Supreme Court on six of them, the question of permission for the other two being deferred until the hearing.
As a result of directions given in the course of the appeals, the sole ground of appeal before us at the opening of the hearing was the Secretary of States ground 4.
In the statement of facts and issues in Serdar Mohammed, the parties agreed that ground 4 raised the following issues: (1) Whether HM armed forces had legal power to detain SM in excess of 96 hours pursuant to: the relevant resolutions of the United Nations International Humanitarian Law applicable in a (a) Security Council; and/or (b) non international armed conflict.
If so, whether article 5(1) of the ECHR should be read (2) so as to accommodate, as permissible grounds, detention pursuant to such a power to detain under a UN Security Council Resolution and/or International Humanitarian Law.
In Al Waheed, the parties are agreed that the same issues arise, except that the question is whether HM armed forces had power to detain Mr Al Waheed at all, there being no separate issue relating to the first 96 hours.
In the course of the hearing the parties were invited to make written submissions on two further questions arising in SMs appeal about the scope of article 5, which had been argued before Leggatt J and the Court of Appeal.
This was because it was considered to be unsatisfactory to examine the Secretary of States ground 4 without regard to them.
The additional questions substantially corresponded to the Secretary of States grounds 5 and 6.
They were: (3) Whether SMs detention was compatible with article 5(1) on the basis that it fell within paragraph (c) of article 5(1) of the Human Rights Convention (detention for the purpose of bringing a suspect before a competent judicial authority) or article 5(1)(f) (detention pending extradition); and (4) Whether the circumstances of his detention were compatible with article 5(4) of the Human Rights Convention (if necessary, as modified).
These are complex appeals raising distinct issues, which were argued in stages.
They are also related to other appeals arising out of military operations in Iraq and Afghanistan which were before the court at the same time.
For these reasons the argument has extended over an unusually long period, rather more than a year.
The retirement of Lord Toulson in July 2016 meant that he did not sit on the oral argument on the procedural requirements of articles 5(1) and 5(4) of the Convention, and has been concerned only with the other issues.
Lord Hodge, who sat for the first time on these appeals in October 2016 has been concerned only with those procedural issues.
International and Non International Armed Conflict
International humanitarian law is the modern name for what used to be called the law of war and is still commonly called the law of armed conflict.
It is a body of international law based on treaty and custom, which seeks to limit for humanitarian reasons the effects of armed conflict.
International humanitarian law distinguishes between international and non international armed conflict.
An international armed conflict is an armed conflict between states.
A non international armed conflict is an armed conflict between one or more states on the one hand and non state actors on the other.
In theory, it is the difference between an armed conflict of juridical equals and an armed conflict conducted by a lawfully constituted authority against organised rebels or criminals.
The distinction is an ancient one.
It dates back at least as far as Grotius (De Jure Belli ac Pacis I.4, III.6.27), who limited certain belligerent rights to public wars, on the ground that the rights of participants in civil wars were governed by municipal law administered by the municipal judge.
But the crude distinction proposed by Grotius was never an adequate tool for dealing with the complex position of non state actors.
As Vattel pointed out a century later (Droit des Gens, III.18.293), civil wars break the bonds of society, leaving the parties without a common judge and in the same practical position as two nations.
Vattel made this point in support of his argument that once a civil war achieved a level of intensity on a par with an interstate war, the humanitarian customs of war should be observed by both sides.
But ever since his day, there has been a tension between the desire of states to civilise the conduct of war by extending humanitarian rules to all armed conflicts, and their desire to treat their internal enemies as rebels and criminals rather than belligerents.
International humanitarian law treats the parties to international armed conflicts as juridically equal and their rights and obligations as reciprocal.
It proceeds on the basis that in such a conflict members of the armed forces of a state are reciprocally entitled to combatant immunity.
They commit no offence by merely participating in the armed conflict, but only by committing war crimes proscribed by international law.
Their detention is authorised on the footing that it is a purely administrative measure with no penal purpose, and must terminate when the armed conflict ends.
However, notwithstanding the persistent advocacy of the International Committee of the Red Cross in favour of applying the same rules under both regimes, states have generally been reluctant to accept that a non international armed conflict can be reciprocal in the same way as international armed conflicts.
Their concern is that unless a special regime is devised for such conflicts, the corollary would be a recognition of the juridical equality of the participants and the immunity of non state actors.
None the less, it is now accepted that the law of armed conflict cannot be confined to wars waged between states.
A non international armed conflict is an armed conflict for the purposes of international humanitarian law, albeit that it raises more difficult problems of definition and classification than an international armed conflict.
The leading modern authorities are the decisions of the International Criminal Tribunal for Yugoslavia, whose jurisdiction depends on the existence of an armed conflict.
They identify non international armed conflicts by reference to their duration, their intensity and the degree of organisation of the non state actors engaged.
In its widely cited decision in Prosecutor v Duko Tadi (Jurisdiction of the Tribunal) ICTY Case No IT 94 1 AR72 (2 October 1995), the Tribunal held (para 70) that an armed conflict existed whenever there is a resort to armed force between states or protracted armed violence between governmental authorities and organised armed groups or between such groups within a state, provided that it exceeds the intensity requirements applicable to both international and internal armed conflicts.
The intensity requirements were considered in greater detail in Prosecutor v Ramush Haradinaj ICTY Case No IT 04 84 T (3 April 2008).
Indicative factors included (para 49): intensity of the number, duration and individual confrontations; the type of weapons and other military equipment used; the number and calibre of munitions fired; the number of persons and type of forces partaking in the fighting; the number of casualties; the extent of material destruction; and the number of civilians fleeing combat zones.
The involvement of the UN Security Council may also be a reflection of the intensity of a conflict.
In short, the test is whether the operations conducted by non state actors are characteristic of those conducted by the armed forces of the state, as opposed to its police force.
It is common ground that British troops in Afghanistan were engaged in an armed conflict.
The main distinction between international and non international armed conflict lies in the more limited provision made for the latter in the main relevant treaties.
Although the earliest Geneva Convention was adopted in 1864, no attempt was made to provide by treaty for non international armed conflicts until the Geneva Conventions of 1949.
Article 21 of the Third Geneva Convention of 1949 in terms confers on states a right to detain prisoners of war which they had long enjoyed as a matter of customary international law, and comprehensively regulates the conditions of their detention.
Article 78 of the Fourth Geneva Convention confers on an occupying power a right to detain civilians in cases where this is considered necessary for imperative reasons of security.
But these provisions apply only in international armed conflicts: see common article 2.
The International Committee of the Red Cross had proposed that the Conventions of 1949 should apply in their entirety in international and non international armed conflicts alike.
But this proposal was rejected by most states.
Instead, it was agreed to confer a more limited measure of protection by common article 3, which unlike the rest of the Conventions applied in the case of armed conflict not of an international character occurring in the territory of one of the High Contracting Parties.
Common article 3 does not in terms confer a right of detention.
But it provides for the humane and non discriminatory treatment of persons taking no active part in the hostilities, including members of armed forces who have laid down their arms and those placed hors de combat by sickness, wounds, detention or any other cause.
It specifically prohibits the practice against such persons of violence, killing, mutilation, cruelty, torture, hostage taking and outrages against their personal dignity, as well as the infliction of penal sentences upon them otherwise than by the judgment of a regularly constituted court affording all the judicial guarantees which are recognised as indispensable by civilised peoples.
Further provision for the treatment of prisoners in non international armed conflicts is made by Protocol II, adopted in 1977 in cases where dissident armed forces or other armed groups control part of the territory of a state so as to enable them to carry out sustained and concerted military operations and to implement this Protocol: article 1.
In those circumstances, the existence of a legal right in international law to detain members of opposing armed forces in a non international armed conflict must depend on (i) customary international law, and/or (ii) the authority of the Security Council of United Nations.
To establish the existence of a rule of customary law, two things are required.
First, there must be a uniform, or virtually uniform practice of states conforming to the proposed rule, reflected in their acts and/or their public statements; and, secondly, the practice must be followed on the footing that it is required as a matter of law (opinio juris).
It follows that although the decisions of domestic courts may be evidence of state practice or of a developing legal consensus, they cannot themselves establish or develop a rule of customary international law: see Jones v Ministry of the Interior of the Kingdom of Saudi Arabia [2007] 1 AC 270 at para 63 (Lord Hoffmann).
Lord Reed has dealt fully in his judgment with the question whether the detention of members of the opposing armed forces is sanctioned by customary international law in a non international armed conflict.
He concludes that as matters stand it is not, and I am inclined to agree with him about that.
But for reasons which will become clear, I regard it as unnecessary to express a concluded view on the point.
It is, however, right to make certain observations about it which bear on the construction of the relevant Security Council Resolutions.
The first is that, whether or not it represents a legal right, detention is inherent in virtually all military operations of a sufficient duration and intensity to qualify as armed conflicts, whether or not they are international.
As the International Committee of the Red Cross has recently observed (Statement, 27 April 2015), deprivation of liberty is a reality of war.
Whether detention is carried out by states or by non state armed groups, whether it is imposed on military personnel or on civilians, it is certain to occur in the vast majority of armed conflicts.
The same view was expressed by the Supreme Court of the United States in holding, in Hamdi v Rumsfeld 542 US 507 (2004), at p 10, that a power of detention was implicitly conferred by a statute authorising the use of all necessary and appropriate force: Detention of individuals falling into the limited category we are considering [the Taliban and Al Qaeda], for the duration of the particular conflict in which they were captured, is so fundamental and accepted an incident to war as to be an exercise of the necessary and appropriate force Congress has authorized the President to use.
It has been the practice of states to capture and detain members of the opposing armed forces throughout the recorded history of war.
That includes its recent history, which has for the most part been a history of non international armed conflicts.
The purpose of any state participating in an armed conflict is to overcome the armed forces of the other side.
At any time when the opposing forces are in the field, this necessarily involves disabling them from fighting by killing them or putting them hors de combat.
The availability of detention as an option mitigates the lethal character of armed conflict and is fundamental to any attempt to introduce humanitarian principles into the conduct of war.
In many cases, the detention of an enemy fighter is a direct alternative to killing him, and may be an obligation, for example where he surrenders or can be physically overpowered.
As the majority of the US Supreme Court observed in Hamdi, at p 11, citing the earlier decision in In re Territo 156 F 2d 142, 145, (1946) The object of capture is to prevent the captured individual from serving the enemy.
He is disarmed and from then on must be removed as completely as practicable from the front, treated humanely, and in time exchanged, repatriated, or otherwise released.
Second, if there is nevertheless an insufficient consensus among states upon the legal right of participants in armed conflicts to detain under customary international law, it is not because of differences about the existence of a right of detention in principle.
At their most recent international conference (Geneva, 8 10 December 2015), the constituent associations of the Red Cross and Red Crescent approved a resolution by consensus which recited that states had the power to detain in all forms of armed conflict and proposing measures to strengthen the humanitarian protection available to detainees.
The lack of international consensus really reflects differences among states about the appropriate limits of the right of detention, the conditions of its exercise and the extent to which special provision should be made for non state actors.
There is no doubt that practice in international and non international armed conflicts is converging, and it is likely that this will eventually be reflected in opinio juris.
It is, however, clear from the materials before us that a significant number of states participating in non international armed conflicts, including the United Kingdom, do not yet regard detention as being authorised in such conflicts by customary international law.
Third, if there were a right of detention on whatever legal basis, there are various conditions which might be imposed for its exercise.
But if the right were to have any reality, it would at least have to apply in a case where detention was necessary for imperative reasons of security, the test which article 78 of the Fourth Geneva Convention (1949) applies to the right of an Occupying Power to detain civilians.
This is the narrowest available test, and the one which has been proposed by the International Committee of the Red Cross.
On these appeals, the Secretary of State does not contend for anything less.
The Security Council Resolutions
At the time of Mr Al Waheeds detention, the relevant Security Council Resolution was 1723 (2006).
This extended the authority conferred by Resolution 1546 (2004), which had marked the point at which Britain ceased to be an occupying power in Iraq and became a mandatory power acting in support of the newly formed indigenous government of Iraq.
Articles 9 and 10 of Resolution 1546 (2004) It is convenient to start with the position in Iraq. reaffirmed the authorisation conferred by earlier resolutions for the multinational force to operate in Iraq, and conferred on it the authority to take all necessary measures to contribute to the maintenance of security and stability in Iraq in accordance with the letters annexed to this resolution expressing, inter alia, the Iraqi request for the continued presence of the multinational force and setting out its tasks, including by preventing and deterring terrorism, so that, inter alia, the United Nations can fulfil its role in assisting the Iraqi people as outlined in para 7 above and the Iraqi people can implement freely and without intimidation the timetable and programme for the political process and benefit from reconstruction and rehabilitation activities.
The attached letters included a letter of 5 June 2004 from the US Secretary of State, which expressed the willingness of the United States to deploy forces to maintain internal security in Iraq.
Their activities, he said include activities necessary to counter ongoing security threats posed by forces seeking to influence Iraqs political future through violence.
This will include combat operations against members of these groups, internment where this is
necessary for imperative reasons of security
R (Al Jedda) v Secretary of State for Defence [2008] AC 332 arose out of the detention of the applicant by HM forces in Iraq in October 2004.
Article 103 of the UN Charter provides that the obligations of members under the Charter should prevail over their obligations under any other international agreement.
The main issue on the appeal was whether that meant that the Security Council Resolutions authorising military operations in Iraq displaced article 5 of the European Convention on Human Rights.
This depended on whether detention in the course of those operations was an obligation, or merely a power.
The House of Lords held that Resolution 1546 both authorised and required the exercise of a power of detention where this was necessary for imperative reasons of security.
Lord Bingham, with whom the rest of the House agreed, gave three reasons for this.
The first was that British forces occupying Iraq before Resolution 1546 came into effect had been authorised to intern persons for imperative reasons of security.
This was because detention in those circumstances was authorised by the Hague Regulations (1907), and if the occupying power considers it necessary to detain a person who is judged to be a serious threat to the safety of the public or the occupying power there must be an obligation to detain such person. (para 32) Resolution 1546 was intended to continue the pre existing security regime, not to change it.
Lord Binghams second reason was that although the resolution was couched in permissive terms, this merely reflected the fact that the United Nations can invite but not require states to contribute forces for purposes such as the security of Iraq.
Applying a purposive approach, and adopting the view of a substantial body of academic writing, he considered the exercise of that authority to be an obligation for those who accede to that invitation.
The third reason was that those states which contributed forces became bound by articles 2 and 25 of the UN Charter to carry out the decisions of the Security Council so as to achieve its objectives.
They were therefore bound to exercise the power of detention where this was necessary for imperative reasons of security.
The decision of the Appellate Committee in Al Jedda was rejected by the European Court of Human Rights when the matter came before them: Al Jedda v United Kingdom (2011) 53 EHRR 23.
I shall return to the implications of this decision below.
But it was rejected only insofar as it treated the exercise of the power of detention as an obligation.
It was not suggested that the exercise of the power of detention was not even authorised by the Security Council Resolution.
Turning to the position in Afghanistan, Security Council Resolution 1386 (2001) authorised the establishment of an International Security Assistance Force to assist the Afghan Interim Authority in the maintenance of security in Kabul and its surrounding areas so that the Afghan Interim Authority can operate in a secure environment.
It called on the International Security Assistance Force (ISAF) to work in close consultation with the Afghan Interim Authority in the implementation of the force mandate, and on member states to contribute personnel and resources to ISAF.
Article 3 authorised member states participating in the International Security Assistance Force to take all necessary measures to fulfil its mandate.
The mandate was subsequently extended by Resolution 1510 (2003) to the provision of security assistance for reconstruction and humanitarian efforts throughout Afghanistan.
At the time of SMs detention, the most recent Security Council Resolution was 1890 (2009), which extended the mandate by twelve months and reaffirmed its earlier resolutions.
Resolution 1890 contained a number of recitals which throw light on the nature of ISAFs role as it was then perceived to be and on the dangerous character of its mission.
The recitals recognised that the responsibility for providing security and law and order resided with the government of Afghanistan, and that the mandate of ISAF was to assist the Afghan government to improve the security situation.
What was meant by the security situation appears from a subsequent recital expressing the Security Councils strong concern about the security situation in Afghanistan, in particular the increased violent and terrorist activities by the Taliban, Al Qaida, illegally armed groups, criminals and those involved in the narcotics trade, and the increasingly strong links between terrorism activities and illicit drugs, resulting in threats to the local population, including children, national security forces and international military and civilian personnel.
The recitals go on to express concern about the high level of civilian casualties, and the harmful consequences of violent and terrorist activities by the Taliban, Al Qaida and other extremist groups on the capacity of the Afghan Government to guarantee the rule of law, to provide security and basic services to the Afghan people, and to ensure the full enjoyment of their human rights and fundamental freedoms.
They condemned in the strongest terms all attacks, including Improvised Explosive Device (IED) attacks, suicide attacks and abductions, targeting civilians and Afghan and international forces and their deleterious effect on the stabilization, reconstruction and development efforts in Afghanistan, and condemning further the use by the Taliban, Al Qaida and other extremist groups of civilians as human shields.
They recorded the Security Councils support for ISAFs work in improving the security situation in Afghanistan in the face of these threats, and welcomed ISAFs intention to undertake continued enhanced efforts in this regard including the increased focus on protecting the Afghan population as a central element of the mission, and noting the importance of conducting continuous reviews of tactics and procedures and after action reviews and investigations in cooperation with the Afghan Government in cases where civilian casualties have occurred and when the Afghan Government finds these joint investigations appropriate.
Under article 24 of the United Nations Charter, the Security Council has primary responsibility for the maintenance of international peace and security, and under article 25 the member states of the UN have a duty to carry out its decisions in accordance with the Charter.
The basis of the Security Council Resolutions in Iraq and Afghanistan was Chapter VII (Action with respect to Threats to the Peace, Breaches of the Peace and Acts of Aggression).
This confers extensive powers on the Security Council to deploy force on its own account or call on its members to do so, and imposes on members corresponding duties to support these operations.
Measures taken under Chapter VII of the United Nations Charter are a cornerstone of the international legal order.
They are taken under a unique scheme of international law whose binding force is now well established.
In Legal Consequences for States of the Continued Presence of South Africa in Namibia, Advisory Opinion [1971] ICJ Rep 16, paras 115 116, the International Court of Justice confirmed that these provisions are binding not only by treaty on members of the United Nations but as a matter of customary international law on the small number of states which are not members.
In Kuwait Airways Corpn v Iraqi Airways Co (Nos 4 and 5) [2002] 2 AC 883, at para 115, Lord Steyn described them as embodying a principle of international public policy.
At para 114 he summarised their status in the following terms: Not only has the Charter of the United Nations been adhered to by virtually all states, that is 189 states, but even the few remaining non members, have acquiesced in the principles of the Charter: American Law Institute, Restatement of the Law, The Foreign Relations of Law of the United States, 3d (1987), Section 102, comment (h).
It is generally accepted that the principles of the United Nations Charter prohibiting the use of force have the character of jus cogens, ie is part of peremptory public international law, permitting no derogation: see Restatement, p 28, para 102, comment (k).
Security Council Resolutions under Chapter VII of the Charter, and therefore the resolutions in question here, were binding in law on all members including the United Kingdom and Iraq It would have been contrary to the international obligations of the United Kingdom were its courts to adopt an approach contrary to its obligations under the United Nations Charter and under the relevant Security Council Resolutions.
These considerations are recognised in the jurisprudence of the European Court of Human Rights in the same way as they are by other international courts and by the domestic courts of England.
In Behrami v France; Saramati v France, Germany and Norway (2007) 45 EHRR SE10 at paras 148 149, the Strasbourg Court declined to review the compatibility of the acts of French, German and Norwegian troops operating under direct United Nations command.
In doing so it drew attention to the significance of the UNs functions in conducting peacekeeping operations or authorising member states to conduct such operations, and to the special legal framework within which these functions were performed. 148. the primary objective of the UN is the maintenance of international peace and security.
While it is equally clear that ensuring respect for human rights represents an important contribution to achieving international peace (see the Preamble to the Convention), the fact remains that the UNSC has primary responsibility, as well as extensive means under Chapter VII, to fulfil this objective, notably through the use of coercive measures.
The responsibility of the UNSC in this respect is unique and has evolved as a counterpart to the prohibition, now customary international law, on the unilateral use of force. 149.
Since operations established by UNSC Resolutions under Chapter VII of the UN Charter are fundamental to the mission of the UN to secure international peace and security and since they rely for their effectiveness on support from member states, the Convention cannot be interpreted in a manner which would subject the acts and omissions of contracting parties which are covered by UNSC Resolutions and occur prior to or in the course of such missions, to the scrutiny of the Court.
To do so would be to interfere with the fulfilment of the UNs key mission in this field including, as argued by certain parties, with the effective conduct of its operations.
It would also be tantamount to imposing conditions on the implementation of a UNSC Resolution which were not provided for in the text of the Resolution itself.
This reasoning equally applies to voluntary acts of the respondent States such as the vote of a permanent member of the UNSC in favour of the relevant Chapter VII Resolution and the contribution of troops to the security mission: such acts may not have amounted to obligations flowing from membership of the UN but they remained crucial to the effective fulfilment by the UNSC of its Chapter VII mandate and, consequently, by the UN of its imperative peace and security aim.
A Security Council Resolution adopted in the exercise of these responsibilities is not itself a treaty, nor is it legislation.
But it may constitute an authority binding in international law to do that which would otherwise be illegal in international law.
Sir Michael Wood, a former Principal Legal Adviser to the Foreign and Commonwealth Office, has made the point that Security Council Resolutions are not usually drafted by the Secretariat, but within the various national missions.
For this reason they are not always clear or consistent either in themselves or between one resolution and another: The Interpretation of Security Council Resolutions, Max Planck Yearbook of United Nations Law [1998] 73.
The meaning of a Security Council Resolution is generally sensitive to the context in which it is made.
In its advisory opinion of June 1971 on the Legal consequences for states of the continued presence of South Africa in Namibia (South West Africa) notwithstanding Security Council Resolution 276 (1970) [1971] ICJ Rep 16, 53, para 114, the International Court of Justice observed: The language of a resolution of the Security Council should be carefully analysed before a conclusion can be made as to its binding effect.
In view of the nature of the powers under article 25 [which requires member states to carry out decisions of the Security Council], the question whether they have been in fact exercised is to be determined in each case, having regard to the terms of the resolution to be interpreted, the discussions leading to it, the Charter provisions invoked and, in general, all circumstances that might assist in determining the legal consequences of the resolution of the Security Council.
The expression all necessary measures, as used in a Security Council Resolution has, however, acquired a meaning sanctioned by established practice.
It authorises the use of the full range of measures open to the United Nations itself for the purpose of maintaining or restoring international peace and security under Chapter VII of the Charter.
This will normally involve the use of force under article 42, but subject to the requirement that the measures should be necessary.
What is necessary depends primarily on the specific mandate, on the general context and on any conditions or limitations laid down in the resolution.
In Gill & Flecks valuable Handbook of the International Law of Military Operations (2010), at para 25.03, the opinion is expressed that although Security Council Resolutions do not as a rule authorise operational detention in so many words, a mandate to use all necessary means to achieve the assigned tasks logically encompasses operational detention as one such means, if indeed necessary.
A similar approach was adopted by the European Court of Human Rights in Behrami v France; Saramati v France, Germany and Norway, supra.
In that case, the analysis of the legal responsibility of UN forces proceeded on the basis, accepted by the Court, that Security Council Resolution 1244 (1999), authorising military operations in Kosovo, implicitly authorised detention: see paras 124, 127.
There was no express authority to detain.
But it was deduced from the authority conferred on troop contributing nations by article 7 to take all necessary means to fulfil certain responsibilities specified in article 9, including supporting the work of the international civil presence.
In my opinion, that inference was inevitable, just as it is in relation to the corresponding operations in Iraq and Afghanistan.
This point is not dependent on the categorisation of the relevant armed conflict as international or non international.
In my opinion, it is clear that the authorisation given to troop contributing states in Afghanistan by Resolution 1386 (2001) to use all necessary measures included the detention of members of the opposing armed forces when this was required for imperative reasons of security.
The nature of the mission, apparent from the context recited in Resolution 1890 (2009), involved operations of two kinds.
The first entailed operations ancillary to the ordinary law enforcement processes of the Afghan government, essentially heavy police work.
The second entailed armed combat with the forces of an organised insurrection, with a view to defending ISAF and its contingent forces, protecting the civilian population against the continual threat of violence, and creating a secure environment for the reconstruction of the Afghan state and the country generally.
The distinction between these two functions broadly corresponds to the distinction made by UK military doctrine between (i) military internment authorised either by the host states municipal law or by United Nations Security Council Resolutions, and (ii) criminal detention in support of the national police force: see Joint Doctrine Publication 1 10 (Prisoners of War, Internees, Detainees, April 2006), at para 113.
In performing functions in the former category they must be authorised to employ methods appropriate to military operations.
In short, if detention is imperative for reasons of security, it is must be necessary for the performance of the mission.
Leggatt J accepted this up to a point, but considered that it could authorise detention only for a very short period.
His reason was that once a prisoner had been captured and disarmed, he no longer represented an imminent threat to the security of HM forces or the civilian population.
His continued detention thereafter could not therefore be justified under the Security Council Resolutions.
This seems a surprising conclusion and it was rejected, rightly to my mind, by the Court of Appeal.
If a person is a sufficient threat to HM forces or the civilian population to warrant his detention in the first place, he is likely to present a sufficient threat to warrant his continued detention after he has been disarmed.
Unless UK forces are in a position to transfer him for detention to the civil authorities for possible prosecution, the only alternative is to release him and allow him to present the same threat to HM forces or the civilian population.
This necessarily undermines the mission which constitutes the whole purpose of the armys operations.
I conclude that in both Iraq and Afghanistan, the relevant Security Council Resolutions in principle constituted authority in international law for the detention of members of the opposing armed forces whenever it was required for imperative reasons of security.
It was not limited to detention pending the delivery of the detainee to the Afghan authorities.
I say that this was the position in principle, because that conclusion is subject to (i) in the case of SM the question whether that authority was limited to 96 hours by virtue of the detention policy of ISAF, and (ii) in the case of both SM and Mr Al Waheed, the question whether the authority conferred by the relevant Security Council Resolutions was limited by article 5 of the European Convention on Human Rights.
The alleged limitation of detention to 96 hours in Afghanistan
This issue arises from differences between the detention policy applied generally by ISAF and that operated by United Kingdom forces and the forces of certain other troop contributing nations in their own areas of operation.
Both Leggatt J and the Court of Appeal concluded that although detention was in principle authorised by the Security Council Resolutions for imperative reasons of security, in Afghanistan the duration of that detention was limited to 96 hours by ISAFs detention policy.
In order to address this question, it is necessary to say something about the relationship between ISAF and the command structure of British forces in Afghanistan.
Overall command of ISAF was exercised by its commander in Afghanistan who was himself under the command of NATO at the relevant time.
ISAFs detention policy was contained in its Standard Operating Procedures for detention (SOP 362).
Paras 4 8 of SOP 362 provided that the only grounds on which a person might be detained were that detention was necessary for ISAF force protection, self defence of ISAF or its personnel or the accomplishment of the ISAF mission.
Detention was limited to 96 hours, after which the person must either be released or transferred to the Afghan authorities.
That period could be extended on the specific authority of the ISAF commander or his delegate, or in a case where there were logistical difficulties about effecting his release or transfer within the 96 hour period.
Across Afghanistan there was a regional command structure with distinct task forces.
Most British troops, including those who detained SM, were deployed in Helmand as part of Task Force Helmand.
They operated there under their own national chain of command.
British commanders in the field reported up their chain of command to UK Permanent Joint Headquarters, which in turn reported to the Ministry of Defence.
The judge found that the conduct of operations in Afghanistan, including detention policy, was regarded as United Kingdom sovereign business.
He described the relationship between the UK Detention Authority and the ISAF chain of command as one of liaison and coordination only.
The British position, summarised in a military assessment report of September 2006, was that the United Kingdom was responsible for complying with its domestic and international legal obligations and that this required that responsibility for detention should rest with British officials.
The judge found (para 181) that ISAF headquarters tacitly accepted this, and that thereafter detention decisions continued to be taken by British officials without involving ISAF.
It was essentially for this reason that the judge and the Court of Appeal found that the United Kingdom and not the United Nations was responsible for SMs detention, a conclusion which is no longer challenged.
It is clear from the recitals in the successive Resolutions of the Security Council, culminating in Resolution 1890 (2009), that the level of violence increased over time and that the threat to the force and the civilian population from suicide attacks, improvised explosive devices and other extreme methods had become very serious by 2009.
The evidence is that Helmand was one of the most difficult provinces.
In these circumstances, the United Kingdom government became concerned that the 96 hour limit was unsatisfactory, primarily because in some cases it did not allow long enough for the prisoner to be interrogated with a view to acquiring valuable intelligence which was judged essential for mission accomplishment.
This was unsatisfactory to the main detaining nations (identified as the United States, the United Kingdom, Canada and the Netherlands), but it was considered that agreement to a change would not be obtained from other detaining nations or from non detaining nations.
For these reasons, the United Kingdom decided in November 2009 to adopt its own detention policy.
The UK policy was announced in Parliament on 9 November 2009: see Hansard (HL (Written Statements)), 9 November 2009, cols WS 31 32).
The minister recorded that under ISAF guidelines, detainees were either transferred to the Afghan authorities within 96 hours for potential prosecution, or released.
He said that in the majority of cases, UK forces will operate in this manner.
However, in the light of the evolving threat to our forces, they would detain for longer periods those prisoners who can yield vital intelligence that would help protect our forces and the local population potentially saving lives, particularly when detainees are suspected of holding information on the placement of improvised explosive devices.
Given the ongoing threat faced by our forces and the local Afghan population, this information is critical, and in some cases 96 hours will not be long enough to gain that information from the detainees.
Indeed, many insurgents are aware of the 96 hours policy and simply say nothing for that entire period.
In these circumstances the Government have concluded that Ministers should be able to authorise detention beyond 96 hours, in British detention facilities to which the ICRC has access.
Each case will be thoroughly scrutinised against the relevant legal and policy considerations; we will do this only where it is legal to do so and when it is necessary to support the operation and protect our troops.
The new policy was notified to NATO, which made no objection.
The judge found that it was also accepted by ISAF headquarters.
The detention policy applied by HM forces in Afghanistan was contained in UK Standard Operating Instructions (SOI) J3 9 (Stop, Search and Detention Operations in the Herrick JOA), issued on the authority of UK Permanent Joint Headquarters.
It was originally issued in 2006.
At the time of SMs capture, the version in force was Amendment 1, issued on 6 November 2009.
This was replaced on 10 April 2010, three days after SMs capture, by Amendment 2, which was issued to forces in the field two days later on 12 April.
Since Amendment 2 was in force for substantially the whole of the period when the judge found SMs detention to have been unlawful, I shall refer throughout to this version.
SOI J3 9 authorised British troops to conduct stops, search, detention and questioning procedures in accordance with [Security Council Resolutions] for reasons of force protection, mission accomplishment and self defence.
The introduction sets out in general terms the principles governing detention policy.
It provided: 6.
Detention Criteria.
UK Forces are authorised to conduct stop, search, detention and question procedures in accordance with Reference A for reasons of Force Protection, Mission Accomplishment and Self Defence.
ISAF authorises detention for up to a maximum of 96 hours following the point of detention 7.
Post detention requirements.
Within 96 hours detainees will in most cases be either handed over to the Afghan Authorities in accordance with [the UK/Afghan Memorandum of Understanding] or released.
Detention and evidence gathering processes must be managed as a capability to ensure that they support the collection of tactical intelligence and assist the Afghan criminal justice system in achieving lawful convictions.
In almost all cases, Afghan Authorities in this context refers to the National Directorate of Security (NDS) and it is to the NDS that transfers will normally be made Detainees should only ever be detained beyond 96 hours in exceptional circumstances as follows: a.
On medical or logistic grounds, with HQ ISAF authorisation (and ministerial authority where appropriate)
b. With PJHQ and ministerial authority
Part I of SOI J3 9 dealt with the initial capture of a detainee.
It provided: 8.
As in the case of stop and search, a person must only be detained if it is deemed necessary to do so.
If items found during the search of the individual or any other factors indicate that he may be a threat to mission accomplishment, the call sign or wider force protection, he should be detained.
If items found relate purely to criminal conduct and do not threaten the accomplishment of the mission, there are no grounds for UK FE to detain.
In such circumstances the individual should be released and his details passed to the ANP Force protection must always be the primary concern in such situations. 9.
Decision to Detain.
UK FE can detain persons only if: The person is a threat to force protection; and/or to mission threat a. b.
The person is a accomplishment; and/or c.
It is necessary for reasons of self defence.
The view of the courts below was, in effect, that the United Kingdom had no power under the Security Council resolutions to adopt its own detention policy so far as that policy purported to authorise detention for longer than was permitted by ISAFs practice, even in the exceptional circumstances envisaged in SOI J3 9.
This was because they considered that the Security Council Resolutions conferred the authority to take all necessary measures on ISAF and not on troop contributing nations.
It followed that although British forces had their own chain of command leading ultimately to ministers in London, compliance with ISAFs detention policy was a condition of any authority to detain conferred by the Security Council Resolutions.
In my opinion they were mistaken about this.
The Security Council Resolution has to be interpreted in the light of the realities of forming a multinational force and deploying it in a situation of armed conflict.
ISAF is simply the expression used in the Resolutions to describe the multinational force and the central organisation charged with co ordinating the operations of its national components (liaison and co ordination, to use the judges phrase).
Resolution 1386 (2001) provides for the creation of that force, but article 3 (quoted above) expressly confers authority to take all necessary measures on the member states participating in it.
Both practically and legally, the British government remained responsible for the safety of its forces in Afghanistan and the proper performance of their functions, as the United States Supreme Court has recognised in the case of American forces participating in multinational forces under United Nations auspices: Munaf v Geren (2008) 533 US 674.
ISAF was not authorised, nor did it purport to serve as the delegate of the Security Council for the purpose of determining what measures should prove necessary.
It follows that the United Kingdom was entitled to adopt its own detention policy, provided that that policy was consistent with the authority conferred by the relevant Security Council Resolutions, ie provided that it did not purport to authorise detention in circumstances where it was not necessary for imperative reasons of security.
For these reasons, I conclude that the authority conferred by the Security Council Resolutions on Afghanistan to detain for imperative reasons of security, was not limited to 96 hours.
I would have reached the same conclusion even if I had thought that the power to detain was conferred by the Security Council Resolutions on ISAF, as opposed to the troop contributing nations.
This is because, in agreement with Lord Mance and for the same reasons, I consider that the unchallenged evidence, accepted by the judge, shows that ISAF tacitly accepted the United Kingdoms right to adopt its own detention policy within the limits allowed by the Resolutions.
Impact of the European Convention on Human Rights
All international human rights instruments include provisions which potentially affect the conduct of military operations in an armed conflict.
Those which protect the rights to life and liberty are the most likely to be relevant.
In the European Convention on Human Rights, these rights are protected by articles 2 and 5.
Article 5 provides, so far as relevant: (1) Everyone has the right to liberty and security of person.
No one shall be deprived of his liberty save in the following cases and in accordance with a procedure prescribed by law: (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. (f) the lawful arrest or detention of a person to prevent his effecting an unauthorised entry into the country or of a person against whom action is being taken with a view to deportation or extradition. (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.
Release may be conditioned by guarantees to appear for 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.
The enforcement of human rights has from its inception been a significant part of the United Nations mission under its Charter.
It is therefore appropriate to construe Security Council Resolutions on the footing that those acting under their authority will respect the human rights of those with whom they deal, so far as that is consistent with the proper performance of the functions entrusted to them.
But that qualification is important.
In the first place, although it is axiomatic that under a resolution authorising all necessary measures, the measures must be necessary, ie required for imperative reasons of security, military operations will in the nature of things interfere with rights such as the right to life, liberty and property.
Secondly, most if not all schemes of human rights protection assume a state of peace and basic standards of public order.
This is particularly true of provisions protecting liberty, which are generally directed to penal and police procedures.
They assume not just minimum levels of public order, but a judiciary with effective criminal jurisdiction and a hierarchy of state officials with a chain of responsibility.
The rights which they protect cannot be as absolute in a war zone in the midst of a civil war, where none of these conditions necessarily obtains.
Thirdly, Security Council Resolutions such as those authorising peacekeeping operations in Iraq and Afghanistan are addressed to every country in the world.
They must be taken to mean the same thing everywhere.
This means that they cannot be construed by reference to any particular national or regional code of human rights protection, such as the European Convention on Human Rights.
The United Kingdom is a member of the Council of Europe and a party to the European Convention, but about 50 countries participated in ISAF many of which were not.
These considerations are particularly important when it comes to article 5 of the European Convention, which is unique among international codes of human rights protection in containing an exhaustive list of six grounds on which the law may authorise a deprivation of liberty.
No other major international human rights instrument has this feature.
In particular it is not a feature of the corresponding provision, article 9, of the International Covenant on Civil and Political Rights.
The Covenant, which is an expansion in treaty form of the Universal Declaration of 1948, has been ratified by 167 states to date and may be regarded as the paradigm statement of internationally recognised human rights.
Article 9.1 provides: 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 procedure as are established by law.
The rest of article 9 is concerned with procedural safeguards.
These include provisions for judicial supervision and a right of resort to a court to challenge the detention.
No attempt is made to prescribe exhaustively the grounds on which the law may authorise detention, provided that those grounds do not amount to a licence for arbitrary detention.
The attempt by the draftsmen of article 5 of the European Convention to codify the exceptions more precisely makes it unusually inflexible if applied according to its literal meaning in a situation of armed conflict.
In some circumstances, some of the six grounds may adventitiously accommodate military detention.
But as the Strasbourg court recognised in Hassan v United Kingdom (2014) 38 BHRC 358, para 97, they are not designed for such a situation and are not well adapted to it.
When the Security Council calls upon member states of the United Nations to participate in an armed conflict, the relevant source of human rights protection as far as the Security Council is concerned is not some particular code of human rights, let alone a national or regional one.
It is the body of principle which applies as a matter of international law in armed conflicts.
The laws of armed conflict are lex specialis in relation to rules laying down peace time norms upon the same subjects.
In the case of a non international armed conflict, this includes Common Article 3 of the Geneva Conventions and, where it applies, Additional Protocol II.
In Legality of the Threat or Use of Nuclear Weapons, Advisory Opinion [1996] ICJ Rep 226, the International Court of Justice considered the interrelation between international humanitarian law and international human rights law, taking the International Covenant on Civil and Political Rights as the measure of the latter.
Article 6 of the International Covenant on Civil and Political Rights provides that no one may be arbitrarily deprived of his life.
At para 25 of its advisory opinion, the Court observed that the protection of the International Covenant of Civil and Political Rights does not cease in times of war, except by operation of article 4 of the Covenant whereby certain provisions may be derogated from in a time of national emergency.
Respect for the right to life is not, however, such a provision.
In principle, the right not arbitrarily to be deprived of ones life applies also in hostilities.
The test of what is an arbitrary deprivation of life, however, then falls to be determined by the applicable lex specialis, namely, the law applicable in armed conflict which is designed to regulate the conduct of hostilities.
Thus whether a particular loss of life, through the use of a certain weapon in warfare, is to be considered an arbitrary deprivation of life contrary to article 6 of the Covenant, can only be decided by reference to the law applicable in armed conflict and not deduced from the terms of the Covenant itself.
Referring to these observations in Legal Consequences of the Construction of a Wall in the Occupied Palestinian Territory, Advisory Opinion, [2004] ICJ Rep 136, the International Court of Justice said, at para 106: the relationship between As regards international humanitarian law and human rights law, there are thus three possible situations: some rights may be exclusively matters of international humanitarian law; others may be exclusively matters of human rights law; yet others may be matters of both these branches of international law.
In order to answer the question put to it, the Court will have to take into consideration both these branches of international law, namely human rights law and, as lex specialis, international humanitarian law.
Cf Armed Activities on the Territory of the Congo (Democratic Republic of the Congo v Uganda) Judgment, [2005] ICJ Rep, 168, para 216.
As a study group of the United Nations International Law Commission has observed, when lex specialis is being invoked as an exception to the general law, then what is being suggested is that the special nature of the facts justifies a deviation from what otherwise would be the normal course of action: Fragmentation of International Law: Difficulties Arising from the Diversification and Expansion of International Law (2006) A/CN.4/L.682.
These observations, which were made in the context of article 6 of the International Covenant on Civil and Political Rights, are equally true of the prohibition in article 9 of the Covenant of arbitrary detention or detention otherwise than in accordance with law.
Article 9, like article 6, applies in hostilities.
But the question what is arbitrary or in accordance with law in an armed conflict cannot be answered in the same way as it would be in peacetime.
International humanitarian law does not specifically authorise detention in a non international armed conflict.
But, as I have explained, the relevant Security Council Resolutions did authorise detention, and international humanitarian law regulates its consequences on the assumption that it is an inevitable feature of state practice.
In that respect, the Resolutions served the same function in a non international armed conflict as the authority to detain under article 21 of the Third Geneva Convention does in an international armed conflict.
It conferred an authority in international law to detain in circumstances where this was necessary for imperative reasons of security.
The next question is how these considerations can live with the European Convention when troops are contributed to a United Nations multinational force by a member state of the Council of Europe.
The European Convention is not easy to apply to military operations outside the national territory of a contracting state.
Article 2(2)(c) provides that the right to life is not infringed when it results from necessary action taken to quell an insurrection, but there is no corresponding provision for killing in the course of an international armed conflict.
Article 5 of the European Convention, as I have observed, lists the permissible occasions for a deprivation of liberty in terms which take no account of military detention in the course of an armed conflict, whether international or non international.
In the case of an armed conflict on the national territory of the member state concerned, these problems may be resolved by resort to article 15, which permits derogation from (among others) article 2 in respect of deaths resulting from lawful acts of war and from article 5 generally.
But derogation under article 15 is permitted only in time of war or other public emergency threatening the life of the nation.
Like Lord Bingham of Cornhill in R (Al Jedda) v Secretary of State for Defence [2008] AC 332, para 38, I am inclined to think that the nation in article 15 means the nation seeking to derogate.
It cannot, as Leggatt J suggested, mean Iraq or Afghanistan.
It is of course theoretically possible that an armed conflict outside the United Kingdom might threaten the life of the British nation.
The fighting in France in 1939 40 could no doubt have been so described.
But it is difficult to imagine any circumstances in which this would be true of an armed conflict abroad in which UK armed forces were engaged as part of a peacekeeping force under the auspices of the United Nations.
In Bankovic v Belgium (2001) 44 EHRR SE5, the European Court of Human Rights rejected an argument that a Convention states obligation under article 1 to secure to everyone within their jurisdiction the rights and freedoms secured by Section I, could apply to those affected by military operations conducted abroad, unless they occurred in the territory of another Convention state or in a non Convention territory where a Convention state exercised effective governmental control.
Two features of the reasoning are particularly significant for present purposes.
The first was the Courts view that the rights protected by Section I of the Convention were a total package.
It could not be divided and tailored in accordance with the particular circumstances of the extra territorial act in question (para 73).
The Convention could not therefore be applied in a non Convention territory where the Convention state in question was not in a position to apply it as a whole.
The second significant feature of the reasoning concerned the relationship between the Convention and international law generally.
In Behrami v France; Saramati v France, Germany and Norway (2007) 45 EHRR SE10 at para 122, the Court cited the decision in Bankovic in support of the broader proposition that the principles underlying the Convention must take into account relevant rules of international law when examining questions concerning its jurisdiction and, consequently, determine state responsibility in conformity and harmony with the governing principles of international law of which it forms part, although it must remain mindful of the Conventions special character as a human rights treaty.
The principle thus stated corresponds to the ordinary principle on which treaties are interpreted, taking into account any relevant rules of international law: see Vienna Convention on the Law of Treaties, article 31(3)(c).
In Al Skeini v United Kingdom (2011) 53 EHRR 18, the Grand Chamber adopted what was widely regarded as a radically different approach.
The Convention was held to apply, so far as relevant, to extra territorial military operations in any case where the agents of a Convention state exercised control and authority over an individual, even if they did not exercise governmental powers in the place where the relevant operations occurred.
The procedural requirements of article 2 were accordingly applied to the deaths of Iraqi citizens in the course of firefights with British troops.
The implications of this for the conduct of military operations were apparent from the Grand Chambers judgment in Al Jedda v United Kingdom (2011) 53 EHRR 23, which was delivered on the same day as Al Skeini.
The Strasbourg court, rejecting the prior decision of the House of Lords, held that in the absence of a derogation under article 15 military detention in the course of an armed conflict outside the national territory of a Convention state contravened article 5, because it could not be brought within any of the six permitted occasions for detention in article 5(1).
It rejected the submission that under article 103 of the UN Charter, UN member states had an obligation to give effect to resolutions of the Security Council which prevailed over obligations under the European Convention.
This was because the relevant Security Council Resolution left the choice of methods to the multinational force in Iraq.
In the absence of sufficiently specific language the Security Councils authorisation to use all necessary measures did not therefore create an obligation to detain even if it created a power to do so.
The Strasbourg court reached a similar conclusion in two cases arising out of Security Council Resolutions imposing sanctions on specified individuals: Nada v Switzerland (2012) 56 EHRR 18, and Al Dulimi and Montana Management Inc v Switzerland (Application No 5809/08) (judgment delivered 21 June 2016).
In both cases article 103 of the United Nations Charter was held to be inapplicable because the sanctions resolutions left enough discretion to member states to fall short of an obligation.
In equating the application of physical force with the exercise of jurisdiction, the decision of the Strasbourg court in Al Skeini was consistent with the opinion of the United Nations Human Rights Committee, which has treated extraterritorial kidnappings as exercises of state jurisdiction: see Lopez Burgos v Uruguay (Case No C 52/79) (1981) 68 ILR 41 and Lilian Celiberti de Casariego v Uruguay (Case No C 56/79) (1981) 68 ILR 29.
The principle in Al Skeini was also adopted by this court in Smith v Ministry of Defence [2014] AC 52, in the admittedly rather different context of the states duties to its own soldiers.
But it goes substantially further than the jurisprudence of the International Court of Justice, which has thus far recognised the extraterritorial application of human rights treaties only in cases where governmental powers are exercised by a state in the course of a military occupation of foreign territory: see Legal Consequences of the Construction of a Wall in the Occupied Palestinian Territory, Advisory Opinion, [2004] ICJ Rep 136, para 109; Armed Activities on the Territory of the Congo (Democratic Republic of the Congo v Uganda) Judgment, [2005] ICJ Rep 168, para 216.
It also gives rise to serious analytical and practical difficulties, when applied to a states treatment of enemy combatants outside its own territory, because the practical effect is to apply the Convention to any extra territorial exercise of force.
This is not consistent with the essentially regional character of the Convention.
It goes well beyond the ordinary concept of extra territorial jurisdiction in international law, which is generally confined to territory where the state is the governmental authority or occupying power and to enclaves of national jurisdiction such as ships, aircraft, military establishments or diplomatic premises.
It thereby requires a Convention state to apply its terms in places where it has no effective administrative control and no legal right to effective administrative control.
It brings the Convention into potential conflict with other sources of international law such as the Charter and acts of the United Nations, as well as with the municipal law of the territory in question.
It requires the application of the Convention to the conduct of military operations for which it was not designed and is ill adapted, and in the process cuts across immunities under national law which may be fundamental to the constitutional division of powers, as they arguably are in the United Kingdom.
The ambit of article 1 of the Convention is a matter of particular sensitivity to any Convention state.
At the level of international law, by defining the extent of the Contracting Parties obligation to give effect to its provisions, it identifies the limits of what they have agreed in an altogether more fundamental sense than the following articles which set out the rights protected.
At the level of municipal law, the authority of the courts to apply the Convention is a creature of the Human Rights Act 1998.
It is ultimately a matter for the courts of the United Kingdom to decide the territorial ambit of the obligation of public authorities under section 6 to act compatibly with the Convention.
In doing so it will in accordance with established principle assume that the legislature intended to act consistently with the United Kingdoms treaty obligations.
It will not depart from the interpretation of those obligations by the European Court of Human Rights without very good reason.
But it cannot in the last resort be bound by the view of the Strasbourg court on that question if it is satisfied that that view goes beyond what Parliament has enacted.
As Lord Neuberger and Lord Mance observed of the European Communities Act 1972 in R (Buckinghamshire County Council) v Secretary of State for Transport [2014] 1 WLR 324, para 207, there may be fundamental principles, whether contained in other constitutional instruments or recognised at common law, whose abrogation Parliament neither contemplated nor authorised.
The particular application of the principle in Al Skeini by the Strasbourg court in Al Jedda gives rise to further difficulties of its own.
It caused consternation among those concerned with the enforcement of international humanitarian law, because it appeared to undermine its role in armed conflicts as well as the efficacy of international peacekeeping operations.
In an influential article in the International Review of the Red Cross (The European Court of Human Rights Al Jedda judgment: the oversight of international humanitarian law, (2011) 93 IRRC 837), Jelena Pejic, the Legal Adviser in the Legal Department of the International Committee of the Red Cross and a distinguished authority in this field, criticised the decision on the grounds (i) that it required authority to detain in armed conflicts to be specifically conferred by the language of a Security Council Resolution, when the relevant lex specialis in international law was the Geneva Conventions; and (ii) that to make detention an obligation of powers participating in an armed conflict would restrict their discretion in a way which would be operationally counter productive and hardly a human rights friendly outcome (pp 847 848).
For the moment, she concluded (p 851), Al Jedda casts a chilling shadow on the current and future lawfulness of detention operations carried out by ECHR states abroad.
In addition, their ability to engage with other, non ECHR, countries in multinational military forces with a detention mandate currently remains, at best, uncertain.
It is, however, unnecessary to explore these problems any further in the present case, because of the relatively narrow basis on which Al Jedda was argued and decided and because of the development of the jurisprudence of the Strasbourg court since it was decided.
Al Jedda was presented as a case of conflicting obligations.
The argument in the Strasbourg court proceeded, as it had done in the House of Lords, on the footing that there was an irreconcilable conflict between the Security Council Resolutions and article 5 of the European Convention, one of which must be displaced by the other: see para 105.
By declining to treat military detention as an obligation, as opposed to a discretionary power, the court was able to treat article 5 as consistent with the United Kingdoms obligations under the UN Charter.
But, in the light of later developments, perhaps the most significant feature of the decision in Al Jedda was that it marked a clear (though unacknowledged) departure from the principle stated in Bankovic that the Convention could not be divided and tailored for particular situations and had to be applied on an all or nothing basis.
It thereby opened the possibility of a partial or modified application of the Convention to the extra territorial acts of Convention states.
In particular, some adaptation of the Convention might be required by the international law context in which those acts occurred: see paras 76, 102.
This suggests that a more fruitful approach in Al Jedda would have been to reconcile the terms of the Convention with those of the Security Council Resolutions by adapting the former to the situation created by the latter.
This was the step which the Grand Chamber ultimately took in Hassan v United Kingdom (2014) 38 BHRC 358, a decision which was considered by the Court of Appeal but unfortunately appeared too late to be taken into account by Leggatt J.
The facts were that the applicants brother had been detained by British forces in Iraq for a period of nine days.
When it was ascertained that he was a civilian who posed no threat to security, he was released.
This happened in 2003, immediately after the invasion of Iraq by coalition forces, at a stage when the armed conflict was international in character.
Hassans detention did not fall within any of the six cases specified in article 5(1) where detention might be permitted, and he had no effective access to a court for the purposes of article 5(4).
The Grand Chamber none the less held that there was no violation of article 5.
It rejected the argument that article 5 was displaced, as it had in Al Jedda, but held that it fell to be adapted to a context in which international humanitarian law provided the relevant safeguards against abuse.
The judgment calls for careful study.
The starting point is that on the Courts analysis no question arose of conflicting international obligations or of a Security Council Resolution displacing or overriding article 5 of the European Convention.
Cases of conflicting obligations may have to be resolved by deciding which of them is to override the other.
But where an obligation is inconsistent with a mere power, there is normally no conflict.
The power does not have to be exercised.
The United Kingdom relied in Hassan on article 21 of the Third Geneva Convention and article 78 of the Fourth Geneva Convention.
These provisions did no more than confer a power to detain.
No one suggested that they gave rise to an obligation to detain or that they overrode article 5 of the Convention.
The question was a different one, namely what did article 5 mean in the context of an armed conflict.
Or, as the Grand Chamber put it (para 99), whether the Court should interpret [the obligations of the United Kingdom under article 5] in the light of powers of detention available to it under international humanitarian law.
In particular, the question was whether the six cases of permissible detention listed in article 5(1) were to be interpreted as exhaustive in that context.
This involved interpreting it according to the ordinary principles of international law, taking account of state practice in its application and of any relevant rules of international law: see article 31(3)(b) and (c) of the Vienna Convention.
In the result, the Grand Chamber held that article 5(1) fell to be modified by treating the six cases as non exhaustive so as to accommodate the existence of a power of detention in international law.
This was a very different issue from the one which had arisen in Al Jedda, as the court pointed out at para 99.
The court began (para 97) by drawing attention to the incongruity of the six permitted grounds of detention in article 5(1) of the Convention in a situation of armed conflict: It has long been established that the list of grounds of permissible detention in article 5(1) does not include internment or preventive detention where there is no intention to bring criminal charges within a reasonable time (see Lawless v Ireland [1961] ECHR 332/57 at paras 13 and 14; Ireland v UK [1978] ECHR 5310/71 at para 196; Guzzardi v Italy [1980] ECHR 7367/76 at para 102; Jecius v Lithuania [2000] ECHR 34578/97 at paras 47 52; and Al Jedda v UK (2011) 30 BHRC 637 at para 100).
Moreover, the court considers that there are important differences of context and purpose between arrests carried out during peacetime and the arrest of a combatant in the course of an armed conflict.
It does not take the view that detention under the powers provided for in the Third and Fourth Geneva Conventions is congruent with any of the categories set out in sub paras (a) to (f).
Although article 5(1)(c) might at first glance seem the most relevant provision, there does not need to be any correlation between security internment and suspicion of having committed an offence or risk of the commission of a criminal offence.
As regards combatants detained as prisoners of war, since this category of person enjoys combatant privilege, allowing them to participate in hostilities without incurring criminal sanctions, it would not be appropriate for the court to hold that this form of detention falls within the scope of article 5(1)(c).
The court went on to consider whether these inconsistencies could be resolved by resort to the right of derogation under article 15.
It did not decide whether derogation was available in respect of armed conflict in Iraq, but concluded that it was unnecessary to do so, because the consistent practice of states was not to derogate from article 5 of the European Convention or article 9 of the International Covenant on Civil and Political Rights in order to detain persons on the basis of the Third and Fourth Geneva Conventions during international armed conflict: However, in respect of the criterion set out in article 31(3)(b) of the Vienna Convention , the court has previously stated that a consistent practice on the part of the high contracting parties, subsequent to their ratification of the convention, could be taken as establishing their agreement not only as regards interpretation but even to modify the text of the convention (see, mutatis mutandis, Soering v United Kingdom [1989] ECHR 14038/88 at paras 102 103 and Al Saadoon v United Kingdom [2010] ECHR 61498/08 at para 120). (para 101)
In those circumstances, the solution was to adapt the states obligations under the European Convention so as to accommodate the lex specialis applicable to armed conflict: The court has made it clear on many occasions that the Convention must be interpreted in harmony with other rules of international law of which it forms part This applies no less to international humanitarian law.
The four Geneva Conventions of 1949, intended to mitigate the horrors of war, were drafted in parallel to the European Convention on Human Rights and enjoy universal ratification.
The provisions in the Third and Fourth Geneva Conventions relating to internment, at issue in the present application, were designed to protect captured combatants and civilians who pose a security threat.
The court has already held that article 2 of the Convention should be interpreted in so far as possible in light of the general principles of international law, including the rules of international humanitarian law which play an indispensable and universally accepted role in mitigating the savagery and inhumanity of armed conflict (see Varnava v Turkey [GC] para 185, ECHR 2009), and it considers that these observations apply equally in relation to article 5.
Moreover, the International Court of Justice has held that the protection offered by human rights conventions and that offered by international humanitarian law co exist in situations of armed conflict In its judgment Armed Activities on the Territory of the Congo, the International Court of Justice observed, with reference to its advisory opinion concerning Legal Consequences of the Construction of a Wall in the Occupied Palestinian Territory, that [a]s regards the relationship between international humanitarian law and human rights law, there are thus three possible situations: some rights may be exclusively matters of international humanitarian law; others may be exclusively matters of human rights law; yet others may be matters of both these branches of international law The court must endeavour to interpret and apply the Convention in a manner which is consistent with the framework under international law delineated by the International Court of Justice. (para 102)
The Courts conclusion is set out at paras 104 106.
Dealing first with the lawfulness of detention, it observed: 104.
None the less, and consistently with the case law of the International Court of Justice, the Court considers that, even in situations of international armed conflict, the safeguards under the Convention continue to apply, albeit interpreted against the background of the provisions of international humanitarian law.
By reason of the co existence of the safeguards provided by international humanitarian law and by the Convention in time of armed conflict, the grounds of permitted deprivation of liberty set out in subparagraphs (a) to (f) of that provision should be accommodated, as far as possible, with the taking of prisoners of war and the detention of civilians who pose a risk to security under the Third and Fourth Geneva Conventions.
The court is mindful of the fact that internment in peacetime does not fall within the scheme of deprivation of liberty governed by article 5 of the Convention without the exercise of the power of derogation under article 15 (see para 97 above).
It can only be in cases of international armed conflict, where the taking of prisoners of war and the detention of civilians who pose a threat to security are accepted features of international humanitarian law, that article 5 could be interpreted as permitting the exercise of such broad powers. 105.
As with the grounds of permitted detention already set out in those subparagraphs, deprivation of liberty pursuant to powers under international humanitarian law must be lawful to preclude a violation of article 5 para 1.
This means that the detention must comply with the rules of international humanitarian law and, most importantly, that it should be in keeping with the fundamental purpose of article 5 para 1, which is to protect the individual from arbitrariness (see, for example, Kurt v Turkey (1998) 5 BHRC 1, para 122; El Masri v former Yugoslav Republic of Macedonia (2012) 34 BHRC 313, para 230; see also Saadi v Italy (2008) 24 BHRC 123, paras 67 74, and the cases cited therein).
In para 104 of the judgment the Grand Chamber referred to the co existence of the safeguards provided by international humanitarian law and by the Convention in time of armed conflict.
It is clear that the fact that the relevant lex specialis applicable to armed conflict contained its own safeguards against abuse, albeit less extensive than those of article 5 of the Convention, was at least part of the reason why it was legitimate to accommodate the six permitted grounds of detention to cater for detention in the course of armed conflict.
The rules of international humanitarian law which the court had in mind are identified in para 106 of the judgment: 106.
As regards procedural safeguards, the Court considers that, in relation to detention taking place during an international armed conflict, article 5 paras 2 and 4 must also be interpreted in a manner which takes into account the context and the applicable rules of international humanitarian law.
Articles 43 and 78 of the Fourth Geneva Convention provide that internment shall be subject to periodical review, if possible every six months, by a competent body.
Whilst it might not be practicable in the course of an international armed conflict for the legality of detention to be determined by an independent court in the sense generally required by article 5 para 4 (see, in the latter context, Reinprecht v Austria, para 31, ECHR 2005 no 67175/01), none the less, if the contracting state is to comply with its obligations under article 5 para 4 in this context, the competent body should provide sufficient guarantees of impartiality and fair procedure to protect against arbitrariness.
Moreover, the first review should take place shortly after the person is taken into detention, with subsequent reviews at frequent intervals, to ensure that any person who does not fall into one of the categories subject to internment under international humanitarian law is released without undue delay.
The reference to articles 43 and 78 of the Fourth Geneva Convention is of some importance.
Leaving aside common article 3, the Fourth Geneva Convention is concerned with the treatment of protected persons (essentially civilian non combatants) who in the course of an international armed conflict find themselves in the hands of a belligerent or occupying power of which they are not nationals.
The Convention authorises the internment of aliens found in the territory of a party to the conflict (article 42) and of protected persons generally in an occupied territory (article 78).
The analogy between those situations and the present one is that internment is authorised under article 42 only if the security of the Detaining Power makes it absolutely necessary and under article 78 only for imperative reasons of security.
The difference of phraseology reflects the fact that internment in an occupied territory may be necessary for the security of those interned.
There is no substantial difference in the test of necessity as between the two situations.
This contrasts with the position relating to prisoners of war under the Third Geneva Convention, where it is enough to justify their detention that they belong to a hostile organised armed force or a civilian service ancillary to such a force.
Since the factual basis of internment is more readily disputable under Fourth Convention, article 43 confers on those interned under article 42 a right to have their internment reconsidered as soon as possible by an appropriate court or administrative board designated by the Detaining Power for that purpose.
If continued detention is authorised, the court or administrative board must review the case at least twice a year to determine whether detention is still justified.
Article 78 confers similar rights on persons interned under that article.
In either case, article 132 provides that an internee shall be released as soon as the reasons which necessitated his internment no longer exist.
With the possible exception of article 5 of the Third Geneva Convention (which provides for a competent tribunal to determine disputed claims to prisoner of war status), articles 43 and 78 of the Fourth Geneva Conventions are the only provisions of the Geneva Conventions which confer rights on detainees that can in any sense be said to correspond to those conferred by article 5 of the European Convention on Human Rights.
It was argued before us that these observations had no bearing on a non international armed conflict such as we are concerned with on these appeals, and no bearing on detentions under the authority of a Security Council Resolution as opposed to international humanitarian law.
There are occasional passages in the judgment which can be cited in support of these arguments.
But I would not accept them, for two main reasons.
In the first place, the Grand Chamber in Hassan dealt with the point before them by reference to international armed conflicts because that was the character of the Iraqi conflict at the time of the events in question.
It followed that the relevant source of the international law power to detain was the Third and Fourth Geneva Conventions.
But the essential question was whether article 5 of the European Convention on Human Rights should be interpreted so as to accommodate an international law power of detention which was not among the permissible occasions for detention listed at article 5(1).
The question is the same in the present cases, although the source of the international law power to detain is a resolution of the Security Council under Chapter VII of the Charter instead of the Geneva Conventions.
I have already pointed out that resolutions under Chapter VII are a cornerstone of the international legal order.
Their status as a source of international law powers of coercion is as significant as the Geneva Conventions, and is just as relevant where the Convention falls to be interpreted in the light of the rules of international law.
Secondly, I reject the argument that the decision has no application to non international armed conflicts because, while there are differences between the two classes of armed conflict, those differences do not, as it seems to me, affect the particular features of the reasoning in Hassan which are critical to the resolution of these appeals.
The fundamental question in Hassan was whether the six permitted grounds listed in article 5(1) of the Convention were to be treated as exhaustive in the context of armed conflict.
The Court decided that they were not.
This was because the exhaustive list of permitted grounds was designed for peacetime and could not accommodate military detention in the very different circumstances of an armed conflict: para 97.
The Grand Chamber referred at para 102 to the decision of the International Court of Justice in Armed Activities on the Territory of the Congo, and its advisory opinion concerning The Legal Consequences of the Construction of a Wall in the Occupied Palestinian Territory.
At para 104, it drew the same distinction as the International Court of Justice had made between peacetime norms, such as the prohibition of internment by international human rights instruments, and detention in the course of an armed conflict.
These points do not depend on the international character of the armed conflict in question.
The taking of prisoners of war and the detention of civilians posing a threat to security are inherent in international and non international armed conflicts alike.
The practice of states to detain is common to both and is universal in both contexts.
It is right to add that the state practice as regards derogations, to which the Grand Chamber attached some importance, is the same in both international and non international armed conflicts.
No member of the Council of Europe has ever derogated from the European Convention with respect to military action of whatever kind taken abroad: see Pejic, art cit, at p 850.
It is fair to point out that some aspects of the functions of the peacekeeping forces deployed in Iraq and Afghanistan can more readily be accommodated within the six specified grounds in article 5(1) than the internment of prisoners of war in an international armed conflict.
In particular, where armed forces are operating in support of the government of the territory, article 5(1)(c) may apply (detention for the purpose of bringing a person before a competent legal authority on suspicion of having committed an offence or to prevent him from committing one).
But the enforcement of the criminal law against individual suspects is far from exhausting the functions of the forces deployed in either theatre.
As I have pointed out (paras 21 22, 28 above), their mandate under the relevant Security Council Resolutions extended well beyond operating as an auxiliary police force.
It required them to engage as combatants in an armed conflict with the forces of a violent, organised insurrection, with a view to defending itself, protecting the civilian population, and creating a secure environment for the reconstruction of the country.
Once one concludes that the six grounds are not necessarily exhaustive in a situation of armed conflict, the next question is whether there is some alternative legal standard to determine what circumstances justify detention and subject to what procedural safeguards.
The court in Hassan answered this question by seeking to identify the fundamental purpose of ECHR article 5(1) and to consider whether that purpose would be sufficiently served by the rules applicable in armed conflict even if the case did not come within the six permitted grounds.
They considered that, as with other international human rights instruments, the fundamental purpose of article 5 was to protect the individual from arbitrariness (para 105).
The essence of arbitrariness is discretion uncontrolled by law.
There were two essential conditions for ensuring that detention was not uncontrolled by law.
The first was that there should be a legal basis for it.
In other words, there must be a legal power to detain and it must not be exercisable on discretionary principles so broad, flexible or obscure as to be beyond legal control.
The second was that there must be some sufficient means available to the detainee to challenge the lawfulness of his detention.
In these respects article 5 of the European Convention, although a great deal more prescriptive in detail, shares the objective of article 9 of the Universal Declaration of Human Rights and article 9 of the International Covenant on Civil and Political Rights.
The relevance of the Geneva Conventions in Hassan was that in the context of an international armed conflict, they provided an appropriate alternative legal standard to the literal application of article 5.
But it does not follow that in a conflict to which the relevant provisions of the Geneva Conventions do not directly apply, anyone detained by the peacekeeping forces must necessarily be treated as being detained arbitrarily.
The present question is whether there is an appropriate legal standard in a non international armed conflict, notwithstanding that the relevant provisions of the Geneva Conventions do not directly apply.
As far as the right of detention itself is concerned, the answer is reasonably straightforward.
There is, for the reasons which I have explained, a sufficient legal basis for detention in the Security Council Resolutions.
The implicit limitation to occasions where detention is necessary for imperative reasons of security, provides a clear legal standard which is no wider than the purpose of the UN mandate requires.
Indeed, it is the same standard as that which applies under articles 42 and 78 of the Fourth Geneva Convention, which the Grand Chamber endorsed in the context of an international armed conflict.
The claimants argue that the Grand Chamber could not have envisaged that its reasoning would be applied to non international armed conflicts because the procedural safeguards derived from international humanitarian law, which they regarded as an acceptable substitute for the protection of article 5, were available only to those detained in the course of an international armed conflict.
I recognise the force of this argument, but I think that it is mistaken.
It is true that with the exception of common article 3, the Third and Fourth Geneva Conventions apply only in international armed conflicts.
The duty of review in articles 43 and 78 of the Fourth Convention, to which the Grand Chamber attached importance, does not apply to those detained in the course of a non international armed conflict.
But it should be noted that it does not apply to most of those detained in an international armed conflict either.
It applies only to those detainees who are protected persons within the meaning of article 4 of the Fourth Convention.
They are, as I have observed, mainly civilian non combatants.
The definition of protected persons expressly excludes those who are protected by the Third Geneva Convention.
The persons thus excluded from the ambit of articles 43 and 78 of the Fourth Convention include not only the armed forces and civilian ancillary services of a belligerent state, but also other persons participating in an international armed conflict as members of organised and identifiable resistance movements or militias, or as persons who on the approach of the enemy take up arms spontaneously: see article 4 of the Third Geneva Convention.
The Third Convention has no equivalent provision for review of the detention of persons in these categories.
It is of course possible that the Grand Chamber intended to confine the accommodation between international humanitarian law and article 5 of the European Convention on Human Rights strictly to the limited category of detainees entitled to the benefit of articles 43 and 78 of the Fourth Geneva Convention.
This would, however, have been a rather arbitrary choice.
The Grand Chamber was not concerned to define the ambit of international humanitarian law but to adapt article 5 of the Convention to conditions of armed conflict for which it was not primarily designed.
I think it unlikely that they intended that article 5 should apply without modification to prisoners of war taken in an international armed conflict, simply because no review procedure was available to them under the Geneva Conventions.
It is in my opinion clear that they regarded the duty of review imposed by articles 43 and 78 of the Fourth Convention as representing a model minimum standard of review required to prevent the detention from being treated as arbitrary.
They were adopting that standard not just for cases to which those articles directly applied, but generally.
Given that the Security Council Resolutions themselves contain no procedural safeguards, it is incumbent on Convention states, if they are to comply with article 5, to specify the conditions on which their armed forces may detain people in the course of an armed conflict and to make adequate means available to detainees to challenge the lawfulness of their detention under their own law.
There is no reason why a Convention state should not comply with its Convention obligations by adopting a standard at least equivalent to articles 43 and 78 of the Fourth Geneva Convention, as those participating in armed conflicts under the auspices of the United Nations commonly do.
Provided that the standard thus adopted is prescribed by law and not simply a matter of discretion, I cannot think that it matters to which category the armed conflict in question belongs as a matter of international humanitarian law.
The essential purpose of article 5, as the court observed at para 105 of Hassan, is to protect the individual from arbitrariness.
This may be achieved even in a state of armed conflict if there are regular reviews providing sufficient guarantees of impartiality and fair procedure to protect against arbitrariness (para 106).
which are central to the resolution of these appeals: I conclude that Hassan v United Kingdom is authority for three propositions (1) The Strasbourg court was concerned in Hassan with the interface between two international legal instruments in the domain of armed conflict outside the territory of a Convention state.
This is pre eminently a domain governed by international legal norms.
In that context, the Grand Chamber recognised that international law may provide a sufficient legal basis for military detention for the purposes of article 5, which requires that any detention should be lawful.
This is consistent with the courts approach in Medvedyev v France (2010) 51 EHRR 39, in which the adequacy of the legal basis for the detention of the applicant on a Cambodian merchant ship on the high seas by French armed forces was analysed wholly in terms of international law.
The particular source of the international law right to detain which was relevant in Hassan was international humanitarian law, specifically the Geneva Conventions.
But I see no reason to regard the position as any different in a case where the source of the international law right to detain is a resolution of the UN Security Council under powers conferred by the UN Charter.
It does not of course follow from the fact that international law authorises military detention for the purposes of article 5 of the Convention, that it also constitutes a defence to a claim in tort.
That depends on other considerations lying wholly in the realm of municipal law, notably the concept of Crown act of state, which are addressed in the Serdar Mohammed case in a separate judgment. (2) Hassan does not add a notional seventh ground of permitted detention to those listed at (a) to (f) of article 5(1), namely military detention in the course of armed conflict.
Its effect is rather to recognise that sub paragraphs (a) to (f) cannot necessarily be regarded as exhaustive when the Convention is being applied to such a conflict, because their exhaustive character reflects peacetime conditions.
This means that where the armed forces of a Convention state are acting under a mandate from the Security Council to use all necessary measures, article 5(1) cannot be taken to prevent them from detaining persons for imperative reasons of security. (3) The procedural provisions of article 5, in particular article 5(4), may fall to be adapted where this is necessary in the special circumstances of armed conflict, provided that minimum standards of protection exist to ensure that detention is not imposed arbitrarily.
The minimum standard of protection is a standard equivalent to that imposed by articles 43 and 78 of the Fourth Geneva Convention.
This involves an initial review of the appropriateness of detention, followed by regular reviews thereafter, by an impartial body in accordance with a fair procedure.
These are the minimum requirements for protection against arbitrary detention, and nothing in the Grand Chambers decision in Hassan justifies any departure from them.
Indeed, it is clear that in the Courts view, the continuing existence of these procedural obligations in large measure justified reading the six permitted occasions for detention as non exhaustive in conditions of armed conflict.
In the following sections of this judgment, I shall deal with the safeguards which were available to those in SMs position.
The circumstances of SMs detention after his capture
Part II of SOI J3 9 dealt with the processing of detainees through temporary holding facilities after capture, and their ultimate release or transfer to the Afghan authorities.
The Detention Authority was required to decide within 48 hours whether the prisoner should be released, further detained or transferred to the Afghan authorities.
The relevant paragraphs of Part II provided: 19.
The Detention Authority must decide whether to release, transfer or further detain the detainee.
This decision must be made within 48hours of the time of detention of the detainee.
To authorise continued detention, the Detention Authority will need to be satisfied, on the balance of probabilities, that it is necessary for self defence or that the detainee has done something that makes him a threat to Force Protection or Mission Accomplishment. 24.
Logistical Extensions.
On some occasions, practical, logistic reasons will entail a requirement to retain a UK detainee for longer than the 96 hours.
Such occasions would normally involve the short notice non availability of pre planned transport assets or NDS facilities toreceive transferred detainees reaching full capacity.
These occasions may lead to a temporary delay until the physical means to transfer or release correctly can be reinstated.
Where this is the case, authority to extend the detention for logistic reasons is to be sought from both HQ ISAF and from Ministers in the UK through the Detention Authority. 25.
Initial Detention Review.
The Initial Detention Review must take place within 48 hours of the point of detention The Detention Authority does not have the authority to hold a detainee for longer than 96 hours from the point of detention (this authority must be sought from Ministers through the Detention Review Committee (DRC) see paras 26 29 below.
Routinely, therefore, within the 96 hour point the detainee must be either released or transferred to the Afghan authorities.
Detention beyond 96 hours is only permitted in exceptional circumstances. 26.
Detention Review Committee (DRC).
The DRC is the mechanism which supports the Detention Authority in managing detention cases in the Op HERRICK theatre.
The key role of the DRC is in assessing applications for exceptional extension to detention before they are submitted through PJHQ and from there on to the MoD for Ministerial approval as necessary.
The committee should be convened by the Detention Authority as and when required and may take the form of a standing committee.
The committees membership is flexible (and should be reviewed regularly by the Detention Authority), but should include the following as a minimum: Detention Authority (chair), [Chief of Staff Joint Force Support Afghanistan, Joint Force Support Afghanistan Legal Adviser, Commanding Officer Intelligence Exploitation Force, Force Provost Marshall, Staff Officer Grade 2, J3 Branch (current operations), Joint Force Support Afghanistan Policy Adviser, Task Force Helmand Liaison Officer Joint Force Support Afghanistan] The chair may call on SME advice from Comd Med, S02 J2X and the [redacted] as necessary, but the core membership must remain outside the chain of command for targeting and tactical legal issues, with the aim of being able to present cases to the Detention Authority cold.
Members do not hold a vote as such, but attend in order to provide expert advice to the Detention Authority to assist in his decision
making
Detention beyond the 96 hour limit applied by ISAF was permitted only in exceptional circumstances on medical or logistic grounds or with the authority of both the UK Permanent Joint Headquarters and ministers in London.
The criteria used to assist ministers in deciding whether to approve continued detention were set out in paragraph 27 of Part II and the procedure was described in para 29.
They provided, so far as relevant, as follows: 27.
Extension of Detention.
Where it is believed that there are exceptional circumstances which justify an extension to the 96 hour limit, the Detention Authority should make an application for an extension through the DRC to PJHQ, using the form at Annex G.
This application should describe the background to the application, the operational imperative for the extension, any anticipated impacts of the decision and any other pertinent factors to assist in the consideration of the application.
The following criteria are used to assist Ministers in deciding whether or not to approve applications for extension of detention: a.
Will the extension of this individual provide significant new intelligence vital for force protection? b.
Will the extension of this individual provide significant new information on the nature of the insurgency? c.
How long a period of extension has been requested [redacted] 29.
Extended Detention Review Process.
In exceptional cases, where extended detention is authorised beyond 96 hours, the detention is to be the subject of review as follows: a. Detention Authority.
The Detention Authority is to conduct an internal review of the detention through the DRC every 72 hours after extended detention starts.
The Detention Authority is similarly to submit a review to PJHQ at the 14 day period to seek authorisation for continued extended detention, using Annex H. b. PJHQ.
PJHQ J3 will review all periods of extended detention every 14 days, informed by a submission from Theatre c. Ministerial Level.
The Minister authorising the extension is to review the decision every 14 days The maximum detention permissible (inclusive of the initial ISAF permissible 96 hours), as endorsed by UK Ministers and the Attorney General, is [redacted]
The judge found that until some point shortly before 12 April 2010 (five days after SMs capture) the Detention Authority for British forces in Helmand was the commander of Task Force Helmand.
He delegated his authority to handle routine authorisations and reviews to the commander of the Camp Bastion Joint Operating Base.
At some point on or shortly before that date the commander of Joint Force Support (Afghanistan) became the Detention Authority.
The evidence about which officer was the Detention Authority at the time when the first application was made to extend SMs detention beyond 96 hours was unclear, but the Secretary of States case proceeded on the basis that it was the later arrangements which applied, and the judge proceeded on the same basis.
As Part II, paragraph 27 records, the Detention Authority chaired the Detention Review Committee, whose function was to support him in managing detention cases and to provide him with expert advice.
The Committee had an important role in preparing the reports on which any decision would be based and in advising the Detention Authority.
But the decision rested with the Detention Authority alone.
SM was captured in the early hours of 7 April 2010.
Upon his arrival at Camp Bastion, he was informed that he had been detained because he was considered to pose a threat to the accomplishment of the ISAF mission, and that he would either be released or transferred to the Afghan authorities as soon as possible.
He was told that he was entitled to make a statement about his detention if he wished, to which he replied through the interpreter that he was working in his field when a helicopter arrived, and so he lay down in the field until he was attacked by a military dog and then arrested.
He was told that he was entitled to contact the International Committee of the Red Cross, and on being asked whether there was any one whom he wished to be informed of his capture he gave the name of his father.
Thereafter, he was detained in British military detention facilities, at Camp Bastion and at Kandahar airport.
On 9 April 2010, two days after SMs capture, a request was made to the Ministry of Defence in London to exceptionally extend the 96 hour detention limitation in order to gain intelligence from [SM], on the basis that in theatre reviews of the continuing utility of his detention would be conducted every 72 hours.
The official submission to the minister was consistent with the criteria set out in Part II, paragraph 27 of SOI J3 9.
It recommended that SM should be further detained to gain valuable intelligence, and advised that this was necessary in the particular case for intelligence exploitation.
It described the circumstances of his capture, summarised what was known or believed about him, and set out the information relevant to each of the three criteria listed in paragraph 27.
On 12 April, a minister authorised his continued detention to gain valuable intelligence.
Writing to the Foreign Secretary to report his decision, the minister recorded his view that questioning SM would provide significant intelligence which was vital for force protection purposes and would provide valuable information about the nature of the Taliban insurgency.
Thereafter, in theatre reviews were conducted every 72 hours until 4 May, and after that roughly every 14 days.
Responsibility for making decisions about the prosecution of detainees rested with the Afghan authorities, principally the National Directorate of Security (NDS).
The review documentation suggests that after an initial assessment of SM, the Detention Review Committee took the view that the prospect of a successful prosecution was weak unless a confession was obtained.
This was because the rocket propelled grenade launcher had not been recovered and the biometric evidence linking him with other weaponry was judged to be of poor quality.
On 19 April it is recorded that the NDS will be consulted further, and on 22nd it is recommended that he be held until the [redacted] point and then transferred to the NDS for investigation by the Afghan authorities.
Although there are references to discussions on the point with the NDS from 24 April 2010, the Secretary of States pleading and evidence is that the NDS was not asked until 4 May, when the British authorities had concluded that there was no more intelligence to be obtained from him.
On that date it was decided that SM should remain in UK custody for interrogation until 6 May. Contact was then made with the NDS to find out whether they wished to take him into their custody for investigation and possible prosecution.
They replied that they did, but had insufficient capacity to do so at the prison to which he was to be transferred.
At the time, there was a serious capacity problem, partly because of an increase in the number of detentions following the surge of the previous year; and partly because the British authorities had a policy of refusing to transfer detainees to a number of NDS prisons at which they had reason to believe that detainees were liable to be maltreated.
The result was that from 6 May 2010 the British authorities regarded themselves as holding SM on behalf of the Afghan authorities until capacity became available at an acceptable prison.
He was finally transferred on 25 July.
The judge distinguished between three periods of detention.
He found that for the first 96 hours after his capture (the first period), SM was detained for the purpose of bringing him before an Afghan prosecutor or judge in circumstances where he was believed to be a senior Taliban commander involved in the production of improvised explosive devices.
He found that his detention beyond 96 hours had been authorised by Ministers for the sole purpose of interrogating him with a view to obtaining intelligence, and that that remained the sole purpose of his detention for the next 25 days until 4 May, when the NDS formally expressed their intention of taking him into their custody as soon as they could (the second period).
From 4 May to 25 July 2010, (the third period), the judge considered that SM was once again being held for the purpose of bringing him before the competent legal authorities on reasonable suspicion of having committed an offence.
Application of ECHR: article 5(1)
Of the six permissible grounds of detentions listed in article 5(1), only two were relied upon by the Secretary of State before us.
They were ground (c), which deals with lawful detention for the purpose of bringing a suspect before a competent legal authority, and ground (f), which deals with detention pending extradition.
Ground (f): detention pending extradition
I can deal shortly with this ground.
The judge accepted that the transfer of a detainee to the Afghan authorities was capable of being an extradition, but held that it did not apply on the facts.
For my part, I would not even accept that it was capable of being an extradition.
The judges reasoning on this point was that the Convention was only engaged because SM was regarded as being within the jurisdiction of the United Kingdom for the purposes of article 1.
It followed that the transfer constituted a removal of the detainee from the jurisdiction of the United Kingdom to that of Afghanistan, notwithstanding that it occurred within the national territory of Afghanistan.
In my opinion, this analysis stretches the meaning of sub paragraph (f) further than it will go, and is not consistent with what actually happens when a detainee is transferred from British to Afghan custody.
Sub paragraph (f) is concerned with movements between the territorial jurisdiction of one state and that of another.
Thus it deals with detention in the course of enforcing immigration control and with deportation on the same footing as extradition.
SM was not within the territorial jurisdiction of the United Kingdom at any time.
He was not even in a place where the United Kingdom exercised effective governmental control.
He was within its jurisdiction for the purpose of article 1 of the Convention in a different sense, namely that he was under the physical power and control of the United Kingdoms agents: see Al Skeini v United Kingdom (2011) 53 EHRR 18, para 136.
That physical power and control was exercised, like other functions of HM forces, in support of the government of Afghanistan.
It is not therefore correct to speak of a transfer from the jurisdiction of the United Kingdom to that of Afghanistan.
Afghanistan always had criminal jurisdiction in Helmand Province and in other places where British forces operated.
In transferring a detainee to the Afghan criminal justice system British forces were simply enabling the criminal jurisdiction which Afghanistan already possessed over SM to be more effectually exercised.
Ground (c): detention for the purpose of bringing SM before a competent legal
authority
The judge concluded that SMs detention was justified on ground (c) during the first 96 hours.
He held that ground (c) did not apply during the second period, because in that period he was being held solely for intelligence exploitation and not for ultimate transfer to the Afghan authorities.
The Strasbourg court has consistently ruled that detention for the sole purpose of intelligence exploitation is incompatible with article 5(1) of the Convention in a domestic context, even in the face of a significant terrorist threat: Sakik v Turkey (1998) 26 EHRR 662, para 44, calan v Turkey (2005) 41 EHRR 45, para 104, Medvedyev v France (2010) EHRR 39, para 126.
The Grand Chambers decision in Hassan does not in my opinion justify a departure from that principle in an armed conflict.
Nor does the Secretary of State suggest otherwise.
However valuable the intelligence is expected to be, its exploitation lacks the immediate connection with the neutralisation of the threat which justifies detention for imperative reasons of security.
As Justice OConnor pointed out in the Supreme Court of the United States in Hamdi v Rumsfeld 542 US 507 (2004), the considerations of military security which justify the detention of combatants do so only for the purpose of preventing them from returning to the battlefield.
Since imperative reasons of security were the only ground on which detention was authorised by the relevant Security Council Resolutions, it follows that the new policy announced to Parliament in November 2009, which permitted extended detention solely for the purpose of intelligence exploitation, had no basis in international law.
In other circumstances, it might have been argued that the intention to transfer SM to the Afghan authorities persisted during the second period notwithstanding that advantage was being taken of his detention to question him.
But that would not be consistent with the facts.
The evidence shows that after an initial assessment following his capture, there was thought to be little prospect that the evidence would support a prosecution.
The NDS was not asked at this stage whether they wanted him for further investigation and possible prosecution.
If SM had been detained in the second period in order to obtain better evidence against him, the case might have fallen within sub paragraph (c), even if that evidence was not forthcoming: see Brogan v United Kingdom (1988) 11 EHRR 117 at para 53.
But in fact the intelligence that the British authorities hoped to obtain by detaining him related not to his own criminality but to the nature of the Taliban insurgency and the requirements of force protection generally.
It follows that SMs detention in the second period cannot be justified by reference to article 5(1)(c).
It does not follow from this that SM would or should have been released on 11 April if ministers had not authorised his further detention for intelligence exploitation.
While this must be a matter for trial, it is on the face of it more likely that if SM had not been detained for intelligence exploitation during the second period, the British authorities would have asked the NDS earlier whether they wanted to take custody of him, and would have received the same answer.
He would then have been further detained until he could be transferred to them, although not necessarily until 25 July.
To the extent that his detention was prolonged by the interlude of intelligence exploitation, and that this was not taken into account in determining the duration of his imprisonment pursuant to the sentence of the Afghan court, he may have suffered a recoverable loss.
Turning to the third period, the judge held that article 5(1)(c) applied in principle because from 4 May 2010 SM was once again being detained for the purpose of being transferred to the Afghan authorities.
But he held that his detention in the third period could not be justified on that ground because he was not brought promptly or at all before a judicial officer as required in such cases by article 5(3).
I shall return to article 5(3) when I come to deal with the procedural requirements of article 5.
Detention for imperative reasons of security
I have explained earlier in this judgment why, even on the footing that none of the of the six grounds of detention specified in article 5(1) of the Convention applies, military detention may be justified.
Notwithstanding the ostensibly exhaustive character of the six grounds, that article cannot be taken to prevent HM forces from detaining persons in the course of an armed conflict for imperative reasons of security.
The real question in those circumstances is whether this was in fact why SM was detained in the second and third periods.
The judge made findings about the reasons for SMs detention on which the claimants naturally rely.
But the problem about these findings is that they were made for the purpose of determining whether SMs detention was justified on any of the six grounds specified in article 5(1).
It is not easy to redeploy them for the rather different purpose of determining whether detention was justified by imperative reasons of security.
This is not only because, coming to the matter as he did before the judgment of the Strasbourg court in Hassan, the judge regarded the six grounds as exhaustive, and imperative reasons of security as irrelevant.
The judge also believed that there could be no imperative reasons of security for detaining someone once he had been captured and disarmed.
He did not therefore consider the possibility that imperative reasons of security might have been a concurrent reason for SMs detention during the second and third periods.
I have already said, in agreement with the Court of Appeal, that in my opinion he was wrong about this.
For that reason, I do not think it possible to attach any weight to his finding that interrogation was the sole purpose of SMs detention in the second period, nor to his implicit view that detention pending the availability of prison capacity to the NDS was the sole reason for his detention in the third period.
So far as the judge rejected the possibility that SM was also being detained for imperative reasons of security, he did so on a false legal premise.
There is, as it seems to me, a real issue about whether imperative reasons of security continued to operate after the first 96 hours concurrently with other factors.
It is clear from SOI J3 9, the relevant part of which I have quoted, that the British authorities in Afghanistan did not regard themselves as entitled to detain any person unless his detention was and remained necessary for self defence, force protection, or wider mission accomplishment.
Persons arrested on these grounds might, consistently with the Security Council Resolutions, have been detained for as long as they continued to represent a threat.
In fact, however, as the minister explained to Parliament when announcing the new detention policy in November 2009, the policy was to hold them only pending transfer to the Afghan authorities or (subject to ministerial authorisation) for intelligence exploitation.
In the absence of one or other of these grounds, the detainee would be released, as SM would have been if the NDS had shown no interest in him on 4 May 2010.
For that reason, the only question with which a minister was concerned when considering whether to authorise extended detention for intelligence exploitation was whether it was justified for that purpose.
There is nothing in SOI J3 9 or in the ample documentation concerning SMs detention to suggest that the minister was concerned with any other grounds for his detention.
It seems probable that even after ministers had authorised continued detention for intelligence exploitation purposes, it was a precondition for the actual exercise of that authority in the field that detention should be assessed as necessary for imperative reasons of security.
The detention documentation relating to SM appears to suggest that this test was applied at each review after the ministerial authorisation had been received.
On each occasion, the Detention Review Committees assessment for the authorising officers included an account of the circumstances of his capture, followed by the following statement: Legal issues.
The test to be applied is whether, on the balance of probabilities, [SM] has done something which makes him a threat to self defence, force protection, or wider mission accomplishment.
Having considered that [SM] was seen running from a Col known to have links with Obj WHITE, in an attempt to evade [redacted] after they had been engaged from nearby compounds, the route along which he was running was found to contain a hidden RPG launcher and two rounds and the assessment that he may be Obj WHITEs deputy, I advise that the policy test is satisfied.
The judgment of those involved was presumably that this test was satisfied in SMs case.
On that basis, there may have been concurrent reasons for holding any detainee, because imperative reasons of security were a necessary condition for detention, even if not the only one.
Unlike the judge, the Court of Appeal did consider the possibility that imperative reasons of security constituted a concurrent reason for his detention after the expiry of the initial period of 96 hours.
But they did so only by reference to the grounds on which further detention was authorised by ministers in London.
It is correct that the sole criterion for ministerial authorisation for continued detention beyond 96 hours was the value of the intelligence that the detainee might be in a position to provide.
Indeed, that was the reason for the change of policy which led to the adoption of the procedure for ministerial authorisation.
It is also correct that British troops had no right, either under SOI J3 9 or under the Security Council Resolutions, to arrest someone solely in order to interrogate them.
But it does not follow that they could not interrogate a detainee who was being held for imperative reasons of security.
Nor does it follow that continued detention after 96 hours for intelligence exploitation was not also justified by imperative reasons of security.
It is not necessary for this court to express a concluded view on these points, and not appropriate to do so on the inevitably incomplete information before us.
They will be open to the parties at the full trial of the action.
At that trial, my discussion of the facts at paras 86 88 may turn out to be very wide of the mark.
For present purposes, it is enough to say that imperative reasons of security are capable of justifying SMs detention in all three periods.
Application of article 5: Procedural safeguards
Article 5 imposes procedural requirements on any deprivation of liberty at four points.
Under article 5(1), the detention must be in accordance with a procedure prescribed by law.
Under article 5(2), the detainee must be informed promptly, in a language that he understands, of the reason for his detention.
Under article 5(3), where a person is detained in accordance with article 5(1)(c) (detention of suspects for the purpose of bringing them before the competent legal authorities), he must be brought promptly before such an authority.
And under article 5(4) the detainee must be entitled to take proceedings by which his detention shall be decided speedily by a court, and his release ordered if the detention is not lawful.
The claimants allege breach of all of these requirements except for the one imposed under article 5(2).
ECHR article 5(1): in accordance with a procedure prescribed by law
There is a substantial overlap between the requirement of article 5(1) that any detention should be in accordance with a procedure prescribed by law and the requirements of the other sub articles, in particular article 5(4).
In substance, the difference is that this part of article 5(1) requires that the detention should be authorised by law.
Moreover, as explained over the years in the jurisprudence of the Strasbourg court, it also implicitly defines what kind of rules may properly be regarded as law for this purpose.
By comparison, article 5(4) prescribes the minimum content of that law in one critical area, namely the availability of an effective right to challenge the lawfulness of the detention.
Both sub articles are concerned with the protection of persons against arbitrariness, which the Grand Chamber in Hassan identified as the core function of article 5.
I have dealt with the Grand Chambers analysis of this point at paras 63 and 68(3) above.
The requirement that the procedure should be prescribed by law, is intended to satisfy the test of legal certainty which is inherent in any prohibition of arbitrary detention.
Law for this purpose has the enlarged meaning which it normally bears in the Convention.
It is not limited to statute, but extends to any body of rules which is enforceable, sufficiently specific, and operates within a framework of law, including public law: Nadarajah v Secretary of State for the Home Department [2004] INLR 139, at para 54; R (Gillan) v Comr of Police of the Metropolis [2006] 2 AC 307, paras 32 34.
In Medvedyev v France, (supra,) another case of extraterritorial military detention, the Strasbourg court observed at para 80 that it was essential that the conditions for deprivation of liberty under domestic and/or international law be clearly defined and that the law itself be foreseeable in its application, so that it meets the standard of lawfulness set by the Convention, a standard which requires that all law be sufficiently precise to avoid all risk of arbitrariness and to allow the citizens if need be, with appropriate advice to foresee, to a degree that is reasonable in the circumstances of the case, the consequences which a given action may entail.
As I have pointed out (para 63), this means in a case like the present one, that a power of detention must not only be governed by rules but those rules must not be exercisable on discretionary principles so broad, flexible or obscure as to be beyond effective legal control.
The procedure governing military arrest and detention by HM forces in Afghanistan was laid down by SOI J3 9.
I have summarised this document above, and quoted the essential parts of it.
Its requirements were precise, comprehensive and mandatory.
The principles on which discretionary judgments were to be made, whether by the Detention Authority in the theatre or by ministers in London, were exactly specified.
The judge considered that it defined the conditions for deprivation of liberty with sufficient clarity and precision to meet the requirement of legal certainty.
The Court of Appeal agreed, and so do I. ECHR article 5(3): brought promptly before a judge or other officer authorised
by law
Article 5(3) qualifies the ground of detention specified in article 5(1)(c).
It requires that a person suspected of having committed an offence, who is detained for the purpose of bringing him before the competent legal authority, must be brought promptly before a judge or other officer authorised by law.
It is relevant to this appeal only so far as it is sought to justify his detention under article 5(1)(c) during the third period.
It is plain that SM was not brought before a judge or other officer promptly or at all in that period.
The question is therefore how far the requirements of article 5(3) can properly be adapted to conditions of armed conflict in a non Convention state.
Without the benefit of the decision in Hassan, the judge understandably did not appreciate the significance of this question and did not deal with it.
The Court of Appeal recorded the judges conclusion, but did not address article 5(1)(c) at all, presumably because it was irrelevant in the light of their conclusion that any authority to detain conferred by the Security Council Resolutions was limited to the 96 hours prescribed by the ISAF policy.
This is, I think, a more difficult question than the judge appreciated.
Articles 5(3) and 5(4) are both directed to the requirement for independent judicial oversight of any detention.
Article 5(3) must be read with article 5(1)(c), to which it is ancillary.
Unlike article 5(4), which applies generally, article 5(3) is concerned only with prospective criminal proceedings.
What is envisaged is that the suspect will be brought promptly before a judge or other officer with jurisdiction either to try him summarily or to release him summarily or to make arrangements for his continued detention or release on bail or otherwise pending a later trial.
In the present case, that posits a judge or other officer with criminal jurisdiction under Afghan law.
It is far from clear what if any procedures of this kind existed in Afghanistan.
The judges findings about Afghan criminal procedure do not identify any.
The judge adopted the statement of principle by the Strasbourg court in Demir v Turkey (1998) 33 EHRR 43, para 41, that where necessary, it is for the authorities to develop forms of judicial control which are adapted to the circumstances but compatible with the Convention.
This gives rise to no particular difficulty in a purely domestic case such as Demir, where the state is responsible both for the arrest and detention of the suspect and for the process of prosecution and trial.
But in citing Demir the judge appears to have thought that the British government assumed the same responsibility in Afghanistan.
This cannot in my view be correct.
The United Kingdom was not a governmental authority or an occupying power.
It was responsible for SMs arrest and detention, but it did not have and could not have assumed responsibility for the organisation or procedures of the system of criminal justice in Afghanistan, which was a matter for the Afghan state, nor for the conduct of prosecutions, which was a matter for the NDS.
The operations of the British army in Afghanistan did not displace the role of the NDS, which had jurisdiction throughout the country, including those areas in which British troops were operating.
It was seized of SMs case at the latest by 4 May 2010, when the third period began.
The British authorities regarded themselves as holding SM on their behalf.
If there was such a procedure as article 5(3) envisages, it was on the face of it the responsibility of the NDS and not of the British army to operate it.
For the same reason, I do not think that the judge can have been right to say that, quite apart from any limit on detention arising from ISAF policy, any period of detention in excess of four days without bringing the person before a judge is prima facie too long.
I doubt whether there can be even a prima facie rule about the appropriate period of detention which applies as a matter of principle in all circumstances for the purpose of article 5(3) of the Convention, although four days is probably a reasonable maximum in the great majority of cases.
A prima facie limit of four days takes no account of the truly extraordinary position in which British troops found themselves in having to contain a violent insurgency while dealing with the prosecuting authorities of a country whose legal system had recently been rebuilt and over which they had no control or constitutional responsibility.
The judge recorded that the Secretary of State adduced no evidence that it was impractical to bring SM before an Afghan judicial officer and that accordingly the Secretary of State had failed to justify the detention under articles 5(1)(c) and 5(3).
I confess to finding this an unsatisfactory basis on which to resolve this question.
The judge cannot be criticised for adopting it, because he understandably assumed in the light of the then state of Strasbourg jurisprudence that article 5 of the Convention fell to be applied without modification to military detention in Afghanistan.
There are difficulties about determining preliminary issues of law in a complex case, in conjunction with limited questions of fact, the answers to which are not only inter related but dependent on the answers to the issues of law.
The difficulties are increased when the issues of fact fall to be determined partly on assumptions derived from the pleadings and partly on evidence.
They are further increased when the basis on which article 5 of the Convention falls to be applied is changed by developments in the jurisprudence of the Strasbourg court after the judge has given judgment, with the result that findings made in one legal context have to be applied in another.
On any view there will have to be a trial before SMs claims can be finally determined.
I would therefore decline to determine at this stage whether the procedure adopted in SMs case was compatible with article 5(3) of the Convention, and would leave that question to a trial at which the relevant facts can be found and assessed in the light of the judgments on this appeal.
ECHR article 5(4): right to take proceedings to decide the lawfulness of the
detention
If the essence of arbitrariness is discretion uncontrolled by law, article 5(4), although procedural in nature, is fundamental to the values protected by article 5.
The gravamen of the procedural objection to SMs detention was that he had no practical possibility of testing its lawfulness while he remained in British custody.
There are three avenues by which in theory a detainee might have challenged his detention.
The first was an application to the High Court in England for a writ of habeas corpus.
The second was an internal challenge under the system of review provided for by SOI J3 9.
The third was an application for equivalent relief to the courts of Afghanistan.
No one appears to have suggested that the third possibility was available even in theory, and we have no information about it.
We are therefore perforce concerned with the first two.
The Secretary of State submits that there would be no jurisdiction to grant a writ of habeas corpus in these cases.
This appears always to have been the British governments position in relation to military detention in Iraq and Afghanistan.
There is aged but respectable authority that habeas corpus will not be granted to prisoners of war: see R v Schiever (1759) 2 Keny 473, Furly v Newnham (1780) 2 Dougl 419, The Case of Three Spanish Sailors (1779) 2 W Bl 1324.
Nor will it be granted to those interned as enemy aliens in the United Kingdom in time of war: Ex p Weber [1916] 1 KB 280; [1916] 1 AC 421, R v Superintendant of Vine Street Police Station, Ex p Liebmann [1916] 1 KB 268.
None of these cases, however, decided that there is no jurisdiction to grant habeas corpus.
They decided only that it would not be granted on the merits because the detention of prisoners of war and enemy aliens was a lawful exercise of the prerogative of the Crown.
These classes of persons were regarded as liable to internment merely on account of their status.
Thus in Ex p Weber, and in the later case of R v Home Secretary, Ex p L [1945] KB 7, where there was an issue about whether the applicant was in fact an enemy alien, the court resolved it.
It must have had jurisdiction to do that.
The only case in which the courts have declined to entertain the issue was R v Bottrill, Ex p Kuechenmeister [1947] KB 1, a questionable decision in a case where the Crown had continued to detain a civilian internee after the war had ended.
The application for habeas corpus was met with the answer that the courts would not review the Crowns prerogative to determine whether or not the United Kingdom was still at war.
If this decision was ever good law, it has certainly not been since the decision of the House of Lords in Council of Civil Service Unions v Minister for the Civil Service [1985] AC 374 that the exercise of prerogative powers is in principle reviewable.
Once that is accepted, the rest is legally straightforward.
A writ of habeas corpus is a personal remedy directed against the person alleged to have possession or control of the applicant.
Jurisdiction to issue it depends on the respondent being within the jurisdiction of the court, and not on the location of the applicant.
There is no principle to the effect that the writ is not available where the applicant has been captured in the course of armed conflict, if he disputes the status which is said to make his detention lawful or otherwise challenges its lawfulness.
Thus the US Supreme Court has recognised that habeas corpus is available to persons captured in non international armed conflicts seeking to challenge their designation as enemy combatants: Hamdi v Rumsfeld 542 US 507 (2004).
The same court has held that habeas corpus may issue to a public official whose agents have effective control over the applicants detention outside the United States: Boumedienne v Bush 553 US 73 (2008).
In the United Kingdom, this court has gone further and approved the issue of the writ in a case where the applicant had been lawfully delivered in Iraq by British forces to the United States, and the only element of control over his subsequent detention was an undertaking by the United States to return him on demand: Rahmatullah v Secretary of State for Defence (JUSTICE intervening) [2013] 1 AC 614.
There was no reason in principle why SM should not have been entitled to apply for habeas corpus while he was detained by British forces in Afghanistan.
I have concluded that British forces in Afghanistan were entitled to detain him if detention was and remained necessary for imperative reasons of security.
On that footing, the only issue on the review would have been whether the Detention Authority had reasonable grounds for concluding that imperative reasons of security required the detention to continue.
The problem about treating the right to apply for habeas corpus as a sufficient compliance with article 5(4) lies not in any legal difficulty, but in the absence of any practical possibility of exercising it.
SM was an illiterate man with, by his own account, limited formal education, detained by troops who did not speak his language and who worked within a system of military law which he had no reason to understand.
In these respects, his position must have been similar to that of many other detainees.
Without sponsors in the United Kingdom, a detainee in Afghanistan would face formidable practical difficulties in applying for habeas corpus in an unfamiliar court in a distant foreign country, even if the circumstances of his detention allowed it.
In fact, however, they did not allow it.
The British authorities did not recognise the existence of a right to challenge military detention.
Like other persons detained by British forces under SOI J3 9, SM had no access to legal advice or assistance and no facilities for communicating with his family or making contact with the outside world (except with the Red Cross).
It follows that although SM was entitled in point of law to apply for a writ of habeas corpus, the procedures operated by the British authorities prevented that right from being effective.
Wisely, Mr Eadie QC, who appeared for the Secretary of State, did not press this aspect of his case.
This would not necessarily matter if there was a satisfactory alternative.
I turn therefore to the system of internal review, which is the real area of dispute.
The procedure put in place by SOI J3 9 operated wholly internally.
In itself this was not necessarily objectionable.
The Grand Chamber in Hassan (para 106) envisaged that it might not be practical in a war zone to bring the detainee before a court.
Articles 43 and 78 of the Fourth Geneva Convention, which they regarded as providing an alternative standard in that event, provide for a review by an appropriate court or administrative board designated by the Detaining Power for that purpose (article 43), or in the case of an occupying power a competent body set up by the said Power (article 78).
The essential requirements emphasised by the Grand Chamber were (i) that the detention should be reviewed shortly after it began and at frequent intervals thereafter, and (ii) that it should provide sufficient guarantees of impartiality and fairness to protect against arbitrariness.
In my opinion, the British procedures satisfied the first criterion but not the second.
Even on the footing that a review by a court was impractical, the procedure which existed had two critical failings, both of which were pointed out by the courts below.
The first was that it lacked independence.
It is true, as counsel for the Secretary of State pointed out, that in addition to fairness the fundamental requirement in the eyes of the Grand Chamber was impartiality, and that independence is not necessarily the same thing.
This is, however, an unsatisfactory distinction in practice.
We are concerned with the framework of rules governing military detention, and not with the circumstances of any individual case.
What is required is not just impartiality in fact, but the appearance of impartiality and the existence of sufficient institutional guarantees of impartiality.
I would accept that it may be unrealistic to require military detention in a war zone to be reviewed by a body independent of the army or, more generally, of the executive, especially if reviews are to be conducted with the promptness and frequency required.
But it is difficult to conceive that there can be sufficient institutional guarantees of impartiality if the reviewing authority is not independent of those responsible for authorising the detention under review, as it commonly is in the practice of other countries including the United States.
The Court of Appeal doubted whether the procedure for review under SOI J3 9 was sufficiently independent but considered that it was impossible to reach a concluded view on that point without further information about the procedure and the chain of command.
I am bound to say that I do not see how the process described in SOI J3 9 (Amendment 2) can possibly be regarded as independent.
The UK Detention Authority was responsible both for authorising detention and then for reviewing his own decision.
The role of the Detention Review Committee was purely advisory and it consisted, with the possible exception of the Legal Adviser and the Political Adviser (a civilian), of his military subordinates.
There was no procedure for the case to be reviewed at any higher level than the Detention Authority, except where it was referred to a minister in London for authority to detain beyond 96 hours.
But the written procedures envisaged that in those cases the minister would focus on the intelligence value of extended detention, and the documentation in SMs own case does not suggest that any wider considerations were before him.
I do not doubt that those who operated this system in the field brought an objective eye to the matter.
On the facts to be assumed for the purpose of this appeal, SMs detention was certainly not arbitrary.
The problem is that there were no sufficient institutional guarantees that this would necessarily be so.
The assumptions in SMs case have not been fully tested, as they might have been under a procedure which was fairer to the detainee.
The second failing of the system was that it made no provision for the participation of the detainee.
SM did not in fact participate.
Indeed, there is no reason to believe that he was even aware that the reviews were occurring.
The right conferred on a detainee by article 5(4) of the Convention is to take proceedings by which the lawfulness of his detention shall be decided.
This is not simply a requirement that the authorities should review their own act.
It is a right of challenge which must necessarily involve the detainee.
Specifically, he must be entitled to challenge the existence of any imperative reasons of security justifying his detention, which was the essential condition for it to be lawful.
This is, as I have observed in another context, an inherently disputable question.
At each review of his detention, the Detention Authority had before him a brief written summary of what SM had said when he was first brought into Camp Bastion and asked whether he had anything to say about his detention.
This recorded that he was briefly questioned and denied he was running away or that he had been in command [redacted] stating he is simply a farmer and had no knowledge of the RPG launcher or rounds.
Otherwise, the only version of the facts which was before the Detention Authority was that of the soldiers who captured him.
It may well be that SM would have had little to add.
But the vice of the procedure adopted is that we cannot know that, because he was never given an opportunity to do so.
There is no treaty and no consensus specifying what fairness involves as a matter of international humanitarian law.
But some basic principles must be regarded as essential to any fair process of adjudication.
In the present context, the minimum conditions for fairness were (i) that the internee should be told, so far as possible without compromising secret material, the gist of the facts which are said to make his detention necessary for imperative reasons of security; (ii) that the review procedure should be explained to him; (iii) that he should be allowed sufficient contact with the outside world to be able to obtain evidence of his own; and (iv) that he should be entitled to make representations, preferably in person but if that is impractical then in some other effective manner.
It is a more debatable question whether he should be allowed access to legal advice and assistance.
In a situation of armed conflict this may not always be possible, at any rate within the required time scale.
But there is no evidence before us to suggest that the restrictions on access to such assistance imposed by the British authorities in Afghanistan were necessary.
They do not, for example, appear to have been imposed by ISAF, whose procedures permitted both communication with the outside world and contact with lawyers: see SOP 362 (Detention Procedure), para 7.
In these respects, British practice also conflicted with the UN Body of Principles for the Protection of All Persons under Any Form of Detention or Imprisonment, adopted by the General Assembly in 1988: see Principles 17 19; and with the position taken by the International Committee of the Red Cross: see Pejic, Procedural Principles and Safeguards for Internment/ Administrative Detention in Armed Conflict and Other Situations of Violence, International Review of the Red Cross, 87 (2005), 375 at 388.
The absence of minimal procedural safeguards was unwise as well as legally indefensible, for it rendered the decisions of the Detention Authority more vulnerable than they need have been.
Even without a judicial element, a proper procedure for the fair and independent review of detention in the theatre may be faster, more efficient, better informed, and more satisfactory for both detainer and detainee than a procedure by way of application for habeas corpus or judicial review in the courts of a country on the other side of the world.
I conclude that the United Kingdom was in breach of its obligations under article 5(4) of the Convention.
How far this conclusion will help SM remains to be seen.
Article 5(4) imposes an ancillary duty on the state, breach of which does not necessarily make the detention unlawful under article 5(1): R (Kaiyam) v Secretary of State for Justice [2015] AC 1344, para 37.
It does not therefore follow from a finding of breach of article 5(4) that SM ought to have been released any earlier than he in fact was.
The facts which are being assumed for the purpose of the preliminary issues may or may not be proved at trial.
If they are proved, it is difficult to envisage that a fair and independent review process would have resulted in his release, and an application for habeas corpus would probably have failed.
In those circumstances, it is far from clear that SM would be able to show that he had suffered any recoverable loss.
Conclusion
In the result, in Serdar Mohammed I would set aside paragraph 1(3)(ii) and paragraph 1(5) of the judges order dated 20 May 2014.
Subject to the parties submissions on the form of order, I would make the following declarations: (1) For the purposes of article 5(1) of the European Convention on Human Rights HM armed forces had legal power to detain SM in excess of 96 hours pursuant to UN Security Council Resolutions 1386 (2001), 1510 (2003) and 1890 (2009) in cases where this was necessary for imperative reasons of security. (2) ECHR article 5(1) should be read so as to accommodate, as permissible grounds, detention pursuant to that power. (3) SMs detention in excess of 96 hours was compatible with ECHR article 5(1) to the extent that he was being detained for imperative reasons of security. (4) SMs detention after 11 April 2010 did not fall within ECHR article 5(1)(f), and his detention between 11 April and 4 May 2010 did not fall within ECHR article 5(1)(c). (5) The arrangements for SMs detention were not compatible with ECHR article 5(4) in that he did not have any effective means of challenging the lawfulness of his detention. (6) Without prejudice to any other grounds on which it may be found that SMs detention was unlawful, the defendant is liable under ECHR article 5(5) and section 8 of the Human Rights Act 1998 to pay compensation to the claimant so far as the duration of his detention (including any detention pursuant to his conviction by the court in Afghanistan) was prolonged by his detention by HM forces between 11 April and 4 May 2010 for intelligence exploitation purposes.
All other questions raised in Serdar Mohammed by the issues identified in paras 5 and 6 of this judgment, should be open to the parties at any further trial.
In Al Waheed I would make the following declarations: (1) For the purposes of article 5(1) of the European Convention on Human Rights HM armed forces had legal power to detain Mr Al Waheed pursuant to UN Security Council Resolutions 1546 (2004) in cases where this was necessary for imperative reasons of security. (2) ECHR article 5(1) should be read so as to accommodate, as permissible grounds, detention pursuant to that power.
LORD WILSON:
I agree with the judgment of Lord Sumption.
In the light, however, of the disagreement within the court, I propose in my own words to address the main issues before it.
A: RESOLUTION 1546 (2004) REFERABLE TO IRAQ
The authority given by the UN Security Council in Resolution 1546 was to take all necessary measures to contribute to the maintenance of security and stability in Iraq in accordance with Mr Powells letter dated 5 June 2004; and it is worth noticing that the authority was expressed to be given to the multinational force.
Mr Powells letter included, as an example of such a measure, internment where this is necessary for imperative reasons of security.
In the Al Jedda case both in the House of Lords and in the Grand Chamber of the Strasbourg court, Mr Al Jedda therefore conceded that the resolution conferred on the UK, as one member of the multinational force, an authorisation, valid under international law, to detain Iraqi nationals where necessary for imperative reasons of security.
Mr Al Waheed makes the same concession.
But an issue remains, albeit in the end not at the centre of either of these appeals, whether in context the authorisation should, as in the Al Jedda case the House of Lords accepted but the Grand Chamber rejected, be regarded as an obligation.
In the House Lord Bingham accepted at para 31 that the language of the resolution was one of authorisation rather than of obligation.
He proceeded, however, with the agreement of the other members of the House (apart from Lady Hale, who had doubts about it), to identify in paras 32 to 34 three reasons which, so he considered, justified a conclusion that, for the purposes of article 103 of the UN Charter, the resolution imposed an obligation to intern in the specified circumstances.
So Lord Bingham concluded in para 39 that the conflict between the UKs obligation to detain an Iraqi national under the resolution and its obligation to uphold his right not to be deprived of his liberty under article 5 of the European Convention (the Convention) should be the subject of what one might now conveniently describe as an accommodation: namely that the United Kingdom might detain him if necessary for the imperative reasons but must ensure that the detainees rights under article 5 are not infringed to any greater extent than is inherent in such detention.
When the Al Jedda case reached the Strasbourg court, the Grand Chamber carefully considered the reasons which Lord Bingham and the other members of the House had articulated.
In para 102 of its judgment, however, it noted that, of the four declared purposes of the UN, one was to achieve international co operation in promoting respect for human rights.
In that light it approached the task of interpreting Resolution 1546 with a presumption that the Security Council does not intend to impose any obligation on member states to breach fundamental principles of human rights.
It followed, so the Grand Chamber considered, that, in the event of any ambiguity in the terms of a resolution of the Security Council, the interpretation more in harmony with the requirements of the Convention should be preferred.
In some of its language, for example in para 101 of the judgment, the court seemed to accept that Resolution 1546 did contain obligations; but the decision was that, insofar as it did so, the obligations did not extend to internment on the part of such states as were members of the Council of Europe because article 5(1) cast a contrary obligation upon them.
It was accepted without argument by the Grand Chamber in the Al Jedda case that the effect of article 5(1), even when construed in the context of Resolution 1546 and its successors, was such as to impose an obligation on member states not to effect internment otherwise than with a view to criminal proceedings pursuant to subpara (c).
At the outset of its assessment, namely in paras 99 and 100, the court emphasised that since, as was accepted, none of the six exceptions prescribed in article 5(1) applied, the United Kingdom did indeed have an obligation thereunder not to intern Mr Al Jedda.
So the only question was whether its obligation under article 5(1) had altogether been displaced by the resolutions in the light of article 103 of the UN Charter.
The assumption of the Grand Chamber was therefore that, subject only to the possibility of its displacement altogether, the extent of the United Kingdoms obligation under article 5(1) was immutable even in the context of the resolutions; and, having made that assumption, the Grand Chamber turned to construe the resolutions in order to determine the applicability of article 103.
In Mr Al Waheeds appeal the central task of this court today is to decide whether, particularly in the light of the later reasoning of the Grand Chamber in the Hassan case, it is necessary to regard the extent of the United Kingdoms obligation to him under article 5(1) as having been immutable.
Unless it was immutable, we have no need to wrestle with the difference of opinion as to whether Resolution 1546 cast an obligation to detain where necessary for imperative reasons of security.
B: RESOLUTION 1386 (2001) REFERABLE TO AFGHANISTAN
The authority given by the UN Security Council in Resolution 1386 was to take all necessary measures to fulfil the mandate given to ISAF; and its mandate was, by para 1, to assist the Afghan Interim Authority in the maintenance of security in Kabul and its surrounding areas, so that the Afghan Interim Authority as well as the personnel of the United Nations can operate in a secure environment.
Later resolutions expanded the geographical reach of the mandate beyond Kabul and surrounding areas and they progressively extended the period for which the authority was to remain operative; but the terms of the authority itself remained untouched.
There can be no doubt that all necessary measures included a power to intern.
All measures were included so long as they were necessary.
If, as the Security Council was later to recognise expressly when passing Resolution 1546 in relation to Iraq and when annexing Mr Powells letter to it, all necessary measures to contribute to the maintenance of security in Iraq included a power of internment, how could the Council not have regarded it as likewise included in relation to the maintenance of security in Afghanistan? An authority to assist in the maintenance of security which did not include a power to intern would not have been a worthwhile authority at all.
In Mr Mohammeds case the Court of Appeal agreed that the authority included a power to intern but held that the authority had been given to ISAF and so was subject to their policy.
There, in my respectful opinion, the Court of Appeal misread the resolution.
The authority to take all necessary measures was given to the member states participating in the [ISAF].
In this regard the later Resolution 1546 referable to Iraq, which, in conferring authority on the multinational force, is accepted to have conferred authority on the United Kingdom, ran closely parallel to it.
ISAF was no more than an umbrella body, which had no independent personality in law, international or otherwise.
Indeed the authority to take all necessary measures was unqualified: it was not to take all such necessary measures as ISAF might identify.
Were the continued internment of an insurgent after 96 hours to be objectively necessary and yet to conflict with ISAFs policy, the authority to intern under the resolution would be unaffected.
How could necessity, of all things, be subordinated to policy?
C: THE AL SKEINI CASE
In a second controversial decision handed down on the same day as its decision in the Al Jedda case, namely Al Skeini v United Kingdom (2011) 53 EHRR 18, the Grand Chamber held that non detained Iraqi civilians, shot by United Kingdom forces in the course of military operations during the second of the three periods in which United Kingdom forces operated in Iraq, namely the period of occupation from 1 May 2003 to 28 June 2004, had also had rights under the Convention which the United Kingdom had been bound to respect, including a right under article 2 of the Convention to an investigation into their deaths, and that the United Kingdom had breached it.
The declared basis of this seemingly novel extension of the Convention was that during this period the United Kingdom had assumed authority for the maintenance of security in South East Iraq and had thus assumed authority over the individual civilians whom they had shot, even if it had not had effective control over the area in which the shootings had occurred (para 149).
The Grand Chamber added, however, that, when jurisdiction under article 1 of the Convention depended upon authority over an individual, including when a Convention state took a person into custody abroad, rather than upon effective control over an area, Convention rights could be divided and tailored (paras 136 137).
This was an important recognition that the courts substantial extra territorial enlargement of the concept of jurisdiction under article 1 of the Convention required re examination of the breadth of certain of the articles in section 1 of it.
It seems obvious that in particular attention would need to be given to the tailoring of article 5(1) which, on the face of it, permitted no detention in the course of military operations; and the first step towards doing so was soon taken by the Grand Chamber in its decision in the Hassan case.
D: THE HASSAN CASE
The facts in the Hassan case were that on 23 April 2003 British forces, searching for the applicant who was a general in the army of the Baath party, raided his home in Basra and found not him but his brother, T, who might well have been armed with an AK 47 machine gun.
They arrested T either as a suspected combatant or as a civilian suspected to pose a threat to security.
They detained him for eight days.
At about midnight on 1/2 May 2003, having established that he was a civilian rather than a combatant and that he did not pose a threat to security, they released him.
Following his subsequent death, the applicant brought a claim on Ts behalf in the High Court against the Secretary of State in which he alleged a breach of Ts rights under the Convention, including under article 5.
The judge dismissed the claim on the ground that Ts detention, albeit managed by British forces, had been in a camp officially designated as a US facility and under overall US control, with the result (so the judge held) that he had not been within the jurisdiction of the United Kingdom within the meaning of article 1 of the Convention.
The applicant then made an analogous application against the United Kingdom in the Strasbourg court.
Disagreeing with the High Court judge, the Grand Chamber held that, while in detention, T had been in the physical control of United Kingdom forces and that the substantive provisions of the Convention were therefore engaged.
It therefore proceeded to consider the nature of its obligations to him, in particular under article 5.
At this stage it is important to note the context of Ts detention.
It occurred in the first of the three periods in which United Kingdom forces operated in Iraq, namely between 20 March 2003 and 1 May 2003, during which there was an international armed conflict (an IAC).
Geneva Convention III, relating to the treatment of prisoners of war, and Geneva Convention IV, relating to the protection of civilians in time of war, have a common article 2, which provides that they apply to all cases of declared war or any other armed conflict which may arise between two or more of the High Contracting Parties, in other words that they apply to an IAC.
Article 21 of Convention III provides that the Detaining Power may subject prisoners of war to internment.
Article 78 of Convention IV provides that the Occupying Power may intern protected persons if it considers it necessary, for imperative reasons of security.
Insofar as British forces suspected that T was a combatant, the United Kingdom had power to detain him under article 21 of Convention III.
Insofar, alternatively, as they suspected that he was a civilian who posed a threat to security, it had power to detain him under article 78 of Convention IV.
The source of the power to detain him was therefore in those two conventions rather than, for example, in any resolution of the Security Council.
Section II of Part III of Convention III and Section IV of Part III of Convention IV contain elaborate provisions for the proper treatment of prisoners of war and civilian internees respectively.
By 13 votes to four, the Grand Chamber held that, in detaining T, the United Kingdom had not violated article 5(1) of the Convention.
Its central reasoning was as follows: (a) There were important differences of context and purpose between arrests carried out during peacetime and the arrest of a combatant in the course of an armed conflict (para 97). (b) None of the six exceptions to the right to liberty, prescribed in article 5(1), applied (para 97). (c) But in Cyprus v Turkey (1976) 4 EHRR 482 the European Commission of Human Rights had refused to examine the lawfulness of the detentions of Greek Cypriot forces by Turkey in the area of Cyprus under Turkish control because the detentions had been effected under Geneva Convention III, which accorded to the detainees the status of prisoners of war thereunder (para 99). (d) The court should interpret article 5(1) of the Convention in the light of article 31(3) of the Vienna Convention on the law of treaties 1969 (the Vienna Convention), which required it to take into account, at (b), any subsequent practice in the application of the (European) Convention which established the agreement of the parties regarding its interpretation and, at (c), any applicable rules of international law (para 100). (e) The case of Al Saadoon v United Kingdom (2010) 51 EHRR 9 demonstrated that, in accordance with article 31(3)(b) of the Vienna Convention, consistent practice of the parties to the (European) Convention could even establish an agreement to modify its text (para 101).
I interpolate that the central fact there had been that all but five of the member states had agreed in a protocol that the death penalty shall be abolished.
Taking it together with consistent state practice not to impose the death penalty, the Strasbourg court in the Al Saadoon case had held, at para 120, that the protocol indicated that article 2 of the Convention, which had allowed for the imposition of the death penalty in specified circumstances, had been amended so as to delete that part of it. (f) The practice of member states, when engaged extra territorially in IACs in which they effected detentions under Geneva Conventions III and IV, had not been to exercise their power of derogation from article 5 under article 15 of the Convention (para 101). (g) In accordance with article 31(3)(c) of the Vienna Convention, the court should interpret article 5 of the Convention in harmony with international humanitarian law, in particular Geneva Conventions III and IV, which had been designed to protect both prisoners of war and captured civilians who posed a threat to security (para 102). (h) The United Kingdom (which had argued see para 90 that it was more in the interests of a detainee that the detaining power should not derogate altogether from article 5 but should instead remain subject to a suitably accommodated interpretation of it) had been correct in saying that the lack of derogation did not disable the court from interpreting article 5 in the light of Geneva Conventions III and IV (para 103). (i) The safeguards in article 5(2) to (4) of the Convention, albeit also to be interpreted in the light of Geneva Conventions III and IV, should continue to apply to detentions during an IAC but, in the light of those safeguards and of those in the Geneva Conventions themselves, the six exceptions to the right to liberty prescribed in article 5(1) should be accommodated, as far as possible with the taking of prisoners of war and the detention of civilians under the Geneva Conventions (para 104). (j) The court is mindful of the fact that internment in peacetime does not fall within the scheme of deprivation of liberty governed by article 5 of the Convention without the exercise of the power of derogation under article 15 It can only be in cases of international armed conflict, where the taking of prisoners of war and the detention of civilians who pose a threat to security are accepted features of international humanitarian law, that article 5 could be interpreted as permitting the exercise of such broad powers. (para 104). (k) But the requirement in article 5(1) that every deprivation of liberty should be lawful continued to apply to these cases, with the result that detentions had to comply with the provisions of the two Geneva Conventions (para 105). (l) Interpretation in the light of the Geneva Conventions of the safeguard in article 5(4), when applied to detentions during an IAC, required limited, but only limited, departure from its usual interpretation (para 106).
The central issue in these appeals is whether the reasoning of the Grand Chamber in the Hassan case should be applied so as to justify a conclusion that, when detaining the two claimants, the United Kingdom did not violate article 5(1) any more than when it had detained T.
The obvious difference is that the detention of T took place in the course of an IAC whereas the detention of the claimants took place in the course of a non international armed conflict (a NIAC).
In the Hassan case the Grand Chamber laid great stress on Geneva Conventions III and IV, which, as I have explained, provided both the source of the power to detain T and the safeguards which were to surround his detention.
But these two Geneva Conventions scarcely relate to a NIAC.
They include just one provision relating to a NIAC, namely article 3, which is common to both of them and which requires humane treatment of all those taking no active part in the conflict, whether by reason of detention or otherwise.
Additional Protocol II to the Geneva Conventions, dated 8 June 1977 and expressed to relate to the protection of victims of NIACs, develops and supplements article 3 (Part I, article 1), in particular by elaborating upon the requirement that they be treated humanely (Part II).
But the legal regulation exerted by the Geneva Conventions, together with Additional Protocol II, of states participating in a NIAC is negligible in comparison with their regulation of states participating in an IAC.
This is no accident.
In his article entitled Is There a Way Out of the Non International Armed Conflict Detention Dilemma?, 91 Intl L Stud 32 (2015), Professor Rona identifies at pp 37 38 three reasons why states have traditionally had no desire to accept international regulation of the grounds of their detentions, or of the procedures relating to them, during a NIAC.
They have insisted that: international regulation would be an intrusion into their sovereign (a) right to address conflict confined to their own territory; (b) an entirely adequate, means of addressing it; and their domestic law, in particular their criminal law, was the proper, and (c) the prospect that international regulation would afford reciprocity of rights to the other party to the conflict, ie to the insurgents, was unacceptable.
On any view the claimants are entitled to place reliance on the references of the Grand Chamber in the Hassan case to the application in that case of the two Geneva Conventions and, of course, on the sentence in para 104 of its judgment, quoted in para 124(j) above, which begins [i]t can only be in cases of international armed conflict .
But one does not have to delve far below the surface of the Grand Chambers judgment in the Hassan case in order to perceive the problems which confront the claimants in seeking to distinguish it.
It was inevitable that in its judgment the Grand Chamber should speak in terms of an IAC: for T had been detained in the first period of the conflict in Iraq.
The court had no reason to consider detention in the course of a NIAC.
Significantly the essential distinction which it drew, both in para 97 and in para 104, was between detention during an IAC, on the one hand, and detention during peacetime (as opposed to during a NIAC), on the other.
The Grand Chamber relied heavily on the requirement under article 31(3)(c) of the Vienna Convention that, in interpreting the (European) Convention, it should take account of any relevant rules of international law.
It had not considered this important principle in the Al Jedda case when making the assumption which I have identified in para 117 above.
In the Hassan case the relevant authority under international law for the purposes of article 31(3)(c) was derived from the two Geneva Conventions.
In the present cases, by contrast, it was derived from the resolutions of the Security Council.
There is no reason to afford any less interpretative significance to the resolutions of the Security Council than to the Geneva Conventions.
On the contrary the resolutions may be said to have carried greater significance.
The purposes of the United Nations, invested with greater world wide authority than any other body in seeking to achieve them, are to maintain international peace and security, and to that end to take effective collective measures for the prevention and removal of threats to the peace and to achieve international co operation in promoting and encouraging respect for human rights: paras 1 and 3 of article 1 of the UN Charter.
Primary responsibility for the maintenance of international peace and security is conferred by the UN on the Security Council which, in discharging it, must act in accordance with those purposes: article 24.
Unlike the generalised authorities to detain during every IAC which are to be found in the two Geneva Conventions, the authority to detain in the resolutions was specifically devised by the Security Council to address what it had concluded to be the threat to international peace and security which were constituted by the situations in Iraq and Afghanistan.
But the authority conferred by the Security Council was appropriately narrow: internment would be lawful not because it was expedient nor even because it was reasonably deemed to be necessary but only when it was actually necessary for the maintenance of security.
Since about the end of the Second World War an apparently rigid distinction has emerged between an IAC and a NIAC.
But, particularly where there is foreign intervention in an armed conflict within a state, the distinction is often difficult to apply in practice: International Law and the Classification of Conflicts ed Wilmshurst (2012), Chapter III by Professor Akande, p 56.
Before concluding that article 5(1) of the Convention falls to be accommodated to an IAC but not to a NIAC, we should ask: why not? There is in principle no lesser need for detention in a NIAC than in an IAC.
I can see no reason why, if an authorisation for detention during a NIAC is valid under international law in that it emanates from the Security Council, article 5(1) should hobble the authorisation so long, of course, that safeguards against arbitrary or unchallengeable detention remain in place.
So I agree with the conclusion of the Court of Appeal in Mr Mohammeds case, at para 163, that, in the light of the Hassan case, a resolution of the Security Council which (contrary to that courts construction of Resolution 1386) did confer direct authority on a troop contributing state to effect a detention during a NIAC would be compatible with article 5 of the Convention, provided that procedural safeguards in relation to detention and to its review were also compatible with it.
Interpretation of the procedural safeguards provided in paras (2) to (4) of article 5 may also be sufficiently flexible to take account of the context of the detentions, namely that they took place in the course of armed conflict and pursuant to the resolutions (see the Hassan case at para 106).
But any dilution of those safeguards should be to the minimum extent necessary to accommodate the demands of that context; and (if I may gratefully adopt the reasoning in para 146 of the decision in a different context of the Grand Chamber in Al Dulimi v Switzerland, Application No 5809/08, 21 June 2016) these resolutions, which contained no explicit wording to the contrary, cannot justify any interpretation of the safeguards which undermines their objective that detentions should not be arbitrary.
But it is insufficient to consider only the safeguards, diluted to the minimum extent necessary, in paras (2) to (4) of article 5.
In the context of detention safeguards are so important that they are subject to a double lock.
The extra lock is provided by the requirement in para 1 that no one shall be deprived of his liberty save in accordance with a procedure prescribed by law.
No one suggests that this particular IN ACCORDANCE WITH LAW phrase requires to be accommodated with the circumstances surrounding the detentions in Iraq and Afghanistan.
An interesting question, left open in the courts below but pressed on this court by Ms Fatima QC on behalf of the first interveners in the appeal relating to Mr Mohammed, is whether, even if the detentions were to accord with international law, the phrase would nevertheless also require their accordance with national law.
Even after having studied paras 79 and 80 of its judgment in the Medvedyev case, cited by Lord Sumption at para 80 above, I regard the Strasbourg court as not yet having provided clear authority on this question for us to consider.
On any view, however, there is much to be said in favour of Ms Fatimas submission that accordance with national law remains necessary.
At the centre of the requirement is the need for the detaining state to be answerable for the detention; and that need is most obviously met in the domestic law by which the state is bound.
The detention is required to accord with a procedure prescribed by law; within the resolutions which in these appeals represent the relevant international law there is no prescription of procedure.
In its report to the UN Human Rights Council dated 4 May 2015, the Working Group on Arbitrary Detention suggested, in Guideline 17 at para 115(ii), that a detention in the course of a NIAC had to be shown to be on the basis of grounds and procedures prescribed by law of the State in which the detention occurs and consistent with international law.
Although the prescription can no doubt be by any law by which the detaining State is bound, thus including, if it is operating abroad, its own domestic law, the guideline in my view helps to identify the source of the law with which article 5 requires accordance.
So the next question is: what does this phrase in the opening words of article 5(1) require of domestic law? The answer is complicated first by the use in the Convention of the word lawful in the description of each of the six exceptions to the right to liberty in (a) to (f) of para 1; and also by the three specific safeguards, each clearly procedural, which are importantly provided by paras 2, 3 and 4 of the article.
So there is overlap between the various requirements of the article in this respect.
All of them are generally designed to prevent a detention from being arbitrary: A v United Kingdom (2009) 49 EHRR 29, para 164.
Clearly, however, the precise territory of the phrase in the opening words of para 1 is procedure.
In Winterwerp v The Netherlands (1979) 2 EHRR 387, the Strasbourg court stated at para 45: The notion underlying the term in question is one of fair and proper procedure, namely that any measure depriving a person of his liberty should issue from and be executed by an appropriate authority and should not be arbitrary.
This statement has stood the test of time; and in my view the only helpful elaboration of it has been the suggestion that the phrase relates to the quality of the law rather than the content of it.
As the Grand Chamber observed in Mooren v Germany (2009) 50 EHRR 23, para 76, it requires the relevant domestic law to be compatible with the rule of law.
The court added: Quality of the law in this sense implies that where a national law authorises deprivation of liberty it must be sufficiently accessible, precise and foreseeable in its application, in order to avoid all risk of arbitrariness.
In para 80 of the Medvedyev case, cited above, these requirements were described as falling within the general principle of legal certainty.
In the case of Iraq Mr Powell referred in his letter annexed to Resolution 1546 to the obligations of the multinational force under the Geneva Conventions.
Why did he do so in circumstances in which, apart from those in common article 3, the obligations would not in terms relate to the NIAC which was shortly to begin? The answer is to be found in sections 1 and 6 of the revised Memorandum No 3, which was promulgated lawfully, so I will assume on 27 June 2004 by the administrator of the Coalition Provisional Authority.
The memorandum was given continuing effect under Iraqi law after 28 June 2004, when the conflict became a NIAC, by article 26(C) of the Transitional Administrative Law which had been promulgated in March 2004 by the Iraqi Governing Council: see the Al Saadoon case at para 22, cited at para 124(e) above.
Under those sections the multinational force was to apply the relevant standards of Geneva Convention IV as a matter of policy during the forthcoming NIAC and specific provisions were made for regular reviews of internment.
Procedural safeguards under Iraqi law, binding on the United Kingdom when operating there, were thereby put in place; and in my view it follows that Mr Al Waheeds detention was in accordance with a procedure prescribed by law.
In para 38 of its judgment in the Al Jedda case the Grand Chamber, which had set out the memorandum in para 36, referred to the Iraqi Constitution adopted in 2006; and it seemed to suggest that (or at least to question whether) articles 15 and 37 of the constitution thereafter rendered Mr Al Jeddas detention unlawful even under Iraqi law.
Unfortunately, however, the Grand Chambers attention was not drawn to article 46 of the constitution, which allows other Iraqi laws, such as the memorandum, to limit constitutional rights in certain circumstances.
In its consideration of a second claim made by Mr Al Jedda, namely Al Jedda v Secretary of State for Defence [2010] EWCA Civ 758, [2011] QB 773, the Court of Appeal concluded that article 46 did indeed limit Mr Al Jeddas constitutional rights, with the result that his detention remained lawful under Iraqi law even after 2006.
It would be extraordinary that, by a side wind generated by a conventional constitutional provision intended to protect civilians against arbitrary detention during peacetime, detentions in Iraq effected by the multinational force during the final years of the armed conflict suddenly became unlawful under Iraqi law.
In the case of Afghanistan, the requisite obligation upon the United Kingdom under article 5(1) to effect internment there only if in conformity with the rules of national law as well as to keep within the boundaries of its authorisation under international law arose even more directly.
For the Ministrys policy in that respect was set out in instruction SOI J3 9; and United Kingdom law will in principle require it to have implemented its policy.
The conclusion of Leggatt J that the terms of the instruction satisfied the requirement of legal certainty in the opening words of article 5(1) does not appear to have been challenged in the Court of Appeal and is not in issue before this court.
F: CONCLUSION
I conclude that the effect of the resolutions of the Security Council was to modify the United Kingdoms obligations to the claimants under para 1 of article 5 of the Convention with the result (a) that its detention of Mr Al Waheed was not in breach of it and (b) that, to the extent that Mr Mohammed was detained for imperative reasons of security, its detention of him was not in breach of it.
The invitation of the claimants to this court has been that it should depart from the decision of the House of Lords in the Al Jedda case pursuant to Practice Statement (Judicial Precedent) [1966] 1 WLR 1234.
Any departure pursuant to the statement must be from the previous decision itself rather than from any of the reasoning which led to it.
Like that of Mr Al Waheed, the detention of Mr Al Jedda by United Kingdom forces took place during the third and final period in which they operated in Iraq; and Resolution 1546 and its successors applied to it.
It can now be seen that the effect of the resolutions was to modify Mr Al Jeddas right under article 5(1) of the Convention, with the result that, by detaining him, the United Kingdom did not violate it.
So, by a jurisprudential route different from that which it took, the decision of the House to that effect can now be seen to have been correct.
Far more debateable is whether, in light of the points later to be made by the Grand Chamber, the reasoning of the House was correct.
For reasons which one can well understand but which in retrospect have proved unfortunate, the drafters of the Convention chose to identify six cases as being the only cases in which it would be lawful for a member state to deprive a person of liberty.
Compare the exhaustive precision of article 5(1) with, for example, article 9(1) of the UNs International Covenant on Civil and Political Rights 1966, which, although otherwise closely modelled on article 5, provides that [n]o one shall be deprived of his liberty except on such grounds as are established by law.
There is nothing to indicate that the drafters of the Convention contemplated that its jurisdiction under article 1 would extend to the operations of member states in the course of armed conflict beyond their territories.
Once, however, the Strasbourg court had construed the jurisdiction of the Convention as extending that far, it became essential, as indeed was swiftly recognised in the Al Skeini case, that Convention rights should be so divided and tailored as to make the extension workable.
Otherwise member states would be driven, insofar as they were able to do so, to derogate under article 15 from their obligations under the Convention which would leave the human rights of those caught up in the conflict far less protected.
The exercise of tailoring article 5 was duly conducted by the Grand Chamber in the Hassan case; and today, by a majority, the court takes forward the exercise which it charted.
In my view it is no part of the function of this court to speculate upon the approach of another court, not even of the Grand Chamber of the Strasbourg court, to the issue presently raised before it.
We cannot foretell the determination in the Grand Chamber of any claim which might now be brought by the claimants, and by the hundreds of other claimants in our courts in a position analogous to them, of a violation by the United Kingdom of article 5(1) of the Convention.
No doubt there would again be dissentient voices, concerned, in a way understandably, about a perceived dilution of Convention rights.
But a vastly more important factor would be in play.
For all of us judges, both in Strasbourg and in the United Kingdom, who believe many of us, passionately in the value of the Convention in having raised the standards of a states treatment of its people across the Council of Europe, its very credibility is at stake in determination of the present issues.
Could it be that, by reason of article 5(1), such state contributors to the multinational forces in Iraq and Afghanistan as happened also to be members of the Council of Europe would be legally disabled from effecting internments in Iraq after 28 June 2004, and from effecting internments in Afghanistan beyond 96 hours, even where necessary for the maintenance of security and even pursuant to UN resolutions which, having surveyed the nature of the conflict there, expressly sanctioned internment in such circumstances? Could it be that those contributors to the multinational force would be disabled from acting pursuant to the UN resolutions although fellow contributors which happened not to be members of the Council of Europe would not be so disabled? Such conclusions would bring the Convention into widespread international disrepute and it is, frankly, a relief for me to have found myself persuaded that they can properly be avoided.
By contrast there was a clear breach of Mr Mohammeds rights under para 4 of article 5 of the Convention, irrespective of the extent to which the paragraph falls to be accommodated with the exigencies of an armed conflict; and in that regard the only remaining question for the trial judge should, in my view, be whether the breach caused Mr Mohammed to suffer loss.
For the reasons given by Lord Sumption at paras 105 and 106 above, the violation of the paragraph was in each of two respects: first, the structural system for the reviews of Mr Mohammeds detention meant that they were not sufficiently independent of those within the United Kingdom force who sought its continuation; and second, he was afforded no opportunity to contribute to them.
Lord Mance argues strongly, at para 216 below, that the evidence so far filed by the Ministry about the structural system for the reviews might, if supplemented, displace a positive finding against it in the first respect; but in my view the opportunity already given to the Ministry to file the relevant evidence has been fair and there is no justification for granting to it any extra indulgence.
LORD MANCE:
Introduction
The present appeals concern claims for damages by two individuals in respect of their allegedly wrongful detention by British forces in respectively Iraq and Afghanistan.
I have had the benefit of reading in draft three of the other judgments which have been prepared, by respectively Lord Sumption, Lord Wilson and Lord Reed.
A central issue of principle on these appeals is whether the United Kingdom, in the course of assisting the recognised governments of Iraq and Afghanistan to combat non international armed insurgencies, had under international law power to detain suspected terrorists or insurgents when necessary for imperative reasons of security, or whether any power to detain must be found within the express terms of article 5 of the European Convention on Human Rights.
The United Kingdom advances two bases on which it submits that it possessed such power; one is customary international law applicable to a non international armed conflict (a NIAC) read with the Geneva Conventions and their additional Protocols; the other is the relevant Security Council Resolutions (SCRs) endorsing the authority of the United Kingdom to act as part of the multinational force in Iraq and as part, or indeed leader, of the International Security Assistance Force (ISAF), in Afghanistan at the relevant times.
Customary international law
Lord Reed concludes positively that customary international law and the Geneva Conventions and their Protocols do not confer any such authority to detain on states (para 263).
Lord Sumption is inclined to agree with Lord Reed on this, but regards it as unnecessary to decide (para 14).
His more nuanced thinking is that, while there is in principle consensus about a right to detain, there is a lack of consensus about its limits and conditions and the extent to which special provision should be made for non state actors, but that practice is converging and it is likely that this will ultimately be reflected in opinio juris (para 16).
My position is closer on this issue to Lord Sumptions than to Lord Reeds.
Like Lord Sumption I also regard it as one which is in the event unnecessary to decide.
But I add one observation.
The role of domestic courts in developing (or in Lord Sumptions case even establishing) a rule of customary international law should not be undervalued.
This subject was not the object of detailed examination before us, and would merit this in any future case where the point was significant.
But the intermeshing of domestic and international law issues and law has been increasingly evident in recent years.
Just as States answer for domestic courts in international law, so it is possible to regard at least some domestic court decisions as elements of the practice of States, or as ways through which States may express their opinio juris regarding the rules of international law.
The underlying thinking is that domestic courts have a certain competence and role in identifying, developing and expressing principles of customary international law.
The potential relevance of domestic court decisions as a source of international law was recognised and discussed as long ago as 1929 by H Lauterpacht, then an assistant lecturer at the London School of Economics, in his article Decisions of Municipal Courts as a Source of International Law 10 British Yearbook on International Law (1929) 65 95.
This drew on insights derived from Lauterpachts joint editorship with his former LSE doctorate supervisor, the then Arnold McNair, of the Annual Digest and Reports of Public International Law Cases (now the International Law Reports) series also launched in 1929: see The Judiciary, National and International, and the Development of International Law by Sir Robert Jennings QC in vol 102 of the series (1996).
There is a further extensive bibliography on the subject annexed at pp 18 19 of the Fourth report on identification of customary international law dated 25 May 2016 submitted by Sir Michael Wood QC as rapporteur to the International Law Commission (ILC).
Most recently, in the chapter The Interfaces between the National and International Rule of Law: a Framework Paper in The Rule of Law at the National and International Levels (Hart Publishing, 2016) the classic answer given by Machiko Kanetake (at p 27) is that under international law, national rule of law practices are, after all, part of state practices, which contribute to the creation of new customary international law, that they may also form part of the general principles of international law, and may also qualify as opinio juris.
Sir Michael Wood, as rapporteur to the ILC, recognised in his Second Report dated 22 May 2014 para 58 the potential significance in international law of domestic jurisprudence not only as state practice, but also, with caution, as a means for the determination of rules of customary international law: see also his Third Report dated 27 March 2015 paras 41(e) and 76(b).
Yet more significantly, the current draft Annual Report of the International Law Commission to the UN General Assembly for 2015, following upon Sir Michael Woods Reports, contains the following draft Conclusion 13 (subject to finalisation in 2018): Decisions of courts and tribunals 1.
Decisions of international courts and tribunals, in particular of the International Court of Justice, concerning the existence and content of rules of customary international law are a subsidiary means for the determination of such rules. 2.
Regard may be had, as appropriate, to decisions of national courts concerning the existence and content of rules of customary international law, as a subsidiary means for the determination of such rules.
Security Council Resolutions (SCRs) (a)
The relevant SCR for Iraq was 1723 (2006), whereby the Security Council, recognizing the tasks and arrangements set out in letters annexed to resolution 1546 (2004) and the cooperative implementation by the Government of Iraq and the multinational force of those arrangements, reaffirmed the authorisation for the multinational force as set forth in resolution 1546 (2004) and decided to extend the mandate of the multinational force as set forth in that resolution until 31 December 2007, taking into consideration the Iraqi Prime Ministers letter dated 11 November 2006, which had in turn requested such extension in accordance with the Security Council Resolutions 1546 (2004) and 1637 (2005) and the letters attached thereto until 31 December 2007.
SCR 1546 (2004) itself reaffirming the authorisation conferred by earlier resolutions, conferred the authority to take all necessary measures to contribute to the maintenance of security and stability in Iraq in accordance with the letters annexed to this resolution .
The resolution went on to state that the letters set out the tasks of the multinational force, including preventing and deterring terrorism.
The letters included a letter of 5 June 2004 from the US Secretary of State, expressing the United States willingness to deploy forces to maintain internal security in Iraq and to undertake activities which would, the letter said: include activities necessary to counter ongoing security threats posed by forces seeking to influence Iraqs political future through violence.
This will include combat operations against members of these groups, internment where this is
necessary for imperative reasons of security
SCR 1546 (2004) is thus on its face clear.
It gave authority to take all necessary measures, which, it was expressly stated, would include internment where this is necessary for imperative reasons of security.
In Al Jedda v United Kingdom (2011) 53 EHRR 23, the European Court of Human Rights addressed the relevant letter (which it had earlier summarised in para 34), by concluding that it did not impose an obligation or requirement to detain (para 108).
On that basis, it further concluded that the letter could not override the United Kingdoms duties under article 5 of the Convention.
But it did not suggest that the SCR, read with the letter, did not contain power to detain.
The European Court of Human Rights in Al Jedda was only concerned with arguments based under article 103 on competing obligations: see paras 101 110.
Once it had concluded that there were no competing obligations, that was the end of those arguments.
The relationship between a power to detain conferred by international law in circumstances of armed conflict and article 5 of the European Convention on Human Rights was not squarely addressed until Hassan v United Kingdom (2014) 38 BHRC 358.
There it was addressed in the context of an international armed conflict (IAC).
The Third and Fourth Geneva Conventions expressly recognise certain powers (though not obligations) to detain prisoners of war and civilians who pose a risk to security.
The European Court of Human Rights held that the scheme provided by article 5 had to be read in the light of, and modified to reflect, the power to detain on security grounds, subject to the condition that such detention was not arbitrary, but was accompanied by a review process which was independent, even if it was not by a court.
The European Court of Human Rights acknowledged at the outset that the arguments raised in Hassan were novel.
As it said (para 99): 99.
This is the first case in which a respondent state has requested the court to disapply its obligations under article 5 or in some other way to interpret them in the light of powers of detention available to it under international humanitarian law.
In particular, in Al Jedda v United Kingdom (2011) 30 BHRC 637, the United Kingdom government did not contend that article 5 was modified or displaced by the powers of detention provided for by the Third and Fourth Geneva Conventions.
Instead they argued that the United Kingdom was under an obligation to the United Nations Security Council to place the applicant in internment and that, because of article 103 of the United Nations Charter, this obligation had to take primacy over the United Kingdoms obligations under the convention.
It was the governments case that an obligation to intern the applicant arose from the text of United Nations Security Council Resolution 1546 and annexed letters and also because the resolution had the effect of maintaining the obligations placed on occupying powers under international humanitarian law, in particular article 43 of the Hague Regulations (see Al Jedda v United Kingdom (2011) 30 BHRC 637 at para 107).
The court found that no such obligation arose.
In this passage, the European Court of Human Rights was recognising, realistically, that it had before it arguments that had not been, though they might have been, raised for its consideration in Al Jedda. (This is so, even though its reference to powers of detention provided for by the Third and Fourth Geneva Conventions may quite possibly be open to question, in the light of paras 115 116 of this judgment.) To treat the fact that the United Kingdom did not in Al Jedda present any argument about the relationship between a power to detain conferred by international law and the provisions of article 5 of the Convention as fatal to any such argument now appears to me unreal.
The United Kingdom has now changed its stance, and the previous stance of one individual state cannot in context anyway be significant.
As to the European Court of Human Rights, in a case law system, like that which the European Court of Human Rights operates under the Convention, courts proceed from case to case, sometimes having to reconsider or modify past jurisprudence (moreover, in Strasbourg without applying any strict doctrine of precedent).
Above all, it is necessary to bear in mind the very considerable difficulty of the issues which arise, since the European Court of Human Rights judgment in Al Skeini v United Kingdom (2011) 53 EHRR 18, in applying the Convention to circumstances and territories outside any which are likely to have been in Contracting States mind when they agreed to secure the Convention rights and freedoms to everyone within their jurisdiction (Convention, article 1).
Finally, if Hassan had been decided before Al Jedda, it is quite obvious that the submissions and the reasoning in the judgment in Al Jedda would have been very different.
Hassan itself concerned a situation of IAC, where the Geneva Conventions confer express powers to detain.
This was, not surprisingly, underlined by the European Court of Human Rights as a reason for concluding that the terms of article 5 could not be applied, and that they should be modified so as to recognise a further and different power to detain, based on the Conventions concurrently.
Thus, the court said in para 104: 104.
None the less, and consistently with the case law of the International Court of Justice, the Court considers that, even in situations of international armed conflict, the safeguards under the Convention continue to apply, albeit interpreted against the background of the provisions of international humanitarian law.
By reason of the co existence of the safeguards provided by international humanitarian law and by the Convention in time of armed conflict, the grounds of permitted deprivation of liberty set out in subparagraphs (a) to (f) of that provision should be accommodated, as far as possible, with the taking of prisoners of war and the detention of civilians who pose a risk to security under the Third and Fourth Geneva Conventions.
The court is mindful of the fact that internment in peacetime does not fall within the scheme of deprivation of liberty governed by article 5 of the Convention without the exercise of the power of derogation under article 15 (see para 97 above).
It can only be in cases of international armed conflict, where the taking of prisoners of war and the detention of civilians who pose a threat to security are accepted features of international humanitarian law, that article 5 could be interpreted as permitting the exercise of such broad powers.
Again, it would be unrealistic to treat this (and in particular the word only in the last sentence) as either addressing or as decisive of the issue now before the courts, where there is on the face of SCR 1546 an unqualified power to detain where necessary for imperative reasons of security.
There is no logical and substantial reason why article 5 should not adapt to a power to detain contained in a SCR directed to a NIAC, just as it does to a power to detain conferred by customary international law and/or the Geneva Conventions in the context of an IAC.
The reasons why there may as yet be no recognised customary international law power to detain in a NIAC are closely associated with member states wish to avoid recognising or giving reciprocal rights to insurgent groups.
These are precisely the reasons why a host state may request, and the Security Council may under Chapter VII of the UN Charter confer, a unilateral power to detain to a friendly third state helping the host state to resist the insurgency.
The principal basis on which Lord Reed would refuse to recognise the existence of any such power consists in the reasoning in Al Jedda, as followed in Nada v Switzerland (2012) 56 EHRR 18 and Al Dulimi and Montana Management Inc v Switzerland (Application No 5809/08) (unreported) (judgment given 21 June 2016).
In the latter two cases, the European Court of Human Rights identified the need for clear and specific language if SCRs were to be read as intending states to take measures that would conflict with their obligations under international human rights law: see in particular Al Dulimi, para 140.
That was said in the context of the fundamental right of a person made the subject of a sanctions order to know and have the right to address the case against him or her.
In the present case, not only is SCR 1546 clear on its face in authorising detention, but there is nothing in general international human rights law precluding such a measure.
Article 5 of the European Convention on Human Rights is alone in seeking to define and limit grounds of permissible detention.
International human rights law generally is reflected by the International Covenant on Civil and Political Rights (ICCPR).
Article 9 of the ICCPR provides a general limitation, by reference to a test of arbitrariness, no more.
It reads, so far as relevant: 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 procedure as are established by law. 2.
Anyone who is arrested shall be informed, at the time of arrest, of the reasons for his arrest and shall be promptly informed of any charges against him.
The argument that one must start with the express terms of article 5 of the Convention, and read SCR 1546 consistently therewith is not in my opinion sustainable.
SCR 1546 was not directed to states party to the Convention, but to all member states of the United Nations and to the multinational force established to operate in Iraq.
It is perfectly tenable to treat a SCR as intended impliedly (in the absence of clear and specific language to the contrary) to comply with general principles of international law, as the European Court of Human Rights indicated in Nada and Al Dulimi.
But article 5 of the European Convention does not reflect general international law, and it is circular to construe SCR 1546 in the light of an assumption that it cannot have been intended to detract or differ from article 5.
The starting point is not what article 5 says.
The starting point is to identify what SCR 1546 says about the power to detain in a NIAC, just as the starting point in Hassan was to see what customary international law and the Geneva Conventions say about the power to detain in an IAC.
As the European Court of Human Rights said in Hassan (paras 77 and 102) that it had observed on many occasions, the Convention cannot be interpreted in a vacuum and should so far as possible be interpreted in harmony with other rules of international law of which it forms part.
The fundamental significance in international law of SCRs under Chapter VII of the United Nations Charter needs little underlining.
It has been recorded by Lord Sumption in his judgment (para 23), and was clearly expressed by the European Court of Human Rights in Behrami v France; Saramati v France, Germany and Norway [2007] 45 EHRR SE10, para 149, when the Court said that the contribution by NATO states of troops to the KFOR security mission in Kosovo may not have amounted to obligations flowing from membership of the UN but they remained crucial to the effective fulfilment by the UNSC of its Chapter VII mandate and, consequently, by the UN of its imperative peace and security aim.
To treat SCR 1546 as contemplating that member states, participating in the peace keeping operations in Iraq and exercising the power to detain afforded by its terms, would satisfy their European Convention obligations by derogating from the Convention appears to me unreal.
Putting the same point the other way round, I see no basis for treating member states party to the Convention when exercising such power to detain as being in breach of article 5 unless they derogated from the Convention.
First, it seems clear that article 15 of the Convention, which authorises derogation in time of war or other public emergency threatening the life of the nation was itself not conceived with this this type of situation expressly in mind.
Second, if it be said that the expanded concept of jurisdiction now recognised in European Court of Human Rights jurisprudence under article 1 should lead to some implied modified understanding of the scope of potential derogation under article 15, that is both highly speculative, and a possibility which any contracting state can well be forgiven for missing.
Third, not surprisingly, there is just as little indication that any state has ever purported to derogate under article 15 in respect of involvement in a NIAC as there is in respect of involvement in an IAC (see Hassan).
Fourth, it would be splitting hairs to treat the reasoning and decision in Hassan as turning essentially on state practice not to derogate under article 15 in the course of an IAC.
In the light of the above, I conclude that SCR 1546, properly construed in the light of its terms and the circumstances to which it was directed, provided for a power to detain in a NIAC for imperative reasons of security.
On the assumption (which the government does not now challenge on this appeal) that the matters in question fell within the United Kingdoms jurisdiction under article 1 of the Convention, and provided that sufficient procedural safeguards exist (see the next two paragraphs), I also conclude that article 5 of the Convention should be interpreted in a way which gives effect to and enables the exercise of this power.
This can be done, as it was in Hassan, by recognising that the fundamental purpose of article 5(1) is to protect the individual from arbitrariness in accordance with the basic international law principle stated in ICCPR, article 9 (para 160 above).
On that basis, the more detailed express terms of article 5(1) may be seen as illustrations of, rather than limitations on, the exercise of the power to detain.
This in turn allows scope for or accommodates the operation of wider powers to detain in situations of armed conflict, where provided by general international law or by a specific SCR under Chapter VII.
It follows that I concur in principle with all that is said by Lord Sumption in para 18 to 30 and 40 to 68 and by Lord Wilson in paras 114 to 117 and 121 to 134 of their respective judgments.
On that basis, the only point requiring further attention is whether a power to detain where this is necessary for imperative reasons of security, as provided in Iraq by SCR 1546, is too unspecific, or too lacking in procedural safeguards, to be recognised either generally or in conjunction with and in addition to the express terms of article 5.
As already stated (para 160), the general principle of international law is that No one shall be subjected to arbitrary arrest or detention.
The relevant ICCPR article 9(1) goes on to provide that: No one shall be deprived of his liberty except on such grounds and in accordance with such procedure as are established by law.
The requirement for grounds to be established is met by a power to detain where necessary for imperative reasons of security.
The requirement for a procedure established by law was met in Hassan by the terms of the Third and Fourth Geneva Conventions.
The Third Convention provides for the internment of prisoners of war (articles 4(A) and 21), for any doubt about their status to be determined by a competent tribunal (article 5) and for their release and repatriation without delay after the cessation of active hostilities (article 118).
The Fourth Convention provides for the detention of individuals definitely suspected of or engaged in activities hostile to the security of the state (Fourth Convention, article 5), for any such action to be reconsidered as soon as possible by an appropriate court or administrative board, and, if maintained, to be reviewed periodically and at least twice yearly (article 43).
The United Kingdom had reason to believe that Mr Hassan fell within these categories, and released him as soon as screening showed that he was a civilian who did not pose a threat to security: Hassan, para 109.
In agreement with Lord Sumption (paras 67 68), I would not read Hassan as requiring the procedure needed to avoid arbitrariness to be specified in the convention or other treaty or the relevant SCR authorising detention.
The procedure falls to be established by or on behalf of the detaining state, and it must at least comply in a NIAC both with the minimum standard of review required in an IAC under article 43 of the Fourth Geneva Convention and accepted as appropriate in that context in Hassan and, subject to such alterations as are necessary to meet the exigencies of armed conflict, with the procedural requirements of article 5: see per Lord Sumption, paras 91 et seq.
(b) Afghanistan
The relevant SCR in respect of Afghanistan at the time of the detention of Mr Serdar Mohammed (SM) was 1386 (2001), the operation of which was subsequently extended, lastly by SCR 1890 (2009).
Lord Sumption has stated the terms of these SCRs in his paras 21 22.
SCR 1386 authorised the establishment of an International Security Assistance Force (ISAF) to assist in the maintenance of security in Kabul and surrounding areas, working in close cooperation with the Afghan Interim Authority, and it authorised member states participating in [ISAF] to take all necessary measures to fulfil its mandate.
This last critical phrase of article 3 of SCR 1386 falls to be read in the context of the extreme circumstances of violence (including improvised explosive device, IED, and suicide attacks targeting civilians as well as Afghan and international forces and use of civilians as human shields), terrorism, illegally armed groups, increasingly strong links between terrorism activities and illegal drugs, recounted in recitals to resolution 1890.
For the reasons coinciding with those given by Lord Sumption in paras 28 and 30 and by Lord Wilson in paras 118 and 119, I consider that the critical phrase in article 3 of SCR 1386 in principle contemplated and authorised detention where necessary to fulfil the mandate, in short detention for imperative reasons of security.
Again, appropriate procedural safeguards must be established, meeting the standards identified in para 160 and 165 to 167 above.
Afghanistan do the SCRs give powers to ISAF alone or to both ISAF and its member states?
This further question arises because of SMs case that any permissible detention was governed by the detention policy guidelines adopted by ISAF, which basically restricted detention (before transfer to the custody of Afghan authorities) to 96 hours with only limited exceptions.
I understand Lord Reed to conclude that it was, for reasons set out in his paras 322 334 and 343 346.
The context in which this question arises can be summarised as follows.
Leggatt J considered that the position of ISAF in Afghanistan broadly mirrored that of KFOR in Kosovo, as examined by the European Court of Human Rights in Behrami.
But he went on to reject the United Kingdoms submission that the detention of SM was in reality undertaken by or on behalf of ISAF and so the United Nations, to which SM must in consequence address any claim.
He rejected it, because the United Kingdom had at least in November 2009, pursuant to responsibilities which it saw as resting on itself under national and international law, established its own extended detention policy, claiming to enable it to detain for periods longer than 96 hours.
It had not, in this respect, acted on behalf of or under any authority conferred, at least originally, on ISAF.
ISAF originally complained about this, but Leggatt J inferred that ISAF headquarters did subsequently accept the UK position as detention decisions continued to be taken by United Kingdom officials without involving ISAF and there is no evidence of any further complaints.
But that did not mean that the United Kingdom was acting as part of or on behalf of ISAF.
See generally per Leggatt J, paras 180 184, and see further paras 181 190 below.
On that basis Leggatt J held the United Kingdom responsible for the detention of SM.
The United Kingdom thus failed below on the basis that the relevant SCRs gave power only to ISAF to detain, and not to individual member states participating in security operations in Afghanistan: see the Court of Appeals judgment, paras 155 156.
Lord Sumption (para 38) and Lord Wilson (para 120) consider that the correct analysis is that the relevant SCRs conferred power to act on the individual participating member states, and that there is no basis for limiting this power (as between the United Kingdom and SM) by reference either to ISAFs detention policy or to any agreement between the United Kingdom and the Afghan authorities, such as that dated 23 April 2006, by clause 3.1 whereof it was agreed that the The United Kingdom AF will only arrest and detain personnel where permitted under ISAF Rules of Engagement.
In these circumstances, Lord Sumption concludes that the United Kingdom was entitled to operate its own detention policy vis vis SM, provided of course that this complied as a minimum with the procedural standards required under international law to avoid arbitrariness.
The difference on this point between Lord Reed on the one hand and Lord Sumption and Lord Wilson on the other turns on the construction of the relevant SCRs.
It is correct that article 3 of SCR 1386 authorised the member states participating in the International Security Assistance Force to take all necessary measures to fulfil its mandate.
This followed recitals which inter alia recorded a request in the Bonn Agreement to the Security Council to consider authorising the early deployment to Afghanistan of an international security force and welcomed a letter from the United Kingdom government and took note of the United Kingdoms offer contained therein to take the lead in organising and commanding an International Security Assistance Force.
In the light of these recitals, articles 1 and 2 of SCR 1386 went on to authorise as envisaged in Annex 1 to the Bonn Agreement, the establishment for six months of an International Security Assistance Force to assist the Afghan Interim Authority in the maintenance of security in Kabul and its surrounding areas, so that the Afghan Interim Authority as well as the personnel of the United Nations can operate in a secure environment and, second, to call upon member states to contribute personnel, equipment and other resources to the International Security Assistance Force.
Article 3 was, further, followed by articles 4 and 5, respectively calling upon the International Security Assistance Force to work in close consultation with the Afghan Interim Authority in the implementation of the force mandate, as well as with the Special Representative of the Secretary General and calling upon all Afghans to cooperate with the International Security Assistance Force and relevant international governmental and non governmental organizations, and welcom[ing] the commitment of the parties to the Bonn Agreement to do all within their means and influence to ensure security .
The Bonn Agreement itself contained recitals reaffirming the independence, national sovereignty and territorial integrity of Afghanistan, recognizing that some time may be required for a new Afghan security force to be fully constituted and functional and that therefore other security provisions detailed in Annex I to this agreement must meanwhile be put in place and considering that the United Nations, as the internationally recognized impartial institution, has a particularly important role to play, detailed in Annex II to this agreement, in the period prior to the establishment of permanent institutions in Afghanistan.
Consistently with the references contained in SCR 1386, Annex I to the Bonn Agreement provided: 3.
Conscious that some time may be required for the new Afghan security and armed forces to be fully constituted and functioning, the participants in the UN Talks on Afghanistan request the United Nations Security Council to consider authorizing the early deployment to Afghanistan of a United Nations mandated force.
This force will assist in the maintenance of security for Kabul and its surrounding areas.
Such a force could, as appropriate, be progressively expanded to other urban centres and other areas. 4.
The participants in the UN Talks on Afghanistan pledge to withdraw all military units from Kabul and other urban centres or other areas in which the UN mandated force is deployed.
It would also be desirable if such a force were to assist in the rehabilitation of Afghanistans infrastructure.
Annex II to the Bonn Agreement included the provision that: 1.
The Special Representative of the Secretary General will be responsible for all aspects of the United Nations work in Afghanistan.
The Bonn Agreement therefore envisaged a UN mandated force (ISAF) under UN control to assist the Afghan Interim Authority.
It does not support the idea of individual contributing nations operating on their own authority or terms to support the UNs role or give effect to its aims.
SCR 1510 (2003) authorised expansion of the mandate of [ISAF] to allow it, as resources permit, to support the Afghan Transitional Authority and its successors in the maintenance of security in areas of Afghanistan outside of Kabul and its environs (article 1).
It called upon ISAF to continue to work in close consultation with the Afghan Transitional Authority and its successors and the Special Representative of the Secretary General as well as with the Operation Enduring Freedom Coalition in the implementation of the force mandate, and to report to the Security Council on the implementation of the measures set out in article 1 (article 2).
It decided also to extend the authorization of ISAF, as defined in resolution 1386 (2001) and this resolution, for a period of 12 months (article 3), and it authorised the member states participating in [ISAF] to take all necessary measures to fulfil its mandate (article 4) and requested the leadership of [ISAF] to provide quarterly reports on the implementation of its mandate to the Security Council through the Secretary General.
SCR 1890 (2009) decided to extend the authorization of [ISAF], as defined in resolution 1386 (2001) and 1510 (2003), for a period of 12 months beyond 13 October 2009 (article 1).
It authorised the member states participating in ISAF to take all necessary measures to fulfil its mandate (article 2).
It recognised the need to further strengthen ISAF to meet all its operational requirements, and in this regard calls upon member states to contribute personnel, equipment and other resources to ISAF (article 3), and stressed the importance of increasing, in a comprehensive framework, the functionality, professionalism and accountability of the Afghan security sector, encourage[ing] ISAF and other partners to sustain their efforts, as resources permit, to train, mentor and empower the Afghan national security forces (article 4).
It further called upon ISAF to continue to work in close consultation with the Afghan Government and the Special Representative of the Secretary General as well as with the OEF coalition in the implementation of the force mandate (article 5), and requested the leadership of ISAF to keep the Security Council regularly informed, through the Secretary General, on the implementation of its mandate, including through the provision of quarterly reports (article 6).
Under these SCRs, member states were, necessarily, to provide the personnel and resources which ISAF needed, and were thus authorised to participate in ISAF and take all necessary measures to fulfil its mandate.
But the SCRs are replete with references to ISAF acting and being authorised to act, to ISAF having or being given resources and to ISAF reporting to the Secretary General.
SCRs also need to be read in light of the principle of proportionality: see Simma et al, The Charter of the United Nations: A Commentary (2012), who continue: This will typically lead to a restrictive reading: resolutions should be understood to embody less restrictive measures generally favoured on proportionality grounds unless the SC has clearly used its discretion to decide otherwise.
Thus, in cases of deliberate ambiguity, especially as regards delegations of powers and authorizations to use force, a narrow interpretation is appropriate.
Against a narrow view, Lord Sumption notes the exceptional and escalating levels and threats of violence faced by UK forces.
That these were particularly serious in Helmand Province where UK troops were located is a fact.
On the other hand, the wording of the mandate conferred by the SCRs goes back to the outset of UN involvement, when these levels and threats were not necessarily apparent.
Viewing the SCRs overall, I am unable to read them as authorising member states to act otherwise than as participants in or in collaboration with ISAF.
The alternative construction, which Lord Sumption and Lord Wilson adopt, amounts to saying that member states received their own authorisation entitling them each to act quite independently of ISAF and each other.
This appears to me ultimately a recipe for confusion and unlikely to have been intended by the Security Council.
That is not however the end of the matter as regards the United Kingdoms authority to operate its own detention policy.
ISAFs and the United Kingdoms policies regarding detention
The position is summarised in Lord Sumptions judgment in paras 31 to 37.
ISAF policy under its Standard Operating Procedures SOP 362 allowed up to 96 hours for release or handing over into the custody of Afghan authorities, subject in para 8 to authority, vested in the ISAF commander in the following terms: The authority to continue to detain an individual beyond the 96 hour point is vested in COMISAF (or his delegated subordinate).
A detainee may be held for more than 96 hours where it is deemed necessary in order to effect his release or transfer in safe circumstances.
This exception is not authority for longer term detentions but is intended to meet exigenciessuch as that caused by local logistical conditions eg difficulties involving poor communications, transport or weather conditions or where the detainee is held in ISAF medical facilities and it would be medically imprudent to move him.
Where this exigency applies, COMISAF must be notified.
Where, in the opinion of COMISAF (or his delegated subordinate), continuation of detention is warranted, COMISAF (or his delegated subordinate) may authorize continued detention.
Although no change was made in ISAFs guidelines, the United Kingdom did over the years develop and operate its own policy relating to detention.
In the years prior to November 2009, this involved decisions regarding detention being taken by United Kingdom officials, rather than ISAF.
On the evidence of Mr Devine, called by the Ministry and unchallenged on this point, ISAF was kept informed both of the United Kingdoms policy in this respect and of individual detentions made under it.
Leggatt J made significant findings in this connection.
In para 181, he referred to a United Kingdom report of an initial objection by the Chief of Staff of ISAF in this connection in 2006, to the effect that ISAF, rather than United Kingdom officials should be taking detention decisions.
The United Kingdom rejected this objection, explaining that it considered that the United Kingdom had to take such decisions in order to ensure that its legal obligations were properly discharged.
The report concluded by saying that, now United Kingdom officials had made this point to NATO HQ, it is hoped that HQ ISAF will soon be directed to accept the UK position.
Importantly, Leggatt J went on to say, in the passage already quoted in para 25 above: I infer that ISAF headquarters did subsequently accept the UK position as detention decisions continued to be taken by UK officials without involving ISAF and there is no evidence of any further complaints.
Until November 2009, United Kingdom policy matched ISAF policy with regard to the length of detention.
But, with effect from November 2009, the United Kingdoms detention policy changed to allow detention beyond 96 hours not only in accordance with ISAF policy, on the grounds set out in para 8 of SOP 362 and with ISAF HQ authorisation, but also in exceptional circumstances with the authority of United Kingdom HQ and United Kingdom ministerial authorisation.
The revised policy was set out in BRITFOR Standard Operating Instruction J3 9 dated 6 November 2009.
Annex G required detailed justification to be submitted with any application for extension of detention beyond 96 hours.
The notes to assist its compilation identified as relevant factors the intelligence gained to date and likely to be obtained by further detention and its relevance for any prosecution, together with (and emphasised) the likely impact of detention for United Kingdom/Coalition forces, and in particular whether detention would save life and limb and what the detained was likely to do if released, as well as any legal issues relevant to continued detention.
Mr Devine also gave evidence that ISAF was made aware at the highest level of the change introduced in November 2009 and of its application thereafter in individual cases and never objected.
He said in one passage: No, my point under this policy is when we introduced the policy in November 2009 we informed ISAF both through its senior body, the North Atlantic Council, and I assume, I dont recall, ISAF through its chain of command.
The chain of command, and indeed the NATO political authority, the North Atlantic Council, were fully aware of the policy we were undertaking.
I think we can take that understanding how NATO works, I think we can take that consent as NATO authority for our actions.
Mr Devines evidence on this point was again not challenged by cross examination.
In this connection, Leggatt J said this in para 184: The MOD has argued that the UK did not operate a detention policy which was separate from ISAF policy because ISAF policy envisaged and accommodated some variations in national practice and, in particular, ISAF accepted the need for the UK to depart from the ISAF 96 hour detention limit in exceptional circumstances in light of the fact that UK armed forces were operating in an area of Afghanistan where there is a particularly high level of insurgent activity.
I have accepted the evidence of Mr Devine that NATO was informed of the UKs decision to apply a national policy caveat to the ISAF 96 hour limit and did not object to this.
But that is a very long way from showing that either UK detention operations generally or individual detentions by UK armed forces were under the command and control of ISAF.
It is clear that they were not.
The documentation shows that NATO was indeed informed in the most formal way and at the highest level, by letter dated 5 November 2009 to its Secretary General, Mr Anders Rasmussen, giving full details and the explanation for the change in policy.
The terms would clearly have been expected to elicit an objection, if objection there had been.
In fact there was none.
In the light of Mr Devines evidence, I read Leggatt Js findings in paras 181 and 184 as accepting as an inference that ISAF acquiesced in the UK position that it was open to the UK to take its own detention decisions within the 96 hour period, and, in and after November 2009, to apply its own policy regarding detention in excess of 96 hours in exceptional circumstances.
In international law terms, the position is in my opinion covered by the judgment in Case Concerning the Temple of Preah Vihear (Cambodia v Thailand) Merits, [1962] ICJ Rep (judgment of 15 June 1962), where the ICJ said this at p 23: It has been contended on behalf of Thailand that this communication of the maps by the French authorities was, so to speak ex parte, and that no formal acknowledgment of it was either requested of, or given by, Thailand.
In fact, as will be seen presently, an acknowledgment by their conduct was undoubtedly made in a very definite way; but even if it were otherwise it is clear that the circumstances were such as called for some reaction, within a reasonable period, on the part of the Siamese authorities, if they wished to disagree with the map or had any serious question to raise in regard to it.
They did not do so, either then or for many years, and thereby must be held to have acquiesced.
Qui tacet consentire videtur si loqui debuisset ac potuisset.
The Court of Appeal did not consider that ISAFs failure to protest in these circumstances could be considered to amount to tacit consent (para 71).
I do not agree with the Court of Appeals analysis.
The Court of Appeal did not refer to Leggatt Js clear conclusion in para 181 that ISAF did subsequently accept the UKs position regarding detention, and para 184, which the Court of Appeal did cite, is directed not to the contrary, but to the question of command and control.
Leggatt J expressly accepted the evidence of Mr Devine, which also establishes that ISAF was kept fully and regularly informed of the UK detention policy and its application to particular detainees.
The natural inference from this and from the absence of any further complaints by ISAF at any time is, in my opinion, that ISAF did accept the UKs right to apply its policies and procedures both before and after November 2009, even though they differed from ISAFs.
I add that it seems that two other members of ISAF also adopted different policies regarding the 96 hour limit, the USA by enacting domestic legislation and Canada by reaching specific agreement with the Afghan authorities to treat detainees as prisoners of war.
Domestic legislation would protect US forces in at any rate the United States.
It may be that an agreement with the Afghan authorities could be presented as an independent source of authority to detain under local law.
The UK did not pursue either of these protective routes.
But in no case is there an indication that ISAF raised any objection to this conduct by members of ISAF.
I add that, had I not concluded that ISAF tacitly accepted (and indeed that the judges findings amount to acceptance that ISAF tacitly accepted) the UKs position regarding its policies both before and after November 2009, I would not have determined this largely factual point against the Ministry of Defence.
I would have remitted it to the judge for further examination, on the basis that Mr Devines evidence on the point was effectively unchallenged, such potential significance as the point may have does not appear to have emerged very clearly at the hearing before him, and the point should now be clearly addressed and determined.
The consequences of the above analysis
The above analysis means that the UK was, when implementing its detention policies before and after November 2009, acting in a way which was accepted as permissible by ISAF.
ISAF could not however authorise any detention policy by a state whose forces were participating in ISAF outside the scope of the authority which ISAF had under the relevant SCRs.
The SCRs did not authorise detention save where necessary for imperative reasons of security.
Any policy involving detention purely for intelligence gathering reasons, without the co existence of some other ground such as danger to UK forces or the ISAF mission generally, could not properly have been authorised by ISAF, or applied by the UK.
But, subject to that caveat, I see no reason why ISAF should not accept the operation by a particular state participating in ISAF of its own detention policy, separate from ISAFs own guidelines.
A number of possibilities arise from these conclusions.
One is that, as a result of ISAFs tacit assent to the United Kingdoms operation of its own policies, responsibility for any detention by United Kingdom forces should be borne by ISAF, not the United Kingdom.
The Ministry of Defence argued as much before the courts below, relying on the decision of the Grand Chamber of the European Court in Behrami v France, Saramati v France, Germany and Norway (2007) 45 EHRR SE10.
Leggatt J rejected the argument for the reasons given in his para 184 (quoted in para 185 above).
The essential reason was that the UK forces were not in this respect under the command and control of ISAF.
The Ministry of Defence originally sought permission to appeal against this conclusion (by a proposed Ground 3 in its notice of appeal to this court).
The Ministry has not however pursued that application, so that Leggatt Js conclusion in para 184 stands.
That is again not the end of the matter.
The issue to which Leggatt J was referring in his para 184 whether UK armed forces were under the command and control of ISAF in relation to detention is one thing.
Whether the UK was authorised by ISAF to pursue its own detention policy in the context of its activities as a participating member of ISAF is another.
Accordingly, subject to the caveat that detention purely for intelligence gathering reasons could not be justified, the primary question in relation to each period of detention in respect of which SM complains is whether there was a good reason for his detention for imperative reasons of security, and if so whether exceptional circumstances existed justifying United Kingdom forces in continuing to act as the detaining authority, rather than handing SM over to the Afghan authorities, after the first 96 hours.
If such circumstances operated as a concurrent reason for continued detention, they could justify the detention, even if another illegitimate reason, such as a desire to interrogate, was also in operation.
Even if the only motive for continued detention present in the United Kingdom authorities mind was to continue interrogation, that does not exclude the possibility that another basis in fact existed, which would have justified and led to continued detention, had the United Kingdom authorities directed themselves correctly.
SM is claiming damages for wrongful detention.
It is highly material to consider whether, but for any failures which he may establish in United Kingdom authorities reasoning or procedures, he would have been any better off in other words, anywhere other than in custody.
Further, if the answer is that he would not have been in the custody of United Kingdom forces, but would have been in the custody of Afghan forces, it would be material to consider whether this would have involved him in any form of detriment, justifying an award to damages.
Exceptional circumstances could well exist if extended detention was or would have been necessary because SM represented a real danger to United Kingdom forces or ISAFs mission generally, but could not in the meanwhile be transferred to Afghan custody because the Afghan facilities were for the time being either unsatisfactory or full.
As to this, para 44 of the Ministrys amended defence, which is for the purposes of the issues now before the Court to be taken as correct, indicates that overcrowding and lack of capacity in Afghan facilities was a reason for non transfer during the third period from 6 May to 25 July 2010 in respect of which SM complains.
It seems unlikely that this situation did not also exist during the second period starting on 10 April 2010.
Another factor of potential relevance is that throughout that period a legal challenge was on foot as to the appropriateness of any transfers of detainees to any of the three detention facilities operated by the National Directorate of Security (NDS) of Afghanistan in Kabul, Kandahar and Lashkar Gah.
The relevant proceedings were heard in the Divisional Court on 19 to 23 and 26 to 29 April 2010.
They led to a judgment given 25 June 2010, which concluded that it would be unlawful for United Kingdom transfers to be made to NDSs Kabul facility.
It could hardly lie in the mouths of the present respondents to assert that they could have been transferred to a facility to which it would have been unlawful for such a transfer to be made.
As to the danger or risks for United Kingdom forces or the ISAF mission, the assumed facts set out in paras 26 to 65 of the amended defence speak for themselves.
I set out the most material: 26.
The claimant was detained at around 3.20 am (Afghan time) on 7 April 2010 as part of a planned ISAF operation.
The team which undertook this operation included UK military personnel, members of the Afghan Partnering Unit and ISAF military working dogs.
The operation targeted a senior Taliban commander and the vehicle in which it was believed he was travelling.
When the operation was launched, approximately four people were seen leaving the vehicle and entering two compounds. 27.
From the outset of the operation, as their helicopter touched down near the two compounds, the capturing team came under heavy fire. 28.
The claimant ran from one of the two compounds, along with another insurgent.
The other insurgent fired upon UK military personnel and was killed.
The claimant fled from the compound into a field about 450 metres from the compound.
He was asked a number of times via an interpreter to identify his location and to come out with his hands up.
He did not do so.
He was considered to present a significant and imminent threat.
Accordingly, a military working dog was released into the field by its handler and the dog apprehended the claimant, in the process causing him to suffer a bite to his right arm. 29.
Halfway along the route along which the claimant was observed to have fled, between the compound and the place of his arrest, UK Armed Forces found a rocket propelled grenade (RPG) launcher and two RPG rounds. 30.
During the course of the operation, another two insurgents were found in one of the two compounds.
One of them engaged UK armed forces and was killed.
The other insurgent was captured. 31.
UK Armed Forces safely extracted the claimant and the other captured insurgent.
They did so whilst under heavy and sustained small arms and RPG fire.
The extraction took about ten hours.
Three members of UK Armed Forces were wounded in action. 32.
The claimant was lawfully captured and detained in accordance with ISAFs standard operating procedures, pursuant to authorisation contained in UN Security Council Resolution 1890 (2009) and in compliance with IHL. 33. the claimants asserted ignorance of the RPGs and launcher is denied.
The Detainee Transfer Paperwork records that explosive traces were found on the claimants clothes. 36.
In response to questioning the claimant stated he was a farmer.
The defendant subsequently received information that the claimant was a senior Taliban commander, also known as Mullah Gulmad.
Mullah Gulmad was, and is, believed to have been involved with the large scale production of IEDs and to have commanded a local Taliban training camp in mid 2009. 38.
On 7 April 2010, at Camp Bastion, the claimant was informed, with the aid of an interpreter, that he had been detained because he was considered to pose a threat to the accomplishment of the ISAF mission and that he would either be released by ISAF or transferred to the Afghan authorities as soon as possible.
He was informed that he had the right to contact the International Committee of the Red Cross (ICRC) at any time and when asked if he wished to have someone informed of his detention, gave the name of his father.
Taking this account as correct, as we are required for present purposes to do, it is unsurprising that, in an initial application by BRITFOR for continued detention dated 8 April 2010 the Detention Authority said this in respect of SM in the section of the relevant form (Annex G) headed Legal Issues: The test to be applied is whether, on the balance of probabilities, Detainee 995 has done something that makes him a threat to force protection, self defence or wider mission accomplishment.
Having considered all the evidence and intelligence relating to this operation, in particular Detainee 995s actions immediately prior to capture and the assessment that he attempted to hide two RPGs, I advise that the policy test is satisfied.
The Legal Issues sections in the eight subsequent Annex G applications which were completed to obtain a series of 72 hour extensions of detention included similar information, but were from time to time also expanded and updated.
Thus on 13 April 2010 specific mention was added of the fact that the compound from which SM had fled had been known to have links with Obj White (code for the local Taliban commander) and the assessment was added that SM may be that commanders deputy.
By 16 April 2010, the assessment was expanded to say that SM is the commanders deputy.
On 25 April 2010, there was reference to the positive identification that he is a TB Comd and Obj WHITEs deputy.
On 28 April 2010, the addition was made that the recent CHEMEX results have revealed a high confidence return for RDX, PETN and TNT.
It is also assessed that he may be Obj WHITES deputy.
On 1 May 2010, the further addition appeared that he has been positively identified by HUMINT as call sign . (The dots represent redactions in the versions before the Supreme Court.)
The picture which on its face emerges is that the completion of the Annex G applications was not a mere formality or box ticking exercise.
Rather, it appears as a conscientious exercise on each occasion in reconsidering and restating the facts and in re applying the test whether SM had done something which makes him a threat to self defence, force protection or wider mission accomplishment.
The initial application was also completed with No to Release and Yes to Transfer, Extension to 96 hours and Extension beyond 96 hours.
The eight subsequent applications were all completed with No to Release and Yes to Transfer and to Extension beyond 96 hours.
In these circumstances, despite the further entries to the effect that the evidence to hand made this a weak case to hand to the NDS, the natural (and unsurprising) inference is that SM was seen throughout not only as a threat to self defence, force protection and/or wider mission accomplishment, but also as a suspect who, once United Kingdom forces ceased to hold him and a suitable NDS facility was available, was to be handed over to the NDS rather than released.
Whether exceptional circumstances for extended detention in this or any other sense existed which justified or could have justified detention by United Kingdom forces for longer than 96 hours is therefore an issue which should, in my view, be left open for further consideration at trial.
The judges findings in relation to the second and third periods of SMs detention were made on the false premises that, firstly, once someone has been captured and disarmed, there can be no imperative reasons of security for detaining him further, and, secondly, that article 5 of the ECHR applied without qualification or addition.
The judge also appears to have thought that a short term absence of capacity in the NDS Lashkar Gar detention facility would preclude a conclusion that SM was being held with a view to transfer there (see eg his para 348).
That was wrong in my view, if there was a fair prospect of transfer there within a not unreasonable longer term period.
I add that the Court of Appeal was incorrect, in para 250 of its judgment, to say that Mr Devine had stated about SM that his continued detention was not assessed to be necessary for force protection purposes.
Likewise, if, contrary to my above conclusions, ISAF cannot be treated as having tacitly accepted the UKs changed policy in and after November 2009, it should still remain open to the UK to submit that SMs detention beyond 96 hours could and would have been authorised under ISAFs guidelines, had they been applied.
That too will require factual inquiry and findings about the reasons for which SM was in fact held, as well as potentially about any other basis or bases on which he could and would have been held in any event, and in each case whether they would have constituted grounds for extended detention within the terms of the ISAF guidelines.
Para 8 of the ISAF guidelines gives some limited, but not exclusive, examples of the exigencies which may justify extended detention.
It also contemplates extended detention where it is deemed necessary in order to effect his release or transfer in safe circumstances.
Whether the situation falls within these words or not, there must be a strong argument that the relevant exigencies could include, for example, extended detention when necessary because the person in question represented a real danger to UK forces or ISAFs mission generally, but could not for the meanwhile be transferred to Afghan custody because the Afghan facilities were for the time being either unsatisfactory or full.
In these circumstances, and in common with Lord Sumption, (paras 86 and 87), I am not satisfied that Leggatt Js findings can be transposed to the present context, when the issue is now whether there were exceptional reasons which under UK policy, or alternatively, exigencies which under ISAF rules, justified SMs continuing detention during either or both of those periods.
I would remit that issue for determination at the trial accordingly.
Application of ECHR
This brings me to consider whether and how far detention for exceptional reasons under UK policy or by reasons of exigencies under ISAF rules can be regarded as consistent or can be accommodated with article 5 of the ECHR.
The Ministry of Defence relies upon article 5(1)(c) and (f) as heads expressly covering the present circumstances, alternatively upon the accommodation between the power to detain conferred by SCR 1546 and article 5 which I have already concluded (para 164 above) should be made in the context of non international armed conflicts such as those in Iraq and Afghanistan in which United Kingdom forces were engaged at the times relevant to these appeals.
To the extent that SM was held with a view to handing him over to the NDS on reasonable suspicion of having committed an offence or offences, article 5(1)(c) would constitute a basis for his detention.
It would, however, be necessary to go on to consider whether the United Kingdom had complied with article 5(3).
Article 5(3) is (as Lord Sumption also notes in his para 96) not easy to fit into a context where the United Kingdom was not in a position to exercise judicial authority or power, or ever going to put SM on trial itself.
Applying an approach similar to that taken in Hassan, it may be that it can be modified in the present context to accommodate administrative procedures undertaken by United Kingdom authorities.
Alternatively, if articles 5(1)(c) and 5(3) do not, even with modification, fit the present circumstances, then, to the extent that SM was held with a view to his handing over to the NDS, there is to my mind attraction in Leggatt Js view that article 5(1)(f) can be regarded as applicable to a de facto transfer of jurisdiction between armed forces of different States in Afghanistan.
It would then be necessary to consider whether the United Kingdom complied with article 5(4).
However, even if neither article 5(1)(c) nor article 5(1)(f) directly applies, each offers an analogy which points towards and assists in identifying a more general accommodation between the international law power to detain and article 5.
Under both article 5(1)(c) and (f), the Ministry of Defence faces a difficulty if its only actual motivation in continuing to detain during the second period was to interrogate.
That, as I have stated, was not a legitimate basis under the SCR, any more than it is under the European Convention on Human Rights (see authorities cited by Lord Sumption in para 80).
If there was in fact some other legitimate basis on which SM could and would still have been detained, then the question would arise whether, on showing this, the Ministry of Defence could bring itself directly within article 5(1)(c) or (f), or whether its relevance would simply be to the question whether SM should receive any (or what) damages.
This would then merit further argument in due course before the judge.
If neither article 5(1)(c) nor article 5(1)(f) applies directly, the question arises whether and how far the power conferred by SCR 1546 to detain for imperative reasons of security can and should be accommodated with article 5.
For reasons indicated in paras 152 to 168 above, I consider that the two can and should be read together.
But this is subject always to compliance with core procedural requirements modelled on the provisions of article 5(1), (3) and (4).
With regard to article 5(1) (in accordance with a procedure prescribed by law), I am content to adopt what Lord Sumption says in his paras 91 to 93.
With regard to article 5(3), which will arise for consideration if the circumstances prove on further consideration to make article 5(1)(c) relevant, I agree with Lord Sumption that the critical question is how far the requirements of article 5(3) can properly be adapted to the conditions of armed conflict in Afghanistan, and that this question should be left to be determined at the trial (see his paras 95 and 98 in particular).
For completeness, I must address the argument raised by the First Interveners and considered by Lord Wilson in paras 136 140 that, whatever the international or Convention law position, compliance with domestic law (whether English law or the law of the place of detention or one or other is not entirely clear) is also required for any detention to be in accordance with law.
This argument cannot, in my view, arise in Al Waheed in the light of the limited leap frog issue before the Supreme Court.
In SM the argument was suggested below by Ms Fatima QC for the Interveners, but neither court found it necessary to deal with.
However, the Ministry of Defence argued unsuccessfully for a reverse position, namely that it was authorised to detain SM by Afghan law, and this alone sufficed to justify SMs detention under article 5, whatever the international legal position.
The Supreme Court has now decided to defer decision whether to grant permission to appeal on this issue.
My own view is that Ms Fatimas argument fails for the reasons given by Lord Reed in his paras 343 345, which I understand to fit with those given by Lord Wilson in his para 139.
But, if the view were to be taken that the argument does not fail for these reasons, this adds potentially to the significance of the issue on which the Court has now deferred any decision whether to grant permission to appeal (viz, whether Afghan law authorised detention in accordance with international law, and in particular in accordance with any Security Council Resolution authorising such detention).
ECHR article 5(4): right to review of the lawfulness of detention
Article 5(4) provides in terms 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.
In Hassan, para 106, the European Court of Human Rights explained how this might be understood and adapted to cater for the exigencies of an international armed conflict: 106.
As regards procedural safeguards, the Court considers that, in relation to detention taking place during an international armed conflict, article 5 paras 2 and 4 must also be interpreted in a manner which takes into account the context and the applicable rules of international humanitarian law.
Articles 43 and 78 of the Fourth Geneva Convention provide that internment shall be subject to periodical review, if possible every six months, by a competent body.
Whilst it might not be practicable, in the course of an international armed conflict, for the legality of detention to be determined by an independent court in the sense generally required by article 5 para 4 (see, in the latter context, Reinprecht v Austria, (2005) no 67175/01, para 31, ECHR 2005XII), none the less, if the Contracting State is to comply with its obligations under article 5 para 4 in this context, the competent body should provide sufficient guarantees of impartiality and fair procedure to protect against arbitrariness.
Moreover, the first review should take place shortly after the person is taken into detention, with subsequent reviews at frequent intervals, to ensure that any person who does not fall into one of the categories subject to internment under international humanitarian law is released without undue delay.
For reasons already given, I consider that this guidance is equally relevant in relation to the NIAC in which United Kingdom forces were engaged and in the context of which SM was captured and detained.
In October 2012, a wide range of 24 states together with international organisations including the UN, NATO, the African Union, the European Union and the ICRC agreed on The Copenhagen Process: Principles and Guidelines.
These were specifically intended to reflect generally accepted standards (Commentary, para 16.2) applicable to international military operations in the context of non international armed conflicts and peace operations (Introductory para IX).
Principle and Guideline 12 reads: A detainee whose liberty has been deprived for security reasons is to, in addition to a prompt initial review, have the decision to detain reconsidered periodically by an impartial and objective authority that is authorised to determine the lawfulness and appropriateness of continued detention.
This is both consistent with and supports the application to detention in the course of a NIAC of principles similar to those recognised in Hassan as appropriate in relation to an IAC.
The possibility that SM could have sought habeas corpus while in United Kingdom forces custody was not pressed by Mr Eadie QC.
Even assuming that a writ of habeas corpus could (contrary to the Ministry of Defences primary case) have lain, Mr Eadie was, as I understood him, prepared to accept that the possibility of seeking and obtaining such a writ would not, at least in the Afghan context, satisfy the modified requirements of article 5(4).
On the other hand, it is not, I understand, suggested, and in any event could not, I think, realistically be suggested, that SM should have been afforded access to any local court prior to being handed over to an NDS detention facility.
The question is therefore whether the legality of SMs detention was subject to periodic review by a competent body in the sense of a body providing sufficient guarantees of impartiality and fair procedure to protect against arbitrariness, the first such review taking place shortly after he was taken into detention, with subsequent reviews at frequent intervals thereafter.
What is frequent must depend on the context in and basis on which a detainee is being held.
But the European Court of Human Rights was, on the face of it, envisaging periodic reviews of greater regularity than if possible every six months, the phrase it quoted earlier in para 106 from the Fourth Geneva Convention.
The scheme established by SOI J3 9 is detailed and clear.
The reviews undertaken under it in respect of SM were very frequent, and the documentation relating to them can be seen (despite redactions for security reasons) to be impressive in its thoroughness.
Criticisms are however directed in two main areas: (a) sufficiency of the guarantees of impartiality and (b) fairness of the procedure so far as concerns SMs involvement.
Before considering these criticisms, it is appropriate to consider the purpose, in the context of the present case, of reviews such as those contemplated by Hassan, para 106, and by Copenhagen principle 12.
The purpose is to ensure that detention only occurs and continues when there is good cause for it.
For that reason, the detainee should be told why he is being detained, and given the opportunity to give his account of events as well as to pass information to the outside world which will reach his family.
But, if this has occurred and a detainee is held as an active member of the Taliban and a continuing threat, with a view to his eventual transfer to NDS custody, the frequency of review which is required may well diminish.
In the present case, the actual frequency of reviews was closely linked with the process of obtaining authorisation for further interrogation, but interrogation was not itself a basis for detention.
What was a potential basis for detention was the risk that SM posed to United Kingdom forces and the ISAF mission and the intention to transfer him into NDS custody with a view to further investigation and/or criminal prosecution.
In the present case, SM was arrested during armed operations and extracted under heavy and sustained small arms and RPG fire in a process which took ten hours.
He must have known that he was being arrested as an insurgent, and he responded to questioning by saying that he was a farmer: see para 195 above.
He was then taken to Camp Bastion where he was interviewed through an interpreter, told that he had been detained as a threat to the ISAF mission and further told that he would be either released or transferred to the Afghan authorities as soon as possible.
He was then given the opportunity of making a statement about his detention.
Form Annex A Rights of a detainee, which was (on the currently assumed facts) accurately translated to him and signed by SM by thumbprint, records SMs response and information which he was given, in the following terms: I was working in the field 9 12.
Helicopter came so I layed down in my Field, they let the dog attack me and then arrested me.
Likewise, he was informed of his right to contact the ICRC by letter at any time during your detention here.
No subsequent information came to light to change the United Kingdom forces assessment of SMs role and involvement with the Taliban in any way which could have militated in favour of his release, rather than his detention and transfer in due course into NDS hands.
On the contrary, such further information as came to light merely strengthened the grounds for considering that he was an insurgent: see para 196 above.
In fact, SM was also interrogated over a period during which he maintained an obstructive approach to questioning and persisted in his denial of involvement in the insurgency and specifically Obj WHITE, as recorded in Annex G relating to the eighth successive 72 hour review.
So it is clear that he did have further opportunities to give his account and to provide any information which might put a different complexion on his involvement.
Against this background, I turn more specifically to the two areas of criticism.
As to (a), sufficiency of the guarantees of impartiality, the Court of Appeal dealt with this at some length, on the assumption that (although it took place on 9 10 April 2010) the initial review as well as all the subsequent reviews were all conducted in accordance with the revised Detention Authority regime set out in Amendment 2 of SOI J3 9 dated 12 April 2010.
The Court of Appeal noted that under Amendment 2 the Detention Authority was the Commander of Joint Force Support (Afghanistan), and went on (para 288): Amendment 2, para 12 states that his continuing duty as the Detention Authority to ensure that each detention is justified provided an independent level of review for all detention operations, and that the Legal Advisor is a member of the Detention Review Committee.
We note that it is also stated that the core members of the Detention Review Committee must remain outside the chain of command for targeting and tactical legal issues, although they are not wholly outside the chain of command in the Theatre.
The Court of Appeal went on to point out (para 289) that the judge had made no detailed findings about the nature of this relationship (because he did not need to in the light of his view that strict compliance with article 5 was necessary and because he was only dealing with preliminary issues), and continued: This, together with the fact that this issue was only explored in the Secretary of States post hearing note on outstanding issues, means that we have limited information as to the precise relationship of the chain of command which has the Commander of Joint Force Support (Afghanistan) at its pinnacle and those responsible for detaining a person.
The court lacks the factual context required to reach a decision about the independence of the reviewing body.
That would include details of the precise chain of command in Afghanistan, and the meaning of the statement that the core membership must remain outside the chain of command for targeting and tactical reasons.
However, the Court of Appeal went on to give some guidance, stating: 291.
We doubt whether a Detention Authority squarely within the chain of command in the relevant theatre, advised by a committee consisting of members who are either the subordinates of the Detention Authority or otherwise within the chain of command under him meets the requirement of independence and impartiality. and 292.
As to whether that regime satisfied the requirements of independence and impartiality, we know that the core membership included the Commanding Officer of the Intelligence Exploitation Force and the Force Provost Marshal.
The relationship of the legal adviser who was also a core member of the Detention Review Committee and those responsible for tactical legal issues, who it was stated should not be core members, was not explained.
We, however, note that the legal and political Advisers and the Force Provost Marshal provided advice to the Detention Authority as to whether to release, transfer or detain in the first 48 hours.
The Force Provost Marshal was stated to be the subject matter specialist for detention issues.
This does not sit easily with, and might even be thought to be contrary to the requirement that all members of the Committee should be able to present cases cold to the Detention Authority.
Moreover, the Detention Authority reported to military superiors, and MoD civil servants advised a government minister who made the decision about whether to authorise further detention.
For these reasons, we also doubt that the new regime was sufficiently independent, although our doubts are of a lesser order than those concerning the former Detention Authority regime.
During the hearing before the Supreme Court, Mr Eadie produced a list giving the full composition of the Detention Review Committee as well as explaining some of the acronyms used in Amendment 2.
But for my part I do not think that the picture is materially clearer than it was before the Court of Appeal.
Both the Court of Appeal and Lord Sumption in para 105 of his judgment also adopt the concept of independence as an element of the appropriate test.
To my mind, that risks introducing too formal an aspect into an essentially military review.
It is notable that the European Court of Human Rights in Hassan, para 106, used only the word impartial, while Copenhagen principle 12 spoke only of review by an impartial and objective authority.
I am not confident that the Supreme Court knows enough about the relationships between the various ranks and posts identified in the list that the Court has been given or the way in which the military operates to be able to condemn the review system introduced by Amendment 2 as inadequate.
Appellate judges with no military experience sitting thousands of miles from the theatre of armed conflict should, I think, be very cautious to assess the impartiality of a group of officers from or about whom, or of a process about which, they have heard no oral evidence.
This should be left to the judge who will at trial have had the opportunity of hearing evidence and making findings about these matters.
On this, I see no reason for us, sitting in the Supreme Court, to disagree with the Court of Appeal.
Up to this point, I have focused on the process before the Detention Authority and Detention Review Committee.
I have done so, because the material available suggests to me that it was only at this level that the existence and level of any threat presented by SM were assessed.
So far as appears, and subject to anything that may emerge at trial, it appears that the matter only went to a higher level (that is to Permanent Joint Headquarters (PJHQ) and ultimately to ministerial level) in the context of the 14 day reviews which were undertaken under Amendment 2 Part II paragraph 29 using Annex H, to gain permission for further detention for further interrogation.
Annex H does not appear to have included information directed at enabling either PJHQ or ministers themselves to form any view on whether SM presented a threat which itself justified further detention pending transfer into NDS hands.
Both paragraph 27 of Part II of Amendment 2 to SOI J3 9 and the way in which Annex H was itself completed focus on the value of the intelligence which any extension of detention might provide for force protection and/or (more generally) for a better understanding of the nature of the insurgency.
I would add that in the light of what I have said in paras 209 211 above, I find it difficult to see that the circumstances of SMs detention called for reviews every 72 hours or even every 14 days directed to the question whether he was a threat to United Kingdom forces or the ISAF mission.
If he was a threat on capture, as he clearly was on the assumed facts, there was nothing to make that threat go away.
Rather, as I have said, the only information becoming available simply strengthened the case for regarding him as a threat.
There was no change in the general situation in Afghanistan to affect this.
The reason for the regular reviews which actually occurred was the repeated need to authorise further interrogation.
But that was not by itself a justified reason for detention (and one might add that, if it had been, it could hardly be expected that SM would be offered the opportunity to make observations on the course of interrogation so far or the merits or otherwise of further interrogation).
I turn to (b), the fairness of the procedure as regards SM.
For the reasons I have already given, he was in my view given and in possession of sufficient information about the case against him at the outset, and had an appropriate opportunity of responding to it.
He must have known that this was part of a process of considering the appropriateness of his continuing detention.
Likewise, to the extent that he was held thereafter because he would if released have been a threat and was being held pending transfer to the NDS, I cannot see what any further opportunity or opportunities to comment could have offered him in practical terms.
However, I accept that in order to avoid leaving a suspect in SMs position in silent limbo, and in some contexts perhaps also to minimise the risks of ill treatment there is an intrinsic value in having a suspects case reviewed at regular intervals and informing him of the opportunity to make representations.
This is so, even if such reviews appear unlikely to lead to any change in his treatment or detention.
Here, SM was not, so far as appears, informed about any review process or offered any opportunity of making representations in that connection (although he was offered the opportunity at any time of contacting the ICRC).
On the face of it, the United Kingdom fell short in this respect of providing him with the appropriate procedural guarantees.
However, the claimant is seeking damages, expressly including just satisfaction.
In this context, it seems highly unlikely indeed contrary to all the evidence presently available to suggest that there would have been any prospect that informing SM about any review process, or offering him any opportunity of making representations in respect of it, would have made any difference to actual events.
There is of course a question whether SMs handing over to the NDS was delayed, or (putting the point the other way around) whether his detention in United Kingdom hands was extended, by the fact that the United Kingdom regarded him as a potential source of information material to the success of the ISAF mission, and repeated extensions of his detention were sought and obtained on that ground.
He was not notified of the reviews which led to such extensions.
Had he been notified, he might, at least in theory, have objected to any extensions with that purpose in mind.
Had that objection (however implausible it may seem) been given weight, the question would at once have arisen whether there was any other basis for United Kingdom forces continuing to detain him.
The United Kingdom authorities would then have had to consider, earlier than it appears they did, the question whether there was any NDS detention facility with spare capacity to which they could properly transfer SM.
Again, however, so far as one can presently see, such a process may well have led to no more than SM remaining in United Kingdom custody pending transfer to NDS or his slightly earlier transfer from United Kingdom to NDS custody.
Either way, a claim for substantial damages might be optimistic.
In the light of the above, I, for my part, would limit myself to the views expressed, and remit the whole case to the judge for trial on that basis.
Conclusions
The appeal in Al Waheed is not concerned with the question whether minimum procedural standards were established and applied in relation to the relevant detention.
I agree with its disposition as Lord Sumption proposes.
As to SM, whether the United Kingdom was or would have been entitled to detain him after the expiry of a 96 hour period, that is after 11 April 2010, depends upon whether it can show, firstly, that detention was required for imperative reasons of security, and, secondly, that exceptional circumstances under the UK policy (or alternatively exigencies under ISAF guidelines) existed justifying United Kingdom forces in continuing to act as the detaining authority, rather than handing the detainee over to Afghan authorities.
This and the further issue whether failure to provide SM with an appropriate review process in any respect led to any extended detention or other loss should be remitted for determination at the trial.
LORD HUGHES: (with whom Lord Neuberger agrees)
The ground in this case has been comprehensively covered by the judgments above.
It would not help to repeat the valuable analysis offered.
Subject to what follows, I agree with the judgments of Lord Mance, Lord Wilson and Lord Sumption.
It is necessary to address three points on which these judgments do not agree, and one further point which is considered by Lord Wilson at paras 136 140.
The first difference is whether the UN Security Council resolutions concerning Afghanistan conferred authority to detain (and to lay down rules about detention) upon ISAF as an entity (as Lord Mance says) or upon the troop contributing member nations through the medium of ISAF (as Lord Sumption and Lord Wilson say).
This difference has no impact on the outcome of the appeal in the case of Serdar Mohammed because, as Lord Mance concludes, ISAF in any event endorsed the decision of the United Kingdom to adopt its own detention policy, as was also the position in relation to the USA and Canada.
I therefore doubt if it is necessary to express a concluded view on this topic, but, subject only to observing that the authority to troop contributing member nations is clearly premised on mutual co operation although not on precise identity of polices, I presently prefer the analysis of Lords Sumption and Wilson.
The second difference relates to whether there has been established an infringement of article 5(4) ECHR on the grounds that the United Kingdom system of internal review in Afghanistan failed to achieve sufficient impartiality.
On this topic I agree with Lord Mance, for the reasons he gives, that that suggested shortcoming has not been established, and accordingly do not agree with the contrary conclusion of Lords Sumption and Wilson.
I particularly support Lord Mances observations in the last four sentences of para 215.
I also agree with both Lord Mance and Lord Sumption that it is very questionable that any further opportunity to state his case could have made any difference to Serdar Mohammed.
The third difference concerns the possible application of article 5(1)(f).
On this topic I agree with Lord Mance at paras 202 203.
My primary conclusion is, like Lords Mance, Sumption and Wilson, that the very terms of article 5(1)(f), as well as those of other subparagraphs, demonstrate that in the context of armed conflict the article must be interpreted on the principle explained in Hassan.
If, however, that were to be wrong, then it seems to me that subparagraph (f) is capable of including situations in armed conflict when one State detains for the purpose of handing over the detainee to another.
I should add that I doubt if there is a difference between Lord Mance and Lord Sumption as to the possible application of article 5(1)(c).
On the findings of fact made by the judge at para 333 it cannot apply to the second period of Serdar Mohammeds detention but if he could have been detained in that period for the purpose of producing him to the Afghan authorities, this goes to the question whether he is entitled to any, or if so what, award of damages.
The additional point considered by Lord Wilson at paras 136 140 concerns the relevance of the domestic law of the country concerned.
As to that, I agree with the conclusions of Lord Mance at para 204, for the reasons which he gives and in the light of the observations of the ECtHR in calan v Turkey (2005) 41 EHRR 45, cited by Lord Reed at para 345.
LORD TOULSON:
My involvement in this appeal has been in relation to all issues except the procedural requirements of articles 5(1), 5(3) and 5(4) of the Convention in relation to the detention of Serdar Mohammed.
On all those issues I agree, subject to one point, with the judgments of Lord Mance, Lord Wilson and Lord Sumption.
The one point is that discussed in para 226 of Lord Hughes judgment with which I agree.
LORD HODGE:
My only involvement in this appeal has been the hearing on 26 October 2016, following the retirement of Lord Toulson, at which the court considered the procedural requirements of articles 5(1), 5(3) and 5(4) of the Convention in relation to the detention of Serdar Mohammed.
On those matters I agree with the judgment of Lord Sumption at paras 68 and 90 110 and with the declarations which he proposes at para 111(4), (5) and (6).
LORD REED: (dissenting) (with whom Lord Kerr agrees)
I agree in part with the conclusions reached by Lord Sumption, in which the majority of the court concur.
In particular, I agree that Mr Mohammeds detention by HM Forces after 11 April 2010 did not fall within article 5(1)(f) of the European Convention on Human Rights, and that his detention between 11 April and 4 May 2010 did not fall within article 5(1)(c).
I also agree that the arrangements for his detention did not fall within article 5(4), and that the question whether they complied with article 5(3) should be considered after trial.
I also agree that the Ministry of Defence is in principle liable to pay compensation to Mr Mohammed if and in so far as his detention was prolonged by his detention by HM Forces between 11 April and 4 May 2010 for intelligence exploitation purposes.
There are also some matters on which I have reached a different conclusion, in agreement with the courts below: in particular, whether UN Security Council Resolutions (SCRs) 1546 (2004) and 1890 (2009) should be interpreted as authorising detention in circumstances other than those specified in article 5(1)(a) to (f) of the Convention, and in consequence whether HM Forces were entitled to detain Mr Al Waheed and Mr Mohammed in such circumstances, pursuant to those SCRs.
Having reached that conclusion, I also require to consider whether a right to detain was conferred by international humanitarian law, an issue on which Lord Sumption does not (and does not require to) reach a concluded view.
In relation to that issue, I conclude that no right of detention arose under international humanitarian law.
I therefore reach the conclusion that Mr Mohammeds detention between 11 April and 4 May 2010, being authorised neither by an SCR nor by international humanitarian law, was in violation of article 5(1).
Given the importance of the issues, and the potential influence of this courts decision, I have thought it right to prepare a reasoned judgment.
As it is a long judgment which discusses many issues and arguments, I shall summarise my main conclusions at the outset, with references to the sections of the judgment containing the relevant discussion: (i) Conventional (ie treaty based) international humanitarian law provides no authority for detention in a non international armed conflict (paras 243 270 and 274). (ii) Customary international humanitarian law, in its present state of development, provides no authority for detention in a non international armed conflict (paras 256 257, 271 273 and 275 276). (iii) For the purpose of applying the European Convention on Human Rights, UN Security Council Resolutions should be interpreted on the basis that there is a presumption that the Security Council does not intend to impose any obligation on member states to breach fundamental principles of human rights; that, in the event of ambiguity, the court must choose the interpretation which is most in harmony with the requirements of the Convention; and that it is to be expected that clear and explicit language will be used if the Security Council intends states to take measures which would conflict with their obligations under international human rights law (paras 277 289). (iv) The judgment of the Grand Chamber of the European Court of Human Rights in the case of Hassan v United Kingdom [2014] BHRC 358 should not be interpreted as entailing a departure from that approach (paras 290 300). (v) The court should depart from the decision of the House of Lords in Al Jedda v Secretary of State for Defence (JUSTICE intervening) [2007] UKHL 58; [2008] 1 AC 332, that SCR 1546 imposed an obligation to detain in circumstances other than those listed in sub paras (a) to (f) of article 5(1) of the Convention, which prevailed over the obligation to comply with the Convention by virtue of article 103 of the Charter of the United Nations (paras 304 305). (vi) Hassan should not be interpreted as warranting the modification of article 5(1) so as to permit detention in circumstances not falling within sub paras (a) to (f), in relation to the detention authorised in Iraq by SCR 1546 (2004), as extended by SCRs 1637 (2005) and 1723 (2006) (paras 292 297 and 307 315). (vii) Interpreting SCR 1546 consistently with the Convention, Mr Al Waheeds detention by HM Forces was compatible with article 5(1) of the Convention only if he was detained in circumstances falling within sub paras (a) to (f) (para 316). (viii) Hassan should not be interpreted as warranting the modification of article 5(1) so as to permit detention in circumstances not falling within sub paras (a) to (f), in relation to the detention authorised in Afghanistan by SCR 1386 (2001), as extended by SCR 1890 (2009) (para 324). (ix) Interpreting SCRs 1386 and 1890 consistently with article 5(1), HM Forces had authority to detain Mr Mohammed under the SCRs for more than 96 hours only in circumstances falling within sub paras (a) to (f) of article 5(1) (paras 322 334). (x) Mr Mohammeds detention by HM Forces between 11 April 2010 (ie the end of the initial period of 96 hours) and 4 May 2010 was for the purpose of obtaining intelligence.
It did not fall within sub paras (a) to (f) of article 5(1) (paras 335 346 and 351). (xi) Mr Mohammeds detention during that period was in any event for a purpose falling outside the scope of the authority granted by SCR 1890, and was therefore for that reason also incompatible with article 5(1) (paras 343 and 352 353). (xii) Mr Mohammeds detention by HM Forces after 4 May 2010 fell within the scope of article 5(1)(c) of the Convention, and was not incompatible with article 5(1) (paras 347 350 and 354 357). (xiii) The arrangements for Mr Mohammeds detention were not compatible with article 5(4), since he did not have any effective means of challenging the lawfulness of his detention (para 359). (xiv) Whether there was a violation of article 5(3) of the Convention should be considered after trial (para 359).
Article 5 of the European Convention on Human Rights
Article 5(1) of the Convention defines the circumstances in which persons may be detained.
It begins: 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.
In relation to the question whether a procedure prescribed by law has been followed, the Convention refers essentially to national law but also, where appropriate, to other applicable legal standards, including those which have their source in international law: Medvedyev v France (2010) 51 EHRR 39, para 79.
Medvedyev itself provides an example of a situation where the legal basis of detention was assessed by reference to international law, since the detention took place on the high seas.
There follows in sub paragraphs (a) to (f) a list of circumstances in which detention is permissible.
They do not include detention for reasons of security, or for the gathering of intelligence.
The only ones which are relevant to these appeals are those set out in sub paragraphs (c) and (f): (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; . (f) the lawful arrest or detention of a person to prevent his effecting an unauthorised entry into the country or of a person against whom action is being taken with a view to deportation or extradition.
The remaining paragraphs of article 5 are concerned with procedural protections against arbitrary detention: 2.
Everyone who is arrested shall be informed promptly, in a language which he understands, of the reasons for his arrest and of any charge against him. 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.
Release may be conditioned by guarantees to appear for 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.
Although the conflicts in Iraq and Afghanistan with which these appeals are concerned took place outside Europe, the European Court of Human Rights has held that a contracting state which detains persons in a situation of armed conflict, outside its own territory, has those persons within its jurisdiction for the purposes of article 1 of the Convention, so that the Convention is applicable.
That approach has been applied in particular to the detention of persons by HM Forces operating in Iraq during both the international and the non international phases of the armed conflict there (the distinction between the international and non international phases will be explained shortly): see Al Skeini v United Kingdom (2011) 53 EHRR 18, Al Jedda v United Kingdom (2011) 53 EHRR 23 and Hassan v United Kingdom (2014) 38 BHRC 358.
The substantive guarantees set out in the Convention have been given effect in the domestic law of the United Kingdom by the Human Rights Act 1998.
In so far as HM Forces operating in conflicts overseas may have been acting in circumstances which engaged the United Kingdoms responsibilities under the Convention, and in so far as the Human Rights Act is applicable to those overseas operations, any breach of the Convention rights by those forces falls within the jurisdiction of British courts.
The central question which has to be determined at this stage of these appeals is how article 5 applied in the context of the phases of the armed conflicts in Iraq and Afghanistan during which Mr Al Waheed and Mr Mohammed were respectively interned by HM Forces.
It is contended on behalf of the Secretary of State that detention in these non international armed conflicts was authorised under international law by one or more of (1) treaty based international humanitarian law, (2) customary non international law, or (3) the relevant SCRs.
It is further contended that article 5(1) is modified in its application to these conflicts so as to accommodate the authorisation of detention under international humanitarian law or the relevant SCRs, with the consequence that the list of permissible grounds of detention set out in sub paras (a) to (f) is not to be regarded as exhaustive.
It is also contended that detention in these conflicts satisfied the requirement in article 5(1) that any deprivation of liberty must be in accordance with a procedure prescribed by law.
In considering these contentions, it is necessary to consider the relationship between the Convention, international humanitarian law, and SCRs.
It is also necessary to consider the extent to which the application of international humanitarian law and international human rights law depends on the nature of the armed conflict in question: whether, in particular, it is classified under international humanitarian law as an international or a non international armed conflict.
It may be helpful at the outset to consider the meaning of these terms.
International and non international armed conflict
Non international armed conflict is an expression which has no universally agreed definition, but can be understood for present purposes as referring, in the language of article 3 of all four of the Geneva Conventions of 1949 (common article 3), to armed conflict not of an international character, as opposed to international armed conflict, which can be understood as referring, in the language of common article 2, to cases of declared war or of any other armed conflict which may arise between two or more of the high contracting parties.
So understood, non international armed conflict includes conflict in which organised armed groups engage in hostilities against a state.
Such conflict may be purely internal to the state concerned, or it may not.
It may include situations where a foreign state intervenes in an internal armed conflict in support of the government of the state concerned, at its invitation or with its consent.
Such conflict is to be distinguished from conflict in which one state engages in hostilities against another, which falls into the category of international armed conflict.
Examples of non international armed conflict involving the intervention of foreign armed forces include certain phases of the recent conflicts in Iraq and Afghanistan.
Although the conflict in Iraq began as an international armed conflict conducted by coalition forces against the Iraqi armed forces, a multi national force, to which about 40 states contributed, remained there after that war had concluded and a new Iraqi Government had been established, so as to assist the Iraqi Government in combating insurgents.
That phase of the conflict was a non international armed conflict.
Similarly, when an international security assistance force, to which about 50 states contributed, assisted the Government of Afghanistan in its struggle against the Taliban, that also was a non international armed conflict.
Detention and the Geneva Conventions
It is necessary next to consider the significance of the distinction between international and non international armed conflicts in relation to the authorisation of detention under international humanitarian law.
In that regard, it is helpful to begin by considering the relevant provisions of the Geneva Conventions.
Traditionally, international humanitarian law, like other international law, was concerned almost entirely with the reciprocal relationships between states, and therefore with conflicts between states rather than internal conflicts between a state and its subjects (subject to exceptions under customary law where internal conflicts affected relationships with other states).
It was therefore concerned only with international armed conflict (subject, as I have explained, to limited exceptions).
Atrocities committed in civil wars led however to the adoption, as part of the Geneva Conventions, of a limited measure of treaty based regulation of non international armed conflict under common article 3.
That article provides for the humane treatment of those who may have been involved in armed conflict not of an international character occurring in the territory of one of the high contracting parties.
It states in para 1: Persons taking no active part in the hostilities, including members of armed forces who have laid down their arms and those placed hors de combat by sickness, wounds, detention, or any other cause, shall in all circumstances be treated humanely .
It goes on to prohibit specific acts, such as torture and rape.
Common article 3 was later supplemented by Additional Protocol II to the Geneva Conventions (1977).
This is narrower in scope than common article 3 in two important respects.
First, it is only applicable in armed conflicts taking place on the territory of a state that has ratified it.
Those states do not include several states in which non international armed conflicts have recently taken place, including Iraq and, until November 2009, Afghanistan.
It also applies to a more limited category of armed conflicts than common article 3: namely, those that take place in the territory of a contracting party between its armed forces and dissident armed forces which, under responsible command, exercise such control over a part of its territory as to be enable them to carry out sustained and concerted military operations and to implement [the obligations imposed by the Protocol].
Certain categories of armed conflict are excluded: first, armed conflicts in which peoples are fighting against colonial domination and alien occupation and against racist regimes in the exercise of their right of self determination, and secondly situations of internal disturbances and tensions, such as riots, isolated and sporadic acts of violence and other acts of a similar nature.
The Protocol spells out rules of humane treatment in greater detail than common article 3, and lays down minimum standards in relation to the prosecution and punishment, under domestic law, of criminal offences related to the armed conflict.
By comparison, the Geneva Conventions deal much more fully with the treatment of those involved in international armed conflict.
In relation to the present appeals, it is relevant to note in particular the provisions concerned with the detention of prisoners of war and civilians.
In relation to the first of these categories, article 21 of the Third Geneva Convention authorises the detention of prisoners of war: The Detaining Power may subject prisoners of war to internment.
The persons who may be detained under this power are defined in detail by article 4(A).
They include members of armed forces of a party to the international armed conflict (article 4(A)(1)), members of other armed forces who profess allegiance to a party to the conflict (article 4(A)(3)), members of militias fulfilling certain conditions (article 4(A)(2)), and persons who accompany the armed forces, such as civilian contractors and war correspondents (article 4(A)(4)).
The treatment of prisoners of war during their internment is also the subject of detailed regulation.
Under article 118 of the Third Geneva Convention, they must be released and repatriated without delay after the cessation of active hostilities in the international armed conflict.
So far as civilians are concerned, the Fourth Geneva Convention is concerned with protected persons, defined by article 4 as those who at a given moment and in any manner whatsoever, find themselves, in case of a conflict or occupation, in the hands of a Party to the conflict or Occupying Power of which they are not nationals.
That general definition is then subject to a number of exclusions, such as nationals of a neutral state who find themselves in the territory of a belligerent State . while the State of which they are nationals has normal diplomatic representation in the State in whose hands they are.
In the section of the Convention dealing with aliens in the territory of a party to the conflict, article 41 prohibits measures of control of protected persons more severe than assigned residence or internment.
Article 42 sets out the permitted grounds of internment, and provides that the internment . of protected persons may be ordered only if the security of the detaining power makes it absolutely necessary.
The International Criminal Tribunal for the former Yugoslavia has interpreted article 42 as permitting internment only if there are serious and legitimate reasons to think that the interned persons may seriously prejudice the security of the detaining power by means such as sabotage or espionage: Prosecutor v Zejnil Delali, Case No: IT 96 21 T, Trial Chamber, 16 November 1998, para 1132.
Article 43 lays down procedures governing internment: Any protected person who has been interned . shall be entitled to have such action reconsidered as soon as possible by an appropriate court or administrative board designated by the detaining power for that purpose.
If the internment . is maintained, the court or administrative board shall periodically, and at least twice yearly, give consideration to his or her case, with a view to the favourable amendment of the initial decision, if circumstances permit.
Article 46 requires that restrictive measures taken regarding protected persons, in so far as they have not previously been withdrawn, must be cancelled as soon as possible after the close of hostilities in the international armed conflict.
Further provision for the detention of civilians is made in the section of the Fourth Geneva Convention dealing with occupied territories.
Article 68 is concerned with protected persons who commit an offence which is solely intended to harm the occupying power.
In the case of certain specified types of offence, such persons are liable to internment, provided its duration is proportionate to the offence committed.
A further power of internment is provided by article 78: If the occupying power considers it necessary, for imperative reasons of security, to take safety measures concerning protected persons, it may, at the most, subject them to assigned residence or to internment.
Decisions regarding such assigned residence or internment shall be made according to a regular procedure to be prescribed by the occupying power in accordance with the provisions of the present Convention.
This procedure shall include the right of appeal for the parties concerned.
Appeals shall be decided with the least possible delay.
In the event of the decision being upheld, it shall be subject to periodical review, if possible every six months, by a competent body set up by the said power.
Article 79 of the Fourth Geneva Convention prohibits the internment of protected persons other than in accordance with articles 41, 42, 43, 68 and 78.
Detailed provision is made elsewhere in the Fourth Geneva Convention in relation to the treatment of internees.
Article 132 requires that each interned person shall be released as soon as the reasons which necessitated his internment no longer exist, and article 133 provides that internment shall cease as soon as possible after the close of hostilities, subject to specified exceptions.
Whereas articles 4 and 21 of the Third Geneva Convention, and articles 4, 42, 43, 68 and 78 of the Fourth Geneva Convention, confer explicit authority to detain in an international armed conflict, and contain detailed provisions concerning the grounds and procedures governing detention in those circumstances, no comparable treaty provisions of international humanitarian law apply in relation to non international armed conflicts.
Instead, legal authority for the detention of participants in a civil conflict, and the grounds and procedures governing detention in those circumstances, are normally regulated by the domestic law of the state where the conflict occurs.
They may also be regulated for some purposes by the domestic law of the detaining state, if different from the state where the conflict occurs; or by SCRs.
It will be necessary to return to the latter possibility.
This distinction reflects the fact that prisoners of war have committed no offence by their participation in an international armed conflict.
They are detained purely as an administrative measure, for the duration of the hostilities.
Non state actors who participate in a non international armed conflict, on the other hand, commit offences against the law of the country in question when fighting to overthrow its government (as in most, but not all, non international armed conflicts), and killing or injuring individuals in the course of doing so.
They are therefore subject to penal proceedings, including detention pending trial or following conviction.
The distinction has long been understood and accepted by the British Government.
For example, during the Troubles in Northern Ireland, participants in the violence, other than the forces of the Crown, were treated as criminals under domestic law rather than as prisoners of war.
When the Government wished to impose administrative internment on suspected members of the IRA, instead of dealing with them through the criminal justice system, Parliament enacted legislation in order to enable it to do so.
The Ministry of Defence summarised the general position in The Joint Service Manual of Armed Conflict (2004 ed), paras 15.6.2 15.6.3: Unlike combatants in an international armed conflict, members of dissident armed forces remain liable to prosecution for offences under domestic law.
These can include normal acts of combat for example, a dissident combatant who kills or injures a member of the government forces may be prosecuted for murder or other offences against the person and even membership of the dissident group.
A member of the security forces who kills a dissident or a civilian will also have to justify his actions under domestic law and may be tried before the courts for any offence he may have committed.
A captured member of dissident fighting forces is not legally entitled to prisoner of war status.
He may be dealt with according to the law of the state for any offences he may have committed.
A member of the security forces who is captured by the dissidents is not entitled to prisoner of war status but any mistreatment of him is likely to amount to an offence against the law of the state.
Prisoner of war status does not arise in internal armed conflicts unless the parties to the conflict agree, or decide unilaterally, as a matter of policy, to accord this status to detainees.
Otherwise, the treatment of detainees is governed by the domestic law of the country concerned, and human rights treaties binding on that state in time of armed conflict and the basic humanitarian principles mentioned in [common article 3 and Additional Protocol II].
It added at para 15.30.3: Arguments in favour of the view that detention in non international conflicts is
authorised by international humanitarian law
Some commentators have argued that international humanitarian law impliedly authorises the detention of persons in a non international armed conflict: see, for example, Gill and Fleck, The Handbook of the International Law of Military Operations (2010), p 471, and Pejic, Procedural principles and safeguards for internment/administrative detention in armed conflict and other situations of violence (2005) 87 International Review of the Red Cross 375, 377.
In summary, such arguments place reliance on the reference to detention in common article 3, and the reference to persons interned or detained in Additional Protocol II.
They argue that common article 3 and Additional Protocol II, in requiring detention in non international armed conflicts to comply with certain humanitarian standards, impliedly recognise that detention is authorised by international humanitarian law in such circumstances.
They also argue that, since states are undeniably entitled to use lethal force in combating insurgents in non international armed conflicts, they must also be authorised to use the lesser alternative of detention.
It is inherent in the nature of any armed conflict that parties to such a conflict may capture persons who, if at liberty, would pose a threat to their security.
There must, it is contended, be an implied authority under international humanitarian law to intern such persons, since otherwise the alternatives would be either to release them or to kill them.
A related approach has been adopted by the International Committee of the Red Cross (ICRC) in its Opinion Paper, Internment in Armed Conflict: Basic Rules and Challenges (2014), where it distinguishes between traditional non international armed conflict, occurring between government armed forces and non state armed groups, and non international armed conflict with an extraterritorial element, in which the armed forces of one or more state, or of an international or regional organisation, fight alongside the armed forces of a host state, in its territory, against one or more organised non state armed groups (p 7).
In a situation of traditional non international armed conflict, the ICRC Opinion Paper acknowledges that domestic law constitutes the legal framework for possible internment whereas, in a situation of non international armed conflict with an extraterritorial element, the Opinion Paper contends that common article 3 and Additional Protocol II, and also customary international humanitarian law, reflected in those instruments, contain an inherent legal basis to intern (pp 7 8).
Arguments against that view
As a matter of policy, there is much to be said for the view that international humanitarian law should recognise a right to intern in non international armed conflicts with an extra territorial element.
As statements of the current state of the law, however, these contentions are controversial.
Many scholars take a different view: to give only a few recent examples, see Conte, The legality of detention in armed conflict, in The War Report 2014 (2015), ed Casey Maslen; Dinstein, Non International Armed Conflicts in International Law (2014), para 274; Debuf, Captured in War: Lawful Internment in Armed Conflict (2013), p 465; Goldman, Extraterritorial Application of the Human Rights to Life and Personal Liberty, Including Habeas Corpus, During Situations of Armed Conflict, in Research Handbook on Human Rights and Humanitarian Law (2013), eds Kolb and Gaggioli, p 121; Hill Cawthorne, Detention in Non International Armed Conflict (2016), Chapter 3; Milanovic, The Applicability of the Conventions to Transnational and Mixed Conflicts, in The 1949 Geneva Conventions: A Commentary (2015), Clapham, Gaeta and Sassli (eds), pp 46 47; Rona, Is there a Way Out of the Non International Armed Conflict Dilemma? (2015) 91 International Law Studies 32; Rowe, Is there a right to detain civilians by foreign armed forces during a non international armed conflict? (2012) 61 ICLQ 697, 702; and Sivakumaran, The Law of International Armed Conflict (2012), p 71.
The contentions set out in paras 256 and 257 above have also been rejected by the International Commission of Jurists in its Legal Commentary on the Right to Challenge the Lawfulness of Detention in Armed Conflict (2015), pp 16 23.
Considering first the contention that the Geneva Conventions and their Protocols impliedly authorise detention in non international armed conflicts, the arguments against that view can be summarised as follows.
Textual arguments
First, whereas articles 4 and 21 of the Third Geneva Convention (concerning prisoners of war), and articles 4, 42, 68 and 78 of the Fourth Geneva Convention (concerning civilians) confer express authority to detain specified categories of person on specified grounds in situations of international armed conflict, the Conventions and their Additional Protocols contain no provisions expressly conferring such authority in situations of non international armed conflict.
Applying ordinary principles of interpretation (expressio unius, exclusio alterius), it is unlikely in those circumstances that the contracting parties intended to confer such authority by implication.
Secondly, the Geneva Conventions and Additional Protocol II are silent as to the grounds of detention and the applicable procedural safeguards in a non international armed conflict, in contrast to the detailed provision made for international armed conflict.
It is argued that it is difficult to suppose that these instruments were intended to confer an authority to detain, or to interpret them as doing so, when they contain no indication of the scope of the power supposedly conferred.
The ICRC Opinion Paper suggests that these matters can be addressed, in the context of an extraterritorial non international armed conflict, by an ad hoc international agreement between the international forces and the host state, or by the domestic law of the host state (p 8).
In that event, however, the legal basis for detention would be the international agreement or domestic law.
Contextual arguments
It is also argued that there are cogent reasons why the states negotiating the Conventions and their Additional Protocols are unlikely to have intended to confer any such authorisation.
It is apparent from the travaux prparatoires that states regarded it as important to maintain their sovereignty over internal matters.
Common article 3 was a controversial measure, the British delegate, for example, objecting that it would strike at the root of national sovereignty (Final Record of the Diplomatic Conference of Geneva of 1949: Vol II, Section B (1963), p 10).
It has to be remembered that it was only in the aftermath of the Second World War that the scope of international law was widely extended to matters internal to sovereign states.
In that regard, common article 3 was connected to other developments, including the emergence of international human rights law, with the Universal Declaration of Human Rights (1948) and the International Covenant on Civil and Political Rights (ICCPR) (1966), together with regional instruments such as the European Convention on Human Rights (1950).
Similar concerns about sovereignty were also expressed by numerous states during the diplomatic conference which led to Additional Protocol II (see Hill Cawthorne, op cit, pp 23 24).
A further concern was to avoid giving the appearance of a legitimate status to those who rebel against their government (ibid, pp 25 26).
The British delegate in 1949 commented, for example, that the application of the Conventions [to internal conflicts] would appear to give the status of belligerents to insurgents, whose right to wage war could not be recognised (Final Record, Vol II, Section B, p 10).
In so far as common article 3 raised that concern, it was addressed by common article 3(4), which makes clear that the legal status of the parties to the conflict is not altered.
It is argued that it is unlikely, given those concerns, that the parties intended to depart from the position that the detention of captured insurgents was governed by domestic law, subject to guarantees of humane treatment.
Furthermore, since international humanitarian law is generally understood as being reciprocal in its operation (unlike international human rights law, which is directly binding only on states), the authorisation of detention in non international armed conflicts would have entailed that states recognised the legitimacy of detention by dissident armed groups (for example, the legitimacy of the detention of British and American troops in Afghanistan by the Taliban): something which would be anathema to most states.
Arguments against inferential reasoning
Fourthly, in so far as the contentions are based on an inference, from the fact that common article 3 and Additional Protocol II require a minimum level of humanitarian treatment for people who are detained during non international armed conflict, that detention is therefore authorised by those instruments, it is argued that the reasoning rests on a non sequitur: that the regulation of conduct by international humanitarian law entails that the conduct in question is authorised by international humanitarian law.
Provisions requiring that persons interned in a non international armed conflict should be treated humanely implicitly recognise that detention occurs in fact, but, it is argued, do not imply that it is authorised by law, let alone that it is authorised by international law rather than by the domestic law of the place where the conflict takes place or some other applicable law, still less that it is authorised by those very provisions.
Common article 3 and Additional Protocol II, it is argued, are not concerned with the grant of powers to detain: they are simply intended to ensure the humane treatment of all persons who are detained, including those detained by non state groups, and apply whether their detention is legally justified or not.
As the International Committee of the Red Cross Commentary on the Geneva Conventions (1952), ed Pictet, states in relation to common article 3, it merely ensures respect for the few essential rules of humanity which all civilised nations consider as valid everywhere and in all circumstances (p 60).
Fifthly, it is argued that a similar fallacy that the absence of a prohibition is equivalent to the presence of an authorisation vitiates the contention that, since international humanitarian law does not prohibit the use of lethal force in non international armed conflict, therefore it must impliedly provide lawful authority for the use of the lesser alternative of detention.
In the first place, it is argued, the contention is based on a false dichotomy: that either international humanitarian law confers lawful authority for the detention of prisoners, or they must be killed or released.
As explained above, however, lawful authority for detention (and, indeed, for killing) in a non international armed conflict is normally conferred not by international humanitarian law but by the domestic law of the state in which the conflict occurs.
It may also be conferred by other sources of law, such as the domestic law of the detaining state, or SCRs.
Detention may be authorised by any of these sources of law only for defined purposes, such as criminal investigation and prosecution, and it may be rendered subject to judicial control (just as domestic or international law may authorise killing only in specified circumstances, and render soldiers who kill in other circumstances liable to prosecution and punishment).
The idea that, in the absence of authority under international humanitarian law, soldiers have no lawful option in a non international armed conflict but to release captured prisoners is therefore mistaken.
Furthermore, it is argued, the contention that authority to kill impliedly carries with it authority to detain, even if well founded, would only result in authority to detain those who might otherwise be lawfully killed: a limited category of persons which would not, for example, include Mr Al Waheed, who on the assumed facts was an unarmed man who offered no violence towards the members of HM Forces who detained him.
The argument would not, therefore, support the existence of a power of detention of the width for which the Secretary of State argues in the present proceedings.
In short, it is argued that it is not germane to the question here in issue to demonstrate that the killing of insurgents in non international armed conflict is not prohibited by international humanitarian law.
It does not follow from the absence of such a prohibition that international humanitarian law therefore confers lawful authority for detention.
In international armed conflict, such authority can be found in article 21 of the Third Geneva Convention and articles 42, 68 and 78 of the Fourth Geneva Convention, but those provisions do not apply to non international armed conflict.
In a situation of the latter kind, lawful authority must be sought elsewhere.
Normally, it will arise under domestic law, but it may also arise out of other branches of international law, as for example where it is conferred by an SCR.
Arguments based on the absence of protection against arbitrary detention
Sixthly, it is argued that the contention that common article 3 and Additional Protocol II authorise detention in non international armed conflict is difficult to reconcile with the requirement under international law that the deprivation of liberty must be non arbitrary.
That is a requirement which the ICRC maintains is implicit in the obligation, imposed by common article 3 and Additional Protocol II, that detainees should be treated humanely, and it is in any event imposed by article 9(1) of the ICCPR, which provides that no one shall be subjected to arbitrary arrest or detention and that no one shall be deprived of his liberty except on such grounds and in accordance with such procedure as are established by law.
Similar provisions exist in the regional human rights treaties: article 6 of the African Charter on Human and Peoples Rights, article 7 of the American Convention on Human Rights, article 14 of the Arab Charter on Human Rights, and article 5 of the European Convention on Human Rights.
Any law authorising detention must therefore define the circumstances in which it applies with sufficient precision to avoid overly broad or arbitrary interpretation or application (see the Human Rights Committees General Comment No 35, Article 9 (Liberty and security of the person), UN Doc CCPR/C/GC/35 (2014), para 22: the Human Rights Committee is the UN body established to monitor the implementation of the ICCPR, and has included among its members present and former judges of the European Court of Human Rights).
This requirement is illustrated by several reports in which the Human Rights Committee has considered grounds for detention to be insufficiently precise (eg Concluding Observations: Initial Report of Honduras, UN Doc CCPR/C/HND/CO/1 (2006), para 13).
The concept of arbitrariness is, however, of broader scope: it is not to be equated with against the law but must be interpreted more broadly to include elements of inappropriateness, injustice, lack of predictability and due process of law: Mukong v Cameroon, UN Doc CCPR/C/51/D/458/1991 (1994).
International humanitarian law, however, contains no definition of the permitted grounds of detention in non international armed conflict, nor any mention of procedural protections.
Specifically in relation to security detention in situations of armed conflict, the Human Rights Committee has stated that security detention authorised and regulated by and complying with international humanitarian law in principle is not arbitrary (General Comment No 35, para 64; emphasis added).
In other words, in order for detention for reasons of security not to be arbitrary, on the hypothesis that it is (1) authorised by international humanitarian law, it must also be (2) regulated by international humanitarian law, so that (3) it is possible to determine whether the detention is in compliance with international humanitarian law.
These requirements are satisfied in situations of international armed conflict by the provisions of the Third and Fourth Geneva Conventions which were discussed earlier.
In non international armed conflict, on the other hand, it is argued that neither common article 3 nor Additional Protocol II defines who may be detained, on what grounds, in accordance with what procedures, or for how long.
In consequence, it is argued, there is no possibility of determining whether detention in non international armed conflict complies with any such requirements.
Arguments relating to customary international humanitarian law
Considering next the contention that detention in a non international armed conflict is authorised by customary international humanitarian law, the arguments against that view can be summarised as follows.
It is argued that the contention lacks sufficient support in either opinio juris or state practice.
So far as the former is concerned, the contention is disputed by many experts in this area of the law, as explained in para 258 above.
It is argued that it is also unsupported by the ICRCs major international study into state practice, Henckaerts and Doswald Beck, Customary International Humanitarian Law (2005).
That study concludes that the arbitrary deprivation of liberty is prohibited (pp 347 349), but not that there are grounds on which the deprivation of liberty is authorised under customary international humanitarian law.
The ICRCs catalogue of the rules of customary international humanitarian law is also said to give no support to the idea that they include an authority to detain: ICRC, Customary IHL, www.icrc.org/customary ihl/eng/docs/v1.
So far as state practice is concerned, it is of course true that states involved in non international armed conflicts have detained persons, but, it is argued, it does not follow that they have done so in reliance on a right to do so under international humanitarian law (rather than the absence of a prohibition of such detention under international humanitarian law, and a right under domestic law, or under an SCR).
Reference was made by counsel for the Secretary of State to a recital forming part of the preamble to Resolution 1 of the 32nd International Conference of the ICRC and Red Crescent in December 2015, which refers to states having in all forms of armed conflict, the power to detain, but commentators have argued that those words are not conclusive evidence of state practice, and that the resolution was not in any event concerned with the authorisation of detention.
Reference was also made to The Copenhagen Process: Principles and Guidelines, but commentators have pointed out that the official commentary to principle 16 states that the mere inclusion of a practice in The Copenhagen Process Principles and Guidelines should not be taken as evidence that states regard the practice as required out of a sense of legal obligation.
As the Court of Appeal noted at para 231 of its judgment in the case of Mr Mohammed, the only example of a state which has placed reliance on international humanitarian law as a basis for detention in a non international armed conflict, other than the Ministry of Defence in the present proceedings, appears to be the Netherlands, in a letter dated 21 July 2006, headed Combating international terrorism, sent by the Foreign Minister, the Minister of Defence and the Minister for Development Cooperation to the President of the House of Representatives (KST 99753, 27 225 Nr 221).
That approach can be contrasted with the practice of the UK and other states in Iraq and Afghanistan (see paras 311 312, 336 337 and 341 below).
In addition, it has been pointed out that the ICRC itself accepts that customary international humanitarian law prohibits the arbitrary deprivation of liberty: see ICRC, Customary IHL, rules 87 and 99.
That prohibition is said to be a rule applicable in both international and non international armed conflict, established by state practice in the form of military manuals, national legislation and official statements, and also international human rights law.
The arguments discussed in paras 268 270 above are therefore also relevant in this context.
Conclusions
As the foregoing discussion makes clear, there are substantial arguments both for and against the contention that the Geneva Conventions or their Protocols implicitly confer authority under international law for detention in non international armed conflicts.
My current view, based on the submissions in the present case, is that the arguments against that contention the textual arguments discussed in paras 260 261 above, the contextual arguments discussed in paras 262 263, the arguments against inferential reasoning discussed in paras 264 267, and the arguments based on the absence of adequate protection against arbitrary detention discussed in paras 268 270 are cumulatively the more persuasive.
Customary international humanitarian law is a developing body of law, and it may reach the stage where it confers a right to detain in a non international armed conflict.
The submissions made on behalf of the Ministry of Defence have not, however, persuaded me that it has yet reached that stage.
The contention that authority for detention in non international armed conflicts is conferred by customary international humanitarian law is controversial as a matter of expert opinion.
There appears to be a paucity of state practice which is supportive of the contention, as explained at para 272.
In those circumstances, I have not been persuaded that there exists at present either sufficient opinio juris or a sufficiently extensive and uniform practice to establish the suggested rule of customary international law.
In short, it appears to me that international humanitarian law sets out a detailed regime for detention in international armed conflict, conferring authority for such detention, specifying the grounds on which detention is authorised, laying down the procedures by which it is regulated, and limiting its duration, in accordance with the requirements of article 9 of the ICCPR and analogous regional provisions.
In contrast, subject to compliance with minimum standards of humane treatment, international humanitarian law leaves it to states to determine, usually under domestic law, in what circumstances, and subject to what procedural requirements, persons may be detained in situations of non international armed conflict.
It follows that the Ministry of Defences argument in the present case that the detention of Mr Al Waheed and Mr Mohammed was authorised by conventional or customary international humanitarian law should be rejected.
Detention in the non international conflicts in Iraq and Afghanistan under the
It is necessary next to consider the Ministry of Defences contention that authority for detention, in circumstances falling outside article 5(1)(a) to (f) of the Convention, was conferred on HM Forces, in the non international conflicts in Iraq and Afghanistan, by the relevant SCRs.
For the purpose of considering that contention, the SCRs have to be interpreted in accordance with principles laid down by the European Court of Human Rights in a number of its judgments.
It is therefore necessary to begin by considering the most significant of these judgments.
(1) Al Jedda v United Kingdom
In the case of Al Jedda v United Kingdom the Grand Chamber concluded that there had been a violation of article 5(1) in respect of the detention by HM Forces of a suspected insurgent during the non international armed conflict in Iraq.
Mr Al Jeddas detention occurred between October 2004 and December 2007, after an Iraqi Government had been established with sovereign authority.
It overlapped with that of Mr Al Waheed, which occurred during February and March 2007.
The Multi National Force was at that time fighting against insurgents with the consent of the Iraqi Government, under a mandate established by SCR 1546 (2004), as extended by SCRs 1637 (2005) and 1723 (2006).
SCR 1546 had been preceded by letters to the President of the Security Council from the Prime Minister of Iraq and the US Secretary of State.
In his letter, the Prime Minister requested the Security Council to make a new resolution authorising the Multi National Force, which had previously been in occupation of Iraq following the defeat of Iraqi forces, to remain on Iraqi territory and to contribute to maintaining security there, including through the tasks and arrangements set out in the accompanying letter from the US Secretary of State.
In his letter, the Secretary of State confirmed that the Multi National Force was prepared to continue to contribute to the maintenance of security in Iraq, including by preventing and deterring terrorism.
He added that, under the agreed arrangement, the Multi National Force stood ready to continue to undertake a broad range of tasks to contribute to the maintenance of security and to ensure force protection.
These include activities necessary to counter ongoing security threats posed by forces seeking to influence Iraqs political future through violence.
This will include combat operations against members of these groups, internment where this is necessary for imperative reasons of security, and the continued search for and securing of weapons that threaten Iraqs security.
The words internment when this is necessary for imperative reasons of security reflected the terms of article 78 of the Fourth Geneva Convention, which had applied prior to the establishment of the Iraqi Government, when Iraq had been an occupied territory.
These letters were annexed to SCR 1546.
The preamble to the resolution recognised the request of the Iraqi Prime Minister in the annexed letter to retain the presence of the Multi National Force, welcomed the willingness of the Multi National Force to continue efforts to contribute to the maintenance of security and stability in Iraq, and noted the commitment of all forces . to act in accordance with international law.
In para 9 of the resolution the Security Council noted that the Multi National Force remained in Iraq at the request of the incoming government, and reaffirmed the authorisation for the Multi National Force first established under SCR 1511, having regard to letters annexed to this resolution.
In para 10 it stated that the Multi National Force: shall have the authority to take all necessary measures to contribute to the maintenance of security and stability in Iraq in accordance with the letters annexed to this resolution expressing, inter alia, the Iraqi request for the continued presence of the Multi National Force and setting out its tasks, including by preventing and deterring terrorism.
Procedures were laid down for the review of detention, under the domestic law of Iraq, by Coalition Provisional Authority (CPA) Memorandum No 3 (Revised), which provided: (1) Any person who is detained by a national contingent of the MNF [Multi National Force] for imperative reasons of security in accordance with the mandate set out in UNSCR 1546 (hereinafter security internee) shall, if he is held for a period longer than 72 hours, be entitled to have a review of the decision to intern him. (2) The review must take place with the least possible delay and in any case must be held no later than seven days after the date of induction into an internment facility. (3) Further reviews of the continued detention of any security internee shall be conducted on a regular basis but in any case no/later than six months from the date of induction into an internment facility. (4) The operation, condition and standards of any internment facility established by the MNF shall be in accordance with Section IV of the Fourth Geneva Convention .
It has been held by a majority of the Court of Appeal that detention in accordance with these procedures was lawful under the law of Iraq: Al Jedda v Secretary of State for Defence [2010] EWCA Civ 758; [2011] QB 773.
Mr Al Jedda was detained in a British military facility for over three years.
His continuing internment was authorised and reviewed in accordance with the CPA Memorandum, initially by British military personnel and subsequently also by representatives of the Iraqi and British Governments and by non British military personnel, on the basis of intelligence material which was never disclosed to him.
He was able to make written submissions to the reviewing authorities but there was no provision for an oral hearing.
His internment was authorised for imperative reasons of security.
There was no intention at any point to bring criminal charges against him.
In these circumstances, his detention did not fall within any of sub paragraphs (a) to (f) of article 5(1) of the Convention.
In domestic proceedings, the majority of the House of Lords considered that it could be inferred from the text of SCR 1546, and from the context in which it was adopted, that states contributing to the Multi National Force were authorised to intern individuals where necessary for imperative reasons of security; that the authorisation should be regarded as an obligation for the purposes of article 103 of the UN Charter (In the event of a conflict between the obligations of the members of the United Nations under the present Charter and their obligations under any other international agreement, their obligations under the present Charter shall prevail); and that, to the extent that such internment was unavoidably incompatible with article 5(1) of the European Convention, the UKs obligations under article 5(1) were therefore qualified: R (Al Jedda) v Secretary of State for Defence (JUSTICE intervening) [2007] UKHL 58; [2008] 1 AC 332.
In a speech which anticipated some of the points later to be made by the European court, Baroness Hale of Richmond agreed only to the extent that competing commitments under the UN Charter and the Convention could be reconciled by adopting a qualification of the Convention rights.
The European court rejected the idea that the SCR should be interpreted as impliedly imposing an obligation which would contravene obligations under international human rights law: [T]he court must have regard to the purposes for which the United Nations was created.
As well as the purpose of maintaining international peace and security, set out in the first sub paragraph of article 1 of the UN Charter, the third sub paragraph provides that the United Nations was established to achieve international cooperation in . promoting and encouraging respect for human rights and fundamental freedoms.
Article 24(2) of the Charter requires the Security Council, in discharging its duties with respect to its primary responsibility for the maintenance of international peace and security, to act in accordance with the Purposes and Principles of the United Nations.
Against this background, the court considers that, in interpreting its resolutions, there must be a presumption that the Security Council does not intend to impose any obligation on member states to breach fundamental principles of human rights.
In the event of any ambiguity in the terms of a Security Council resolution, the court must therefore choose the interpretation which is most in harmony with the requirements of the Convention and which avoids any conflict of obligations . [I]t is to be expected that clear and explicit language would be used were the Security Council to intend states to take particular measures which would conflict with their obligations under international human rights law. (para 102)
The principles of interpretation of SCRs which can be taken from that passage are the following: (1) there is a presumption that the Security Council does not intend to impose any obligation on member states to breach fundamental principles of human rights; (2) in the event of ambiguity, the court must choose the interpretation which is most in harmony with the requirements of the European Convention; and (3) it is to be expected that clear and explicit language will be used if the Security Council intends states to take measures which would conflict with their obligations under international human rights law.
On that basis, the European court interpreted SCR 1546 as leaving unaffected the obligation of the member states within the Multi National Force to comply with their obligations under international human rights law: Internment is not explicitly referred to in the resolution.
In para 10 the Security Council decides that the Multi National Force shall have authority to take all necessary measures to contribute to the maintenance of security and stability in Iraq in accordance with the letters annexed, which inter alia set out the Multi National Forces tasks.
Internment is listed in Secretary of State Powells letter, as an example of the broad range of tasks which the Multi National Force stood ready to undertake.
In the court's view, the terminology of the resolution appears to leave the choice of the means to achieve this end to the member states within the Multi National Force.
Moreover, in the preamble, the commitment of all forces to act in accordance with international law is noted.
It is clear that the Convention forms part of international law .
In the absence of clear provision to the contrary, the presumption must be that the Security Council intended states within the Multi National Force to contribute towards the maintenance of security in Iraq while complying with their obligations under international human rights law. (para 105)
The court rejected the Governments alternative contention that a legal basis for the applicants detention could be found in international humanitarian law.
The argument was that SCR 1546 had maintained in place the position under international humanitarian law which had existed during the occupation of Iraq, when the Fourth Geneva Convention applied.
The court noted that para 2 of SCR 1546 recorded the end of the occupation, and that the Fourth Geneva Convention did not in any event authorise indefinite internment (para 107).
The court also considered whether a basis for detention which could operate to disapply the requirements of article 5(1) was provided by the agreement between the Iraqi Government and the US Government, set out in the letters annexed to SCR 1546, but concluded that such an agreement could not override the obligations under the Convention (para 108).
The court therefore concluded that there was no conflict between the United Kingdoms obligations under the UN Charter and its obligations under article 5(1) of the Convention (para 109).
It followed that the applicants detention constituted a violation of article 5(1) (para 110).
(2) Nada v Switzerland
Shortly after Al Jedda, the Grand Chamber decided the case of Nada v Switzerland (2012) 56 EHRR 18, which concerned a Swiss law implementing an SCR requiring sanctions to be imposed on individuals listed as being associated with Al Qaeda.
The sanctions imposed were incompatible with the applicants rights under article 8 of the Convention.
The court confirmed the principles laid down in para 102 of Al Jedda, set out in para 284 above, but distinguished that case on the basis that the SCR in issue in Nada clearly and explicitly imposed an obligation to take measures capable of breaching human rights, whereas in Al Jedda the wording of the resolution at issue did not specifically mention internment without trial (para 172).
However, the court also found that Switzerland enjoyed some latitude, which was admittedly limited but nevertheless real, in implementing the SCR (para 180).
On the basis of that finding, it took the view that Switzerland could not confine itself to relying on the binding nature of SCRs, but should have persuaded the court that it had taken or at least had attempted to take all possible measures to safeguard the applicants rights under the Convention within the constraints set by the SCR.
On that basis, the court found it unnecessary to determine the relative priority of the two instruments (paras 196 197).
(3) Al Dulimi v Switzerland
The case of Al Dulimi and Montana Management Inc v Switzerland (Application No 5809/08) (unreported) given 21 June 2016 also concerned the implementation of sanctions required by an SCR.
The Grand Chamber repeated what it had said in para 102 of Al Jedda (para 140).
It gave effect to that approach by holding that, since the SCR in question did not contain any clear or explicit wording excluding the possibility of judicial supervision of the listing of persons on whom sanctions were to be imposed, it must be understood as authorising national courts to exercise sufficient scrutiny so that any arbitrariness could be avoided (para 146).
(4) Hassan v United Kingdom
Between Nada and Al Dulimi, the Grand Chamber decided the case of Hassan v United Kingdom, which concerned an earlier phase of the Iraq conflict than Al Jedda or the present appeal of Mr Al Waheed.
Mr Hassan was captured by HM Forces in Iraq during 2003, at a time when the situation there constituted either international armed conflict or occupation, and the Third and Fourth Geneva Conventions applied.
He was detained for about nine days.
He complained of a violation of his rights under article 5 of the Convention.
In response, the British Government submitted that his detention had been authorised under article 21 of the Third Geneva Convention, as a prisoner of war, or by articles 42 and 78 of the Fourth Geneva Convention, as a civilian whose internment was necessary for imperative reasons of security.
In those circumstances, it argued, article 5 of the Convention was displaced, or had to be modified so as to be compatible with the applicable lex specialis, namely international humanitarian law.
In deciding how article 5 was to be interpreted in the light of the provisions of the Third and Fourth Geneva Conventions, the court applied article 31 of the Vienna Convention on the Law of Treaties (para 100).
Under article 31(3)(b), account was to be taken of any subsequent practice in the application of the treaty in question which established the agreement of the parties regarding its interpretation.
The practice of the contracting parties to the European Convention was not to derogate from their obligations under article 5 in order to detain persons on the basis of the Third and Fourth Geneva Conventions during international armed conflict.
That practice was contrasted with the practice of the contracting states in relation to non international armed conflict, such as the Troubles in Northern Ireland and the Kurdish conflict in Turkey, and their practice in relation to terrorist threats (para 101).
Under article 31(3)(c) of the Vienna Convention, account was to be taken of any relevant rules of international law applicable in the relations between the parties.
The provisions in the Third and Fourth Geneva Conventions relating to internment were designed to protect captured combatants and civilians who posed a security threat.
The International Court of Justice had held that the protection offered by human rights conventions and that offered by international humanitarian law co existed in situations of armed conflict.
The court must therefore endeavour to interpret and apply the European Convention in a manner which was consistent with the framework under international law delineated by the International Court of Justice (para 102).
Accordingly: By reason of the co existence of the safeguards provided by international humanitarian law and by the Convention in time of armed conflict, the grounds of permitted deprivation of liberty set out in sub paras (a) to (f) of [article 5(1)] should be accommodated as far as possible, with the taking of prisoners of war and the detention of civilians who pose a risk to security under the Third and Fourth Geneva Conventions.
The court is mindful of the fact that internment in peacetime does not fall within the scheme of deprivation of liberty governed by article 5 of the Convention without the exercise of the power of derogation under article 15.
It can only be in cases of international armed conflict, where the taking of prisoners of war and the detention of civilians who pose a threat to security are accepted features of international humanitarian law, that article 5 could be interpreted as permitting the exercise of such broad powers. (para 104)
The court added that deprivation of liberty pursuant to powers under international humanitarian law must be lawful to preclude a violation of article 5(1).
This meant that the detention must comply with the rules of international humanitarian law and, most importantly, that it should be in keeping with the fundamental purpose of article 5(1), which was to protect the individual from arbitrariness (para 105).
In that regard, the court cited its case law concerning the necessary safeguards against arbitrary detention.
Applying this approach to the facts, the court found that the applicant was captured in circumstances giving reason to believe that he might be either a person who could be detained as a prisoner of war or someone whose internment was necessary for imperative reasons of security, both of which provided a legitimate basis for detention under international humanitarian law (under article 21 of the Third Geneva Convention and articles 42 and 78 of the Fourth Geneva Convention).
He was subject almost immediately to a screening process which led to his being cleared for release.
He was released shortly afterwards (para 109).
In these circumstances, his detention was consistent with the powers available to the UK under the Third and Fourth Geneva Conventions, and was not arbitrary.
In these circumstances, the court held that there had been no breach of article 5(1) of the European Convention.
The relevance of Hassan to the present appeals
In the present appeals, the majority of the court accept the Ministry of Defences argument that the reasoning in Hassan leads to the conclusion that, where an SCR authorises detention in a non international armed conflict in circumstances other than those contemplated by sub paragraphs (a) to (f) of article 5(1), the latter provision must be modified so as to be consistent with the SCR.
On that basis, the majority accept that article 5(1) is modified so as to permit the detention which is said to have been authorised by the SCRs in question in these appeals.
The argument takes as its starting point an interpretation of the SCRs as authorising detention in circumstances falling outside the terms of article 5(1)(a) to (f).
It is because of that interpretation that it can be argued that article 5(1) then requires to be modified so as to accommodate the detention authorised by the SCRs.
The terms of SCR 1546, which applied in the case of Mr Al Waheed, have already been considered.
They did not clearly or explicitly authorise detention in circumstances falling outside article 5(1)(a) to (f), as the court held in Al Jedda.
Nor did SCR 1890, which applied in the case of Mr Mohammed, and will be considered later.
Applying the approach to the interpretation of SCRs established by the court in its case law both prior and subsequent to Hassan, and summarised in para 285 above, it follows that the SCRs cannot be interpreted as authorising detention falling outside article 5(1)(a) to (f).
The premise on which the Ministry of Defences argument is based is therefore inconsistent with the clear and constant jurisprudence of the Grand Chamber concerning the interpretation of SCRs.
The answer put forward by the majority of the court is that, following Hassan, article 5(1) must be interpreted as permitting detention during armed conflicts which falls outside the categories listed in sub paragraphs (a) to (f) but is authorised by an SCR.
On that basis, the interpretation of the SCRs as authorising detention which falls outside article 5(1)(a) to (f) is not incompatible with the Convention.
There are a number of reasons why the judgment in Hassan does not appear to me to be applicable to detention in the non international conflicts with which these appeals are concerned, which are explained below at paras 307 315 and 324.
But a point which should be made at the outset is that the reasoning of the majority appears to me to be circular.
The proposition which the majority seek to establish that article 5(1) is modified so as to permit detention falling outside sub paragraphs (a) to (f), where such detention is authorised by an SCR is actually assumed for the purposes of its premise, that the SCRs should be interpreted as authorising such detention.
The case of Hassan was not concerned with the interpretation of an SCR.
The court did not, therefore, cite or consider, let alone depart from, the approach to the interpretation of SCRs which it had set out in Al Jedda and repeated in later cases.
On the contrary, at para 99 it pointed out that its judgment in Al Jedda had concerned the SCR there in question, and that no issue had been raised in relation to the powers of detention provided for in the Third and Fourth Geneva Conventions.
The only issue in the case of Hassan was the interpretation of article 5 of the Convention in a context where detention was authorised by international humanitarian law in particular, by the provisions of the Geneva Conventions authorising the detention of prisoners of war and civilians during international armed conflicts.
Those provisions did not apply in the situations with which the present appeals are concerned.
Nor was the detention of Mr Al Waheed or Mr Mohammed authorised by any other rules of international humanitarian law, for the reasons summarised in paras 274 276 above.
The case of Hassan does not therefore appear to me to be in point when deciding whether the detention of Mr Al Waheed or Mr Mohammed was authorised by the relevant SCRs.
The answer to that question depends on the interpretation of the SCRs; and the principles governing their interpretation, for the purpose of establishing whether there has been a breach of the Convention, are those laid down in Al Jedda, Nada and Al Dulimi, and summarised in para 285 above.
Put shortly, in Al Jedda the court required greater precision of international law, when it comes to authorising military detention in situations of armed conflict, than was afforded by SCR 1546.
Nothing in Hassan appears to me to cast any doubt on that decision.
Hassan was concerned with powers of detention under the Geneva Conventions which are explicit and detailed, as explained at paras 249 252 above.
A different argument is put forward by Lord Mance at para 163: that to start from the premise that SCR 1546 should be interpreted consistently with article 5(1) is unsustainable, since article 5(1) does not reflect general international law, but is unique in stating an ostensibly exhaustive list of circumstances in which detention is permissible (unlike article 9 of the ICCPR), whereas SCR 1546 was not directed only to states party to the Convention but to all member states of the United Nations.
I recognise the force of that argument, but it appears to me to be inconsistent with the approach to the interpretation of SCRs which the European court has adopted in a clear and constant line of decisions at Grand Chamber level.
Having considered the Strasbourg authorities, I can next consider the appeals.
The case of Mr Al Waheed
Mr Al Waheed is an Iraqi citizen.
He was detained by HM Forces in Iraq for about six weeks during February and March 2007, when the relevant legal regime was identical to that considered in Al Jedda and explained at paras 278 281 above.
The relevant facts in relation to his detention have not yet been established, but it is assumed for the purposes of this appeal that he was detained on 11 February 2007 at a house where arms, ammunition, components for improvised explosive devices (IEDs), and explosive charges, were found.
Two days later an ad hoc British Divisional Internment Review Committee decided that he should be interned for imperative reasons of security.
On 22 February the committee decided that, if it were confirmed that he could not be proved to have handled any of the recovered material, it was unlikely that he could be successfully prosecuted, and he should be released.
His case was reviewed again on 12 or 13 March, and again on 21 March, when a decision on his release was deferred while forensic evidence was obtained.
On 28 March he was released.
Mr Al Waheed accepts that SCR 1546, as extended by SCR 1723, authorised detention.
He complains, however, that his detention violated article 5(1) of the Convention.
It is conceded on behalf of the Secretary of State that his detention was attributable to the UK, and that he fell within the jurisdiction of the UK during his internment for the purposes of article 1 of the Convention (which governs its applicability).
It is maintained on behalf of the Secretary of State that his detention was justified under article 5(1)(c), but that issue is not before the court in this appeal.
The only issue raised in the appeal, as a preliminary point, is whether it was legally necessary for his detention to fall within any of sub paragraphs (a) to (f) of article 5(1).
In relation to that issue, the judge, Leggatt J, was bound by the decision of the House of Lords in Al Jedda that article 5(1) did not apply to detention under SCR 1546 for imperative reasons of security, since SCR 1546 should be construed as imposing an obligation to detain, and such an obligation prevailed over the inconsistent obligation imposed by article 5(1) of the Convention, by reason of article 103 of the UN Charter.
Since the Court of Appeal would have been equally bound by that decision, the appeal has come directly to this court.
Discussion
In my opinion this court should depart from the reasoning of the House of Lords in relation to this point, summarised in para 283 above.
It did not approach the interpretation of SCR 1546 on the basis subsequently laid down by the Grand Chamber and summarised in para 285 above.
That approach, subsequently applied in relation to other SCRs in the cases of Nada and Al Dulimi, represented a development in the courts case law, based on a fuller consideration of international law than appears in the speeches in the House of Lords.
Its interpretation of SCR 1546 was also based on a fuller consideration of the scope of the authority conferred than appears to have been canvassed in argument before the House of Lords.
Although it is of course open to this court to adopt a different approach to the relationship between the Convention and other international instruments from that adopted by the Grand Chamber, such a course would run contrary to the general intention that the Human Rights Act 1998 should bring rights home, and would require some compelling justification.
It does not seem to me that such a justification has been made out.
In particular, the Ministry of Defences argument that the issue is a question of interpretation of the UN Charter and the SCR, on which the European court has no particular authority, seems to me to be an over simplification.
The interpretation and application of the Convention depend on its interaction with other international instruments, and a uniform approach to these issues is desirable if the Convention system of guaranteeing a minimum level of human rights protection by all the contracting parties is to be preserved.
In my view, this court should therefore proceed on the basis that article 103 of the UN Charter is not applicable.
Consistently with that conclusion, the Grand Chamber held in Al Jedda that there was a presumption that the Security Council intended states within the Multi National Force to contribute towards the maintenance of security in Iraq while complying with their obligations under international human rights law.
In its view, nothing in SCR 1546 displaced that presumption.
Article 5(1) of the Convention therefore continued to apply.
Since Mr Al Jeddas detention did not fall within any of sub paragraphs (a) to (f), it followed that there was a violation of article 5(1).
As I have explained, it is now argued that the reasoning in Hassan supersedes that in Al Jedda.
I reject that argument, firstly for the reasons explained in paras 295 300 above, and also for the following additional reasons.
In addressing the problem which arose in Hassan, the courts starting point was article 31(3)(b) of the Vienna Convention, and the need to take account of subsequent practice in the application of the treaty in question.
In that regard, the court noted the absence of any practice of derogating from article 5 of the Convention in relation to detention during international armed conflicts, notwithstanding the practice of exercising powers of detention under the Third and Fourth Geneva Conventions in circumstances not falling within any of sub paragraphs (a) to (f) of article 5(1).
The court expressly contrasted that position with the practice of derogating from article 5 in relation to non international armed conflicts, citing cases concerned with internal conflicts in Northern Ireland and Turkey as examples.
In order to answer that point, counsel for the Secretary of State argue that a distinction should be drawn between purely internal conflicts, and those which are extraterritorial, in the sense that they involve armed forces from outside the host state.
They point out that, although there have been a number of military missions involving contracting states participating in non international armed conflicts outside their own territory since their ratification of the Convention, no state has ever made a derogation in respect of these.
But that is not in itself enough to meet the requirements of article 31(3)(b) of the Vienna Convention (assuming, for the sake of the argument, the validity of the distinction drawn between extraterritorial and other non international armed conflicts: a distinction which is controversial and has not as yet been drawn by the European court in its case law).
In the first place, it has to be borne in mind that until the case of Al Skeini it might not have occurred to contracting states participating in military operations overseas that they remained bound by their obligations under the Convention.
More importantly, however, a practice of non derogation is significant only if (1) it has been the practice of contracting states to detain persons during non international armed conflicts in circumstances not falling within sub paragraphs (a) to (f) of article 5(1) of the Convention, and (2) if so, that practice has been sufficiently accepted by other contracting states to justify imputing to all of them an intention to modify the obligations undertaken under article 5.
It appears to me that neither of these conditions is met.
The practice of other contracting states in relation to non international armed conflicts does not establish a common intention to modify the obligations arising under article 5 in the context of extraterritorial non international armed conflicts.
On the contrary, statements by a number of contracting states confirm, without qualification, the continuing relevance of international human rights law and, in particular, of the Convention.
The German government, for example, made explicit in 2007, in a statement to the Bundestag, its view that its obligations under the Convention continued to apply in relation to persons detained by its forces operating in Afghanistan as part of the International Security Assistance Force (ISAF) (ICRC, Customary IHL Database: Practice Relating to Rule 99 Deprivation of Liberty (www.icrc.org/customary ihl/eng/docs/v2_rul_rule99)).
Switzerland has questioned the United Kingdoms claim that the provisions of the Convention need to be qualified, in the context of military operations overseas, in order to take SCRs into account, and recommended that the United Kingdom should consider that any person detained by armed forces is under the jurisdiction of that state, which should respect its obligations concerning the human rights of such individuals (UN Human Rights Council, Report of the Working Group on UPR: United Kingdom, UN Doc A/HRC/8/25 (2008), para 33).
The Netherlands has expressed the view that international human rights law, in the absence of derogation, continues to apply without restriction during armed conflicts, and that detainees therefore cannot be held indefinitely or without due process (Hill Cawthorne, op cit, p 178).
The argument now put forward by the Ministry of Defence is also a recent departure from the previous practice of the United Kingdom.
In Al Jedda, for example, the government did not suggest that the nature of the situation in Iraq at the material time, as an extraterritorial non international armed conflict, affected the application of article 5.
Its view of the law at the time of its operations during the non international armed conflict in Afghanistan is discussed below (see paras 336 337).
In addressing the problem which arose in Hassan, the court also based its reasoning on the requirement under article 31(3)(c) of the Vienna Convention to take account of other relevant rules of international law applicable in the relations between the parties when interpreting the European Convention.
The relevant rules in Hassan were the provisions in the Third and Fourth Geneva Conventions conferring powers of internment on specified grounds during an international armed conflict, subject to specified procedural safeguards.
In Mr Al Waheeds case the Secretary of State argues, by analogy, that the European Convention must also be interpreted compatibly with the exercise of the powers of internment conferred by SCR 1546.
As explained in para 285 above, the European court construed SCR 1546 in Al Jedda on the basis that there is a presumption that the Security Council does not intend to impose any obligation on member states to breach fundamental principles of human rights; that, in the event of ambiguity, the court must choose the interpretation which is most in harmony with the requirements of the European Convention; and that it is to be expected that clear and explicit language will be used if the Security Council intends states to take measures which would conflict with their obligations under international human rights law.
On that basis, the court interpreted the SCR as meaning that the Security Council intended states within the Multi National Force to contribute towards the maintenance of security in Iraq while complying fully with their obligations under the Convention.
Article 5(1)(a) to (f) therefore applied, so as to limit the circumstances in which SCR 1546 was to be understood as authorising detention.
As explained in paras 288 289 above, the court has followed the same approach to the interpretation of SCRs in more recent cases.
On that basis, there is no need to modify article 5 in order for it to be interpreted harmoniously with SCR 1546.
Accordingly, whereas in Hassan the court identified an inconsistency between the terms of article 5 of the Convention and the provisions of international humanitarian law regulating detention in an international armed conflict, and resolved that inconsistency by concluding that a substantial body of state practice, together with the need to reconcile the Third and Fourth Geneva Conventions with the European Convention, justified reading article 5 so as to accommodate the relevant provisions of those Conventions, there is no such inconsistency between article 5 and SCR 1546; and there exists, in any event, no comparable body of state practice.
It follows that it was necessary for Mr Al Waheeds detention to fall within one or more of the categories listed in sub paragraphs (a) to (f) of article 5(1), in order for it to be compatible with article 5 of the Convention.
The case of Mr Mohammed
Mr Mohammed is an Afghan national who was detained by HM Forces in Afghanistan for about 15 weeks during 2010.
It is assumed, for the purposes of this appeal, that he was captured by HM Forces on 7 April 2010 during a military operation which targeted a senior Taliban commander and the vehicle in which he was travelling.
After an exchange of fire, during which two insurgents were killed, Mr Mohammed and another insurgent were captured.
They were extracted after an operation lasting ten hours, during which British troops were under heavy and sustained fire.
Three British soldiers were wounded.
Following his capture, Mr Mohammed was taken to Camp Bastion in Helmand Province.
HM Forces received information that he was a senior Taliban commander involved in the large scale production of IEDs.
He was said to have commanded a Taliban training camp.
On 8 April, an application for the extension of his detention beyond 96 hours for intelligence purposes was submitted to UK Permanent Joint Headquarters (PJHQ), in accordance with BRITFOR Standard Operating Instructions J3 9 (J3 9), discussed at paras 339 340 below.
It stated that there was no information to confirm Mr Mohammeds identity, and that information suggested that he might be a senior Taliban commander with an extensive knowledge of the structure of the Taliban and of IED networks.
On 9 April, an application was submitted to the Ministry of Defence to extend the 96 hour limit in order to gain intelligence from Mr Mohammed.
On 12 April, a minister authorised Mr Mohammeds continued detention to gain further valuable intelligence.
The Afghan authorities were not asked whether they wanted Mr Mohammed transferred to them for investigation and possible prosecution.
The view had been formed by this time that it would be a weak case to pass to the Afghan authorities for prosecution, given the available evidence.
On 4 May it was decided that there was no more intelligence to be obtained from Mr Mohammed.
The Afghan authorities were then asked whether they wished to have Mr Mohammed transferred into their custody for criminal investigation and possible prosecution.
They responded that they did, as soon as space became available.
As they had insufficient capacity at the Lashkar Gah detention facility to which he was to be transferred, he continued to be held by UK armed forces until capacity became available.
He was transferred to the Afghan authorities on 25 July 2010.
He was subsequently prosecuted and convicted by the Afghan courts of offences relating to the insurgency.
He was sentenced to ten years imprisonment.
Mr Mohammed complains that his detention, beyond the initial period of 96 hours, violated his rights under articles 3, 5, 6 and 8 of the Convention, as given effect by the Human Rights Act 1998.
A number of preliminary issues were identified and decided by Leggatt J.
In particular, he found that for the first 96 hours after his capture, Mr Mohammed was detained for the purpose of bringing him before the competent legal authorities on reasonable suspicion of having committed an offence.
His detention during that period was authorised, in the judges view, by SCR 1890 and the Memorandum of Understanding concluded between the British and Afghan Governments, as explained at paras 322 326 and 329 334 below.
During the period of 24 days between 11 April and 4 May 2010, on the other hand, Mr Mohammed was detained by HM Forces for the sole purpose of obtaining intelligence.
During the 82 days between 5 May and 25 July 2010, he was detained for logistical reasons, as they were described, because of the shortage of space in Afghan detention facilities.
The judge concluded that Mr Mohammeds detention after the initial period of 96 hours was contrary to article 5 of the Convention, the effect of which was not, in his view, displaced or qualified by SCRs or international humanitarian law.
He also held that Mr Mohammeds detention after an initial period of a few days (as explained at para 329 below) was unlawful under Afghan law.
On appeal, those conclusions were upheld by the Court of Appeal.
The Secretary of State has appealed to this court on a number of grounds.
Those which are being considered at this stage of the proceedings are: if so, whether article 5(1) of the Convention should be read so as to (1) whether HM armed forces had the legal power to detain Mr Mohammed in excess of 96 hours pursuant to the relevant SCRs or international humanitarian law; (2) accommodate detention pursuant to such a power; (3) whether Mr Mohammeds detention was in any event compatible with article 5(1) on the basis that it fell within para (c) (detention for the purpose of bringing a suspect before a competent judicial authority) or (f) (detention pending extradition); and (4) whether the circumstances of his detention were compatible with article 5(4) (if necessary, as modified).
So far as (1) is concerned, the contention based on international humanitarian law has already been rejected at paras 274 277 above.
It is also unnecessary to consider ground (4), as to which I agree with Lord Sumption.
That leaves the contention under ground (1) based on the SCRs, any issue then arising under ground (2), and the issues arising under ground (3).
The interpretation of SCR 1890
It is common ground that, at the time when Mr Mohammed was detained, HM Forces were engaged in a non international armed conflict.
They were operating as part of ISAF, whose establishment had initially been authorised by SCR 1386 (2001), following the establishment of the Afghan Interim Authority by the Bonn Agreement of 5 December 2001 and its agreement to the deployment of such a force.
SCR 1386 authorised the establishment of ISAF to assist the Afghan Interim Authority in the maintenance of security in Kabul and its surrounding areas, and authorised the member states participating in ISAF to take all necessary measures to fulfil its mandate.
The mandate was subsequently extended to the whole of Afghanistan.
At the time of Mr Mohammeds capture, the SCR in force was SCR 1890 (2009).
In its preamble, it reaffirmed the Security Councils strong commitment to the sovereignty . of Afghanistan, recognised that the responsibility for providing security and law and order throughout the country resides with the Afghan authorities, and stressed the role of [ISAF] in assisting the Afghan Government to improve the security situation.
It also called for compliance with international humanitarian and human rights law.
It again authorised the member states participating in ISAF to take all necessary measures to fulfil its mandate.
Whereas the letters annexed to SCR 1546 referred explicitly to internment for imperative reasons of security, SCR 1890 said nothing about internment or detention.
It was, however, apparent at the time when SCR 1890 was adopted that the accomplishment of ISAFs mission would involve engaging in combat operations against armed and organised insurgents, in the course of which it was inevitable that insurgents and suspected insurgents would be taken prisoner.
In that context, construing the SCR in accordance with the principle of interpretation in good faith, ut res magis valeat quam pereat, the words all necessary measures should be understood as encompassing the detention of insurgents.
At the same time, since SCR 1890 said nothing about the procedures to be followed, but conferred a mandate on a basis which recognised the sovereignty of Afghanistan and envisaged ISAFs role as being to assist the Afghan authorities in the maintenance of security, it must have been intended that detention would be in accordance with procedures agreed with the Afghan Government.
As explained at paras 329 334 below, a Memorandum of Understanding covering these matters was indeed agreed with the Afghan Government.
It is argued on behalf of the Ministry of Defence, as in the case of Mr Al Waheed, that in the light of the Hassan judgment, article 5(1) of the Convention is modified by SCR 1890, or in any event by customary international humanitarian law, so as to permit detention falling outside the scope of sub paras (a) to (f).
I reject that argument, in agreement with the judge and the Court of Appeal, for the reasons explained at paras 276 277 above in relation to customary international law, and at paras 296 300 and 307 315 in relation to Hassan.
Construed on that basis, SCR 1890 can be understood as having conferred on the states participating in ISAF authority under international law to take prisoner persons who posed an imminent threat to ISAF forces or the civilian population, and to detain them for the purpose of transferring them to the Afghan authorities, so that those authorities could then undertake criminal investigations and proceedings.
It is accepted, for reasons explained below at para 331, that a period of 96 hours could reasonably be required for that purpose, and it is apparent that there could be circumstances where a longer period was necessary (eg where a detainee was medically unfit to be transferred, or where the Afghan authorities did not have accommodation immediately available).
So construed, SCR 1890 is consistent with the principles established by the case law of the European court and summarised in para 285 above.
As explained there, the European court considers there to be a presumption that, unless it uses clear and unambiguous language to the contrary, the Security Council does not intend states to take measures which would conflict with their obligations under international human rights law.
Interpreting SCR 1890 on that basis, there is nothing which demonstrates, in clear and unambiguous terms, an intention to require or authorise detention contrary to international human rights law.
That construction of SCR 1890 is also consistent with the traditional approach to non international armed conflicts, including the approach of the Ministry of Defence, under which the treatment of insurgents is regulated primarily by the law, including the criminal law, of the state where the conflict occurs: see paras 253 255 above.
Behrami v France; Saramati v France, Germany and Norway
I am not persuaded that the admissibility decision in Behrami v France; Saramati v France, Germany and Norway (2007) 45 EHRR SE10 supports a different conclusion.
The relevant part of that decision concerned the criminal justice system operating in Kosovo at the time when the territory was governed by the United Nations Interim Administration in Kosovo (UNMIK), established by SCR 1244.
UNMIK was assisted by the UN security presence in Kosovo, Kosovo Force (KFOR), also established by SCR 1244.
Para 7 of the SCR authorised member states to establish KFOR with all necessary means to fulfil its responsibilities under para 9.
Its responsibilities under para 9 included supporting, as appropriate . the work of [UNMIK].
UNMIKs responsibilities, as set out in para 11, included maintaining civil law and order, including . through the deployment of international police personnel.
The UNMIK police force was commanded by the commander of KFOR (COMKFOR).
Mr Saramati was arrested by UNMIK police officers on suspicion of attempted murder, by order of COMKFOR, and detained on the orders of COMKFOR until his trial.
The admissibility decision concerned the question whether Mr Saramatis detention was the responsibility of the contracting states which had contributed the individuals holding the position of COMKFOR during the relevant period, or was attributable to the UN.
In the course of considering that question, the European court stated that KFORs security mandate included issuing detention orders.
It stated (para 124) that it based that finding on two considerations.
The first was the terms of the agreement under which the government of the Federal Republic of Yugoslavia (FRY) withdrew its own forces from Kosovo in favour of UNMIK and KFOR, which provided that KFOR would operate with the authority to take all necessary action to establish and maintain a secure environment for all citizens of Kosovo.
As the court stated, UNMIK and KFOR exercised the public powers normally exercised by the government of the FRY (para 70).
The second consideration was para 9 of SCR 1244, as well as para 4 of Annex 2, which repeated the relevant wording of the agreement with FRY, as confirmed by later documents describing the procedures governing detention authorised by COMKFOR.
This was a very different context from that of SCR 1890: as has been explained, that SCR was premised on a recognition of the sovereignty of Afghanistan, and of the Afghan authorities responsibility for security.
The Memorandum of Understanding
SCR 1890 did not itself specify the procedures required to comply with the requirement in article 5(1) of the Convention that detention should be in accordance with a procedure prescribed by law.
It was however supplemented by agreements between the Afghan Government and the states participating in ISAF.
The relevant agreement between the UK and Afghanistan at the time of Mr Mohammeds detention was a Memorandum of Understanding dated 23 April 2006.
Para 3 provided: 3.1 The UK AF will only arrest and detain personnel where permitted under ISAF Rules of Engagement.
All detainees will be treated by UK AF in accordance with applicable provisions of international human rights law.
Detainees will be transferred to the authorities of Afghanistan at the earliest opportunity where suitable facilities exist.
Where such facilities are not in existence, the detainee will either be released or transferred to an ISAF approved holding facility. 3.2 The Afghan authorities will accept the transfer of persons arrested and detained by the UK AF for investigation and possible criminal proceedings .
In relation to para 3.1, applicable provisions of international human rights law were recognised at the time to include the European Convention on Human Rights: see para 332 below.
The Memorandum of Understanding made no provision for HM Forces to detain persons for intelligence purposes rather than transferring them to Afghan custody, but it provided for British personnel to have full access to question persons who had been transferred to Afghan custody.
In relation to para 3.1 of the Memorandum of Understanding, detention was permitted under ISAF rules of engagement, at the relevant time, in the circumstances set out in ISAFs Standard Operating Procedures 362 (the SOP).
Para 1 of that document stated that commanders at all levels are to ensure that detention operations are conducted in accordance with applicable international law and human rights standards.
Para 4 stated that the only grounds upon which a person could be detained under current ISAF Rules of Engagement were if the detention was necessary for ISAF force protection, for the self defence of ISAF or its personnel, or for accomplishment of the ISAF mission.
Para 5 stated that the current policy for ISAF was that detention was permitted for a maximum of 96 hours, after which time an individual was either to be released or handed into the custody of the Afghan National Security Forces or the Government of Afghanistan.
According to internal United Kingdom correspondence, 96 hours reflected the time it might take to transport someone from a battlefield to an Afghan detention facility.
Para 6 of the SOP stated that, as soon as practicable after a detention had taken place, the decision to continue to detain must be considered by an appropriate authority.
Certain senior ranks were specified as being permitted to act as an ISAF Detention Authority.
That authority must be able to support the grounds of detention by a reasonable belief in facts.
Para 7 permitted a Detention Authority to authorise detention for up to 96 hours.
Authority for detention beyond that period could only be granted by the commanding officer of ISAF (COMISAF) or his delegated subordinate.
In that regard, para 8 stated: A detainee may be held for more than 96 hours where it is deemed necessary in order to effect his release or transfer in safe circumstances.
This exception is not authority for longer term detentions but is intended to meet exigencies such as that caused by local logistical conditions eg difficulties involving poor communications, transport or weather conditions or where the detainee is held in ISAF medical facilities and it would be medically imprudent to move him.
Where this exigency applies, COMISAF must be notified.
Where, in the opinion of COMISAF (or his delegated subordinate), continuation of detention is warranted, COMISAF (or his delegated subordinate) may authorize continued detention. (Emphasis supplied) A footnote stated that the standards outlined within this SOP are to be considered the minimum necessary to meet international norms and are to be applied.
In relation to international norms, the document identified two sources of international human rights law: the ICCPR and the European Convention on Human Rights.
It was therefore envisaged under the Memorandum of Understanding, read with the SOP, that persons would only be detained by HM Forces on specified grounds, would be screened as soon as practicable, and would be transferred to the Afghan authorities at the earliest opportunity, for investigation and possible criminal proceedings.
Detention by HM Forces would normally be for a maximum of 96 hours, although that period could be extended by a decision taken at a senior level where necessary in order to effect the detainees release or transfer in safety.
The detention which this agreement permitted fell within the authorisation conferred by SCR 1890.
It reflected the traditional treatment of insurgents in a non international armed conflict as having committed offences under domestic criminal law, and ISAFs mandate to assist the sovereign Afghan authorities.
It was compatible with article 5(1)(c) of the Convention: that is to say, 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.
A procedure was prescribed which protected detainees against arbitrary detention.
The new United Kingdom policy: detention beyond 96 hours in order to obtain
intelligence
In the event, powers of detention which were limited to holding persons for up to 96 hours, before transferring them to the Afghan criminal system if they might have committed a criminal act, were found by the states principally involved in detaining insurgents, including the United Kingdom, to be unsatisfactory from a military perspective.
Particularly after they undertook operations in Helmand Province, HM Forces wished to be able to hold detainees for longer periods for the purpose of questioning them in order to obtain intelligence, for example about the whereabouts of IEDs.
Ministers were advised that legal advice has confirmed that there is currently no basis upon which we can legitimately intern such individuals (briefing paper for the Armed Forces Minister on Detention Policy in Afghanistan, dated 1 March 2006).
They were told that the considered advice was that the European Convention would apply unless those detained were immediately handed over to the Afghan authorities, and that the possibility of amending the 96 hour policy to permit longer periods of detention . would not be lawful because the UNSCR does not authorise extended detention (ibid).
The advice concluded that The reality of the legal basis for our presence in Afghanistan is such that available powers may fall short of that which military commanders on the ground might wish (ibid).
It was felt that the UK was unlikely to succeed in having the SCR revised to provide some kind of specific authorisation to detain, and that, so far as ISAF was concerned, even with the added authority of a UNSCR, the reservations of some of our allies in becoming involved or associated with detention or internment are likely to remain (internal correspondence concerning UNSCR renewal in Afghanistan, dated 25 June 2007).
A further memorandum stated: There is no power for any ISAF forces to intern individuals in Afghanistan.
This would require an express UNSCR authorisation and preferably a power in Afghan law as well, neither of which currently exist.
Therefore, if UK forces were to intern people, we would probably be acting unlawfully. (Ministry of Defence briefing note, Detention by UK Forces on Overseas Operations Iraq and Afghanistan, sent on 12 September 2007)
A later briefing for the Secretary of State explained that, although in Iraq a significant proportion of operations had been triggered by intelligence from detainees: In Afghanistan, however, we cannot replicate Iraq arrangements because UK forces have no power to intern under the extant UNSCR (only a power to temporarily detain is inferred). (Ministerial Brief on Afghanistan: Intelligence Exploitation Capability, dated June 2008: NATO was in effective command of ISAF) Later correspondence dated 10, 21 and 24 August 2010 considered the possibility that the ISAF rules of detention might be altered, but concluded that any approach to NATO would be unsuccessful, and that the United Kingdom would have to adopt its own policy if it wished to detain individuals for more than 96 hours.
The policy then adopted, as announced to Parliament on 9 November 2009, was that while HM Forces would adhere to NATO guidelines (ie, the SOP) in the majority of cases, Ministers in the United Kingdom would in some cases authorise detention for more than 96 hours in order to obtain intelligence: [I]n exceptional circumstances, detaining individuals beyond 96 hours can yield vital intelligence that would help protect our forces and the local population potentially saving lives, particularly when detainees are suspected of holding information on the placement of improvised explosive devices.
Given the ongoing threat faced by our forces and the local Afghan population, this information is critical, and in some cases 96 hours will not be long enough to gain that information from the detainee.
Indeed, many insurgents are aware of the 96 hours policy and simply say nothing for that entire period.
In these circumstances, the Government have concluded that Ministers should be able to authorise detention beyond 96 hours, in British detention facilities to which the ICRC has access.
Each case will be thoroughly scrutinised against the relevant legal and policy considerations; we will do this only where it is legal to do so and when it is necessary to support the operation and protect our troops.
Following a Ministerial decision to authorise extended detention, each case will be thoroughly and regularly monitored by in theatre military commanders and civilian advisers.
Individuals will not remain in UK detention if there is no further intelligence to be gained.
We will then either release the detainee or transfer the detainee to the Afghan authorities. (Hansard (HL (Written Statements), 9 November 2009, cols WS 31 32)
The policy announced to Parliament was reflected in J3 9.
The version of J3 9 which was in force during most of Mr Mohammeds detention was Amendment 2.
Part 1 dealt with the initial stages of detention.
It stated in para 9 that a person could be detained by British forces only if he was a threat to force protection or mission accomplishment, or if it was necessary for reasons of self defence.
Part II dealt with the processing of detainees, and required the detaining authority to decide within 48 hours whether to release, transfer or further detain the detainee.
To authorise continued detention, the Detention Authority had to be satisfied that it was necessary for self defence or that the detainee had done something that made him a threat to force protection or mission accomplishment (para 19).
Para 25 stated that the Detention Authority did not have the authority to hold a detainee for longer than 96 hours from the point of detention, and that authority for any further detention must be sought from Ministers through the Detention Review Committee (DRC).
Para 27 stated that the criteria used to assist Ministers in deciding whether or not to approve applications for extension of detention were a.
Will the extension of this individual provide significant new intelligence vital for force protection? b.
Will the extension of this individual provide significant new information on the nature of the insurgency? c.
How long a period of extension has been requested [redacted] Para 29 set out the procedure to be followed following an extension.
This involved fortnightly reviews, internally and at Ministerial level.
The only other nations whose forces were detaining significant numbers of insurgents by that stage of ISAF operations were the USA and Canada (the Netherlands having been the fourth nation in that category at an earlier stage).
They also departed from the ISAF policy limiting detention to a maximum of 96 hours, but on a different basis from the United Kingdom.
The USA authorised its conduct by domestic legislation.
Canada entered into an agreement with the Afghan Government providing for it to treat detainees as if they were prisoners of war, and thus to apply the Third Geneva Convention.
An internal assessment dated 18 September 2011 described the United Kingdoms current detention regime in Afghanistan as being based upon United Kingdom national sovereignty.
Afghanistan was however a sovereign state at the relevant time; and it was inconsistent with Afghan sovereignty for the United Kingdom to carry out detention in Afghanistan without the permission of the government of that country.
The judge found that the United Kingdom policy was not agreed with the Afghan Government, and that there was no evidence that any attempt was made to amend the Memorandum of Understanding between the British and Afghan Governments to reflect the new policy.
The legal basis of detention for intelligence purposes
The judge concluded that the United Kingdom policy announced in November 2009 had no legal basis under Afghan, international or English law.
In relation to Afghan law, he considered that, since the United Kingdom Government was operating on the territory of an independent sovereign state at the invitation of, or at least with the consent of, that state, it was arguable that it was necessary under article 5(1) for the detention to comply with the law of that state.
On the basis that there had been no argument on the point, however, he proceeded on the assumption that it was sufficient that there was a basis for the detention under the SCR (para 301).
The Court of Appeal considered it unnecessary to decide the point (para 126).
The point has however been pursued before this court on behalf of the first interveners, who had also raised it in their skeleton argument before the judge.
As they point out, the European court has said many times that, where the lawfulness of detention is in issue, including the question whether a procedure prescribed by law has been followed, the Convention refers essentially to national law and lays down an obligation to conform to the substantive and procedural rules of national law.
The same approach has been followed by the UN Human Rights Committee in relation to article 9 of the ICCPR.
They also point out that that approach has been adopted, specifically in relation to detention in a non international armed conflict, in the Report of the UN Working Group on Arbitrary Detention, Basic Principles and Guidelines on remedies and procedures on the right of anyone deprived of their liberty to bring proceedings before a court, UN Doc WGAD/CRP.1/2015 (2015), Guideline 17, para 115(a)(ii) (With regard to detention in relation to a non international armed conflict: (a) . the detaining State must show that: . (ii) administrative detention is on the basis of grounds and procedures prescribed by law of the State in which the detention occurs and consistent with international law).
I am not persuaded that that is the correct approach to adopt to the application of the Convention in the present context.
Guidance is provided by the judgment in Ocalan v Turkey (2005) 41 EHRR 45, which concerned the arrest of a Turkish citizen in Kenya by Turkish officials who then transferred him to Turkey.
The court considered it irrelevant to examine whether the conduct of the officials had been unlawful under Kenyan law: what mattered was whether their conduct had been authorised by the Kenyan Government, so as to provide a basis in international law for an extra territorial arrest, and had a legal basis under Turkish law.
The court stated: Irrespective of whether the arrest amounts to a violation of the law of the state in which the fugitive has taken refuge a question which only falls to be examined by the court if the host state is a party to the Convention the court requires proof in the form of concordant inferences that the authorities of the state to which the applicant has been transferred have acted extra territorially in a manner that is inconsistent with the sovereignty of the host state and therefore contrary to international law.
Only then will the burden of proving that the sovereignty of the host state and international law have been complied with shift to the respondent Government. (para 60; emphasis supplied)
So far as international law and English law are concerned, I agree with the judges conclusion, which is consistent with the legal advice given to the British Government at the time.
The practice of detaining persons for more than 96 hours for intelligence purposes, rather than transferring them to the Afghan authorities for the purpose of criminal investigations and proceedings, was not authorised by SCR 1890, interpreted as explained in para 325 above.
The grounds for the persons being detained by HM Forces, rather than being transferred to the Afghan authorities for criminal investigation and prosecution, did not fall within any of those listed in sub paras (a) to (f) of article 5(1) of the Convention.
Indeed, even leaving article 5(1) out of account, the phrase necessary for imperative reasons of security in the SCR did not authorise detention for the purpose of obtaining intelligence from the detainee.
In addition, the policy did not respect Afghan sovereignty, having been introduced without the agreement of the Afghan Government, and without any amendment of the Memorandum of Understanding.
Since the detention during that period was not authorised by SCR 1890, it was, on that basis also, not lawful for the purposes of article 5(1).
Detention pending the availability of space in Afghan facilities
As explained at para 332 above, the Memorandum of Understanding, read with the SOP, permitted detention to be extended beyond 96 hours where necessary to enable the detainee to be transferred in safe circumstances.
Provision for logistical extensions was also made by para 24 of J3 9: On some occasions, practical, logistic reasons will entail a requirement to retain a UK detainee for longer than the 96 hours.
Such occasions would normally involve the short notice non availability of pre planned transport assets or NDS [Afghan National Security Directorate] facilities to receive transferred detainees reaching full capacity.
These occasions may lead to a temporary delay until the physical means to transfer or release correctly can be reinstated.
Where this is the case, authority to extend the detention for logistic reasons is to be sought from both HQ ISAF and from Ministers in the UK through the Detention Authority.
In the event, HM Forces held people for substantial periods when the Afghan authorities wished to accept their transfer but the detention facilities were full, or when the only accommodation available was in facilities which were considered unsuitable.
This situation arose as a result of three factors.
One was the fact that Afghanistan remained a state under reconstruction, with limited detention facilities.
The second was the large number of insurgents captured by HM Forces, particularly during operations in Helmand.
The third was the fact that the treatment of detainees in some Afghan detention facilities did not meet Convention standards.
It was indeed held by the Divisional Court, during the period when Mr Mohammed was detained pending the availability of space in the Afghan detention facility at Lashkar Gah, that it would be unlawful for HM Forces to transfer detainees to the Afghan detention facility in Kabul: R (Evans) v Secretary of State for Defence [2010] EWHC 1445 (Admin).
The judge accepted, in relation to Mr Mohammed, that his detention in these circumstances was for the purpose of bringing him before the competent legal authority on reasonable suspicion of having committed an offence.
The implication is that such detention fell in principle within the scope of article 5(1)(c) of the Convention.
That conclusion has not been challenged: as the Court of Appeal noted, the question has not been explored at any stage of the proceedings.
I am inclined to agree with the judge, and to regard such detention as in principle authorised by SCR 1890, but in the absence of any argument on the point it would be inappropriate to consider the issue in detail.
There are, however, other aspects of article 5 which are also relevant to detention in these circumstances: notably, the requirement in article 5(1) that detention be in accordance with a procedure prescribed by law, and the procedural requirements of article 5(3) and (4).
It will be necessary to return to these.
Application to the facts of Mr Mohammeds case
On the facts of the case, Mr Mohammeds detention by HM Forces between 11 April 2010 (ie after 96 hours) and 4 May 2010 (when he ceased to be held for intelligence purposes) was not in my view compatible with article 5(1), since it was not for any of the purposes listed in sub paras (a) to (f).
In particular, the reason for his detention at that time was not to bring him as a suspect before a competent judicial authority, within the meaning of article 5(1)(c).
Nor was he, either then or later, detained pending extradition within the meaning of article 5(1)(f), for the reasons explained by Lord Sumption at para 79.
Even if SCR 1890 were to be construed as going beyond article 5(1)(a) to (f), and as authorising detention when necessary for imperative reasons of security, I would not regard it as authorising Mr Mohammeds detention during this period.
Although I accept that detention for imperative reasons for security would not become unauthorised by reason of a concurrent purpose of obtaining intelligence, it appears to me to be clear from the facts found by the judge that the obtaining of intelligence was the only reason why HM Forces detained Mr Mohammed during the period in question, rather than enquiring of the Afghan authorities whether they wished to have him transferred to their custody.
That was not a reason for detention falling within SCR 1890.
Nor was Mr Mohammeds detention during this period in accordance with the commitment in SCR 1890 to respect Afghan sovereignty, since it was based on a policy to which the Afghan Government had not agreed.
I respectfully disagree with Lord Sumptions conclusion that there remains a question whether Mr Mohammeds detention between 11 April and 4 May 2010 was for imperative reasons of security, which should be determined after trial.
The grounds for his initial detention clearly fell within the scope of that phrase, but it seems to me to be clear that this was not the reason why he continued to be detained by HM Forces after 11 April.
As the judge observed at para 333 of his judgment, not only was the obtaining of intelligence the sole purpose alleged in the Secretary of States defence, but there was no other criterion set out in the UK policy which could have been used to approve an extension of Mr Mohammeds detention at that time (the availability of space in Afghan detention facilities not having been investigated).
Furthermore, as the Court of Appeal noted at para 250 of its judgment, according to the evidence given on behalf of the Ministry of Defence, Mr Mohammeds continued detention beyond 96 hours was for the purposes of intelligence exploitation and was not assessed to be necessary for force protection purposes.
In relation to the period of detention between 5 May and 25 July 2010, the judge found that, although the circumstances of the detention fell within the scope of article 5(1)(c) of the Convention, there was a violation of the requirement in article 5(1) that the detention should be in accordance with a procedure prescribed by law.
In that regard, he held (para 309) that detention for lengthy periods (82 days in the case of Mr Mohammed, and between 231 and 290 days in the cases of the interveners) was not authorised by para 24 of J3 9.
Alternatively, he held that if that para 24 did authorise detention for such protracted periods, then it failed to meet the test of legal certainty implicit in the requirement that detention be in accordance with a procedure prescribed by law, since it failed to provide standards which were clearly defined and whose application was reasonably foreseeable.
I recognise the force of that reasoning.
I also recognise the importance of legal certainty, especially in this context.
The European court referred in Hassan to the fundamental purpose of article 5(1), which is to protect the individual from arbitrariness (para 105).
In Medvedyev v France, the court stated: . 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 and that the law itself be foreseeable in its application, so that it meets the standard of lawfulness set by the Convention, a standard which requires that all law be sufficiently precise to avoid all risk of arbitrariness . (para 80)
Nevertheless, it is also necessary to recognise the practical exigencies of the situation which confronted HM Forces at the time, and to endeavour to apply the Convention in a manner which is feasible in the real world.
The terms of para 24 of J3 9 suggest that it was originally envisaged as a basis for accommodating occasional logistical problems, normally arising at short notice and leading to a temporary delay.
It did however provide a procedure for extending detention which could be used when more serious and long term problems emerged in relation to the capacity of the Afghan authorities to deal satisfactorily with large numbers of insurgents and suspected insurgents, in the context of a state undergoing reconstruction.
In principle, the provision by a member of ISAF of detention facilities on behalf of the Afghan authorities, when they were unable to cope, was within its mandate under SCR 1890.
In the nature of things, the duration of such detention in individual cases could not be predicted, particularly when it depended on contingencies, such as the willingness of the Afghan authorities to treat detainees humanely, and the outcome of legal proceedings in the English courts, which lay wholly outside the control of HM Forces and the Ministry of Defence.
It is also relevant to note that para 24 of J3 9 required the detention to be authorised by HQ ISAF as well as by UK Ministers.
It was therefore consistent with para 8 of the SOP, and hence with the Memorandum of Understanding.
In these circumstances, it appears to me that the basic requirement that there should be a procedure prescribed by law was satisfied by J3 9.
I agree with Lord Mance that, in considering Mr Mohammeds claim for damages for wrongful detention, it is highly material to consider whether, but for any failures on the part of the United Kingdom authorities, he would have been any better off in other words, would have spent less time in custody.
That is an important question both in relation to the period during which Mr Mohammed was held by HM Forces for the purpose of obtaining intelligence, and in relation to the period during which he was held because of the unavailability of suitable accommodation in an Afghan detention facility.
Further, as Lord Mance observes, if the answer is that he would have been in the custody of the Afghan authorities, it will be material to consider whether this would have involved him in any form of detriment.
Finally, in relation to article 5(3) and (4) of the Convention, I agree with Lord Sumptions conclusions, and with the core of his reasoning at paras 94 109.
Whether there was a breach of article 5(3) should be considered after trial.
It is however apparent from the material already before the court that the arrangements for Mr Mohammeds detention were not compatible with article 5(4), since he did not have any effective means of challenging the lawfulness of his detention.
Conclusions
For these reasons, I would have allowed Mr Al Waheeds appeal and declared that it was legally necessary for his detention to fall within one or more of sub paragraphs (a) to (f) of article 5(1).
In agreement with the judge and the Court of Appeal, I would have dismissed the Secretary of States appeal in the case of Mr Mohammed, so far as based on the grounds considered at this stage.
| UK-Abs | This judgment is one of three being given simultaneously on the liabilities of the United Kingdom government for allegedly tortious acts done by HM Forces in the course of operations overseas or by foreign governments in which UK officials are alleged to have been complicit.
This particular judgment deals with allegations that persons in Iraq and Afghanistan were unlawfully detained in breach of article 5 of the European Convention on Human Rights (ECHR) by HM forces engaged in peacekeeping operations in those countries under mandates from the United Nations Security Council.
Serdar Mohammed (SM) was captured by British forces in Afghanistan on 7 April 2010.
It is the Governments case that his capture took place in the course of a planned operation involving a ten hour firefight, from which SM was seen fleeing, discarding a rocket propelled grenade launcher and ammunition as he went.
Intelligence is said to have identified him as a senior Taliban commander.
SM was detained in British facilities until 25 July 2010, when he was transferred to the Afghan authorities.
His detention can be divided into three periods: (i) the first 96 hours, (ii) 11 April to 4 May 2010, when he was being interrogated, and (iii) 4 May to 25 July, when he was held pending transfer to the Afghan authorities.
Abd Ali Hameed Al Waheed was captured by British forces in Basrah, Iraq on 11 February 2007 at his wifes home.
The Government contends that weaponry material for explosives were found on the premises.
He was held at a British army detention centre for six and a half weeks, and was then released after an internal review had concluded that a successful prosecution would be unlikely.
The relationship between article 5 and international law is one of three preliminary issues in Serdar Mohammed.
The High Court held that British forces had no power to detain prisoners for any longer than was required to transfer them to the Afghan authorities, and then for no more than 96 hours.
Accordingly, it held that the detention of SM breached article 5(1) and 5(4) of the ECHR.
The Court of Appeal reached the same conclusion, albeit for different reasons.
In Al Waheed, it was common ground before the High Court that, so far as the claim was based on a breach of article 5(1) of the ECHR, the judge and the Court of Appeal would be bound to dismiss it by virtue of the decision of the House of Lords in Al Jedda.
The judge granted a certificate for a leapfrog appeal to the Supreme Court.
Lord Toulson sat on all aspects of the appeals other than those involving the scope and procedural requirements of articles 5(1)(c) and/or (f), 5(3) and 5(4) of the Convention in relation to the detention of Serdar Mohammed, in relation to which (following Lord Toulsons retirement) Lord Hodge sat on 26 October 2016.
By a majority of 7 to 2, the Supreme Court dismisses Mr Al Waheeds appeal, and allows the Governments appeal in Serdar Mohammed in part.
The majority holds that British forces had power to take and detain prisoners for periods exceeding 96 hours if this was necessary for imperative reasons of security, but that its procedures for doing so did not comply with ECHR article 5(4) because they did not afford prisoners an effective right to challenge their detention.
Lord Sumption (with whom Lady Hale agrees) gives the lead judgment.
Lord Wilson gives a concurring judgment.
Lord Mance adds a mainly concurring judgment, as does Lord Hughes (with whom Lord Neuberger agrees).
On the issues with which he was involved, Lord Toulson agrees with Lord Mance, Lord Wilson and Lord Sumption.
So far as he was involved, Lord Hodge agrees with Lord Sumption.
Lord Reed (with whom Lord Kerr agrees) gives a dissenting judgment holding that there was authority to detain prisoners for periods exceeding 96 hours only in circumstances falling within the grounds specified in article 5(1) (which would cover the first and third periods of detention, but not the second).
The first issue the Court addresses is whether British forces had legal power to detain SM in excess of 96 hours.
The possible sources for such a power are customary international law and/or the authority of the UN Security Council [13].
The majority finds it unnecessary to express a concluded view on whether customary international law sanctions the detention of combatants in a non international armed conflict (NIAC) [14, 113, 148, 224].
Lord Reed concludes that no such rule currently exists as a matter of customary international law [275].
However, the majority holds that authority to capture and detain enemy combatants for imperative reasons of security was implicitly conferred by the relevant Security Council resolutions [30, 119, 164, 224].
These were UNSCR 1546 (2004) in Iraq [20]; and UNSCR 1386 (2001) in respect of Afghanistan [28, 119].
The majority (other than Lord Mance) further concludes that individual states participating in the International Security Assistance Force (ISAF) in Afghanistan were not limited by ISAFs policy of restricting detention to 96 hours, so that the United Kingdom was entitled to adopt its own detention policy [38 39].
Lord Mance considers that the resolutions conferred authority to detain on ISAF, not the contributing states [180], but arrives at the same conclusion as the majority regarding the legitimacy of the United Kingdoms detention policy on the ground that ISAF tacitly accepted of the UKs adoption of this policy [39, 188].
The next question is whether it is possible to reconcile these conclusions under public international law with article 5 ECHR.
The European Court of Human Rights in Hassan v UK was able to accommodate the six permitted grounds of detention under article 5 with the power recognised under public international law to detain in the course of an international armed conflict (IAC).
The majority holds that the same approach applies to a NIAC, where the source of the power to detain is a resolution of the Security Council [60, 134 6, 164, 224].
The six permitted grounds for detention in article 5(1) ECHR were formulated in relation to peacetime conditions and could not be regarded as exhaustive in conditions of armed conflict.
Their object was to protect the individual from arbitrariness.
This object was achieved if there was a legal basis for detention and the power to detain was not exercisable on grounds which were unduly broad, opaque or discretionary [63, 93, 164 167, 224].
The procedure governing military arrest in Afghanistan was suitably clear and precise to meet the standards of article 5(1) [93, 113, 165 167, 224].
Article 5(1) did not therefore prevent a Convention state from acting under the authority conferred by a Security Council resolution.
A majority (Lord Sumption, Lady Hale, Lord Wilson, Lord Hodge, Lord Reed and Lord Kerr) considers that the detention of SM did not fall within any of the six specified grounds in article 5(1), during the second period of his detention.
He was not at any time held pending extradition to the Afghan authorities, because transfer to the civil authorities within Afghanistan did not constitute an extradition within article 5(1)(f) [78, 84, 113, 235, 236, 351].
Any period when he was being detained solely for intelligence exploitation purposes could not be justified under article 5(1)(c) [81, 84, 113, 235, 236, 351], or under the relevant Security Council resolution.
Lord Mance, Lord Hughes and Lord Neuberger consider that whether SMs detention during any period fell within article 5(1)(f), as modified if necessary under
Hassan, should be remitted for trial [202 203, 230].
Lord Mance would also have remitted for trial the question whether article 5(1)(c) justified detention during the second period [202 203].
However, a majority (Lord Sumption, Lady Hale, Lord Wilson, Lord Mance, Lord Hughes, Lord Neuberger and Lord Toulson) holds that there should be remitted for trial issues as to: whether intelligence exploitation was in fact the sole ground for detention during the second period or whether imperative reasons of security were not also a concurrent reason, justifying detention under article 5 read with and modified as necessary under Hassan having regard to the relevant Security Council resolution [89, 113, 191 200 and 223, 224], and whether SMs detention during the third period fell within article 5(1)(c) or was justified by imperative reasons of security under article 5 read with and modified as necessary having regard to the relevant Security Council resolution [83, 94 98, 111, 113, 204, 224, 235].
The question of article 5(3) compatibility must also be left for trial [83, 94 98, 111, 113, 204, 224, 235].
A majority holds that it is unnecessary for the United Kingdom to establish a right of detention under Afghan law in order to rely on article 5 read with and modified as necessary having regard to the relevant Security Council resolution [139, 202, 233 and 343 346].
Under article 5(4), the minimum standard of protection from arbitrariness equates to that imposed by articles 43 and 78 of the Fourth Geneva Convention: an impartial body carrying out initial and regular reviews in accordance with a fair procedure [68, 134, 205 206, 224, 235].
Fairness required that SM be given an effective means of challenging his detention.
A majority (Lord Sumption, Lady Hale, Lord Wilson, Lord Hodge, Lord Reed and Lord Kerr) holds that there was a breach of the requirement to provide sufficient guarantees of impartiality and fairness to protect against arbitrariness in two respects: the procedure lacked independence and it failed to provide for the participation of the detainee [104 106, 144].
Lord Mance, Lord Hughes and Lord Neuberger consider that in both respects the matter should, as the Court of Appeal concluded, be remitted for trial in the light of the views they express [212 218, 227] The majority all agree that a finding of breach of the procedural standards required by article 5(4) will not necessarily entitle SM to damages.
A different review process might well have led to no more than SM remaining in UK custody or being transferred slightly to Afghan custody. [110, 113, 219 220, 223, 224, 232, 235].
In his dissenting judgment, Lord Reed concludes that the Security Council resolutions cannot be interpreted as authorising detention falling outside article 5(1)(a) to (f) of the ECHR [296].
Moreover, Hassan v UK only operates to modify article 5 where it is necessary to reconcile it with the Third and Fourth Geneva Conventions (i.e. not in the case of a NIAC, to which the Geneva Conventions have only limited application). [315 316].
SMs detention during the second period was incompatible with article 5 as it was not for one of the six specified purposes [351].
In any event, it was for a purpose outside the scope of the authority granted by UNSCR 1890; it does not remain an open question whether it was for imperative reasons of security [352 353].
|
Council Directive 79/7/EEC on the Progressive Implementation of the Principle of Equal Treatment for Men and Women in Matters of Social Security is concerned with state benefits, including old age and retirement pensions.
It provides by article 4 that there shall be no discrimination whatsoever on ground of sex either directly, or indirectly by reference in particular to marital or family status .
The material provisions of the Directive have direct effect.
Article 7.1(a) of the Directive provided that it was to be without prejudice to the right of member states to exclude from its scope the determination of pensionable age for the purpose of granting old age and retirement pensions.
The United Kingdom has exercised that right.
The combined effect of (i) the Social Security Contributions and Benefits Act 1992, section 44, (ii) the definition of pensionable age in section 122 of the Act, and (iii) the Pensions Act 1995, Schedule 4, paragraph 1, is that a woman born before 6 April 1950 becomes eligible for the state retirement pension (referred to in the legislation as a Category A retirement pension) at the age of 60, and a man born before 6 December 1953 becomes eligible at the age of 65.
The pensionable age of younger persons will converge over a period of time and will eventually be the same, but these changes do not affect the present appeal.
At the time which is relevant to this appeal, the acquired gender of a transsexual person was not recognised for the purpose of determining the qualifying age for a state pension, if that person was and remained party to a subsisting marriage.
The question at issue on this appeal is whether that state of affairs was compatible with the Directive.
The United Kingdom statutory framework
Until 2005, the law made no provision for gender reassignment in any of the three jurisdictions of the United Kingdom.
A person was for all legal purposes treated as having the gender determined by the application of biological criteria at birth without regard to any psychological characteristics or later surgical intervention.
In Goodwin v United Kingdom (2002) 35 EHRR 18, the European Court of Human Rights held that this was incompatible with article 8 of the European Convention on Human Rights and that, so far as it prevented a transsexual from contracting a valid marriage with a person of the same birth gender, it was also incompatible with article 12.
In consequence, Parliament enacted the Gender Recognition Act 2004, which received royal assent on 1 July 2004 and came into force on 4 April 2005.
Section 1 of the Act provided that a person could apply to a Gender Recognition Panel for a full gender recognition certificate recording a change of his or her birth gender on the basis of living in the other gender.
The applicants new gender was referred to as the acquired gender.
Sections 2 and 3 of the Gender Recognition Act deal with the criteria for determining whether a change of gender has occurred.
Section 2 provides that the Gender Recognition Panel is required to grant the application if the applicant has or has had gender dysphoria, has lived in the acquired gender for at least two years up to the date of the application, intends to live in the acquired gender until death and satisfies the evidential requirements laid down by section 3.
Section 3 requires the Panel to be furnished with a report from two medical practitioners or from a medical practitioner and a psychologist.
If the Panel concludes having regard to the evidence required by section 3 that the criteria in section 2 are satisfied, it must grant the application.
By section 9 of the Act, where a full certificate is issued, the acquired gender thereafter becomes the persons gender for all purposes.
Schedule 5, paragraph 7 of the Gender Recognition Act deals specifically with the effect of a full gender recognition certificate on eligibility for a state pension.
It provides that once the certificate has been issued, any question of entitlement to a state retirement pension is to be decided as if the persons gender has always been the acquired gender.
Accordingly, where the person was a man immediately before the issue of the certificate but had attained the age at which a woman would have attained pensionable age, she is to be treated as having attained pensionable age upon the issue of the certificate.
At the time that the Gender Recognition Act was passed a valid marriage could subsist in law only between a man and a woman.
This had always been the law, but had been confirmed by the Matrimonial Causes Act 1973, section 11(c).
For this reason, the 2004 Act made special provision for married applicants, whose change of legally recognised gender would otherwise have resulted in their being married to a person of the same gender as themselves.
This will be referred to below as the marriage condition.
By section 4(2) an unmarried applicant who satisfied the criteria for gender recognition in sections 2 and 3 was entitled to a full gender recognition certificate, whereas by section 4(3) a married applicant who satisfied the same criteria was entitled only to an interim gender recognition certificate.
Unlike a final gender recognition certificate, an interim gender recognition certificate did not itself effect any change in the applicants legally recognised gender.
It merely entitled a married applicant to apply to have the marriage annulled by a court.
The Matrimonial Causes Act 1973 (as amended), section 12(g), provided that upon the issue of an interim gender recognition certificate the applicants marriage became voidable.
By section 13(2A) of the same Act, the court was then bound to grant a decree of nullity, provided that proceedings to that end were instituted within six months from the date of issue of the interim gender recognition certificate, and subject to certain other conditions which are irrelevant for present purposes.
Only when this had been done did the applicant become entitled to a full gender recognition certificate.
The court granting the decree of nullity was required by section 5(1) of the Gender Recognition Act to issue the full certificate.
Shortly after the Gender Recognition Act was passed, Parliament passed the Civil Partnership Act 2004, which received royal assent on 18 November 2004 and came into force on 5 December 2005.
The Act provided for the legal recognition of same sex partnerships upon registration.
A civil partnership was not a marriage but had substantially the same legal consequences as a marriage.
Once the Civil Partnership Act had come into force, a married person to whom an interim gender recognition certificate had been issued could, after obtaining the annulment of the marriage, enter into a civil partnership with his or her former spouse.
These statutory arrangements were changed by the Marriage (Same Sex Couples) Act 2013, which came into full force on 10 December 2014.
The Act of 2013 provided for same sex couples to enter into a marriage.
Schedule 5 amended section 4 of the Gender Recognition Act 2004 so as to provide that a Gender Recognition Panel must issue a full gender recognition certificate to a married applicant if the applicants spouse consents.
The Act of 2013 does not apply retrospectively and does not affect the present appeal.
The relevant statutory provisions are attached.
The situation of MB
MB (the initials have been used in these proceedings to protect her anonymity) was born on 31 May 1948 and was registered at birth as a man.
MB was married on 21 September 1974.
In 1991 she began to live as a woman and in 1995 underwent sex reassignment surgery.
MB has not applied for a gender recognition certificate since the coming into force of the Gender Recognition Act.
This is because she and her wife continued and still continue to live together and wish to remain married.
For religious reasons, they are unwilling to see their marriage annulled, even if it can be replaced by a civil partnership.
On 31 May 2008 MB attained the age of 60.
On 28 July 2008, she applied for a state retirement pension, backdated to 31 May 2008, on the footing that she was a woman.
The application was rejected on 2 September 2008 on the ground that in the absence of a full gender recognition certificate, she could not be treated as a woman for the purpose of determining her pensionable age.
That decision was subsequently upheld by the First tier Tribunal (18 November 2009), the Upper Tribunal (13 September 2013) and the Court of Appeal (31 July 2014).
Permission to appeal was granted by the Supreme Court of the United Kingdom on 11 March 2015.
The arguments
The principal arguments for MB may be summarised as follows: (1) The Court of Justice has already recognised that the prohibition in article 4(1) of the Directive of discrimination on grounds of sex extends to discrimination between persons of a given birth gender and persons who have acquired the same gender by later reassignment: P v S and Cornwall County Council (Case C 13/94) [1996] ECR I 2143, para 20; Richards v Secretary of State for Work and Pensions (Case C 423/04) [2006] ECR I 3585, paras 24, 29 30. (2) MB accepts that in principle it is for member states to determine by their domestic law the conditions on which a persons change of gender may be legally recognised: KB v National Health Service Pensions Agency and Secretary of State for Health (Case C 117/01) [2004] ECR I 541, para 35; Richards v Secretary of State for Work and Pensions (Case C 423/04) [2006] ECR I 3585, para 21.
But she submits that the power to impose conditions is confined to conditions relating to the objective physical or psychological characteristics which determine whether an applicant is a man or a woman: see Richards, at para 38 (and cf the opinion of Advocate General Jacobs at para 57).
It may not be used to impose conditions relating to such matters as marital status which have nothing to do with the determination of an applicants gender. (3) Since the holder of an interim gender recognition certificate must have satisfied the physical and psychological criteria for gender recognition, the imposition of a further condition for obtaining a full certificate which applies to married applicants only constitutes unlawful discrimination. (4) Even if it were legitimate to impose the marriage condition for the purpose of protecting the status of marriage as a relationship between a man and a woman, that could not justify imposing the same condition on eligibility for a state retirement pension, to which marital status is likewise irrelevant. (5) Although MBs primary case is that the Gender Recognition Act directly discriminates against her on grounds of sex, she also contends that it discriminates indirectly, because the evidence is that the great majority of persons who have undergone gender reassignment have been reassigned from male to female.
For the above reasons, it cannot be justified.
The principal arguments for the Secretary of State may be summarised as follows: (1) The decision of the Court of Justice in Richards was concerned with discrimination arising from the absence at the relevant time of any provision in English law for recognising gender reassignment.
That lacuna has been filled in the United Kingdom since 2005.
The decision is of limited relevance to the conditions on which gender reassignment may lawfully be recognised under a comprehensive legislative scheme for recognition. (2) At the time when Richards was decided, the Court of Justice had already recognised in KB that it was for member states to determine those conditions, and it reaffirmed that principle in Richards itself: see para 15(2) above.
A corresponding principle is applied under the European Convention on Human Rights: Goodwin v United Kingdom, para 103. (3) The United Kingdom may properly make the recognition of gender change dependent on a process of registration or certification, as the Gender Reassignment Act does.
Under the Act, a person born a man is not a woman merely by virtue of establishing that she has the qualifying social, physical and psychological characteristics.
A full certificate must have been issued. (4) There is no reason why the conditions for the issue of that certificate should be limited to satisfaction of the social, physical and psychological criteria of gender.
Gender reassignment has significant social implications which the law may also regulate.
The conditions may therefore properly reflect criteria such as the status of marriage, which are legitimate social considerations not regulated by EU law.
In acknowledging, as para 103 of Goodwin does, that it was for national law to determine the conditions for recognising gender reassignment, the European Court of Human Rights acknowledged that they may include conditions under which past marriages cease to be valid.
This was implicitly accepted by the Court of Justice in Richards, when it adopted the principle thus stated at para 21. (5) Since the decision in Goodwin, the European Court of Human Rights has upheld the marriage condition as being in itself compatible with the Human Rights Convention (Parry v United Kingdom (Application No 42971/05)) as well as a similar condition in corresponding legislation in Finland (Hamalainen v Finland (2014) 37 BHRC 55).
The reason was that, although the Convention requires states to recognise the acquired gender of transsexual persons, it does not require them to allow marriages between same sex couples.
In the absence of such a requirement, a state which does not recognise same sex marriages has a legitimate interest in maintaining the traditional concept of marriage between a man and a woman.
That interest justified the imposition of the marriage condition in the Finnish legislation.
The proviso could not be regarded as disproportionate given that a civil partnership was available to same sex couples as an alternative to marriage. (6) No question of indirect discrimination arises.
Even on the footing that most gender reassignments are male to female, there is no reason to regard it as any more difficult for a male to female transsexual to qualify for a full gender recognition certificate than it is for a female to male transsexual.
The Supreme Courts conclusion
The Supreme Court is divided on the question, and in the absence of Court of Justice authority directly in point considers that it cannot finally resolve the appeal without a reference to the Court of Justice.
The question
The question referred is whether Council Directive 79/7 EEC precludes the imposition in national law of a requirement that, in addition to satisfying the physical, social and psychological criteria for recognising a change of gender, a person who has changed gender must also be unmarried in order to qualify for a state retirement pension.
| UK-Abs | This case concerns Council Directive 79/7/EEC on the Progressive Implementation of the Principle of Equal Treatment for Men and Women in Matters of Social Security (the Directive).
Article 4 of the Directive provides that there shall be no discrimination whatsoever on ground of sex either directly, or indirectly by reference in particular to marital or family status.
Article 7(a) provides that the Directive (which has direct effect) was to be without prejudice to the right of Member States to exclude from its scope the determination of pensionable age for the purpose of granting old age and retirement pensions.
The United Kingdom has exercised that right.
Under United Kingdom law, a woman born before 6 April 1950 is eligible for the statement retirement pension at the age of 60, and a man born before 6 December 1953 is eligible at the age of 65.
For people born after those dates, the ages will converge over a period of time.
At the time relevant to this appeal, the acquired gender of a transgender person was not recognised for the purpose of determining their qualifying pension age, if they were married.
So far as MB was concerned, she was registered at birth as a man but has lived as a woman since 1991 and underwent gender reassignment surgery in 1995.
She has not applied for a full gender recognition certificate because she and her wife are married and wish to remain so, a situation at that time precluded by the conditions for obtaining a full gender recognition certificate [13].
On 31 May 2008, MB turned 60.
In July of that year, she applied for a state retirement pension, backdated to her 60th birthday.
That application was rejected on 2 September 2008 because, in the absence of a gender recognition certificate, MB could not be treated as a woman for the purposes of pension eligibility and would instead become eligible at 65, as if she were a man.
The First tier Tribunal, Upper Tribunal and Court of Appeal all agreed with that approach [14].
The appellant challenged the compatibility of that approach with the Directive.
The Supreme Court refers the question to the Court of Justice of the European Union.
Lord Sumption gives the reasons for the referral, with which the rest of the Panel agree.
The question referred is whether the Directive precludes the imposition in national law of a requirement that, in addition to satisfying the physical, social and psychological criteria for recognising a change of gender, a person who has changed gender must also be unmarried in order to qualify for a state retirement pension [18].
Before 2005, the position under UK law was that a person was treated for all legal purposes as having the gender determined by their biological characteristics at birth.
In 2002, the European Court of Human Rights deemed that to be incompatible with Article 8 of the European Convention on Human Rights (the right to private and family life) and, in so far as it prevented a transgender person from marrying a person of the same gender, incompatible with Article 12 (the right to marry and found a family) [4].
The Gender Recognition Act 2004 (which came into force on 4 April 2005) amended the situation such that a persons acquired gender would be legally recognised if they satisfied certain criteria.
If a full certificate of gender recognition was issued to a person, their entitlement to a state retirement pension would be decided according to the rules that apply to the acquired gender [7].
If, however, a person was married, because same sex marriages were not at that time recognised, they received only an interim gender recognition certificate which did not change their legally recognised gender but, first, entitled them to have their marriage annulled after which a full gender recognition certificate would follow [8 9].
Once the Civil Partnership Act 2004 came into force in December 2005 a married person who changed their gender could have their marriage annulled and subsequently enter a civil partnership with their former spouse [10].
In 2014, that situation was changed by the entry into force of the Marriage (Same Sex Couples) Act 2013.
The Gender Recognition Act 2004 was amended so that a full gender recognition certificate could, from then on, be issued to a married applicant with the consent of the applicants spouse [11].
MB has argued that the CJEU has recognised that article 4(1) of the Directive prohibits discrimination between persons of a particular birth gender and people who have acquired that gender and, although it is for member states to determine the conditions by which someone may acquire a gender, that only applies to physical or psychological characteristics and not to marital status [15(1) (2)].
The imposition of a marital status criterion on a person who satisfies the states physical and psychological criteria must therefore be unlawful, and cannot appropriately affect eligibility for state retirement pension [15(3) (4)].
MB therefore argues that the Gender Recognition Act 2004 discriminates against her directly on the grounds of sex, and indirectly because the great majority of people who have undergone gender reassignment have been reassigned from male to female [15(5)].
The Secretary of State argues that the UK procedure by which, for a persons acquired gender to be recognised, a gender recognition certificate must be obtained, is lawful [16(1) (3)].
There is no reason that the conditions for the acquisition of a gender should be limited to satisfaction of physical and psychological criteria.
Conditions may properly reflect social factors such as the status of marriage, which may include a definition of marriage as between a man and a woman [16(4) (5)].
No question of indirect discrimination arises [16(6)].
The Supreme Court is divided on the correct answer to the question and, since there is no CJEU authority directly in point, it refers the question for their guidance [17].
|
The appellant, O, is a woman of Nigerian nationality, aged 38.
In November 2003, with her son, then aged three, she illegally entered the UK.
In July 2008 she pleaded guilty to offences of cruelty towards her son, who had returned to live in Nigeria, and the court sentenced her to 12 months imprisonment and recommended that she be deported.
On 8 August 2008 her sentence came to an end, whereupon the respondent, the Home Secretary, detained her at first pending the making of a deportation order and then, following the making of such an order, pending her deportation pursuant to it.
Os detention, which was at the Immigration Removal Centre (IRC) at Yarls Wood in Bedfordshire, continued until 6 July 2011 when, pursuant to a grant of bail on 1 July 2011, she was released.
It follows that O was detained at Yarls Wood for almost three years.
The court knows nothing about her circumstances after 6 July 2011 but infers that she has not, or not yet, been deported.
In her first claim for judicial review, O, acting (as now) by the Official Solicitor, her litigation friend, challenged the lawfulness of the earlier period of her detention, namely from 8 August 2008 to 22 July 2010.
In the Administrative Court her claim failed entirely but on appeal it succeeded to a limited extent.
By its decision, entitled R (OM) v Secretary of State for the Home Department [2011] EWCA Civ 909 and dated 28 July 2011, the Court of Appeal held that for most of that earlier period, namely until 28 April 2010, O had been the subject of unlawful detention but was entitled only to nominal damages in respect of it and that for the remainder of that earlier period she had not been the subject of unlawful detention at all.
In the present proceedings, which chronologically encompass her fourth claim for judicial review, O challenges the lawfulness of the later period of her detention, namely from 22 July 2010, and in particular from say 4 March 2011, until 6 July 2011.
The object of the present proceedings has never been to secure her release, which had already occurred at the time of their issue.
The object has been to secure a declaration that the detention was unlawful and, perhaps in particular, an award of substantial damages for false imprisonment.
But on 3 April 2012 Lang J refused to grant permission for this claim to proceed and on 17 July 2014 the Court of Appeal (by a panel which comprised Arden LJ, who gave the substantive judgment, and Underhill and Floyd LJJ, who agreed with it) dismissed her appeal: [2014] EWCA Civ 990, [2015] 1 WLR 641.
O now asks this court to grant permission for the claim to proceed and therefore to remit it to the Administrative Court, so that, following the filing by the Home Secretary of detailed grounds for contesting it and of any written evidence on which she wished to rely, it might proceed to substantive determination.
O has the misfortune to have suffered for many years from serious mental ill health.
So the appeal requires this court to consider the Home Secretarys policy relating to the detention of the mentally ill pending deportation; and perhaps also to identify the criterion by which the court should determine a complaint that she has failed to implement some aspect of her policy relating to it.
Furthermore the Home Secretary is obliged to conduct monthly reviews of whether a persons detention pending deportation should continue.
There were, as the Court of Appeal held, defects in the Home Secretarys conduct of the monthly reviews of Os detention between March and July 2011.
The appeal requires this court to identify the effect of the deficiencies on the lawfulness of her detention during those four months, particularly in the light of the Court of Appeals decision in R (Francis) v Secretary of State for the Home Department (Bail for Immigration Detainees intervening) [2014] EWCA Civ 718, [2015] 1 WLR 567.
Supported by Bail for Immigration Detainees which, jointly with Medical Justice, also intervenes in the present appeal, O contends that the Francis case was wrongly decided.
BACKGROUND
It was within days of their arrival in the UK in November 2003 that O (a) committed the offence of cruelty to her son, contrary to section 1 of the Children and Young Persons Act 1933. (b) In 2004, upon being charged with that offence, O was granted bail but she absconded and did not attend court on the date in February 2005 for which the trial had been fixed. (c) Meanwhile, earlier in 2004, Os claim for asylum or for discretionary leave to remain in the UK under the European Convention on Human Rights (the ECHR) was refused and her appeal against the refusal dismissed.
In July 2005, while she remained unlawfully at large, O gave birth to (d) a daughter, whom, to Os great distress, a court later authorised to be placed for adoption. (e) In September 2007 O was arrested and charged with making a false instrument, namely a false identity document which she had used in an attempt to open a bank account, for which she was later convicted and sentenced to imprisonment for nine months. (f) In due course it was realised that O was the subject of the outstanding charge of child cruelty, to which in due course she pleaded guilty and for which, in July 2008, she became subject to the sentence of 12 months imprisonment and to the recommendation for deportation.
In that the length of the sentence was such as, subject to exceptions, to oblige the Home Secretary to order O to be deported under section 32(5) of the UK Borders Act 2007 (the 2007 Act), no such recommendation would nowadays be given: R v Kluxen [2010] EWCA Crim 1081, [2011] 1 WLR 218. (g) On 5 August 2008, three days prior to Os release from prison and the beginning of her detention at Yarls Wood, the Home Secretary served notice of her intention to make a deportation order in respect of O. (h) On 25 November 2010, following conclusion of the family proceedings relating to Os daughter, the Home Secretary made the deportation order in respect of O. (i) On 7 December 2010 O applied to the Home Secretary to revoke the deportation order on human rights grounds but on 13 January 2011, confirmed on 8 April 2011, the Home Secretary rejected the claim and certified it as clearly unfounded. (j) On 18 January 2011 the Home Secretary made directions for Os removal to Nigeria on a flight booked for 7 February 2011. (k) On 24 January 2011 O issued her second claim for judicial review, which was by way of challenge to the Home Secretarys certificate. (l) On 4 February 2011 the court enjoined the Home Secretary from effecting Os removal to Nigeria on 7 February. (m) On 7 March 2011 a tribunal judge refused to grant bail to O, whereupon she issued her third claim for judicial review by way of challenge to the refusal. (n) On 20 May 2011 a court refused to permit O to proceed with her third claim but permitted her to proceed with her second claim, which ultimately, in November 2012, was upheld, with the result that the Home Secretarys certificate was quashed. (o) Meanwhile, on 17 June 2011, a tribunal judge again refused to grant O bail but on 1 July 2011 she granted it, whereupon, on 6 July 2011, she was released from detention. (p) On 5 October 2011 O issued her fourth claim for judicial review, in which she brings the present appeal.
Os MENTAL ILL HEALTH
During the period of her imprisonment and of her detention at Yarls Wood O displayed signs of serious mental ill health, including by a number of attempts at suicide and other acts of self harm; by suffering hallucinations; and by unpredictable mood swings and impulsive outbursts.
There she was mainly treated with high doses of anti psychotic and anti depressant medication.
In May 2008, for the purposes of the court in sentencing her for the offence of child cruelty, Dr Olajubu, a specialist registrar in forensic psychiatry, diagnosed O as suffering a recurrent depressive disorder and an emotionally unstable personality disorder.
He considered that in prison she would have access to all appropriate psychological interventions.
On 30 April 2009 Professor Katona, a consultant psychiatrist, made the first of a series of reports on O at her request.
At that time he agreed with the diagnosis of Dr Olajubu but on 21 September 2009 he reported a considerable deterioration in Os condition and recommended that the Home Secretary should direct her transfer from Yarls Wood to hospital under section 48 of the Mental Health Act 1983.
On 12 March 2010, following an attempt to suffocate herself, O was admitted to the psychiatric wing of Bedford Hospital for assessment.
On 15 March 2010 Dr Ratnayake, a consultant psychiatrist there, led the assessment and, by letter of discharge to Yarls Wood of that date, he expressed agreement with Dr Olajubus diagnosis of O as having an emotionally unstable personality disorder, which Dr Ratnayake said was of a borderline type.
He added that his team found no true psychosis in her and that her needs, in particular for constant observation and continued medication, would be adequately met at Yarls Wood, to where accordingly she was returned.
On 16 July 2010 Professor Katona reported that, although Os acts of self harm had become somewhat less frequent and her depression less profound, he maintained his recommendation for her transfer to hospital.
On 10 February 2011 Dr Agnew Davies, a clinical psychologist with special expertise on the impact of trauma on the mental health of women, reported on O. Her report forms the foundation of this appeal.
It runs to 69 pages.
Instructions to her to make the report came from Os solicitors, who asked her to comment in particular upon whether Os detention was detrimental to her mental health and upon the effect on it of her forcible return to Nigeria.
Dr Agnew Davies reported: (a) that O gave a plausible history of having suffered frequent physical and sexual abuse at the hands of an uncle when she was aged between 11 and 14 and in his care in Nigeria; (b) that staff at Yarls Wood had told her that since the summer 2010 Os behaviour had been more stable and that she had undertaken a short course of cognitive behavioural therapy; (c) that her study of Os records, her lengthy interview with O and the results of application to her of mainstream psychological tests led her to diagnose in O not only a major depressive disorder but, in particular, a severe, complex and chronic form of post traumatic stress disorder (PTSD) arising out of her uncles protracted abuse of her; (d) necessary mental health services at Yarls Wood; (e) (f) services; (g) (h) that she was not fit to live independently without professional support; that recovery of her mental health could occur only over the long term; that release from detention would greatly benefit her mental health; that she needed a long term structured package of mental health that, unlike Dr Ratnayake, she considered that O could not access the that neither medication nor general counselling services would alone (i) be enough to secure her recovery; (j) that she needed to be referred to a specialist trauma focussed psychiatric clinic, such as those in London provided by St Bartholomews Hospital, by the Maudsley Hospital and by three others, for treatment which would take place in phases over years; (k) that such a referral was in accordance with guidance issued by the National Institute for Health and Care Excellence (NICE) to the effect that neither general counselling services nor treatment with medication could alone provide sufficient interventions in a severe, complex case of this sort; and (l) that her deportation to Nigeria would have grave effects upon her mental health and be likely to precipitate unsuccessful attempts at suicide followed perhaps by a successful one.
On 30 June 2011, for the purposes of the application for bail which proved successful on the following day, Dr Agnew Davies wrote an addendum report.
She noted the apparent absence of any acts of self harm on Os part during the previous six months and, from her psychological perspective, she urged Os immediate release.
She recommended that O should receive medical support in the community from a home treatment team and later from a community mental health team and, as before, that in the long term O should engage in treatment at a specialist clinic.
Also on 30 June 2011 Professor Katona wrote a further report in which, without having again interviewed O, he reviewed the reports of Dr Agnew Davies and the up to date medical records from Yarls Wood.
In the light of the marked improvement in Os self harming behaviour, he withdrew his recommendation for her transfer to hospital.
He now agreed with Dr Agnew Davies that O was suffering PTSD in addition to her depressive disorder.
He also agreed with her recommendation for O to access medical care in the community and in the long term for her to undertake treatment at a specialist clinic, which, he added, would probably continue for two or three years.
AUTHORITY TO DETAIN
Paragraph 2 of Schedule 3 to the Immigration Act 1971 (the 1971 Act), entitled Detention or control pending deportation, provides: (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 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) (2) Where notice has been given to a person in accordance with regulations under section 105 of the Nationality, Immigration and Asylum Act 2002 of a decision to make a deportation order against him 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).
I have set four words above in italics in order that the reader may more easily understand my discussion in paras 42 to 49 below of the Francis case cited at para 4 above.
In that she had been the subject of a recommendation for deportation, it follows that from 8 August 2008 to 25 November 2010 O was detained under para 2(1) of Schedule 3 to the 1971 Act and that, from 25 November 2010, when the deportation order was made in respect of her, until 6 July 2011 she was detained under the words in parenthesis in para 2(3) of the schedule.
In that the Home Secretary made the deportation order in accordance with section 32(5) of the 2007 Act, it is worthwhile to note section 36(2) of that Act, which provides: Where a deportation order is made in accordance with section 32(5) the Secretary of State shall exercise the power of detention under paragraph 2(3) of Schedule 3 to the [1971 Act] unless in the circumstances the Secretary of State thinks it inappropriate.
I have set the word power in italics for the same reason.
POLICY
[I]mmigration detention powers need to be transparently identified through formulated policy statements, observed Lord Dyson in R (Lumba) v Secretary of State for the Home Department (JUSTICE and another intervening) [2011] UKSC 12, [2012] 1 AC 245 at para 34.
The Home Secretarys published policy in this regard is set out in Chapter 55, entitled Detention and Temporary Release, of a manual addressed to caseworkers and entitled Enforcement Instructions and Guidance (the manual).
It states: (a) at para 55.1.1 that the power to detain had to be retained in the interests of maintaining effective immigration control but that there was a presumption in favour of release; (b) at para 55.1.2 that the presumption applied even to foreign national offenders (such as O) but that, in relation to detention pending their intended deportation, the risks of their re offending and absconding might well outweigh it; and (c) at para 55.8 that, following the start of any detention, reviews of it were necessary in order to ensure that it remained lawful and in line with policy; that in a criminal case (such as that of O) they should take place at least every 28 days; and that the law required detainees to be provided every 28 days with written reasons for their continued detention, based on the outcome of the reviews.
Paragraph 55.10 of the manual is entitled Persons considered unsuitable for detention.
It states: Certain persons are normally considered suitable for detention in only very exceptional circumstances In criminal cases, the risk of further offending or harm to the public must be carefully weighed against the reason why the individual may be unsuitable for detention.
There may be cases where the risk of harm to the public is such that it outweighs factors that would otherwise normally indicate that a person was unsuitable for detention.
The following are normally considered suitable for detention in only very exceptional circumstances : Those suffering from serious mental illness which cannot be satisfactorily managed within detention The words at the bullet point quoted above were introduced into the paragraph on 25 August 2010.
Prior to that date the category was described as those suffering from serious medical conditions or the mentally ill.
It is clear that, in considering whether there are very exceptional circumstances which make a person suitable for detention even though her (or his) serious mental illness cannot satisfactorily be managed there, the caseworker has to weigh the severity of any risks of offending or further offending and of absconding.
On 14 January 2016 Mr Stephen Shaw CBE made a report to the Home Secretary entitled Review into the Welfare in Detention of Vulnerable Persons, Cm 9186.
His eleventh recommendation was that the phrase satisfactorily managed should be removed from para 55.10 of the manual.
Mr Shaw noted suggestions that the meaning of the phrase was inexact and obscure and he stated that, irrespective of whether it was satisfactorily managed, serious mental illness among detainees was clearly not being treated in accordance with good psychiatric practice.
REVIEWS OF Os DETENTION
A central inquiry mandated by this appeal is into the treatment of the report of Dr Agnew Davies in the Home Secretarys reviews of Os detention.
The report was submitted to the Home Secretary under cover of a letter from Os solicitors dated 16 February 2011.
It is of some relevance that it was expressly submitted in support of Os application, then recently issued, for judicial review of the Home Secretarys certificate that the application to revoke the deportation order had been clearly unfounded.
In the letter Os solicitors quoted at some length from the report and stressed passages relevant to the claim for judicial review, including doubts about Os ability to conduct an out of country appeal and the risk of her suicide in the event of deportation.
Although in the letter they did refer to the diagnosis of PTSD, the solicitors did not refer to the recommendation of treatment at a specialist clinic in London; did not allege that Os illness could not be satisfactorily managed at Yarls Wood; and, generally, did not question the legality of Os continued detention in the short term.
By letter dated 8 April 2011 the Home Secretary, by her caseworker, replied to the letter dated 16 February 2011.
Again the context of the letter was Os claim for judicial review rather than the legality of her continued detention in the short term; and the gist of it was that the Home Secretary found nothing in the report of Dr Agnew Davies to lead her to abandon her defence of the claim.
Presumably in an attempt to show that she had carefully read it, the writer quoted at length from the report, including that the doctor had diagnosed PTSD.
Oddly, however, she then twice asserted that the report contained no new diagnosis.
She said that, in response to Dr Agnew Davies report, the medical officers at Yarls Wood had explained that Os condition had become more stable; that her last attempt at self harm had occurred more than a year previously; and that she was compliant with her medication.
In the six reviews of Os detention which were written between 4 March 2011 and 4 July 2011, each prepared by the caseworker who wrote the letter dated 8 April 2011 and each duly countersigned by senior officers, only the briefest reference was made to the report of Dr Agnew Davies.
Inserted into the lengthy recital in each review of Os protracted immigration history was reference to yet another psychiatric report, which had been treated as a further request to revoke the deportation order.
Again oddly, the reviews identified Os most recent diagnosis as being that of Dr Ratnayake on 15 March 2010.
In each case the senior officers in effect indorsed the caseworkers conclusion that the risk of Os reoffending and absconding outweighed the presumption in favour of release.
One has some sympathy for the caseworker because the report of Dr Agnew Davies had been submitted to the Home Secretary as relevant to an issue different from that of the legality of Os continued detention in the short term.
Nevertheless on any view the report bore some relevance to the Home Secretarys policy relating to the detention of the mentally ill and should have been properly addressed in the reviews.
The reviews (a) failed to refer to Dr Agnew Davies diagnosis of O as suffering PTSD; (b) indeed wrongly stated that the most recent diagnosis of Os mental condition was that of Dr Ratnayake; (c) failed to refer to Dr Agnew Davies assessment of Os need for treatment at a specialist trauma focussed psychiatric clinic; and (d) failed therefore to consider whether O could be satisfactorily managed at Yarls Wood and, even if not, whether there were very exceptional circumstances which nevertheless justified her continued detention.
In the above circumstances the Court of Appeal concluded that the Home Secretary had unlawfully failed to apply the policy set out in para 55.10 of the manual when deciding to continue to detain O between March and July 2011.
This conclusion the Home Secretary now accepts.
She does not suggest that the evidence which she would be entitled to file in the event that the claim was permitted to proceed would be likely to throw a different light on it.
The defects in the reviews already filed speak for themselves.
Appendix 4 to Mr Shaws recent report, referred to in para 20 above, is an assessment by Mr Jeremy Johnson QC of six High Court cases in which since 2010 the Home Secretarys treatment of immigration detainees has been held to be inhuman or degrading and therefore in violation of their rights under article 3 of the ECHR.
He also assessed at least six other cases in which, without identifying a violation of article 3, the High Court or the Court of Appeal held the detention to have been unlawful.
For the purposes of these assessments Mr Johnson made a detailed study of the Home Secretarys detention reviews and concluded: There are two themes that run through the cases.
The first is that the person reviewing detention does not always appear to have been aware of all of the relevant evidence (particularly medical evidence) that is relevant to the assessment of whether it is appropriate to detain (so sequential reviews are written in almost identical terms without any reference being made to important developments in the medical picture).
The second is that decisions to detain are made without properly engaging with the test that has to be satisfied before a decision is made.
The reviews of Os detention between March and July 2011 are perfect illustrations of both of Mr Johnsons themes.
The next question is: were she to have applied her policy correctly, how would the Home Secretary have reacted to the report of Dr Agnew Davies? The first part of the answer is to consider the meaning of the phrase satisfactory management.
There is lively dispute between the parties as to the nature of the courts review of the legality of the Home Secretarys application of policy (which presupposes that she has purported to apply it: see para 37 below).
But in this appeal there is no dispute that the courts approach to the meaning of the policy is to determine it for itself and not to ask whether the meaning which the Home Secretary has attributed to it is reasonable: R (Raissi) v Secretary of State for the Home Department [2008] EWCA Civ 72, [2008] QB 836, paras 107 to 123.
SATISFACTORY MANAGEMENT
NHS England is responsible for commissioning the provision of all health services in IRCs as well as in prisons in England pursuant to regulations made under section 3B(1)(c) of the National Health Service Act 2006.
What level of health services should NHS England arrange to be provided there? The answer is to be found in the following two principles identified in the Partnership Agreement, first published in 2013 and republished in April 2015, between Home Office Immigration Enforcement, NHS England and Public Health England, at p 12: Detainees should receive health care equivalent to that available to the general population in the community with access to services based on clinical need and in line with the Detention Centre Rules; and Health and wellbeing services in IRCs should seek to improve health and wellbeing (including parity of esteem between services which address mental and physical health) In relation to the detention of those suffering from mental health problems, the Home Secretarys Policy Equality Statement dated 26 November 2014 recorded her agreement with NHS England that the provision of healthcare at a standard equal to that provided in the community was a core principle.
She noted, however, that respondents to her consultation had suggested that in IRCs there was an insufficiency of specialist mental health interventions, with the result that adherence to the principle was not achieved.
Although both the Partnership Agreement and the Equality Statement post date 2011, the Home Secretary does not suggest that they are irrelevant to the interpretation of the policy then applicable to O.
In formulating policy that, save very exceptionally, management of serious mental illness in an IRC, if not satisfactory, should precipitate release, the Home Secretary has adopted a word of extreme and appropriate elasticity.
It catches a host of different factors to which the circumstances of the individual case may require her to have regard.
In R (Das) v Secretary of State for the Home Department (Mind and another intervening) [2014] EWCA Civ 45, [2014] 1 WLR 3538, in a judgment with which Moses and Underhill LJJ agreed, Beatson LJ, at paras 45 to 47 and 65 to 70, offered a valuable discussion of the phrase satisfactory management.
I respectfully disagree with him only in relation to an aside in para 71 of his judgment.
Beatson LJ there expressed an inclination to accept the Home Secretarys contention that, if the management of the illness in an IRC was likely to prevent its deterioration, it would be satisfactory even if treatment was available in the community which was likely to secure its improvement.
I would not exclude the relevance of treatment, available to the detainee only if released, which would be likely to effect a positive improvement in her (or his) condition.
If it was likely that such treatment would actually be made available to the detainee (rather than be no more than on offer in principle to all members of the community in NHS publications), its availability should go into the melting pot; and the burden would be upon the Home Secretary to inquire into its availability.
If, contrary to the Partnership Agreement quoted in para 29 above, the standard of care (expressly aimed at improving health as well, of course, as preventing it from deteriorating) provided to a detainee in an IRC were for some reason not equal to that which would be made available to her if released, it would in my view be questionable, subject to the strength of other relevant factors, whether the management of her illness in the IRC was satisfactory.
While satisfactory management does not mean optimal management, a narrow construction of the word management as meaning no more than control of the illness would lack principled foundation, particularly when in very exceptional circumstances the detainee may continue to be detained in the IRC pursuant to the policy notwithstanding the unsatisfactory management of her illness there.
Above all the policy in para 55.10 of the manual mandates a practical inquiry.
As Beatson LJ stressed in the Das case, the phrase satisfactory management should be interpreted with regard to its context and purpose (para 45); should not be subjected to the fine analysis appropriate to a statute (para 47); nor invested with a spurious degree of precision (para 65).
An important part of its context is that the management of the illness takes place in detention pending likely deportation.
Treatment of a patient who finds herself in the doubly stressful circumstances both of detention and of likely deportation has its own considerable, extra challenges; treatment in those circumstances might be satisfactory even if it would not otherwise be satisfactory.
The reliance by Dr Agnew Davies on highly generalised words of guidance issued by NICE, set out in para 11(k) above, leads O to refer the court to the paragraph in The NHS Constitution for England, updated to 14 October 2015, which tells the patient: You have the right to drugs and treatments that have been recommended by NICE for use in the NHS, if your doctor says they are clinically appropriate for you.
But Os argument is underdeveloped and carries her appeal no further.
Precisely what treatment has been recommended for use in the NHS and for use in what circumstances? As I explore more fully below, would the doctor responsible for O have agreed that treatment at the trauma clinic was clinically appropriate for her and, if so, would it have been among the treatments which the doctors local clinical commissioning group had decided to commission? And to what extent is the right referred to in the NHS Constitution circumscribed by the limited availability of recommended treatments?
Had she sought to ask herself whether, in the light of the report of Dr Agnew Davies, Os illness would satisfactorily be managed at Yarls Wood, the Home Secretary would have sought to obtain answers to questions along the following broad lines: (a) Was Dr Agnew Davies likely to be correct in diagnosing PTSD in O? No one had previously diagnosed it.
In particular it had been diagnosed neither by Dr Ratnayake nor (until 30 June 2011) by Professor Katona. (b) In particular did the clinicians treating O at Yarls Wood agree with the diagnosis and, if not, what diagnosis did they favour? Their intimate and protracted exposure to O might, subject to the quality of their response, invest their views with considerable authority. (c) What was the nature of the treatment currently provided to O at Yarls Wood? (d) How satisfactory did the clinicians regard the current treatment and would they confirm the improved stability of Os behaviour reported by Dr Agnew Davies? (e) Was it necessary to instruct an independent psychologist to comment on the diagnosis of Dr Agnew Davies? (f) What was the likely length of time before the Home Secretary could achieve Os deportation? In February 2011 she had come close to achieving it but Os second claim for judicial review in relation to revocation of the deportation order was pending. (g) Insofar as Dr Agnew Davies was recommending that O needed at once to embark on lengthy treatment at a specialist trauma focussed clinic, would the doctor responsible for O approve it and was the recommendation in any way practical? Was there evidence that any such clinic could and would accept O, as a foreign citizen awaiting deportation, even for immediate assessment let alone for early treatment? (h) If O were released into the community, what accommodation should be provided for her and would its location be compatible with her need to undergo the treatments appropriate for her? (i) What medical services (in particular, what mental health services) and what local authority community care services would be available to O in her locality immediately following any release?
Realistically O accepts that the proper application of the Home Secretarys policy to her case in the light of the report of Dr Agnew Davies would not have led to her immediate release in March 2011.
She correctly contends that the report should have led the Home Secretary to make inquiries.
We cannot predict the result of the inquiries, most of which, judged by the contents of the reviews, seem never to have been made.
Indeed, even if, which is doubtful and which indeed the Court of Appeal expressly rejected, the appropriate conclusion would or might have been that Os illness could not be satisfactorily managed in detention, the Home Secretary, in considering whether there were very exceptional circumstances which nevertheless justified her continued detention, would have had to consider the risks of her absconsion and (possibly also) re offending.
On 1 July 2011 the tribunal judge rated them as acceptably low.
But, in his judgment given later that month on Os appeal in her first claim for judicial review, and therefore by reference to the circumstances which existed only up to 22 July 2010, Richards LJ at para 36 assessed the risk of her absconsion as very high.
At least, however, the limited period between March and her release on bail on 6 July 2011 makes one thing clear: even on the dubious assumption that proper application of her policy should in due course have led the Home Secretary to direct Os release, it is unrealistic to consider that the conditions necessary for her release would have been in place prior to 6 July 2011.
For the above reasons, in agreement with the Court of Appeal, I regard it as already clear that, although the Home Secretary unlawfully failed to apply her policy under para 55.10 of the manual to Os continued detention between March and July 2011, a lawful application of her policy would not have secured Os release from detention any earlier than the date of her actual release on bail.
I have referred at para 28 above to the dispute as to the nature of the courts review of the legality of the Home Secretarys application of policy.
It is now settled at the level of the Court of Appeal at first sight unsurprisingly that the nature of the review is the traditional public law inquiry into whether the application of it was rational: R (ZS) (Afghanistan) v Secretary of State for the Home Department [2015] EWCA Civ 1137.
In para 30 above I have explained the open texture of the concept of satisfactory management, which reflects the wide range of factors relevant to it and explains the broad nature of the Home Secretarys decision making process.
If indeed the inquiry is into the decisions rationality, a process of that breadth may very well yield more than one rational, and thus more than one lawful, decision.
But, supported by the interveners, O vigorously commends a more muscular approach.
She insists that the subject is liberty; that indeed it is liberty denied by executive diktat; and that nothing less than an intense judicial inquiry into whether the application of policy was correct can be warranted in circumstances so controversial and of such fundamental importance.
I do not descend more fully into the rival contentions noted above because I consider that this appeal does not afford to the court the opportunity to choose between them.
For the Home Secretary failed to address the satisfactory management or otherwise of Os illness at Yarls Wood in the light of Dr Agnew Davies report and so there is no decision for a court to be able on either basis to appraise.
Instead the overall refusal to release O betrays a different type of public law error: it was procedurally flawed.
What however is clear is that, even in the absence of any flaw, no decision to release O would in any event have been made prior to 6 July 2011.
THE LUMBA PRINCIPLE
In the Lumba case, cited at para 17 above, two foreign nationals, Mr Lumba and Mr Mighty, were sentenced to terms of imprisonment, apparently without being recommended for deportation by the sentencing judge.
Once their sentences came to an end, and following notice of her decision to make deportation orders against them, the Home Secretary detained them; and, following the making of those orders, her detention of them continued.
So initially, unlike O, they were detained pursuant to para 2(2) of Schedule 3 to the 1971 Act, set out in para 14 above; and subsequently, like O, they were detained pursuant to the words in parenthesis in para 2(3) of the schedule, also there set out.
In proceedings for judicial review they challenged the lawfulness of their detention and claimed damages for false imprisonment.
At the time of the detention of the two men the Home Secretarys published policy was that, even in relation to foreign national prisoners such as them, there was a presumption that they should be at liberty pending their intended deportation.
In fact, however, the Home Secretary detained them pursuant to an unpublished policy which, inconsistently with her published policy, amounted almost to a blanket resolution on her part to detain foreign national prisoners pending intended deportation.
It had been patently unlawful for the Home Secretary to apply to them an unpublished policy which was inconsistent with the published one.
It was also clear, however, that, had the Home Secretary applied her published policy to them, her decision would, similarly, have been to detain them.
This had led the Court of Appeal to hold that her unlawful application of policy had not made their detention unlawful.
By a majority, this court disagreed.
Giving the leading judgment, Lord Dyson said: 71.
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.
I provisionally conclude that, were Os claim for judicial review permitted to Although an unrelated aspect of one claim was remitted for further consideration, the claims relating to the Home Secretarys policy thus resulted in awards to each of the two men of damages in the sum of 1.
proceed, it should therefore lead to the same result.
The Home Secretary, however, contends that the Lumba case is distinguishable from the present case; and that, where the detainee is initially detained, as here, under para 2(1) of Schedule 3 to the 1971 Act, rather than under para 2(2) of the schedule, an unlawful application of policy does not make the detention itself unlawful; and that therefore it does not generate a right even to nominal damages for false imprisonment.
In this respect the Home Secretary relies on the Francis case, cited at para 4 above.
THE FRANCIS CASE
Although the initial detention of the two men in the Lumba case had been effected pursuant to paragraph 2(2) of Schedule 3 to the 1971 Act, the Court of Appeal in that case, [2010] EWCA Civ 111, [2010] 1 WLR 2168, in the course of explaining its decision (later reversed), had in passing addressed the effect of para 2(1) of the schedule.
It had clearly had in mind the difference between the words shall in para 2(1) and may in para 2(2), both of which I have set in italics in my quotation of the sub paragraphs in para 14 above; and at paras 88 to 89 it had proceeded to observe that, unlike detention under para 2(2), a persons detention under para 2(1) was authorised by that sub paragraph itself and that, even were the Home Secretary to have made an unlawful decision not to direct that persons release, the lawfulness of the detention would therefore remain unaffected.
In para 55 of his judgment in this court in the Lumba case Lord Dyson had specifically put those observations to one side.
In the Francis case the Court of Appeal, by a majority (Moore Bick and Christopher Clarke LJJ), reached its decision by reference to the observations which that court had made in passing in the Lumba case.
Mr Francis, who for the purposes of the proceedings was assumed to have Jamaican rather than British nationality, had been sentenced to a term of imprisonment and recommended for deportation.
On 4 December 2007 his sentence came to an end and he was detained pending the making of a deportation order.
Following the making of that order on 21 May 2008, he continued to be detained until 29 September 2011.
So, like that of O, his initial detention was effected pursuant to para 2(1) of Schedule 3 (being a shall provision) and his subsequent detention was effected pursuant to the words in parenthesis in para 2(3) (also being a shall provision).
The Court of Appeal divided the detention of Mr Francis into three periods: (a) The first period was from 4 December 2007 to 9 September 2008.
In respect of this period the court adopted the conclusion of the trial judge that the Home Secretary had, as in the Lumba case, unlawfully applied to Mr Francis an unpublished policy in favour of detention which was inconsistent with her published policy. (b) The second period was from 9 September 2008 to 1 June 2010.
In respect of this period the court adopted the conclusion of the trial judge that the Home Secretary had unlawfully failed to apply her policy by failing to cause the reviews of the continued detention of Mr Francis to be conducted by persons with authority to direct his release. (c) The third period was from 1 June 2010 to 29 September 2011.
The court adopted the finding of the trial judge that during this period there was no longer any prospect that the deportation of Mr Francis would take place within a reasonable time.
Although the focus required by the present case is upon the courts treatment in the Francis case of the first and second periods, its treatment of the third period remains important.
This requires reference to principles which are no longer in play in the present case, namely the Hardial Singh principles, named after the decision of Woolf J in R v Governor of Durham Prison, Ex p Hardial Singh [1984] 1 WLR 704.
In due course Lord Dyson distilled the decision of Woolf J into four principles of public law and he repeated them in para 22 of his judgment in the Lumba case.
The second Hardial Singh principle is that the Home Secretary should detain a person pending intended deportation only for a reasonable period and the third is that if, before the expiry of the reasonable period, it becomes apparent that the Home Secretary will not be able to effect deportation within a reasonable period, she should direct release.
In the Francis case the Court of Appeal concluded, in the light of the judges finding, that in respect of the third period the Home Secretary had been in breach of the third Hardial Singh principle.
What, however, is of importance is that it then proceeded to hold that the detention of Mr Francis during the third period had been rendered unlawful by the Home Secretarys breach of the third principle and that accordingly he was entitled to damages for false imprisonment during that period.
By contrast, however, the Court of Appeal proceeded to hold that neither of the different deficiencies in the Home Secretarys application of policy during the first and second periods rendered the detention of Mr Francis during those periods unlawful.
The court felt obliged to give a different value to the word shall in para 2(1) of Schedule 3 from that to be given to the word may in para 2(2) of it.
Moore Bick LJ said: 21.
In the present case there was no discretionary decision to detain the claimant which was capable of being vitiated by the application of an unlawful policy . 22.
The fact remains that the decision to detain has been made by Parliament and the statute provides the authority for detention, unless and until the [Home Secretary] exercises the power to release him.
It is that which distinguishes detention under sub paragraph (1) from detention under sub paragraph (2).
And see the judgment of Christopher Clarke LJ at paras 53 and 54.
Notwithstanding the proper predisposition of any court to discern a difference of effect in any difference of language between statutory provisions, I have, with great respect to Moore Bick and Christopher Clarke LJJ, come to the conclusion that their decision in relation to the first and second periods was wrong.
It was wrong for the following reasons, taken cumulatively: (a) Any claim by the Home Secretary to be entitled to detain a person pending deportation must be clearly justified by the statutory language: Khawaja v Secretary of State for the Home Department [1984] AC 74, 122 (Lord Bridge of Harwich). (b) The Home Secretarys duty to review the continuation of detention applies as much to those detained under para 2(1) as to those detained under para 2(2).
Why would Parliament intend that the same unlawful deficiencies in her conduct of those reviews should have such different legal consequences? (c) Why should the effect of a recommendation for deportation, with the result that detention falls into para 2(1) rather than para 2(2), be that it remains lawful notwithstanding the Home Secretarys unlawful application of policy? A Crown Court judges recommendation, perhaps made several years previously, has no other legal consequence, let alone one of such significance, and it is not even a recommendation for detention pending deportation. (d) Both men in the Lumba case were detained initially under para 2(2) (being a may provision) and subsequently under the words in parenthesis in para 2(3) (being a shall provision).
This court decided that they had been unlawfully detained throughout both periods as a result of the Home Secretarys unlawful application of policy; and it clearly considered that their later detention under the shall provision was no impediment to its decision.
It was no doubt respect for this courts decision which led Moore Bick LJ in the Francis case to suggest at para 17 that [t]he natural meaning of the words in paragraph 2(3) (and the meaning which best gives effect to the purpose of paragraph 2 as a whole) is that if the person in question has been detained, whether under sub paragraph (1) or (2), his detention is to continue on the same basis.
His suggestion therefore was that, where detention began under the authority of para 2(2), with the result that it would be rendered unlawful by any misapplication of policy, the same result would continue even after a deportation order was made and after authority for the detention instead became conferred by the words in parenthesis in para 2(3).
But, if in that situation no different effect is to be attributed to the word shall when found in the parenthesis in para 2(3), it is hard to attribute a different effect to it when found in para 2(1). (e) Section 36(2) of the 2007 Act, set out in para 16 above, refers to the Home Secretarys exercise of the power of detention under para 2(3).
But, according to the decision in the Francis case, Parliaments reference to a power under para 2(3) was incorrect in circumstances in which detention under para 2(3) has been preceded by detention under para 2(1). (f) The courts treatment in the Francis case of the Home Secretarys breach of the third Hardial Singh principle seems to me to have been at odds with its treatment of her unlawful application of policy.
The former was held to have rendered detention during the third period unlawful.
The latter was held not to have rendered detention during the first and second periods unlawful.
But why the difference? Moore Bick LJ suggested at para 47 that the Hardial Singh principles can be understood as implied limitations on the scope of an otherwise unqualified direction.
But why should the requirement in public law for the Home Secretary properly to apply her policy have any lesser effect than the requirement in public law for her to comply with the Hardial Singh principles? (g) In my view, therefore, the preferable analysis is along the lines sketched by Sir Stephen Sedley in his concurring judgment in the Francis case at paras 56 and 57, namely that the mandate to detain conferred by para 2(1) and by the words in parenthesis in para 2(3) is subject to two conditions.
At the risk of oversimplifying the Hardial Singh principles, I would summarise the first condition as being that there is a prospect of deportation within a reasonable time.
I would summarise the second as being that the Home Secretary will consider in accordance with her policy whether to exercise the power expressly given to her to direct release.
Were either condition not to be satisfied, the mandate would cease and the detention would become unlawful. (h) The second condition was not satisfied in respect of the first and second periods of Mr Francis detention, with the result that, as in respect of the third period, the mandate to detain him ceased and therefore his detention during those periods should also have been held to have been unlawful.
Accordingly there is no difference in effect between, on the one hand, the conditional mandate to detain conferred on the Home Secretary by para 2(1) and by the words in parenthesis in para 2(3) and, on the other, the power to detain conferred on her by para 2(2) and by the words not in parenthesis in para 2(3).
DISPOSAL
The conclusion postulated in para 40 above need no longer be provisional: were Os claim for judicial review permitted to proceed, the result in all likelihood would be a declaration that her detention from 4 March 2011 to 6 July 2011 was unlawful and an award to her of damages in the sum of 1.
The Court of Appeal decided that, since such was at most, so it added the likely result of the claim, it was appropriate to uphold the refusal of Lang J to grant permission for it to proceed.
I agree.
By the time of its issue O had been released and it could bring her no practical benefit.
To the extent that her contentions in these proceedings have deserved to be vindicated, she has secured their vindication in this judgment.
I would dismiss the appeal.
| UK-Abs | The appellant (O) is a Nigerian woman aged 38.
After arriving in the UK illegally in 2003, her claim for asylum or discretionary leave to remain in the UK was refused and her appeal was dismissed.
She was charged with an offence of child cruelty, but absconded on bail.
In 2007 she was arrested and charged with another offence, for which she was later convicted and imprisoned.
She later pleaded guilty to the outstanding child cruelty charge, and was sentenced to 12 months imprisonment and made the subject of a recommendation for deportation.
Upon her release from prison in August 2008, the respondent (the SSHD) detained O, first under para 2(1) of Schedule 3 to the Immigration Act 1971 (the 1971 Act) pending the making of a deportation order and then, once the deportation order was made, under para 2(3) of Schedule 3 to the 1971 Act pending deportation.
O was detained at Yarls Wood Immigration Removal Centre until 6 July 2011, when she was released on bail.
O has suffered from serious mental ill health, including episodes of self harm, and has been the subject of several medical reports.
In 2008 she was diagnosed with a recurrent depressive disorder and an emotionally unstable personality disorder.
In 2009 a consultant psychiatrist instructed by O recommended that she be transferred from Yarls Wood to hospital.
Following a suicide attempt in March 2010, O was admitted to hospital but was subsequently discharged, the hospitals consultant psychiatrist concluding that her needs would be met adequately at Yarls Wood.
In February 2011 a report on O was prepared by another clinical psychologist instructed by O (the Report).
The Report concluded in particular that: O suffered from not only a depressive disorder but a severe form of post traumatic stress disorder; O could not access the necessary mental health services at Yarls Wood and that release from detention would greatly benefit her mental health; O needed a long term structured package of mental health services; O needed to be referred to a specialist trauma focussed clinic for phased treatment; and that such a referral was in accordance with the National Institute for Health and Care Excellence (NICE) guidelines.
In the present proceedings, O challenges the lawfulness of the period of her detention from 22 July 2010 (and in particular from 4 March 2011, the date of the first review of Os detention following the SSHDs receipt of the Report) until 6 July 2011 (the date of her release on bail).
The object of these proceedings is to secure a declaration that Os detention during this period was unlawful and an award of damages.
In April 2012 Lang J refused permission for the claim to proceed and in July 2014 the Court of Appeal dismissed Os appeal.
O now appeals to the Supreme Court.
The Supreme Court unanimously dismisses Os appeal.
Lord Wilson gives the leading judgment, with which the other Justices agree.
This appeal requires the Court to consider the SSHDs policy relating to the detention of mentally ill persons pending deportation (the Policy) and the effect of any failure by the SSHD to apply that Policy, in the light of the Court of Appeals decision in R (Francis) [4].
The Policy obliges the SSHD to conduct monthly reviews of detention pending deportation [18].
Para 55.10 provides that those suffering from serious mental illness which cannot be satisfactorily managed within detention will normally be considered suitable for detention only in very exceptional circumstances, including for example where there is a risk of further offending or harm to the public [19].
In Os detention reviews between 4 March and 4 July 2011, only the briefest reference was made to the Report, and Os most recent diagnosis was incorrectly identified as being in March 2010 [24].
Although the Report was submitted to the SSHD expressly in support of Os application to challenge her deportation [22 23], on any view it bore some relevance to the Policy and should have been addressed properly in the detention reviews [25].
Therefore, as the Court of Appeal concluded (and the SSHD now accepts), the SSHD unlawfully failed to apply her Policy when deciding to continue to detain O between March and July 2011 [26 27].
The refusal to release O during this period was procedurally flawed [37].
Given that conclusion, this case does not afford the opportunity to consider the nature of the courts review of the legality of the SSHDs application of her Policy [28, 37].
The question is then how the SSHD would have reacted to the Report, had she applied her Policy correctly.
It is for the Court to determine the meaning of the Policy for itself [28].
Satisfactory is a word which catches the various different factors to which the SSHD may be required to have regard.
The discussion of satisfactory management in R (Das) is approved, save that treatment (available to a detainee only if released) which would be likely to effect a positive improvement in his or her condition might be relevant; the burden would be on the SSHD to inquire as to its availability.
While satisfactory does not mean optimal management, a narrow construction of management, meaning no more than control of the illness would lack principled foundation [30].
The Policy mandates a practical inquiry by the SSHD, in the light of the context of immigration detention [31].
The SSHD should have made inquiries and obtained answers to a number of questions as to whether, in the light of the Report, Os illness could satisfactorily be managed at Yarls Wood [32 33].
The Court cannot predict the result of those inquiries, most of which seem never to have been made.
The SSHD would also have had to consider whether there were very exceptional circumstances which nonetheless justified Os detention.
Even on the assumption that the proper application of the Policy should in due course have led the SSHD to direct Os release, it is unrealistic to consider that the conditions necessary for her release would have been in place prior to 6 July 2011, when she was released on bail [34 35].
Were Os claim for judicial review permitted to proceed, it would result in no more than a declaration that her detention was unlawful and an award of only nominal damages [38 40].
The lower courts were entitled to refuse Os application for permission [50].
R (Francis) R (Francis) was wrongly decided.
The power to detain conferred by para 2(1) of Schedule 3 to the 1971 Act (pending the making of a deportation order) and by the words in parenthesis in para 2(3) (pending deportation) is a mandate subject to two conditions: first, there must be a prospect of deportation within a reasonable time; and second, the SSHD must consider in accordance with the Policy whether to exercise the power to detain.
If either condition is not satisfied, the mandate to detain ceases and detention becomes unlawful [42 49].
|
This appeal raises three questions.
The first is whether a court, when entertaining a claim for possession by a private sector owner against a residential occupier, should be required to consider the proportionality of evicting the occupier, in the light of section 6 of the Human Rights Act 1998 and article 8 of the European Convention on Human Rights (the Convention).
The second question is whether, if the answer to the first question is yes, the relevant legislation, in particular section 21(4) of the Housing Act 1988, can be read so as to comply with that conclusion.
The third question is whether, if the answer to the first and second questions is yes, the trial judge would have been entitled to dismiss the claim for possession in this case, as he said he would have done.
The factual and procedural background
The substantive facts
The appellant, Fiona McDonald, is aged 45 and, sadly, she has had psychiatric and behavioural problems since she was five.
Dr Peter Sargent, an experienced psychiatrist, explained in his expert evidence that she had an emotionally unstable personality disorder and at times when her mental state has deteriorated she has presented with frank psychotic symptoms.
She has been unable to hold down any employment, and has not worked since 1999; since that time she lost two public sector tenancies owing to her behaviour.
In those circumstances, her parents, who are technically the respondents to this appeal, decided to buy a property for her to occupy.
Accordingly, in May 2005, they purchased 25 Broadway Close, Witney (the property) with the assistance of a loan from Capital Home Loans Ltd (CHL), which was secured by way of a registered legal charge over the property.
From about June 2005, the respondents granted the appellant a series of assured shorthold tenancies (ASTs) of the property, on the basis that the rent would be covered by housing benefit.
The last of those ASTs was granted in July 2008 for a term of one year from 15 July 2008.
The appellant continues to live in the property.
The financial arrangements between the respondents and CHL were that the respondents were to pay interest on the loan by way of monthly instalments, and that the loan was to be repayable in full after eight years ie on 12 May 2013.
Initially, the respondents paid the interest instalments as they fell due.
However, owing to financial difficulties which they unfortunately encountered in their business, they failed to meet all the interest as it fell due.
Accordingly, in August 2008, CHL appointed Andrew Hughes and Julian Smith (the Receivers) to act as receivers of the property under section 109 of the Law of Property Act 1925.
Having been appointed under that provision, the Receivers, although appointed by the chargee, CHL, were entitled to take steps in relation to the property on behalf of, and in the name of, the chargors, the respondents.
As the rent was being regularly paid, and the arrears of interest were not substantial, the Receivers took no immediate steps to end the AST or to sell the property.
However, not least because the arrears persisted, albeit not on a very large scale, the Receivers served a notice, in the name of the respondents, on the appellant on 13 January 2012, indicating that they would be seeking possession of the property.
The notice was served under section 21 of the Housing Act 1988 (the 1988 Act) and it expired on 14 March 2012.
The procedural history
On the expiry of that notice, the Receivers then issued the instant proceedings, again in the names of the respondents, for possession of the property in the Oxford County Court.
In the light of the appellants mental health, her brother, Duncan McDonald, was appointed her litigation friend.
The proceedings came on for trial before His Honour Judge Corrie, who heard them on 4 December 2012 and 7 March 2013.
The evidence of Dr Sargent included the following passages, which were quoted by the judge in his judgment: [Homelessness], I am sure, would have a major detrimental effect on [the appellants] mental health and she would decompensate entirely, very probably requiring admission to hospital.
I think that if she was evicted from the current accommodation she would have real difficulty in finding alternative rented accommodation that would accept her on benefits and in view of her mental health history including at times aggression towards others.
I think that there is a significant possibility that she would become homeless as a consequence.
Even if alternative accommodation is found for her, I think that the stress and upheaval of trying to find and move into alternative accommodation would also very likely have a significantly detrimental effect on her mental health with the possibility of harm to herself or suicide, or the possibility of violence towards others which she has exhibited on a number of occasions when she has previously de compensated under stress.
Judge Corrie gave judgment on 22 April 2013.
In his judgment, he considered a number of issues which are no longer live between the parties, including whether the respondents had misled CHL (they had not), and whether the Receivers had had authority to serve the notice and bring the proceedings (they had).
Accordingly, the judge concluded that, subject to the appellants reliance on article 8, the court had no alternative to make an order for possession.
He then turned to consider the appellants article 8 case, and held that it was not open to her to require the court to consider the proportionality of making an order for possession against a residential occupier, given that the person seeking possession was not a public authority.
He went on to hold that, if he was wrong on that issue, and he had been entitled to consider the proportionality of making an order for possession, he would have dismissed the action, because, on balance, he would have taken the view that those circumstances were sufficiently exceptional to justify dismissing the claim for possession on the basis that it was disproportionate.
The appellant appealed to the Court of Appeal, who dismissed the appeal [2014] EWCA Civ 1049; [2015] Ch 357.
The main judgment was given by Arden LJ, Tomlinson LJ gave a brief concurring judgment, and Ryder LJ gave a concurring judgment agreeing with them both.
The Court of Appeal agreed with the judge that article 8 could not be invoked by a residential occupier in possession proceedings brought by a private sector landowner, as a ground for opposing the making of, or the terms of, the order for possession.
However, they considered that, if article 8 could have been invoked in this case, the judge would have been wrong to dismiss the claim as he had indicated that he would have done.
The appellant now appeals to this court.
Before turning to the three issues identified in para 1 above, it is appropriate to explain the relevant provisions of the 1988 Act, and, albeit in very summary terms, the history of the policy of successive Governments towards renting in the private sector.
Private sector residential tenants and the relevant statutory provisions
Government policy since 1977
In the late 1970s, residential tenants in England and Wales had two forms of protection, which applied even if their tenancies had contractually expired, namely (i) protection from summary eviction and (ii) security of tenure.
The first, which applied to all residential tenants and most licensees, was under the Protection from Eviction Act 1977, which, among other things, precluded their eviction other than through court proceedings.
That statute remains in force, and, although it has been amended from time to time (sometimes for the purpose of strengthening or extending), its original provisions remain substantially in place.
There were also statutory provisions governing the amount of time which a court could allow an occupier before an order for possession took effect and could be executed.
Security of tenure, which only applied to tenants with private sector landlords, was accorded by the Rent Act 1977, whose provisions extended to most but not all such tenancies.
In very summary terms, that Act (i) precluded a court making an order for possession against most such tenants unless one or more of a number of specified grounds could be established, (ii) permitted family members to succeed on the death of the tenant in some circumstances, and (iii) limited the level of rent which a landlord could recover from the tenant, often to a rate considerably below the market level.
Under Chapter II of Part I of the Housing Act 1980, later replaced by Part IV of the Housing Act 1985, residential public sector tenants were for the first time given a substantially similar degree of security of tenure.
In 1987, the Conservative government published a White Paper, Housing: The Government's Proposals (Cm 214, 1987).
One of its principal aims was to reverse the decline of rented housing and to improve its quality para 1.1.
An important part of its thesis was that the protection afforded to tenants by the Rent Act 1977 and similar predecessor legislation, not least because of the security of tenure thereby afforded to tenants, had greatly reduced both the supply and the quality of housing in the private rented sector, which was to the disadvantage of residential tenants as a group paras 1.8 and 3.1.
The 1987 White Paper therefore made proposals which were intended according to para 1.15 to ensure that the letting of private property will again become an economic proposition.
The White Paper therefore proposed two new types of tenancy, namely (i) an assured tenancy, which would be at a freely negotiated rent, but with the tenant having security of tenure (albeit somewhat more attenuated than under the Rent Act 1977), and (ii) an AST, under which the tenant would have very limited security of tenure, and either party could have an appropriate rent determined (which would be substantially less restricted than the rent fixed under the Rent Act 1977) para 3.11.
The Bill which became the 1988 Act was introduced to give effect to these proposals (as well as giving effect to other proposals).
As originally enacted, the 1988 Act defined an AST as being a fixed term tenancy for at least six months, which could not be determined earlier by the landlord, and in respect of which the tenant had been given a notice in a prescribed form before the tenancy was granted.
The 1988 Act set out a number of grounds upon which a landlord could seek possession against a tenant under a shorthold tenancy (including an AST); it also contained provision for the landlord to serve a notice seeking possession at any time after the contractual term of an AST had expired, and then provided that the court should grant possession. (Housing Associations which had previously been treated as public sector landlords were brought into the ambit of the 1988 Act by section 140(2) and Schedule 18).
In 1995, the Conservative government published another White Paper, Our Future Homes: Opportunity, Choice and Responsibility (Cm 2901, 1995).
This White Paper noted the increase in the number of private sector tenancies in the residential sector between 1988 and 1994, and ascribed it largely to the 1988 Act, which had made renting out property a much more attractive alternative for owners p 21.
It also emphasised the need to reduce unnecessary regulation and control p 24.
The 1995 White Paper led to provisions in the Housing Act 1996 (the 1996 Act), whose effect was that (subject to exceptions) all assured tenancies granted after March 1997 would be ASTs; the 1996 Act also abolished the requirements for a six month minimum term and for the service of a prescribed notice (although it gave some protection under section 21(5) and it also required certain information to be given to tenants).
At the same time, an accelerated procedure was introduced whereby landlords could obtain possession against tenants under ASTs which had been the subject of notice of determination (see CPR 55.11 to 55.19 and CPR PD55A).
Around the same time, the so called buy to let sector began in earnest, and it subsequently has undergone an expansion, reflecting the structural and demographic trends towards a larger [private rental sector] according to a Treasury consultation paper, Financial Policy Committee powers of direction in the buy to let market, published in December 2015.
Following the general election in 1997, the Labour Government stated that it did not intend to reverse the reforms affected by the 1988 and 1996 Acts, but rather to build on them by promoting choice in both the public and private sectors, to quote from para 2.68 of a Law Commission Consultation Paper No 162 Renting Homes 1: Status and Security (2002), citing a paper published by the Department for Transport, Local Government and the Regions, Quality and Choice: A Decent Home for All, The Way Forward for Housing (December 2000).
That policy was continued by the Coalition government in 2010 and there is no reason to think that the Conservative government, elected in 2015, has different ideas.
Accordingly, since 1996, although the 1988 Act has been amended from time to time, its basic provisions have remained unaffected and continue to apply in England. (The Welsh Assembly has enacted a scheme based upon the Law Commissions recommendations on Renting Homes: The Final Report (2006, Law Com No 297) which preserves essentially the same distinction between private and public sector tenancies.) Successive reports emanating from government departments have claimed that the decrease in statutory protection effected by the 1988 and 1996 Acts has been at least one of the factors which has served to reinvigorate the private residential rented sector in England and Wales over the past 25 years see eg the annual English Housing Surveys issued by the Department for Communities and Local Government.
The Housing Act 1988 in its current form
Chapters I and II of Part I of the 1988 Act are concerned with assured tenancies generally and ASTs respectively.
Section 1 provides that a tenancy under which a dwelling house is let as a separate dwelling to an individual or individuals, who occupy it as her or their only or principal home is an assured tenancy, subject to certain specified exceptions (including cases where a local authority is the landlord).
None of those exceptions apply here.
Section 19A (as inserted by section 96(1) of the 1996 Act) provides that, subject to certain irrelevant exceptions, an assured tenancy entered into after March 1997 shall be an AST.
Section 5 of the 1988 Act (as amended by section 299 of, and paragraph 6 of Schedule 11 to, the Housing and Regeneration Act 2008) is in these terms, so far as relevant: (1) An assured tenancy cannot be brought to an end by the landlord except by (a) obtaining an order of the court for possession of the (i) dwelling house under section 7 or 21, the execution of the order, and (ii) and, accordingly, the service by the landlord of a notice to quit is of no effect in relation to a periodic assured tenancy. (1A) Where an order of the court for possession of the dwelling house is obtained, the tenancy ends when the order is executed. (2) comes to an end otherwise than by virtue of If an assured tenancy which is a fixed term tenancy an order of the court [of] the kind mentioned in (a) subsection(1)(a) , or (b) tenant, a surrender or other action on the part of the then, subject to section 7 and Chapter II below, the tenant shall be entitled to remain in possession of the dwelling house let under that tenancy and his right to possession shall depend upon a periodic tenancy arising by virtue of this section.
Section 7(1) of the 1988 Act provides that [t]he court shall not make an order for possession of a dwelling house let on an assured tenancy except on one or more of the grounds set out in Schedule 2.
Section 7(3) (as amended by paragraph 18 of Schedule 11 to the Anti social Behaviour, Crime and Policing Act 2014) requires the court to make an order for possession if any of those grounds is made out, subject, inter alia, to any available defence based on the tenants Convention rights, within the meaning of the Human Rights Act 1998.
Section 7(6) provides that a landlord can only rely on section 7 if the AST has expired or could be brought to an end on the ground on which possession is sought.
A common ground relied on under section 7 is arrears of rent, which represent a mandatory ground for possession if the rent is more than a specified period, between eight weeks and three months (depending on how frequently it is to be paid), in arrear see ground 8 of Schedule 2.
Section 19A provides that (subject to certain exceptions which are irrelevant for present purposes) an assured tenancy entered into after March 1997 is an AST.
Section 20A (as inserted by section 97 of the 1996 Act) requires a landlord under such a tenancy to provide the tenant with certain information in writing, failing which the landlord is liable to be convicted.
Section 21(1) of the 1988 Act (as amended by section 193 of, and paragraph 103 of Schedule 11 to, the Local Government and Housing Act 1989 and section 98(2) of the 1996 Act) states at the time of the service of notice and the hearing in the County Court in this case: [O]n or after the coming to an end of an assured shorthold tenancy which was a fixed term tenancy, a court shall make an order for possession of the dwelling house if it is satisfied (a) that the assured shorthold tenancy has come to an end and no further assured tenancy (whether shorthold or not) is for the time being in existence, other than an assured shorthold periodic tenancy (whether statutory or not); and (b) the landlord has given to the tenant not less than two months notice in writing stating that he requires possession of the dwelling house. (Various other restrictions on a courts power to order possession in relation to an AST have been added by the Housing Act 2004, the Deregulation Act 2015 and the Assured Shorthold Tenancy Notices and Prescribed Requirements (England) Regulations (SI 2015/1646) but nothing hangs on them for period proposed.)
Section 21(4) (as amended by section 98(3) of the 1996 Act) is at the centre of this case.
It states that: Without prejudice to any such right as is referred to in subsection (1) above, a court shall make an order for possession of a dwelling house let on an assured shorthold tenancy which is a periodic tenancy if the court is satisfied (a) that the landlord has given to the tenant a notice in writing stating that, after a date specified in the notice, being the last day of a period of the tenancy and not earlier than two months after the date the notice was given, possession of the dwelling house is required by virtue of this section; and that the date specified in the notice under (b) paragraph (a) above is not earlier than the earliest day on which, apart from section 5(1) above, the tenancy could be brought to an end by a notice to quit given by the landlord on the same date as the notice under paragraph (a) above.
Accordingly, a landlord under an AST can obtain an order for possession from a court against the tenant either (i) under section 21, after giving two months notice once the AST has come to an end, or (ii) under section 7, where the AST is a periodic tenancy or has come to an end or could be brought to an end, and one of the specified grounds is made out by the landlord.
In practice, the majority of possession proceedings issued against tenants who have been granted ASTs are brought under section 21 rather than section 7.
Chapter IV of the 1988 Act reinforces the protection to residential tenants afforded by the Protection from Eviction Act 1977.
In particular, it imposes a fairly steep measure of damages on a landlord who unlawfully evicts a residential occupier, and extends the ambit of the offence of harassment.
It is also relevant to refer to section 89(1) of the Housing Act 1980 which applies to possession orders against tenants under ASTs.
That section provides that, subject to certain exceptions (which do not include orders for possession in respect of an AST): Where a court makes an order for the possession of any land , the giving up of possession shall not be postponed (whether by the order or any variation, suspension or stay of execution) to a date later than 14 days after the making of the order, unless it appears to the court that exceptional hardship would be caused by requiring possession to be given up by that date; and shall not in any event be postponed to a date later than six weeks after the making of the order.
The issues
In summary terms, the appellants argument is that, when considering whether to make an order for possession against her, and if so on what terms, the judge should have taken into account the proportionality of making any such order, bearing in mind in particular article 8 and the interference which would be occasioned by the making of the order to her enjoyment of her home, and that, had he done so, he would have been entitled to refuse to make an order for possession and to dismiss the claim.
The effect of this argument would be that, despite the apparently mandatory requirements of section 21(4) of the 1988 Act (set out in para 25 above), the judge could have refused to make an order for possession in favour of the respondents, or, despite the apparently mandatory terms of section 89(1) of the 1980 Act (set out in para 28 above), he could have suspended or delayed the operation of the order for possession for a substantial, or even an indeterminate, period.
This argument gives rise to the three issues set out at para 1 above.
We shall take them in turn.
The first issue: can the appellant rely on proportionality?
Introductory
Article 8 of the Convention provides as follows: 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.
Section 6(1) of the Human Rights Act 1998 provides that [i]t is unlawful for a public authority to act in a way which is incompatible with a Convention right, which, of course, includes an article 8 right.
Section 6(1) is subject to subsection (2), which provides that subsection (1) does not apply if the authority is required so to act as a result of primary legislation or provisions made thereunder which cannot be construed in any other way.
Where the party seeking possession of residential property is a local authority, or other public authority within the meaning of section 6 of the Human Rights Act 1998, it is now well established that it is, in principle, open to the occupier to raise the question whether it is proportionate to make an order for possession against her, and if it is, to invite the court to take that into account when deciding what order to make.
That is the effect of the decisions of this court in Manchester City Council v Pinnock [2011] 2 AC 104 and Hounslow London Borough Council v Powell [2011] 2 AC 186.
Pinnock represented the resolution of a protracted inter judicial dialogue between the House of Lords and the Strasbourg court, discussed in paras 25 50.
The view originally taken by the House of Lords was that, although a claim for possession of residential property by a local authority engaged the article 8 right of the residential occupier, the proportionality of making an order for possession was already taken into account by Parliament through the legislation which limited the landlords right to obtain possession.
However, the Strasbourg court took the view that the existence of the legislation did not prevent an occupier in such a case from raising her article 8 rights when possession of her home was being sought.
In Pinnock, para 49, this court concluded that, in the light of the Strasbourg courts clear and constant jurisprudence, if our law is to be compatible with article 8, where a court is asked to make an order for possession of a persons home at the suit of a local authority, the court must have the power to assess the proportionality of making the order, and, in making that assessment, to resolve any relevant dispute of fact.
However, the Supreme Court also made it clear in paras 51 and 54 that it would only be in very highly exceptional cases that it will be appropriate for the court to consider a proportionality argument and that where the local authority is entitled to possession as a matter of domestic law, there will be a very strong case for saying that making an order for possession would be proportionate.
In Pinnock, it was made clear that the Supreme Courts conclusion, that proportionality should, if raised, be addressed (albeit that in the great majority of cases it could and should be summarily rejected) in every possession action against a residential occupier, only applied in cases where the person seeking possession was a local authority or other public authority.
That was because section 6(1) of the 1998 Act only applied to a public authority, which is unsurprising, given that the Convention is intended to protect individual rights against infringement by the state or its emanations.
Thus, in Pinnock, para 50, the Supreme Court made it clear that nothing said in the judgment in that case was intended to bear on cases where the person seeking the order for possession is a private landowner, and added that it was preferable for this court to express no view on the issue until it arises and has to be determined.
The present appeal raises that issue, and it therefore now falls to be determined.
A private sector landlord, such as the respondents, who are individuals, or CHL, which is a limited company trading for profit, is not a public authority.
However, the appellant argues that, because a court is specifically included within the expression public authority by section 6(3)(a) of the 1998 Act, no judge can make an order for possession of a persons home without first considering whether it would be proportionate to do so, and, if so, what terms it would be proportionate to include in the order.
Again, it can be said with some force that this is not, at least on the face of it, a particularly surprising proposition, as a domestic court would be regarded by the Strasbourg court as part of the state, and therefore obliged to respect individual rights enshrined in the Convention.
Accordingly, runs the appellants argument, in terms of article 8 proportionality, the position of a private sector residential tenant facing eviction is quite similar to that of a public sector residential tenant, as determined in Pinnock and Powell.
Having said that, it is, I think, accepted by the appellant that the position of a private sector tenant is rather weaker in that a private sector landlord can claim that any delay in giving him possession of the property to which he is entitled would be an interference with his rights under article 1 of the First Protocol to the Convention (A1P1), which provides as follows: Every natural or legal person is entitled to the peaceful enjoyment of his possessions.
No one shall be deprived of his possessions except in the public interest and subject to the conditions provided for by law and by the general principles of international law.
The preceding provisions shall not, however, in any way impair the right of a state to enforce such laws as it deems necessary to control the use of property in accordance with the general interest or to secure the payment of taxes or other contributions or penalties.
Accordingly, as Ms Bretherton QC accepts on behalf of the appellant, unlike in the case of a public sector landlord, a judge invited to make an order for possession against a residential occupier by a private sector landlord would, if the appellants argument is correct, have to balance the landlords A1P1 rights against the occupiers article 8 rights.
Either party would have a potential claim against the United Kingdom in Strasbourg if the balance were struck in the wrong place.
Preliminary view
In the absence of any clear and authoritative guidance from the Strasbourg court to the contrary, we would take the view that, although it may well be that article 8 is engaged when a judge makes an order for possession of a tenants home at the suit of a private sector landlord, it is not open to the tenant to contend that article 8 could justify a different order from that which is mandated by the contractual relationship between the parties, at least where, as here, there are legislative provisions which the democratically elected legislature has decided properly balance the competing interests of private sector landlords and residential tenants.
In effect the provisions of the Protection from Eviction Act 1977, section 89 of the Housing Act 1980 and Chapters I and IV of the 1988 Act, as amended from time to time, reflect the states assessment of where to strike the balance between the article 8 rights of residential tenants and the A1P1 rights of private sector landlords when their tenancy contract has ended. (It is true that the balance was initially struck in statutes enacted before the 1998 Act came into force in 2000.
However, the effect of those statutes has not only been considered and approved in government reports since 2000, as mentioned in para 19 above, but they have been effectively confirmed on a number of occasions by Parliament, when approving amendments to those statutes since 2000).
To hold otherwise would involve the Convention effectively being directly enforceable as between private citizens so as to alter their contractual rights and obligations, whereas the purpose of the Convention is, as we have mentioned, to protect citizens from having their rights infringed by the state.
To hold otherwise would also mean that the Convention could be invoked to interfere with the A1P1 rights of the landlord, and in a way which was unpredictable.
Indeed, if article 8 permitted the court to postpone the execution of an order for possession for a significant period, it could well result in financial loss without compensation for instance if the landlord wished, or even needed, to sell the property with vacant possession (which notoriously commands a higher price than if the property is occupied).
The contrary view would also mean that article 8 could only be invoked in cases where a private sector landowner, or other private sector entity entitled to possession in domestic law, was either required by law, or voluntarily chose, to enforce its rights through the court, as opposed to taking the law into its own hands eg by changing the locks when the residential occupier was absent.
There are a number of types of residential occupiers who are not protected by the Protection from Eviction Act 1977, and who can therefore be physically (albeit peaceably) evicted, such as trespassers, bare licensees, sharers with the landlord and some temporary occupiers, as well, it appears, as mortgagors see Ropaigealach v Barclays Bank plc [2000] 1 QB 263.
The risk of otherwise facing an article 8 defence seems a somewhat perverse incentive for a private sector landowner to take the unattractive course of locking out the occupier rather than the more civilised course of seeking possession through the courts.
More broadly, it would be unsatisfactory if a domestic legislature could not impose a general set of rules protecting residential tenants in the private sector without thereby forcing the state to accept a super added requirement of addressing the issue of proportionality in each case where possession is sought.
In the field of proprietary rights between parties neither of whom is a public authority, the state should be allowed to lay down rules which are of general application, with a view to ensuring consistency of application and certainty of outcome.
Those are two essential ingredients of the rule of law, and accepting the appellants argument in this case would involve diluting those rules in relation to possession actions in the private rented sector.
It is, of course, true that a court, which is a public authority for the purposes of the 1998 Act (and is regarded as part of the state by the Strasbourg court), actually makes the order for possession which deprives the tenant of his home and indeed puts an end to the AST.
However, as Lord Millett explained in Harrow London Borough Council v Qazi [2004] 1 AC 983, paras 108 109, the court is merely the forum for the determination of the civil right in dispute between the parties and once it concludes that the landlord is entitled to an order for possession, there is nothing further to investigate.
This conclusion does not mean that a tenant could not contend that the provisions of the 1988 Act did not, for some reason, properly protect the article 8 rights of assured shorthold tenants: that would involve arguing that the legislature had not carried out its obligations under the Convention.
However, quite rightly, no such argument was advanced on behalf of the appellant in this case.
As the summary in paras 11 19 above shows, the Governments approach to the private rented sector in England has been designed to confer a measure of protection on residential occupiers, without conferring so much protection as to deter private individuals and companies from making residential properties available for letting.
The extent of the protection afforded to tenants under ASTs is significant, if limited, and it enables both landlords and tenants to know exactly where they stand.
While there will of course occasionally be hard cases, it does not seem to us that they justify the conclusion that in every case where a private sector landlord seeks possession, a residential tenant should be entitled to require the court to consider the proportionality of the order for possession which she has agreed should be made, subject to what the legislature considers appropriate.
Of course, there are many cases where the court can be required to balance conflicting Convention rights of two parties, eg where a person is seeking to rely on her article 8 rights to restrain a newspaper from publishing an article which breaches her privacy, and where the newspaper relies on article 10.
But such disputes arise not from contractual arrangements made between two private parties, but from tortious or quasi tortious relationships, where the legislature has expressly, impliedly or through inaction, left it to the courts to carry out the balancing exercise.
It is in sharp contrast to the present type of case where the parties are in a contractual relationship in respect of which the legislature has prescribed how their respective Convention rights are to be respected.
Given that that is our view as a matter of principle, it is necessary to consider the jurisprudence of the Strasbourg court to see whether it points to a different conclusion.
The Strasbourg jurisprudence
There are two admissibility decisions of the European Commission on Human Rights which are inconsistent with the appellants case, and are understandably relied on by Mr Jourdan QC for the respondents.
They are Di Palma v United Kingdom (1986) 10 EHRR 149 and Wood v United Kingdom (1997) 24 EHRR CD 69.
Di Palma was a case where a private sector landlord forfeited a long and valuable residential lease for non payment of a relatively small amount of service charge, and the court refused the tenant relief from forfeiture owing to her refusal to apply within the statutorily prescribed time.
The Commission rejected the tenants application, which was based on articles 6, 8, 13 and 14 and on A1P1, as manifestly ill founded, as the Governments Convention responsibilities were not engaged by an exclusively private law relationship between the parties (p 154).
The Commission also said that the fact that a domestic court made the orders granting forfeiture and refusing relief made no difference, as the court merely provided a forum for the determination of the civil right in dispute between the parties (p 155).
In Wood, the same reasoning led to the conclusion that a mortgagor had no article 8 complaint if a private sector mortgagee sought and obtained possession of her home in circumstances in which she had failed to pay instalments due under the mortgage, which gave the mortgagee the right to seek possession as a matter of domestic law.
If these decisions represent the view in Strasbourg, they would be fatal to the appellants case.
However, Ms Bretherton QC contends that the Strasbourg jurisprudence has developed in a very different direction over the past 15 years.
So far as possession actions brought by public sector landlords are concerned, this is undoubtedly correct, as the decisions discussed in Pinnock, paras 31 43, demonstrate.
However, as we have explained, and as Ms Bretherton fairly accepts, there is a fundamental difference between public sector landlords (who owe their residential tenants an article 8 duty) and private sector landlords (such as those in the two admissibility decisions described in para 48 above, who do not).
Accordingly, we do not consider that the decisions concerning cases where a public sector landlord seeks possession are of much relevance.
Of those decisions discussed in Pinnock, it appears to us therefore that Connors v United Kingdom (2004) 40 EHRR 9, Blei v Croatia (2006) 43 EHRR 48, McCann v United Kingdom (2008) 47 EHRR 40, osi v Croatia (2011) 52 EHRR 39, Pauli v Croatia (Application No 3572/06) (unreported) 22 October 2009 and Kay v United Kingdom [2011] HLR 13 take matters little further for present purposes, as the party seeking possession was a public institution.
The same applies to the decisions in Orli v Croatia [2011] HLR 44 and in Buckland v United Kingdom (2013) 56 EHRR 16 (where the local authority owned the site see para 60).
The furthest any observations in those eight decisions can be said to go for present purposes is to support the notion that, whenever an order for possession is made by a court, article 8 is engaged.
However, observations which appear to have that effect when read on their own in the context of claims by public authorities, cannot be confidently translated to cases involving private sector landlords seeking to enforce a contractual right to possession subject to legislative constraints.
And, even if they can be so read, they beg the question whether a domestic court can be required to take into account the proportionality of making the order for possession required by the contractual terms as softened by domestic legislation.
Zehentner v Austria (2009) 52 EHRR 22 is at first sight of some assistance to the appellant, because the Strasbourg court held that article 8 rights could be invoked where the court had ordered a sale of the applicants home to reimburse her creditors.
However, quite apart from the fact that Austria does not seem to have challenged the contention that article 8 was engaged, the case was not concerned with the enforcement of a landlords right to possession, but with statutorily created powers of a court to enforce debts owed to creditors by ordering the sale of the debtors assets, including her home.
The basis of the courts finding of incompatibility was that the decision of the domestic court refusing the applicant any opportunity to pay off what was owing to her creditors had been disproportionate, principally in the light of the absence of any procedural safeguards and the applicants mental incapacity, which meant that the debts were unenforceable see paras 61 65.
The furthest this decision goes in assisting the appellant is to support the notion that article 8 is engaged whenever a court determines a tenancy of residential property and makes an order for possession.
However, once again, the decision does not support the notion that article 8 can be invoked by a residential occupier to curb her private sector landlords reliance on its contractual right to possession, where the statutory regime according her a degree of protection is not said to infringe the Convention.
Zrili v Croatia (Application No 46726/11) (unreported) 3 October 2013 is unhelpful for the same sort of reasons.
It involved the partition and sale of a residential property.
Croatia does not seem to have challenged the contention that article 8 could be invoked by the applicant, once she established that the property concerned was her home (see paras 42 and 59).
Quite apart from this, the case involved the domestic court exercising its own powers of partition and sale, rather than enforcing the contractual rights of the parties subject to specific legislative protective provisions, and it was a case where both parties had article 8 rights.
Thus, in para 65, the Strasbourg court described the domestic courts function as being to seek a partition model which would be feasible and appropriate in the circumstances of the case.
In any event, the application was rejected on the merits.
In two other cases involving Croatia, article 8 was successfully invoked by a residential tenant against whom a private sector landlord had obtained an order for possession.
In Breec v Croatia [2014] HLR 3, the land owner was a private company, but it had been a state owned company when the tenancy was granted a factor which the court plainly thought relevant (see para 48).
In any event, Croatia did not rely on the subsequent privatisation to justify an argument that article 8 could not be invoked (see para 33).
It therefore seems to us that the judgment in that case can take matters no further on this appeal.
The same points can be made about the subsequent decision in Lemo v Croatia (Application No 3925/10, etc) (unreported) 10 July 2014 (see paras 28 and 43).
For completeness, it is right to mention Belchikova v Russia (Application No 2408/06) (unreported) 25 March 2010, which also involved a private land owner seeking possession (having inherited the property concerned after the former owners death), but the decision is of no assistance as there appears to have been no challenge to the contention that article 8 could be invoked, it appears that the domestic law may well have involved a balancing exercise, and in any event the application was held to be manifestly ill founded on the facts.
It is worth noting concurring opinions in two of the Strasbourg court decisions mentioned above, which are very much in line with Lord Milletts observation in Qazi, cited in para 44 above.
In Buckland, para OI 1, Judge De Gaetano said that while it is perfectly reasonable to require that an eviction notice issued by the Government or by a local authority should be capable of being challenged on the grounds of proportionality, when the landlord is a private individual the tenants right should in principle be limited to challenging whether the occupation has in fact come to an end according to law.
He added that [i]n this latter case the proportionality of the eviction in light of the relevant principles under article 8 should not come into the equation.
In Breec, at pp 37 38, Judge Dedov, having pointed out that the applicant did not challenge the privatisation of the properties, observed that, if the domestic court could hold that it was disproportionate to grant the land owner possession when domestic law entitled him to it, it would represent an interference with the private owners claims, and that it would have amounted to interference with the owners rights and such interference would be arbitrary from the very outset, since the private owner cannot be responsible for the states social obligations.
Another decision which deserves mention is Mustafa and Tarzibachi v Sweden (2008) 52 EHRR 24, where the Strasbourg court considered a claim by applicants who had been evicted by a court order at the suit of their landlords, who had determined their tenancy for installing a satellite dish in breach of covenant.
The Strasbourg court held that this infringed the applicants article 10 rights, but did not go on to consider their claim in so far as it was based on article 8 (see para 54).
It is fair to say that the domestic courts involvement was enough to render the application based on articles 8 and 10 admissible (see paras 33 34).
However, as we have already said, that does no more than establish that article 8 is engaged in a case where a private sector claimant seeks possession of a defendants home pursuant to the terms of the contract between them.
Beyond that, it does not seem to us that Mustafa is of any assistance.
Contrary to the submission on behalf of the appellant, we do not consider that this decision involved holding that article 10 could be invoked to vary the contractual rights as agreed between two private persons, in a case such as the present, where there is no suggestion that the legislature has failed to protect the relevant Convention rights.
The effect of the decision in Mustafa, as we see it, was that the Swedish Government had failed to enact legislation to satisfy article 10, so far as individuals rights to receive information by satellite were concerned, and that in those circumstances, unless the court had power to give effect to such rights despite the terms of the relevant contract, the applicants article 10 rights would be infringed (see again para 34).
Indeed, it is worth noting that the Strasbourg court in Mustafa considered that para 59 of its earlier judgment in Pla v Andorra (2006) 42 EHRR 25 was in point (see footnote 8).
In that paragraph the Strasbourg court said that it could not remain passive where a national courts interpretation of a legal act, be it a testamentary disposition, a private contract, a public document, a statutory provision or an administrative practice appears unreasonable, arbitrary or, as in the present case, blatantly inconsistent with the prohibition of discrimination established by article 14 and more broadly with the principles underlying the Convention.
That is a long way from what this case is about.
Conclusion on the first issue
In these circumstances, while we accept that the Strasbourg court jurisprudence relied on by the appellant does provide some support for the notion that article 8 was engaged when Judge Corrie was asked to make an order for possession against her, there is no support for the proposition that the judge could be required to consider the proportionality of the order which he would have made under the provisions of the 1980 and 1988 Acts.
Accordingly, for the reasons set out in paras 40 46 above, we would dismiss this appeal on the first issue.
This renders it unnecessary to address the second and third issues.
However, both issues are of potential importance.
The second issue is relevant to many cases when the court is faced with a choice between making an order under section 3 or under section 4 of the 1998 Act.
The third issue is of importance in terms of giving guidance to judges faced with an article 8 proportionality argument by a residential occupier in the context of a possession claim by a public sector land owner.
Accordingly, we will go on to consider those two issues.
The second issue: could section 3 have applied?
Section 3(1) of the 1998 Act provides 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.
The appellant argues that, if this court could read down section 143D(2) of the 1996 Act (as inserted by paragraph 1 of Schedule 1 to the Anti social Behaviour Act 2003) in Pinnock and section 127(2) of the same Act in Powell, then there is no reason not to do the same for section 21(4) of the 1988 Act.
Their wording is in similarly mandatory terms.
Section 21(4) (para 25 above) states that the court shall make an order for possession of a dwelling house let on an assured shorthold tenancy which is a periodic tenancy if satisfied, in effect, that the landlord has served the correct two months notice.
Section 143D(2) of the 1996 Act, which relates to demoted tenancies, states that The court must make an order for possession unless it thinks that the procedure under sections 143E and 143F has not been followed.
Section 127(2) of the 1996 Act, which relates to introductory tenancies, states that The court shall make [an order for possession] unless the provisions of section 128 apply.
If those two mandatory provisions can be read down so as to allow for the court to assess the proportionality of making the order, why can section 21(4) not be read in the same way? What is the difference between the notice requirements in section 21(4) and the requirements in sections 143E and 143F or section 128 respectively?
This is an attractive argument, so much so that the second interveners, the Residential Landlords Association, are persuaded that section 21(4) could be read in this way (although they argue that it should not).
Indeed, we were ourselves initially attracted by it.
There are, however, powerful arguments to the contrary.
Both demoted and introductory tenancies can only be granted by a public authority landlord.
There are three inter linked reasons why decisions made by public authorities under the 1996 Act are different from decisions made by private landlords.
First, public authorities are obliged to use their powers lawfully in accordance with the general principles of public law; it is open to a tenant to defend possession proceedings on the ground that the authority has acted unlawfully: see Wandsworth London Borough Council v Winder [1985] AC 461.
As Lord Scott of Foscote pointed out in Doherty v Birmingham City Council [2009] 1 AC 367, at para 69, this concept of lawfulness has no application to a private landlord, who is entitled to recover possession of his property in accordance with the law for whatever reason he likes.
He is not subject to the constraints of Wednesbury reasonableness: see Associated Provincial Picture Houses Ltd v Wednesbury Corpn [1948] 1 KB 223.
Second, section 143E of the 1996 Act (as inserted by paragraph 1 of Schedule 1 to the 2003 Act) requires the landlord seeking to bring a demoted tenancy to an end to serve a notice giving reasons for doing so and informing the tenant of his right to seek a review of the decision under section 143F (as inserted by paragraph 1 of Schedule 1 to the 2003 Act).
Similarly, section 128 of the 1996 Act requires the landlord seeking to bring an introductory tenancy to an end to serve a notice giving reasons and informing the tenant of his right to seek a review.
In short, both are reasons based processes.
There is nothing equivalent in section 21(4) of the 1988 Act, which is purely mechanical the right form of notice must be given at the right time to expire at the right time.
Third, of course, by section 6(1) of the 1998 Act, it is unlawful for a public authority landlord to act incompatibly with the Convention rights.
By section 7(1)(b) 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 rely on the Convention right concerned in any legal proceedings.
None of this applies to a private landlord, who is not obliged to act compatibly with the Convention rights.
It was for this combination of reasons that this court, in both Pinnock and Powell, held that it was possible to read the relevant provisions of the 1996 Act in such a way as to include the article 8 requirement of proportionality in the courts assessment of the lawfulness of the public authoritys actions in seeking possession.
It is true, as the third interveners, Shelter, point out, that there are constraints on a private landlords freedom of action, other than those laid down in section 21(4) itself (an example is the Equality Act 2010, which prohibits unlawful discrimination in bringing possession proceedings).
But all of these are laid down by statute or statutory instrument.
And none of them imports the public sector obligations, in particular the duty to act compatibly with the Convention rights, set out above.
There is therefore not the same flexibility inherent in the language of section 21(4) of the 1988 Act as there is in the language of sections 143D and 127(2) of the 1996 Act such as to enable the court to read into it a requirement that the court consider the proportionality of making an order for possession.
More importantly, however, there are substantive limits to what the courts can achieve under section 3(1) of the 1998 Act.
It is possible to do a great deal with words.
In the leading case of Ghaidan v Godin Mendoza [2004] UKHL 30; [2004] 2 AC 557, it was possible to read as husband and wife to include two people of the same sex.
The courts had already learned what could be achieved by interpretation in order to make statutory provisions conform to a higher law, under the European Communities Act 1972 and in construing the legislation of certain Caribbean islands compatibly with the fundamental rights protected by their Constitutions.
As Lord Rodger of Earlsferry put it in Ghaidan at para 119, Such cases are instructive in suggesting that, where the court finds it possible to read a provision in a way which is compatible with Convention rights, such a reading may involve a considerable departure from the actual words.
But there is a difference between interpretation, which is a matter for the courts and others who have to read and give effect to legislation, and amendment, which is a matter for Parliament.
While the boundary may not always be easy to discern, the difference was neatly encapsulated by Lord Rodger in Ghaidan at para 121: If the court implies words that are consistent with the scheme of the legislation but necessary to make it compatible with Convention rights, it is simply performing the duty which Parliament has imposed on it and on others.
It is reading the legislation in a way that draws out the full implications of its terms and of the Convention rights.
And, by its very nature, an implication will go with the grain of the legislation.
By contrast, using a Convention right to read in words that are inconsistent with the scheme of the legislation or with its essential principles as disclosed by its provisions does not involve any form of interpretation, by implication or otherwise.
It falls on the wrong side of the boundary between interpretation and amendment of the statute.
Notably, Lord Rodger was looking at the legislation itself when seeking to draw the line, rather than its broader policy.
In the case before us, the scheme of the legislation is to draw a careful distinction between those cases in which good grounds must be shown for obtaining possession and those cases, such as this, where no ground need be shown.
The essential principles disclosed by its provisions are that private landlords letting property under an AST should have a high degree of certainty that, if they follow the correct procedures and comply with their own obligations, they will be able to regain possession of the property.
Reading in an obligation to assess the proportionality of doing so in the light of the personal circumstances of the individual tenant would not go with the grain of the legislation but positively contradict it.
All this can be concluded without considering the broader policy of the 1988 Act, which (as we have explained at paras 12 to 19 above) was to stimulate the re growth of the private rented sector and in doing so to increase the supply of homes available to rent.
For all those reasons, we conclude that it would not be possible to read section 21(4) in the way contended for by the appellant.
Had we been persuaded that it was incompatible with the Convention rights, the only remedy would have been a declaration of incompatibility under section 4.
As was said (in a different context) in Powell, at para 64, this is an area where the choice of if, and how, to remedy any incompatibility should be left to Parliament.
The third issue: would the judge have been entitled to dismiss the claim?
Even supposing that a proportionality assessment were required, at least where the occupier has crossed the high threshold of showing an arguable case, and section 21(4) could be read so as to accommodate it, what should the consequences be? The judge in this case held, that had proportionality arisen, he would on balance have taken the view that the appellants personal circumstances were sufficiently exceptional to justify dismissing the claim for possession on the basis that it was disproportionate.
In reaching that obiter conclusion, he did not consider whether there were other solutions to the problems than dismissing the claim.
In those rare cases where the court is required to assess the proportionality of making a possession order, the court has at least four possible options.
One is to make a possession order, and if it does so, its powers to suspend or postpone the effect of the order are severely limited by section 89(1) of the Housing Act 1980 (set out at para 28 above).
In Powell, at para 62, this court held that the language of section 89(1) was so strong that any reading down to enable the court to postpone the execution of a possession order for a longer period than the statutory maximum would go well beyond what section 3(1) of the 1998 Act permits.
As Lord Phillips pointed out in Powell at para 103, the effect of section 89(1) is to increase the options available to the court.
It may (a) make an immediate order for possession; (b) make an order for possession on a date within 14 days; (c) in cases of exceptional hardship make an order for possession on a date within six weeks; or (d) decline to make an order for possession at all.
The cases in which it would be justifiable to refuse, as opposed to postpone, a possession order must be very few and far between, even when taken as a proportion of those rare cases where proportionality can be successfully invoked.
They could only be cases in which the landlords interest in regaining possession was heavily outweighed by the gravity of the interference in the occupiers right to respect for her home.
The evidence filed on behalf of Shelter indicates that Pinnock defences hardly if ever succeed against public authority landlords save in combination with some other public law factor (although they may well provide a helpful bargaining counter in particularly deserving cases).
Were a proportionality defence to be available in section 21 claims, it is not easy to imagine circumstances in which the occupiers article 8 rights would be so strong as to preclude the making, as opposed to the short postponement, of a possession order.
In this case, the judge referred to the fact that the arrears of interest on the mortgage were insubstantial and the rent was always up to date.
That is, however, only part of the story.
The loan which enabled the appellants parents to buy this house was for a period of only eight years, expiring on 12 May 2013, three weeks after the judge gave his judgment.
The lenders were entitled to their money back then.
The amount due (apart from legal costs) was nearly 164,000.
The best chance of recovering all that was due to them was to sell the property with vacant possession.
It may be, as the appellant argues, that they could recoup everything by selling the property with the appellant as sitting tenant.
This does, however, seem unlikely, as her parents would have been advised to do this if they could have done.
It was also in their interests to achieve the best price possible on the property, in the hope of realising some equity (which might have helped their daughter find another home).
In any event, it would be for the appellant to show that a possession order would be disproportionate, and that to refuse a possession order would not prevent the lenders from recovering the sums to which they were entitled.
It is difficult to see how the appellants circumstances, most unfortunate though they undoubtedly are, could justify postponing indefinitely the lenders right to be repaid.
In the circumstances, therefore, and on the evidence available to the judge, it seems likely that the most the appellant could hope for on a proportionality assessment would be an order for possession in six weeks time.
Conclusion
For these reasons, we would dismiss this appeal.
| UK-Abs | The appellant, Fiona McDonald, is aged 45 and suffers from a personality disorder.
In May 2005 her parents purchased 25 Broadway Close, Witney (the property), as a home for her, with the assistance of a loan from Capital Home Loans Ltd (CHL), which was secured by way of a registered legal charge over the property.
From about June 2005, the respondents granted the appellant a series of assured shorthold tenancies (ASTs) of the property, the last of which was granted in July 2008 for a term of one year.
The appellant continues to live in the property.
Owing to financial difficulties with their business, the respondents failed to meet payments on the loan as they fell due.
CHL accordingly appointed Andrew Hughes and Julian Smith (the Receivers) to act as receivers of the property.
The rent due was regularly paid, but the arrears persisted.
The Receivers subsequently served a notice, in the name of the appellants parents, on the appellant on 13 January 2012, indicating that they would be seeking possession of the property and, on the expiry of that notice, they issued proceedings in the name of the parents for possession of the property in the Oxford County Court.
His Honour Judge Corrie heard the proceedings on 4 December 2012 and 7 March 2013.
He gave judgment on 22 April 2013 and held that the court was not required to consider the proportionality of making an order for possession against a residential occupier where the person seeking possession was not a public authority, and as section 21(4) of the Housing Act 1988 (the 1988 Act) required him to make an order for possession against a person holding under an AST who had been served with an appropriate order, he had to make such an order.
The judge added that, had he been entitled to consider proportionality, he would, on balance, have concluded that the claim for possession was disproportionate and dismissed the action.
The Court of Appeal dismissed the appellants appeal.
The appellant now appeals to the Supreme Court.
The Supreme Court unanimously dismisses Fiona McDonalds appeal.
Lord Neuberger and Lady Hale give the only judgment, with which the other Justices agree.
This appeal raises three questions [1]: (i) whether a court, when entertaining a claim for possession by a private sector owner against a residential occupier, should, in light of section 6 of the Human Rights Act
1998 (the HRA) and article 8 of the European Convention on Human Rights (the ECHR) be required to consider the proportionality of evicting the occupier; (ii) whether, if the answer to question (i) is yes, the relevant legislation, in particular section 21(4) of the 1988 Act, can be read so as to comply with that conclusion; (iii) whether, if the answer to questions (i) and (ii) is yes, the trial judge would have been entitled to dismiss the claim for possession in this case, as he said he would have done.
The appellants argument is that the judge should have taken into account the proportionality of making an order for possession for article 8 purposes and, on that basis, could have refused to make an order for possession despite the apparently mandatory terms of section 21(4) of the 1988 Act and section 89(1) of the Housing Action 1980 (the 1980 Act), which limits the period for which a court can postpone an order for possession taking effect [29 30].
It is well established that it is open to the occupier to raise the question of the proportionality of making an order for possession where the party seeking possession is a public authority within the meaning of section 6 of the HRA [34].
In deciding this issue in the case of Manchester City Council v Pinnock [2011] 2 AC 186, the Supreme Court made it clear that nothing in its judgment was intended to bear on cases where the person seeking possession was a private landowner [37].
The appellant contends that the same reasoning applies to a private sector landlord because the court which would grant the order for possession is a public authority for the purposes of the HRA [38 39].
The courts preliminary view is that it is not open to the tenant to contend that article 8 could justify a different order from that which is mandated by the contractual relationship between the parties, at least where there are legislative provisions through which the democratically elected legislature has balanced the competing interests of private sector landlords and residential tenants [40].
Were it otherwise, the ECHR could be said to be directly enforceable as between private citizens so as to alter their contractual rights and obligations [41].
As to the Strasbourg authorities, the admissibility decisions of Di Palma v United Kingdom (1988) 10 EHRR CD 149 and Wood v United Kingdom are inconsistent with the appellants case [48].
While subsequent authorities provide some support for the notion that article 8 is engaged on the making of the order for possession against a residential occupier such as the appellant, there is no support for the proposition that the judge could be required to consider the proportionality of the order which he would have made under legislation such as the 1980 and 1989 Acts [49 59].
The appeal is accordingly dismissed on the first issue [59 60].
As to the second issue, it would not be possible to read section 21(4) of the 1988 Act in the way contended for by the appellant [61 70].
Had the court been persuaded that the appellant was right on the first issue, a declaration of incompatibility under section 4 of the HRA would have been the only remedy [70].
As to the third issue, the judge did not consider whether, if he had found that the claim for possession were disproportionate, there might have been other solutions to the problem than dismissing the claim [71].
In those rare cases where a court is required to assess the proportionality of making a possession order, its powers to suspend or postpone the effect of that order are severely limited by section 89(1) of the 1980 Act [72].
The cases in which it would be justifiable to refuse, as opposed to postpone, a possession order must be very few and far between and could only be cases in which the landlords interest in regaining possession was heavily outweighed by the gravity of the interference in the occupiers right to respect for her home [73].
On the facts of this case, it seems likely that the most the appellant could hope for on a proportionality assessment would be an order for possession in six weeks time, the maximum permitted by section 89(1) of the 1980 Act [75].
|
The appellant (Ms McBride) was unfairly dismissed.
The Employment Tribunal ordered her reinstatement.
The issue in this appeal is whether the tribunal erred in so doing.
The appeal stems from the controversy created by the disputed identification by four fingerprint officers in the Scottish Criminal Records Office (the SCRO) of a fingerprint in a murder inquiry in 1997.
They identified the print which was found at the locus of the murder as being that of Detective Constable Shirley McKie.
David Asbury was tried and convicted of the murder, but his conviction was later quashed.
As a result of the disputed identification, DC McKie was charged with perjury for giving evidence, in the trial, that she had had never been to the place where the fingerprint was found.
During DC McKies trial, differences of opinion were expressed about the identification, and she was acquitted of perjury.
A number of investigations followed which generated intense media interest and criticism of the fingerprint service in Scotland.
Factual background
Ms McBride was employed as a fingerprint officer in the SCRO from 1984.
She was originally employed by the Strathclyde Joint Police Board but her employment was transferred to the Scottish Police Services Authority (the SPSA) with effect from 1 April 2007.
Her dismissal from employment occurred on 1 May 2007 in the context of that transfer.
Ms McBride and three other officers were suspended from duties from 3 August 2000 until 20 May 2002, while investigations were undertaken.
One investigation concluded that the four experts had not been guilty of any malicious wrongdoing.
The Black report of February 2002 concluded that no matters of misconduct or lack of capability have taken place in the work surrounding [the fingerprint which was the subject of the disputed identification] and recommended that the four experts be returned to their normal positions without any disciplinary action being taken.
On 20 May 2002 Ms McBride and the other three experts returned to work on restricted duties.
It should be explained that the SCRO fingerprint bureau provided services for the police and the Crown Office.
The duties of fingerprint experts included signing reports on fingerprint identification for use in criminal trials and giving evidence at such trials.
Because Scots criminal law requires corroboration, it was and is the practice for fingerprint experts to produce joint reports and for both experts to be available, if required, to give oral evidence in support of their findings, although frequently their report is accepted by the defence or, if it is not, only one of the two signatories gives oral evidence at trial.
On return to work Ms McBride and the other three experts resumed work on restricted duties but also undertook an extensive retraining programme over 12 to 18 months with a view to their return to full duties, including the signing of joint reports and giving evidence in court.
The four experts sought to return to full duties but were not allowed to do so.
The problem was that there remained disagreement between fingerprint experts, within the SCRO, nationally and internationally, over the disputed identification.
It was and is the task of prosecuting counsel in the Crown Office, under the direction of the Lord Advocate, to select witnesses to give evidence in trials.
There were concerns in the Crown Office that the use of any of the four experts in a criminal trial would encourage defence counsel to cross examine on matters relating to the DC McKie controversy in order to weaken the significance of the fingerprint evidence in the eyes of the jury.
In September 2006, Lord Boyd of Duncansby, who was then Lord Advocate, gave evidence to the Scottish Parliaments Justice 1 Committee, which was inquiring into the SCRO and the Scottish Fingerprint Service.
He was asked whether the Crown Office intended to call the fingerprint officers involved in the DC McKie case as expert witnesses in the future.
In response he expressed the view that a trial in which any of those officers gave evidence might become a trial of the fingerprint officer rather than the accused and that this was a situation that he wished to avoid.
Ms McBride and her colleagues remained on restricted duties.
In their evidence to the Employment Tribunal some of her colleagues stated that she fulfilled a worthwhile role and had made a valuable contribution to her department.
Two managers who had direct experience of her work gave evidence that she was seen as trustworthy and conscientious.
See para 43 below.
After the Scottish Government had announced its intention to establish the SPSA, the Justice Minister instructed Assistant Chief Constable David Mulhern to review the Scottish fingerprint service and produce an action plan to develop it as an integrated part of the new Scottish Forensic Science Service.
Mr Mulhern was appointed the interim chief executive of the SPSA, which was intended to bring together the work of five separate bodies.
Because of the continued disagreements over the disputed identification, Mr Mulhern saw the creation of a new fingerprint service within the Scottish Forensic Science Service as of the utmost importance.
In the lead in to the creation of the SPSA, Mr Mulhern made it clear that he did not want Ms McBride and the other three experts involved in the disputed identification to transfer to the SPSA.
At a meeting on 12 September 2006 between representatives of the employer and trade union representatives he stated that there would be an opportunity to take redeployment within Strathclyde Police and that he had not considered the possibility that the fingerprint officers might return to full duties.
Ms McBride wanted to return to full duties and expected that the question of her return to full duties would be discussed after her transfer to the SPSA.
Ms McBrides employment transferred to the SPSA on 1 April 2007.
She was invited to a meeting on the next day to discuss redeployment.
She asked her employers representatives to disclose who had made the decision to consider only redeployment, and when and why that decision had been made.
Her questions were not answered correctly until 27 April 2007.
On 1 May 2007 at a meeting chaired by Mr Tom Nelson, the SPSAs director of forensic services, Ms McBride said that she was willing to discuss redeployment but wished an opportunity to discuss reinstatement to unrestricted duties before she considered redeployment.
There was no discussion at the meeting of her returning to unrestricted duties or of the status quo of restricted duties continuing.
On the same day, Mr Nelson gave Ms McBride a letter in which he informed her that her employment would terminate forthwith because of her inability to carry out the full range of [her] duties and the failure to identify any suitable redeployment options for [her].
Ms McBrides internal appeal against her dismissal was unsuccessful.
She presented a complaint of unfair dismissal to an Employment Tribunal.
Before discussing the legal proceedings, I mention, first, the terms of her contract of employment and, secondly, later events.
The contract of employment
Ms McBrides job description stated her job title as fingerprint officer and described her main functions as a fingerprint expert as being to provide an efficient and effective identification support to operational police personnel.
Of the 12 listed job activities, one and part of another had become excluded duties as a result of the SPSAs decision that she was not to give evidence in court.
They were: 2.
To prepare court cases and give evidence as required. 3.
To check and sign identifications prepared by other Fingerprint Officers and trainee Fingerprint Officers.
Ms McBride could not give evidence in court and so could not perform task 2.
She was able to check identifications under task 3 above.
But she could not sign the identifications because she was not allowed to give evidence in court.
Other activities, such as examining the fingerprints lifted by scene of crime officers, assessing and verifying identifications, validating fingerprint classifications, preparing and collating statistical information, liaising with investigating officers, assimilating new technology and assisting in the training of fingerprint trainees, remained open to her.
Later events
A public judicial inquiry, the Fingerprint Enquiry, chaired by Sir Anthony Campbell, reported in December 2011 (after the decision of the Employment Appeal Tribunal discussed below).
It concluded among other things that Ms McBride and her colleagues had not acted improperly in identifying the fingerprint, although it was not DC McKies fingerprint.
David Mulhern ceased to be the chief executive officer and left the employment of the SPSA in April 2009.
The SPSA ceased to exist on 1 April 2013 and its rights and obligations were transferred to the respondent (the SPA).
The legal proceedings
(i) The Employment Tribunal
The Employment Tribunal (the ET) in a judgment dated 26 January 2009 found that Ms McBride had been unfairly dismissed.
Because the arguments which this court has heard in this appeal have included opposing interpretations of the ETs judgment and reasons and the appeal turns on whether the ET erred in law, it is necessary to set out the relevant part of the judgment and to refer to parts of the supporting reasoning.
The ET in its judgment ordered Ms McBrides reinstatement in these terms: The claimant shall be reinstated by the respondent to the position of Fingerprint Officer and treated in all respects as if she had not been dismissed.
The judgment also awarded Ms McBride a sum as arrears of pay from the date of her dismissal and ordered the SPSA to restore to her all rights and privileges, including pension rights, to which [she] was entitled at the time of her dismissal.
In its reasons, the ET set out the reasons for its judgment in detail and with thoroughness.
After finding that the dismissal of Ms McBride had been unfair, the ET turned to the question of remedy.
In para 356 the ET commenced its discussion by stating: We must now consider the issue of remedy.
The claimant seeks reinstatement if successful, and we firstly considered this matter (it being understood that reinstatement would be to a non court going fingerprint officer role). (emphasis added as counsel for the SPA submitted that this demonstrated an error of law)
The ET then referred to sections 114 and 116 of the Employment Rights Act 1996 (the 1996 Act) and addressed the question whether it was practicable for the SPSA to comply with an order for reinstatement.
The ET referred to press articles about Mr Mulherns alleged wish to force the resignation of staff involved in the disputed identification.
It rejected the idea that the articles demonstrated a breakdown in the trust and confidence between Ms McBride and Mr Mulhern.
It acknowledged that Ms McBride had had legitimate concerns when she had raised a grievance when Mr Mulhern was appointed.
The ET also held (para 370) that Ms McBride was right in her belief that Mr Mulhern had deliberately not provided her with full and accurate details in response to the questions which she posed on 2 April 2007 (para 11 above).
As against its finding that Ms McBride held Mr Mulhern responsible for the decisions made and to a certain degree distrusted him, the ET weighed in the balance the fact that the SPSA was a large employer with over 1,800 employees and that Mr Mulhern as chief executive, would not have day to day contact with her (paras 371 372).
In response to the employers submission that Ms McBride, on returning to work, would seek to vindicate her disputed identification of the fingerprint, the ET acknowledged both that she continued to believe that her identification had been correct and that the thrust of her evidence had been about returning to court going duties.
But it stated (para 373): We considered our conclusion that the decision of the respondent that the claimant could not return to court going duties, was a reasonable decision, will move this matter forward for both the claimant and the respondent.
In so saying the ET appears to have thought that its support for the SPSAs decision to restrict Ms McBrides duties would make it easier for both employee and employer to work together because it might persuade Ms McBride that she would not succeed in her quest to return to the excluded duties.
The ET (para 374) concluded on balance that it would be practicable for the SPSA to reinstate the claimant to the role of (non court going) fingerprint expert (again emphasis added).
It rejected the submission that this was creating a job for Ms McBride, because she would be reinstated to the job that she had carried out for several years and because there were other examples of fingerprint officers who did not carry out court going duties but who continued to fulfil a role.
The ET also held that it was just and equitable that a reinstatement order be made because Ms McBrides conduct had not contributed to her dismissal: (a) her inability to return to court going duties was not the result of any misconduct and (b) her unwillingness to discuss redeployment in late April 2007 had been justified by her employers prevarication.
The ET summarised its decision in the closing paragraphs.
It stated (para 379): We decided, having taken all of the above points into account, to order the respondent to reinstate the claimant to the position of fingerprint officer: the respondent shall treat the claimant in all respects as if she had not been dismissed.
(ii) The Employment Appeal Tribunal
The SPSA appealed to the Employment Appeal Tribunal (EAT) which revoked the ETs judgment on remedy and remitted the case to a freshly constituted tribunal to determine compensation.
The EAT decided that the ETs decision that it was practicable for the SPSA to comply with an order for reinstatement was perverse because of Ms McBrides continued demands to be allowed to resume the excluded duties.
The EAT stated (para 35): The clear picture is that returning the claimant to work for the respondents in the limited non court role provided for by the Tribunal would not work.
Far from being practicable, the impression presented was one of the reinstatement envisaged by the Tribunal being liable to have disastrous consequences.
The EAT expressed sympathy with the argument advanced on behalf of the SPSA that Ms McBride had contributed to her dismissal, because she had been given the answers to her questions by 27 April 2007 and yet had persisted in her refusal to engage in discussions about redeployment.
But it decided that it was appropriate that a freshly constituted tribunal should consider whether monetary compensation should be reduced as a result of her conduct.
It justified the requirement of a differently constituted tribunal because [t]he nature and extent of [the ETs] criticism of Mr Mulhern and of the respondents is such as to be indicative of a significant measure of sympathy towards the claimant (para 37).
(iii) The Inner House
Ms McBride appealed to the Inner House of the Court of Session.
An Extra Division of the Inner House (Lady Paton, Lady Dorrian and Lord McGhie) heard the appeal.
In its opinion the Inner House rejected the EATs conclusion that the ET had been perverse.
It criticised the EAT for substituting its own perception of the facts for the interpretation of the ET and stated that the reasons which the EAT gave for implying that the ET might be partial did not withstand scrutiny.
But the Extra Division held that the ET had erred in law; it interpreted the ETs judgment as an order to employ Ms McBride on altered contractual terms.
As reinstatement had to be unconditional, the ET had misapplied the law.
The Extra Division therefore refused the appeal so far as it sought to restore the ETs order of reinstatement, but allowed the appeal to the extent of remitting the case to the original ET.
Ms McBride appeals to this Court.
The issues in this appeal
The central issue in this appeal is the correct interpretation of the ETs judgment.
It is whether the ET had erred in law by purporting to reinstate Ms McBride to employment which was different from the employment from which she had been dismissed.
Mr Calum MacNeill QC for Ms McBride submitted that the ET had not fallen into error because it had sought to place her in the same contractual relationship as she was in before her dismissal.
Mr Brian Napier QC, for the SPA, argued the contrary.
He accepted the Inner Houses criticisms of the EATs finding of perversity and did not seek to defend that finding or the EATs suggestion of bias.
Mr Napier however sought to advance a new argument, which had not been pursued before the ET, the EAT or the Inner House, as a fall back if this Court took the view that the ET had not sought to alter the terms of Ms McBrides employment contract.
He submitted that the ET had erred in its judgment of practicability and had reached a perverse decision for a different reason from that which the EAT had found.
The decision, he submitted, was perverse because it had not considered that its order, if made, would return the parties to a position of contractual conflict in which Ms McBride could assert (a) a contractual right to carry out the excluded duties and therefore (b) that her employer was in material breach of contract when it refused to allow her to perform those duties.
In my view, this additional argument comes too late.
It was not developed in the tribunals below and is not supported by findings of fact which were made in the context of such a submission.
In any event, on the facts found by the ET, I am not persuaded that the argument, if properly developed at the time, would have succeeded.
I therefore comment on this argument only briefly after I have examined the statutory provisions and addressed the central issue in this appeal.
The statutory provisions
The remedies for unfair dismissal are set out in sections 112 to 117 of the 1996 Act.
If the complainant wishes such an order, the tribunal is required first to consider whether to make an order for reinstatement, and if it decides not to make such an order, then, secondly, to consider whether to make an order for re engagement (sections 112(2), (3) and 116(1), (3)).
If neither order is made, the tribunal may make an award of compensation for unfair dismissal (section 112(4)).
An order for reinstatement is defined as an order that the employer shall treat the complainant in all respects as if he had not been dismissed (section 114(1)).
An order for re engagement on the other hand is an order that the complainant be engaged in employment comparable to that from which he was dismissed or other suitable employment (section 115(1)).
The EAT (Simler J) in British Airways plc v Valencia [2014] IRLR 683, (paras 25 and 26) contrasted an order for reinstatement which places the complainant into the same job on the same terms, and an order for re engagement, which may involve a change in the identity of the employer, the nature of the employment or the terms as to remuneration.
I would not go so far as Simler J where she said (para 25) that a reinstatement order involved the employee having the same manager.
The employer, while treating the employee in all respects as if he had not been dismissed, could give the employee a new line manager to avoid further conflict.
It is the contractual rights, the terms and conditions of the employment, which must be reinstated and the rights and privileges (such as seniority and pension rights) which must be restored to the employee under a reinstatement order.
In my view Mr Napier was right to challenge the view that a reinstatement order required the recreation of the precise factual conditions at the point of dismissal.
But the basic dichotomy between the two types of order of which Simler J spoke is in my view correct.
Thus, the ET has no power to order reinstatement in terms which alter the contractual terms of the complainants employment.
When considering whether to make an order for reinstatement the tribunal must take into account: (a) whether the complainant wishes to be reinstated, (b) whether it is practicable for the employer to comply with the order and (c) where the complainant has caused or contributed to the dismissal, whether it would be just to order his reinstatement (section 116(1)).
The tribunal, when considering whether to make an order for re engagement, must take into account similar considerations the complainants wishes, the practicability of the employers compliance with the order, and the justice of making the order if the complainant caused or contributed to the dismissal (section 116(3)).
At the stage when it is considering whether to make a reinstatement order, the tribunals judgment on the practicability of the employers compliance with the order is only a provisional determination.
It is a prospective assessment of the practicability of compliance, and not a conclusive determination of practicability.
This follows from the structure of the statutory scheme, which recognises that the employer may not comply with the order.
In that event, section 117 provides for an award of compensation, and also the making of an additional award of compensation, unless the employer satisfies the tribunal that it was not practicable to comply with the order.
Practicability of compliance is thus assessed at two separate stages a provisional determination at the first stage and a conclusive determination, with the burden on the employer, at the second: Timex Corpn v Thomson [1981] IRLR 522, 523 524 per Browne Wilkinson J and Port of London Authority v Payne [1994] ICR 555, 569 per Neill LJ.
Thus in Ms McBrides case, the ET, when considering whether to make the order for reinstatement, did not need to reach a concluded view on whether Ms McBride would accept her continued exclusion from the excluded duties and avoid confrontation with her employer on that issue.
It was sufficient if the ET reasonably thought that it was likely to be practicable for the employer to comply with the reinstatement.
Discussion
The principal question, as I have said, is a question of the interpretation of the ETs judgment.
In my view, the order, which I have set out in para 18 above, if viewed by itself is not open to criticism, reflecting as it does the words of section 114(1) of the 1996 Act.
The question is whether the context, in particular the ETs reasoning, gives rise to a different interpretation of the order.
I am satisfied that the answer to that question is no.
In reading the ETs reasons, I ask myself whether the ET was seeking to impose a contractual limitation on Ms McBride in the reinstatement order, which removed the excluded duties from her job description, or was simply recognising a practical limitation on the scope of her work caused by circumstances beyond her control and that of her employer.
I am satisfied that it was the latter for the following four reasons.
First, the ET was aware both of the terms of Ms McBrides contract of employment and that for several years previously she had been actively employed as a fingerprint officer but had not been asked or allowed to sign reports or give evidence in court (paras 16 and 298 of its reasons).
That was the status quo to which Ms McBride would have returned pursuant to a reinstatement order as the employer had to treat her as if she had not been dismissed (section 114(1) of the 1996 Act).
Secondly, the ET was aware that she wanted to perform the excluded duties but held that the SPSAs decision that she could not return to those duties was reasonable (para 297 of its reasons).
As the decision whether to call a particular expert as a witness in a criminal trial rested with the Crown Office and not the SPSA and as the Lord Advocate had made his views clear (para 7 above), the conclusion that the SPSA had acted reasonably is unsurprising.
Thirdly, the ET rejected the idea that continuing in a non court going role amounted to alternative employment.
The ET criticised Mr Mulherns evidence which had been calculated to give the impression that Ms McBride had done little of value in the previous years.
He had failed to investigate that and had decided from an early date that the four fingerprint officers would not work for the SPSA.
The ET accepted the evidence of Ms McBrides managers, Mr McKenzie and Mr Innes, about the amount of work carried out by a fingerprint expert which does not involve signing reports or giving evidence in court and their assessment that Ms McBride had made a valuable contribution in the years in which her duties had been restricted (paras 144 to 146 and 298 to 309 of the reasons).
The ETs reasoning in para 374 of its reasons, which I have summarised in para 22 above, also supports this view.
Fourthly, the words in para 356 of the reasons, on which counsel for the SPA relied and which I have set out and emphasised in para 19 above, were in parenthesis and spoke of an understanding, which may suggest that the ET was considering the practical context of the reinstatement rather than an alteration of the terms of employment.
The words in parenthesis confirmed that the order for reinstatement did not amount to an order that the employer must alter the status quo by allowing Ms McBride to resume the excluded duties.
This interpretation is in my view supported by the ETs statement in para 373 of the reasons, which I have quoted in para 21 above, that its conclusion that the employers decision about the excluded duties was reasonable would move [the] matter forward for both the claimant and the respondent.
Such a statement would make no sense if the ET thought that its order was altering the terms of the contract of employment.
For completeness, I refer to the suggestion that the ET in para 298 of its reasons had held that Ms McBride was unable to continue in her role and that the employer had to consider alternative employment.
In my view, on a proper reading of that paragraph, in which the ET examined the actions of the SPSA, it referred back to the finding that Mr Mulhern had decided by May 2006 or in any event before September 2006 that the four fingerprint experts could not continue in their current restricted roles and that their employment had to be terminated (paras 27, 49 and 142 of the reasons).
That explains why the ET spoke in that paragraph of the claimant being placed in a position which was akin to redundancy.
The reference to alternative employment therefore did not relate to the continuation of their restricted roles and thus does not militate against the decision on the interpretation of the ETs decision to which I have come.
That is sufficient to determine this appeal in Ms McBrides favour.
But I comment briefly on Mr Napiers late arriving submission that the ETs view on the practicability of compliance with the reinstatement order was perverse because it had the potential to expose the SPSA to a claim by Ms McBride that it was in fundamental breach of contract.
The ET addressed the arguments which the SPSA advanced on the practicability of compliance between paras 357 and 371 of its reasons.
Those arguments did not include the submission which the SPA now seeks to advance.
There are cases in which it has been held that an employer, who by unilateral action has fundamentally altered the nature of an employees job, has repudiated the contract of employment.
See, for example, Coleman v S and W Baldwin [1977] IRLR 342, Pedersen v Camden London Borough Council (Note) [1981] ICR 674.
But the problem for the SPA is that such decisions depend on the particular facts of the case.
Whether an employee had a reasonable expectation of being allowed to do certain work which he or she enjoyed or which maintained or developed work related skills are questions to which the answers are fact sensitive.
These questions were not raised before the ET.
If they had been, the ET could have applied its mind to them and made findings of fact which were relevant to their answer.
It did not do so because it was not asked to do so.
In any event, it is not clear from the findings which the ET made that the SPSAs decision to bar Ms McBride from the excluded duties would amount to a fundamental alteration of the nature of Ms McBrides job.
I have no doubt that giving expert evidence in a criminal court and being cross examined by counsel would be a stimulating experience and repeated exposure to the courts would develop or preserve skills.
Ms McBrides wish to return to the excluded duties is therefore understandable.
But that does not mean that her exclusion from them is a fundamental alteration of her job.
The ET recorded evidence that much of the work of the fingerprint office did not involve the excluded duties.
At para 147 of its reasons, the ET recorded that only 3.6% of cases referred to the fingerprint service required a joint report to be signed and in only 0.8% of cases did an expert have to attend court to give evidence.
The ET also recorded its findings (para 149 of its reasons) that several fingerprint officers had been excused from attending, or had never been required to attend, court, including an officer who suffered from ill health, a trainer and the Head of Bureau.
There were the findings, which I have mentioned (para 43 above), of the valuable role which Ms McBride performed although barred from the excluded duties.
There is also the finding (paras 297 and 373 of the reasons) that the SPSA acted reasonably in deciding that Ms McBride should not return to the excluded duties.
Further, there was no finding in the ETs reasons that Ms McBride had ever asserted that her exclusion from the excluded duties amounted to a breach of contract by her employer.
Mr MacNeill in his submissions accepted that Ms McBride did not have a contractual right to sign reports or give evidence, as the provision of work in the criminal courts was not in the SPAs gift.
As I have said (para 37 above), the ETs determination on practicability was only a provisional determination.
It was aware of friction between Ms McBride and Mr Mulhern and had formed the view that its finding that it was reasonable for the SPSA to maintain the bar on the excluded duties would assist both parties to move forward.
On the findings of fact which the ET has made, and in particular its finding on the reasonableness of the bar, a breach of contract seems a remote possibility.
I therefore reject the SPAs fall back argument.
Remedy
There is now no challenge to the further involvement in this case of the ET which heard Ms McBrides claim in 2008 and issued its judgment in 2009.
The Court was informed that Employment Judge Lucy Crone remains in office but it was not known if the lay members of the original ET are still in service.
I therefore propose that the Court should remit the case to the original tribunal, or to a tribunal which includes the member or members of the original tribunal who are still in office, to consider variation of its order relating to the matters specified under section 114(2) of the Employment Rights Act 1996 in view of the time that has passed since its order was made.
I also propose that counsel be invited to make submissions within 21 days about the order for expenses which this Court should make.
Conclusion
I would therefore allow the appeal.
| UK-Abs | This appeal concerns the proper approach of Employment Tribunals (ETs) when ordering that an employer reinstate an employee who has been unfairly dismissed.
The appeal arises from the scandal over the disputed identification of a fingerprint in a murder inquiry in 1997, which resulted in the trial and conviction (later quashed) of David Asbury (the McKie Scandal).
A fingerprint at the murder scene was identified by four experts from the Scottish Criminal Records Office (SCRO) fingerprint bureau as belonging to Detective Constable Shirley McKie.
The SCRO provided services for the police and Crown Office, and their experts duties included signing fingerprint reports for use in criminal trials and giving evidence at trial.
As a result of the identification, DC McKie was charged with perjury for giving evidence at Mr Asburys trial that she had never been to the crime scene.
During DC McKies trial differences of opinion emerged about the fingerprint identification and she was acquitted.
The McKie Scandal generated much media interest and criticism of the fingerprint service in Scotland.
The appellant, Ms McBride, was one of the experts involved in the McKie Scandal, and she and the other experts were suspended from 3 August 2000 while investigations took place.
One investigation concluded that the experts had not been guilty of any malicious wrongdoing and recommended that they return to work without any disciplinary action being taken.
Accordingly, in May 2002 Ms McBride and the other experts resumed work on restricted duties and undertook extensive retraining.
They sought to return to full duties (including the signing of joint reports and giving evidence in court) but were not allowed to do so.
This was because there remained disagreement, within the SCRO, nationally and internationally, over the McKie Scandal and concern that any evidence from the experts at trial would be undermined by cross examination on matters relating to the scandal.
In 2007 the Scottish Police Services Authority (SPSA, the respondent, now known as the Scottish Police Authority) was established.
David Mulhern was tasked with integrating the fingerprint service into a new Scottish Forensic Science Service.
He made it clear he did not want the experts involved in the McKie Scandal to transfer to the SPSA but that redeployment was an option.
After her employment transferred to the SPSA, Ms McBride indicated that she would discuss redeployment but wished first to discuss reinstatement to unrestricted duties.
There was no such discussion and she was dismissed.
She claimed for unfair dismissal.
The ET held that Ms McBride had been unfairly dismissed and ordered that she be reinstated to the position of Fingerprint Officer and treated in all respects as if she had not been dismissed.
In its reasoning the ET held it would be practicable for the SPSA to reinstate the claimant to the role of (non court going) fingerprint expert.
The SPSA appealed, and the Employment Appeal Tribunal (EAT) revoked the ETs judgment on remedy and remitted the case to a freshly constituted tribunal to determine compensation, holding that the ETs decision that it was practicable for the SPSA to comply with an order for reinstatement was perverse.
On Ms McBrides appeal to the Court of Session, although the Inner House rejected the EATs conclusion that the ETs order for reinstatement was perverse, it held that the ET had erred in law by ordering the SPSA to employ Ms McBride on altered contractual terms.
Ms McBride appealed to the Supreme Court.
The Supreme Court unanimously allows Ms McBrides appeal.
Lord Hodge (with whom the other Justices agree) gives the leading judgment.
The case is remitted to the original ET, or to a tribunal which includes the member or members of the original ET who are still in office, to consider in what respects it should vary its order for compensation in view of the time that has passed since the order.
Lord Hodge observes that the ETs order for reinstatement (set out at [18]) viewed alone is not open to criticism, as it reflects the definition of such orders set out under s.114(1) of the Employment Rights Act 1996.
The question is whether the context in which the order was made and the ETs reasoning in support of the order should give rise to a different interpretation of the order [39].
Lord Hodge answers this question in the negative.
The ET was not seeking to impose a contractual limitation in the reinstatement order removing the excluded duties (i.e. signing reports and attending court to give evidence) from Ms McBrides job description.
Rather it was recognising a practical limitation on the scope of her work caused by circumstances beyond her and her employers control [40].
This conclusion is supported by four reasons: (1) The ET was aware both of Ms McBrides terms of employment and that for several years previously she had been actively employed as a fingerprint officer but had not been asked or allowed to sign reports or give evidence in court.
That was the status quo to which she would have returned pursuant to a reinstatement order [41]. (2) The ET was aware that Ms McBride wanted to perform the excluded duties but held that the SPSAs decision that she could not return to those duties was reasonable [42]. (3) The ET rejected the idea that continuing in a non court going role amounted to alternative employment.
It criticised Mr Mulherns evidence, which had been calculated to give the impression that Ms McBride had done little of value in the previous years, and accepted the evidence of Ms McBrides managers about the amount of work carried out by fingerprint experts which does not involve the excluded duties and their assessment that Ms McBride had made a valuable contribution in the years in which her duties had been restricted [43]. (4) The ETs references to Ms McBride being reinstated to a non court going fingerprint officer role were included in parenthesis and spoke of an understanding, which may suggest that the ET was considering the practical context of the reinstatement rather than an alteration of the terms of employment.
The words in parenthesis confirmed that the order for reinstatement did not amount to an order that the employer must alter the status quo by allowing Ms McBride to resume the excluded duties [44].
Lord Hodge rejects an additional argument by the respondent that the ETs view on the practicability of compliance with the reinstatement order was perverse because it had the potential to expose the SPSA to a claim by Ms McBride that it was in fundamental breach of her employment contract by refusing to allow her to perform the excluded duties.
This argument was not developed in the courts below and, in any event, would not have succeeded if properly developed at the time in the light of the ETs findings of fact [30 31 & 46 52].
|
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.
| UK-Abs | 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].
|
A man is convicted of an offence.
Satisfied that he is suffering from mental disorder, the court makes an order for his detention in hospital.
Satisfied that it is necessary for the protection of the public, the court also makes a restriction order, which removes from the hospital the power to discharge him.
In due course a tribunal directs his discharge from hospital on conditions.
Afterwards, however, the Secretary of State for Justice (the Minister) exercises his power to recall the man to hospital, where he is subject to renewed detention.
This appeal is about the explanation for the recall which the law requires the Minister to provide to the man both at the time of his recall and soon afterwards.
In this case the explanation provided on behalf of the Minister, the respondent, to Mr Lee Hirons, the appellant, at the time of his recall was simply that his mental health had deteriorated.
This generates three questions: (1) Was such an explanation legally sufficient? (2) If not, did it make the appellants renewed detention unlawful? (3) If his detention was unlawful, should the court formally so declare and, in particular, should it award him damages for it and, if so, how much? Fifteen days after the appellants recall, a fuller oral explanation for it was provided to him.
The Minister concedes that each of two separate legal principles required it to have been provided to him within three days of the recall and indeed in writing.
These conceded breaches of the appellants rights generate three further questions: (4) Did the breaches make the appellants detention between the third and the fifteenth days following his recall unlawful? (5) award him damages and, if so, how much? If so, should the court formally so declare and, in particular, should it (6) Even if they did not make his detention unlawful, should the court make the breaches the subject of a formal declaration and, in particular, should it award him damages for them and, if so, how much?
The appellant appeals against the order of the Court of Appeal dated 1 May 2014, whereby it dismissed his appeal against the dismissal of his application for judicial review of the Ministers explanations to him: [2014] EWCA Civ 553, [2015] QB 385.
The leading judgment was given by Sir Stanley Burnton; and Jackson LJ (who added some observations of his own) and Patten LJ both agreed with it.
In effect the answers to the questions given by the Court of Appeal were: (1) Yes. (2) Not applicable. (3) Not applicable. (4) no. (5) Not applicable. (6) Not addressed but the courts order means no.
B: BACKGROUND
The appellant is aged 49.
He has the misfortune to have suffered protracted mental disorder, namely a personality disorder and a chronic paranoid delusional disorder.
The question whether he has also suffered mental illness, in particular paranoid schizophrenia, has for long been the subject of clinical disagreement.
He has a long history of admission to psychiatric hospitals.
The appellant has 61 convictions for a variety of offences.
In 2006 he was convicted of offences of arson and burglary.
In the light of the nature or degree of his mental disorder and of all the other circumstances, the court then made a hospital order pursuant to section 37 of the Mental Health Act 1983 (the Act), by which it authorised his admission to and detention in a secure hospital.
But, in the light of the perceived need to protect the public from serious harm, the court then also made a restriction order pursuant to section 41 of the Act, by which the power From 11 June 2012 to 19 July 2012 the appellant resided at the care home in to discharge the appellant was removed from the hospital and vested in the Minister or the First tier Tribunal (Health, Education and Social Care Chamber).
By section 79(1) of the Act, the appellant thereby became a restricted patient for the purposes of Part V of it.
The appellants detention took place in medium secure hospitals first in Dawlish and, from 2009, in Doncaster.
On 27 April 2012, under section 73(2) of the Act, the First tier Tribunal made a direction, which on 24 August 2011 it had in principle resolved to make but had deferred, that he should be conditionally discharged from the hospital in Doncaster.
In so directing, the tribunal overruled the concerns of the appellants responsible clinician that the risks of his discharge, even on a conditional basis, were too great.
Having received evidence from Mr Hart, the appellants proposed social supervisor at a registered care home for ex offenders in Lancaster, the tribunal approved a plan that the appellant should move there on 11 June 2012.
There were eight conditions, including that he should reside only at places approved by Mr Hart, that he should accept treatment directed by whoever was to become his responsible clinician, that he should not drink alcohol, that he should not approach members of the public in order to promote his (very intense) religious beliefs and that he should not contact an identified woman.
Lancaster.
On 19 July 2012 both Mr Hart, who had indeed become the appellants social supervisor at the home, Ms Weldon, who was a psychologist attached to the home, and Dr Omar, who had become his responsible clinician in Lancaster, resolved to invite the Minister to consider whether to exercise his power under sections 42(3) and 73(4)(a) of the Act to recall the appellant to a secure hospital.
That afternoon Mr Hart telephoned Mr Elliott, who was a senior case worker at the National Offender Management Service within the Ministry of Justice (the Ministry).
Mr Elliott was responsible for acting on behalf of the Minister in deciding whether to recall conditionally discharged patients to hospital.
Immediately after their conversation, Mr Hart sent to Mr Elliott, by email, a statement in which he outlined the concerns of himself and of Ms Weldon, who had together seen the appellant that morning, and of Dr Omar.
In the statement Mr Hart suggested that in the appellant there was a greater component of mental illness (as opposed to other types of mental disorder) than had at first been observed; that his mental health had deteriorated; that he had become fixated upon securing change of the conditions of his discharge; that he had been craving alcohol; that his presentation had become more unpredictable; that he had threatened to assault somebody; that he had been ranting and swearing in the office; that, against Dr Omars advice, he had refused to take all medication; that he was likely to abscond and thereupon to abuse alcohol and to seek to contact the woman identified in one of the conditions; that the only option was to recall him; and that a bed was available for him in a medium secure hospital in Manchester.
Mr Elliott immediately resolved that the appellant should be recalled to the hospital in Manchester.
One hour after receiving Mr Harts email, he sent to Mr Hart by email a warrant for the appellants recall.
It recited no reason for the recall.
When, however, Mr Hart thereupon informed the appellant that he had been recalled to a hospital in Manchester, he added that the reason for his recall was that his mental health had deteriorated.
No fuller explanation was provided to the appellant that day; and, as I have indicated, the warrant with which he was then served would not have enlightened him.
That evening police officers took him from Lancaster to the hospital in Manchester.
He was unhappy but cooperative.
Mr Hart at once confirmed to Mr Elliott by email that the warrant had been executed.
Nothing in the evidence casts doubt on the appellants assertions that, when he arrived there, the hospital in Manchester knew nothing about him; that, during that evening, Dr Kasmi, a consultant forensic psychiatrist who was to become his responsible clinician there, asked him why he had been recalled; and that even two days later the nursing staff remained unable to explain to him the reasons for his recall.
Within a month of recalling a restricted patient to hospital, the Minister is obliged by section 75(1)(a) of the Act to refer his case to the First tier Tribunal.
In the appellants case the Minister did so at once, namely on 20 July 2012.
On 24 July 2012 an officer in the Ministry, not Mr Elliott, sent a profoundly unsatisfactory letter to the hospital in Manchester.
It was no doubt intended to be addressed to the appellants responsible clinician there, namely Dr Kasmi.
But it was addressed to Dr Omar even though the writer should have been well aware that he had been the appellants responsible clinician in Lancaster.
It enclosed a copy of the warrant which, for some reason, the writer understood not yet to have been executed.
The writer was equally unaware of the fact that the Minister had already referred the appellants case to the tribunal.
In the letter the writer stated that the appellant should be informed of the reasons for his recall within 72 hours of admission; but 72 hours had passed by the date of the letter.
Nor did the letter in any way identify the reasons for the recall; it did not even attach the statement which Mr Hart had emailed to Mr Elliott on 19 July.
One surely needs to hope that the letter represents an isolated example of incompetence and that it does not betoken within the Ministry a cavalier attitude towards recall wholly inappropriate to the discharge of its grave responsibilities.
On 3 August 2012, namely 15 days following his recall, the appellant was apprised of the reasons for it.
Dr Kasmi, who had somehow secured a copy of Mr Harts statement, then read it out to the appellant and discussed it with him.
But he did not give the appellant a copy of it nor provide him with any other written explanation of the reasons for his recall.
As quickly as 13 August 2012 the appellants long standing and energetic solicitors in Cornwall wrote a pre action letter to the Ministry, by which he challenged the lawfulness of the decision to recall him to hospital.
On 19 October 2012 his application for judicial review was issued.
It is clear from the judgment by which Dingemans J dismissed the application (reported together with the judgments in the Court of Appeal at [2015] QB 385) that at that stage the appellants primary case was that there were insufficient grounds for the Ministers decision to recall him.
But it was only his secondary case that he took to the Court of Appeal, namely that there was an unlawful failure to explain the reasons for the recall to him; that the failure infected the legality of his detention; but that, even if it did not do so, it nevertheless generated a right to a declaration and damages.
This court is not concerned with the outcome of the proceedings before the First tier Tribunal but understands that the appellant remains presently detained in hospital, albeit no longer the one in Manchester.
C: THE CONCEDED BREACHES
In April 1993 the Department of Health issued a circular to local authorities, LAC (93)9, and guidelines to health authorities, HSG (93)20, both of which were entitled Recall of mentally disordered patients subject to Home Office restrictions on discharge.
The two documents are in much the same terms and remain substantially operative today.
In annexes they state the governments policy towards the provision to recalled patients of an explanation for their recall.
The annexes introduce the subject by pointing out that a patient recalled to hospital may be in an excitable and nervous state and that it is difficult to expect whoever is escorting him to hospital to provide a full explanation of the decision to recall him.
Accordingly, so they continue, a three stage procedure should be applied: (1) at the time of the patients return to hospital, the person returning him should inform him in simple terms that he is being recalled by the Minister and that, to the extent possible, a further explanation will be given later; (2) as soon as possible after re admission to hospital and in any event within 72 hours of it the patients responsible clinician or another specified person at the hospital should explain to him the reasons for his recall and ensure so far as possible that he understands them; and (3) within 72 hours of his re admission the patient should be provided with a written explanation of the reasons for his recall.
Where a public authority issues a statement of policy in relation to the exercise of one of its functions, a member of the public to whom it ostensibly applies, such as this appellant, has a right at common law to require the authority to apply the policy, so long as it is lawful, to himself unless there are good reasons for the authority not to do so: Mandalia v Secretary of State for the Home Department [2015] UKSC 59, [2015] 1 WLR 4546, paras 29 31.
But the appellant also had rights under article 5 of the European Convention on Human Rights (the Convention): (1) Para 1(e) provides that the lawful detention of persons of unsound mind is a case in which deprivation of liberty is permissible so long as it is in accordance with a procedure prescribed by law. (2) Para 2 provides: Everyone who is arrested shall be informed promptly, in a language which he understands, of the reasons for his arrest and of any charge against him. (3) Para 4 provides that everyone deprived of his liberty should be entitled to take proceedings by which a court will speedily decide the lawfulness of his detention. (4) Para 5 provides that every victim of detention in contravention of any of the earlier paragraphs should have an enforceable right to compensation.
No issue arises in respect of para 4 of article 5 of the Convention.
The Ministers obligation under section 75(1)(a) is to refer the case of a recalled patient to the tribunal within a month.
But we can leave open whether, were he to delay the reference for that full month, he would nevertheless be in breach of para 4; for his practice is to make the reference much more quickly, as exemplified by his immediate reference of the appellants case.
The result was that, within a day of his recall, the tribunal was seised of a jurisdiction to direct his further discharge.
Equally, within 25 days of his recall, the appellants solicitors had, by their pre action letter, set in train the present proceedings, the focus of which has been the lawfulness of the Ministers decision to recall him.
So there was no violation of para 4.
In relation to para 2 of article 5 of the Convention the Minister submits that, in the case of the recall of a restricted patient, implementation of the three stage procedure set out in the issued policy would satisfy the patients Convention rights thereunder.
He accepts that, although it is convenient for him to delegate to those on the ground the task of explaining to the patient the reasons for the decision to recall, the obligation to do so remains on him as the maker of that decision.
He contends that the first stage of the procedure, applicable to the time of the recall to hospital, was duly implemented and indeed that, when Mr Hart then explained to the appellant that the reason for his recall was a deterioration in his mental health, the explanation went slightly further than was required at the first stage.
Inevitably, however, the Minister concedes that the second and third stages of the procedure were not implemented: for an adequate explanation was provided to the appellant not within three days but only within 15 days of the recall and, which seems to be agreed to have been less significant, an explanation in writing was provided to him not within three days but only months later in response to the present proceedings.
The Minister therefore concedes that: (1) he breached the appellants right at common law to receive within three days an adequate explanation for the recall in accordance with published policy; and (2) he also breached the appellants analogous right under article 5(2) of the Convention to be informed promptly of the reasons for his recall.
The Minister makes no further concessions.
So it is almost time to consider the questions identified in para 2 above.
But first they must be placed in context.
D: CONTEXT
The context is that, for seven reasons, the way in which the Minister both reaches and implements a decision to recall a restricted patient to hospital is a function of great importance which he must approach with scrupulous care: (1) He is depriving a person of liberty.
We can be proud of the fact that, even in the dark ages, our law recognised the need for strict control of a deprivation of liberty: no free man, so King John was obliged to concede in clause 39 of Magna Carta (9 Hen 3), is to be arrested, or imprisoned nor will we go against him or send any against him, except by the lawful judgment of his peers or by the law of the land. (2) Only exceptionally will the law countenance a deprivation of liberty at the direction of the executive, rather than of the judiciary before whom protections are built into the system. (3) In particular the procedure entitles the Minister to effect a persons recall without having received any representations by him or on his behalf. (4) Often, as in the present case, the Minister is depriving a person of liberty shortly after a judicial body concluded that, albeit subject to conditions, he was, on the contrary, entitled to liberty. (5) The person whom the Minister is depriving of liberty is, as a restricted patient, a member of a particularly vulnerable group and therefore any interference with their rights must be subject to strict scrutiny (Zagidulina v Russia, European Court of Human Rights (ECtHR), 2 May 2013, Application No 11737/06, para 52).
The patient may well be unable to respond to his recall in a manner which, objectively, would best serve his interests. (6) The recall deprives the person of liberty for an indefinite length of time subject only to the possibility of further discharge at some stage. (7) The recall exposes the person to the possible administration to him of medical treatment without his consent pursuant to section 58(3)(b) of the Act.
E: QUESTIONS (1), (2) AND (3)
The appellant cannot contend that the explanation provided to him by Mr Hart at the time of his recall failed to comply with the Ministers published policy referable to the provision of an explanation at that first stage.
In this regard the appellant invokes a different strand of the common law; and the cornerstone of his submission is the decision of the House of Lords in Christie v Leachinsky [1947] AC 573.
There police officers arrested the respondent without a warrant.
They told him that they were arresting him for an offence categorised as a misdemeanour, for which there was no power to arrest without a warrant.
In fact they had reasonable grounds for suspecting that he had committed a felony, namely larceny of a bale of cloth, which, but for the deficit identified by the House of Lords, would have entitled them to arrest him without a warrant.
The deficit was that they did not tell him that they were arresting him on suspicion of larceny of the cloth.
Viscount Simon said at p 586: in normal circumstances an arrest without warrant either by a policeman or by a private person can be justified only if it is an arrest on a charge made known to the person arrested.
Lord Simonds said at p 592: Arrested with or without a warrant the subject is entitled to know why he is deprived of his freedom, if only in order that he may, without a moments delay, take such steps as will enable him to regain it.
And at p 593 he referred to the principle, which lies at the heart of the matter, that the arrested man is entitled to be told what is the act for which he is arrested.
Lord du Parcq expressed it starkly at p 598: a man is entitled to his liberty, and may, if necessary, defend his own freedom by force.
If another person has a lawful reason for seeking to deprive him of that liberty, that person must as a general rule tell him what the reason is, for, unless he is told, he cannot be expected to submit to arrest, or blamed for resistance.
When Mr Hart told the appellant that the ground for his recall was a deterioration in his mental health, the Ministers duty about what to explain to him at that first stage was in my view satisfied.
It was an accurate summary of the ground.
Deterioration in health is not the only permissible ground for recall.
For example the commission of a crime or the breach of a condition would, if of sufficient significance (R (MM) v Secretary of State for the Home Department [2007] EWCA Civ 687, para 50, Toulson LJ), justify a recall.
Just as in the Christie case the officers had to tell the respondent only that the ground of his arrest was the suspected larceny of the cloth, without any need to refer to the grounds for their suspicion, so there was no need at that stage for Mr Hart or anyone else to communicate to the appellant the grounds for considering that his mental health had deteriorated.
In any event, had he wanted to understand those grounds, the appellant had only to recall his discussion with Mr Hart and Ms Weldon that morning when, as Mr Harts written note makes clear, they had ventilated their concerns with him.
It was reasonable for the Department of Health, when introducing its guidelines, to have suggested both that, at the time of his recall, a restricted patient is likely to be under stress and probably not able to digest a detailed presentation of the reasons for it and that those, for example the police, deputed to effect the recall, often in an emergency, might well know little or nothing about the background to it.
Equally the effect of the Ministers immediate reference of the appellants case to the First tier Tribunal was that the failure to have provided him with detailed reasons for the recall at that stage did not delay his recourse to that facility for seeking renewed discharge.
If, as I conclude, there was at the time of his recall no breach of the appellants right at common law, was there nevertheless a violation at that time of his right under article 5(2) of the Convention?
Inevitably I reach for the decision of the European Commission of Human Rights, and thereafter of the ECtHR, on facts closest to those of this appeal: X v United Kingdom (1981) 4 EHRR 188.
The applicant, a restricted patient, challenged the Home Secretarys recall of him in 1974 to a secure hospital following his conditional discharge, pursuant to the Mental Health Act 1959.
Reporting in July 1980 to the ECtHR, the Commission concluded that his recall did not violate article 5(1) of the Convention.
In relation to article 5(2), however, the Commission accepted at para 107 that: it may not be the role of police officers, who are charged with the sometimes delicate task of arresting a patient, to inform him of the detailed reasons of arrest or recall, as they are not qualified to assess the patients condition and his ability to understand the position.
However, the responsibility of informing the patient or his representatives will, in such circumstances, fall on the medical officers concerned.
Then in its report the Commission added and this is the high point of the appellants submissions in this connection: Nevertheless this obligation has to be discharged promptly, ie at the latest on arrival at the hospital.
In the event, in the light of an unresolved dispute between the applicant and the hospital as to what he had been told on arrival, the Commission concluded that a violation of article 5(2) had at any rate occurred seven weeks later when his solicitors request for reasons for the recall had been inadequately addressed on behalf of the Home Secretary.
Two points are worthy of note: (1) Under section 66 of the Mental Health Act 1959, the power to discharge a restricted patient was vested solely in the Home Secretary and the role of a tribunal, namely the Mental Health Review Tribunal, was only advisory. (2) By way of swift response to the Commissions report (and as the ECtHR was informed when in 1981 it came to consider the Commissions reference see para 16 of its judgment), the Home Secretary issued advisory circulars about the stages at which recalled patients should be informed of the reasons for their recall, which closely parallel the circulars still operative today.
Upon reference to it of the X case, the ECtHR agreed with the Commission that the relief available in the habeas corpus proceedings which the applicant had swiftly taken was inadequate to satisfy his right under para 4 of article 5 of the Convention and, in that there was at that time no other avenue by which to challenge his continued detention, his right under that paragraph had been violated.
When it turned to para 2, the court stressed the link between it and para 4: 66. anyone entitled to take proceedings to have the lawfulness of his detention speedily decided cannot make effective use of that right unless he is promptly and adequately informed of the facts and legal authority relied on to deprive him of his liberty.
Its conclusion was that, in that the complaint under para 2 was no more than an aspect of the complaint under para 4, there was no need to rule separately upon it.
In Fox, Campbell and Hartley v United Kingdom (1990) 13 EHRR 157 the ECtHR held that, in arresting the applicants in Northern Ireland on no more than a suspicion that they were terrorists, the UK authorities had deprived them of their liberty in violation of para 1 of article 5.
But the court rejected their complaint under para 2.
It explained the paragraph as follows: 40.
This provision is an integral part of the scheme of protection afforded by article 5: by virtue of paragraph (2) any person arrested must be told, in simple, non technical language that he can understand, the essential legal and factual grounds for his arrest, so as to be able, if he sees fit, to apply to a court to challenge its lawfulness in accordance with paragraph (4).
Whilst this information must be conveyed promptly (in French: dans le plus court dlai), it need not be related in its entirety by the arresting officer at the very moment of the arrest.
Whether the content and promptness of the information conveyed were sufficient is to be assessed in each case according to its special features.
The Commissions throw away remark in the X case that article 5(2) requires detailed reasons for a recall to be provided to a restricted patient at the latest on arrival at the hospital is far too slender a thread on which to hang a conclusion that the appellants right under para 2 was breached on the day of his recall.
The remark shows no understanding of the special features of a recall which, often effected in an emergency, may, as in the case of the appellant, render the hospital unacquainted with those reasons until later.
The flexibility, albeit limited, of the courts analysis in the Fox case is much to be preferred.
In relation to the explanation required to be provided to the appellant at the time of his recall, I conclude that the demands of article 5(2) did not extend beyond the demands of the common law.
Their demands were met.
In answer to the first question, the Court of Appeal was right to conclude that Mr Harts explanation to him at that time was legally sufficient; and it followed that the second and third questions were indeed not applicable.
The court is told that, since 2012, it has become the Ministers practice to include within the warrant to be served upon the restricted patient at the time of recall a brief reason for it.
Indeed, in the Mental Health Act 1983: Code of Practice published in 2015, the Department of Health goes further than the guidance given in 1993 in relation to stage one when it states at para 4.19: Where a conditionally discharged patient is to be recalled to hospital, a brief verbal explanation of the Secretary of States reasons for recall must be provided to the patient at the time of recall unless there are exceptional reasons why this is not possible, eg the patient is violent or too distressed.
Were this guidance to be followed and were the warrant served upon the patient also to include a brief reason for the recall, the Ministers obligations to provide an explanation for it at the time of his recall would be likely to be discharged.
F: QUESTIONS (4) and (5)
The starting point for consideration of the fourth question, namely the effect of the conceded breaches on the lawfulness of the appellants actual detention, is the decision of this court in R (Lumba) v Secretary of State for the Home Department [2011] UKSC 12, [2012] 1 AC 245.
The Home Secretary had, so the majority held, infringed the rights of two men in reaching a decision to detain them pending deportation by reference to unpublished criteria inconsistent with her published criteria.
Also by a majority, the court decided that the infringement had rendered their actual detention unlawful.
It was obvious that the criteria by reference to which the Home Secretary decided whether initially to detain the men, and thereafter whether to continue to detain them, bore in principle, ie at least theoretically, on the decision to detain them even though, as the court also proceeded to find, they would nevertheless have fallen to be detained by reference to the published criteria.
Lord Dyson said: 68.
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.
Lady Hale said: 207. 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.
Lord Kerr added at para 248 that the breach had to have a direct bearing on the decision to detain.
Lord Kerrs adjective took centre stage in this courts decision in R (Kambadzi) v Secretary of State for the Home Department [2011] UKSC 23, [2011] 1 WLR 1299, which swiftly followed the Lumba case.
In breach of a rule and indeed by way of departure from her own policy the Home Secretary had failed on about 12 occasions in the course of less than two years to conduct a monthly review of whether the appellant should continue to be detained.
By a majority the court held that her failures had rendered his detention unlawful.
Lady Hale said at para 77 that the departure from policy was so obvious and so persistent and so directly related to the decision to continue to detain that it was clearly material in the Lumba sense.
Lord Kerr stressed at paras 83 and 88 that the public law error touched directly on the decision to detain.
The first of three decisions on the other side of the line is that of the House of Lords in R (Saadi) v Secretary of State for the Home Department [2002] UKHL 41, [2002] 1 WLR 3131, and, following the appellants application to it, also of the ECtHR in Saadi v United Kingdom (2008) 47 EHRR 427.
The reason why the appellant had been detained was to enable the determination of his claim for asylum to be subject to a fast track procedure but for three days a different explanation for his detention was provided to him.
The House of Lords held that the error did not affect the legality of his detention.
The ECtHR held that, in informing him only after three days of the true reason for his detention, the Secretary of State had failed to inform him of it promptly and so had breached his right under article 5(2) of the Convention; but there was no suggestion that the breach had affected the validity of his detention.
The second of the decisions is that of the House of Lords in Cullen v Chief Constable of the Royal Ulster Constabulary [2003] UKHL 39, [2003] 1 WLR 1763.
Police officers were statutorily entitled in limited circumstances to defer compliance with an arrested persons request to see a solicitor but they were required as soon as practicable to tell him their reason for deferring it.
It was held that their breach of the latter requirement did not make the appellants detention unlawful.
Lord Millett at para 61 described his claim to that effect as hopeless.
The third of the decisions is that of this court in R (Kaiyam) v Secretary of State for Justice [2014] UKSC 66, [2015] AC 1344.
The court held that the Secretary of State had breached the rights of prisoners, implied by article 5 of the Convention, to be given access to programmes which might enable them to demonstrate to the Parole Board that they no longer represented an unacceptable danger to the public.
Lord Mance and Lord Hughes considered that the implied rights were analogous to rights under article 5(4).
They stated unequivocally at para 37 that a breach of article 5(4) did not directly impact on the lawfulness of detention; and they held at para 38 that, likewise, breach of the implied rights did not affect the lawfulness of the prisoners detention.
In my opinion there is no link, let alone a direct link, between, on the one hand, the Ministers wrongful failure for 12 days to provide to the appellant an adequate explanation for his recall and, on the other, the lawfulness of his detention.
The failure did not delay reference of his case to the First tier Tribunal.
Nor has the appellant suggested that it delayed institution of the present proceedings.
Even if it had created delay, the unequivocal statement of Lord Mance and Lord Hughes in the Kaiyam case about the limited effects of a violation of article 5(4) would appear to exclude the relevance of the delay to the validity of the detention itself.
The case closest to the present is the Saadi case where the difference was one only of degree (namely a delay of three days rather than of 12) and not of kind.
The wise judge will also address the consequences of the argument presented to him.
In the present case there was a clear departure from the 72 hour policy, in relation to which the Minister can claim no extenuating circumstances.
But it is easy to imagine lively arguments in other cases about either the adequacy of the reasons provided to the patient for the recall or the practicability of having provided them to him within that time frame.
I would be very concerned if the right of a restricted patient to walk out of hospital or to seek to do so should depend upon where the stronger of such an argument lies.
I therefore consider that the Court of Appeal was right to conclude, in answer to the fourth question, that the conceded breaches did not make the appellants detention for those 12 days unlawful; and to conclude that the fifth question was therefore inapplicable.
G: QUESTION (6)
As a result of the conceded breaches, the appellant suffered no pecuniary loss.
But in his evidence, unchallenged by the Minister, he says that in the months following his recall to hospital he suffered great distress.
Nevertheless, as one would expect, he attributes his distress to the recall itself.
He does not identify the failure for 12 days to have provided him with the reasons for it as an additional cause of it and, although one may infer that to some extent it increased his level of frustration and anxiety, the time span of only 12 days precludes any inference that it caused significant non pecuniary injury.
The appellant is not entitled to damages for the breach of his right at common law to receive an adequate explanation for his recall within the time identified by published policy.
The breach does not amount to a tort and there is nothing to suggest that damages would have been available to the appellant in any ordinary action which he might have brought against the Minister in that respect; see section 31(4)(b) of the Senior Courts Act 1981.
But the Ministers concession is also of a breach of the appellants right under article 5(2) of the Convention.
Thus the claim for damages must be appraised also through the prism of section 8 of the Human Rights Act 1998 which in particular requires the court, by subsection (3), to make an award of damages for the breach only if it is necessary to afford just satisfaction to the appellant and, by subsection (4), to take into account the principles applied by the ECtHR in relation to the award of compensation under article 41 of the Convention.
In R (Greenfield) v Secretary of State for the Home Department [2005] UKHL 14, [2005] 1 WLR 673, Lord Bingham of Cornhill stressed at paras 4 and 9 that the focus of the Convention was upon securing the observance of minimum standards in the protection of human rights and that compensation to the victim of a breach was of secondary, if any, importance to it.
Before the House, however, was a violation of article 6; and, having referred to the specific provision under article 5(5) for compensation for violation of any of the earlier paragraphs of that article, Lord Bingham stressed in para 7 the risk of error if the decisions of the ECtHR in relation to one article were read across so as to apply to another.
In R (Faulkner) v Secretary of State for Justice and R (Sturnham) v Parole Board [2013] UKSC 23 and 47, [2013] 2 AC 254, the rights of two prisoners under article 5(4) to a speedy review of their continued detention by the Parole Board had been breached.
In the first case the wrongful delay was about ten months and in the second it was about six months.
In the first case this court reduced the award of damages to 6,500 and in the second it restored an award of 300.
In explaining the courts decisions Lord Reed conducted a masterly exposition of the approach of the ECtHR to damages for violations of article 5(4).
Having observed at para 53 that the ECtHR was prepared, without direct proof, to presume harm in the form of feelings of frustration and anxiety and in answer to his question is there a de minimis principle?, he concluded that: 66. a delay [in the conduct of the requisite review] of three months or more is likely to merit an award, whereas the stress and anxiety which can be inferred from a delay of shorter duration are unlikely to be of sufficient severity.
In Damages and Human Rights, 2016, Hart Publishing, Dr Varuhas argues in chapter 5(1) that in the Faulkner and Sturnham cases this court has sought too rigidly to apply the principles of the ECtHR, such as they are, to awards of compensation for Convention violations.
Be that as it may, it is clear to me that damages should not be payable to the appellant for the breach of his right under article 5(2) of the Convention any more than that they should be payable for the breach of his right at common law.
He has failed to establish that their effects on him were sufficiently grave.
Nor would a formal declaration in this courts order add anything to my recording in this judgment of the Ministers concessions.
No doubt under pressure, the Court of Appeal failed in its judgments to address the sixth question, squarely raised though it had been.
But that courts wholesale dismissal of the appeal incorporates the correct, negative, answer.
I therefore propose that the appeal should be dismissed.
H: DISPOSAL
LORD REED:
I respectfully agree with the judgment of Lord Wilson, and wish only to add some brief observations in relation to the legal consequences, under the common law, of the Secretary of States failure to comply with the administrative policy under which the appellant should have been provided, after being recalled to hospital, with a full explanation of the reasons for the decision to recall him.
It was decided on 19 July 2012 that the appellant should be recalled to hospital, and the decision was implemented that day.
There was, under the common law, a duty to give the appellant reasons for that decision.
That duty followed from the fact that the effect of the decision was to deprive him of his liberty.
For the reasons explained by Lord Wilson at para 25, the Secretary of State complied with that duty.
The case illustrates the extent to which the common law duty to give reasons for a decision is context specific, in the sense that what is required in order to comply with the duty depends on the context in which it arises.
Quite separately, the Secretary of State had adopted an administrative policy that a full explanation of the decision to recall should be provided to patients within 72 hours of their re admission to hospital.
That policy was adopted in the context of a statutory scheme governing the discharge of restricted patients, under the Mental Health Act 1983 as amended, which imposes on the Secretary of State a duty to refer the patients case to the First tier Tribunal within a month of his recall to hospital, as Lord Wilson explains at para 11.
On such a reference, the tribunal has the power to order the patients discharge.
It is conceded that the adoption of the policy created a public law duty to comply with it, absent good reason for non compliance.
That duty arose under the common law in accordance with principles of good administration.
It is conceded that there was a failure to comply with that duty in the appellants case.
At the hearing of the appeal, the discussion of the effect of that failure focused primarily upon the appellants Convention rights.
So far as the legal consequences under the common law are concerned, the failure to comply with the policy did not in my view render the decision to recall invalid, either ab initio or with effect from the expiry of the 72 hour period.
That is so for three reasons.
First, the duty is to provide reasons ex post facto.
It remains capable of meaningful performance even after the 72 hour period has expired.
Such performance can if necessary be enforced.
Delayed performance does not, in this situation, call into question the validity of the antecedent decision.
Secondly, the duty to refer the case to the tribunal within a month provides a statutory mechanism for ensuring that an adequate justification is provided for the patients detention in hospital, failing which he will be discharged.
It would be inconsistent with the statutory framework governing discharge if an entitlement to release arose under the common law as soon as there had been a failure to comply with the administrative policy.
Thirdly, it would be perverse if the legal consequence of the breach of a duty imposed for the sake of good administration was one which itself created administrative chaos, such as would occur if patients whose condition might require detention in hospital were entitled to walk out of the hospital as soon as the 72 hours had expired.
For these reasons, in addition to those given by Lord Wilson, I agree that the failure to comply with the policy did not affect the validity of the decision to recall the appellant, or therefore the lawfulness of his consequent detention.
| UK-Abs | The appellant suffers from a personality disorder and chronic paranoid delusional disorder.
He has a history of admission to psychiatric hospitals.
In 2006 he was convicted of arson and burglary.
In the light of his mental disorder, he was made the subject of a hospital order under the Mental Health Act 1983 (the Act), which authorised his admission to and detention in a secure hospital, and a restriction order under the Act, which vested the power to discharge him in the respondent (the Minister) or the First tier Tribunal (Health, Education and Social Care Chamber) (the Tribunal).
The appellant thereby became a restricted patient under the Act, and was detained in medium secure hospitals.
In April 2012 the Tribunal directed that the appellant should be conditionally discharged from hospital and approved a plan that he should move to a registered care home subject to conditions.
The appellant took up residence at a care home.
On 19 July 2012 the carers responsible for the appellant invited the Minister to consider recalling the appellant to hospital.
This was for a number of reasons, including that the appellants mental health had deteriorated, that he was likely to abscond, and that he was likely to breach the conditions of his discharge.
The Minister immediately issued a warrant for the appellants recall and the warrant was executed on 19 July 2012.
As required by the Act, the Minister referred the appellants case to the Tribunal promptly on 20 July 2012.
The warrant set out no reasons for the appellants recall.
When the appellant was informed that he was being recalled, he was told only that it was because his mental health had deteriorated.
When the appellant was taken into hospital, the staff were unable to explain the reasons for his recall.
On 24 July 2012 the Minister wrote a letter to the hospital which contained a number of errors, including the assertion that the recall warrant had not been executed, and the instruction that the appellant should be informed of the reasons for his recall within 72 hours of admission (even though that time limit had already expired).
The letter also failed to state any reasons for the appellants recall.
On 3 August 2012 (15 days after the appellants recall), he was provided orally with a fuller, adequate explanation for the recall, but was not provided with a written explanation.
The appellant challenged the lawfulness of the decision to recall him.
His application was dismissed at first instance.
Before the Court of Appeal, his primary case was that there was an unlawful failure to explain the reasons for his recall and that (a) that failure affected the legality of his detention, or alternatively (b) that it generated a right to a declaration and damages.
The Court of Appeal dismissed his appeal, and the appellant appealed to the Supreme Court.
The Supreme Court unanimously dismisses the appellants appeal.
Lord Wilson (with whom Lady Hale, Lord Kerr, Lord Reed and Lord Toulson agree) gives the leading judgment.
Lord Reed gives a
short concurring judgment.
The Department of Health has issued guidelines on the recall of patients to hospital, which set out a three stage procedure for the communication of reasons (the Policy) [16].
The Minister concedes that the second and third stages of the Policy were not implemented: namely, an adequate explanation was not provided to the appellant within three days of his recall (but only after 15 days), and no explanation in writing was provided within three days (but only months later in the context of these proceedings).
The Minister further concedes that this means there has been a breach of the appellants common law right to have the Policy properly applied, and his right under Article 5(2) of the European Convention on Human Rights (ECHR) to be informed promptly of the reasons for his recall [17 21].
Legal sufficiency of the Ministers explanation The explanation provided to the appellant at the time of his recall (i.e. that it was because of his deteriorating mental health) satisfied the first stage of the Policy.
It also complied with the Ministers common law duty to provide reasons [24 25].
As for the ECHR, Article 5(2) does not in this respect extend beyond the demands of the common law and, accordingly, there is no violation of that article [26 32].
The Court of Appeal was therefore correct to find that the Ministers explanation at that time was legally sufficient, and it is unnecessary to consider the effect of an insufficient explanation [32].
Effect of the Ministers conceded breaches on the legality of detention The appellant argued that the Ministers conceded breaches rendered his detention between the third and 15th days following his recall unlawful.
As to this, there is no link, let alone a direct link (as is required following R (Lumba) and R (Kambadzi) [34 35]) between the Ministers wrongful failure for 12 days to provide the appellant with an adequate explanation for his recall, and the lawfulness of his detention during that 12 day period [39].
Further, the consequences of the appellants argument would be of concern in other similar cases, given the need to detain restricted patients under the Act in appropriate circumstances [40].
The Court of Appeal was therefore right to conclude that the conceded breaches did not render the detention unlawful [41].
Damages and declaration The appellant is not entitled to damages for the breach of his common law right to receive an adequate explanation for his recall within the time set out by the Policy.
The breach does not amount to a tort and there is nothing to suggest that damages would have been available in an ordinary action against the Minister [43].
The conclusion is the same in relation to the violation of Article 5(2) ECHR; the appellant has failed to establish that the effects of the breach were sufficiently grave [46].
As for a formal declaration, it would not add anything to the recording of the Ministers concessions in the Courts judgment [46].
Lord Reed adds some observations in relation to the consequences at common law of the Ministers failure to comply with the Policy [48 53].
|
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.
| UK-Abs | 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].
|
At common law, if an insured makes a fraudulent claim on his insurer, the latter is not liable to pay the claim.
In relation to contracts concluded after 12 August 2016, the rule has been restated and its other consequences defined in section 12 of the Insurance Act 2015.
The question at issue on this appeal is what constitutes a fraudulent claim.
This is a controversial question at common law, which the Act of 2015 does not resolve.
Three possible situations may be relevant.
First, the whole claim may have been fabricated.
In principle the rule would apply in this situation but would add nothing to the insurers rights.
He would not in any event be liable to pay the claim.
Secondly, there may be a genuine claim, the amount of which has been dishonestly exaggerated.
This is the paradigm case for the application of the rule.
The insurer is not liable, even for that part of the claim which was justified.
Third, the entire claim may be justified, but the information given in support of it may have been dishonestly embellished, either because the insured was unaware of the strength of his case or else with a view to obtaining payment faster and with less hassle.
The present appeal is concerned with embellishments of this kind.
They are generally called fraudulent devices.
The expression is borrowed from a standard clause avoiding contracts of fire insurance which was widely used in the 19th and early 20th centuries.
But it is archaic and hardly describes the problem.
I shall use the expression collateral lies, by which I mean a lie which turns out when the facts are found to have no relevance to the insureds right to recover.
The question is whether the insurer is entitled to repudiate a claim supported by a false statement, if the statement was irrelevant, in the sense that the claim would have been equally recoverable whether it was true or false.
The facts
On the night of 28/29 January 2010, shortly after leaving Klaipeda in Lithuania with a cargo of scrap iron, the DC MERWESTONE was incapacitated by an ingress of water which flooded the engine room.
The ingress of water was the combined result of (i) the negligence of the crew in failing to close the sea inlet valve of the emergency fire pump and drain down the system, after they had used the hoses to clear ice chips from the hatch covers; (ii) damage to the emergency fire system pump casing and filter after the vessel had sailed from Klaipeda, as a result of the freezing and expansion of the seawater inside them; (iii) the negligence of contractors employed on an earlier occasion, who failed to seal the engine room bulkheads after passing cables through them, with the result that they were not watertight; and (iv) defects in the engine room pumping system, which was unable to cope with the rate of ingress.
The main engine was damaged beyond repair.
The insurers instructed solicitors, Ince & Co, to investigate.
Ince asked the owners for their explanation of the casualty.
Mr Chris Kornet, the relevant individual in the vessels managers, developed a theory that the bilge alarm had sounded at about noon on 28 January, but the crew had been unable to investigate or deal with the leak because of the rolling of the ship in heavy weather.
The judge found that this was a speculation on Mr Kornets part which he genuinely regarded as plausible.
But in proffering it to Ince & Co in an e mail of 21 April 2010, he pretended that he had been told about the alarm activation by members of the crew.
The judge found that this was a reckless untruth.
Mr Kornet had not been told this by the crew and had no reason to believe that the crew would support it.
And, although the master did later support the story, he had not done so by 21 April.
Mr Kornets reason for acting in this way was that he was frustrated by the insurers delay in recognising the claim and making a payment on account.
At a time when the cause of the flooding was not clear, he believed that it would fortify the claim and accelerate payment if the casualty could be blamed on the crews failure to respond to the activation of the bilge alarm.
This was because otherwise attention would be concentrated on the defective condition of the ship and on the possible responsibility of the owners for that state of affairs.
He had been advised that the wording of the Inchmaree clause in the Institute Time Clauses might afford a defence under the policy if the owners were found to have any responsibility for what happened.
In fact, the lie was irrelevant to the merits of the claim.
The judge, Popplewell J, held that the loss was proximately caused by a peril of the seas, namely the fortuitous entry of seawater through the sea inlet valve during the voyage, and that the relevant part of the Inchmaree clause had no application to this peril.
He rejected a contention that the owners had sent the vessel to sea with defective engine room pumps in breach of the warranty implied by section 39(5) of the Marine Insurance Act 1906, because the managers had not known of the problem at the relevant time.
It followed that the owners had a valid claim for some 3.241m whether or not the crew had failed to act on a bilge alarm activation at about noon on 28 January.
However, he held that that claim was lost as a result of the collateral lie about it: [2013] 2 All ER (Comm) 465.
He reached that conclusion with regret because he regarded it as unjust to the parties before him.
At para 225 of his judgment, he observed: In a scale of culpability which may attach to fraudulent conduct relating to the making of claims, this was at the low end.
It was a reckless untruth, not a carefully planned deceit.
It was told on one occasion, not persisted in at the trial.
It was told in support of a theory about the events surrounding the casualty which Chris Kornet genuinely believed to be a plausible explanation.
The reckless untruth was put forward against the background of having made the crew available for interview by the Underwriters solicitor, who had had the opportunity to make his own inquiries of the crew on the topic.
To be deprived of a valid claim of some 3.2m as a result of such reckless untruth is, in my view, a disproportionately harsh sanction.
The case law: exaggerated claims
There is a substantial body of case law on the effect of express clauses avoiding the policy or forfeiting the claim if it is affected by fraud.
These cases turn on the language of the contract, although it is fair to say that most of them show a strong propensity on the part of the courts to give them an interpretation wide enough to cover any dishonesty in relation to the claim whether or not it was decisive of the merits.
Such clauses appear to have been in common use from the end of the 18th century.
The common law rule relating to fraudulent claims appears to originate rather later, in the middle of the 19th century.
In Britton v Royal Insurance Co (1866) 4 F & F 905, which is generally regarded as the leading case, there was an express clause, but Willes J in his summing up to the jury stated the law altogether generally at pp 908 909: A fire insurance, he said, is a contract of indemnity; that is, it is a contract to indemnify the assured against the consequences of a fire, provided it is not wilful.
Of course, if the assured set fire to his house, he could not recover.
That is clear.
But it is not less clear that, even supposing it were not wilful, yet as it is a contract of indemnity only, that is, a contract to recoup the insured the value of the property destroyed by fire, if the claim is fraudulent, it is defeated altogether.
That is, suppose the insured made a claim for twice the amount insured and lost, thus seeking to put the office off its guard, and in the result to recover more than he is entitled to, that would be a wilful fraud, and the consequence is that he could not recover anything.
This is a defence quite different from that of wilful arson.
It gives the go bye to the origin of the fire, and it amounts to this that the assured took advantage of the fire to make a fraudulent claim.
The law upon such a case is in accordance with justice, and also with sound policy.
The law is, that a person who has made such a fraudulent claim could not be permitted to recover at all.
The contract of insurance is one of perfect good faith on both sides, and it is most important that such good faith should be maintained.
It is the common practice to insert in fire policies conditions that they shall be void in the event of a fraudulent claim; and there was such a condition in the present case.
Such a condition is only in accordance with legal principle and sound policy.
This approach was not initially accepted in Scotland, where the Court of Session held that the genuine part of a fraudulently inflated claim was recoverable: Reid & Co Ltd v Employers Accident & Livestock Insurance Co Ltd (1899) 1 F 1031.
But in England the courts consistently applied Willes Js test to avoid the entirety of an exaggerated claim.
That approach was endorsed by the House of Lords in Manifest Shipping Co Ltd v Uni Polari Insurance Co Ltd (The STAR SEA) [2003] 1 AC 469.
It was settled from an early stage of the history of English insurance law that the duty of utmost good faith applied not only in the making of the contract but in the course of its performance.
The principle was given statutory force by section 17 of the Marine Insurance Act.
In Brittons Case, Willes J regarded the fraudulent claims rule as a manifestation of the duty of utmost good faith, a view adopted by Christopher Clarke LJ, delivering the leading judgment in the Court of Appeal in the present case (paras 76 77).
The rule is peculiar to contracts of insurance, and there can be little doubt that historically it is because they are contracts of utmost good faith that they have this unique characteristic.
But I am inclined to agree with the view expressed by Lord Hobhouse in The STAR SEA (paras 50, 61 62) that once the contract is made, the content of the duty of good faith and the consequences of its breach must be accommodated within the general principles of the law of contract.
On that view of the matter, the fraudulent claims rule must be regarded as a term implied or inferred by law, or at any rate an incident of the contract.
The correct categorisation matters only because if it is a manifestation of the duty of utmost good faith, then the effect of section 17 of the Marine Insurance Act 1906 is that the whole contract is voidable ab initio upon a breach, and not just the fraudulent claim.
If, on the other hand, one adheres to the contractual analysis, the right to avoid the contract for breach of the duty must depend on the principles governing the repudiation of contracts, and avoidance would operate prospectively only.
The choice is not, however, before us on this appeal because the insurers do not seek to avoid the contract.
They seek only to avoid the claim for this particular casualty.
What matters for present purposes is the rationale of the rule, on which there is a broad consensus in the authorities.
It is the deterrence of fraud.
As Lord Hobhouse observed in The STAR SEA at para 62, The logic is simple.
The fraudulent insured must not be allowed to think: if the fraud is successful, then I will gain; if it is unsuccessful, I will lose nothing.
Cf Galloway v Guardian Royal Exchange (UK) Ltd [1999] Lloyds Rep IR 209, 214 (Millett LJ); Direct Line Insurance v Khan [2002] Lloyds Rep IR 364, para 38; Agapitos v Andrew [2003] QB 556, para 14 (Mance LJ); AXA General Insurance Ltd v Gottlieb [2005] 1 All ER (Comm) 445 (CA), paras 28, 31.
The courts have explained the lack of a similar rule in other areas of the law of contract by pointing to the asymmetrical positions of the parties to an insurance contract, the insurer being vulnerable on account of his dependence on the insured for information both at the formation of the contract and in the processing of claims: see Pan Atlantic Insurance Co Ltd v Pine Top Insurance Co Ltd [1995] 1 AC 501, 542B (Lord Mustill); Orakpo v Barclays Insurance Services [1995] Lloyds Rep IR 443, 451 (Hofmann LJ), 452 (Parker LJ).
Fraudulent insurance claims are a serious problem, the cost of which ultimately falls on the general body of policy holders in the form of increased premiums.
But it was submitted to us that a forfeiture rule was not the answer to that problem.
There was, it was said, little empirical evidence that the common law rule was an effective deterrent to fraud, and no reason to think that the problem was peculiar to claims on insurers as opposed to, say, claims in tort for personal injuries, the cost of which also falls ultimately on insurers and policy holders without there being any equivalent common law rule.
Informational asymmetry is not a peculiarity of insurance, and in modern conditions may not even be as true of insurance as it once was.
These points have some force.
But I doubt whether they are relevant.
Courts are rarely in a position to assess empirically the wider behavioural consequences of legal rules.
The formation of legal policy in this as in other areas depends mainly on the vindication of collective moral values and on judicial instincts about the motivation of rational beings, not on the scientific anthropology of fraud or underwriting.
As applied to dishonestly exaggerated claims, the fraudulent claims rule is well established and, as I have said, will shortly become statutory.
The case law: collateral lies
The extension of the common law rule from dishonestly exaggerated claims to justified claims supported by collateral lies is a more recent and a more controversial development.
So far as reported cases go, it makes its first appearance in a brief and unexplained remark of Lord Sumner in Lek v Mathews (1927) 29 Ll L Rep 141, 164.
Mr Lek was alleged to have dishonestly exaggerated a claim on the insurers of his stock.
In the Court of Appeal, Atkin LJ had held that even a knowing falsehood would not give rise to a forfeiture if Mr Lek genuinely believed that he was entitled to utter it.
Commenting on this observation, Lord Sumner said that Lord Atkin must have had in mind mis statements on a purely collateral question, adding that even so I could not agree.
Three years later, Roche J offered a somewhat more expansive statement of principle in his direction to the jury in Wisenthal v World Auxiliary Insurance Corpn Ltd (1930) 38 L Rep 54.
This case concerned an all risks policy on goods in transit and in storage pending sale.
The insurers disputed the insureds title and accused her of fraudulently exaggerating her claim.
They also alleged that facts and documents relevant to these issues had been concealed.
The report (p 62) records the relevant part of the judges summing up in the following terms: Fraud, said his Lordship, was not mere lying.
It was seeking to obtain an advantage, generally monetary, or to put someone else at a disadvantage by lies and deceit.
It would be sufficient to come within the definition of fraud if the jury thought that in the investigation deceit had been used to secure easier or quicker payment of the money than would have been obtained if the truth had been told.
The jury held that the insured did have title and rejected the allegation of exaggeration.
But they found that she had fraudulently suppressed relevant documents, and on that basis Roche J entered judgment for the insurers.
In England, matters rested there until 1985, when the relevance of a collateral lie was considered in Black King Shipping Corpn and Wayang (Panama) SA v Massie (The LITSION PRIDE) [1985] 1 Lloyds Rep 437.
The LITSION PRIDE was insured against war risks on terms which required her owners to give notice as soon as practicable of her entry into specified war zones and to pay an additional premium.
The owners traded her into a war zone without giving notice, dishonestly intending to avoid the payment of the additional premium if the vessel got out unscathed.
When she was hit by a missile and sunk, they gave the required notice by a letter which they dishonestly backdated to a date before the vessel entered the war zone.
The fraud was irrelevant to the merits of the claim, because the vessel was held to be insured under a held covered clause with or without prior notice.
But Hirst J held that the claim was forfeit on the ground that it was a breach of the insureds duty of good faith.
His decision has not fared well in subsequent decisions.
Royal Boskalis Westminster NV v Mountain [1997] 1 Lloyds Rep LR 523 was a claim on war risk underwriters for the constructive total loss of a fleet of dredgers trapped in Iraq by the Iraqi invasion of Kuwait.
The owners abandoned the vessels to the underwriters, but then succeeded in procuring their release by the Iraqi authorities in return for a substantial ransom.
They subsequently claimed for (i) the value of the ships, and (ii) sue and labour costs (other than the ransom) incurred in extricating them from Iraq.
In presenting their claim to the underwriters, they suppressed the fact of the ransom and the detailed terms on which it was paid, mainly because they were concerned about a possible breach of United Nations sanctions against Iraq.
Rix J held that the vessels were not a constructive total loss, but that the insured were entitled to a proportion of their sue and labour costs.
He refused to allow the underwriters to argue that the claim was forfeit on account of the dishonest suppression of information about the insureds dealings with Iraq because the point had not been pleaded.
But he added that he would have rejected the argument anyway.
This was because he considered that the claim for sue and labour costs was entitled to succeed irrespective of the matters which the owners had concealed.
At pp 592 593, he observed: Whatever be the precise definition and ambit of the concept of a fraudulent claim, there was no such claim here.
I am in the process of finding that the sue and labour claim was and is a good and valid claim.
It is not a false or fraudulent claim.
It is totally unlike those instances of fraudulent claim to be found in the authorities, such as claims in respect of deliberately self inflicted or pretended losses, or claims in amounts which are knowingly or recklessly exaggerated: see, for instance, Goulstone v The Royal Insurance Co, (1858) I F & F 276, where, in the context of a claim for inter alia the loss of furniture whose value was exaggerated four fold, Pollock CB glossed a fraudulent claim as one wilfully false in any substantial particular at p 279; or Chapman v Pole, (1870) 22 LT 306, where again in the context of exaggerated value Cockburn, CJ spoke of one who knowingly preferred a claim he knew to be false or unjust at p 307; or The Captain Panagos DP, [1986] 2 Lloyds Rep 470, where Mr Justice Evans defined a fraudulent claim as one which is made on the basis that facts exist which constitute a loss by an insured peril, when to the knowledge of the assured those alleged facts are untrue, at p 511.
It seems to me that even if one assumed, for instance, that the representation over the existence of any record of the finalization agreement was made fraudulently, that would not make the claim in question a fraudulent claim within these definitions of that expression.
Rix Js judgment was appealed in part to the Court of Appeal and the appeal allowed, but not on this point: see [1999] QB 674.
I shall refer to the Court of Appeals decision in another context below.
Manifest Shipping Co Ltd v Uni Polaris Insurance Co Ltd (The STAR SEA) [2003] 1 AC 469, concerned the insureds non disclosure in good faith of a privileged expert report, said to be relevant to an allegation that the insured had knowingly sent the vessel to sea in an unseaworthy condition.
The House of Lords rejected the insurers contention that they were entitled to forfeit the claim, because (i) the duty of the insured in presenting claims under the policy was a duty of honesty only, and (ii) it did not in any event subsist once proceedings had been begun.
The relevance of the decision for present purposes lies in the discussion of The LITSION PRIDE in the speech of Lord Hobhouse (para 71), with whom Lord Steyn, Lord Hoffmann and Lord Clyde agreed: The particular claim was only fraudulent in so far as the broker had not been truthful in dealing with the insurers at that stage.
The reasoning adopted by Hirst J has been criticised both by academic writers and by other judges in later cases.
I consider that it should not any longer be treated as a sound statement of the law.
In so far as it is based upon the principle of the irrecoverability of fraudulent claims, the decision is questionable upon the facts since the actual claim made was a valid claim for a loss which had occurred and had been caused by a peril insured against when the vessel was covered by a held covered clause.
In K/S Merc Scandia XXXXII v Certain Underwriters (The MERCANDIAN CONTINENT) [2001] 2 Lloyds Rep 563, the point arose in a rather oblique fashion.
The owners of the MERCANDIAN CONTINENT had obtained judgment in earlier High Court proceedings against a Trinidadian shipyard for damage caused by negligent repair work.
Jurisdiction in the earlier proceedings had been founded on an agreed submission to the jurisdiction of the English court.
The yards liability insurers appointed solicitors to conduct the defence on behalf of their insured.
They had challenged the jurisdiction of the English court, relying in good faith on a document forged by the shipyards management, which suggested that the agreed submission had been made without authority.
In due course the document was exposed as a forgery and the challenge to the jurisdiction was abandoned.
The shipyard having gone into liquidation, the owners brought the current proceedings against the yards liability insurers under the Third Parties (Rights Against Insurers) Act 1930.
The insurers defended the claim on the ground that they had lawfully avoided the policy because of the fraud of the insured shiprepairer in relation to the question of jurisdiction.
Longmore LJ, delivering the leading judgment in the Court of Appeal, drew attention to the fact that the fraud was directed against the shipowners, not the liability insurers.
But he rejected the defence on the principal ground that the concocted document would have made no difference to the insurers liability to meet the claim: para 42.
He drew attention to the law relating to pre contractual non disclosure and misrepresentation, which required the relevant matters to be material to the risk and their non disclosure to have induced the insurer to act in a way that he would not otherwise have done.
He continued (para 26): In my judgment these requirements, which must exist before an underwriter can avoid for lack of good faith pre contract, must also apply, making due allowance for the change of context, where an underwriter seeks to avoid for lack of good faith or fraud in relation to post contractual matters.
In particular the requirement of inducement which exists for pre contract lack of good faith must exist in an appropriate form before an underwriter can avoid the entire contract for post contract lack of good faith.
Referring (para 29) to Rix Js judgment in Royal Boskalis, he gratefully borrow[ed] the concept that the relevant conduct of the insured must be causally relevant to underwriters ultimate liability, or at least, to some defence of the underwriters before it can be permitted to avoid the policy.
This is, I think, the same concept as that underwriters must be seriously prejudiced by the fraud complained of before the policy can be avoided.
Longmore LJ considered the question entirely in the context of the right to avoid the policy for breach of the duty of good faith under section 17 of the Marine Insurance Act 1906, because that was the right which the defendant insurers invoked.
But I do not think that the requirement for a causal connection between the fraud and the insurers liability can be any different, depending on whether the insurer is seeking to avoid the policy or just the claim.
Thus far, it would be fair to say that the case law on post contractual collateral lies since the brief and early references in Lek v Mathews and Wisenthal v World Auxiliary Insurance Corpn Ltd reveals considerable judicial misgivings about their use as a basis for avoiding liability when the claim is well founded.
The position, however, changed with the important and influential judgment of Mance LJ in Agapitos v Agnew (The AEGEON) [2003] QB 556.
This was a claim for the total loss of the passenger ferry AEGEON following a fire during hot work on the vessel.
The hull insurers defended the claim on the ground that the hot work had been carried out in breach of various warranties in the policy.
If the warranties alleged were effective, there was undoubtedly a breach.
The issue was whether they were.
It was argued that they had never been agreed or had been waived.
In the course of the proceedings, the insurers purported to avoid the policy for fraud and applied to amend their pleading to rely on this as a defence.
The fraud alleged consisted in the owners having pleaded in their reply that hot work had begun on 12 February 1996, when they subsequently disclosed witness statements asserting that it was 12 days earlier on 1 February.
The difference of date had no bearing on the merits of the claim, because if the warranties existed and had not been waived, there was a breach whenever hot work began.
The question was whether this mattered.
Toulson J held that it did not.
His reason was that on the footing that the underwriters had a good defence of breach of warranty the defence of fraud was superfluous.
On the footing that they did not, he distinguished the cases on fraudulently exaggerated claims on the same ground as Rix J in Royal Boskalis, namely that the alleged lie had to be material to the claim, in the sense that the truth would have afforded the insurers a defence.
He therefore refused to allow them to amend.
The Court of Appeal affirmed his decision on different grounds.
They held, following The STAR SEA, that any duty of good faith in the presentation of claims ceased with the commencement of proceedings.
But Mance LJ dealt, obiter, with the question whether the fraudulent claim could ever have applied to a collateral lie.
Rejecting Toulson Js analysis, he held that a collateral lie in the presentation of a claim, even if it was irrelevant to the merits of the claim, was as much subject to the fraudulent claim rule as a dishonest exaggeration.
Mance LJ distinguished between the common law rule about fraudulent claims and the duty of utmost good faith which was the basis of section 17 of the Marine Insurance Act 1906.
He rejected the suggestion that the common law rule depended on the insurer having acted on the lie, and tentatively proposed that the test should be subject to an attenuated test of materiality.
On inducement, he said this: 36.
What relationship need there then be between any fraud and the claim if the fraudulent claim rule is to apply? And need the fraud have any effect on insurers conduct? Speaking here of a claim for a loss known to be non existent or exaggerated, the answers seem clear.
Nothing further is necessary.
The application of the rule flows from the fact that a fraudulent claim of this nature has been made.
Whether insurers are misled or not is in this context beside the point.
The principle only arises for consideration where they have not been misled into paying or settling the claim, and its application could not sensibly depend upon proof that they were temporarily misled.
The only further requirement is that the part of the claim which is non existent or exaggerated should not itself be immaterial or unsubstantial: see paras 32 33 above.
That also appears consistent with general principle, even though, in a pre contract context, no significance or sanction attaches to a fraudulent misrepresentation or nondisclosure unless it has, by misleading insurers, induced them to enter a contract.
On materiality, he continued: 37.
What is the position where there is use of a fraudulent device designed to promote a claim? I would see no reason for requiring proof of actual inducement here, any more than there is in the context of a fraudulent claim for non existent or exaggerated loss.
As to any further requirement of materiality, if one were to adopt in this context the test identified in the Royal Boskalis case [1997] LRLR 523 and The Mercandian Continent [2001] 2 Lloyds Rep 563, then, as I have said, the effect is, in most cases, tantamount to saying that the use of a fraudulent device carries no sanction.
It is irrelevant (unless it succeeds, which only the insured will then know).
On the basis (which the cases show and I would endorse) that the policy behind the fraudulent claim rule remains as powerful today as ever, there is, in my view, force in Mr Popplewells submission that it either applies, or should be matched by an equivalent rule, in the case of use of a fraudulent device to promote a claim even though at the end of a trial it may be shown that the claim was all along in all other respects valid.
The fraud must of course be directly related to and intended to promote the claim (unlike the deceit in The Mercandian Continent).
Whenever that is so, the usual reason for the use of a fraudulent device will have been concern by the insured about prospects of success and a desire to improve them by presenting the claim on a false factual basis.
If one does use in this context the language of materiality, what is material at the claims stage depends on the facts then known and the strengths and weaknesses of the case as they may then appear.
It seems irrelevant to measure materiality against what may be known at some future date, after a trial.
The object of a lie is to deceive.
The deceit may never be discovered.
The case may then be fought on a false premise, or the lie may lead to a favourable settlement before trial.
Does the fact that the lie happens to be detected or unravelled before a settlement or during a trial make it immaterial at the time when it was told? In my opinion, not. Materiality should take into account the different appreciation of the prospects, which a lie is usually intended to induce on insurers side, and the different understanding of the facts which it is intended to induce on the part of a judge at trial. 38.
The view could, in this situation, be taken that, where fraudulent devices or means have been used to promote a claim, that by itself is sufficient to justify the application of the sanction of forfeiture.
The insureds own perception of the value of the lie would suffice.
Probably, however, some limited objective element is also required.
The requirement, where a claim includes a non existent or exaggerated element of loss, that that element must be not immaterial, unsubstantial or insignificant in itself offers a parallel.
In the context of use of a fraudulent device or means, one can contemplate the possibility of an obviously irrelevant lie one which, whatever the insured may have thought, could not sensibly have had any significant impact on any insurer or judge.
Tentatively, I would suggest that the courts should only apply the fraudulent claim rule to the use of fraudulent devices or means which would, if believed, have tended, objectively but prior to any final determination at trial of the parties rights, to yield a not insignificant improvement in the insureds prospects whether they be prospects of obtaining a settlement, or a better settlement, or of winning at trial.
Courts are used enough to considering prospects, eg when assessing damages for failure by a solicitor to issue a claim form within a limitation period.
Mance LJs analysis of the law relating to collateral lies was applied by the Privy Council in Stemson v AMP General Insurance (NZ) Ltd [2006] Lloyds Rep IR 852 and Beacon Insurance Co Ltd v Maharaj Bookstore Ltd [2014] 4 All ER 418.
It was recognised by the Supreme Court in Summers v Fairclough Homes Ltd [2012] 1 WLR 2004, para 29, although in that case the point arose only by way of analogy in a case turning on the inherent procedural power of a court to strike out a dishonest claim.
In none of these cases was there any issue about the correctness of the analysis in The AEGEON.
Other common law jurisdictions
The only Commonwealth jurisdiction in which the application of the fraudulent claim rule to valid claims has been considered in any detail is Australia, whose case law exhibits the same differences of opinion as the English cases.
GRE Insurance Ltd v Ormsby (1982) 29 SASR 498 is a decision of the Full Court of South Australia.
The insured, whose policy covered theft consequent upon a forcible entry, embellished the evidence of forcible entry by causing further damage to the door and lock before taking a photograph of it and sending it to the insurers.
The trial judge found that there had in fact been a forcible entry and the insurer accepted this finding on appeal to the full court.
But the insurer defended the claim on account of the dishonest photograph.
The defence was rejected.
Mitchell J held that the defence did not arise because the claim was valid.
A valid claim would not, as it seems to me, become a fraudulent claim, even if it were proved that there was an attempt to support the valid claim by evidence which was intentionally false (pp 502 503).
Walters J agreed, adding that at common law an insurer could not be treated as having the necessary fraudulent intent if there never was an intention on the part of the respondents to get, and knowingly to get, more than what they had really lost (p 503).
Cox J also agreed, suggesting that in this respect the common law may differ from the effect of some standard express clauses forfeiting fraudulent claims as the courts had construed them (pp 505 506).
In Tiep Thi Ho v Australian Associated Motor Insurers Ltd [2001] VSCA 48, the insureds car was damaged in a road accident while being driven by her son.
She mistakenly believed that the policy did not cover damage while the car was being driven by her son and so pretended that it had been damaged while being driven by thieves.
In fact the son was insured, and the lie was irrelevant to the insurers liability.
The Victoria Court of Appeal held that the insurer was entitled to reject the claim.
The decision turned mainly on section 56(1) of the Commonwealth Insurance Contracts Act 1984, which provided that it should be a defence that the claim had been made fraudulently.
But Buchanan JA, delivering the leading judgment, considered that the same result would have followed at common law, because the mischief of the fraudulent claims rule lay in the insureds dishonest state of mind and not in its consequences.
At para 14, he put the matter thus: As a matter of public policy, attributable to the need to promote honesty on the part of insured persons and proponents for insurance, whose knowledge of the relevant circumstances of the casualty as well as the nature of the risk was generally greater than that of their insurers, the courts would not aid a fraudulent claimant.
The courts would not look behind fraud to see if otherwise there was a valid claim or a claim unaffected by the fraud, and no effort was made to reduce or extinguish claims only after gauging the effects of the fraud upon insurers.
Buchanan JA concluded (para 23) that the existence of an underlying valid claim does not render fraud irrelevant, and that in deciding otherwise in Ormsby the South Australia court had been wrong.
In the United States almost all the relevant case law concerns fire policies subject to an express avoidance clause, generally the clause against any fraud or false swearing in the Standard Fire Insurance Policy of the State of New York.
The cases ultimately turn on the construction of the language.
However, they are nonetheless of interest, because materiality is not in terms dealt with in the clause, and is consequently addressed by the courts as a matter of general principle.
In applying the clause, the courts have generally adopted a test of materiality similar to that of Mance LJ in The AEGEON.
The leading case is the decision of the US Supreme Court in Claflin v Commonwealth Insurance Co 110 US 81 (1884) in which the court held (p 95) that the materiality of a statement in the eye of the law, consists in their tendency to influence the conduct of the party who has an interest in them, and to whom they are addressed.
In Long v Insurance Company of North America 670 F 2d 930 (1982), the insurers defended a claim for loss by fire on the ground (i) that the fire was caused by arson procured by the insured, and (ii) that in the course of the insurers investigation he had untruthfully denied moving his furniture out of his house shortly before it was destroyed.
The Tenth Circuit Court of Appeals, applying the test stated in Claflin, held that summary judgment had been properly given against an insured on ground (ii), without there being any need to investigate whether the insured was in fact responsible for the fire.
The court held (p 934): Regarding allegations of false swearing, a misrepresentation will be considered material if a reasonable insurance company, in determining its course of action, would attach importance to the fact misrepresented.
In Fine v Bellefonte Underwriters Insurance Co 725 F 2d 179 (1984), the Second Circuit Court of Appeals considered that this result followed from the absence of any requirement of inducement in the fraudulent claims rule.
It observed that: materiality of false statements is not determined by whether or not the false answers deal with a subject later determined to be unimportant because the fire and loss were caused by factors other than those with which the statements dealt.
False sworn answers are material if they might have affected the attitude and action of the insurer.
They are equally material if they may be said to have been calculated either to discourage, mislead or deflect the companys investigation in any area that might seem to the company, at that time, a relevant or productive area to investigate.
Some states, such as Texas, have overruled these decisions by statute.
But they have generally been followed by state and US district courts in cases where similar clauses have appeared in the policy and there is no overriding statutory rule.
Analysis
This is the first time that the House of Lords or the Supreme Court has had the opportunity to resolve the question whether the fraudulent claims rule applies to justified claims supported by collateral lies.
I have reached the conclusion that the rule does not apply to such claims.
The starting point is that in law it is not a precondition of the insurers liability that a claim should have been made on him.
The insureds right to indemnity arises as soon as the loss is suffered: Chandris v Argo Insurance Co Ltd [1963] 2 Lloyds Rep 65; Firma C Trade SA v Newcastle Protection and Indemnity Association [1991] 2 AC 1, 35 36 (Lord Goff).
It follows, as Mance LJ pointed out in AXA General Insurance Ltd v Gottlieb [2005] 1 All ER (Comm) 445, para 26 that the effect of a claim subsequently being made for a fraudulently inflated amount is retrospectively to remove or bar the insureds pre existing cause of action.
In other words, it is not a conditional liability but a forfeiture.
In this context, there is an obvious and important difference between a fraudulently exaggerated claim and a justified claim supported by collateral lies.
Where a claim has been fraudulently exaggerated, the insureds dishonesty is calculated to get him something to which he is not entitled.
The reason why the insured cannot recover even the honest part of the claim is that the law declines to sever it from the invented part.
The policy of deterring fraudulent claims goes to the honesty of the claim, and both are parts of a single claim: Galloway v Guardian Royal Exchange (UK) Ltd [1999] Lloyds Rep IR 209, 213 214 (CA); Direct Line Insurance v Khan [2002] 1 Lloyds Rep IR 364; AXA General Insurance Ltd v Gottlieb [2005] 1 All ER (Comm) 445 (CA), para 31.
The principle is the same as that which applies in the law of illegality.
The courts will not sever an agreement affected by illegality into its legal and illegal parts unless it accords with public policy to do so, even if each part is capable of standing on its own: Kuenigl v Donnersmarck [1955] 1 QB 515, 537 (McNair J); Royal Boskalis Westminster NV v Mountain [1999] QB 674, 693 (Stuart Smith LJ), 704 (Pill LJ).
The position is different where the insured is trying to obtain no more than the law regards as his entitlement and the lie is irrelevant to the existence or amount of that entitlement.
In this case the lie is dishonest, but the claim is not.
The immateriality of the lie to the claim makes it not just possible but appropriate to distinguish between them.
I do not accept that a policy of deterrence justifies the application of the fraudulent claim rule in this situation.
The law deprecates fraud in all circumstances, but the fraudulent claim rule is peculiar to contracts of insurance.
It reflects, as I have pointed out, the laws traditional concern with the informational asymmetry of the contractual relationship, and the consequent vulnerability of insurers.
It is therefore right to ask in a case of collateral lies uttered in support of a valid claim, against what should the insurer be protected by the application of the fraudulent claims rule? It would, as it seems to me, serve only to protect him from the obligation to pay, or to pay earlier, an indemnity for which he has been liable in law ever since the loss was suffered.
It is not an answer to this to say, as Christopher Clarke LJ did in the Court of Appeal, that the insurer may have been put off relevant inquiries or driven to irrelevant ones.
Wasted effort of this kind is no part of the mischief against which the fraudulent claims rule is directed, and even if it were the avoidance of the claim would be a wholly disproportionate response.
The rule, moreover, applies irrespective of whether or not the lie set a hare running in the insurers claims department.
Nor is it an answer to say, as the courts have often said of fraudulently inflated claims, that the insured should not be allowed a one way bet: he makes an illegitimate gain if the lie persuades, and loses nothing if it does not.
This observation, which is true of fraudulently inflated claims, cannot readily be transposed to a situation in which the claim is wholly justified.
In that case, the insured gains nothing from the lie which he was not entitled to have anyway.
Conversely, the underwriter loses nothing if he meets a liability that he had anyway.
In The STAR SEA at para 61, Lord Hobhouse warned that the courts should be prepared to examine the application of any such principle to the particular class of situation to see to what extent its application would reflect principles of public policy or the over riding needs of justice.
Where the application of the proposed principle would simply serve the interests of one party and do so in a disproportionate fashion, it is right to question whether the principle has been correctly formulated or is being correctly applied.
It was for this reason that Rix J questioned the correct formulation of the principle in Royal Boskalis and Longmore LJ did the same in The MERCANDIAN CONTINENT.
As their judgments show, the difficulties really arise from the fact that the fraudulent claim rule does not require the insurer to have relied upon the dishonest information or acted on it in any way.
In almost every case in which it has been applied, the insurer has declined to pay, either because there were other grounds for declining or because he saw through the exaggeration or both.
Indeed, in AXA General Insurance Ltd v Gottlieb [2005] 1 All ER (Comm) 445 (CA) the Court of Appeal held that the insurer was entitled to recover interim payments made in respect of a valid claim before any exaggeration had occurred; and in Stemson v AMP General Insurance (NZ) Ltd [2006] Lloyds Rep IR 252 the rule was applied in a case where not only was the lie irrelevant to the recoverability of the indemnity but it had been corrected before any payment had been made.
That these remarkable consequences follow from applying the fraudulent claims rule to a collateral lie suggests that something has gone wrong with the underlying principle.
Anomalies of this kind flow from the absence of any requirement of reliance or inducement when a lie is said to have been told in support of a claim.
This is a well established feature of the fraudulent claims rule, but nonetheless remarkable for that.
There is one other context in which neither reliance nor inducement need be shown, and that is in the criminal law, a position confirmed by the Fraud Act 2006.
But there is, as far as I am aware, no other context in which the civil law avoids a transaction on account of a fraud which has had no impact on its intended target.
In the law of deceit, it is fundamental that the representee must have acted on the misrepresentation.
If he would have done the same thing even in the absence of the misrepresentation, a claim based on it will fail.
The same applies in a claim to rescind a contract for misrepresentation, fraudulent or otherwise.
Thus, if an insurer were to settle a claim by agreement and then discover that that he had been told a lie in the course of the claim process, he would have to show that his agreement was influenced by the lie in order to rescind it.
A lie which had no impact on him would not be good enough.
Even in the law of insurance a material misrepresentation or non disclosure in the making of the contract, whether honest or dishonest, will not give rise to a right of avoidance unless it induced the insurer to accept the risk or to do so on the particular terms: Pan Atlantic Insurance Co Ltd v Pine Top Insurance Co Ltd [1995] 1 AC 501.
As Lord Mustill pointed out in that case, the need to show inducement reflected the fundamental requirement of the law that the misrepresentation or non disclosure should have had some substantial causative effect.
He specifically rejected an argument that in the context of pre contractual misrepresentation or non disclosure the absence of any reference to inducement in the Marine Insurance Act 1906 reflected a disciplinary element in the law of marine insurance, which required that breaches of the insureds duty of utmost good faith should be deterred by imposing condign sanctions even in the absence of reliance or inducement.
In language which would later be echoed by Lord Hobhouse in The STAR SEA (para 61, quoted above), he remarked of this submission that to enable an underwriter to escape liability when he has suffered no harm would be positively unjust, and contrary to the spirit of mutual good faith (p 549D).
Yet if causation is irrelevant to the application of the fraudulent claim rule, some connection must necessarily exist between the collateral lie and the claim, unless the rule is to part company with rationality.
Mr Edelman QC, who appeared before us for the insurers, recognised this.
He found the necessary connection in a test of materiality.
But he submitted that what was required was that the lie should be material to the potential merits of the claim as they would have appeared to a hypothetical insurer at the time that the lie was uttered, when the full facts were not necessarily known.
It did not have to be material to the merits of the claim as they were subsequently shown to be, for example at trial after the facts had been found.
For reasons which I shall explain, I agree that materiality provides the necessary connection between the collateral lie and the claim, but in the context of a fraudulent statement in support of a claim I do not accept that it must be assessed by reference to the merits of the claim as they appear to be when the lie was uttered.
In this context, I think that hindsight is necessary.
Materiality would not ordinarily be relevant at all where a representation was made fraudulently.
But that is because causation is ordinarily established in such cases by the mere fact that the representee acted on the statement.
If a person sets out to induce the representee to act on a dishonest statement, and the representee does act on it, it is necessarily material, or at any rate the representor having intended the result cannot be heard to say that it was not.
The point does not arise in a case where, whatever the insureds intentions, the statement had no relevant impact on the insurer.
This is, I think, why Lord Mance acknowledged in The AEGEON (para 38) that while the lie must be in some sense material if the fraudulent claims rule is to apply, the test of materiality cannot be the same in this context as it is in the law of fraud generally.
Mance LJs tentative answer was substantially the same as Mr Edelmans.
The lie must be such as would, if believed, have tended objectively but prior to any final determination at trial of the parties rights, to yield a not insignificant improvement in the insureds prospects whether they be prospects of obtaining a settlement, or a better, settlement, or of winning at trial.
In the Court of Appeal in the present case, Christopher Clarke LJ was inclined (para 165) to modify this test so as to substitute for the requirement of a not insignificant improvement in the insureds apparent prospects, a requirement of a significant improvement.
The modification is endorsed by Mance LJ in his judgment on this appeal.
In either form, the test proposed is similar to the test for the materiality of pre contractual misrepresentations and non disclosures, from which it was presumably derived.
But I do not think that such a test can apply to a collateral lie at the claims stage.
I start from the proposition that materiality and inducement are closely connected.
This is well established in the context of pre contractual breaches of the insured duty of good faith.
The test of inducement is subjective.
It depends on the state of mind of the actual insurer when he decided to accept the risk or the particular terms.
The test of materiality by comparison is objective.
It depends on what would be relevant to a hypothetical prudent insurer in the same situation: see section 18(2) of the Marine Insurance Act 1906; cf section 7(3) of the Insurance Act 2015.
Thus it is well established that an insured is required to disclose credible reports that his ship is in trouble, even if they subsequently turn out to have been unfounded; and conversely the insured need not disclose circumstances which were immaterial at the time, even if they subsequently turn out to have been material after all.
This is because, as the Court of Appeal held in Brotherton v Aseguradora Colseguros SA [2003] Lloydss Rep IR 746, the materiality of a given circumstance has to be tested at the time of the placing of the risk and by reference to the impact that it would then have on the mind of a prudent underwriter at that time: cf Arnould, The Law of Marine Insurance and Average, 18th ed (2013), paras 15.95 15.107, esp 15.96 15.97; MacGillivray on Insurance Law, 13th ed (2015), para 17.047.
There are in my opinion two reasons why this test of materiality cannot apply to lies told in the course of making a claim.
The first is that no impact on the mind of the prudent underwriter is required in that context.
As Lord Goff said of pre contractual disclosure in Pan Atlantic (p 517G H), if actual inducement is not required, materiality becomes all important.
In that case, there were two competing tests of materiality: a weak test, which depended on whether the relevant fact would have influenced the thought processes of the hypothetical prudent underwriter, and a strong test which would have depended on whether it would have been decisive.
Lord Goff went on to point out that it was only because the Appellate Committee thought it necessary to show that the actual underwriter was induced to accept the risk on the particular terms that the majority felt able to adopt the weak test of materiality.
It is, however, difficult to see what relevance either test of materiality can have if there is no requirement of inducement.
The function of materiality in the law of misrepresentation and non disclosure is to limit the matters upon which the insurer can relevantly claim to have relied.
If the insureds statements need have no actual impact on the insurer at all, why should it matter what impact it might objectively have been expected to have? Even the strong test of materiality rejected in Pan Atlantic, ie that the relevant fact must be decisive, fails to connect the misrepresentation or non disclosure to the claim if the law does not require the actual insurer to have made any decision at all in response to what he has been told.
If the question of materiality is not to depend on the impact of the statement on the mind of the insurer, then it is difficult to see why it should depend on the merits of the claim as they appeared to be at any particular moment, as opposed to the merits of the claim as they actually were.
The second reason is that the insurers assessment of a claim is of a quite different character from his assessment of a risk at the pre contract stage.
In deciding whether to accept the risk and on what terms, the insurer has a complete discretion.
There are no legal standards by which his decision can be assessed.
It is a pure question of judgment, which the hypothetical prudent insurer may make for good reasons or bad in his own commercial interest.
Hence the critical importance of the impact of non disclosure on his thought processes.
But when deciding whether to accept a claim under an existing contract, the insurers position is very different.
He has no discretion, because he is already bound.
The only question properly before him is whether to acknowledge a liability that if it exists at all exists already, whether or not he realises it.
Ultimately, his assessment is simply an attempt to predict what a court would decide.
In that context, the only rational test of the materiality of a lie must be based on its relevance to a court which is in a position to find the relevant facts.
For this reason, although a lie uttered in support of a claim need not have any adverse impact on the insurer, I consider that it must at least go to the recoverability of the claim on the true facts.
By that test, the fraudulent claims rule applies to a wholly fabricated claim.
It applies to an exaggerated claim.
It applies even to the genuine part of an exaggerated claim if the whole is to be regarded as a single claim, as it must be.
But it does not apply to a lie which the true facts, once admitted or ascertained, show to have been immaterial to the insureds right to recover.
It is true that the moral character of the insureds lie is in no way mitigated by the fact that it turns out to have been unnecessary.
But there are principled limits to the role which a claimants immorality can play in defeating his legitimate civil claims.
These limits have been applied outside the realm of insurance ever since the failure two centuries ago of Lord Mansfields attempt to introduce a general duty of good faith in the law of contract.
Ultimately, however, even the law of insurance is concerned more with controlling the impact of a breach of good faith on the risk than with the punishment of misconduct.
The extension of the fraudulent claims rule to lies which are found to be irrelevant to the recoverability of the claim is a step too far.
It is disproportionately harsh to the insured and goes further than any legitimate commercial interest of the insurer can justify.
It leads naturally to the anomalous consequences which Popplewell J, rightly to my mind, pointed out in this case.
Those anomalies are all the more remarkable for the fact that the rule has no application to collateral lies told after the commencement of legal proceedings, when experience suggests that parties are most likely to gild the lily.
In my opinion, it is not the law.
The Human Rights Convention
I have not dealt with the appellants further arguments based on article 1 of the First Protocol to the Human Rights Convention.
They do not arise on the view which I take of the position at common law.
Disposition
I would accordingly allow the appeal.
Subject to any submissions which may be made to us on the form of order, I would enter judgment against the insurers for the sum which the judge found would have been due but for the forfeiture of the claim, namely 3,241,310.60 and interest.
LORD CLARKE:
Introduction
I would allow the appeal, essentially for the reasons given by Lord Sumption, which I will not repeat.
This appeal is concerned with what, like Lord Sumption, I will call collateral lies, that is lies which are not relevant to the question whether the underwriters are liable under the insurance contract or not.
It seems to me that the question whether collateral lies told by the insured should entitle underwriters to refuse to discharge their liability under a contract is essentially a policy question.
Lord Sumption, Lord Toulson and Lord Hughes conclude that the question should be answered in the negative.
I agree.
As Lord Mance shows, there is a case to be made for the contrary view, but in my opinion public policy does not require that the insurer should have a defence.
The critical point is that, in the case of a collateral lie, as Lord Sumption observes at para 26, the insured is trying to obtain no more than the law regards as his entitlement and the lie is irrelevant to the existence or amount of that entitlement.
Such a lie is thus immaterial to the claim.
As Lord Sumption puts it, the lie is dishonest but the claim is not.
This approach reflects the personal views of Popplewell J. Having concluded that the underwriters defence of fraudulent device (ie the telling of a collateral lie) succeeded, he said this in para 225, very near the end of his judgment: I have reached this conclusion with regret.
In a scale of culpability which may attach to fraudulent conduct relating to the making of claims, this was at the low end.
It was a reckless untruth, not a carefully planned deceit.
It was told on one occasion, not persisted in at the trial.
It was told in support of a theory about the events surrounding the casualty which Chris Komet genuinely believed to be a plausible explanation.
The reckless untruth was put forward against the background of having made the crew available for interview by the Underwriters solicitor, who had had the opportunity to make his own inquiries of the crew on the topic.
To be deprived of a valid claim of some 3.2m as a result of such reckless untruth is, in my view, a disproportionately harsh sanction.
I agree.
In my opinion, legal policy does not require such a harsh result.
Moreover, this conclusion seems to me to be consistent with the approach of Rix J in Royal Boskalis Westminster NV [1997] 1 Lloyds Rep 523, which is discussed by Lord Sumption at para 15.
I will not repeat his account of the facts, save to note that the shipowners claimed for the value of their ships and sue and labour costs other than a ransom which they had paid.
In presenting their claim to the underwriters, they concealed the fact of the ransom and the detailed terms on which it was paid, (as Lord Sumption puts it) because they were concerned about a possible breach of UN sanctions against Iraq.
Rix J held (albeit obiter) that he would have rejected the argument on the basis that he considered that the claim for sue and labour was entitled to succeed irrespective of the matters which the owners had concealed.
In this regard Rix J said at pp 592 593, in a passage quoted by Lord Sumption: Whatever be the precise definition and ambit of the concept of a fraudulent claim, there was no such claim here.
I am in the process of finding that the sue and labour claim was and is a good and valid claim.
It is not a false or fraudulent claim.
It is totally unlike those instances of fraudulent claim to be found in the authorities, such as claims in respect of deliberately self inflicted or pretended losses, or claims in amounts which are knowingly or recklessly exaggerated: see, for instance, Goulstone v The Royal Insurance Co, (1858) I F & F 276, where, in the context of a claim for inter alia the loss of furniture whose value was exaggerated four fold, Pollock CB glossed a fraudulent claim as one wilfully false in any substantial particular at p 279; or Chapman v Pole, (1870) 22 LT 306, where again in the context of exaggerated value Cockburn, CJ spoke of one who knowingly preferred a claim he knew to be false or unjust at p 307; or The Captain Panagos DP, [1986] 2 Lloyds Rep 470, where Mr Justice Evans defined a fraudulent claim as one which is made on the basis that facts exist which constitute a loss by an insured peril, when to the knowledge of the assured those alleged facts are untrue, at p 511.
It seems to me that even if one assumed, for instance, that the representation over the existence of any record of the finalization agreement was made fraudulently, that would not make the claim in question a fraudulent claim within these definitions of that expression.
Those conclusions seem to me to be consistent with the approach outlined above.
They are also consistent with the views expressed by Lord Hobhouse in The Star Sea [2003] 1 AC 469, para 72 and by Longmore LJ in The Mercandian Continent [2001] 2 Lloyds Rep 563 discussed by Lord Sumption at paras 16 and 17.
I agree with him that the relevant conduct must, as Longmore LJ put it, be causally relevant to underwriters ultimate liability.
I also agree with him (at the end of para 17) that the requirement for a causal connection cannot be any different depending upon whether the insurer is seeking to avoid the policy or just the claim.
Lord Sumption further notes at para 27 that at para 61 in The Star Sea Lord Hobhouse warned that the courts should be prepared to examine the application of any such principle to the particular class of situation to see to what extent its application would reflect principles of public policy or the over riding needs of justice.
Where the application of the proposed principle would simply serve the interests of one party and do so in a disproportionate fashion, it is right to question whether the principle has been correctly formulated or is being correctly applied.
I agree.
In addition to the absent requirement of materiality, there are two other features that seem to me to point to the conclusion that a collateral lie should not be held to be relevant, save no doubt to the veracity of the insured, which may be relevant to the facts found at a trial.
The first is that the mere telling of a lie to underwriters in connection with a claim cannot sensibly be treated as forfeiture of the claim.
Suppose a collateral lie is told on a Monday but resiled from, say, a week later, can it sensibly be held that it is then too late because the lie has already caused forfeiture of the claim? Such a principle would in my opinion be disproportionate and contrary to public policy.
The second is the effect of the principle laid down in The Star Sea and not challenged in this appeal that, as Lord Hughes puts it at para 94, the common law rule of fraudulent claims has evolved to exclude from its operation fraud committed after litigation has begun.
It is I think accepted that this includes collateral lies.
I agree with Lord Hughes that it would be altogether disproportionate for the insurers to be vouchsafed a new defence to the whole claim if, for example, under pressure in the witness box the claimant were to utter a demonstrable untruth going to the claim.
It would mean that the moment the collateral lie was uttered, it would be open to the underwriters to invite the judge to hold that the statement was a lie and to stop the trial on the basis that the underwriters now had a cast iron defence which could not be remedied by admission that the statement was a lie or in any other way, whether the underwriters were liable under the insurance contract or not.
This too would in my opinion be disproportionate and contrary to public policy.
Could it really make any difference if the lie was uttered just before the issuing of proceedings? In my opinion such a conclusion would make no sense.
In all the circumstances I agree that the appeal should be allowed for the reasons given by Lord Sumption.
I do not detect any significant difference between the reasons given by Lord Sumption, Lord Toulson and Lord Hughes.
LORD HUGHES:
A policyholder makes a claim under his insurance policy.
The claim is within the cover provided by the policy.
The loss has indeed occurred without complicity on the part of the policyholder and it is not exaggerated as to amount.
There has been no breach of any specific warranty in the policy.
The claim is thus far good in law and would succeed.
But the insured embellishes the claim by fraudulent evidence designed to improve the prospects of the insurers accepting it without undue delay or enquiry.
Does the claim for this reason fail? What, in other words, is the true extent of what is known as the fraudulent claims rule?
I have reached the same conclusion as Lord Sumption.
The fraudulent claims rule does not defeat a claim which is wholly good in law, even if a lie is told in support of it.
But I do so for reasons which are a little different from, and to an extent additional to, his.
It has been common ground between the parties, and is indisputable, that the fraudulent claims rule is well established in English law and that it operates to bar the whole of the policyholders claim where that claim is either wholly invented or fraudulently exaggerated.
The claiming policyholder, if he is found fraudulently to have exaggerated his claim, recovers nothing; he does not recover the unexaggerated part.
The issue in this case has been whether that rule extends also to bar the claim where the insured has not invented or exaggerated the claim but has employed what has been termed a fraudulent device.
By that, in this special context, is meant a lie or other fraud in the presentation of the claim to the insurers, in a case where the underlying claim is in fact good in the amount claimed.
Typically the fraudulent device is bogus evidence of some kind advanced in support of the claim in order to bolster it.
Plainly, a fraudulent claim, properly so called, ie one which is either wholly invented or fraudulently exaggerated, may also be supported by bogus evidence of this kind.
But in the terminology of insurance law, the expression fraudulent device, which derives from language adopted in times past by express clauses in some policies, has been used conveniently to refer only to those cases where the underlying claim, even though supported by bogus evidence or some other fraud, is good.
I gratefully adopt Lord Sumptions expression, collateral lie to describe this situation.
In the vernacular, the situation contemplated might be described as the policyholder gilding the lily.
The issue as to the extent of the fraudulent claims rule, and whether it extends to collateral lies, arises in the present case in the context of a claim under a marine insurance policy for some 3.2m in respect of sea damage to the engines of a ship.
However, the law in question applies in exactly the same way to any commercial or domestic insurance policy.
Insurance against losses plays a very large part in the lives of most people, whether the context is commercial or domestic.
Increasingly, people do not themselves stand the multifarious risks of loss which inevitably attend daily life but, rather, insure against it.
Reporting in 2014 after a substantial consultation process, the English and Scottish Law Commissions recorded that: Insurance underpins a healthy and prosperous society, enabling businesses and individuals to protect themselves against risk.
The UK insurance industry is the third largest in the world, the largest in Europe and a vital part of the UK economy. (Law Com, No 353, para 1.1) The UK insurance market was noted to manage investments amounting to 25% of the UKs total net worth.
The law has for centuries recognised that special rules need to apply to insurance contracts.
At the stage when a policy is being taken out, the potential insured will typically know a great deal more about his circumstances, and thus about the risk, than can the insurer to whom he is applying.
The response of the common law to this truth was to develop the rule that a contract for insurance must be conducted on both sides in the utmost good faith.
In particular, when the contract is in negotiation the general common law rule was that the applicant must volunteer to the insurer, whether he is asked or not, anything which he knows or ought to know and which a prudent insurer would regard as relevant to the assessment of the risk.
The consequence of breach, at common law, was that the insurer is entitled to avoid the policy altogether.
When the law of insurance as it applied to marine contracts was codified by the Marine Insurance Act 1906, this rule of utmost good faith was repeated in section 17, which read: 17.
A contract of marine insurance is a contract based upon the utmost good faith, and, if the utmost good faith be not observed by either party, the contract may be avoided by the other party.
This provision was declaratory of the common law relating to insurance generally.
As will be seen, this common law/statutory rule has recently been modified by statute, differentially for consumer insurance and non consumer policies, but exacting duties of disclosure are still imposed on the applicant for insurance at the pre contract stage.
Otherwise, no doubt, the consequence would either be difficulty obtaining insurance or, more likely, demands for higher premiums.
At the later stage when a claim is made, the policyholder will also typically know a good deal more about the facts which give rise to the claim than the insurers possibly can, whether the claim arises out of a motor accident, a burglary, fire damage to a factory or warehouse, the loss of luggage on holiday or the ingress of seawater into a ship.
Insured loss is generally adventitious.
It may occur anywhere in the world and with or without witnesses.
Only sometimes will thorough investigation of the circumstances of the claimed loss be a realistic option for insurers.
Moreover, it is very much in the interest of policyholders generally that when a claim arises, it should be accepted promptly by the insurers, payment should be made, and business or private life should be allowed to resume with the loss repaired.
Typically, insurers market their policies in part by advertising what they assert to be their prompt and uncomplicated response to claims.
If such is to be the response to claims, insurers must take the claiming insured to a considerable extent on trust.
Furthermore, if claims have to be investigated in detail and routinely verified by insurers, the cost of the systems necessary to do this will fall on policyholders generally through increased premiums, and good claims will be delayed alongside the bad.
The response of the common law to these truths was the development of the fraudulent claims rule.
It is a rule of law, imposed by the courts whether or not the policy contains a clause to the same effect, although many do and more used to do in the early days of insurance when the rule was developing.
It seems more realistic to acknowledge it as having achieved the status of a rule of common law, grounded in sound policy, rather than depending on an implied term in the contract.
Apart from any other reason, it seems far from clear that in every case such an implied term would meet the tests of obviousness or business necessity.
To anticipate, it will be seen that the recent legislation in relation to consumer and non consumer insurance preserves the fraudulent claims rule, but without resolving the question raised in the present case about its extent.
The very clear rationale of the fraudulent claims rule is the need to discourage fraud in claims.
It is notorious that such fraud is endemic.
The problem is longstanding, but if anything the evidence suggests that it is increasing rather than diminishing.
Recent concerns, chiefly about the connected problem of fraudulent third party claims against insurers (generally alleging personal injury) led to a government established task force formed of representatives of all principal interests.
It accepted an Association of British Insurers estimate of between 1.32 billon and 2.1 billon per annum as a likely level of dishonestly inflated or totally fictitious claims: Insurance Fraud Taskforce Final Report PU 1891 January 2016.
Although that estimated figure did not distinguish between fraudulent claims by policyholders and those made by third parties, the two species of fraud clearly exhibit shared features.
Reviewing the same problem specifically in the context of claims by policyholders, the English and Scottish Law Commissions had concluded just a few months earlier that fraudulent insurance claims are a serious and expensive problem: Insurance Contract Law: Law Com 353 (July 2014) paragraph 19.1.
Part of the reason for the level of fraud may be that it is too easy, for in many cases the prospect of discovery may be poor.
Another part seems likely to be a prevalent feeling that insurance companies are fair game and deception of them effectively victimless.
Although that perception is quite false, since the cost of fraudulent claims is in effect distributed amongst policyholders generally via increased premiums, it is likely that it is one widely shared.
An unacceptably high level of fictitious and dishonestly inflated claims thus forms part of the background against which the proper ambit of the fraudulent claims rule falls to be considered.
The occasion of the claim in this case
The insured claimants were the owners of a cargo ship the DC Merwestone (the vessel).
At about 0930 on 27 January 2010 she left Klaipeda in Lithuania bound for Bilbao.
From just before 2100 on the following evening, 28 January, seawater was seen to be pushing up through the floor plates in the engine room.
By just before 0300 on 30 January, about 30 hours later, the main engine was fully submerged and stopped working.
Later that morning a tug came alongside and the vessel was towed to Gdynia.
The main engine was damaged beyond repair.
The owners were insured against loss under a marine insurance policy.
At the trial before Popplewell J there was dispute about what had occurred and whether it was or was not covered by the policy.
The judge set out his findings of fact and his construction of the terms of the policy in a careful and comprehensive judgment, and neither has been subject to appeal.
Accordingly, it is enough now to record that the cover extended to loss attributable to crew negligence, unless the owners were personally guilty of want of due diligence, and that it extended to unseaworthiness unless, the owners were personally privy to it.
The details of what had occurred can similarly now be much abbreviated.
The vessel had a duct keel tunnel running more or less its full length in a central position, from the bowthruster room in the foreship to the engine room in the aft.
Before leaving Klaipeda the crew had used an emergency fire hose and pump, housed in the bowthruster room, to blast ice from the hatch covers, but had negligently failed to drain seawater from the pump when they finished, nor had they closed the sea inlet valve to the pump.
The water froze and expanded, cracking the pump casing and disturbing the seal on the filter.
That left two holes in the bowthruster room, open to the sea.
After the vessel sailed, the water melted and seawater entered the bowthruster room.
From there it ran along the duct keel tunnel and into the engine room, which it was able to do because apertures at each end, through which cables passed, had not been packed or sealed.
The lack of seals had been the responsibility of contractors who had modified the vessel.
In the engine room there were pumps which ought to have been able to cope with pumping out the water which entered via the duct keel tunnel, but they were defective.
Accordingly the causes of the damage were crew negligence, contractors negligence and unseaworthy pumps.
The judge determined that the owners were not personally guilty of want of due diligence, nor privy to the unseaworthiness.
It followed that the claim was covered by the policy.
Whilst that is now accepted to be the position, both the facts of the casualty and the import of the policy were heavily in dispute at the trial.
The insurers disputed liability under the policy for a raft of different reasons.
On any view, the casualty ought not to have happened, and seaworthiness and the owners possible privity to it were bound to come under active consideration, as must have been apparent to them.
It was with this background of a claim which was likely to be disputed, and in due course was disputed, that one of the owners principal directors recklessly misled the insurers with the false statement which amounted to a fraudulent device.
The fraudulent device
The insurers were understandably sceptical about how the flooding could have resulted from a relatively small leak in the bowthruster room.
They made specific written inquiries about a number of matters relating to this and to seaworthiness, included amongst which was a request for the owners explanation of the ingress of the water and the failure of the pumps to control it.
By a letter of 21 April 2010, written by way of answer, the owners director Chris Kornet asserted amongst other things that the bilge alarm had sounded at around 1200 on 28 January, that is to say about nine hours before the water was seen to be under the floor plates of the engine room.
No action had been taken in relation to the sounding alarm, he said, because it was attributed to the ship rolling in heavy seas.
When, later, he was asked the source of these assertions, Mr Kornet said that he had been given this information by the Master and crew.
These statements were untrue.
The alarm had not sounded before about 2100, nine hours later, and Mr Kornet had not been told by the Master or crew that it had.
Later, after Mr Kornet had spoken to him, the Master fell into line with what had been reported to the insurers, but it was not in fact correct.
The judge concluded that Mr Kornet had convinced himself that the alarm must have gone off at about the time he asserted, and that his proffered explanation (heavy seas) for non investigation was plausible.
Nevertheless, even on these findings, the false assertions were, as the judge found, reckless.
The false statements were made when Mr Kornet was frustrated that the insurers were not paying up immediately.
They were intended to reassure the insurers that the ship was not unseaworthy and in particular that its alarm systems were working satisfactorily.
Otherwise the insurers were, as he knew, likely to focus on the state of the ship and the possible privity of the owners to any unseaworthiness.
As it turned out, these false statements made no difference to the claim.
The causes of the water ingress were not altered by whether the bilge alarm had sounded earlier than it did or not, nor did it make any difference whether or not the Master and crew had told Mr Kornet that it had gone off.
The fraudulent claims rule and the duty of good faith
It seems likely that the fraudulent claims rule developed as a matter of history from the general rule that the parties to a contract of insurance owe each other the duty to act with the utmost good faith.
In the present case, in the Court of Appeal, Christopher Clarke LJ accepted this as the juridical basis for the fraudulent claims rule: see para 77.
In the past it has from time to time been assumed, in cases where any difference between the two rules did not fall for examination, that the fraudulent claims rule was simply a manifestation of the rule of good faith.
That assumption was made in passing in the classic direction to the jury of Willes J in Britton v Royal Insurance Co (1866) 4 F & F 905, quoted by Lord Sumption at para 7 above, doubtless for the very good reason that the judge was directing the jury as to the law to be applied rather than embarking on a general lecture upon legal theory.
A similar assumption then figured in the judgments in both Orapko v Barclays Insurance Services Co Ltd [1995] 1 LRLR 443 and Galloway v Guardian Royal Exchange (UK) Ltd [1999] Lloyds Rep 209.
But in none of those cases did any question of difference between the two rules arise.
In each of the three there was fraudulent exaggeration of the claim, and indeed in the last two cases also non disclosure pre contract.
In fact, there are significant differences between the two rules.
If it were the case that the pre contract duty of good faith continues unaltered post contract, that would no doubt support the contention that the fraudulent claims rule embraces collateral lies deployed in support of a legally sound claim.
The collateral lie would be a breach of good faith and, as Lord Sumption says at para 8, the consequence of an unaltered duty of good faith would be that the collateral lie would entitle the insurer to avoid the whole policy, and not simply for the future but ab initio.
If that were so, the claim would fall with the policy.
It has, however, been clear for many years, and is now indisputable following Manifest Shipping Co Ltd v Uni Polaris Insurance Co Ltd (The Star Sea) [2001] UKHL 1; [2003] 1 AC 469, that although some duty of good faith continues post contract, it differs significantly from the pre contract rule both as to the obligation which it imposes and as to the remedy for breach.
There is, for example, no continuing duty on the insured to disclose information which comes to the actual or constructive knowledge of the insured after the cover was issued see Cory v Patton (1872) LR7 QB 304, Lishman v Northern Maritime Insurance Co (1875) LR 10 CP 179, Niger Co Ltd v Guardian Assurance Co Ltd (1922) 13 Lloyds Rep 75 and New Hampshire Insurance Co v MGN Ltd [1997] LRLR 24, all confirmed in The Star Sea.
There is no occasion in the present case to pursue the elusive matter of definitive analysis of the content of the post contract duty of good faith, for it is enough that it plainly includes the fraudulent claims rule.
Secondly, any duty of disclosure which may exist post contract ends with the commencement of litigation, when the different rules of court take over; they include, significantly, the concept of legal privilege.
Thirdly and for present purposes most importantly, as The Star Sea makes clear, the remedy for post contract fraud in the making of the claim is loss of the claim, not avoidance of the whole policy.
All of that means that one cannot answer the question in the present case by predicating it on the basis that the fraudulent claims rule is merely a manifestation of the duty of utmost good faith.
Whilst the fraudulent claims rule is confirmed by The Star Sea, that case leaves open the present issue, namely what kind of fraud is caught by it.
Moreover, the recent legislation (see below) treats the rules of good faith and fraudulent claims differently.
It modifies the rule of utmost good faith but leaves the fraudulent claims rule untouched.
Fraudulent devices: authority
In Agapitos v Agnew (The Aegeon) [2002] EWCA Civ 247; [2003] QB 556, in the course of a thorough review of the question here in issue, Mance LJ, as he then was, justly observed at para 22 that there is a dearth of convincing authority either for or against the inclusion of fraudulent devices within the fraudulent claims rule.
There is no direct decision against inclusion.
At first instance in Royal Boskalis Rix J expressed strong obiter doubts about it.
That case did concern falsity in the presentation of the claim which could properly be analysed as a collateral lie.
It amounted to deliberate concealment of the terms on which the ship had been extracted from Iraq.
The lie was told for fear that the insurers would try to rely on illegality if the truth were revealed, but on the judges ruling the validity of the claim was not affected by the falsity.
Thus, the concealment was collateral because the claim was good.
At [1997] LRLR 523, 592, Rix J said: Whatever be the precise definition and ambit of the concept of a fraudulent claim, there was no such claim here.
I am in the process of finding that the sue and labour claim was and is a good and valid claim.
It is not a false or fraudulent claim.
It is totally unlike those instances of fraudulent claim to be found in the authorities, such as claims in respect of deliberately self inflicted or pretended losses, or claims in amounts which are knowingly or recklessly exaggerated: see, for instance, Goulstone v Royal Insurance Co (1858) 1 F & F 276 . or The Captain Panagos DP [1986] 2 Lloyds Rep 470, 511, where Evans J defined a fraudulent claim as one which is made on the basis that facts exist which constitute a loss by an insured peril, when to the knowledge of the assured those alleged facts are untrue I doubt that it is every knowingly or recklessly false statement made in the context of a claim which renders that claim a fraudulent claim for the purpose of the doctrine whereby the making of a fraudulent claim leads to the automatic forfeiture of the whole policy under which the claim is made.
However, that case was not decided by the judge on the basis of the fraudulent claims rule, and he refused a late application by the insurers to allege fraud.
It was decided on the basis of the scope of the duty of good faith.
When in due course it reached the Court of Appeal, the decision was reversed on different grounds and the present issue did not arise for discussion.
For the reasons explained by Mance LJ at para 28 in The Aegeon, there is no significant assistance to be had on the present issue from Piermay Shipping Co SA v Chester (The Michael) [1979] 2 Lloyds Rep 1.
In The Star Sea the House was clearly exercised by the risk of disproportionately severe remedies, which risk tends to support a policy argument against inclusion.
On the other hand, to the extent that the decision concludes that there is an obligation on the insured to treat his insurer with honesty when making a claim, it is capable of supporting inclusion, as perhaps may Lord Hobhouses parting remarks on the topic at para 72, emphasising the fundamental impact which fraud has on the relationship under insurance contracts.
But the present issue simply did not arise and was not discussed.
The much criticised decision in Black King Shipping Corpn and Wayang (Panama) SA v Massie (The Litsion Pride) [1985] 1 Lloyds Rep 437 did assume that the lie there told defeated the claim, and in The Mercandian Continent at para 29 Longmore LJ (obiter) treated the decision as justified by the fraudulent claims rule.
But Hirst J did not so base it, reasoning instead from the duty of good faith, and this was roundly rejected in The Star Sea at para 71.
The treatment of The Litsion Pride by Lord Hobhouse in The Star Sea is, to my mind, more consistent with the exclusion of collateral lies from the fraudulent claims rule than with their inclusion.
At para 71, Lord Hobhouse said of the earlier case; In so far as it is based upon the principle of the irrecoverability of fraudulent claims, the decision is questionable upon the facts since the actual claim made was a valid claim for a loss which had occurred and had been caused by a peril insured against when the vessel was covered by a held covered clause.
True it is that Lord Hobhouse then added: It is not necessary to examine whether there might or might not have been some other basis upon which the case could be decided in favour of the insurer as one feels it clearly ought to have been.
It is not at all clear what route towards a finding for the insurers in The Litsion Pride Lord Hobhouse had in mind, but it does not seem likely that he can have been assuming that a collateral lie relating to the claim would have provided it, for then he could not easily have made the first observation.
With hindsight, it may be that the better analysis of The Litsion Pride is that the lie told was not part of the presentation of the claim at all, but rather part of a dishonest antecedent attempt to avoid liability to pay the additional premium for taking the ship into a war zone.
Likewise the present point was far from arising in The Mercandian Continent, where the lie was in no sense part of the presentation of the claim, indeed was not even directed to the insurers, but rather amounted to a misplaced attempt to serve their interests.
In summary, authority for inclusion of fraudulent devices within the rule boils down to a possibly relevant dictum of Lord Sumner in Lek v Matthews (1927) 29 Lloyds List Rep 141 and a first instance trial before Roche J in Wisenthal v World Auxiliary Insurance Corp Ltd (1930) 38 Lloyds List Rep 54, plus the considered obiter view of the Court of Appeal in The Aegeon itself.
Lek v Matthews concerned a claim by a stamp collector for valuable stamps lost by theft.
The theft had genuinely occurred and many stamps had been stolen.
But in the course of quantifying the claim, the insured listed a substantial number of stamps which he knew he had never had.
The trial judge, Branson J, held that he had been fraudulent and that his claim accordingly failed.
In the Court of Appeal the collector succeeded in persuading Atkin and Bankes LJJ that he had not been fraudulent, although Scrutton LJ disagreed.
The House of Lords restored the decision of Branson J.
The judgments at every stage are long and heavily detailed as to fact and evidence.
It is apparent that there was in some quarters a good measure of judicial sympathy for the claimant, on the grounds that he was a man of wealth and good reputation, who had certainly suffered the theft.
The basis of the Court of Appeal decision was, in part, the conclusion of Atkin LJ that Mr Lek had not been dishonest, and thus not fraudulent, if he had genuinely believed that he was entitled to the sum which he claimed, and whether or not he had knowingly or recklessly included stamps which he had never had.
Although Lord Phillimore dissented in restoring the finding of fraud, all three members of the House of Lords rejected this Atkin approach to the meaning of fraud, thus perhaps to an extent anticipating the debate many years later in the line of cases which includes Royal Brunei Airlines Sdn Bhd v Tan [1995] 2 AC 378 and Barlow Clowes International Ltd v Eurotrust International Ltd [2005] UKPC 37; [2006] 1 WLR 1476.
Atkin LJ offered this example at (1926) 25 Lloyds Rep 544: In the course of adumbrating the later overruled view of dishonesty/fraud, The owner of a picture may have valued it at its true value, and may have had undoubted loss by theft.
At the same time he may be unwilling to disclose how he acquired it, and in answer to underwriters may give a false account of its purchase.
Such a falsehood, however blameworthy, seems to me on the supposed facts to afford no evidence of a fraudulent claim.
Referring to this, Lord Sumner said in the House of Lords at 163 164: If a man has claimed for the loss of things which he knew he had not got, I think it is a contradiction in terms to say that he may have honestly believed in his claim.
What is the use of a clause of defeasance in case a false claim is made, if we are to say that answers which violate this contractual clause and the most obvious rules of honesty as well do not matter so long as Mr Lek was convinced that he ought to win? It simply means that if he decides his own case in his own mind in his own favour and is persuaded that he is right (as anyone might be), falsehood in securing the victory does not matter.
The learned Lord Justice gives an illustration about a picture, which shows, I think, that he had in his mind a case of misstatements on purely collateral matters.
Even so, I could not agree: but these present matters are not collateral; they are of the essence.
Atkin LJs picture illustration was plainly offered in support of his theory of fraud.
It was not related to any issue as to collateral lies.
The fraud practised by Mr Lek could not on any view be regarded as a mere collateral fraud, for it pretended that items had been lost which had never been there to be stolen.
I respectfully agree entirely with Lord Mance (para 128) that there is no difficulty whatever in describing what Mr Lek did as fraudulent, whether or not he believed that he was morally justified in doing it.
But the question which we face in the present case is not whether a collateral lie is dishonest (or fraudulent) but whether it brings the consequence that the whole claim fails.
As to that, it is perhaps possible that in his brief riposte Lord Sumner may have had in mind the present issue as to collateral lies, but it does not seem particularly likely in a case where the issue was whether there was fraud at all.
On any view, the present issue did not arise and there is no sign of it having been argued.
Wisenthal did raise collateral lies.
The claim was made on a policy insuring valuable furs and skins which were being taken to Glasgow to be auctioned.
The insurers primary case was that the claimed theft had been carried out with the connivance or privity of the insured and most of the cross examination by Mr Norman Birkett QC on their behalf focussed on issues of credit.
They also alleged pre contract non disclosure by allowing the insurers to think that daily rental rooms where the sale was to take place were a proper auction house.
However, the jury answered questions about whether these complaints were made out either not satisfied or no.
The jury further answered that it was not satisfied that there had been fraudulent exaggeration of the claim.
The findings which the jury made against the claimant furriers were that (1) they had concealed whatever stock book they had, and had fraudulently told the insurers that there was none, and (2) they had fraudulently concealed a bank account in a name of a relative which was being used habitually for the business, but which name camouflaged the connection.
The jury also found that it was impossible to put a quantity or value on the merchandise which had been taken.
On these findings the judge gave judgment for the defendant insurers.
Although the inability to say what had been stolen would presumably have justified this outcome, it seems clear that the judge took the view that the two collateral frauds specifically found also led to the failure of the claim.
Otherwise there would have been no need to ask the jury for findings in relation to those complaints.
Moreover he had directed the jury that it would be sufficient to come within the definition of fraud if deceit had been used in the investigation to secure easier or quicker payment of the money than would have been obtained if the truth had been told.
Understandably therefore in The Aegeon at para 29 Mance LJ described the case as of interest.
The report contains no indication that the issue was argued.
Whether there were other first instance trials at this time which made the same assumption that collateral lies were sufficient to defeat a claim, even in the absence of fiction, complicity in loss, or exaggeration, is not known.
The considered view of the Court of Appeal in The Aegeon was that the fraudulent claims rule did include fraudulent devices, differing on this point from the view of Toulson J (as he then was) at first instance.
The case proceeded on a preliminary point of pleading, and the views on the present issue were technically obiter, because the fraud had been committed after the commencement of litigation, and on the basis of The Star Sea it was held that the fraudulent claims rule, whatever its scope, did not apply after that point.
Although expressed at para 45 as a tentative view, the conclusion on the present issue was nevertheless fully reasoned and thorough.
It depended not so much on authority, which as has been seen was scanty and equivocal, but upon reasoning from principle.
The governing consideration seems to have been that the insured would otherwise enjoy the advantage of what has become known as the one way bet: see especially paras 20 and 37.
The conclusion reached in The Aegeon has been assumed subsequently to represent the law in cases both at first instance and on appeal, but in none of them was the point put in issue and in several it could not have arisen for decision.
Sharons Bakery (Europe) Ltd v AXA Insurance UK plc [2011] EWHC 210 (Comm); [2012] Lloyds Rep IR 164, was a case of material non disclosure at inception of cover of the fact that a finance company had been deceived into advancing finance, although the same bogus invoices had also been submitted in support of a subsequent claim in relation to a fire which had genuinely happened.
The policy was held by Blair J to be avoidable for the non disclosure, irrespective of the fraudulent device employed in support of the claim.
Moreover in that case there was an express clause avoiding the policy in the event of fraudulent devices, so that the general law was not in point.
Similarly, in Bate v Aviva Insurance UK Ltd [2014] EWCA Civ 334; [2014] Lloyds Rep IR 527 the policy was avoidable for (fraudulent) non disclosure quite apart from that non disclosure being untruthfully denied when a subsequent claim was made.
Apart from the facts that the judge found the latter fraudulent device, and that the Court of Appeal upheld his decision, the present issue was simply not discussed.
Likewise, although in AXA General Insurance Ltd v Gottlieb [2005] EWCA Civ 112; [2005] 1 All ER 445 the Court of Appeal (per Mance LJ) re stated the conclusion in The Aegeon, the fraud in that case consisted in asserting payments made for alternative accommodation and electrical work when those payments had never been made; the case was one of fraudulent claim properly so called and what was at issue was the extent to which insurers could recover sums previously paid under the policy.
Aviva Insurance Ltd v Brown [2012] Lloyds Rep IR 211 was another case of a fraudulent claim rather than of fraudulent device.
The claim was for rent allegedly paid out for alternative accommodation when there was no question of payment because the policy holder himself owned the house in question.
That he might have made an entirely different claim for the loss of rental which might otherwise have been paid by a third party tenant does not alter the fact that this was a fraudulent claim; if he had sought to make that quite different case he would have had to show that the house would otherwise have been rented out.
The correctness of The Aegeon was not debated, although whether the fraud was sufficiently connected to the claim, and/or sufficiently serious, was.
The clearest case of direct application of The Aegeon is Stemson v AMP General Insurance (NZ) Ltd [2006] UKPC 30; [2006] 1 Lloyds Rep IR 852.
The principal decision of the Privy Council was that there was no reason to disturb the concurrent findings in both courts below that the insured had himself started the house fire on which the claim was predicated.
He had, however, also lied to the insurers during the investigation by claiming, falsely, that he had not previously contemplated sale of the house, when in fact he had indeed done so under considerable financial pressure.
The Board upheld the judges decision that this lie was, as well as clearly relevant to the conclusion that the insured started the fire, an independent reason why the claim failed.
The judgment of Lord Mance records, however, at para 121 that the law as stated in The Aegeon had not been questioned in argument.
The real issue was whether the finding that the claim was wholly bogus could stand.
Lastly, in Summers v Fairclough Homes Ltd [2012] UKSC 26; [2012] 1 WLR 2004 the Supreme Court dealt with the law relating to fraudulent third party claims against insurers.
It is true that at para 29 Lord Clarke, giving the judgment of the court, distinguished the law as between parties to an insurance contract, and that in doing so he included The Aegeon in his list of cases demonstrating the fraudulent claims rule in such cases.
But that cannot realistically be treated as expressing any view on the present issue.
The personal injuries claimant in Summers made a bogus claim, alleging that he was grossly disabled when in fact he was working and playing football, and on this basis claimed approximately eight times what his case was truly worth.
The court referred to the fraudulent claims rule in insurance only to distinguish it from the law applicable to third party claims.
Plainly, the fact that The Aegeon has been assumed to represent the law, and indeed has not been questioned, is of some relevance to the present issue.
But the present case appears to be the first time since that decision that any court has heard argument about it, and certainly the first time that either this court or the House of Lords has been required to confront the issue.
The essential question is whether The Aegeon was right.
Authority: other jurisdictions
As Lord Sumption records, Australian cases demonstrate a difference of opinion on the present issue.
That the second of them involved construction of a statute whereas the first did not does not affect this position.
Just as does the English statute (see below), the Australian Act left open the meaning of claim made fraudulently and thus the present issue.
Materiality
Materiality is a concept of central importance to the law of pre contract disclosure, founded on the duty of utmost good faith: Pan Atlantic Insurance Co Ltd v Pine Top Insurance Co Ltd [1995] 1 AC 501.
It means something significant which the proposer knows, or ought to know, but the insurer does not.
If that unknown something would affect the decision of a hypothetical insurer whether to take the risk or not, or on what terms to do so, it is material in the sense there used.
Can materiality in this sense be read across to the later stage of a claim being made, and if it can, does it assist in providing the answer to the present issue as to whether fraudulent devices are included in the fraudulent claims rule?
In Royal Boskalis, Rix J thought, at 597 598, that it was not apparent how the concept of materiality was to apply at the stage of a claim made under the policy.
He added that an obstacle to transposing materiality of fraud from the pre contract to the claims stage lies in the fact that by definition at the latter stage it will arise only when the fraud has been detected.
But the debate in his case was being conducted before The Star Sea reached the House of Lords.
It was being conducted in the context of an issue about whether the pre contract duty of good faith continued unaltered to the post contract stage of the making of a claim, and with it the right to avoid the policy altogether for breach.
I do not think that the discovery of the truth is necessarily the difference between the pre and post contract stages.
True it is that by the time there is a question whether a lie told in support of a claim does or does not defeat that claim, the lie will normally have been discovered.
But the same is true of a failure of pre contract disclosure.
By the time there is a question whether it justifies the insurer in avoiding the contract, the truth will normally have been discovered.
The insurer avoids the policy, or seeks to do so, because he has found out what he was not told during the negotiations leading to it.
It is not difficult in most situations to ask, a propos the collateral lie, whether it was told intending the insurer to act in reliance on it, nor whether it did in fact affect the insurers behaviour during the period before he found out the truth.
There may be the occasional case of a lie which is simply irrelevant to the laying of the claim and is told for some different reason, such as the lies in The Litsion Pride (to hide the fact that the insured had been trying to evade his liability to pay the additional premium) and The Mercandian Continent (to support the insurers wish to litigate in Trinidad rather than in London).
The genuinely burgled householder who was unquestionably absent at the time but lies about where he was to avoid domestic embarrassment would be another example.
But leaving aside such wholly irrelevant lies, generally speaking a lie told in the making of the claim, whether collateral or otherwise, is told with the aim of affecting the behaviour of the insurer.
That is the whole point of it.
The aim may be to speed up the acceptance of liability, or to avoid further enquiry, or there may be many other reasons.
And the insurer, before he learns the truth, may be influenced in his behaviour in these or other ways, by the lie.
The important difference between the pre and post contract (claim) stages lies in the power of decision in the hands of the insurer.
Pre contract, he is free to take or to refuse the risk.
A failure of disclosure or false statement deprives him of the opportunity to consider something.
If it might have affected his decision, it is material.
And if he had known the truth, he would have had a perfect right to refuse to issue the policy.
Post contract, the insurer has no such freedom of choice.
If the claim is good, he is legally obliged to pay it.
A lie told in the making of the claim may well affect his handling of the claim, or the speed at which he pays it, or the inquiries which he calls for, but it can make no difference to his liability to pay.
It may well be material (relevant) to his behaviour, but it is immaterial (irrelevant) to his liability.
So materiality means something different at the two stages.
The question is: material to what? For this reason, I respectfully agree with Rix Js conclusion that the concept cannot simply be transposed to the post contract situation.
It does not migrate unchanged between the two stages, any more than the duty of good faith does.
It is therefore possible to say, as Lord Sumption explains, that materiality used in the different sense of relevance to liability provides the answer to the issue in the present case.
The collateral lie is immaterial to the liability of the insurer.
In analysing the issue in that way one is, in a sense, re stating the question: does a collateral lie defeat the claim? But one is also focussing on the critical difference between the collateral lie and the false or exaggerated claim.
The collateral lie is certainly told with the aim of improving the position of the liar, but in fact and in law it makes no difference to the validity of his claim whether it is accepted or found out.
The false or exaggerated claim is also made with the aim of improving the position of the liar, but if accepted it provides him with something to which he is not entitled in law.
Lest it be thought that to state the present issue only in terms of materiality is to re state rather than to answer the question, it is helpful to address the underlying policy of the law.
This becomes relevant in any event since the rule that the exaggerated claim fails altogether can only be because, as a matter of policy, severance is refused in law even where the exaggerated part is eminently severable in fact (as for example where an additional valuable has been added to the list of items lost, just as Mr Lek added stamps he had never had).
The rationale of the fraudulent claims rule
There is no doubt that the purpose of the fraudulent claims rule is to discourage fraud, having regard to the particular vulnerability of insurers.
This rationale has frequently been reiterated.
In Galloway v Guardian Royal Exchange (UK) Ltd [1990] Lloyds Rep IR 209, 214, it was expressed thus by Millett LJ at 214: The making of dishonest insurance claims has become all too common.
There seems to be a widespread belief that insurance companies are fair game, and that defrauding them is not morally reprehensible.
The rule which we are asked to enforce today may appear to some to be harsh, but it is in my opinion a necessary and salutary rule which deserves to be better known by the public.
I for my part would be most unwilling to dilute it in any way.
And in The Star Sea Lord Hobhouse said this at para 62: The logic is simple.
The fraudulent insured must not be allowed to think: if the fraud is successful, then I will gain; if it is unsuccessful, I will lose nothing.
This latter formulation of the justification for the rule, which has often been repeated, gives rise to the commonly used shorthand that the fraudulent insured must not be allowed a one way bet.
It was the principal argument relied upon by the insurers in The Aegeon and in the present case for the inclusion of collateral lies within the rule.
The need for such a rule, severe as it is, has in no sense diminished over the years.
On the contrary, Parliament has only recently legislated to apply a version of it to the allied social problem of fraudulent third party personal injuries claims.
Section 57 of the Criminal Justice and Courts Act 2015 provides that in a case where such a claim has been exaggerated by a fundamentally dishonest claimant, the court is to dismiss the claim altogether, including any unexaggerated part, unless satisfied that substantial injustice would thereby be done to him.
Parliament has thus gone further than this court was able to do in Summers v Fairclough Homes.
Severe as the rule is, these considerations demonstrate that there is no occasion to depart from its very long established status in relation to fraudulent claims, properly so called.
It is plain that it applies as explained by Mance LJ in The Aegeon at paras 15 18.
In particular, it must encompass the case of the claimant insured who at the outset of the claim acts honestly, but who maintains the claim after he knows that it is fraudulent in whole or in part.
The insured who originally thought he had lost valuable jewellery in a theft, but afterwards finds it in a drawer yet maintains the now fraudulent assertion that it was stolen, is plainly within the rule.
Likewise, the rule plainly encompasses fraud going to a potential defence to the claim.
Nor can there be any room for the rule being in some way limited by consideration of how dishonest the fraud was, if it was material in the sense explained above; that would leave the rule hopelessly vague.
Nevertheless, the severity of the rule is an important consideration.
Addressing the related (but distinct) rule of utmost good faith as applied post contract, and its even more severe sanction of avoidance of the policy ab initio, Lord Hobhouse in The Star Sea warned at para 51 of the dangers of remedies becoming disproportionate to the breach of duty.
That consideration underlay the conclusion that the content of the duty of good faith did not extend to mere non disclosure post contract.
When speaking of the fraudulent claims rule, he returned to the point at para 61: The courts should likewise be prepared to examine the application of any such principle to the particular class of situation to see to what extent its application would reflect principles of public policy or the over riding needs of justice.
Where the application of the proposed principle would simply serve the interests of one party and do so in a disproportionate fashion, it is right to question whether the principle has been correctly formulated or is being correctly applied.
In their 2014 report (para 54 supra) the Law Commissions referred at paragraph 1.25 to the same consideration.
They said: The 1906 Act is insurer friendly.
The principles were developed at a time when the insured knew their business while the insurer did not, and were designed to protect the fledgling insurance industry against exploitation by the insured.
Where a policyholder is in breach of an obligation, the law gives wide ranging opportunities for the insurer to avoid the contract and refuse all claims, or to treat its liability as discharged, even where the remedy seems out of proportion to the wrong done by the policyholder.
They also noted that the strict legal entitlement of insurers was not always mirrored by best market practice as to enforcement of remedies.
There is self evidently a much greater risk of disproportionate remedy when the claimant is legally entitled to everything which he claims.
Nor is the proposition that the fraudulent claimant has a one way bet entirely accurate.
He does not stand to lose nothing at all if found out.
He will commit a criminal offence, although the risk of prosecution is relatively slight, even after some well publicised recent trials, especially if he stood to gain nothing to which he was not entitled, and it may not operate as a significant sanction in many cases.
The same may well be true of the potential to be held liable in damages to the insurers.
Even, however, if those risks are regarded as comparatively remote, and are disregarded, the consequence of discovery is not limited to them.
The insured who is shown to have acted fraudulently will, first of all, forfeit all or most of his credibility in any debate, in court or out of it, as to his entitlement under the policy.
He will probably be disbelieved even where he is telling the truth.
Secondly, if there is litigation in relation to the claim, he will be likely to be penalised by expensive inter partes costs orders as a result of his fraud.
Thirdly, the policy is likely to be terminated by the insurers, at least prospectively.
Fourthly, the history will be disclosable in any other insurance proposal which the claimant may make.
He is likely to be refused insurance, or to have to pay a good deal more for it than others must.
These are, cumulatively, significant sanctions.
These sanctions also apply, of course, to the insured who advances a fraudulent claim, properly so called.
But the fact that they may be visited both on him and on the teller of a collateral lie does not answer the question whether the additional sanction of forfeiture of the claim is equally proportionate for both cases.
It is not.
Likewise, the wish to deter the one way bet can be applied to the collateral lie, as it can to fraudulent claims properly so called.
But there is plainly a difference of quality between the insured who deals fraudulently with his insurer in an attempt to gain something to which he is not entitled, and the insured who dishonestly gilds the lily with a lie or falsified evidence, but stands thereby to obtain nothing more than was his legal due.
Courts meet daily the party who gilds the lily with a lie, and have become used to warning themselves that his case will be damaged severely as a result, but may not nevertheless be altogether bad.
It becomes necessary to ask whether the undoubtedly severe rule is required to meet the second category of case.
Given the other consequences which are likely to be visited on the perpetrator of a collateral lie, the sanction of loss of the entire (but valid) claim is disproportionate.
It is otherwise if the claim is wholly or partially false; in that event these other consequences are not a sufficient sanction.
The extension of forfeiture to a purely collateral lie is not justified as part of a generally imposed legal rule irrespective of any expressly agreed term of the policy.
It is simply too large a sledgehammer for the nut involved.
That conclusion is consistent with the manner in which the common law rule of fraudulent claims has evolved to exclude from its operation fraud committed after litigation has begun.
That limitation was derived in The Aegeon from The Star Sea, but is in fact not compelled by it since the earlier case concerned non disclosure rather than fraudulent claims.
It has been assumed in the present case to be correct.
This important limitation cannot be based on anything but policy and a conclusion that without it the remedy would be disproportionate.
It would be perfectly logical to say that whilst of course the separate rules of court regime for disclosure, considered in The Star Sea, overtakes the duty of good faith once litigation is begun, a duty to abstain from fraud is not in the least inconsistent with the regime attending litigation and its eventual resolution by trial.
Indeed, there is a passing observation to that effect in the speech of Lord Sumner in Lek v Matthews at p 145, where he appears to have assumed, obiter, that the fraudulent claims rule would apply to false statements made at trial.
The reason for the limitation now accepted must be that it would be altogether disproportionate for the insurers to be vouchsafed a new defence to the whole claim if, for example, under pressure in the witness box on the second day of the trial, the claimant were to utter a demonstrable untruth going to the claim.
The basis of this important limitation must be that the courts should be left to deal in the other ways available to them with fraud in the course of litigation, for which they have adequate sanctions.
The conclusion here arrived at is also consistent with the recent treatment of the law of insurance by Parliament, acting on the recommendation of the Law Commission.
Consumer insurance contracts are now dealt with by the Consumer Insurance (Disclosure and Representations) Act 2012, already in force.
The Insurance Act 2015, soon to come into force, deals with both commercial and consumer contracts.
The effect of the statutes is to separate the duty of good faith from the law relating to fraudulent claims.
Both abolish the rule previously codified in section 17 of the Marine Insurance Act 1906 providing for avoidance ab initio for breach of the duty of good faith, although the manner in which the continuing duty of disclosure pre contract is expressed differs as between consumer and commercial contracts.
Section 12 of the 2015 Act deals with fraudulent claims.
It preserves the rule that the fraudulent claimant recovers nothing, including any unexaggerated element.
It takes the opportunity to limit the right of the insurer to avoid the whole policy to a prospective one.
But like the Law Commissions, the Act deliberately leaves open the scope of the fraudulent claims rule, and in particular leaves open the present issue as to whether it extends to fraudulent devices.
It was clearly contemplated by Parliament that the courts would in due course resolve this question.
Conclusion
My conclusion is, like that of Lord Sumption but for additional reasons, that the fraudulent claims rule is of considerable importance and must be preserved, but that its extension to collateral lies (fraudulent devices) is not based on sound authority and would result in a remedy disproportionate to the breach of duty involved.
It follows that there is no occasion to consider the separate argument of the claimants based upon article 1 of Protocol 1 to the ECHR.
LORD TOULSON:
I agree with Lord Sumption and Lord Hughes in their conclusion and in what I take to be the essential reasoning in both their judgments.
Lord Sumption at paras 25 and 26 identifies and explains the important difference between a fraudulently exaggerated claim and a justified claim supported by collateral lies.
In the case of the former, he notes that the court declines to sever the dishonest part of the claim.
Unlike the curates egg, the claim is not regarded as good in parts.
The reason for adopting a strict approach is one of deterrence.
In the case of the latter, Lord Sumption observes that the insured is trying to obtain no more than his legal entitlement, and the lie is irrelevant to the existence or amount of that entitlement.
As he succinctly puts it, the lie is dishonest but the claim is not.
Lord Sumption expresses the view, with which I agree, that the immateriality of the lie to the claim makes it not just possible but appropriate to distinguish this from the former case, and that a policy of deterrence does not go so far as to justify the denial of a valid claim by reason of a collateral lie.
Lord Hughes at para 100 identifies a qualitative difference between the insured who deals dishonestly with his insurer in an attempt to gain something to which he is not entitled and the insured who dishonestly gilds the lily with a lie, but stands thereby to obtain nothing more than his legal due.
Like Lord Sumption, he does not consider that the policy of deterrence would justify deprival of the insureds legal right of indemnity under the contract of insurance.
I agree with Lord Hughes that the lie told in the latter case may be material to the insureds conduct, in that it may induce the insurer to accept the claim; but, if so, the insurer will have been induced to pay what it was liable to pay, and the insured will have gained no more than his legal entitlement.
I agree with Lord Sumption that such a lie should not be regarded as material in the same sense as a lie which goes to the existence or amount of the insureds entitlement.
It is aptly described as collateral, or irrelevant to the existence and amount of the insurers liability.
In that critical sense it is immaterial to the parties respective rights and obligations.
Lord Mance argues that to take this view is to overlook the obvious purpose for which the lie is told and its potential impact on the insurer.
I recognise, as I have said, that the lie told in support of a true claim may be material to the insurers conduct by influencing him, as intended, to accept the claim, but the distinction which I draw (echoing the judgments of Lord Sumption and Lord Hughes) is between a lie of that nature and one which is material to the insureds entitlement in the sense that it is an attempt to obtain something to which he is not entitled.
As Lord Hughes has pointed out, to tell lies in support of a valid claim is not risk free.
Every experienced advocate knows that, as well as being dishonest, it is not a smart thing for a client who has a good cause to try to improve it by lying.
In criminal cases it is probably a more likely cause of the wrongful conviction of an innocent person than anything else.
For that reason, it is mandatory for the trial judge to give a Lucas direction (named after R v Lucas (Ruth) [1981] QB 720) in any case where it appears that the defendant may have told lies.
The jury must be specifically warned that people sometimes lie in an attempt to bolster up a just cause.
Insurance claims are tried by judges, not juries, but that does not alter the fact that proof that a party has lied is likely to have an extremely deleterious effect on his credibility.
It is also likely to be reflected in any costs order which the court may make.
Notwithstanding those risks, people sometimes lie in support of a valid claim, whether under an insurance claim or otherwise; but there is no evidence about the prevalence of lies told in support of valid claims, or about the relative effect of different grades of sanction.
I am not a psychologist, but I am sceptical about the idea that knowledge of this judgment will incentivise people with valid insurance claims to lie in support of their claims.
Those who are honest will not do so because it would not be in their nature, while some who are dishonest may do so if they think that they will get away with it, despite the risk of it having a boomerang effect on whether the court believes anything that they say.
I agree with Lord Mance that integrity on both sides of the claims process is an important consideration.
So is arriving at a result which is just and reflects the parties legal rights.
In considering whether as a matter of public policy the courts should apply a draconian rule of denying a right of recovery under a contract of insurance to the insured who tells a lie in support of a valid claim, the court must ultimately be guided by its own sense of what is just and appropriate.
When all is said and done, that is the critical question on which the court is divided.
On that question I agree with all that Lord Sumption and Lord Hughes have said.
LORD MANCE: (dissenting)
In Agapitos v Agnew (The Aegeon) [2002] EWCA Civ 247; [2003] QB 556, I considered in detail whether, as a matter of policy, the underlying rationale of the fraudulent claim principle should extend to invalidate not merely the whole of a claim where part proves otherwise good, but the whole of a claim where the whole proves good (para 19).
As I pointed out, the word proves assumes that all aspects of the litigation proceed to trial and, if the use of fraudulent devices constitutes a defence, there may never be such a trial (para 19).
I concluded, tentatively, that the use of a fraudulent device did give rise to a defence, and the other members of the court (Brooke LJ and Park J) agreed.
The Court of Appeal in the present case (Christopher Clarke and Vos LJJ and Sir Timothy Lloyd) came to the like result as a matter of ratio after full consideration of the relevant considerations and authorities.
In the present case, I have had the benefit of reading the differently nuanced judgments prepared by Lord Sumption and Lord Hughes.
Both wrestle from different angles with the difficulty of describing the use of a fraudulent device as anything other than material to a central underwriting decision that is, the decision whether or not a claim should be settled.
Insurance is about the assessment of risk and the settlement of claims.
Both processes depend on good faith and fair information, and both are normally consensual.
Litigation is neither the aim nor the norm.
To suggest that a lie which the insured felt necessary to promote settlement of a claim is immaterial or collateral if years later it can be shown that it was after all unnecessary to tell it mistakes the nature of the business and the relationship.
Further, it is either a non sequitur or at least begs the issue on this appeal to say, as Lord Sumption says, that because an underwriter assessing a claim will attempt to predict what a court would decide, therefore the only rational test of the materiality of a lie must be based on its relevance to a court which is in a position to find the relevant facts.
On the contrary, since the lie is told to influence the underwriters assessment of what a court would decide and thereby to induce the underwriter to pay the claim, its materiality can perfectly well be, and must in my view be, based on its relevance to that assessment and to the underwriters decision whether to pay: see further 130 below.
I also differ from Lord Hughess view, on the question whether as a matter of policy the fraudulent claims principle should be seen as extending to or embracing the use of fraudulent devices.
More specifically, I do not accept that either the factors he deploys in para 98 or general considerations of proportionality in play in the absence of any expressly agreed term of the policy do or should lead to a conclusion that the fraudulent claims principle does not embrace the use of fraudulent devices.
If and in so far as the factors in para 98 have any real validity or weight as sanctions, they would have it in relation to the established fraudulent claims rule.
Yet that rule exists notwithstanding them.
I will not in the circumstances rehearse all the detailed conclusions which lead me to broadly the same conclusion on the appropriate policy and principles now as I expressed tentatively in 2002.
The only alteration that I might make to the principles which I then identified would be to heighten the threshold test of materiality, rather as Christopher Clarke LJ himself tentatively suggested (para 165), so as to substitute, for the requirement of a not insignificant improvement of the insureds prospects, a requirement of a significant improvement of the insureds prospects, before a claim is barred.
The relationship of insured and insurer is a special one, in relation to which the good faith or uberrimae fidei has long been fundamental.
As a special relationship it survived the failure of Lord Mansfields attempt to introduce a general duty of good faith into English contract law.
It did so rightly because of the general imbalance in information and control and the significance of moral hazard in insurance relationships.
Insurance fraud is commonplace, often being regarded as a victimless crime in relation to which insurers are fair game.
Of course, insurers do not always pay claims as speedily as would be desired, but that is not an excuse for fraud, and is something for which a separate remedy is under current legislative scrutiny.
There is long standing if limited authority for the inclusion of fraudulent devices within the ambit of the fraudulent claims principle.
In Lek v Matthews (1927) 29 Ll L Rep 141, a case of alleged loss of a stamp collection, the policy provided that, if the assured shall make any claim knowing the same to be false and fraudulent, as regards amount or otherwise, the policy shall become void, and all claims thereunder shall be forfeited: see p 141.
The underwriters case was that, if there was any loss and even if the assured believed that it amounted in total to the sum claimed, he had supported this amount by including stamps which he knew he did not possess and had not lost.
In this context, Atkin LJ in the Court of Appeal (1926) 25 Ll L Rep 525, 544 concluded that, so long as the assured believed in his entitlement to the amount claimed, he could not be said to have the intent to defraud the underwriters, which is essential to the underwriters defence, explaining that: From this point of view it appears to me immaterial whether in answering the underwriters interrogatories, whether before or during the action, he gave answers that were inaccurate, reckless or were knowingly false.
The owner of a picture may have valued it at its true value, and may have had undoubted loss by theft.
At the same time he may be unwilling to disclose how he acquired it, and in answer to underwriters may give a false account of its purchase.
Such a falsehood, however blameworthy, seems to me on the supposed facts to afford no evidence of a fraudulent claim.
This approach was given short shrift in the House of Lords, where Viscount Sumner said rhetorically (pp 163 164): If a man has claimed for the loss of things which he knew he had not got, it is a contradiction in terms to say that he may have honestly believed in his claim.
What is the use of a clause of defeasance in case a false claim is made, if we are to say that answers which violate this contractual clause and the most obvious rules of honesty as well do not matter so long as Mr Lek was convinced that he ought to win? It simply means that if he decides his own case in his own mind in his own favour and is persuaded that he is right (as anyone might be), falsehood in securing the victory does not matter.
The clause can only be read as permitting this by treating it as mere folly.
The learned Lord Justice gives an illustration about a picture which shows, I think, that he had in his mind a case of misstatements on purely collateral matters.
Even so, I could not agree; but these present matters are not collateral; they are of the essence.
The other two members of the House, Lord Phillimore (dissenting in the result) and Lord Carson, expressed their full concurrence with these remarks.
Their upshot is that a dishonest statement made to further a claim in which the claimant honestly believes renders the claim fraudulent, in the context of a clause such as that present in the policy in Lek v Matthews.
It is also clear that the remarks embraced the situation of a simply fraudulent device, deployed to promote an insurance claim in respect of goods (eg the picture in Atkin LJs example) which had actually been lost.
One can, as more recent authority illustrates, question whether lies about truly collateral matters should attract the operation of the fraudulent devices principle, (see eg para 125 below, with the reference there to The Mercandian Continent), but that is a different matter.
What matters for present purposes is the assimilation of fraudulent devices with a fraudulent claim.
There is no reason why the position should be any different in this respect under the common law rule mirrored by the wording of the clause in Lek v Matthews.
Roche J so held when summing up to the jury in Wiesenthal v World Auxiliary Insurance Corpn Ltd (1930) 38 Ll L Rep 54.
By the end of the trial, a core issue in that case was whether Mr Wisenthal had used fraudulent devices (the jury held in the event that he had).
The report at pp 61 62 summarises Roche J as instructing the jury, somewhat damningly: Mr Alfred Wisenthal has been shown to be in many respects untruthful, and that was a disadvantage, but if the jury thought his lies were merely the outcome of habit and not intended to obtain a fraudulent advantage in this case they would not count it against him.
Fraud was not mere lying.
It was seeking to obtain an advantage, generally monetary, or to put someone else at a disadvantage by lies and deceit.
It would be sufficient to come within the definition of fraud if the jury thought that in the investigation deceit had been used to secure easier or quicker payment of the money than would have been obtained if the truth had been told.
Roche J, later Lord Roche, had had one of the largest commercial practices as a silk and was an experienced commercial judge.
His conclusion as to the common law in the 1920s carries weight.
A conceptual point which remained unsettled was however the relationship between any such principle and the rule enshrined in section 17 of the Marine Insurance Act 1906, whereby A contract of marine insurance is a contract based upon the utmost good faith, and, if the utmost good faith be not observed by either party, the contract may be avoided by the other party.
In Black King Shipping Corpn and Wayang (Panama) SA v Massie (The Litsion Pride) [1985] 1 Lloyds Rep 437 Hirst J held, in the context of a fraudulent device (a dishonest backdating of a notice of entry into the Gulf, unnecessary and irrelevant to the claim in law, but believed by Owners to be relevant at the time they made it), that section 17 applied to enable avoidance ab initio, while operating at the same time, in Hirst Js view, to give underwriters an alternative option simply to rely on the fraud as a defence to the particular claim.
This theory did not survive academic criticism or subsequent authority: see Manifest Shipping Co Ltd v Uni Polaris Insurance Co Ltd (The Star Sea) [2003] 1 AC 469, paras 61 62 and 71, per Lord Hobhouse, where the fraudulent claims principle is put as the consequence of a rule of law albeit, one may add, a rule of law no doubt deriving from the foundation of good faith on which insurance rests (see para 114 above), but tailored to the post contractual position.
See also the view expressed in Agapitos v Agnew, para 45(d), and the later decision in AXA General Insurance Co Ltd v Gottlieb [2005] EWCA Civ 112; [20015] 1 AER (Comm) 445, para 31 (identifying the fraudulent claims rule as a special common law rule).
When stating in The Star Sea that Hirst Js approach should no longer be regarded as a sound statement of the law, Lord Hobhouse also stated in a passage in para 71 quoted by Lord Sumption: In so far as it is based upon the principle of the irrecoverability of fraudulent claims, the decision is questionable upon the facts since the actual claim made was a valid claim for a loss which had occurred and had been caused by a peril insured against when the vessel was covered by a held covered clause.
But it is important to note that Lord Hobhouse went on immediately to add: It is not necessary to examine whether there might or might not have been some other basis upon which the case could have been decided in favour of the insurer as one feels clearly it ought to have been.
And in the next paragraph (para 72) he also noted that: Fraud has a fundamental impact upon the parties relationship and raises serious public policy considerations.
Remediable mistakes do not have the same character.
Similarly, in K/S Merc Scandia XXXXII v Certain Underwriters (The Mercandian Continent) [2001] 2 Lloyds Rep 563 Longmore LJ was concerned in the passages from paras 26 to 28 which Lord Sumption has cited in para 16 with the relevance of materiality to avoidance ab initio, not with the present problem.
Longmore LJ in fact addressed the present problem in para 29 in terms which constitute further authority for treating the fraudulent claims principle as embracing fraudulent devices and another precursor to the reasoning in The Aegeon.
He said: I should lastly refer to what has been called the much discussed decision in The Litsion Pride [1985] 1 Lloyds Rep 437 where the assured did not inform underwriters that their vessel was about to go into an exclusion zone but concocted a letter to their brokers two days after a casualty in that exclusion zone had occurred; this letter was falsely dated the day that the vessel entered the exclusion zone and informed the brokers and the underwriters that was what the vessel was about to do.
Owners brokers also wrote later false statements in support of the claim.
Mr Justice Hirst held that the false letter was a fraud clearly connected to the claim and the later statements were made in the direct context of the claim.
It is thus a case of making a fraudulent claim and to that extent was, with respect, good law, but irrelevant to the present case.
To the extent, however, that the case enunciates any wider obligations of post contract good faith in relation to merely culpable non disclosure or misrepresentation, it has been finally and authoritatively disapproved in The Star Sea (see para 71) (emphasis added)
In this court we are of course free to reconsider prior authority at a lower level, although we should no doubt be reluctant to upset the instincts of previous courts addressing an issue over the past century.
I appreciate the strength of the comment made by Popplewell J, when dismissing the present claim, that To be deprived of a valid claim of some 3.2m as a result of such reckless untruth is, in my view, a disproportionately harsh sanction.
However, I think this comment has too narrow a focus; and, further, that it fails to consider the matter in the context of the well established core fraudulent claims principle and the reasoning behind it as a whole.
The core fraudulent claims principle deprives an insured of the whole of any claim which he has fraudulently exaggerated.
This principle has, at the instance of the Law Commission, been embodied by Parliament in the Insurance Act 2015, which will shortly come into effect, and will provide as follows: If the insured makes a fraudulent claim under a contract 12.
Remedies for fraudulent claims (1) of insurance (a) the insurer is not liable to pay the claim, (b) the insurer may recover from the insured any sums paid by the insurer to the insured in respect of the claim, and (c) in addition, the insurer may by notice to the insured treat the contract as having been terminated with effect from the time of the fraudulent act.
It is not in dispute that, in proposing this clause in the relevant Bill, the Law Commission left open for the courts to consider its application, directly or by analogy, to fraudulent devices.
But it is clear that the policy behind its enactment by Parliament was the policy which the courts have for long applied, based on the special position of insurance and the belief that a stringent legal response to fraudulent claims serves as a necessary and justified deterrence to insurance fraud.
We were referred to academic criticism of theories of deterrence in this context, but, as Lord Sumption observes, many legal rules are framed on a basis which assumes that they are capable of having and shaping legal, social or economic behaviour, and here is a classic example of Parliament endorsing this approach.
The fraudulent devices rule serves a similar role in encouraging integrity and deterring fraud in the claims process.
It should not be forgotten that very frequently fraud in the claims process will be associated with (a) the fraudulent pursuit of a non existent or bad claim or (b) the fraudulent exaggeration of a good claim.
And, aside from cases in which either (a) or (b) is with the benefit of hindsight established, it will, or will almost always, be associated with (c) the pursuit of what the insured believes or fears to be at least a questionable claim. (There can be cases where an insured tells lies during the claims process for reasons entirely collateral to the merits of the claim, eg as in The Mercandian Continent or to cover up some personal or business embarrassment, but one would not then expect the threshold test of materiality to be met.)
Lord Hughes, Lord Sumption and Lord Toulson suggest a difference in quality between the fraud involved in cases (a) and (b) on the one hand and in case (c) on the other hand.
Lord Hughes says (para 100) that the difference in quality is between fraud in an attempt to gain something to which he [the assured] is not entitled, and the insured who dishonestly gilds the lily with a lie or falsified evidence, but stands thereby to obtain nothing more than was his legal due, while Lord Sumption says (paras 24 25) with Lord Toulsons support (para 105) that it is between a fraudulently exaggerated (or no doubt non existent) claim and the position where the insured is trying to obtain no more than the law regards as his entitlement.
The difficulty with both analyses is that they look at fraud and the use of a fraudulent device with hindsight, rather than by reference to the state of mind with which a fraudulent device is usually deployed.
That, as I have pointed out, is precisely because the assured does not believe or is not confident that he has a good claim.
The fraudulent devices rule means that a fraudulent claimant cannot in cases (a) and (b) safely embellish his bad or exaggerated claim with fraudulent devices, and then, when any such device is discovered, hope to do better with the next device or the lies he will tell in court to pursue his bad or exaggerated claim.
In case (c), it means that he cannot safely distort the claims process to his advantage and hope to prevent the insurer identifying, relying on or investigating the weakness which led to the insured telling the lie in the first place.
In each of cases (a), (b) and (c), the use of a fraudulent device material to the insurance claim operates as a bar to its further pursuit, making further investigation into the underlying circumstances unnecessary and operating as a clear disincentive to lying.
These are significant protective effects, which are entirely consistent with the underlying philosophy of insurance, mutual trust.
Abolishing the fraudulent devices rule means that claimants pursuing a bad, exaggerated or questionable claim can tell lies with virtual impunity.
The same logic governs fraudulent devices as it does fraudulent claims generally.
It is, as Lord Hobhouse said in The Star Sea, para 62: simple.
The fraudulent insured must not be allowed to think: if the fraud is successful, then I will gain; if it is unsuccessful, I will lose nothing.
In short, on the approach advanced by the majority, the fraudulent device will advance the insurance recovery if undiscovered, and quite possibly lead to the recovery of a bad or exaggerated claim, and it will have no effect on any insurance recovery to which the assured may be entitled, even if it is discovered.
Either way, it will have distorted the claims process, which Lord Hughes rightly identifies (in para 55) as key to insurance, from the viewpoint of policyholders as much as insurers.
And, if the fraudulent device is discovered, it will have distorted the claims process by the time and cost involved in unveiling the fraud and attempting to ascertain its true implications.
From the insureds viewpoint the risk that this might lead a court at trial to deprive him of some costs will be unlikely to outweigh the perceived advantages of telling the lie at the time it was told.
And in many cases the lie will be undiscovered, the insurers will pay and it will never be investigated or known how far the claim was bad or exaggerated and how far any questions about it might have been answered adversely to the insured.
Where an insured has a claim which he believes or fears to be questionable, it makes little sense in my view to say, as Lord Sumption does in para 26 with Lord Toulsons support (para 105) that the lie is dishonest, but the claim is not.
When the lie is told, it is, as I have pointed out, often told precisely because the insured does not really believe he has a good claim, even though at a later trial it may be shown (as it was in The Litsion Pride, where notice of entry into the Gulf proved not in law to be a condition of the insurance) that his fears were in law unfounded.
Further, although the point is ultimately semantic, there is no difficulty (and neither Viscount Sumner nor Roche J experienced any) in describing a claim otherwise honestly believed in as itself fraudulent if it is being promoted by a fraudulent device.
In the relatively rare case, like the present, where the insured pursues a claim to trial, and is found after the event to have had a sound claim, it may seem harsh that the insured loses everything.
But policy must by definition look at the position overall, as the core fraudulent claims rule does.
In any event a person who uses fraudulent devices in the context of an insurance relationship deserves no real sympathy: see Lord Hobhouses words in The Star Sea, paras 62 and 72, quoted in paras 120 and 129 above.
As to materiality, it is clear that inducement has no role in relation to the core fraudulent claims rule, and there is no reason why it should do so in relation to fraudulent devices.
It is equally clear that materiality must be considered by reference to the position at the time when the fraudulent device is deployed, and that it cannot be right to consider it retrospectively by reference to whatever a court, years later perhaps, decides is the actual factual or legal position.
There is as a matter of common sense no difficulty about describing a lie told during the claims process as material by reference to the circumstances as they were at the time when it was told.
It makes no sense to do otherwise.
Lies are told in a particular context, and it is only in that context that they can even be identified as lies.
To suggest, as Lord Toulson does (para 107), that a lie told to promote a claim is immaterial to the parties respective rights and obligations, simply because, perhaps years later, it can be seen that the lie was unnecessary and the claim good without it, seems a charter for untruth, which overlooks (a) the obvious imperative of integrity on both sides in the claims process and (b) the obvious reality that lies are told for a purpose, almost invariably as here to obtain the uncovenanted advantage of having the claim considered and hopefully met on a false premise.
I add that, if a lie could be disregarded as immaterial because it could be shown, years later, that it was irrelevant to the outcome of the claim, then logically a lie exaggerating the value of a claim ought also to be disregarded in relation to whatever was, years later, shown to be the valid claim.
The applicability or otherwise of the fraudulent claims rule in relation to lies told during the course of litigation was not argued before us.
In Agapitos v Agnew the court (at paras 47 53) applied by analogy in this context the reasoning in relation to non disclosure adopted by the House of Lords in The Star Sea.
This might have been an area worth revisiting on the present appeal.
But, assuming the correctness of the decision on this point in Agapitos v Agnew, its rationalisation must be that the court process should be allowed to operate independently, with its own inbuilt sanctions in respect of lies or other abuses by either party.
That has no bearing on the present issue, which is whether the undoubted fraudulent claims rule, which Parliament has now endorsed, extends to or embraces the use of a fraudulent device.
It was submitted that the fraudulent devices rule operates in a case like the present inconsistently with the principle in the first paragraph of Protocol 1 (A1P1) to the European Convention on Human Rights, in that it deprives the insured of a proprietary right in the form of an insurance claim.
The court is under section 6(1) of the Human Rights Act 1998 not to act inconsistently with the Convention rights, and this is said to mean that it should define or develop the common law in such a way as to ensure that insurers cannot deprive any insured of his insurance rights in a way which would be disproportionate.
In the light of the view of the majority on this appeal, I do not propose to spend time considering the merits or implications of this sort of horizontal application of the Convention rights in the present context.
Accepting that the fraudulent claims rule, including the fraudulent devices rule, can deprive an insured of a valid claim, the deprivation clearly has a legitimate aim, and my view would be that it would be and was proportionate as a bright line rule for the reasons I have given and which the Court of Appeal gave.
For these reasons, I consider that the Court of Appeal came to the right conclusion and would myself dismiss the appeal.
In the light of the majority judgment, insurers will no doubt be advised about whatever may be the potential merits of making express in future whatever understanding they have, or action they may wish to take, regarding the effect of fraudulent devices, as and when such are discovered to have been used by an insured during the claims process.
| UK-Abs | The issue on this appeal was whether the insurers of a ship were entitled to repudiate liability on the ground that the insured had told a lie in presenting the claim, if the lie proved to be irrelevant to the insurers liability.
The vessel DC MERWESTONE was incapacitated by a flood in her engine room.
Her main engine was damaged beyond repair.
The flood was caused by (i) the crews negligence in failing to close the sea inlet valve in the emergency fire pumps, (ii) damage to the pumps, (iii) the negligence of previous contractors who had failed to seal bulkheads and (iv) defects in the engine room pumping system.
The appellant owners presented an insurance claim to the respondent insurers for 3,241,310.60.
They told the insurers solicitors that the crew had informed them that the bilge alarm had sounded at noon that day, but could not be investigated because the vessel was rolling in heavy weather.
This was a lie told by the owners to strengthen the claim, accelerate payment under the policy, and take the focus off any defects in the vessel for which the owners might have been responsible.
The lie was in fact irrelevant to the claim, since the vessels loss was found to have been caused by a peril of the seas.
But the judge held that the owners lie was a fraudulent device, which meant the insurers did not have to pay out under the policy.
The Court of Appeal agreed.
The Supreme Court allows Versloot Dredgings appeal by a majority of 4 to 1, holding that the fraudulent device rule does not apply to collateral lies, which are immaterial to the insureds right to recover.
Lord Sumption gives the lead judgment.
Lord Clarke, Lord Hughes and Lord Toulson give concurring judgments.
Lord Mance gives a dissenting judgment.
The common law has long prohibited recovery from an insurer where the insureds claim has been fabricated or dishonestly exaggerated (the fraudulent claims rule).
The purpose of the rule is to deter fraud.
This appeal concerns the more recent extension of that rule to fraudulent devices, i.e. collateral lies told by the insured to embellish their claim, but which are irrelevant because the claim is justified whether the statement was true or false [1,9].
The fraudulent claims rule does not apply to collateral lies.
The dishonest lie is typically immaterial and irrelevant to the honest claim: the insured gains nothing by telling it, and the insurer loses nothing if it meets a liability that it has always had [23 26].
If a collateral lie is to preclude the claim, it must be material.
The real test of materiality is that a collateral lie told in the course of making a claim must at least go to the recoverability of the claim on the true facts as found by the court [35 36].
The test is not, as suggested by Mance LJ in The Aegeon [2003] QB 556 and the Court of Appeal and Lord Mance
in this case, an attenuated test of materiality requiring that the prospects of the claim should apparently be improved, given the facts known at the time of the lie [18 22, 31].
Lord Clarke concurs, adding that public policy requires that the collateral lie be irrelevant to the insureds claim, and that it would make little sense to support a rule that bars claims involving collateral lies uttered before proceedings are begun, and not afterwards [39 49].
Lord Hughes agrees, pointing out that this extension of the important fraudulent claims rule has been left open by the Insurance Act 2015.
The forfeiture of the entire claim is not a proportionate sanction for the teller of a collateral lie, who will suffer in other ways if his lie is discovered [65 104].
Lord Toulson, concurring, concludes that this outcome is just and appropriate [105 110].
In a dissenting judgment, Lord Mance would have dismissed the appeal, upholding the principle set out in The Aegeon, but modifying it so as to require a heightened threshold test of materiality of a significant improvement of the insureds prospects at the time of the lie (rather than retrospectively at the time that the court determines the facts), in order to bar the insureds claim [111 134].
|
As is common knowledge, the whole system of funding higher education was reformed, broadly in accordance with the recommendations of Lord Brownes Report, Securing a Sustainable Future for Higher Education (October 2010), in 2011.
The aims were further to widen participation in higher education, so that everyone who had the potential to do so should be able to benefit from it; to increase student choice and therefore competition between institutions; and to produce more investment for higher education.
The fees which universities were allowed to charge their students would increase to something closer to what it cost to educate them; the fees paid by the students, and a sum for their maintenance, would be financed by loans from Government (through an arms length entity); these loans would only be repaid when the students could afford to do so and at a rate which they could afford.
This case is about the criteria for eligibility for those loans, which exclude young people who have been settled here for many years in the factual sense but are not so settled in the legal sense.
In order to qualify for a loan, a student must (a) be resident in England when the academic year begins; (b) have been lawfully ordinarily resident in the United Kingdom for the three years before then; and (c) be settled in the United Kingdom on that day.
The issue is whether either criterion (b) or criterion (c) breaches the appellants right to education, under article 2 of the First Protocol to the European Convention on Human Rights, or unjustifiably discriminates against her in the enjoyment of that right.
The Facts
The appellant is a national of Zambia, born in 1995.
She came to this country with her parents in 2001, at the age of six.
Her father had a student visa and she and her mother came with him, lawfully, as his dependants.
Her father left the UK in 2003, but she and her mother stayed on after their visas had expired.
The appellant has lived in the UK since 2001.
She has been educated here, through reception, primary, secondary and sixth form studies, has worked hard and has done very well.
She was Head Girl of her secondary school and went on to the sixth form at Archbishop Holgates School in York.
She has obtained seven GSCEs and the equivalent of three A levels with grades of A*, A, and C.
These would have been sufficient to enable her to take up the place she had been offered by Northumbria University to read for a degree in International Business Management in the academic year 2013 2014; but in order to do so she needed a student loan.
Hayden J was perfectly satisfied that outside the loan scheme there is no other realistic option for her to fund university education (para 7).
Accordingly, on 20 April 2013, she applied on line to Student Finance England (the trading name of the Student Loans Company Ltd, which administers the scheme).
They requested further information about her immigration status.
She took legal advice and discovered that she was not eligible for a student loan.
Her mother had taken no steps to regularise their immigration status after her father had left in 2003, but the appellant states that growing up, I had no idea what my immigration status was, which seems likely.
In September 2010, the UK Border Agency (UKBA) served upon her mother and her (as her mothers dependant) forms notifying them that they were over stayers and thus liable to removal from the UK, but at the same time granting them temporary admission to the UK.
On 30 January 2012, the UKBA granted them both discretionary leave to remain (DLR) until 29 January 2015.
The letter stated that You are free to take a job and do not need the permission of any Government Department before doing so.
You are free to use the National Health Service and the social services and other services provided by local authorities as you need them.
The grant of DLR was not subject to a condition that she did not have recourse to public funds.
Accordingly, she is not excluded from state benefits such as income based job seekers allowance and housing benefit (Immigration and Asylum Act 1999, section 115).
On 29 January 2015, the appellant applied for a further grant of DLR, using the correct form for doing so.
On 30 April 2015, this was granted until 30 April 2018.
Her covering letter asked that the Secretary of State also consider granting her indefinite leave to remain (ILR), but this was subsequently rejected on the ground that she had not shown compelling reasons for dispensing with the normal qualifying period of DLR.
Under the terms of a published Home Office policy, which applies to those like the appellant who were granted DLR before 9 July 2012, she will be entitled to apply for ILR after six years of DLR, that is, in 2018.
For those granted DLR after that date, however, consecutive periods of ten years of limited leave to remain are required before a person in her position is eligible to apply for ILR.
Applications can be made for ILR to be granted outside the Rules, but the current guidance makes it clear that the Home Office does not regard the desire to qualify for a student loan as a good reason for granting ILR (Immigration Directorate Instruction, Family Migration: Appendix FM, section 1.0b, para 11.3.1).
These proceedings were launched in June 2013, but delayed while the proceedings in R (Kebede) v Secretary of State for Business, Innovation and Skills [2013] EWHC 2396 (Admin), [2014] PTSR 92, which raised the same issues, were continuing.
They were renewed after the appeal against the refusal of relief in that case was withdrawn.
Meanwhile, the appellant did not take up the offered place at Northumbria, but applied through clearing for a place closer to her home in York.
She was offered a place and started the course at the University of Hull in October 2013, with the aid of a commercial student overdraft facility and her mother, who took a better paid job in London in order to help her.
But it soon became apparent that she would not be able to afford the travelling costs and so she withdrew after two weeks.
She made another attempt to start a course at Middlesex University in the academic year 2014 2015, again with the help of her mother and her mothers partner, but withdrew from that after the first term, because of her concerns about the financial pressures on her mother and the quality of the course.
She still hopes to be able to start again in the academic year 2015 2016 and has unconditional offers from five universities, including Manchester Metropolitan University, her top choice.
Whether this is a realistic possibility depends upon the outcome of these proceedings.
The appellant is not alone in her predicament.
The Coram Childrens Legal Centre and the interveners, Just for Kids Law, are aware of many other young people who have been in this country for years, have studied alongside their British classmates, and have planned and qualified to go on to university when their classmates do.
Often they were unaware of their immigration status and the barrier it would pose to achieving their academic potential and ambitions.
Save (perhaps) for those who arrived as unaccompanied asylum seeking children, their immigration status is not their fault, but that of their parents or those responsible for their welfare (such as the local authority looking after the claimants in Kebede).
Some of these young people have set up their own campaign group, under the auspices of Just for Kids Law, called Let us Learn.
Alison East, of the Coram Childrens Legal Centre, describes the impact upon them thus: Our experience suggests that young people find not being able to go to university, when that would be a natural educational progression alongside their peers, incredibly difficult.
They have worked hard to do well at school and at college, and aspire to achieve the best they can.
Seeing their friends and peers go to university when they cannot, and being aware of being held back for as long as ten years in pursuing qualifications that are essential in a competitive job market, inevitably causes these young people to feel marginalised.
They feel that it is deeply unfair as they are not asking for a grant of money but only to be loaned the money which will allow them to progress, alongside their peers, into well paid work so that they can pay that loan back.
No one knows how many such young people there are.
In his first witness statement on behalf of the Secretary of State, Paul Williams assumed that there might be 2,400 extra applicants for student loans in any one year.
In his second witness statement this had come down to around 2000.
In fact, the Home Office statistics reveal that in 2013, a total of just over 2000 people aged 16 to 23 were granted either DLR or its replacement, limited leave to remain (LLTR).
These grants are, of course, for 30 months or two years.
But not all of these young people will aspire to go to university or apply for student loans.
It is perhaps fair to say that the numbers affected are not insignificant but a tiny proportion of the student loans which are made each year.
It is also relevant to note that the cap on the number of home and EU undergraduate students who may be admitted to read for first degrees has been progressively relaxed and is to be removed completely in the academic year 2015 2016.
Professor Ian Walker, of the Department of Economics at Lancaster University, was commissioned by the Department for Business, Innovation and Skills (BIS) to write a report on The Impact of University Degrees on the Life Cycle of Earnings: Some Further Analysis (BIS Research Report No 112, 2013).
This concludes that the average net financial benefit of a degree to the individuals concerned is of the order of 168,000 for men and 252,000 for women.
The benefit to the government is even larger, of the order of 264,000 from men graduates and 318,000 from women.
These calculations take into account the two elements of taxpayers subsidy involved in the student loan scheme: first, the small difference between the interest rate levied on the loans and the cost to the government of borrowing the money; and second, the more important element of forgiveness, in that repayments outstanding after 30 years are written off.
This benefits graduates who do not do so well in the labour market and are not required to repay at the rates required of the higher earning graduates.
These are purely financial calculations, leaving out all the other benefits of higher education, not only to the individuals but also to society: see The Benefits of Higher Education Participation for Individuals and Society: Key Findings and Reports: The Quadrants (BIS Research Paper No 146, October 2013), where they are graphically displayed with links to the supporting evidence.
As Mr Williams accepts, the benefits of higher education have never been in dispute.
Professor Walker was asked, for the purpose of these proceedings, to explain the relevance of his research to the group of young people with DLR or LLTR who are currently ineligible for student loans.
He points out that the incentives for them to move to another country are likely to be small, that there is no reason to think that they would perform less well, on average, in higher education and the labour market than their eligible peers: The implication is that there would be sizeable gains to the Exchequer in the long run to extending student loans provisions to this relatively small group.
It must, however, be borne in mind that gains to the Exchequer do not necessarily translate into gains for BIS, the Department which is responsible for funding the scheme.
These proceedings
The appellant claimed that both the settlement criterion and the lawful ordinary residence criterion constituted unjustified and discriminatory restrictions on her right to education under both article 2 of the First Protocol and article 14.
Her claim was heard in July 2014 by Hayden J who held that her rights had been violated by the application to her of the settlement criterion but not by the application of the lawful ordinary residence criterion: [2014] EWHC 2452 (Admin).
He did not grant any specific relief and gave both parties permission to appeal.
The appeal was expedited and heard only two weeks later, on the last day of the legal year.
The Secretary of States appeal against the judges decision on the settlement criterion was allowed and the appellants appeal against his decision on the lawful ordinary residence criterion was dismissed: [2014] EWCA Civ 1216.
Laws LJ (with whom Floyd LJ agreed) held that the Secretary of State was justified in making, and might even be rationally required to make, a bright line rule and he was entitled to adopt a criterion based on settlement as defined from time to time by the Home Office.
In the view of Vos LJ, however, what saved the requirement was the possibility that the Home Office might exercise its discretion to grant ILR to children in accordance with the Secretary of States duty under section 55(1) of the Borders, Citizenship and Immigration Act 2009 to ensure that her functions are discharged having regard to the need to safeguard and promote the welfare of children in the United Kingdom.
Neither side supports that view on the appeal to this court, not least because the Home Secretary does not regard the need to qualify for a student loan as a reason to make an exception to the Rules.
The law on eligibility for student loans
The parent statute is the Teaching and Higher Education Act 1998.
So far as relevant, section 22 provides that: (1) Regulations shall make provision authorising or requiring the Secretary of State to make grants or loans, for any prescribed purpose, to eligible students in connection with their [undertaking] (a) higher education courses, which are designated for the purposes of this section by or under the regulations. (2) Regulations under this section may, in particular, make provision (a) for determining whether a person is an eligible student in relation to any grant or loan available under this section.
The Secretary of State for this purpose is the Secretary of State for Business, Innovation and Skills, and not the Secretary of State for Education, who is responsible for primary and secondary education, or the Secretary of State for the Home Department, who is responsible for immigration.
The relevant Regulations are the Education (Student Support) Regulations 2011 (SI 2011/1986) (the Regulations).
Regulation 4(2) defines an eligible student as a person whom the Secretary of State determines falls within one of the categories set out in Part 2 of Schedule 1.
Part 2 of Schedule 1 has 12 paragraphs, listing some 20 categories of person.
Six of these are to observe the UKs obligations in international law towards refugees and people granted humanitarian protection and their family members.
Thirteen are to observe the UKs obligations towards people from the European Economic Area, Switzerland and Turkey, and towards people settled in the UK who have exercised their rights of residence within the EEA or Switzerland.
That leaves paragraph 2, which contains the basic category: (1) A person who on the first day of the first academic year of the course (a) (b) (c) has been ordinarily resident in the United Kingdom and Islands throughout the three year period preceding the first day of the first academic year of the course; and (d) whose residence in the United Kingdom and Islands has not during any part of the period referred to in para (c) been wholly or mainly for the purpose of receiving full time education. is settled in the United Kingdom ; is ordinarily resident in England;
In para 1(1) Part I of Schedule 1, settled is defined as having the meaning given in section 33(2A) of the Immigration Act 1971.
This provides that references to a person being settled in the United Kingdom are references to his being ordinarily resident there without being subject under the immigration laws to any restriction on the period for which he may remain.
This of course includes UK nationals with the right of abode, but for others it means that they have been granted indefinite leave to remain in the United Kingdom.
Other forms of leave to enter or remain in the United Kingdom, including DLR and LLTR, are granted for specific periods.
In most cases, a persons immigration status will be readily ascertainable from his passport, if he has one.
The persons to whom, and the circumstances in which, ILR will be granted are determined by the Immigration Rules made by the Secretary of State for the Home Department and her policies.
Like all immigration policy, they are subject to change, as the facts of this case show: a person like the appellant, who was granted DLR before 9 July 2012, will normally be granted ILR after six years of DLR, whereas a person granted DLR after that date will have to wait for ten years.
There is no reason to suppose that the Home Secretary takes the educational rights or aspirations of applicants into account in determining these criteria.
By para 1(2A) Part I of Schedule 1 to the Regulations, for the purpose of that Schedule, a person is not to be treated as ordinarily resident in a place unless that person lawfully resides in that place.
This was no doubt inserted out of an abundance of caution, despite the observation in R v Barnet London Borough Council, Ex p Shah [1983] 2 AC 309, at p 343, that, at least for educational purposes, ordinary residence did not include a person whose residence in a particular place or country was unlawful.
However, there are contexts in which lawfulness is not implied (for example, in relation to habitual residence for the purpose of jurisdiction in matrimonial causes, see Mark v Mark [2006] 1 AC 98), and the implication had been challenged, albeit unsuccessfully, in R (Arogundade) v Secretary of State for Business, Innovation and Skills [2013] EWCA Civ 823, [2013] ELR 466.
At an earlier stage in this litigation, it was argued that the grant of temporary admission in 2010 was sufficient to make the appellants residence lawful for this purpose, but that suggestion was rejected by the Court of Appeal (para 60) and is no longer pursued.
It is common ground, therefore, that the appellant did not achieve three years lawful ordinary residence until January 2015.
It is perhaps worth noting that the three years ordinary residence test dates at least as far back as the University and Other Awards Regulations 1962 (SI 1962/1689), made under the Education Act 1962, which introduced the system of mandatory grants for university education (from which so many of my generation of students benefitted).
The settlement criterion, on the other hand, was not introduced until the Education (Mandatory Awards) Regulations 1997 (SI 1997/431).
This was not only 35 years after a system of mandatory student finance had been introduced, but also 14 years after the House of Lords decision in Shah, which had defined ordinary residence as a mans abode in a particular place or country which he has adopted voluntarily and for settled purposes as part of the regular order of his life for the time being, whether of short or of long duration (p 343).
This may have been a broader definition than had hitherto been thought, but principally because it included people who had come here wholly or mainly for the purpose of study.
It cannot be suggested that before this time, ordinary residence was necessarily equated with ILR or any particular immigration status.
For completeness, it should be noted that in 1980, before the introduction of the settlement criterion, the requirement of three years ordinary residence was removed for refugees (SI 1980/1352).
For reasons which the Secretary of State is unable now to explain, in 1981, the definition of refugee was enlarged to include a person who enjoys asylum in the United Kingdom in pursuance of a decision of Her Majestys government though not so recognised (that is, recognised as a refugee for the purpose of the 1951 Geneva Convention on the status of refugees).
When the settlement criterion was introduced in 1997, a similarly worded category of failed asylum seekers continued to be exempted from both the settlement and the residence requirements.
Not surprisingly, when challenged, the Secretary of State conceded that the distinction drawn between those people with DLR who had applied unsuccessfully for asylum and those who had not done so was irrational (see the account given by McCombe LJ in Arogundade at para 10).
Thus, for a short time, all persons with DLR/LLTR were treated as eligible for student loans under this category.
It was, however, soon abolished (see SI 2011/87).
It is fair to say that, just as there is no evidence of the reasons for including failed asylum seekers within the categories of eligible persons, there is also no evidence that thought was given to the impact of removing eligibility from all people with DLR or LLTR, irrespective of the strength of their connections with the United Kingdom. (There is evidence that the Department considered, but rejected, making an exception for unaccompanied asylum seeking children, who are routinely granted DLR/LLTR until the age of 171/2.) An Equality Impact Assessment of Student Funding Policy for Holders of Discretionary Leave to Remain in the UK was completed in 2011, but this was concerned only with the impact of the policy upon people with the characteristics protected by the Equality Act 2010 and not with the impact upon education rights under the European Convention.
Finally, it should be emphasised that we are concerned only with the law in relation to students who are ordinarily resident in England on the day when the academic year begins.
Financial support for students ordinarily resident in Wales, Scotland and Northern Ireland is a devolved function, and the regulations in each place are different from those in England.
Under challenge in these proceedings, therefore, are (a) the settlement criterion, and (b) the lawfulness element in the three year residence criterion.
This litigation is concerned only with eligibility for student loans, but such eligibility is also a passport to the right to be charged the fees applicable to home students; without it a university is free to charge the fees applicable to overseas students (often significantly higher), although it does not have to do so.
Convention rights
Under article 2 of the First Protocol to the European Convention on Human Rights (A2P1), Everyone has the right to education.
This does not, however, oblige Member States to provide any particular system of state education.
Rather, as was stated in the Belgian Linguistics case (No 2) (1968) 1 EHRR 252, at p 281, it affords people the right in principle to avail themselves of the means of instruction existing at a given time.
Hence, in ahin v Turkey (2005) 44 EHRR 99, at para 137, the Grand Chamber explained that [a]lthough [A2P1] does not impose a duty on the contracting states to set up institutions of higher education, any state doing so will be under an obligation to afford an effective right of access to them.
So fundamental is the role that education plays in the furtherance of human rights in a democratic society that the article should not be given a restrictive interpretation.
The United Kingdom has indeed established a large and flourishing higher education sector, which, although technically consisting of private institutions, is to a large extent supported, either directly or indirectly, from public funds.
Furthermore, as the court reiterated, It is of crucial importance that the Convention is interpreted and applied in a manner which renders its rights practical and effective, not theoretical or illusory (para 136).
Making it prohibitively expensive for some students to gain access to higher education would make that right theoretical or illusory.
Hence the Secretary of States accepts that in certain circumstances eligibility for financial support is capable of coming within A2P1 (and see R (Kebede) v Secretary of State for Business, Innovation and Skills [2013] EWHC 2396 (Admin), [2014] PTSR 92, para 33).
The appellant complains that denial of access to a student loan has denied her access to the higher education provided in this country.
But her real complaint is that some people get student loans and others do not, in short of discrimination.
Article 14 provides: The enjoyment of the rights and freedoms set forth in this Convention shall be secured without discrimination on any ground such as sex, race, colour, language, religion, political or other opinion, national or social origin, association with a national minority, property, birth or other status.
It is now conceded that immigration status is another status for this purpose.
It is therefore unnecessary for us to consider whether, even if it were not, the denial of a student loan to this appellant, when such loans are made available to other university students, would constitute and unjustified denial of her right to education.
Whether considered under A2P1 alone or under article 14, taken together with A2P1, the issue is justification.
There has been some debate before us as to the approach which we should take to scrutinising a governmental decision in this area.
On the one hand, in Strasbourg, a wide margin of appreciation is usually allowed to the state under the Convention when it comes to general measures of political, economic or social strategy, and the court generally respects the legislatures policy choice unless it is manifestly without reasonable foundation: see, for example, Gogitidze v Georgia (Application No 36862/05), (unreported) given 12 May 2015 para 97.
This test was first developed when considering whether an interference with the rights of property guaranteed by article 1 of the First Protocol (A1P1) was in the public interest: see James v United Kingdom (1986) 8 EHRR 123.
That test has also been employed in Strasbourg and domestically when considering the justification for discrimination in access to cash welfare benefits, themselves a species of property right protected by A1P1: see Humphreys v Revenue and Customs Comrs [2012] UKSC 18, [2012] 1 WLR 1545; R (SG) v Secretary of State for Work and Pensions (Child Poverty Action Group intervening) [2015] UKSC 16, [2015] 1 WLR 1449.
On the other hand, education is rather different.
Both sides in this case rely upon the language of the Strasbourg court in Ponomaryov v Bulgaria (2011) 59 EHRR 799.
This concerned two boys, born to Russian parents in what is now Kazakhstan.
After their parents divorce, their mother married a Bulgarian and they all came to live in Bulgaria.
The mother was granted a permanent residence permit and the boys were entitled to residence on the basis of her permit.
They were educated at Bulgarian primary and secondary schools.
There came a time when they should have had permanent residence permits of their own.
Although both eventually succeeded in obtaining these, they complained that they had for a while been charged fees for their secondary education, whereas Bulgarian nationals and aliens having permanent residence permits were not.
The issue was whether, having decided to provide such education free of charge, the state could deny that benefit to a distinct group of people: the notion of discrimination includes cases where a person or group is treated, without proper justification, less favourably than another, even though the more favourable treatment is not called for by the Convention (para 53).
The court started by observing that a state may have legitimate reasons for curtailing the use of resource hungry public services such as welfare programmes, public benefits and health care by short term and illegal immigrants, who, as a rule, do not contribute to their funding.
It may also, in certain circumstances, justifiably differentiate between different categories of aliens residing in its territory (para 54).
However, Although similar arguments apply to a certain extent in the field of education which is one of the most important public services in a modern state they cannot be transposed there without qualification.
It is true that education is an activity that is complex to organise and expensive to run, whereas the resources that the authorities can devote to it are necessarily finite.
It is also true that in deciding how to regulate access to education, and in particular whether or not to charge fees for it and to whom, a state must strike a balance between, on the one hand, the educational needs of those under its jurisdiction and, on the other, its limited capacity to accommodate them.
However, the court cannot overlook the fact that, unlike some other public services, education is a right that enjoys direct protection under the Convention.
It is also a very particular type of public service, which not only directly benefits those using it but also serves broader societal functions.
Indeed, the court has already had occasion to point out that [i]n a democratic society, the right to education is indispensable to the furtherance of human rights [and] plays a fundamental role .
Moreover, in order to achieve pluralism and thus democracy, society has an interest in the integration of minorities (para 55).
The court went on to say that the states margin of appreciation increased with the level of education.
University education remained optional and higher fees for aliens seemed to be almost universal and were fully justified.
The opposite went for primary education, which provided basic skills and integration into society and was compulsory in most countries (para 56).
Secondary education fell between the two extremes, but with more and more countries now moving towards what has been described as a knowledge based society, secondary education plays an ever increasing role in successful personal development and in the social and professional integration of the individuals concerned (para 57).
In the particular circumstances of the case, requiring these boys, who had come to Bulgaria lawfully as young children, had no choice in the matter, and were fully integrated into Bulgarian society, to pay fees on account of their nationality and immigration status was not justified.
Nowhere in that case do the words manifestly without reasonable foundation appear, nor did the Court of Appeal adopt that test, which Laws LJ described as a blunt instrument (para 30).
As the appellant points out, education (unlike other social welfare benefits) is given special protection by A2P1 and is a right constitutive of a democratic society.
Nevertheless, we are concerned with the distribution of finite resources at some cost to the taxpayer, and the court must treat the judgments of the Secretary of State, as primary decision maker, with appropriate respect.
That respect is, of course, heightened where there is evidence that the decision maker has addressed his mind to the particular issue before us (see, for example, Belfast City Council v Miss Behavin Ltd [2007] UKHL 19, [2007] 1 WLR 1420), or that the issue has received active consideration in Parliament (see R (SG) v Secretary of State for Work and Pensions).
Both are lacking in this case: there is no evidence that the Secretary of State addressed his mind to the educational rights of students with DLR/LTTR when making these regulations, which were laid before Parliament subject to the negative resolution procedure.
With those considerations in mind, I turn to the issue of justification.
It is now well established in a series of cases at this level, beginning with Huang v Secretary of State for the Home Department [2007] UKHL 11, [2007] 2 AC 167, and continuing with R (Aguilar Quila) v Secretary of State for the Home Department (AIRE Centre intervening) [2011] UKSC 45, [2012] 1 AC 621, and Bank Mellat v HM Treasury (No 2) [2013] UKSC 39, [2014] AC 700, that the test for justification is fourfold: (i) does the measure have an legitimate aim sufficient to justify the limitation of a fundamental right; (ii) is the measure rationally connected to that aim; (iii) could a less intrusive measure have been used; and (iv) bearing in mind the severity of the consequences, the importance of the aim and the extent to which the measure will contribute to that aim, has a fair balance been struck between the rights of the individual and the interests of the community?
As to (i), the evidence presented on behalf of the Secretary of State suggests that settled students are in a better position to make a significant economic contribution and have a right to remain and work in the United Kingdom.
They are thus regarded as more deserving of the limited funds available.
The appellant accepts that it is legitimate to target resources on those students who are not only likely to stay here to complete their education but also to stay on afterwards and contribute to the United Kingdom economy through their enhanced skills and the taxes they pay.
If they stay, it will also be simpler and easier to collect the repayments due on the loans through the taxation system.
But (ii) are the means chosen rationally connected to those aims? The appellant argues that people in her situation are just as likely to stay here, to complete their education, to contribute to the economy and to repay their loans as are people who are settled here within the meaning of the Regulations.
The reality is that even though she does not yet have ILR, her established private life here means that she cannot be removed from the UK unless she commits a serious criminal offence and she will almost inevitably secure ILR in due course.
She is just as closely connected with and integrated into UK society as are her settled peers.
She has no obvious alternative.
As Professor Walker puts it graduate wages in the UK labour market are large, relative to the wages reigning in those countries where DLR/LLRs are likely to have been born so the incentives to move are likely to be small except for high flyers who would face relatively low subsidies (because they would quickly repay) if they remained in the UK.
He concluded that it seems unlikely that the overwhelming majority would emigrate which is what it would take to make the net benefits to the UK fall to zero.
But even if there is no sufficient rational connection between the aim and the rule, is the Secretary of State nevertheless justified in adopting a bright line rule which enables those administering the scheme quickly and easily to identify those who qualify? The Strasbourg jurisprudence is not altogether clear on this question.
On the one hand, it tends to disapprove of a blanket exclusionary rule, such as that on prisoners voting (Hirst v United Kingdom (No 2) (2005) 42 EHRR 849), or a blanket inclusionary rule, such as that governing the retention of DNA profiles (S and Marper v United Kingdom (2008) 48 EHRR 1169).
On the other hand, it recognises that sometimes lines have to be drawn, even though there may be hard cases which sit just on the wrong side of it (see, for example, Animal Defenders International v United Kingdom (2013) 57 EHRR 607).
The need for bright line rules in administering social security schemes has been recognised domestically, for example in R (RJM) v Secretary of State for Work and Pensions [2008] UKHL 63, [2009] 1 AC 311.
Nevertheless, it was the absence of any possibility of taking the particular circumstances of the case into account which led to the finding of a violation in Ponomaryov (para 62).
The issue is therefore two fold.
First, even if a bright line rule is justified in the particular context, the particular bright line rule chosen has itself to be rationally connected to the aim and a proportionate way of achieving it: see, for example, R (T) v Chief Constable of Greater Manchester Police (Liberty intervening) [2014] UKSC 35, [2015] AC 49.
Secondly, however, it is one thing to have an inclusionary bright line rule which defines all those who definitely should be included.
This has all the advantages of simplicity, clarity and ease of administration which are claimed for such rules.
It is quite another thing to have an exclusionary bright line rule, which allows for no discretion to consider unusual cases falling the wrong side of the line but equally deserving.
Hitherto the evidence and discussion in this case has tended to focus on whether there should be a bright line rule or a wholly individualised system.
There are obvious intermediate options, such as a more properly tailored bright line rule, with or without the possibility of making exceptions for particularly strong cases which fall outside it.
There are plenty of precedents for such an approach, including in immigration control.
Could therefore a bright line rule have been chosen which more closely fitted the legitimate aims of the measure? I quite accept that the settlement rule is a good rule of thumb for identifying those who definitely should be eligible for student loans.
They are the people with the right to stay and work here for as long as they please. (The risk that high flyers will move abroad applies to the settled and not settled alike.) But there are also people such as the appellant who have lived here for many years and cannot in reality be removed from the country unless they commit a serious crime.
The appellant points to the criteria currently used in the Immigration Rules for the grant of leave to remain on grounds of private life.
Paragraph 276ADE (1) includes a person who (iv) is under the age of 18 years and has lived continuously in the UK for at least seven years (discounting any period of imprisonment) and it would not be reasonable to expect to leave the UK; or (v) is aged 18 years or above and under 25 years and has spent at least half his life living continuously in the UK (discounting any period of imprisonment).
To this might be added an exceptional cases discretion.
Given the comparatively small numbers involved, in the total scheme of things, it has not been shown that this would be administratively impracticable.
Indeed, in principle, different fees could be charged for processing different applications, based on the administrative costs of doing so.
Finally, there is (iv) the fair balance to be struck between the effect upon the person whose rights have been infringed and the interests of the community, or, to put it another way, between the means and the ends.
The Secretary of State argues that the effects upon the students denied loans until they have achieved ILR are not so great access is not denied but merely delayed.
Nevertheless, the impact upon the appellant and others in her position is clearly very severe.
As Vos LJ put it, she will be deprived of higher education at the time in her life when her primary and secondary education has led her reasonably to expect that she will go with her peers to university.
She has no intention of leaving the United Kingdom.
Her life was made here from the age of six and she is culturally and socially integrated into British society.
Moreover, under article 8 her removal is simply not an option.
The fact that she falls foul of the twin requirements of the 2011 Regulations is no fault of hers. (paras 74, 75).
One does not need to have been a university teacher to appreciate that it is important to keep up the momentum of ones studies, to maintain the habits and skills learned at A level, and in many cases (particularly the sciences) to retain the knowledge gained there.
A voluntary gap year is one thing, but an enforced gap of several years is quite different.
These young people will also find it hard to understand why they are allowed access to all the public services, including cash welfare benefits, but are denied access to this one benefit, which is a repayable loan.
Furthermore, in considering the overall balance, alongside the harm done to the individuals must be set the harm done to the community by such delay.
Some of these young people may be lost to higher education forever.
Others will not join the productive higher skilled workforce until much later than they otherwise would have done.
The overall benefits to the exchequer and the economy, described in Professor Walkers unchallenged evidence, will be reduced.
These harms to both the individuals concerned and the community as a whole cannot be outweighed by the administrative benefits of this particular bright line rule, which could be achieved in other ways.
Any short term savings to the public purse by denying these students finance, by way of loans, not grants, are just that, as most of them will eventually qualify for loans, and in the meantime the benefit their enhanced qualifications will bring to the exchequer and the economy have been lost.
Furthermore, the additional short term cost of enabling these students to have loans pales into insignificance compared with the costs of removing the cap on home student numbers.
I conclude, therefore, that the application of the settlement rule to this appellant could not be justified and was incompatible with her Convention rights.
The lawful ordinary residence criterion
The appellants challenge is directed towards the lawfulness element in the requirement of three years ordinary residence in the United Kingdom.
Once again, the Secretary of State has not clearly articulated its aim, but the appellant accepts that it is reasonable to restrict benefits to those who are genuinely integrated into the society and a period of residence can be a reasonable proxy for such belonging: see R (Bidar) v Ealing London Borough Council [2005] QB 812, para 57.
The established rationale for insisting that residence cannot be ordinary unless it is lawful is that a person should not be permitted to benefit from his own unlawful conduct: see Shah [1983] 2 AC 309, p 343; Arogundade (No 2), para 37.
That being so, it is argued that this appellant (unlike the appellant in Arogundade) is in no way to blame for the fact that her residence was not lawful.
That was the result of decisions taken by her parents over which she had no control.
The Secretary of State argues that lawful residence is not a status for the purpose of article 14.
A fortiori the reason why that residence was not lawful cannot be such a status.
Justification therefore does not arise.
But even if it does, the rule is fully justified.
In Ponomaryov the court said this: the applicants were not in the position of individuals arriving in the country unlawfully and then laying claim to the use of its public services, including free schooling.
Any considerations relating to the need to stem or reverse the flow of illegal immigration clearly did not apply to the applicants case (para 60).
There are indeed strong public policy reasons for insisting that any period of ordinary residence required before a person becomes entitled to public services be lawful ordinary residence.
Furthermore, if the requirement were to be relaxed for people in the position of the appellant it would also have to be relaxed for all the other categories of persons eligible for student loans to whom the requirement of three years ordinary residence (here or in the EEA) applies, who are just as likely as the appellant to be the victims of their parents decisions rather than their own.
The administrative burden involved in making the moral judgments required would be intolerable.
And the overall balance of harm involved in a delay of up to three years is of a different order from the balance involved in a six or ten year delay.
I would therefore prefer not to enter into the knotty problem of whether lawful residence is a status and whether lawful and unlawful residents are in an analogous situation for this purpose (questions which are analytically difficult to separate).
There is ample justification for the rule.
I conclude therefore that the application of the lawful ordinary residence criterion was compatible with the appellants Convention rights.
Conclusion
The application of the settlement rule to this particular appellant violated her Convention right to be afforded access to education on equal terms with her peers.
What remedy should flow from this?
The primary relief sought by the appellant is (i) a declaration that the impugned criteria breach her Convention rights, and (ii) that the Regulations should be read down so as to give effect to this, by inserting into regulation 4(2) (see para 15 above) or where the grant of support is necessary in order to avoid a breach of the persons Convention rights within the meaning of the Human Rights Act 1998.
Alternatively, if it is not possible to read down the Regulations in this way, she seeks an order quashing the impugned provision and requiring the Secretary of State to put in place a Convention compatible basic criterion.
The problem with quashing the settlement criterion in its entirety is that there must be cases in which it is not incompatible with the Convention rights.
The problem with reading down the regulation as suggested is that it would leave the Department with little guidance as to when the refusal of finance would be a breach of the Convention rights.
But the appellant is clearly entitled to a declaration that the application of the settlement criterion to her is a breach of her rights under article 14, read with article A2P1, of the Convention.
Such a declaration was granted, for example, in In re G (Adoption: Unmarried Couple) [2008] UKHL 38, [2009] AC 173, where it was held that the provision of the Adoption (Northern Ireland) Order 1987 excluding unmarried couples from applying jointly to adopt was incompatible with the appellants Convention rights.
A declaration was granted that it is unlawful for the Family Division of the High Court of Justice in Northern Ireland to reject the applicants as prospective adoptive parents on the ground only that they are not married.
Such a declaration would leave the department in no doubt that this appellant is entitled to a student loan, while leaving it open to the Secretary of State to devise a more carefully tailored criterion which will avoid breaching the Convention rights of other applicants, now and in the future.
LORD HUGHES:
I agree with Lady Hale that this appeal should be allowed, but would make what seems to me a significant qualification in granting a declaration that the present settlement rule unlawfully infringes the appellants Convention rights, whilst my reasoning is not exactly the same as hers.
This appeal was presented on the basis that there was both an infringement of A2P1 and unlawful discrimination.
It was always accepted by the appellant that these two legal arguments went together.
On inspection, I agree with Laws LJ in the Court of Appeal that the case depends upon a complaint of unlawful discrimination only.
The jurisprudence of the Strasbourg court, and in particular Ponomaryov, makes it quite clear that, whatever may be the uncertain ambit of A2P1, it does not impose on any state an obligation to provide, or to fund, tertiary education.
If, therefore, the UK were simply to decline to provide any university funding, that, whilst it would clearly not be acceptable publicly, would not entail any infringement of A2P1.
Equally, it follows that A2P1 does not impose a requirement on the UK to fund tertiary education at any particular level or in any particular way, and whether or not it were to be asserted that such education had become prohibitively expensive for some individuals.
This is an example of the UKs social and political realities being more exacting upon the state than the ECHR (and the Human Rights Act) require; it is not the only one.
The law is not the only, nor even the principal, regulator of the provision of public services.
The complaint in this appeal therefore relates not to an infringement of A2P1 but to the fact that funding is provided on a basis which is discriminatory in that it excludes the appellant, and others in a comparable position, on the grounds of their immigration status.
It was not disputed that her immigration status is a status for the purposes of article 14 ECHR.
It follows that the discrimination must be justified.
Certain groups of European Union citizens have separate rights under EU law which are duly recognised in the eligibility rules set out in the Regulations.
So also, under international obligations, do those accepted as legitimate refugees.
Subject to that, the plain objectives of the government in promulgating the eligibility rules under consideration are: (a) principally, to target the not inconsiderable subsidy represented by the student loan scheme (about 45% of 9 billion per annum) on those who are properly part of the community (in this case of England, for there are separate and different rules for the other parts of the UK); thereby to target the subsidy on those who are likely to remain in (b) England (or at least the UK) indefinitely, so that the general public benefits of their tertiary education will enure to the countrys advantage; (c) thereby to increase the likelihood that, because the recipients of the loans will probably remain here, the public will receive repayment; and (d) to provide a rule which is easy to understand and apply, and inexpensive to operate, so that the minimum part of the available funds are taken up in administration costs.
Those are, as it seems to me, plainly legitimate objectives.
The course which has been taken in pursuit of these objectives has been to define eligibility for student loans in part in terms of the immigration position of the applicant.
This produces the two rules which are in question in the present appeal: (i) the rule which requires the student to have been lawfully resident in the UK for three years immediately preceding the start of the University course; and (ii) by section 33(2A) of the Immigration Act 1971.
It is readily understandable why the Secretary of State for Business, Innovation and Skills should have looked to the immigration rules for a convenient definition of those who are sufficiently connected with this country to justify receipt of the subsidy.
But if he is to take that course, he needs to consider whether those rules do in fact adequately identify those who are sufficiently connected when it comes to University funding, and exclude those who are not.
The purposes served by the immigration rules are not identical to the purposes of the regulations governing eligibility for student loans.
In most respects, these two importations of the rule which requires the student to be settled in the UK as defined immigration concepts do sensibly identify those who are to be made eligible for student loan funding.
But in one respect they do not, and the framers of the Regulations appear not to have considered the case of such as the appellant, where they do not.
I entirely agree with Lady Hale that the rule requiring lawful residence for three years is plainly justified.
Special rules for refugees and EU citizens apart, no one queries, nor could they query, a rule requiring a period of UK residence before entitlement to receipt of a loan on advantageous terms from the state.
The only challenge is to the additional requirement that such residence be lawful.
But that also is plainly justified.
It must be open to the state to exclude from its generosity those whose residence here is illegal or has not been legal for a qualifying period.
It may be true that young people such as the appellant may become and remain illegal immigrants through the actions of their parents and at a time when they were not personally responsible for their movements.
But whilst this is so, it is plainly open to the state to say that a parent cannot obtain for his children subsidised University education by entering or overstaying illegally in this country and choosing to keep quiet about what s/he is doing.
Children are inevitably affected in many ways by decisions made for them by their parents when they were young; this is one such.
The settlement rule, insofar as it affects the cohort of which this appellant is an example, is different.
Those in this cohort do not meet this rule but have these characteristics.
They have lived in this country for the majority of their lives.
They have passed through the education system, secondary certainly and often primary.
Some, such as the present appellant, have done very well, but whether they have or have not, all have been treated throughout as members of UK society and have behaved as such.
Their length of residence is such that no one doubts that there could be no question of removing them from the UK, at least in the absence of grave misconduct.
They are, in any ordinary language, settled in the UK.
They are, however, not settled for the purposes of the immigration legislation, because that defines settlement in terms of indefinite leave to remain (ILR).
Increasingly, it is the practice of the Home Secretary to require a longer period of probationary limited leave to remain than was formerly the case, before ILR is granted.
Until recently, and for this appellant, it was six years from the time when the unlawful presence is discovered, whilst for the future it will be ten years.
At any time, the Home Secretary may alter this practice, whether by requiring a longer period of probation or by shortening it, or by imposing different conditions on grants of limited leave.
The merits of this practice from the point of view of immigration administration have, correctly, not been debated in these proceedings, but I see no difficulty in understanding that it may have benefits when considered from that standpoint.
For example, the grant of ILR brings other consequences in its train, such as family settlement rights for others.
In any event, there is no doubt a case for a probationary period of limited leave.
I see no grounds for criticising the Home Secretary for operating this practice.
But what it brings with it, when invoked as a criterion for eligibility for student funding, is increasing separation of the immigration concept of settlement from the question of whether the young person is in fact tied by long residence, habit and community membership to UK society.
The reality is that young people such as the appellant are members of UK society as much as most others.
They have been brought up here in the English system.
They are as connected to the UK as most others and, like them, they can be expected to remain here indefinitely.
There are therefore the same reasonable prospects of society benefitting from the contribution which tertiary education will equip them to make, and of it obtaining repayment of loans made, as there are in relation to the home grown student population generally.
It follows that in respect of this cohort of people, the settlement rule, whilst no doubt intended to serve the first three objectives set out in para 53 above, does not in fact do so.
It goes further than is needed to serve those objectives.
In consequence, it excludes people who meet the criteria which those objectives are designed to include.
It fails to strike a fair balance between the states interests and those of the cohort concerned.
There is little sign in the evidence lodged by the Department that this cohort was expressly considered.
The adoption of the rule in relation to this cohort creates discrimination which is outside the legitimate range of administrative decisions available to the Secretary of State, and whether the test is correctly characterised as a decision manifestly without reasonable foundation or as some less stringent criterion.
There is evidence that the view was taken that a simply stated and applied rule had great merit.
To an extent, whenever a rule draws a simple line, there may be hard cases which fall the wrong side of it.
The Secretary of States case, fully argued by Mr Kovats QC, is that the exclusion of the cohort of aspiring students of which this appellant is an example is the unavoidable consequence of this truth.
If this were so, I would myself have concluded that the settlement rule falls well within the ambit of lawful decisions which are available to the Secretary of State in framing the eligibility rules, and that the discrimination was thus justified.
Like Laws LJ in the Court of Appeal in this case, and like Burnett J in the similar case of Kebede [2013] EWHC 2396 (Admin), [2014] PTSR 92, I agree that this is an area in which a rule which is simply stated, readily understood and easily applied is legitimate, and indeed advisable.
Such rules tend to be described, when objection is taken to them, as blanket rules, or, when conversely their virtues are recognised, as bright line rules.
But these descriptions, one pejorative and the other approving, obscure the reality which is that all rules are blanket rules, in the sense that those who meet them are included and those who are outside them are excluded.
All such rules are both inclusionary and exclusionary; if one grafts onto them a residual discretion they cease to be rules based on readily ascertainable facts and become rules based in part on an evaluative exercise.
The truth is that clear rules, based on readily ascertainable facts, which are simple to state, to understand and to apply, have a merit of their own.
An applicant can see comparatively easily whether she will qualify or not.
The administrators can process a very large number of applications (approaching a million and a half in 2013 2014 with an increase to be expected now that the cap on student numbers has been lifted) in the relatively short time available each year for matching applicants to places.
Some of the processing can be automated.
The cost of administering the scheme can thus be kept down and the maximum possible proportion of the available budget preserved for loans.
As Lady Hale observes, the argument in this case has tended to proceed astride the fault line between individualised consideration of every case on the one hand and the existing settlement rule on the other.
On behalf of the appellant, the primary submission advanced by Miss Mountfield QC remains that the court should read down the eligibility rule pursuant to section 3 of the Human Rights Act 1998, so as to require individual consideration in every case not plainly within the stated categories.
The contention is that words should be added to the parent eligibility regulation 4(2) which directs one towards the several categories of eligibility set out in Schedule 1, Part 2.
That would involve reading regulation 4(2) as follows, adding the words shown in bold: Subject to paragraph (3) a person is an eligible student in connection with a designated course if (a) in assessing that persons application for support the Secretary of State determines that the person falls within one of the categories set out in Part 2 of Schedule 1 or (b) where the grant of support is necessary in order to avoid a breach of the persons Convention rights (within the meaning of the Human Rights Act 1998).
If applied to regulation 4(2) this qualification would operate upon not only the settlement rule (Schedule 1, Part 2, para 2(1)(a)) but also all the other categories of eligibility, including the three year lawful residence rule (para 2(1)(c) and elsewhere).
Even if only para 2(1)(a) were to have these or similar words attached, the problem would still be the same.
It would mean that individualised assessment of a persons article 8 rights would have to be made by the Secretary of State in order to determine eligibility for a student loan.
Such a determination is highly fact sensitive.
It does not depend by any means only on length of residence in the UK.
Even if that were the only consideration it would inevitably lead to inconsistent decisions as between apparently similar cases adjudicated upon on different occasions.
But it would be likely also to entail consideration of, inter alia, family connections, dependants, community and other ties, employment, commitments and plans.
It would require an entirely different skillset for those administrators charged with running the student loan scheme.
There would be the unavoidable prospect of challenge to such individualised decisions by way of judicial review, at considerable cost in time and money.
Meanwhile, the prospect would be opened up of inconsistent decisions upon article 8 as between on the one hand the Secretary of State for Business, Innovation and Skills and his student loan administrators, and on the other the Secretary of State for the Home Department and the highly sophisticated system of tribunal appeals in the administration of immigration control.
It seems to me clear that such a system would have very powerful disadvantages when considered as a matter of public policy.
It is impossible to say that the Secretary of State acts unlawfully in not adopting it.
If, therefore, this were the inevitable consequence of recognising the position of the appellants cohort of aspiring students, their exclusion from the eligibility criteria could not be held to be unlawful.
It is, however, clear to me, as to Lady Hale, that this consequence is not inevitable.
There would be no difficulty in formulating a rule, as clear as the existing and as simple to operate, which recognises the position of this cohort of students.
It is not for the court to devise such a scheme, but for the Secretary of State.
The role of the court is limited to determining whether the justification for the present rule which is advanced is or is not made out.
That suggested justification is, as the evidence of Mr Williams and the submissions of Mr Kovats make clear, that any alternative would involve either individual assessment of each applicants ties with the UK, or if not that, at least checks on the length of residence.
As to the former, for the reasons already given I agree entirely that the objection is well taken and the justification for the discrimination accordingly made out.
As to the latter, Mr Williams draws attention to the possibility that checking whether an applicant had been through the UK school system would result in checks being made with schools or education authorities and might require permission from other Government departments, and possibly changes in the law to allow the SLC to access such information.
This protests too much.
Whilst it is for the Secretary of State to devise his own rule, one which extended eligibility on the basis of long (although not necessarily lawful) residence would be a simple rule, based on ascertainable fact rather than evaluative assessment.
This would be so whether the length of residence were defined by reference to a set period of years, or to a proportion of the applicants life.
As it happens, there exists within the immigration rules a possible template which might be adopted, with or without modification.
Immigration Rule 276ADE(1) creates just such a long residence rule for entitlement to the grant of limited leave to remain.
It does so by reference to readily ascertainable factual criteria of residence, (a) for those under 18, seven years, (b) for those between 18 and 25, half ones life, and (c) in any event 20 years.
It is true that if such a rule, modified or otherwise, were to be adopted, the applicant whose passport did not show UK citizenship and who did not have ILR would no doubt have to demonstrate whatever long residence was stipulated.
The onus can perfectly well be put upon such an applicant to provide confirmation from an authoritative source, such as a general practitioner or head teacher, rather as at present she is required to submit documentary evidence of household income.
She could perfectly properly be required to consent to any confirmatory enquiries with education or health authorities which the student loan administrators might wish to make, and no delicate inter departmental relations or changes in the law ought to be involved.
If necessary, one would have thought that it would be very easy to insist on the certifier sending the confirmation direct, to minimise any risk of forgery, but these are details which could be worked out by those framing any new rule.
It can no doubt be said that if such a long residence rule were to be adopted, that would not entirely eliminate the risk of hard cases falling on the wrong side of it.
Whilst that is true, it is not a justification for the present rule which fails altogether to address the position of those such as this appellant whose long residence is such that they are in reality home grown students.
As Lady Hale observes, there is no sign that the Department did address this cohort at any stage, although it has done so since through the evidence of Mr Williams, referred to above.
One can understand the difficulties of the Department, which had its eye in part on eliminating the entirely anomalous failed asylum seeker position exposed in Arogundade, but infringement of Convention rights has resulted, even if accidentally.
It follows that I agree that the appellant is entitled to the declaration of this court that the settlement rule infringes her Convention rights because the discrimination involved has not been justified.
Since it is for the Secretary of State to devise a rule which does not thus infringe, it is of course open to him to adopt one which incorporates an elastic exceptional case discretion.
But for my part I am wholly satisfied that if he should elect not to include such a discretion, that decision could not result in any infringement of Convention rights.
That is the qualification to which I referred at the outset of this judgment, and which seems to me to be called for.
LORD SUMPTION AND LORD REED: (dissenting)
The position of persons whose legal right to be in the United Kingdom has not been definitively determined gives rise to difficult problems when it comes to deciding on the conditions of eligibility for state financial support.
There are a number of considerations, financial, economic, administrative and political, which can point in different directions.
No solution is satisfactory from every point of view or equally appropriate for every kind of support.
Under section 22 of the Teaching and Higher Education Act 1998, the conditions of eligibility for student loans are determined by the Secretary of State by regulation.
In our opinion the current regulations represent a lawful policy choice by the Secretary of State and a proper exercise of his statutory powers.
Other criteria could have been chosen.
There is room for argument about which would have been the best choice.
But within broad limits, which have not been exceeded in this case, these are matters for the Secretary of State, who is politically responsible for his decisions about them.
The Court of Appeal recognised that they were beyond the proper limits of the competence of the courts, and for our part we would have upheld their decision and dismissed the present appeal.
Since a majority of the court takes a different view, we will be as brief as we may in explaining our reasons.
The English legislative framework
In England, direct public financial support to students in higher education has never been dependent upon nationality.
But except in the case of refugees and persons entitled under EU law to be treated as favourably as nationals, the criteria for eligibility have always included a sufficient and enduring connection with the United Kingdom.
Under the system of discretionary state scholarships introduced by the Education Act 1944, the practice was to treat all persons ordinarily resident in England and Wales as eligible.
This principle became statutory when a more comprehensive system of grants was introduced under the Education Act 1962.
Regulations under that Act fixed the period of ordinary residence required at three years.
A significant change to the criteria was made in 1997, when the Education (Mandatory Awards) Regulations (SI 1997/431) introduced an additional requirement of settlement which depended on the applicants immigration status.
The Regulations adopted the definition of settlement in the Immigration Act 1971.
Section 33(2A) of that Act defined a person as settled if he was ordinarily resident in [the United Kingdom] without being subject under the immigration laws to any restriction on the period for which he may remain.
In other words, he had to have indefinite leave to remain.
These criteria were retained when the Teaching and Higher Education Act 1998 introduced tuition fees and began the progressive replacement of student grants with loans.
This remains the position today.
The current regulations are the Education (Student Support) Regulations 2011 (SI 2011/1986).
Schedule 1, paragraph 2 makes it a condition of eligibility that the applicant should be (i) settled in the United Kingdom, within the meaning of section 33(2A) of the Immigration Act 1971; and (ii) ordinarily and lawfully resident in the United Kingdom at the beginning of the academic year and for three years before that.
Under Schedule 1, paragraph 2 of the Education (Fees and Awards) (England) Regulations 2007 (SI 2007/779), the same criteria govern eligibility to be charged fees at the controlled rates for home and EU students, with the result that those who are ineligible for a student loan will usually also pay the substantially higher fees.
The immigration status of applicants for student loans is not a matter for the Department of Business, Innovation and Skills, which is responsible for higher education, but for the Home Office and the UK Border Agency.
The Home Office grants leave to remain in the United Kingdom outside the Immigration Rules for limited periods on a discretionary basis.
According to its current guidance document, published in May 2014, this power is used sparingly in limited categories of case, on what can broadly be described as humanitarian grounds.
The practice has now been largely incorporated in the Immigration Rules, which provide for the grant of limited leave to remain for standard periods, generally three years until 2013 and thirty months thereafter.
Discretionary or limited leave to remain is in principle renewable.
Those such as Ms Tigere, who first obtained discretionary leave before 9 July 2012, will become entitled to apply for indefinite leave to remain after six years of discretionary leave.
Those who first obtained it after that date must, under the current policy, wait for ten years.
The Home Office has a discretion to accelerate the timetable in individual cases, but its policy is not to do so for the purpose of enabling an applicant to qualify for financial support for higher education.
Article 14 of the Human Rights Convention
Article 2 of the First Protocol to the Human Rights Convention provides that no person shall be denied the right to education.
It is well established that the negative formulation of article 2 means that it does not import a right to public financial support: Belgian Linguistics Case (No 2) (1968) 1 EHRR 252, at para B3.
But such public support as is available must be offered on a Convention compliant basis.
In particular, article 14 of the Convention prohibits discrimination in the enjoyment of the rights within the scope of the Convention on grounds of sex, race, colour, language, religion, political or other opinion, national or social origin, association with a national minority, property, birth or other status.
These rights include the right not to be denied education.
The same principle applies as regards nationals of other member states under EU law, by virtue of TFEU article 18.
The current eligibility criteria unquestionably discriminate on the ground of immigration status.
The Strasbourg court has accepted that a persons immigration status can be an other status for the purpose of article 14: Bah v United Kingdom (2011) 54 EHRR 773, paras 45 46.
But it also made it clear that, because immigration status is not an immutable characteristic of the individual affected, the state should be accorded a correspondingly wide margin of appreciation when determining whether discrimination based upon that status is justifiable and proportionate to its objective: The nature of the status upon which differential treatment is based weighs heavily in determining the scope of the margin of appreciation to be accorded to Contracting States.
Immigration status is not an inherent or immutable personal characteristic such as sex or race, but is subject to an element of choice.
While differential treatment based on this ground must still be objectively and reasonably justified, the justification required will not be as weighty as in the case of a distinction based, for example, on nationality.
Furthermore, given that the subject matter of this case the provision of housing to those in need is predominantly socio economic in nature, the margin of appreciation accorded to the Government will be relatively wide (see the Grand Chamber judgment in Stec v United Kingdom (2006) 43 EHRR 1017, para 52). (para 47)
Student loans are provided out of public funds on terms which are much more advantageous to students than any commercial alternative.
They are a form of state benefit.
Such benefits are almost invariably selective and the criteria for selection necessarily involve decisions about social and economic policy and the allocation of resources.
For this reason, discrimination in their distribution gives rise to special considerations in the case law of the Strasbourg court.
The test is to be found in the decision of the Grand Chamber of the European Court of Human Rights in Stec v United Kingdom, at para 52: a wide margin is usually allowed to the state under the Convention when it comes to general measures of economic or social strategy.
Because of their direct knowledge of their society and its needs, the national authorities are in principle better placed than the international judge to appreciate what is in the public interest on social or economic grounds, and the court will generally respect the legislatures policy choice unless it is manifestly without reasonable foundation.
Commenting on this test in R (RJM) v Secretary of State for Work and Pensions [2009] AC 311, Lord Neuberger (with whom Lord Hope, Lord Walker and Lord Rodger agreed) remarked on its practical implications, observing that the fact that there are grounds for criticising, or disagreeing with, these views does not mean that they must be rejected.
Equally, the fact that the line may have been drawn imperfectly does not mean that the policy cannot be justified.
Of course, there will come a point where the justification for a policy is so weak, or the line has been drawn in such an arbitrary position, that, even with the broad margin of appreciation accorded to the state, the court will conclude that the policy is unjustifiable.
The test was reviewed and reaffirmed by this court in Humphreys v Revenue and Customs Comrs [2012] 1 WLR 1545, at paras 15 21 (Baroness Hale).
It has recently been applied by this court in R (SG and others) v Secretary of State for Work and Pensions (Child Poverty Action Group intervening) [2015] 1 WLR 1449, at paras 11, 69 (Lord Reed).
Lady Hale suggests that in the context of education, the test is not whether the justification for discrimination in the provision of state financial support was manifestly without foundation but a different and more exacting test.
In our opinion, there is no justification for this critical departure from a test which has been consistently endorsed by the Strasbourg court and at the highest level by the courts of the United Kingdom.
There is no principled reason why state benefits in the domain of education should be subject to any different test from equally important state benefits in other domains.
The problems associated with the judicial scrutiny of criteria for the award of selective benefits are the same.
The manifestly without foundation test was adopted in Stec notwithstanding that it was a sex discrimination case, a context in which very weighty reasons have always been required: see para 52.
It has been applied by the Strasbourg court to discrimination in other contexts, including the provision of housing, affecting the applicants right under article 8 to respect for her private and family life (Bah v United Kingdom (2012) 24 EHRR 773), and the grant of leave to enter the United Kingdom to the spouses of immigrants, again affecting article 8 rights (Hode and Abdi v United Kingdom (2012) 56 EHRR 960).
It was applied by this court to basic subsistence benefits in R (SG and others) v Secretary of State for Work and Pensions [2015] 1 WLR 1449, notwithstanding the indirect effect on the welfare of children of the gender discrimination considered in that case: see paras 81 91.
The majority has not advanced a single reason in support of abandoning it in the case of state financial support for education except that the words manifestly without foundation do not appear in the judgment of the Strasbourg court in Ponomaryov v Bulgaria (2011) 59 EHRR 799, a case in which the nature of the test was not discussed and does not appear to have been in issue.
We will return to Ponomaryov below.
For our part, we would accept that the more fundamental the right which is affected by discrimination in the provision of financial support, the readier a court may be to find that the reasons for discrimination are manifestly without foundation.
But to discard the test would go well beyond anything that the Strasbourg jurisprudence requires.
The Convention refers generally to education, but the limits of what is justifiable in the distribution of financial support by the state are not necessarily the same at every level of the educational system.
In England, full time education is compulsory and available free in state institutions to the age of 17 (18 from September 2015).
University education is not compulsory but a matter of choice.
And it is not free but fee based.
According to the most recent figures published by the Department for Business, Innovation and Skills, in the academic year 2012/13 the Higher Education Initial Participation Rate among English domiciled people aged 17 to 30 was 43%.
The corresponding figure is 24% for 18 year olds, Ms Tigeres age at the time of her first application in January 2013.
University education is an aspiration for very many young people.
It has a high cultural and economic value.
But it is not indispensable to social or economic participation, as primary and secondary education are.
Still less is it indispensable to social or economic participation that an applicant should be able to go to university at the age of 18 or 19, instead of at the age of 23 when Ms Tigere seems likely to obtain indefinite leave to remain.
The same figures suggest that 12%, ie rather more than a quarter of the 43%, are aged between 20 and 30 when they go to university.
Considerations of this kind, which apply in many if not all countries of the Council of Europe, were central to the analysis of the European Court of Human Rights in Ponomaryov v Bulgaria 59 EHRR 779.
The case concerned a rule of Bulgarian law which limited the provision of free secondary education to Bulgarian nationals and those with Bulgarian residence permits.
Others were required to pay.
This was held to violate article 14 of the Convention in the particular circumstances of the applicants case.
For present purposes, its significance is that the European Court of Human Rights distinguished between discrimination in financial provision on grounds of national origin, according to the level of education involved and its significance for social participation.
The court began by observing (para 54) that a state may have legitimate reasons for curtailing the use of resource hungry public services such as welfare programmes, public benefits and health care by short term and illegal immigrants, who, as a rule, do not contribute to their funding.
It went on to point out that this principle could not be applied to education without qualifications, partly because education was specifically protected by article 2 of the First Protocol and partly because of its fundamental cultural significance (para 55).
However, the force of these considerations was not the same at every level.
The court observed, at para 56: at the university level, which to this day remains optional for many people, higher fees for aliens and indeed fees in general seem to be commonplace and can, in the present circumstances, be considered fully justified.
The opposite goes for primary schooling, which provides basic literacy and numeracy as well as integration into and first experiences of society and is compulsory in most countries.
Accordingly, the margin of appreciation increased with the level of education.
That approach was endorsed by the Grand Chamber in Catan v Moldova and Russia (2012) 57 EHRR 99, para 140.
It is clear from the decision in Ponomaryov that the present case would have been most unlikely to succeed in Strasbourg.
That conclusion is fortified by the decision in Bah v United Kingdom, where the court cited Ponomaryov in support of its conclusion that immigration status was a justifiable basis for differential treatment in the allocation of social housing.
Do the eligibility criteria have a legitimate objective?
The formulation of criteria for giving financial support to university students raises a classic question of social and financial priorities.
It is common ground between the parties to this appeal that university education has very substantial economic advantages not only for graduates but for the society in which they live and work.
That cannot, however, be the only relevant consideration in decisions about its funding.
Student loans have a substantial element of public subsidy, currently estimated at about 45% of the total annual outlay.
This is because the rate of interest is below the market rate, the loan is only conditionally repayable and not all repayable sums are collectable.
There are finite funds available for providing this subsidy, and funding for higher education must itself compete with other potential uses of the money which may also have a high social or economic value.
As the Strasbourg court put it in Ponomaryov, at para 55, the state must strike a balance between, on the one hand, the educational needs of those under its jurisdiction, and, on the other, its limited capacity to accommodate them.
There is no direct evidence of the thought processes of ministers and officials as they resolved upon the current criteria.
This is hardly surprising in the case of a policy which has been in place, in the case of the residence test since 1962 and in the case of the settlement test since 1997.
Nor is such evidence necessary.
In the first place, a challenge to a public authoritys decision under the Convention is not a judicial review of the decision making process.
As Lord Bingham put it in R (SB) v Governors of Denbigh High School [2007] 1 AC 100, at para 31, what matters in any case is the practical outcome, not the quality of the decision making process that led to it; cf Lord Hoffmann at para 68.
Secondly, the objectives of the current eligibility rules for student loans are tolerably clear from the regulations themselves, and from the two witness statements of Paul Williams, Head of Student Funding Policy at the Department of Business, Innovation and Skills.
Leaving aside the special cases of refugees and persons protected by EU and international law, the objectives of the current eligibility criteria are (i) to concentrate finite resources on those who (a) have a lawful and close personal connection with the United Kingdom and are therefore more deserving of assistance, and (b) are most likely to remain here permanently and use their enhanced qualifications to the benefit of the economy; and (ii) to do so according to criteria which are based on rules rather than case by case discretion, in the interests of clarity, consistency and administrative practicality, and in order to maximise the proportion of available funds that goes to support students as opposed to administering the system.
In framing the criteria in substantially their current form in 1997, the Secretary of State cannot possibly have been unaware that some of those adversely affected would include some young people who were well integrated in British society.
That was the obvious consequence of adding to the existing residence test a settlement test based on indefinite leave to remain, and thereby requiring young people of university age to satisfy the extended residence requirement imposed by the immigration authorities.
It is common ground that it is in principle legitimate for the state to prioritise funding to those who can be shown to have a genuine, substantial and enduring connection with British society.
The residence test and the settlement test are both approximate measures of the strength of that connection.
Although the majority seeks to distinguish between the two tests, both of them in reality depend on a minimum period of past lawful residence, three years in the case of the residence test and six in the case of the settlement test.
The settlement test serves in addition as a measure of the connections likely permanence, which not only implies a closer connection with Britain but increases the economic value of the applicants university education to society as a whole.
R (Bidar) v Ealing London Borough Council (Case C 209/03) [2005] QB 812 concerned a French national who had had been educated for four years in the UK secondary education system but was refused a maintenance grant to study at university under an earlier version of the same eligibility criteria.
The criteria were challenged as constituting unjustifiable discrimination on grounds of nationality, contrary to what was then article 12 EC.
The Grand Chamber of the Court of Justice of the European Union held, at paras 56 57, that even in the case of an EU citizen it was permissible for a member state to ensure that the grant of assistance to cover the maintenance costs of students from other member states does not become an unreasonable burden which could have consequences for the overall level of assistance which may be granted by that state.
In the case of assistance covering the maintenance costs of students, it is thus legitimate for a member state to grant such assistance only to students who have demonstrated a certain degree of integration into the society of that state.
The court accepted that this justified the residence test: para 60.
It also accepted (para 61) that the settlement test could admittedly, like the requirement of three years residence referred to in the preceding paragraph, correspond to the legitimate aim of ensuring that an applicant for assistance has demonstrated a certain degree of integration into the society of that state.
The only reason why the settlement test was rejected was that applicants were unable to satisfy the residence test if at any time in the three year period the applicant had been here wholly or mainly for the purpose of receiving full time education: see Schedule 1, paragraph 2(1)(d).
The effect of this requirement, as the court pointed out (para 18), was that a national of another member state cannot, in his capacity as a student, obtain the status of being settled in the United Kingdom.
Bidar was distinguished on this ground in Frster v Hoofddirectie van de Informatie Beheer Groep (Case C 158/07) [2009] 1 CMLR 32.
The imposition under Dutch law of a requirement of five years prior residence in the Netherlands was held to be justified because the qualification was attainable by someone who had come to the Netherlands to study.
Paragraph 2(1)(d) of Schedule 1 has since been modified to make it inapplicable to students from other EU member states.
Whether its continued application to nationals of non EU states is lawful is not a question that arises on this appeal, because Ms Tigere has never been here wholly or mainly for the purpose of receiving full time education.
Unlike Mr Bidar, she can acquire settled status, albeit only after six years lawful residence.
The qualification that periods of unlawful residence should be excluded from the qualifying period of residence for the purpose of the Immigration Rules was established by the decision of the House of Lords in R v London Borough of Barnet, Ex p Shah [1983] 2 AC 309.
The statement of principle in the leading speech of Lord Scarman at 340E, 349C, is obiter, but has always been treated as authoritative and has recently been endorsed by the Court of Appeal in R (Arogundade) v Secretary of State for Business, Innovations and Skills [2013] ELR 466.
The reasons were that unlawful residence could not be regarded as ordinary residence, and that a person cannot rely on his own unlawful act to qualify himself for an advantage.
These were reasons for having such a rule even at a time when it was not expressly stated in the Regulations.
But the justification in Convention terms of applying the rule to the criteria of eligibility for student loans is altogether more straightforward.
The financial obligations of the state to those who are not its citizens and ought not to be on its territory cannot be of the same order as those which it owes to others.
They are less deserving of support when it comes to claiming on the finite funds available for the purpose.
Proportionality and bright line rules
In these circumstances, the real issue on this appeal turns on the second of the two objectives which we have summarised at para 81 above, namely the use of a bright line rule to distinguish between those who do and those who do not qualify.
The appellants case, which is substantially accepted by the majority, is that many young people who do not satisfy the eligibility criteria, because they have not been lawfully resident in the United Kingdom for the requisite period, or because they have not been granted the right to remain in the United Kingdom indefinitely, nevertheless have a connection with the United Kingdom which is just as strong as that of others who do satisfy them.
They may have spent most of their lives here, attending British schools.
They may have no subsisting social or cultural connection with any other country.
Their connection with the United Kingdom, it is said, is not only just as strong, but is bound to endure after the expiry of their discretionary leave, because article 8 of the Convention would make it impossible to deport them.
It follows, so the argument goes, that the distinction fails the test of proportionality.
It is disproportionate, first, because it cannot be rationally related to the professed objective of requiring applicants to have a sufficient and enduring connection with the United Kingdom; and, secondly, because a more inclusive rule would not unreasonably compromise that objective.
Both of these are integral parts of the test of proportionality: see Bank Mellat v HM Treasury (No 2) [2014] AC 700, at para 20 (Lord Sumption), at para 73 (Lord Reed).
In the present context they are in reality different ways of saying the same thing.
This argument has been cogently advanced by Ms Mountfield QC, who appeared for the appellant, and is accepted by the majority.
But in our opinion it is fallacious.
Those who criticise rules of general application commonly refer to them as blanket rules as if that were self evidently bad.
However, all rules of general application to some prescribed category are blanket rules as applied to that category.
The question is whether the categorisation is justifiable.
If, as we think clear, it is legitimate to discriminate between those who do and those who do not have a sufficient connection with the United Kingdom, it may be not only justifiable but necessary to make the distinction by reference to a rule of general application, notwithstanding that this will leave little or no room for the consideration of individual cases.
In a case involving the distribution of state benefits, there are generally two main reasons for this.
One is a purely practical one.
In some contexts, including this one, the circumstances in which people may have a claim on the resources of the state are too varied to be accommodated by a set of rules.
There is therefore no realistic half way house between selecting on the basis of general rules and categories, and doing so on the basis of a case by case discretion.
The case law of the Strasbourg court is sensitive to considerations of practicality, especially in a case where the Convention confers no right to financial support and the question turns simply on the justification for discrimination.
In Carson v United Kingdom (2010) 51 EHRR 369, which concerned discrimination in the provision of pensions according to the pensioners country of residence, the Grand Chamber observed, at para 62: as with all complaints of alleged discrimination in a welfare or pensions system, it is concerned with the compatibility with article 14 of the system, not with the individual facts or circumstances of the particular applicants or of others who are or might be affected by the legislation.
Much is made in the applicants submissions and in those of the third party intervener of the extreme financial hardship which may result from the policy However, the court is not in a position to make an assessment of the effects, if any, on the many thousands in the same position as the applicants and nor should it try to do so.
Any welfare system, to be workable, may have to use broad categorisations to distinguish between different groups in need the courts role is to determine the question of principle, namely whether the legislation as such unlawfully discriminates between persons who are in an analogous situation.
This important statement of principle has since been applied by the European Court of Human Rights to an allegation of discrimination in the distribution of other welfare benefits such as social housing: Bah v United Kingdom at para 49.
And by this court to an allegation of discrimination in the formulation of rules governing the benefit cap: R (SG and others) v Secretary of State for Work and Pensions (Child Poverty Action Group intervening) [2015] 1 WLR 1449, at para 15 (Lord Reed).
The second reason for proceeding by way of general rules is the principle of legality.
There is no single principle for determining when the principle of legality justifies resort to rules of general application and when discretionary exceptions are required.
But the case law of the Strasbourg court has always recognised that the certainty associated with rules of general application is in many cases an advantage and may be a decisive one.
It serves to promote legal certainty and to avoid the problems of arbitrariness and inconsistency inherent in weighing, on a case by case basis: Evans v United Kingdom (2007) 46 EHRR 728, at para 89.
The Court of Justice of the European Union has for many years adopted the same approach to discrimination cases, and has more than once held that where a residence test is appropriate as a test of eligibility for state financial benefits, it must be clear and its application must be capable of being predicted by those affected: Collins v Secretary of State for Work and Pensions (Case C 138/02) [2004] 2 CMLR 8, at para 72, Frster v Hoofddirectie van de Informatie Beheer Groep (Case C 158/07) [2009] 1 CMLR 861, at para 56.
As Advocate General Geelhoed acknowledged in considering these very regulations in Bidar (para 61), Obviously a member state must for reasons of legal certainty and transparency lay down formal criteria for determining eligibility for maintenance assistance and to ensure that such assistance is provided to persons proving to have a genuine connection with the national educational system and national society.
In that respect, and as the court recognised in Collins, a residence requirement must, in principle, be accepted as being an appropriate way to establish that connection.
The advantages of a clear rule in a case like this are significant.
It can be applied accurately and consistently, and without the element of arbitrariness inherent in the discretionary decision of individual cases.
By simplifying administration it enables speedy decisions to be made and a larger proportion of the available resources to be applied to supporting students.
Young people considering applying to universities need to know whether they will get a student loan or not.
The Student Loan Company, which administers the scheme, needs to process a very large number of applications for loans in the relatively short interval between the acceptance of a student by a university and the start of the academic year.
None of this is seriously disputed by the appellant.
Yet once it is accepted, the challenge cannot be to the application of the eligibility criteria to the appellant.
It must be to the eligibility criteria themselves.
In the last analysis, the appellants case depends on the proposition that even on the footing that a rule is required, this particular rule draws the line in the wrong place.
In relation to this type of argument, it was noted in Bank Mellat at para 75 (Lord Reed) that courts must accord a measure of discretion to the primary decision maker, and therefore exercise corresponding self restraint, if there is to be any prospect of legislative and executive choices being respected.
As the present case illustrates, it will almost always be possible for the courts to conclude that a more precisely tailored bright line rule might have been devised than the one selected by the body to which the choice has been democratically entrusted and which, unlike the courts, is politically accountable for that choice.
But, in the words of Dickson CJ in R v Edwards Books and Art Ltd [1986] 2 SCR 713, pp 781 782, the courts are not called on to substitute judicial opinions for legislative or executive ones as to the place at which to draw a precise line.
In a case concerned with the allocation of public expenditure in order to fulfil objectives of social and economic policy, the degree of respect paid by the court to the judgment of the legislature or executive, and the consequent width of the discretion afforded to the primary decision maker, must be substantial.
That is reflected in the test of whether the policy choice is manifestly without reasonable foundation.
The need to accord a measure of discretion to the legislator when considering the proportionality of general rules has been recognised by the European Court of Human Rights.
In its judgment in Animal Defenders International v United Kingdom (2013) 57 EHRR 607, concerned with the prohibition on political advertising in this country, the Grand Chamber rejected the argument that a general prohibition was unduly restrictive of freedom of expression, and that a less restrictive rule should have been adopted.
It referred at paras 106 109 to its earlier case law recognising that member states could adopt general measures which applied regardless of the facts of individual cases, even if this might result in individual hard cases; that, in order to determine the proportionality of such a measure, the court must assess the choices underlying it; that it was relevant to take into account the risk of abuse if a general measure were to be relaxed; and that a general measure had been found to be a more feasible means of achieving the legitimate aim than a provision allowing a case by case examination when the latter would give rise to a risk of uncertainty, expense and delay, as well as of discrimination and arbitrariness.
It continued (para 110): The central question as regards such measures is not, as the applicant suggested, whether less restrictive rules should have been adopted or, indeed, whether the state could prove that, without the prohibition, the legitimate aim would not be achieved.
Rather, the core issue is whether, in adopting the general measure and striking the balance it did, the legislature acted within the margin of appreciation afforded to it.
In the circumstances of the present case, the argument that the rule which was chosen fell outside the area of discretionary judgment accorded to the Secretary of State appears to us to be particularly difficult to sustain.
Wherever the line is drawn, there will be many young people on the wrong side of it whose connection with the United Kingdom will be just as strong and enduring as that of many others who find themselves on the right side.
The point may be tested by taking the illustrative example commended by the appellant herself and adopted by Lady Hale and Lord Hughes.
Rule 276ADE(1)(v) of the Immigration Rules draws the line in a different place for the purpose of determining the eligibility of persons aged between 18 and 25 to apply for limited leave to remain under article 8 of the Convention on account of their right to private and family life.
It authorises applications by those have continuously resided in the United Kingdom for at least half their lives.
It is not subject to the exclusion of periods of unlawful residence which apply to the tests of ordinary residence.
The adoption of such a test as a criterion for student loans would mean that the present appellant would qualify.
But the Secretary of State has to take a broader view and consider the functioning of the system as a whole.
The policy considerations relevant to a decision whether to grant limited leave to remain on account of the applicants article 8 rights are not the same as those which bear on a decision whether to grant financial support for higher education.
Moreover, the difficulty, delay and administrative cost of requiring the Student Loan Company to assess evidence of the duration of actual residence, as opposed to the duration of leave to remain, should not be under estimated.
We cannot close our eyes to the fact that candour cannot always be assumed in this field.
However, the real objection to proposed alternative tests is more fundamental.
They do not resolve the problem which is said to justify them.
The adoption of a rule like rule 276ADE(v) would put the cut off point for eligibility in a different place, but it would be equally open to the objection that it left many young people on the wrong side of it whose connections with the United Kingdom were just as strong and enduring as those on the right side.
This is because characteristics such as the strength and enduring character of a persons connection with the United Kingdom are not absolute values but questions of degree.
An element of arbitrariness is inherent in any rule based scheme designed to address that situation.
It cannot therefore be a proper objection to say that the line could have been drawn somewhere else where it would have excluded fewer people.
The point may be tested by reference to the residence test, which the majority regard as justified.
If the sole qualification were the current residence test of three years, some people in the position of the appellant, who is plainly well integrated into British society, would be enabled to qualify; but, correspondingly, eligibility would be extended to many others who were barely integrated at all.
There is no one right balance between these competing considerations.
If the qualifying period of residence were to be extended to six years, it would be difficult to challenge on the ground that the period of lawful residence should have been shorter (a five year period was accepted in Frster).
Both periods would exclude some people with the same characteristics as those who were included.
Yet the effect of a six year qualifying period would be substantially the same as the settlement test as far as persons in Ms Tigeres position are concerned, since six years residence would qualify her to apply for indefinite leave to remain.
In reality, as Lady Hales judgment implicitly acknowledges, the appellant is driven to argue that there should not be a bright line rule at all.
That appears to us to be the implication of the distinction drawn by Lady Hale between inclusionary and exclusionary rules, and of her suggestion that an exceptional cases discretion might be added.
As we have explained, and as Lord Hughes acknowledges, a bright line rule, in relation to eligibility for a benefit, is both inclusionary and exclusionary: by defining those who are eligible, it necessarily excludes those who fall outside the definition.
A discretion to include persons who fall outside the rule necessitates the consideration of cases on an individual basis in order to determine whether they are exceptional, defeating the purpose of having a bright line rule in the first place.
The answer to such arguments is that in a case where a line has to be drawn at some point in a continuous spectrum, proportionality cannot be tested by reference to outlying cases.
The Secretary of State estimates that the exclusion of persons with discretionary or limited leave to remain from eligibility for student loans affects about 2,400 people.
The appellant suggests that the number is only about 534.
Both acknowledge the imprecision of their figures, but on any view it is a small proportion of the cohort of some 1.45m applying for loans annually.
In R (Reynolds) v Secretary of State for Work and Pensions (reported sub nom.
R (Carson) v Secretary of State for Work and Pensions [2006] 1 AC 173, at para 41 Lord Hoffmann (with whom Lord Nicholls, Lord Rodger and Lord Carswell agreed), put the point very clearly in answer to the argument that that the payment of jobseekers allowances at a lower rate to those under 25 years of age was unjustified, because there was no substantial difference between those just over and just under that age: Mr Gill emphasised that the twenty fifth birthday was a very arbitrary line.
There could be no relevant difference between a person the day before and the day after his or her birthday.
That is true, but a line must be drawn somewhere.
All that is necessary is that it should reflect a difference between the substantial majority of the people on either side of the line.
If one wants to analyse the question pedantically, a person one day under 25 is in an analogous, indeed virtually identical, situation to a person aged 25 but there is an objective justification for such discrimination, namely the need for legal certainty and a workable rule.
The argument is not fortified, as it seems to us, by suggesting, as Ms Mountfield did, that the appellant is in substance settled in the United Kingdom because even without indefinite leave to remain she could not be removed consistently with article 8 of the Convention.
The argument is that this affects the position because it means that she is likely to remain in the United Kingdom and contribute with her enhanced qualification to the national economy.
This seems to us to be a point of some, but limited relevance.
In the first place, the likelihood that applicants for student loans will contribute in future to the economy is only one of a number of considerations underlying the current eligibility rules.
Secondly, there is a world of difference between a person who has a legal right to remain in the United Kingdom and a person with no such right who nevertheless cannot be deported.
Thirdly, while it is probably true that the appellant could not be removed consistently with article 8, there is no reason to believe that it is true of the generality of the people denied student loans under the current eligibility criteria.
Article 8 does not automatically protect persons resident here from deportation as illegal immigrants.
That will depend on a careful analysis of the infinitely variable facts of individual cases.
Relevant considerations include, in particular, the duration of the applicants residence, the significance of any family or social relationships that he has formed in the United Kingdom, the circumstances in which those relationships were formed, the availability of any alternative countries of residence where it would be reasonable to expect the applicant to reside, the best interests of any children involved, and the strength of any special justification advanced by the executive.
This court has always emphasised that however intensive the judicial scrutiny of a public authoritys decision, it is not open to the courts to take the decision making function out of the hands in which Parliament has placed it and assume that function themselves: see in particular R (Corner House Research) v Director of the Serious Fraud Office [2008] UKHL 60; [2009] AC 756, at para 41 (Lord Bingham), Bank Mellat v HM Treasury (No 2) [2014] UKSC 39, [2014] AC 700, at paras 21 (Lord Sumption), 71, 93 (Lord Reed); R (Lord Carlile of Berriew QC and ors) v Secretary of State for the Home Department [2014] UKSC 60; [2014] 3 WLR 1404, paras 31, 34 (Lord Sumption).
In a case where a range of rational and proportionate policy options is open to the decision maker, the decision which provides the best allocation of scarce resources is a question of social and economic evaluation.
These are matters of political and administrative judgment, which the law leaves to those who are answerable to Parliament.
They are not questions for a court of law.
It is enough to justify the Secretary of States choice in this case that discrimination on the basis of residence and settlement are not manifestly without foundation.
| UK-Abs | In 2011 the fees charged by universities were increased.
The cost of fees and maintenance are generally financed by loans from the Government, which are only repaid when students can afford to do so and at an affordable rate.
In order to qualify for a loan under Regulation 4(a) of the Education (Student Support) Regulations 2011 (the Regulations) a student must have been lawfully ordinarily resident in the UK for three years before the day the academic year begins (the lawful residence criterion); and be settled in the UK on that day (the settlement criterion).
The effect of the settlement criterion is that all students with limited or discretionary leave to remain in the UK are ineligible for student loans.
The Appellant is a Zambian national, now aged 20, who came to this country in 2001 at the age of six.
Her mother overstayed and the Appellant was unlawfully present in the country until 2012 when she regularised her immigration status.
She presently has discretionary leave to remain in the UK.
She will be able to apply for indefinite leave to remain in 2018.
She has received her entire education in the UK, obtained good grades and wishes to go to university.
She has been unable to take up the university places offered her as she is not eligible for a student loan because of her immigration status.
The issue in the appeal is whether either the lawful residence criterion or settlement criterion breaches the Appellants right to education under Article 2 of the First Protocol to the European Convention on Human Rights (A2P1), or unjustifiably discriminates against her in the enjoyment of that right.
The High Court found that the blanket exclusion from eligibility for student loans based on the Appellants immigration status was a disproportionate interference with her right of access to education under A2P1 and unjustifiable discrimination linked to national origin contrary to Article 14 ECHR.
The Court of Appeal allowed the Secretary of States appeal on the basis that this was an area of national strategic policy related to the distribution of scarce resources and so a broad margin of appreciation should be afforded to government policy.
The Appellant appealed to the Supreme Court.
The Supreme Court allows the appeal by a majority of 3:2.
Lady Hale writes the leading judgment, with which Lord Kerr and Lord Hughes agree.
Lord Hughes writes a concurring judgment.
Lord Sumption and Lord Reed write a joint dissenting judgment.
A2P1 does not oblige a state to provide any particular system of education.
However, if the state sets up higher educational institutions it will be under an obligation to provide a right of access to them [23].
The Appellant complains that the denial of access to a student loan prevents her from undertaking higher education in the UK and that she has been discriminated against on the basis of her immigration status, contrary to Article 14 ECHR.
Whether considered under A2P1 alone or in conjunction with Article 14 ECHR, the question is whether this discrimination is justified [25 26].
The relevant test is not whether the decision was manifestly without reasonable foundation.
As this is a question of the distribution of finite resources, respect must be accorded to the primary decision maker.
However, greater deference is not warranted as the Respondent Secretary of State did not address his mind to the educational rights of students with discretionary or limited leave to remain when making these regulations [32].
The Regulations pursue a legitimate aim, namely targeting resources on those students who are likely to stay in the UK to complete their education and afterwards contribute to the UK economy through their enhanced skills and the taxes they pay [34].
The means chosen to pursue that aim, however, were not rationally connected to it.
Although the Appellant does not yet have indefinite leave to remain, her established private life in the UK means that she cannot be removed unless she commits a serious criminal offence [35].
Even if a bright line rule is justified in the particular context, the particular rule chosen has to be rationally connected to the aim and a proportionate way of achieving it.
Exclusionary rules, which allow for no discretion to consider unusual cases falling the wrong side of the line but equally deserving, are harder to justify [37].
In this case, a bright line rule which more closely fitted the legitimate aims of the measure could have been chosen.
Given the comparatively small numbers involved, it has not been shown that it would be administratively unworkable to provide student loans to at least some of those with discretionary or limited leave to remain [38].
The denial of student loans has a very severe impact upon those it affects [40].
Denying or delaying higher education for these individuals also harms the community and the economy [41].
Therefore, the settlement criterion unjustifiable infringes the Appellants Convention rights [42].
The lawful residence criterion is compatible with the Appellants Convention rights.
There are strong public policy reasons for insisting on a period of lawful ordinary residence before a person become entitled to public services.
If the requirement were to be relaxed it would involve an intolerable administrative burden.
The overall balance of harm involved in a delay of up to three years is of a different order from that resulting from the settlement criterion [45].
The court makes a declaration that the application of the settlement criterion to the Appellant is a breach of her rights under Article 14 ECHR read with A2P1 [49].
In his concurring judgment Lord Hughes argues that all rules are blanket rules and are both inclusionary and exclusionary.
Clear rules of this sort are useful [60].
While the settlement criterion is unjustifiably discriminatory, the Secretary of State is not necessarily required to construct a rule which allows for a discretion to consider exceptional cases [68].
Lord Reed and Lord Sumption would have dismissed the appeal.
A2P1 does not import a right to public financial support [73].
Given that this is a question of state benefits, the test for justification is manifestly without reasonable foundation [77].
The discriminatory effect of the Regulations is justified as it is legitimate to discriminate between those who do and those who do not have a sufficient connection with the UK [88].
A clear rule such as this can be applied accurately and consistently, without the element of arbitrariness inherent in the discretionary decision of individual cases.
It simplifies administration and allows for faster decision making [91].
The court must also accord a measure of discretion to the primary decision maker [93].
|
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.
| UK-Abs | 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.
|
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.
| UK-Abs | 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].
|
The Legal Services Board (the Board) was established by the Legal Services Act 2007 (the 2007 Act).
It exercises supervisory functions in relation to approved regulators of persons carrying on legal activities, including the Bar Standards Board (BSB), the Solicitors Regulation Authority (SRA) and the ILEX Professional Standards Board (IPS).
This appeal concerns the lawfulness of the Boards decision on 26 July 2013 to grant a joint application by the BSB, SRA and IPS for approval of alterations to their regulatory arrangements, under Part 3 of Schedule 4 to the 2007 Act.
The alterations gave effect to the Quality Assurance Scheme for Advocates (the scheme), which provides for the assessment of the performance of criminal advocates in England and Wales by judges.
The appellants are barristers practising criminal law.
They seek judicial review of the decision on a variety of grounds, all of which were rejected by the Divisional Court and the Court of Appeal: [2014] EWHC 28 (Admin) and [2014] EWCA Civ 1276 respectively.
They were given permission to appeal to this court on the single question whether the decision was contrary to regulation 14 of the Provision of Services Regulations 2009 (SI 2009/2999) (the Regulations).
The Regulations
The Regulations were made under section 2(2) of the European Communities Act 1972, in order to implement Directive 2006/123/EC of the European Parliament and of the Council on services in the internal market (OJ No L 376, 27.12.2006, p 36) (the Directive).
Regulation 14 provides, so far as material: (1) A competent authority must not make access to, or the exercise of, a service activity subject to an authorisation scheme unless the following conditions are satisfied. (2) The conditions are that (a) the authorisation scheme does not discriminate against a provider of the service, (b) the need for an authorisation scheme is justified by an overriding reason relating to the public interest, and (c) the objective pursued cannot be attained by means of a less restrictive measure, in particular because inspection after commencement of the service activity would take place too late to be genuinely effective.
Regulation 14 implements article 9(1) of the Directive, which is in almost identical terms.
In particular, regulation 14(2)(b) reproduces verbatim article 9(1)(b) of the Directive, while regulation 14(2)(c) departs from article 9(1)(c) only by translating the Latin phrase used in the Directive, an a posteriori inspection, into the less elegant English, inspection after commencement of the service activity.
It will be necessary to return to the Directive.
The 2007 Act
3 of the 2007 Act: Finally, in relation to the domestic legislation, it is necessary to note section (1) In discharging its functions the Board must comply with the requirements of this section. (2) The Board must, so far as is reasonably practicable, act in a way (a) which is compatible with the regulatory objectives, and (b) which the Board considers most appropriate for the purpose of meeting those objectives. (3) The Board must have regard to (a) the principles under which regulatory activities should be transparent, accountable, proportionate, consistent and targeted only at cases in which action is needed, and (b) any other principle appearing to it to represent the best regulatory practice.
The principles set out in section 3(3)(a) are known as the Better Regulation Principles.
The scheme
The details of the scheme are set out in the QASA Handbook and in separate sets of regulatory arrangements for the BSB, IPS and SRA.
For barristers the relevant provisions are in the Handbook and the BSB QASA Rules.
The object of the scheme is to ensure that those who appear as advocates in criminal courts have the necessary competence.
The scheme was devised because of serious concern about the poor quality of some criminal advocacy.
There was a general (although not universal) acceptance that there was a need for some form of quality assurance scheme involving assessment by the judiciary.
The judgment of the Divisional Court [2014] EWHC 28 (Admin) gives a detailed history of how the scheme came to be developed (at paras 16 to 38) and a detailed description of the nature of the scheme (at paras 39 to 50).
In outline, the scheme classifies criminal cases at four levels.
Magistrates Court and Youth Court work is within Level 1.
Trials at the Crown Court are at one of the upper levels, which are graded according to the seriousness and complexity of the work.
Any advocate wishing to carry out work at one of the upper levels is required to register for provisional accreditation at the appropriate level.
He must then be judicially assessed in at least two of his first three effective trials at that level.
If he is assessed as competent, he will be granted full accreditation at that level, which will be valid for five years.
The assessment is carried out by the trial judge, against nine standards and a number of performance indicators set out in a Criminal Advocacy Evaluation Form.
If an advocate wishes to progress, for example from Level 2 to 3, he must first be judicially assessed as very competent at Level 2 in at least two out of three consecutive effective trials over a 12 month period.
He must then obtain at least two evaluations as competent in his first three consecutive trials at Level 3.
If an advocate is refused accreditation at the level for which he has applied, he drops back to his previous level but can seek to work his way up again.
There is no right of appeal against an individual assessment by a judge.
The BSB proposal of November 2012
Between December 2009 and July 2012 the BSB, SRA and IPS, acting together as a Joint Advocacy Group (JAG), issued a series of consultation papers which led to various amendments of the proposed scheme.
After the fourth consultation, on 1 November 2012 the BSB proposed an alternative scheme under which advocates would register at the level which they thought appropriate for themselves and would be free to move up a level when they felt competent to do so.
They would remain at their chosen level unless judicial concerns were raised about their competence through monitoring referrals or evaluations in a rolling programme of judicial assessment.
The BSB argued that this would be a more proportionate method of quality assurance than a scheme which required a positive assessment before full accreditation at any of the higher levels, essentially because it would be less burdensome for the many advocates who were competent.
In its paper explaining its proposal the BSB said that its approach had the benefit that regulatory action is targeted at where there is the greatest risk and that Those who act within their competence and do not present a risk to the public or the wider regulatory objectives will therefore be subject to minimal oversight and administrative burdens.
The BSBs proposal met with opposition from the Board, SRA and IPS.
The Board considered that judicial evaluation of all advocates wishing to practise at the upper levels was essential for the effectiveness of the scheme and that the BSBs proposal would add little to the pre existing arrangements for judges to raise concerns with regulators, which had little impact on the problem.
The response of the Board, SRA and IPS placed the BSB in a dilemma whether to continue to participate with the other members of JAG in a joint scheme or to devise a separate accreditation scheme for barristers.
It decided for various reasons to continue to participate in a joint scheme involving prior accreditation and to negotiate various amendments on points of detail.
The decision under challenge
In the decision under challenge, the Board explicitly proceeded on the basis that the scheme was not an authorisation scheme within the meaning of the Regulations or the Directive.
It did not consider how regulation 14, or article 9(1), would apply to the scheme in the event that it was properly classified as an authorisation scheme.
The Board did however have regard to the Better Regulation Principles, in accordance with section 3(3)(a) of the 2007 Act.
The Board noted that, in developing the scheme, it was the duty of the BSB and other approved regulators to have regard to the Better Regulation Principles.
It was the BSBs duty to undertake the policy development and drafting of the arrangements.
It was also their responsibility to provide in their application any relevant material which supported it, including evidence establishing the necessity for regulatory arrangements.
The Board had itself undertaken a review of the history and development of the scheme in order to reassure itself that there was a risk which needed to be addressed and that there was a firm rationale for the particular scheme proposed.
In that regard, the Board noted that concerns had been expressed over a long period of time about standards of criminal advocacy.
A range of evidence pointed towards a risk, and in some places a pattern, of advocacy not being of the required standard.
This included some senior judicial comments, the findings of a study conducted by Cardiff University, and reports by Her Majestys Crown Prosecution Service Inspectorate.
The Board noted that poor advocacy could have a detrimental impact on victims, witnesses and defendants, and on public confidence in the rule of law and the administration of justice, and could also result in increased costs.
The Board stated that it had taken into account views disputing the need for a scheme, and opposing the details of the scheme proposed.
It observed that much of the disagreement about the extent of low standards of criminal advocacy and the risks that this posed stemmed from the lack of consistent and measurable evidence available under the current arrangements.
It recognised that, without a quality assurance framework in place, it would be very difficult to find conclusive evidence of quality problems across criminal advocacy.
It observed that it was important that those practising criminal advocacy were operating at least to a minimum imposed standard and that the risks associated with poor quality were addressed by means of a proportionate regulatory response.
The Board concluded that there was sufficient consistency of evidence and concern to warrant a scheme such as that proposed by the application.
The concerns and limited evidence suggested a real risk, and a pattern, of actual problems in standards across a wide range of criminal advocates, and almost nothing by way of evidence that quality was consistently good enough.
the Board stated: In relation to the principle that regulatory activities should be proportionate, 28.
The Board considers that the proposed scheme has the potential to provide reliable and sustained evidence for approved regulators to measure and improve the quality of criminal advocacy over time.
The Board further considers that it is important that where there is opportunity, through a proportionate and targeted mechanism of accreditation, for relevant approved regulators to measure and enhance the quality of criminal advocacy, they should do so.
In that regard, the Board concludes that the scheme is proportionate because it addresses the risk in a structured way that allows the scheme to be adjusted on the basis of evidence gained from its actual implementation.
This is consistent with the Better Regulation Principles enabling a consistent, proportionate and targeted approach to regulation. 29.
The Board is further assured by the commitment from the applicants to review the scheme after two years.
The Board understands from the application that this review will provide a comprehensive analysis of the scheme including the assessment of the performance of key processes.
The review will also assess whether the scheme promotes the regulatory objectives and improves criminal advocacy standards.
With the experience and lessons gained from the operation of the scheme, the Board considers it should be possible to further calibrate it so that there continues to be a proportionate regulatory response to the risk posed from poor criminal advocacy.
The Board will actively engage with the review in its oversight role.
The Board also noted that the JAG had consulted four times on the details of the scheme, and that aspects of it had been adjusted as a result of representations made during the consultation process.
The Board stated: The Board considers that, on balance, the applicants have responded to issues raised during consultation and have adjusted the scheme to make it proportionate and targeted without undermining its potential effectiveness.
The ground of challenge
As we have explained, the only question in this appeal is whether the decision was contrary to regulation 14 of the Regulations.
The appellants argue that the scheme fails to meet the conditions set out in regulation 14(2)(b) and (c), namely that the need for an authorisation scheme is justified by an overriding reason relating to the public interest and that the objective pursued cannot be attained by means of a less restrictive measure.
Since those provisions are derived from article 9(1)(b) and (c) of the Directive, and must be interpreted so as to give effect to the Directive, it is common ground that the argument is in substance a submission that the scheme falls within the ambit of the Directive and fails to comply with article 9(1)(b) and (c).
We shall address the argument on that basis.
In response, the Board submits that the scheme does not fall within the ambit of the Directive (or, therefore, the ambit of the Regulations), and that in any event it complies with article 9(1)(b) and (c).
It is convenient to begin by considering the second of these submissions, on the hypothesis that the Directive is applicable to the scheme.
Before turning to that matter, however, it is desirable to consider more widely the EU principle of proportionality, to which article 9(1)(c) gives effect.
Proportionality in EU law
It appears from the present case, and some other cases, that it might be helpful to lower courts if this court were to attempt to clarify the principle of proportionality as it applies in EU law.
That is the aim of the following summary.
It should however be said at the outset that the only authoritative interpreter of that principle is the Court of Justice.
A detailed analysis of its case law on the subject can be found in texts such as Craig, EU Administrative Law (2006) and Tridimas, The General Principles of EU Law, 2nd ed (2006).
It has also to be said that any attempt to identify general principles risks conveying the impression that the courts approach is less nuanced and fact sensitive than is actually the case.
As in the case of other principles of public law, the way in which the principle of proportionality is applied in EU law depends to a significant extent upon the context.
This summary will range beyond the type of case with which this appeal is concerned, in order to demonstrate the different ways in which the principle of proportionality is applied in different contexts.
It will provide a number of examples from the case law of the court, in order to illustrate how the principle is applied in practice.
Proportionality is a general principle of EU law.
It is enshrined in article 5(4) of the Treaty on European Union (TEU): Under the principle of proportionality, the content and form of Union action shall not exceed what is necessary to achieve the objectives of the Treaties.
It is also reflected elsewhere in the EU treaties, for example in article 3(6) TEU: The Union shall pursue its objectives by appropriate means commensurate with the competences which are conferred upon it in the Treaties.
The principle has however been primarily and most fully developed by the Court of Justice in its jurisprudence, drawing upon the administrative law of a number of member states.
The principle applies generally to legislative and administrative measures adopted by EU institutions.
It also applies to national measures falling within the scope of EU law, as explained by Advocate General Sharpston in her opinion in Bartsch v Bosch und Siemens Hausgerte (BSH) Altersfrsorge GmbH (Case C 427/06) [2008] ECR I 7245, para 69: For that to be the case, the provision of national law at issue must in general fall into one of three categories.
It must implement EC law (irrespective of the degree of the discretion the member state enjoys and whether the national measure goes beyond what is strictly necessary for implementation).
It must invoke some permitted derogation under EC law.
Or it must otherwise fall within the scope of Community law because some specific substantive rule of EC law is applicable to the situation.
The principle only applies to measures interfering with protected interests: R (British Sugar plc) v Intervention Board for Agricultural Produce (Case C 329/01) [2004] ECR I 1899, paras 59 60.
Such interests include the fundamental freedoms guaranteed by the EU Treaties.
It is also important to appreciate, at the outset, that the principle of proportionality in EU law is neither expressed nor applied in the same way as the principle of proportionality under the European Convention on Human Rights.
Although there is some common ground, the four stage analysis of proportionality which was explained in Bank Mellat v Her Majestys Treasury (No 2) [2013] UKSC 39; [2014] AC 700, paras 20 and 72 76, in relation to the justification under domestic law (in particular, under the Human Rights Act 1998) of interferences with fundamental rights, is not applicable to proportionality in EU law.
The division of responsibility between the Court of Justice and national courts
Issues of proportionality may arise directly before the Court of Justice and be decided by that court, as for example when the legality of an EU measure is challenged in direct proceedings, or when enforcement proceedings are brought by the Commission against a member state in relation to a national measure.
Issues of proportionality may also arise before national courts, as occurred in the present case.
According to the jurisprudence of the court, a national court may not declare an EU measure to be illegal.
When, therefore, the validity of an EU measure is indirectly challenged before a national court on the ground of proportionality, the national court can refer the issue to the court for determination, and should do so if it considers the argument to be well founded (R (International Air Transport Association) v Department for Transport (Case C 344/04) [2006] ECR I 403, para 32) or, in the case of a final court, if the issue is other than acte clair.
On the other hand, when the validity of a national measure is challenged before a national court on the ground that it infringes the EU principle of proportionality, it is in principle for the national court to reach its own conclusion.
It may refer a question of interpretation of EU law to the Court of Justice, but it is then for the national court to apply the Courts ruling to the facts of the case before it.
The court has repeatedly accepted that it does not have jurisdiction under the preliminary reference procedure to rule on the compatibility of a national measure with EU law: see, for example, Gebhard v Consiglio dellOrdine degli Avvocati e Procuratori di Milano (Case C 55/94) [1995] ECR I 4165, para 19.
It has explained its role under that procedure as being to provide the national court with all criteria for the interpretation of Community law which may enable it to determine the issue of compatibility for the purposes of the decision in the case before it (Gebhard, para 19).
Nevertheless, where a preliminary reference is made, the court often effectively determines the proportionality of the national measure in issue, by reformulating the question referred so as to ask whether the relevant provision of EU legislation, or general principles of EU law, preclude a measure of that kind, or alternatively whether the measure in question is compatible with the relevant provision of EU legislation or general principles.
That practice reflects the fact that it can be difficult to draw a clear dividing line between the interpretation of the law and its application in concrete circumstances, and an answer which explains how the law applies in the circumstances of the case before the referring court is likely to be helpful to it.
The practice also avoids the risk that member states may apply EU law differently in similar situations, or may be insufficiently stringent in their scrutiny of national measures.
It may however give rise to difficulties if the courts understanding of the national measure, or of the relevant facts, is different from that of the referring court (as occurred, in a different context, in Her Majestys Revenue and Customs v Aimia Coalition Loyalty UK Ltd [2013] UKSC 15; [2013] STC 784).
Where the proportionality principle is applied by a national court, it must, as a principle of EU law, be applied in a manner which is consistent with the jurisprudence of the court: as is sometimes said, the national judge is also a European judge.
The jurisprudence in relation to the principle of proportionality is however not without complexity.
As will be explained, the principle has been expressed and applied by the court in different ways in different contexts.
In order for national judges to know how the principle should be applied in the cases before them, it is necessary for them to understand the nature and rationale of these differences, and to identify the body of case law which is truly relevant.
The nature of the test of proportionality
Proportionality as a general principle of EU law involves a consideration of two questions: first, whether the measure in question is suitable or appropriate to achieve the objective pursued; and secondly, whether the measure is necessary to achieve that objective, or whether it could be attained by a less onerous method.
There is some debate as to whether there is a third question, sometimes referred to as proportionality stricto sensu: namely, whether the burden imposed by the measure is disproportionate to the benefits secured.
In practice, the court usually omits this question from its formulation of the proportionality principle.
Where the question has been argued, however, the court has often included it in its formulation and addressed it separately, as in R v Minister for Agriculture, Fisheries and Food, Ex p Fedesa (Case C 331/88) [1990] ECR I 4023.
Apart from the questions which need to be addressed, the other critical aspect of the principle of proportionality is the intensity with which it is applied.
In that regard, the court has been influenced by a wide range of factors, and the intensity with which the principle has been applied has varied accordingly.
It is possible to distinguish certain broad categories of case.
It is however important to avoid an excessively schematic approach, since the jurisprudence indicates that the principle of proportionality is flexible in its application.
The courts case law applying the principle in one context cannot necessarily be treated as a reliable guide to how the principle will be applied in another context: it is necessary to examine how in practice the court has applied the principle in the particular context in question.
Subject to that caveat, however, it may be helpful to describe the courts general approach in relation to three types of case: the review of EU measures, the review of national measures relying upon derogations from general EU rights, and the review of national measures implementing EU law.
As a generalisation, proportionality as a ground of review of EU measures is concerned with the balancing of private interests adversely affected by such measures against the public interests which the measures are intended to promote.
Proportionality functions in that context as a check on the exercise of public power of a kind traditionally found in public law.
The courts application of the principle in that context is influenced by the nature and limits of its legitimate function under the separation of powers established by the Treaties.
In the nature of things, cases in which measures adopted by the EU legislator or administration in the public interest are held by the EU judicature to be disproportionate interferences with private interests are likely to be relatively infrequent.
Proportionality as a ground of review of national measures, on the other hand, has been applied most frequently to measures interfering with the fundamental freedoms guaranteed by the EU Treaties.
Although private interests may be engaged, the court is there concerned first and foremost with the question whether a member state can justify an interference with a freedom guaranteed in the interests of promoting the integration of the internal market, and the related social values, which lie at the heart of the EU project.
In circumstances of that kind, the principle of proportionality generally functions as a means of preventing disguised discrimination and unnecessary barriers to market integration.
In that context, the court, seeing itself as the guardian of the Treaties and of the uniform application of EU law, generally applies the principle more strictly.
Where, however, a national measure does not threaten the integration of the internal market, for example because the subject matter lies within an area of national rather than EU competence, a less strict approach is generally adopted.
That also tends to be the case in contexts where an unregulated economic activity would be harmful to consumers, particularly where national regulatory measures are influenced by national traditions and culture.
An example is the regulation of gambling, discussed in R (Gibraltar Betting & Gaming Association Ltd v Secretary of State for Culture, Media and Sport) [2014] EWHC 3236 (Admin); [2015] 1 CMLR 751.
Where member states adopt measures implementing EU legislation, they are generally contributing towards the integration of the internal market, rather than seeking to limit it in their national interests.
In general, therefore, proportionality functions in that context as a conventional public law principle.
On the other hand, where member states rely on reservations or derogations in EU legislation in order to introduce measures restricting fundamental freedoms, proportionality is generally applied more strictly, subject to the qualifications which we have mentioned.
Having provided that broad summary, it may be helpful to consider in greater detail the application of the principle of proportionality to EU and national measures in turn.
Measures of EU institutions
Where EU legislative or administrative institutions exercise a discretion involving political, economic or social choices, especially where a complex assessment is required, the court will usually intervene only if it considers that the measure is manifestly inappropriate.
The general approach in such cases is illustrated by the judgment in R v Secretary of State for Health, Ex p British American Tobacco (Investments) Ltd and Imperial Tobacco Ltd (Case C 491/01) [2002] ECR I 11453, concerned with Community legislation harmonising national measures concerning the marketing of tobacco products: 122.
As a preliminary point, it ought to be borne in mind that the principle of proportionality, which is one of the general principles of Community law, requires that measures implemented through Community provisions should be appropriate for attaining the objective pursued and must not go beyond what is necessary to achieve it . 123.
With regard to judicial review of the conditions referred to in the previous paragraph, the Community legislature must be allowed a broad discretion in an area such as that involved in the present case, which entails political, economic and social choices on its part, and in which it is called upon to undertake complex assessments.
Consequently, the legality of a measure adopted in that sphere can be affected only if the measure is manifestly inappropriate having regard to the objective which the competent institution is seeking to pursue.
A further example of this approach is the judgment in R v Minister for Agriculture, Fisheries and Food, Ex p Fedesa.
The case concerned Community legislation which prohibited the use of certain hormones in livestock farming, so as to address barriers to trade and distortions of competition arising from differences in the relevant national legislation of the member states: differences which reflected differing national assessments of the effects of the hormones on public health, and differing levels of consumer anxiety.
The court stated: 13.
The court has consistently held that the principle of proportionality is one of the general principles of Community law.
By virtue of that principle, the lawfulness of the prohibition of an economic activity is subject to the condition that the prohibitory measures are appropriate and necessary in order to achieve the objectives legitimately pursued by the legislation in question; when there is a choice between several appropriate measures recourse must be had to the least onerous, and the disadvantages caused must not be disproportionate to the aims pursued. 14.
However, with regard to judicial review of compliance with those conditions it must be stated that in matters concerning the common agricultural policy the Community legislature has a discretionary power which corresponds to the political responsibilities given to it by articles 40 and 43 of the Treaty.
Consequently, the legality of a measure adopted in that sphere can be affected only if the measure is manifestly inappropriate having regard to the objective which the competent institution is seeking to pursue.
As the court said in another similar case, the criterion to be applied is not whether the measure adopted by the legislature was the only one or the best one possible but whether it was manifestly inappropriate: Jippes v Minister van Landbouw, Natuurbeheer en Visserij (Case C 189/01) [2001] ECR I 5689, para 83.
The court has not explained how it determines whether the inappropriateness of a measure is or is not manifest.
Its practice in some cases suggests that it is sufficient to establish that there is a clear and material error, in law, or in reasoning, or in the assessment of the facts, which goes to the heart of the measure.
In other cases, the word manifestly appears to describe the degree of obviousness with which the impugned measure fails the proportionality test.
In such cases, the adverb serves, like comparable expressions in our domestic law, to emphasise that the court will only interfere when it considers that the primary decision maker has exceeded the generous ambit within which a choice of measures might reasonably have been made.
In this context, therefore, the court does not in practice apply the least onerous alternative test in any literal sense, but instead considers whether the measure chosen is manifestly inappropriate.
The court also made it clear in Jippes that the legality of an EU measure cannot depend on a retrospective check on a predictive assessment: Where the Community legislature is obliged to assess the future effects of rules to be adopted and those effects cannot be accurately foreseen, its assessment is open to criticism only if it appears manifestly incorrect in the light of the information available to it at the time of the adoption of the rules in question. (para 84)
It would however be a mistake to suppose that the manifestly inappropriate test means that the courts scrutiny of the justification for the measure is cursory or perfunctory.
While the court will be slow to substitute its own evaluative judgment for that of the primary decision maker, and will not intervene merely because it would have struck a different balance between countervailing considerations, it will consider in some depth the factual foundation and reasoning underlying that judgment.
The point can be illustrated by the Fedesa case.
The proportionality of a blanket prohibition was challenged on the basis that the legislation was unsuitable to attain its objectives, since it was impossible to apply in practice and would lead to the creation of a black market in the prohibited hormones.
It was also argued to be unnecessary, since the objective could be achieved by the dissemination of information.
It was in addition argued to be disproportionate stricto sensu, since the financial losses imposed on the applicants would be disproportionate to the public benefit.
In relation to the first point, the court noted that, even if the presence of natural hormones in meat prevented the detection of prohibited hormones by tests on animals or on meat, other control methods could be used and had indeed been imposed by a supplementary measure.
It was not obvious that the authorisation of hormones described as natural would be likely to prevent the emergence of a black market for dangerous but less expensive substances.
Moreover, it was not disputed that any system of partial authorization would require costly control measures whose effectiveness could not be guaranteed.
It followed that the prohibition could not be regarded as a manifestly inappropriate measure.
As to whether it was unnecessary, the applicants argument was based on the false premise that the only objective of the measure was to allay consumer anxieties.
Having regard to the requirements of public health, the removal of barriers to trade and distortions of competition could not be achieved merely by the dissemination of information.
As to proportionality stricto sensu, the importance of the objectives pursued was such as to justify substantial negative financial consequences for certain traders.
In cases concerned with EU measures establishing authorisation procedures, for example for the use of particular substances, the court will also require that the procedures reflect principles of sound administration and legal certainty.
For example, in R (Alliance for Natural Health) v Secretary of State for Health (Joined Cases C 154 and C 155/04) [2005] ECR I 6451, the court said at para 73: Such a procedure must be accessible in the sense that it must be expressly mentioned in a measure of general application which is binding on the authorities concerned.
It must be capable of being completed within a reasonable time.
An application to have a substance included on a list of authorised substances may be refused by the competent authorities only on the basis of a full assessment of the risk posed to public health by the substance, established on the basis of the most reliable scientific data available and the most recent results of international research.
If the procedure results in a refusal, the refusal must be open to challenge before the courts.
Where a measure is challenged on the ground that it interferes with fundamental rights, article 52(1) of the EU Charter of Fundamental Rights is relevant: 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.
Where a fundamental right is not absolute, the court has said that it must be viewed in relation to its social purpose: Consequently, its exercise may be restricted, provided that those restrictions in fact correspond to objectives of general interest pursued by the Community and do not constitute a disproportionate and intolerable interference, impairing the very substance of the rights guaranteed (British American Tobacco, para 149).
In the British American Tobacco case, one of the grounds of challenge to the legislation was that it interfered with the fundamental right to property because of its impact on trademark rights.
Having applied the manifestly inappropriate test to grounds of challenge directed at the suitability and necessity of the legislation, the court then turned to the rights based argument, which it approached in the manner described.
One of the contested aspects of the legislation was to require large health warnings on packets.
Although the amount of space available for the display of trademarks was consequently reduced, this did not prejudice the substance of the trademark rights, and was intended to ensure a high level of health protection.
It was a proportionate restriction.
The other contested aspect was the prohibition of certain descriptions (and hence of trademarks incorporating those descriptions) on the packaging, in order to protect public health.
It remained possible for manufacturers to distinguish their products by using other distinctive signs.
In addition, the measure provided for a sufficient period of time between its adoption and the entry into force of the prohibition to enable the affected manufacturers to adapt.
It was therefore proportionate.
National measures derogating from fundamental freedoms
It is necessary to turn next to measures adopted by the member states within the sphere of application of EU law.
In that context, issues of proportionality have arisen most often in relation to national measures taken in reliance upon provisions in the Treaties or other EU legislation recognising permissible limitations to the fundamental freedoms: the free movement of goods, the free movement of workers, freedom of establishment, freedom to provide services, and the free movement of capital.
Compliance with the principle of proportionality is also a requirement of the justification of other national measures falling within the scope of EU law, including those which derogate from other rights protected by the Treaties, such as the right to equal treatment or non discrimination, or fundamental rights such as the right to family life.
The case law concerned with restrictions on the right of establishment and the provision of services is particularly relevant to the present case.
The Treaty on the Functioning of the European Union (TFEU) recognises permissible limitations to those rights which are justified upon grounds of public policy, public security or public health (articles 52(1) and 62).
Those concepts have undergone considerable analysis in the case law of the court.
The courts general approach in this context was explained in the case of Gebhard, concerned with the provision of legal services: National measures liable to make less attractive the exercise of fundamental freedoms guaranteed by the Treaty must fulfil four conditions: they must be applied in a non discriminatory manner; they must be justified by imperative requirements in the general interest; they must be suitable for securing the attainment of the objective which they pursue; and they must not go beyond what is necessary in order to attain it. (para 37)
The last two of these requirements correspond to the two limbs of the proportionality principle.
In some more recent cases, the court has also emphasised other general principles of EU law, by requiring that procedures under the national measure should be compatible with principles of sound administration, such as being completed within a reasonable time and without undue cost, and also compatible with legal certainty, including the right to judicial protection.
The first of the conditions listed in Gebhard is relatively straightforward.
In relation to the second condition, the court must identify the objective of the measure in question and determine whether it is a lawful objective which is capable of justifying a restriction upon the exercise of a fundamental freedom.
The Court of Justice has recognised a wide range of public interest grounds capable of justifying restrictions on the exercise of fundamental freedoms.
Specifically in relation to legal services, the court has accepted that restrictions on freedom of establishment or the provision of services can be justified by the need to protect the interests of the recipients of those services, and by the public interest in the administration of justice.
For example, in Reisebro Broede v Sandker (Case C 3/95) [1996] ECR I 6511, para 38, the court stated that the application of professional rules to lawyers, in particular those relating to organization, qualifications, professional ethics, supervision and liability, ensures that the ultimate consumers of legal services and the sound administration of justice are provided with the necessary guarantees in relation to integrity and experience.
In relation to the third and fourth conditions, the court must determine whether the measure is suitable to achieve the legitimate aim in question, and must then determine whether it is no more onerous than is required to achieve that aim, if there is a choice of equally effective measures.
The position was summarised by Advocate General Sharpston at para 89 of her opinion in Commission of the European Communities v Kingdom of Spain (Case C 400/08) [2011] ECR I 1915, a case concerned with the right of establishment: Whilst it is true that a member state seeking to justify a restriction on a fundamental Treaty freedom must establish both its appropriateness and its proportionality, that cannot mean, as regards appropriateness, that the member state must establish that the restriction is the most appropriate of all possible measures to ensure achievement of the aim pursued, but simply that it is not inappropriate for that purpose.
As regards proportionality, however, it is necessary to establish that no other measures could have been equally effective but less restrictive of the freedom in question.
The justification for the restriction tends to be examined in detail, although much may depend upon the nature of the justification, and the extent to which it requires evidence to support it.
For example, justifications based on moral or political considerations may not be capable of being established by evidence.
The same may be true of justifications based on intuitive common sense.
An economic or social justification, on the other hand, may well be expected to be supported by evidence.
The point is illustrated by Commission of the European Communities v Grand Duchy Luxembourg (Case C 319/06) [2008] ECR I 4323, concerned with legislation which imposed on providers of services in Luxembourg, who were based in other member states, the mandatory requirements of Luxembourgs employment law.
In addressing an argument that the measure ensured good labour relations in Luxembourg, the court stated: 51.
It has to be remembered that the reasons which may be invoked by a member state in order to justify a derogation from the principle of freedom to provide services must be accompanied by appropriate evidence or by an analysis of the expediency and proportionality of the restrictive measure adopted by that State, and precise evidence enabling its arguments to be substantiated . 52.
Therefore, in order to enable the court to determine whether the measures at issue are necessary and proportionate to the objective of safeguarding public policy, the Grand Duchy of Luxembourg should have submitted evidence to establish whether and to what extent the [contested measure] is capable of contributing to the achievement of that objective.
Where goods or services present known and serious risks to the public, the precautionary principle permits member states to forestall anticipated harm, without having to wait until actual harm is demonstrated.
The point is illustrated by the case of Commission of the European Communities v Kingdom of the Netherlands (Case C 41/02) [2004] ECR I 11375, which concerned a prohibition on the sale of foodstuffs fortified with additives, the justification being the protection of public health.
The court held that the existence of risks to health had to be established on the basis of the latest scientific data available at the date of the adoption of the decision.
Although, in accordance with the precautionary principle, a member state could take protective measures without having to wait until the existence and gravity of the risks became fully apparent, the risk assessment could not be based on purely hypothetical considerations.
In a case concerned with an authorisation scheme designed to protect public health, the court required it to ensure that authorisation could be refused only if a genuine risk to public health was demonstrated by a detailed assessment using the most reliable scientific data available and the most recent results of international research: Criminal Proceedings against Greenham and Abel (Case C 95/01) [2004] ECR I 1333, paras 40 42.
As in Commission of the European Communities v Kingdom of the Netherlands, the Court acknowledged that such an assessment could reveal uncertainty as to the existence or extent of real risks, and that in such circumstances a member state could take protective measures without having to wait until the existence and gravity of those risks were fully demonstrated.
The risk assessment could not however be based on purely hypothetical considerations.
The approach adopted in these cases is analogous to that adopted in relation to EU measures establishing authorisation schemes designed to protect public health, as for example in the Alliance for Natural Health case, discussed earlier.
It is not, however, necessary to establish that the measure was adopted on the basis of studies which justified its adoption: see, for example, Sto v Wetteraukreis (Case C 316/07) [2010] ECR I 8069, para 72.
Particularly in situations where a measure is introduced on a precautionary basis, with correspondingly less by way of an evidential base to support the particular restrictions imposed, it may well be relevant to its proportionality to consider whether it is subject to review in the light of experience.
The court has tended to examine closely (again, depending to some extent on the context) the question whether other measures could have been equally effective but less restrictive of the freedom in question.
The point is illustrated by the case of Criminal Proceedings against Bordessa (Joined Cases C 358/93 and C 416/93) [1995] ECR I 361, which concerned a Spanish law requiring that exports of coins, banknotes or bearer cheques should be the subject of a prior declaration if the amount was below a specified limit, and of prior authorisation if the amount was above that limit.
This interference with the free movement of capital was argued to be necessary in order to prevent tax evasion, money laundering and other offences.
The court noted that the requirement of a prior declaration was less restrictive than that of prior authorisation, since it did not entail suspension of the transaction in question.
It nevertheless enabled the national authorities to exercise effective supervision.
The Spanish Government contended that it was only by means of a system of prior authorisation that non compliance could be classified as criminal and hence criminal penalties imposed.
That contention was however rejected by the court, on the basis that the Spanish Government had failed to provide sufficient proof that it was impossible to attach criminal penalties to the failure to make a prior declaration.
It was therefore held that EU law precluded rules which made exports of coins, banknotes or bearer cheques conditional on prior authorisation, but not rules which made such exports conditional on a prior declaration.
In a different context, the point is also illustrated by the case of Germany v Deutsches Milch Kontor GmbH (Case C 426/92) [1994] ECR I 2757, where the systematic inspection of the composition and quality of skimmed milk powder intended for use as animal feed, in order to combat fraud, was held to be disproportionate on the basis that random checks would have sufficed.
The less restrictive alternative test is not however applied mechanically.
In the first place, the court has made it clear that the burden of proof placed upon the member state to establish that a measure is necessary does not require it to exclude hypothetical alternatives.
In Commission of the European Communities v Italian Republic (Case C 518/06) [2009] ECR I 3491, a case concerned with an obligation imposed on insurers, it stated at para 84: Whilst it is true that it is for a member state which relies on an imperative requirement to justify a restriction within the meaning of the EC Treaty to demonstrate that its rules are appropriate and necessary to attain the legitimate objective being pursued, that burden of proof cannot be so extensive as to require the member state to prove, positively, that no other conceivable measure could enable that objective to be attained under the same conditions.
The court has also accepted that, where a relevant public interest is engaged in an area where EU law has not imposed complete harmonisation, the member state possesses discretion (or, as it has sometimes said, a margin of appreciation) not only in choosing an appropriate measure but also in deciding on the level of protection to be given to the public interest in question.
This can be seen, for example, in cases where the public interest relied on is the protection of human life and health, such as Apothekerkammer des Saarlandes v Saarland and Ministerium fr Justiz, Gesundheit und Soziales (Joined Cases C 171/07 and C 172/07) [2009] ECR I 4171, which concerned a rule restricting the ownership of pharmacies.
The court stated: . it is for the member states to determine the level of protection which they wish to afford to public health and the way in which that level is to be achieved.
Since the level may vary from one member state to another, member states must be allowed discretion. (para 19)
The court is therefore unimpressed, in areas of activity where member states enjoy this kind of discretion, by arguments to the effect that one member states regulatory scheme is disproportionate because anothers is less restrictive.
Its focus is upon the objectives pursued by the competent authorities of the member state concerned and the level of protection which they seek to ensure.
This is illustrated by the case of Commission of the European Communities v Italian Republic (Case C 110/05) [2009] ECR I 519, concerned with a ban on a type of trailer, on the ground of road safety, where the court said: 61.
In the absence of fully harmonising provisions at Community level, it is for the member states to decide upon the level at which they wish to ensure road safety in their territory, whilst taking account of the requirements of the free movement of goods within the European Community . 65.
With regard . to whether the said prohibition is necessary, account must be taken of the fact that, in accordance with the case law of the court referred to in para 61 of the present judgment, in the field of road safety a member state may determine the degree of protection which it wishes to apply in regard to such safety and the way in which that degree of protection is to be achieved.
Since that degree of protection may vary from one member state to the other, member states must be allowed a margin of appreciation and, consequently, the fact that one member state imposes less strict rules than another member state does not mean that the latter's rules are disproportionate.
In a context closer to that of the present case, the same approach can also be seen in Alpine Investments BV v Minister van Financin (Case C 384/93) [1995] ECR I 1141, para 51, concerned with the regulation of the provision of financial services.
This margin of appreciation applies to the member states decision as to the level of protection of the public interest in question which it considers appropriate, and to its selection of an appropriate means by which that protection can be provided.
Having exercised its discretion, however, the member state must act proportionately within the confines of its choice.
A national measure will not, therefore, be proportionate if it is clear that the desired level of protection could be attained equally well by measures which were less restrictive of a fundamental freedom: see, for example, Rosengren v Riksklagaren (Case C 170/04) [2007] ECR I 4071, para 43.
In applying the less restrictive alternative test it is necessary to have regard to all the circumstances bearing on the question whether a less restrictive measure could equally well have been used.
These will generally include such matters as the conditions prevailing in the national market, the circumstances which led to the adoption of the measure in question, and the reasons why less restrictive alternatives were rejected.
The court will be heavily reliant on the submissions of the parties for an explanation of the factual and policy context.
In relation to authorisation schemes, the court has identified a number of considerations, including considerations relating to principles of good administration, which should be taken into account in determining the compliance of the scheme with the principle of proportionality.
The following were mentioned in the case of Canal Satlite Digital SL v Administracin General del Estado and Distribuidora de Televisin Digital SA (Case C 390/99) [2002] ECR I 607: 35. First . if a prior administrative authorisation scheme is to be justified even though it derogates from such fundamental freedoms, it must, in any event, be based on objective, non discriminatory criteria which are known in advance to the undertakings concerned, in such a way as to circumscribe the exercise of the national authorities' discretion, so that it is not used arbitrarily . 36.
Second, a measure introduced by a member state cannot be regarded as necessary to achieve the aim pursued if it essentially duplicates controls which have already been carried out in the context of other procedures, either in the same state or in another member state. 39.
Third, a prior authorisation procedure will be necessary only where a subsequent control is to be regarded as being too late to be genuinely effective and to enable it to achieve the aim pursued. 41.
Finally, it should be noted that, for as long as it lasts, a prior authorisation procedure completely prevents traders from marketing the products and services concerned.
It follows that, in order to comply with the fundamental principles of the free movement of goods and the freedom to provide services, such a procedure must not, on account of its duration, the amount of costs to which it gives rise, or any ambiguity as to the conditions to be fulfilled, be such as to deter the operators concerned from pursuing their business plan.
In other cases concerned with authorisation schemes, the court has also stipulated that the procedure should be easily accessible and capable of ensuring that the application will be dealt with objectively and impartially within a reasonable time, and that refusals to grant authorisation should be capable of being challenged in judicial or quasi judicial proceedings: see, for example, Geraets Smits v Stichting Ziekenfonds VGZ and Peerbooms v Stichting CZ Groep Zorgverzekeringen (Case C 157/99) [2001] ECR I 5473, para 90.
Other conditions have been mentioned in relation to schemes with specific aims, such as the imposition of public service obligations (Asociacin Profesional de Empresas Navieras de Lneas Regulares (Analir) and Others v Administracin General del Estado (Case C 205/99) [2001] ECR I 1271).
Where the justification for the national measure is the protection of fundamental rights, the court approaches the issue in the manner described earlier in para 48.
The case of Schmidberger Internationale Transporte und Planzuge v Austria (Case C 112/00) [2003] ECR I 5659, for example, concerned the Austrian governments failure to ban a demonstration on a motorway, on the ground of respect for the rights of freedom of expression and freedom of assembly guaranteed by the Austrian constitution and the European Convention on Human Rights.
The demonstration resulted in the motorways closure for over a day, restricting the free movement of goods.
The court accepted that since fundamental rights were recognised in EU law, the protection of those rights is a legitimate interest which, in principle, justifies a restriction of the obligations imposed by Community law, even under a fundamental freedom guaranteed by the Treaty such as the free movement of goods (para 74).
It noted, however, that neither the freedoms nor the rights were absolute.
The right to free movement of goods could be subject to restrictions for the reasons laid down in the Treaty or for overriding reasons of public interest.
The rights to freedom of expression and freedom of assembly were also subject to certain limitations justified by objectives in the public interest, in so far as those derogations are in accordance with the law, motivated by one or more of the legitimate aims under those provisions and necessary in a democratic society, that is to say justified by a pressing social need and, in particular, proportionate to the legitimate aim pursued (para 79).
The court continued: 80.
Consequently, the exercise of those rights may be restricted, provided that the restrictions in fact correspond to objectives of general interest and do not, taking account of the aim of the restrictions, constitute disproportionate and unacceptable interference, impairing the very substance of the rights guaranteed . 81.
In those circumstances, the interests involved must be weighed having regard to all the circumstances of the case in order to determine whether a fair balance was struck between those interests. 82.
The competent authorities enjoy a wide margin of discretion in that regard.
Nevertheless, it is necessary to determine whether the restrictions placed upon intra Community trade are proportionate in the light of the legitimate objective pursued, namely, in the present case, the protection of fundamental rights.
Applying that approach, the court accepted that the action in question had been proportionate.
A similar approach can also be seen in the case of Omega Spielhallen und Automatenaufstellungs GmbH v Oberbrgermeisterin der Bundesstadt Bonn (Case C 36/02) [2004] ECR I 9609, which concerned a German ban on electronic games involving simulated killing, on the ground that they infringed the guarantee of human dignity in the German Constitution.
The ban was upheld by the Court, which accepted that the circumstances which could constitute a justification on grounds of public policy could vary from one member state to another, and that the national authorities must be accorded a margin of discretion.
National measures implementing EU measures
Member states must also comply with the requirement of proportionality, and with other aspects of EU law, when applying EU measures such as directives.
As when assessing the proportionality of EU measures, to the extent that the directive requires the national authority to exercise a discretion involving political, economic or social choices, especially where a complex assessment is required, the court will in general be slow to interfere with that evaluation.
In applying the proportionality test in circumstances of that nature, the court has applied a manifestly disproportionate test: see, for example, R v Minister of Agriculture, Fisheries and Food, Ex p National Federation of Fishermen's Organisations and Others (Case C 44/94) [1995] ECR I 3115, para 58.
The court may nevertheless examine the underlying facts and reasoning: see, for example, Upjohn Ltd v Licensing Authority established by the Medicines Act 1968 (Case C 120/97) [1999] ECR I 223, paras 34 35.
Where, on the other hand, the member state relies on a reservation or derogation in a directive in order to introduce a measure which is restrictive of one of the fundamental freedoms guaranteed by the Treaties, the measure is likely to be scrutinised in the same way as other national measures which are restrictive of those freedoms.
The case of Commission of the European Communities v Grand Duchy of Luxembourg, cited earlier, concerned a national measure of that kind.
Sinclair Collis
It may be helpful at this point to say a word about the case of R (Sinclair Collis Ltd) v Secretary of State for Health [2011] EWCA Civ 437; [2012] QB 394, which was followed by the Court of Appeal in the present case.
Sinclair Collis concerned a national measure restricting the free movement of goods.
The justification put forward was the protection of public health.
The issue was whether the measure was necessary, or whether the objective might have been achieved by a less restrictive measure.
The relevant area of EU jurisprudence was therefore the body of case law concerning the proportionality of national measures restricting the free movement of goods in the interests of public health.
As we have explained, that case law indicates that a measure of discretion is allowed to member states as to the level of protection of public health which they consider appropriate and as to the selection of an appropriate means of protection.
The judgments in the Court of Appeal, following the arguments of counsel as reported, focused primarily upon the judgments of the Court of Justice in the Fedesa case, British American Tobacco, and R v Minister of Agriculture, Fisheries and Food, Ex p National Federation of Fishermen's Organisations and Others.
As has been explained, the first and second of these cases were concerned with the question whether an EU measure was proportionate, while the third case was concerned with a national measure implementing EU requirements.
In their judgments, Arden LJ and Lord Neuberger of Abbotsbury MR correctly analysed these cases as yielding a manifestly inappropriate test.
They then applied that test in the different context of a national measure restricting a fundamental freedom.
In a dissenting judgment, Laws LJ correctly attached importance to case law concerned with national measures restricting the free movement of goods, but focused particularly upon a case concerned with the maintenance of a national retail monopoly (Rosengren v Riksklagaren), in which the court found that the monopoly was unsuitable for attaining the ostensible aim of protecting health.
Those judgments might be contrasted with that delivered by the Lord Justice Clerk, Lord Carloway, in the parallel Scottish proceedings: Sinclair Collis Ltd v Lord Advocate [2012] CSIH 80; 2013 SC 221.
Lord Carloway rejected the submission that the question was whether the legislation was manifestly inappropriate, stating: . manifestly inappropriate is language used by the ECJ in relation to testing EU institution measures (or national measures implementing EU law) (see eg R v Secretary of State for Health, Ex p British American Tobacco (Investments) [2002] ECR 1 11453, para 123).
There the balance is between private and public interests.
It is not applicable when testing the legitimacy of state measures against fundamental principles contained in the EU Treaties where the balance is between EU and state interests. (para 56) At the same time, Lord Carloway recognised that there was a margin of appreciation afforded to the state not only in determining the general health objective of reducing smoking but also in selecting the manner in which the reduction in health risk is to be achieved (para 59).
Applying that approach, the Inner House arrived at the same conclusion as the majority of the Court of Appeal.
Lord Carloway also questioned the proposition, accepted by the Court of Appeal, that the strictness with which the EU proportionality principle was applied to a national measure restricting a fundamental freedom should depend on the identity of the national decision maker (whether, for example, it was a minister or Parliament).
Lord Carloway commented: . the court has reservations about whether the margin can vary in accordance with the nature of the particular organ of the state which creates or implements the measure.
It might appear strange if the manner in which a EU member state elects to organise government within its borders were capable of increasing or decreasing the margin of appreciation available to that state relative to measures challenged as infringing one of the EU Treaties' fundamental principles.
The legality of a measure ought not to depend upon whether a measure is passed by a central, national, provincial or local government legislature or determined by an official or subsidiary body under delegated authority from such a legislature. (para 59)
There is force in the point made by Lord Carloway; and it is difficult to discern in the courts case law any clear indication that the identity or status of the national authority whose action is under review is a factor which influences the intensity of scrutiny.
On the other hand, we would not rule out the possibility that whether, for example, a measure has been taken at the apex of democratic decision making within a member state might, at least in some contexts, be relevant to an assessment of its proportionality, particularly in relation to the level of protection considered to be appropriate and the choice of method for ensuring it.
It is however unnecessary to resolve that question for the purposes of the present appeal.
The Court of Appeal based its approach in the present case, and in particular its adoption of a test of whether the scheme was manifestly inappropriate, upon the judgments of the majority of the Court of Appeal in Sinclair Collis.
For the reasons we have explained, that aspect of the reasoning in those judgments (as distinct from the conclusion reached) is open to criticism.
The Directive
The Directive is underpinned by the freedom of establishment, and freedom to provide services, guaranteed by articles 49 and 56 respectively of the TFEU.
As explained in recitals 6 and 7 to the Directive, barriers to those freedoms cannot be removed solely by relying on the direct application of the Treaty articles on a case by case basis.
The Directive therefore establishes a general legal framework, based on the removal of barriers which can be dismantled quickly, and, for the others, the launching of a process of evaluation, consultation and harmonisation of specific issues, making possible the coordinated modernisation of national regulatory systems for service activities.
As recital 30 to the Directive acknowledges, there existed prior to the Directive a considerable body of EU law on service activities.
The recital states that the Directive builds on, and thus complements, the Community acquis.
In particular, recital 54 states that the possibility of gaining access to a service activity should be made subject to authorisation only if that decision satisfies the criteria of non discrimination, necessity and proportionality: That means, in particular, that authorisation schemes should be permissible only where an a posteriori inspection would not be effective because of the impossibility of ascertaining the defects of the services concerned a posteriori, due account being taken of the risks and dangers which could arise in the absence of a prior inspection.
Turning to the substantive provisions of the Directive, Chapter III is concerned with freedom of establishment for providers of services.
It is necessary to consider only Section 1, which is concerned with authorisations, and largely codifies the case law of the court, discussed earlier.
The first provision in that section is article 9, para 1 of which provides: Member states shall not make access to a service activity or the exercise thereof subject to an authorisation scheme unless the following conditions are satisfied: (a) the authorisation scheme does not discriminate against the provider in question; (b) the need for an authorisation scheme is justified by an overriding reason relating to the public interest; (c) the objective pursued cannot be attained by means of a less restrictive measure, in particular because an a posteriori inspection would take place too late to be genuinely effective.
The expression authorisation scheme is defined by article 4(6) as meaning any procedure under which a provider or recipient is in effect required to take steps in order to obtain from a competent authority a formal decision, or an implied decision, concerning access to a service activity or the exercise thereof.
A fuller description is set out in recital 39, covering inter alia, the administrative procedures for granting authorisations, licences, approvals or concessions, and also the obligation, in order to be eligible to exercise the activity, to be registered as a member of a profession or entered in a register, roll or database, to be officially appointed to a body or to obtain a card attesting to membership of a particular profession.
The conditions set out in subparagraphs (a) to (c) of article 9(1) broadly reflect the Courts case law, as stated for example in Gebhard.
In relation to (b), overriding reasons relating to the public interest are defined by article 4(8) as meaning reasons recognised as such in the case law of the court, including inter alia public policy, the protection of consumers and recipients of services, and social policy objectives.
Somewhat confusingly, a different and longer list of overriding reasons relating to the public interest is set out in recital 40, and a third list in recital 56.
The former list includes safeguarding the sound administration of justice.
As we have explained, that is a justification which has been recognised in the case law of the court, and therefore falls within the scope of article 4(8).
It is also relevant to note recital 41, which concerns the concept of public policy, and states that, as interpreted by the Court of Justice, it covers protection against a genuine and sufficiently serious threat affecting one of the fundamental interests of society, and may include, in particular, issues relating to human dignity, the protection of minors and vulnerable adults, and animal welfare.
In relation to the indication in subparagraph (c) that an authorisation scheme may be proportionate in particular because an a posteriori inspection would take place too late to be genuinely effective, it is relevant also to note that recital 54, set out above, refers to the need to take account of the risks and dangers which could arise in the absence of a prior inspection.
Article 10 goes on to require authorisation schemes to be based on criteria which preclude the competent authorities from exercising their power of assessment in an arbitrary manner (paragraph 1), and which are non discriminatory, justified by an overriding reason relating to the public interest, proportionate to that public interest objective, clear and unambiguous, objective, made public in advance, transparent and accessible (paragraph 2).
In terms of paragraph 5, the authorisation must also be granted as soon as it is established, in the light of an appropriate examination, that the conditions for authorisation have been met.
Article 11 prohibits an authorisation being for a limited period, except in particular circumstances.
One of those circumstances is where a limited authorisation period can be justified by an overriding reason relating to the public interest.
The ability of a member state to revoke authorisations, when the conditions for authorisation are no longer met, is recognised by article 11(4).
Article 13 lays down a number of requirements in relation to authorisation procedures.
In summary, these include that the procedures are clear, made public in advance, and such as to provide the applicants with a guarantee that their application will be dealt with objectively and impartially (paragraph 1); that they are not dissuasive and do not unduly complicate or delay the provision of the service; that they are easily accessible, and that any charges are reasonable and proportionate to the cost of the authorisation procedures and do not exceed the cost of those procedures (paragraph 2); and that applicants are guaranteed to have their application processed as quickly as possible, and in any event within a reasonable period (paragraph 3).
The Directive was due to be implemented by 28 December 2009.
The issues arising under the Directive
The issues in the present case have been focused by reference to the requirements set out in article 9(1)(b) and (c).
It is not contended that the scheme fails to comply with any other provisions of the Directive.
The arguments in relation to paras (b) and (c) overlap to the point of being practically indistinguishable.
The objectives identified as the overriding reason relating to the public interest justifying the need for the scheme, under article 9(1)(b), are the protection of consumers and other recipients of the services in question, and the sound administration of justice.
There is no dispute about the legitimacy and importance of those considerations.
The argument is about whether they are sufficient to justify the scheme in the form which has been approved by the Board.
That depends essentially on whether the scheme satisfies the condition in article 9(1)(c).
The issue arising under article 9(1)(c) in the present case is not a straightforward question whether prior authorisation is necessary, or whether an a posteriori inspection would be adequate.
The scheme is not a simple prior authorisation scheme, but involves a combination of provisional accreditation, based on self certification, and subsequent assessment.
The contentious element of the scheme is not the requirement, imposed on advocates wishing to practise at a level higher than level one, to register for provisional accreditation at the level at which they consider themselves to be practising.
A requirement to register at a level on the basis of self assessment is common to both the scheme and the BSBs alternative proposal.
It is not argued that it presents any material obstacle to practice.
The issue concerns the particular character and purpose of the judicial assessment which takes place after the advocate has been practising at the level in question on the basis of his or her self assessment.
As was explained earlier, judicial assessment is automatic in relation to all advocates at Level 2 and above, and is carried out in order to decide whether full accreditation should be granted.
Such accreditation is then valid for five years, following which its renewal is conditional on a further assessment.
Progression to a higher level requires provisional accreditation at that level, on the basis of judicial assessment as very competent at the current level, followed by full accreditation at the higher level, based on further assessment.
Under the BSBs alternative proposal, on the other hand, judicial assessment would take place only if concerns were raised about a particular advocate through monitoring referrals or evaluations completed in a rolling programme of judicial assessment.
Advocates would otherwise remain at their self assessed level, or move up a level when they felt competent to do so.
The point is put in a nutshell in the parties agreed statement of facts and issues: The BSB proposal was therefore one which involved self certification at a particular level, with the possibility of judicial assessment at that level to follow subsequently.
QASA proposed self certification for the purposes of initial, provisional accreditation at a particular level, followed by judicial assessment for the purposes of the BSB determining whether the advocate is entitled to maintain full accreditation at the existing level, or to progress to a higher level.
The issue under article 9(1)(c), therefore, is whether, in so far as the requirements of the scheme are more stringent than those of the BSB proposal, the objectives pursued cannot be attained by means of a less restrictive measure.
As the Commissions Handbook on Implementation of the Services Directive (2007) states at para 6.1.1: Member States should keep in mind that, in many situations, authorisation schemes can be . replaced by less restrictive means, such as monitoring of the activities of the service provider by the competent authorities .
In essence, the appellants contend that this is such a situation.
It is clear from the case law of the court, summarised in paras 55 67, that consideration of that issue in a context of this kind requires scrutiny of the justification put forward for rejecting the less stringent alternative.
A manifestly inappropriate or manifest error test is not appropriate in this context; but, as we have explained, that is not to say that no discretion is allowed to the primary decision maker as to the level of protection which should be afforded to the public interest in question or as to the choice of a suitable measure.
The approach of the courts below
In considering the decisions of the courts below, it should be noted at the outset that the EU jurisprudence which we have discussed was not cited to those courts.
Nor was it suggested to them that the proportionality principle in EU law differed in any material respect from that applicable under the Human Rights Act.
In considering the proportionality of the scheme, the Divisional Court ([2014] EWHC 28 (Admin)) referred at para 130 to the four stage analysis of proportionality explained in Bank Mellat v Her Majestys Treasury (No 2) [2014] AC 700, paras 20 and 72 76.
That analysis was however concerned with the proportionality under the Human Rights Act of measures which involve the limitation of a fundamental right, rather than with proportionality as a principle of EU law.
Attempting nevertheless to apply the Bank Mellat approach, the court accepted at stage one of the analysis that the scheme had an important objective, namely to ensure competent advocacy.
At stage two, the court accepted that the scheme was a rational method of tackling incompetent advocacy.
Stages three and four do not appear to have been explicitly addressed.
The court noted that the BSB had considered whether a less intrusive scheme was possible, but had decided that the QASA scheme was the best way forward; that the cost to advocates of participating in the scheme would be very small; that judges would have to be trained before conducting assessments; and that the scheme would be reviewed within a short period.
The court then expressed its conclusion that we cannot regard the balance struck in the light of all these factors as being in any way disproportionate (para 132).
This discussion did not apply the EU principle of proportionality, or address the requirement in article 9(1)(c) of the Directive (or regulation 14(2) of the Regulations) that the objective pursued cannot be attained by means of a less restrictive measure.
The Court of Appeal began its consideration of proportionality by stating (para 102): It is not for the court to decide whether QASA is disproportionate.
We are unable to agree with that statement.
It is for the court to decide whether the scheme is disproportionate.
The court must apply the principle of proportionality and reach its own conclusion.
The Court of Appeal continued (para 102): The court is not entitled simply to substitute its own views for those of the LSB: see R (Sinclair Collis Ltd) v Secretary of State for Health [2011] EWCA Civ 437, [2012] QB 394, at paras 19 23 (per Laws LJ, dissenting), paras 115 155 (per Arden LJ) and paras 192 209 (per Lord Neuberger MR).
We remind ourselves that we are reviewing the proportionality of the LSBs decision.
Even under a proportionality test, the decision maker retains a margin of discretion, which will vary according to the identity of the decision maker, and the subject matter of the decision, as well as the reasons for and effects of the decision.
A decision does not become disproportionate merely because some other measure could have been adopted.
We accept the submission of [counsel for the Board] that the decision makers view of whether some less intrusive option would be appropriate as an alternative is likewise not a question on which the court should substitute its own view, unless the decision makers judgment about the relative advantages and disadvantages is manifestly wrong. (emphasis in original)
For the reasons we have explained, the judgments of the Court of Appeal in Sinclair Collis do not provide reliable guidance as to the test to be applied in a context of the present kind.
It is also difficult to see why, in the circumstances of the present case, the identity of the national decision maker should affect the courts assessment of the compatibility of the scheme with EU law.
A test of whether the decision makers judgment was manifestly wrong has no place in the present context.
A decision of the present kind is disproportionate if a less restrictive measure could have been adopted, provided that it would have attained the objective pursued.
The Court of Appeal considered the scheme in accordance with the approach it had described.
It began by emphasising that the Board was the regulator charged by Parliament with the task of making the necessary assessments: Having regard to the identity of the decision maker and the nature and subject matter of the decision, we consider that the LSB is entitled to a substantial margin of discretion in relation to the question whether the decision was proportionate. (para 103) For the reasons we have explained, that was not the correct approach.
Addressing the argument that it had not been shown that there was no less intrusive means of achieving the aims pursued by the scheme, the Court of Appeal correctly observed that it was not the law that, unless the least intrusive measure was selected, the decision was necessarily disproportionate.
Rather, the question was whether a less intrusive measure could have been used without unacceptably compromising the objective of improving the standards of advocacy in criminal courts (para 105).
Addressing the argument that the BSB proposal would have been an equally effective and less onerous alternative to the scheme, the Court of Appeal stated: In our judgment, the LSB was entitled to reject this proposal for the reasons that it gave.
It was not legally irrelevant that the LSB considered that, for reasons of consistency and in order to promote competition, it was in the public interest to have one scheme for all advocates.
That was not, however, the only reason why the LSB rejected the November alternative.
It judged that it was in the public interest that there should be a comprehensive assessment scheme and that the evidence indicated that there was a need to make assessments across the board.
This was a judgment that it reached after considering a massive amount of material on which it brought its expertise as a regulator to bear.
In short, the LSB was of the view that a separate enhanced quality monitoring scheme for barristers could not be adopted without unacceptably compromising the objective (in the best interests of the public) of having a single accreditation scheme for all advocates. (para 107)
The problem with this reasoning is that, having earlier identified the objective as being to improve the standards of advocacy in the criminal courts, the court here treated the objective as being to have a single accreditation scheme for all advocates.
That cannot however be a relevant objective for the purposes of the Directive.
Having an authorisation scheme is not an objective in itself: it has to be justified by some (other) overriding reason relating to the public interest.
The relevant objectives in the present case could only be the protection of consumers and recipients of services, and safeguarding the sound administration of justice.
The application of a scheme on a consistent basis to all criminal advocates might be necessary in order for the scheme to achieve those objectives effectively.
It might also be necessary in order for the scheme to comply with the requirement in article 9(1)(a) that it must not discriminate against the provider in question.
The court did not however address those issues.
Treating proportionality as a matter primarily for the Board, the Court of Appeal concluded that the Board addressed the issue of proportionality and was entitled to conclude that QASA was proportionate (para 111).
Like the Divisional Court, the Court of Appeal made no reference to the specific requirement imposed by article 9(1)(c) of the Directive, or to the corresponding requirement in regulation 14(2)(c) of the Regulations.
In the circumstances, it is necessary for the matter to be reconsidered on the proper basis.
In particular: (1) It is for the court to decide whether the scheme is proportionate, as part of its function in deciding upon its legality. (2) In so doing it should approach the matter in the same way in which the Court of Justice would approach the issue in enforcement proceedings. (3) Article 9(1)(c) requires the court to decide, in the present case, whether the Board has established that the objectives pursued by the scheme, namely the protection of recipients of the services in question, and the sound administration of justice, cannot be attained by means of a less restrictive scheme, and in particular by means of the procedure set out in the BSB proposal. (4) That decision does not involve asking whether the Boards judgment was manifestly wrong, or whether the scheme is manifestly inappropriate.
The court must decide for itself, on the basis of the material before it, whether the condition set out in article 9(1)(c) is satisfied. (5) In considering the question of necessity arising under article 9(1)(c), it should be borne in mind that EU law permits member states to exercise a margin of appreciation as to the level of protection which should be afforded to the public interest pursued.
It also allows them to exercise discretion as to the choice of the means of protecting such an interest, provided that the means chosen are not inappropriate.
This courts analysis of the proportionality of the Boards decision
In their joint application for the Boards approval of the scheme, the BSB, SRA and IPS explained the rationale of the scheme in terms which concentrated on the need to ensure greater protection for the public in relation to criminal advocacy across the board.
To that end they argued that the systematic assessment and accreditation of the competence of advocates will provide consumers of criminal advocacy with tangible reassurance that their advocate has the necessary competence to handle their case.
They described the proposed regulatory changes as a risk managed approach: only those advocates that meet the requirements will be permitted to undertake criminal advocacy and those that are accredited can deal only with cases within their competence.
And they argued that the scheme was proportionate to the objective: 27.
Protecting the public interest and interest of consumers of criminal advocacy has been at the heart of the design and development of the Scheme. 28.
The SRA, BSB and IPS believe that the proposed Scheme and regulatory changes are proportionate to the objective of protecting the interests of consumers of criminal advocacy.
The proposed changes will ensure consistent and systematic assessment of competence of advocates and result in advocates taking on only those cases in which they are competent to act.
As we have explained at para 14, the Board undertook its own assessment of whether there was a risk which needed to be addressed, and a firm rationale for the particular scheme proposed.
The Boards conclusion that there was such a risk was based upon a range of evidence, which we have summarised at para 15.
It noted the potentially serious consequences of poor advocacy for those affected and for the administration of justice, as we have explained at para 15.
In relation to the particular scheme proposed, the Board considered that a scheme applicable to advocates generally was justified in view of the gravity of the risk and the absence of evidence supporting the adoption of a more selective approach, as we have explained at paras 16 17.
The Board also noted that the scheme was to be reviewed after two years, and that it could be adjusted on the basis of evidence gained from its implementation, as we have explained at para 18.
The Board did not consider that the scheme was an authorisation scheme within the Regulations, but it considered the issue of proportionality in a broad sense and concluded that there is legitimate and sufficient concern about the quality of criminal advocacy and that the Scheme proposed in the application is both proportionate and targeted.
The evidence filed in these proceedings by the Boards chief executive is that the Board did not consider that there were equally effective ways of achieving the schemes objective without adopting a scheme of that nature.
The Court of Appeal considered that the Board was entitled to judge that it was in the public interest that there should be a comprehensive assessment scheme and that the evidence indicated that there was a need to make assessments across the board (original emphasis), and it observed that the Board reached that judgment after considering a massive amount of material on which it brought its expertise as a regulator to bear (para 107).
The appellants submitted that the reasoning of the Court of Appeal was faulty in that it failed to focus on whether an alternative scheme of the kind previously proposed by the BSB would be any less effective and that it rested on a suppressed, and unestablished, premise that the regulated professions represented by the BSB, SRA and IPS all presented the same risk profile, whereas a scheme of prior authorisation required separate analysis in relation to each category of service provider (barristers, solicitors and legal executives).
The appellants further submitted that the BSBs own previous stance was evidence that it could not be demonstrated that the proposed scheme was the least burdensome way of achieving its objective.
The core feature of the scheme is that every criminal advocate without exception, who wishes to practise at one of the upper levels, must undertake judicial assessment at the outset.
No criminal advocate, competent or incompetent, can slip through that net, and every client has the protection that whoever represents him in a case at an upper level will have been subject to such assessment.
A precautionary scheme of this kind provides a high level of public protection, precisely because it involves an individual assessment of each provider wishing to practise at an upper level, and it places a corresponding burden on those affected by it.
Whether such a level of protection should be provided is exactly the sort of question about which the national decision maker is allowed to exercise its judgment within a margin of appreciation: see paras 64 65 above.
A self certifying scheme of the kind proposed by the BSB in November 2012 presents a higher level of risk because of the possibility that an advocate may consider himself competent to practise at a level where he does not have the necessary competence, and even if his incompetence is later detected and reported to the regulator (of which there can be no certainty), for those who have had the misfortune of being poorly represented by him it will be a case of shutting the stable door after the horse has bolted. (To illustrate the uncertainty of detection, an advocate who appears infrequently at the upper levels may lack competence, possibly through not keeping up with the law, but will be correspondingly less likely to be assessed under a rolling programme than an advocate who appears more regularly.) It is perfectly true that the evidence did not enable the level of risk to be quantified with any approach to precision, but that did not preclude the Board from considering that it was unacceptable.
We do not regard the judgment made by the Board in that regard as falling outside the appropriate margin of appreciation.
Since the only way of reducing the risk, so as to provide the desired level of protection for all members of the public involved in criminal proceedings at an upper level, was to have a scheme of the kind proposed by the JAG, it follows that the scheme was proportionate to the objective, notwithstanding the inconvenience caused to competent members of the profession.
Although our reasoning process has been different from the courts below, we therefore agree with the Court of Appeal that a comprehensive assessment scheme was proportionate, and that the Board was entitled to grant the application of the BSB, SRA and IPS.
The scope of the Directive
There remains the question whether the scheme is in fact an authorisation scheme falling within the scope of the Directive.
The answer to that question does not appear to us to be straightforward, and if it were necessary for this court to reach a decision on the point, we would be inclined to make a reference to the Court of Justice.
Given our conclusion, however, that even if the scheme falls within the scope of the Directive, it is compliant with article 9(1)(b) and (c), it is unnecessary for the question to be decided in these proceedings.
Conclusion
For these reasons we would dismiss the appeal
| UK-Abs | The Legal Services Board (the Board) supervises approved regulators of persons carrying on legal activities, including the Bar Standards Board (BSB), the Solicitors Regulation Authority (SRA) and the ILEX Professional Standards Board (IPS).
On 26 July 2013 the Board granted an application by the BSB, SRA and IPS for approval of alterations to their regulatory arrangements to give effect to the Quality Assurance Scheme for Advocates (the scheme).
In making its decision the Board had regard to the Better Regulation Principles in section 3(3)(a) of the Legal Services Act 2007: regulatory activities should be transparent, accountable, proportionate, consistent and targeted only at cases in which action is needed.
It noted concerns about standards of criminal advocacy and evidence pointing to a risk of advocacy not being of the required standard.
The scheme provides for the assessment of criminal advocates in England and Wales by judges.
Full accreditation for criminal work at one of the upper levels depends on an assessment as competent by a trial judge.
The appellants, barristers practising criminal law, sought judicial review of the Boards decision on various grounds, all unsuccessful in the courts below.
Permission to appeal to the Supreme Court was granted on the single question of whether the decision was contrary to regulation 14 of the Provision of Service Regulations 2009, which the Board considered did not apply.
The Regulations implement Directive 2006/123/EC on services in the internal market.
Regulation 14 is nearly identical to article 9(1) of the Directive.
It provides: (1) A competent authority must not make access to, or the exercise of, a service activity subject to an authorisation scheme unless the following conditions are satisfied. (2) The conditions are that (a) the authorisation scheme does not discriminate against a provider of the service, (b) the need for an authorisation scheme is justified by an overriding reason relating to the public interest, and (c) the objective pursued cannot be attained by means of a less restrictive measure, in particular because inspection after commencement of the service activity would take place too late to be genuinely effective.
The Supreme Court unanimously dismisses the appeal.
Lord Reed and Lord Toulson give a joint judgment with which Lord Neuberger, Lady Hale and Lord Clarke agree
Lord Reed and Lord Toulson consider the appellants submissions that the scheme fails to meet the conditions set out in regulation 14(2)(b) and (c) on the hypothesis that the Directive (and therefore the Regulations) applies to the scheme. [21, 118] They review the case law of the Court of Justice of the European Union (CJEU) on the principle of proportionality.
This principle is given effect in the Directive in article 9(1)(c) from which regulation 14(2)(c) is derived. [22 82] Lord Reed and Lord Toulson reason that the issue is whether the legitimate and important objectives of protecting recipients of the services in question, and the sound administration of justice, justify the scheme in the form approved by the Board.
Judicial assessment is automatic in relation to all advocates, and is carried out in order to decide whether full accreditation should be granted, for renewal of accreditation and for progression to higher levels.
The BSB had previously suggested an alternative proposal whereby judicial assessment would take place only if concerns were raised about a particular advocate, through a rolling programme of judicial assessment.
The critical question is whether the objectives cannot be attained by means of a less restrictive measure. [93 97] The proper basis for considering the requirement of article 9(1)(c) of the Directive and regulation 14(2)(c) is: (1) it is for the court to decide whether the scheme is proportionate, (2) it should approach the matter in the same way in which the CJEU would approach the issue in enforcement proceedings, (3) the court must decide whether the Board has established that the objectives cannot be attained by means of a less restrictive scheme, (4) that does not involve asking whether the Boards judgment was manifestly wrong, (5) in considering the question of necessity arising under article 9(1)(c), it should be borne in mind that EU law permits member states to exercise a margin of appreciation as to the level of protection to be afforded to the public interest pursued, and to exercise discretion as to the choice of means of protecting such an interest. [108] The Board noted the potentially serious consequences of poor advocacy and considered that a scheme applicable to advocates generally was justified in view of the gravity of the risk.
It also noted that the scheme was to be reviewed after two years. [110 111] The core feature of the scheme was that every criminal advocate who wishes to practise at one of the upper levels must undertake judicial assessment at the outset.
A precautionary scheme of this kind provides a high level of public protection and places a corresponding burden on those affected by it.
Whether such a level of protection should be provided is exactly the sort of question about which the national decision maker is allowed to exercise its judgment. [114 116, 64 65] In Lord Reed and Lord Toulsons opinion, the Boards judgment that the level of risk presented by a self certifying scheme, such as the BSBs previous proposal, was unacceptable, did not fall outside the appropriate margin of appreciation.
Since the only way of providing the desired level of protection was to have a comprehensive assessment scheme, it followed that such a scheme was proportionate to the aims pursued.
Therefore, the Supreme Court dismisses the appeal.
|
On 8 November 2006 the appellant and his two co accused were convicted of the racially aggravated abduction and murder of a 15 year old boy, who was selected at random and abducted from a public street, repeatedly stabbed, and set alight with petrol.
The appalling nature of that crime was reflected in the sentences imposed.
The appellant was extradited from Pakistan in order to stand trial, and on 6 October 2005 was remanded in custody pending his trial.
On 7 October 2005 he was removed from association with other prisoners and placed in solitary confinement, otherwise described as segregation.
Apart from the period immediately prior to and during his trial, when he was accommodated in mainstream conditions, he remained in continuous segregation until 13 August 2010.
Altogether, he spent 56 months in segregation.
For a prisoner in Scotland to spend almost five years in segregation is exceptional.
The situation of the appellant and his co accused was exceptional primarily because of the media coverage which they attracted as a result of the nature of their crime.
They were notorious as the perpetrators of a crime which, because of its racist nature, and the fact that the victim was a child, was liable to result in their being attacked by other prisoners.
In consequence, there were persistent fears for their safety if they were accommodated in mainstream conditions.
In these proceedings, the appellant seeks orders declaring that certain periods of his segregation were contrary to the relevant Prison Rules, and that there were violations of his Convention rights under articles 3 and 8 of the European Convention on Human Rights (ECHR), as given effect by the Human Rights Act 1998.
He also seeks an award of damages as just satisfaction under section 8 of that Act.
The Ministers expressly acknowledge that the nature of the crime committed does not justify a contravention of the appellants Convention rights.
As Lord Steyn observed in R (Roberts) v Parole Board [2005] UKHL 45; [2005] 2 AC 738, para 84, even the most wicked of men are entitled to justice at the hands of the state.
The appellant first applied for legal aid to bring this application for judicial review in February 2007, when he had been in segregation for about 15 months.
Legal aid was finally granted in June 2010, when he had been in segregation for about four and a half years.
The application was heard a year later, by which time his segregation had ended.
Following a four day hearing, the Lord Ordinary, Lord Malcolm, refused the application on 18 November 2011: [2011] CSOH 192; 2012 SLT 178.
An appeal was refused by an Extra Division, comprising Lord Menzies, Lord Drummond Young and Lord Wheatley, on 31 January 2014: [2014] CSIH 18A; 2014 SC 490.
The Prison Rules
It may be helpful to begin with the relevant Prison Rules.
Section 39 of the Prisons (Scotland) Act 1989 allows the Scottish Ministers to make rules for the regulation and management of prisons.
The rules that are relevant to this appeal are the Prisons and Young Offenders Institutions (Scotland) Rules 1994 (SI 1994/1931) as amended (the 1994 Rules), which were in force when the appellant entered the prison system on 7 October 2005, and the Prisons and Young Offenders Institutions (Scotland) Rules 2006 (SSI 2006/94) (the 2006 Rules), which replaced them on 26 March 2006.
They were in turn replaced by the Prison and Young Offenders Institutions (Scotland) Rules 2011 (SSI 2011/331) (the 2011 Rules) with effect from 1 November 2011.
It is common ground that it is sufficient for the purposes of this appeal to refer to the 2006 Rules, the relevant provisions of which are identical to the corresponding provisions of the 1994 Rules as they stood at the material time.
Rule 94(1) of the 2006 Rules confers a power on the governor (an expression defined for this purpose, by rule 5, as including any authorised unit manager) to order the segregation of a prisoner for specified purposes: (1) Where it appears to the Governor desirable for the purpose of (a) maintaining good order or discipline; (b) protecting the interests of any prisoner; or ensuring the safety of other persons, (c) the Governor may order in writing that a prisoner shall be removed from association with other prisoners, either generally or during any period the prisoner is engaged or taking part in a prescribed activity.
The governor is required by rule 94(4) to specify in the order the reasons why it is made and to record in the order the date and time it is made.
He is also required to explain to the prisoner the reasons why the order is made and provide the prisoner with a copy of the order.
Rule 94(5) is critical to one of the issues in this appeal.
It provides: (5) A prisoner who has been removed from association generally or during any period that the prisoner is engaged in or taking part in a prescribed activity by virtue of an order made by the Governor in terms of paragraph (1) shall not be subject to such removal for a period in excess of 72 hours from the time of the order, except where the Scottish Ministers have granted written authority on the application of the Governor, prior to the expiry of the said period of 72 hours.
Rule 94(6) is also critical.
It provides: (6) An authority granted by the Scottish Ministers under paragraph (5) shall have effect for a period of one month commencing from the expiry of the period of 72 hours mentioned in paragraph (5) but the Scottish Ministers may, on any subsequent application of the Governor, renew the authority for further periods of one month commencing from the expiry of the previous authority.
Finally, in relation to rule 94, it is relevant to note that, under rule 94(9), any order under rule 94(1), or any authority under rule 94(5), ceases to have effect when a prisoner is transferred from one prison to another.
Under rule 94(10), a prisoner who has been removed from association under rule 94 must be visited by a medical officer as soon as practicable and as often as is necessary, but at least once every seven days.
Rule 80(1), (5), (6) and (9) of the 1994 Rules corresponded to rule 94(1), (5), (6) and (9) of the 2006 Rules respectively.
The non observance of time limits
The first issue in the appeal arises from the failure of the authorities, on a number of occasions, to comply with the time limits imposed by rule 94 and its predecessor.
It is common ground that three of the orders made on behalf of the Ministers, authorising the appellants continued segregation under rule 94(5), were granted after the 72 hour period had expired.
On each occasion, authority for continued segregation was purportedly granted with effect from the time when the 72 hours had expired.
It is also common ground that 11 of the renewals of authority on behalf of the Ministers under rule 94(6) or its predecessor were granted after the previous authority had expired.
The renewals again purported to be backdated so as to leave no interval when authorisation was absent.
It is argued on behalf of the appellant that the late authorisations under rule 94(5) were invalid, and that the appellants segregation during the period purportedly authorised was therefore unlawful.
Furthermore, it is argued, the purported renewals of the invalid authorisations under rule 94(6) were equally invalid.
In addition, it is argued, all late renewals under rule 94(6) were invalid, and all subsequent renewals following upon a late renewal were also invalid.
On that basis, it is argued that the appellants segregation was unauthorised for periods totalling 32 months: about 14 months arising from invalid authorisations under rule 94(5), and a further 18 months arising from late renewals under rule 94(6).
On behalf of the Ministers, on the other hand, it is argued that the lateness of the orders had no effect upon their validity.
The courts below accepted the Ministers submissions on this point.
They focused upon the limited extent to which the orders were late, when considered in the context of the appellants segregation as a whole, and took the view that, notwithstanding their lateness, they achieved the intended purpose of ensuring that segregation was maintained only for so long as was necessary, and that the position of the prisoner was regularly reviewed.
In those circumstances, they inferred that the legislator could not have intended the lateness of the authorisations to invalidate continued segregation.
The critical issue is the construction of the legislation.
Considering rule 94(5) in the first place, it plainly means that segregation by virtue of an order made under rule 94(1) should not continue beyond the initial 72 hours from the time of the order, unless authority has been granted before the 72 hours have expired: A prisoner . shall not be subject to such removal for a period in excess of 72 hours from the time of the order, except where the Scottish Ministers have granted written authority on the application of the Governor, prior to the expiry of the said period of 72 hours.
The words shall not be subject to such removal . except mean that what follows is a pre condition to lawful segregation for a period in excess of 72 hours from the time of the order.
The words have granted . prior to the expiry of the said period mean that, in order for the condition to be satisfied, authority must have been granted before the 72 hour period expires.
Rule 94(5) has to be read together with the provision in rule 94(6) that an authority granted under paragraph (5) shall have effect for a period of one month commencing from the expiry of the period of 72 hours mentioned in paragraph (5).
Rule 94(6) does not specify when the authority must be granted, but it makes it clear when it must take effect, namely from the expiry of the 72 hour period beginning when the governors order was made under rule 94(1).
The apparent effect of the provisions is therefore (1) that a late authority under rule 94(5) cannot operate so as to authorise segregation more than 72 hours after the initial order under rule 94(1), since that would be contrary to the requirement in rule 94(5) that the prisoner should not be segregated beyond the expiry of the 72 hour period unless authority has been granted prior to its expiry, and (2) that a late authority under rule 94(5) cannot therefore be of any effect, since rule 94(6) provides that a (valid) authority must take effect from the expiry of the 72 hour period, but we know from rule 94(5) that a late authority cannot do so.
The implication is that authority under rule 94(5) cannot be granted late.
On a natural reading of rule 94(5) and (6), there must be a seamless sequence of authorisations: the governors order under rule 94(1), effective for the first 72 hours, and the Ministers authority, granted prior to the expiry of that period, and effective for the succeeding month.
That reading of the legislation establishes a logical structure.
It is also consistent with its purpose.
The reason for requiring the Ministers authority under rule 94(5), as explained by the House of Lords in Somerville v Scottish Ministers (HM Advocate General for Scotland intervening) [2007] UKHL 44; 2008 SC (HL) 45; [2007] 1 WLR 2734, and reiterated by this court in relation to the corresponding English rule in Bourgass and Hussain v Secretary of State for Justice (Howard League for Penal Reform intervening) [2015] UKSC 54; [2015] 3 WLR 457, is to provide a safeguard for the protection of the prisoner.
The requirement that local prison management must obtain the authority of the Ministers within 72 hours ensures that the need for segregation is reviewed within a short time by officials external to the prison, on the basis of information which is up to date, and that segregation is maintained only for as long as is necessary.
Authorisations which are 17, 44 or 47 hours late, as occurred in this case, defeat the intention of the legislation.
The courts below were concerned about the practical consequences of the legislation, so understood.
The Lord Ordinary gave the example of a prisoner being held in segregation for his own safety, where the documentation in support of an application under rule 94(5) was received one hour late.
Was there nonetheless a continuing duty on the Ministers to consider the governors request? Or must the prisoner be returned to the mainstream population, even if he might be killed or seriously assaulted there? The Lord Ordinary commented that most people would consider it quite unreal that, if the Ministers decided to go ahead and grant the authority, both it and all subsequent renewals would be rendered unlawful.
I shall return to that example.
In the light of considerations of that kind, the courts below concluded that purposive arguments favoured treating a late authorisation as valid, within reasonable limits.
No amount of purposive interpretation can however entitle the court to disregard the plain and unambiguous terms of the legislation.
The consequence of the failure to obtain authority for continued segregation prior to the expiry of the 72 hour period is ineluctably spelled out by the legislation itself: the prisoner shall not be subject to removal for a period in excess of 72 hours from the time of the order.
That consequence cannot be avoided by relying, as the courts below sought to do, upon such authorities as R v Soneji [2005] UKHL 49; [2006] 1 AC 340.
Those authorities were concerned with situations where the legislation was silent as to the consequences of failure to comply with a time limit, and where the intended consequences therefore had to be inferred from the underlying purpose of the legislation.
The present case is fundamentally different.
The only principle of statutory interpretation which might enable the plain meaning of legislation to be circumvented is that it can be given a strained interpretation where that is necessary to avoid absurd or perverse consequences: see, for example, Inland Revenue Comrs v Hinchy [1960] AC 748, 768 (Lord Reid), and R (Edison First Power Ltd) v Central Valuation Officer [2003] UKHL 20; [2003] 4 All ER 209, paras 25 (Lord Hoffmann) and 116 (Lord Millett).
Indeed, even greater violence can be done to statutory language where it is plain that there has been a drafting mistake: Federal Steam Navigation Co Ltd v Department of Trade and Industry [1974] 1 WLR 505, 509 (Lord Reid), and Inco Europe Ltd v First Choice Distribution [2000] 1 WLR 586, 592 (Lord Nicholls of Birkenhead).
In the present case, however, there has not been any drafting mistake.
Nor does the legislation have absurd or perverse consequences.
On the contrary, as I have explained, the plain meaning of the legislation is consistent with its purpose.
The problem which concerned the Lord Ordinary that the prison management might be compelled to return a prisoner to the mainstream even though the result might be to endanger his safety or that of another prisoner nevertheless had a straightforward solution, as I shall explain.
I say had because the 2006 Rules are no longer in force: as explained earlier, they have been replaced by the 2011 Rules.
The corresponding provision in the 2011 Rules, namely rule 95, is expressed differently from rule 94 of the 2006 Rules, and no question arises in these proceedings (and this court has heard no argument) as to its meaning or effect.
In relation to rule 94 of the 2006 Rules, the Lord Ordinary considered that in practice, if the 72 hours expired without authority for continued segregation having been granted, and if it then remained necessary for the prisoner to be segregated, the governor would make a fresh order under rule 94(1).
A new period of 72 hours would then begin, and a fresh application could be made under rule 94(5).
That view may or may not be correct.
Rule 94 does not expressly preclude the making of more than one order under rule 94(1) on the same grounds, and it is arguable that such an order would be valid if it were made reasonably and in good faith, in the event of a failure to comply with the timetable envisaged by rule 94.
It might on the other hand be argued that the repeated use of rule 94(1) in such circumstances is impliedly precluded, on the view that the safeguards created by rule 94(5) could otherwise be circumvented.
It has also to be noted that rule 80(7) of the 1994 Rules originally conferred on the governor an express power to make a further order under rule 80(1) on the expiry of the 72 hour period; but that power was confined to removal from association in relation to a prescribed activity only, and was in any event repealed by amendment in 1998: the Prisons and Young Offenders Institutions (Scotland) Amendment Rules 1998 (SI 1998/1589), rule 32(4).
The court has heard no argument on the question whether a further order might be made as the Lord Ordinary suggested, and it would be inappropriate to determine it without inviting further submissions.
Since another solution exists to the problem which concerned the Extra Division, as I shall shortly explain, and bearing in mind that the 2006 Rules have been superseded and no longer raise any live problem, it is unnecessary to determine the question.
An analogous question may arise under the 2011 Rules, but, as I have explained, the relevant rule is differently expressed, and no question as to its effect is raised in these proceedings.
What is however clear is that any duty arising under the 2006 Rules would be overridden by a conflicting duty imposed by primary legislation.
In particular, the governors duty under section 6(1) of the Human Rights Act to protect the safety of prisoners, in accordance with their article 2 and 3 Convention rights, would override any duty arising from rule 94 to return a prisoner to mainstream conditions, where that would involve a serious risk to life or limb.
This is another issue on which the court was not addressed, but the point is too clear to admit of argument.
The precise mechanism by which rule 94 would be overridden is open to argument: it may be that it should be read down so as to be consistent with Convention rights, or it may be that it is simply to be disregarded in so far as it is inconsistent with those rights.
The practical result is the same in either case.
So far as renewals of authority are concerned, rule 94(6) provides that the Ministers may, on any subsequent application of the governor, renew the authority for further periods of one month commencing from the expiry of the previous authority.
The power of renewal is predicated upon there being a valid grant of authority, but no time limit is imposed on the decision to renew that authority, other than the general implication that it must be made within a reasonable period.
On the facts of the present case, there were, as I have explained, three occasions when authority under rule 94(5) was purportedly granted after the 72 hour period had expired.
No attempt has been made to rely upon the Human Rights Act as providing a lawful basis for the continuation of the appellants segregation on those occasions.
In these circumstances, the only conclusion open is that the authority was invalid and, as such, was incapable of renewal.
The consequence is that the appellants segregation during periods totalling about 14 months lacked authorisation under the rules.
That conclusion does not in itself entitle the appellant to any remedy in damages.
Rule 94 does not confer on a prisoner any right to damages in the event that his segregation is unauthorised: R v Deputy Governor of Parkhurst Prison, Ex p Hague [1992] 1 AC 58; Bourgass and Hussain v Secretary of State for Justice [2015] 3 WLR 457.
Furthermore, it is responsibly accepted on behalf of the appellant that he suffered no prejudice as a result of authority being granted late.
The breaches of rule 94(5) bear, however, on the issues arising under article 8 of the ECHR, to which I shall return.
Article 3 of the ECHR
Article 3 provides: No one shall be subjected to torture or to inhuman or degrading treatment or punishment.
On behalf of the appellant, it was submitted that his segregation violated that guarantee.
As the European Court of Human Rights said in Ahmad v United Kingdom (2012) 56 EHRR 1, para 205, the circumstances in which the solitary confinement of prisoners will violate article 3 are now well established in its case law: 207.
Solitary confinement is one of the most serious measures which can be imposed within a prison and, as the Committee for the Prevention of Torture has stated, all forms of solitary confinement without appropriate mental and physical stimulation are likely, in the long term, to have damaging effects, resulting in deterioration of mental faculties and social abilities.
Indeed, as the Committees most recent report makes clear, the damaging effect of solitary confinement can be immediate and increases the longer the measure lasts and the more indeterminate it is. 208.
At the same time, however, the court has found that the prohibition of contact with other prisoners for security, disciplinary or protective reasons does not in itself amount to inhuman treatment or punishment.
In many states parties to the Convention more stringent security measures, which are intended to prevent the risk of escape, attack or disturbance of the prison community, exist for dangerous prisoners. 209.
Thus, whilst prolonged removal from association with others is undesirable, whether such a measure falls within the ambit of article 3 of the Convention depends on the particular conditions, the stringency of the measure, its duration, the objective pursued and its effects on the person concerned. 210.
In applying these criteria, the court has never laid down precise rules governing the operation of solitary confinement.
For example, it has never specified a period of time, beyond which solitary confinement will attain the minimum level of severity required for article 3.
The court has, however, emphasised that solitary confinement, even in cases entailing
relative isolation, cannot be imposed on a prisoner indefinitely
In the present case, it is accepted that the conditions of the appellants segregation were not such as in themselves to breach article 3.
The space and layout of the cells were satisfactory, and there was integral sanitation, although it was not screened.
Although a report lodged on behalf of the appellant concluded that the ventilation in the relevant segregation units (including the one at HMP Barlinnie) fell short of accepted standards, and that the level of natural light also fell below desirable standards, that view might be contrasted with the report by the European Committee for the Prevention of Torture and Inhuman or Degrading Treatment or Punishment (CPT), following a visit to Barlinnie in 2012, that the cells in the segregation unit had adequate lighting, including access to natural light, and adequate ventilation (Report to the Government of the United Kingdom on the Visit to the United Kingdom carried out from 17 to 28 September 2012).
On any view, the conditions were compatible with respect for the appellants human dignity, and adequate to secure his health and well being.
It is also accepted that the measures imposed on the appellant did not in themselves breach article 3.
Although the regime prevented contact with the general prison population, it did not involve the appellants total isolation from other prisoners or from other human contacts.
He was confined to his cell for between 20 and 22 hours per day.
He was permitted to associate with other prisoners at times when he was released from his cell.
He generally had access to one hour of exercise per day in the segregation unit yard.
He often had access, for about an hour at a time, to a gym located in the segregation unit.
He was entitled to receive visits and to use prison telephones.
He had daily access to showers and newspapers.
He occasionally had his hair cut.
He was occasionally visited by an Imam.
He occasionally attended court.
After March 2008 all the cells in which he was accommodated had electric power, and a television was provided.
Prior to that date, he was provided with a battery powered television in his cell.
The impression conveyed by the documentation is that the staff of the various segregation units generally did their best to treat him as well as they could within the restrictions inherent in the rule 94 regime.
On the other hand, no work or other occupation was provided or permitted in his cell, and education courses were not generally available.
He was not permitted to attend religious services, although from May 2009 he attended a class for Muslim prisoners at HMP Glenochil.
The objective pursued was the protection of the appellant from attack by other prisoners, in accordance with the duties imposed on the prison authorities both by domestic law and under the ECHR.
It is not disputed that the intelligence received by the authorities was such as to give rise to a genuine and reasonable concern that he was at risk of serious injury or worse.
The duration of the segregation was 56 months in total, divided into two periods of 11 and 45 months.
The prison authorities were aware of the risks which segregation, especially for a prolonged period, can pose to mental health.
The effects on the appellant were regularly monitored.
Prison medical officers visited him at least once every seven days.
They did not find that he was medically unfit to be segregated.
He was examined in January 2007 by a psychologist at Barlinnie, who reported that he appeared to be coping well.
When interviewed by a psychologist instructed by his lawyers for the purpose of these proceedings in May 2010, towards the end of his period in segregation, his demeanour indicated low mood.
He reported anxiety about going outside the segregation unit, hearing voices, which the psychologist considered to be a reaction to his environment, and a loss of confidence.
Without under estimating the unpleasantness of the symptoms reported by the appellant, it is not suggested in the report, or in any other evidence before the court, that he suffered any severe or permanent injury to his health.
Considering the facts of this case against the criteria applied in the case law of the European Court, the treatment of the appellant did not attain the minimum level of severity required for a violation of article 3.
It is important to bear in mind that the isolation which he experienced was partial and relative.
The fact that his segregation was imposed in the interests of his own safety is also relevant.
There is no doubt that the duration of his segregation was undesirable, and indeed exceptional by the standards of prisons in the United Kingdom.
There are also respects in which his conditions might have been improved, in particular by making greater provision for the pursuit of purposeful activities.
The procedural protections available were not as effective as they should have been, particularly as a result of the prolonged delay in obtaining legal aid.
Nevertheless, comparison with such cases as Ramirez Sanchez v France (2006) 45 EHRR 1099, where the applicant was held for eight years in solitary confinement, under much more stringent conditions than the appellant, indicates that segregation of the duration experienced by the appellant, under the conditions in which he was held, does not entail a violation of article 3.
Article 8 of the ECHR
Article 8 provides: 1.
Everyone has the right to respect for his private and family life, his home and his correspondence. 2.
There shall be no interference by a public authority with the exercise of this right except such as is in accordance with the law and is necessary in a democratic society in the interests of national security, public safety or the economic 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.
It is accepted on behalf of the Ministers that segregation is an interference with the right to respect for private life guaranteed by article 8(1), and therefore requires to be justified under article 8(2).
That concession reflects the approach adopted by the European Court in Munjaz v United Kingdom [2012] 1 MHLR 351.
The questions that arise are accordingly (1) whether the appellants segregation pursued a legitimate aim, (2) whether it was in accordance with the law, and (3) whether it was necessary and proportionate in order to achieve the legitimate aim pursued.
The Ministers bear the burden of establishing that these requirements were met.
Legitimate aim
There is no doubt that the segregation pursued a legitimate aim, namely the protection of the appellants safety.
In accordance with the law
Whether the segregation was in accordance with the law is a more difficult question.
In the first place, as I have explained, there were periods during which the appellant was held in segregation without valid authorisation under the Prison Rules.
During those periods, his segregation was not in accordance with the law, and accordingly his rights under article 8 were breached.
It was also argued that his segregation was not in accordance with the law because the protections provided by the law were not effective in practice.
Two related points were made.
First, it was argued that the reasons given for the decisions to segregate the respondent, or to apply for the continuation of his segregation, were formulaic and repetitive, and did not indicate that genuine consideration had been given to the question whether it was necessary for his segregation to continue.
Secondly, many of those decisions appeared to have given formal effect to prior decisions taken by a body with no status under the Prison Rules, namely the Executive Committee for the Management of Difficult Prisoners (ECMDP).
In order to address these arguments, it is necessary to consider the history of the appellants segregation.
First, however, it may be helpful to explain the nature and role of the ECMDP (subsequently re named the Prisoner Monitoring and Assurance Group).
It is a non statutory body, composed of prison governors and chaired by a senior official of the Scottish Prison Service (SPS), whose terms of reference include: 1.
To manage the location, movement and progression of all prisoners . held out of association for three months or more under rule 80 of the [1994 Rules, and] 2.
To monitor the provision of appropriate accommodation and regimes for difficult prisoners .
The guidance on segregation issued by the SPS in November 2006 states: ECMDP also carry out an important corporate monitoring role of the rule 94 process.
The membership of the above committee comprises senior managers from all mainstream establishments and its role is to consider the management of difficult prisoners, some of whom are held for lengthy periods of time on rule 94 conditions.
The committee regularly reviews the progress of such prisoners and at times recommends action to assist with the progress and re integration of difficult prisoners to mainstream conditions.
According to a report by the Scottish Public Services Ombudsman on the appellants case, to which it will be necessary to return, the ECMDP determines where such prisoners are to be held, and is accountable to the SPS Director of Custody, who has executive authority for the placement of all prisoners held out of association for three months or more under rule 94 and for the management policy applicable to them.
On 6 October 2005 the appellant was remanded in custody at Barlinnie pending his trial.
The following day, he was segregated under rule 95(2) of the 1994 Rules, pending adjudication of a charge of assaulting another prisoner in his hall.
It was noted that he had declined protection.
On 10 October 2005, he was segregated under rule 80(1) of the 1994 Rules.
Numerous applications for authority to continue his segregation were subsequently made.
The same reasons for making the applications were generally repeated verbatim, or with minor changes.
They were to the effect that the crime with which the appellant was charged had caused highly racial motivated feelings within the local prisoner population and had rendered the appellant a target for retribution.
There does not appear to have been any specific intelligence report indicating a risk to the appellants safety during this period, other than a threat, on 7 October 2005, of revenge by the victim of the assault that day.
During this period, the appellant was discussed at a meeting of the ECMDP on 12 January 2006.
The minute records that he was to remain within segregation unit until trial commences.
That minute pre dated the start of the trial by almost nine months.
On its face, it recorded a decision as to how rule 94 or its predecessor would be applied during the intervening period.
On 18 September 2006 the appellant was transferred to HMP Edinburgh in anticipation of his trial.
He was accommodated in the mainstream regime there until the conclusion of the trial on 8 November 2006.
No incidents between the appellant and other prisoners were recorded during this period.
On his return from court after his conviction, he was placed in segregation.
On 9 November 2006 the appellant was returned to HMP Barlinnie and was immediately segregated, for the same reasons as previously.
He remained in segregation there until 28 January 2007, the necessary applications for authority being made by the local management and granted by officials.
The last such application, granted on 12 January 2007, stated that to admit the appellant to a mainstream regime at that time would result in disorder.
The only specific intelligence report during this period dated from 9 November 2006, and was to the effect that the appellant and his co accused would be killed if they were located at HMP Glenochil.
It was also recorded on 25 January 2007 that there had been a heated exchange of words between the appellant and another prisoner, with threats being made.
During this period, the cases of the appellant and his co accused were discussed at a meeting of SPS senior management on 15 November 2006.
It was minuted that reliable intelligence indicated that they were at very real risk of attack were they to be located in mainstream circulation in any prison in Scotland.
Their location in a protection regime would not offer a significantly diminished prospect of violence.
It was decided that they would be held out of circulation under rule 94 while consideration was given to their medium and longer term management.
It was agreed that they should be held in segregation units that offered a similar range of facilities, namely Edinburgh, Glenochil, Kilmarnock, Perth and Shotts.
The regime to be delivered in the units would need to be coordinated.
A further meeting would therefore be held to identify a model approach and a process for coordinating and monitoring delivery.
On the face of this document, it had been decided that the appellant would continue to be held in segregation, in advance of formal decisions being made under rule 94.
A meeting was then held on 22 November 2006 of the managers responsible, as the minute stated, for the segregation units within HM Prisons Shotts, Glenochil, Barlinnie, Perth and Edinburgh where these prisoners will be held.
A timetable was agreed for their transfers between segregation units.
In relation to the appellant, it was agreed that he would spend December 2006 and January 2007 in the segregation unit at Barlinnie, February and March 2007 in the segregation unit at Edinburgh, April and May 2007 in the segregation unit at Perth, June and July 2007 in the segregation unit at Shotts, August and September 2007 in the segregation unit at Glenochil, October and November 2007 in the segregation unit at Edinburgh, December 2006 and January 2008 in the segregation unit at Barlinnie.
The segregation unit manager where he was currently held would submit the next application for authorisation with an agreed content, and would circulate it to the other segregation units to ensure consistency.
The minutes of the meeting were to be supplied to the assistant director of prisons and to the official at SPS headquarters who subsequently granted many of the authorisations.
On the face of this document, the managers agreed in advance that their powers under rule 94 would be exercised to keep the appellant in segregation for a further period of over a year.
At a meeting of the ECMDP on 5 December 2006 it was agreed that the appellant would be dealt with through the ECMDP for all future management and progression issues.
On 17 January 2007 a meeting was held of SPS officials and the relevant segregation unit managers.
It was agreed that the appellant and his co accused would be transferred as per the plan.
On 28 January 2007 the appellant was transferred to Edinburgh and immediately segregated.
The reason given was that he is managed through ECMDP and the rule 94 is applied for to keep him in Edinburgh segregation unit.
It was during this period in Edinburgh that authority for segregation beyond the first 72 hours was, for the first time, granted late and subsequently renewed.
The applications stated that to admit the appellant to mainstream would result in disorder.
The last of the applications included a note of a case conference which stated that the appellant would be held in segregation until a decision was taken by the ECMDP to relocate [him] to a mainstream regime.
On its face, that implied that local management regarded themselves as required to maintain the appellants segregation unless and until the ECMDP decided otherwise.
During this period, an intelligence report was received on 9 March 2007 to the effect that the appellant and his co accused would be stabbed if they went into the mainstream at Glenochil.
There was also a report of the appellant being racially abused by other prisoners while on his way to the gym.
On 3 April 2007 the appellant was transferred to Perth and immediately segregated.
The application for authority for continued segregation beyond the initial 72 hours stated that the appellant is managed by the ECMDP and any major decisions on his management are currently made by them.
When that was renewed in May 2007, the reason given for the application was that the appellant remains in segregation subject to a national directive.
Authority was renewed again in June 2007, the reason for the application being that the appellant remains subject to removal from general association subject to HQ direction.
The application included a letter from the manager of the segregation unit, who stated that the appellant was admitted there as part of a national agreed programme.
The apparent implication of these documents is again that local management did not regard it as their responsibility to make an independent judgment under rule 94.
On 2 July 2007 the appellant was transferred to Shotts and immediately segregated.
The reasons given narrated that the appellant was transferred to HMP Shotts segregation unit, and referred to the need for time to determine his future management at Shotts so as to protect his safety.
This period in Shotts was the second during which authority for continued segregation was granted late and subsequently renewed.
The application for authorisation included a note of a case conference recording that Shotts was looking at integration into the mainstream, possibly at the National Induction Centre or NIC, which was located there.
It was also noted that the appellant would receive his visits in the main visiting room, so that the reactions of other prisoners towards him could be monitored.
The authorisation was renewed in August 2007, when the application stated that a protocol had been formulated and would be implemented to allow his phased integration into the NIC.
During this period, there were intelligence reports to the effect that the appellant would be killed if he were admitted to a particular hall.
A further renewal was granted in September 2007.
The application stated that attempts at reintegration within the NIC had resulted in protests and information that prisoners were prepared to assault the appellant should the attempts be continued.
The appellant had also attempted to assault a prisoner.
Local management did not consider it safe to try any further integration at that time.
Further renewals were granted during October, November and December 2007.
The applications stated that the appellant was held under ECMDP conditions due to concerns about his safety and the safety of others.
A further renewal was granted on 7 January 2008.
A note of a case conference stated that his case would be discussed at an ECMDP meeting on 8 January 2008, and that future decisions were dependent on outcome of that meeting.
At that meeting, it was noted that Barlinnie had agreed to take the appellant.
On 15 January 2008 the appellant was returned to Barlinnie and was immediately segregated.
The reason given was that he had been admitted into the segregation unit as part of an agreement at the recent ECMDP, and that there remained considerable bad feeling from a lot of the prison population.
Segregation was felt to be appropriate until a long term management plan be put in place via ECMDP.
Authority for continued segregation was granted later in January and February 2008, when the application included a note of a case conference stating that the appellant was to remain in Barlinnie under rule 94 conditions, and that this was the decision by ECMDP.
Further renewals were granted during March and April 2008.
The notes of the most recent case conference stated that the decision that he should remain in Barlinnie under rule 94 conditions was a decision by ECMDP, and that the future action required was the responsibility of ECMDP.
On their face, these documents bear the same implication as those discussed earlier.
At a meeting of the ECMDP on 12 March 2008, it was minuted that the appellant would remain on long term rule [94], and that there would be a need for periodical transfers between establishments.
On its face, that again confirms that the appellants continued long term segregation was pre determined.
At the meeting of ECMDP on 14 May 2008, it was decided that he should be kept at Barlinnie.
A further renewal was granted on 16 May 2008, the reason for the application stating that the appellants admission into the segregation unit at Barlinnie was part of an agreement at the recent ECMDP, and that there was still considerable bad feeling towards the appellant.
In the meantime, the appellant had complained to the Scottish Prisons Complaints Commissioner (the SPCC), who exercised a statutory jurisdiction under Part 12 of the 2006 Rules.
On 2 June 2008 the SPCC wrote to the ECMDP, expressing disappointment that there had been little or no progress since he had first looked at the case, 16 months earlier.
He asked the ECMDP to consider the mental suffering and irreparable harm which many prisoners experienced through extended periods of segregation.
He asked the ECMDP to treat the matter as a priority and to make a decision on the most appropriate placement for the appellant outside of a segregation unit.
There was no response from the ECMDP, and its minutes contain no indication that the matter was discussed.
SPS however replied to the effect that the appellant continued to be held appropriately on rule 94 conditions.
Further authorisations were granted during June, July, August and September 2008.
It was reported that threats had been made by other prisoners when the appellant was being escorted from the segregation unit for legal visits.
There was a further renewal on 17 October 2008, when the note of the case conference stated that it had been decided by ECMDP that the appellant was to remain in Barlinnie on rule 94 conditions until further notice.
On 21 October 2008 the ECMDP minuted that a move to mainstream conditions cannot be considered at this time.
There was a further renewal on 17 November 2008, when the application recorded that the appellants brother, one of his co accused, had been placed in normal circulation in HMP Dumfries, but that the ECMDP had decided that the appellant should remain at Barlinnie.
The case conference note recorded the ECMDPs decision that the appellant was to remain under rule 94 conditions.
On 26 November 2008 the SPCC elicited the information that his recommendations had not been considered by the ECMDP.
There was a further renewal in December 2008, when the appellant stated that both his co accused were now in normal circulation in Dumfries and had not experienced any problems.
On 13 January 2009 the ECMDP agreed that Barlinnie will initiate discussions with Glenochil to arrange a smooth transition to their segregation unit, and that the move would take place during the coming weeks.
In the meantime, there were further renewals.
On 13 March 2009 the appellant was transferred to Glenochil and immediately placed in segregation.
The segregation units profile for the appellant recorded that he came there as a result of ECMDP under rule 94 conditions.
Authorisation for continued segregation was granted, and renewed in April 2009, when it was reported that the appellant had been verbally abused by other prisoners.
It was also reported that local management were carrying out risk assessments in order to assess whether the appellant could be located in association with other prisoners.
A further exchange between the appellant and other prisoners, involving threats, occurred later in April 2009.
In May 2009 he began attending a class with other Muslim prisoners.
An ECMDP meeting that month minuted, in relation to the appellant: Stay Glenochil segregation.
Further renewals were granted during May, June, July and August 2009.
During that period, there was a further report, in July 2009, of threats of violence towards the appellant.
At an ECMDP meeting on 2 September 2009 it was noted that Glenochil had difficulty integrating the appellant into the mainstream, and that Shotts had agreed to take him in the hope of his being moved to the NIC.
On 9 September 2009 the appellant was transferred to Shotts and immediately segregated.
This period in Shotts was the last during which authority for continued segregation was granted late and subsequently renewed.
The application for renewal in November 2009 included a note of a case conference earlier that month, when the appellant was told that his case management had been referred back to the ECMDP, which was meeting that day, and depending on the recommendations a rule 94 extension will be applied for.
In the event, the ECMDP noted a recent increase in intelligence regarding risks to his safety if he were returned to a mainstream hall.
Several intelligence reports of threats to the appellants safety, if he were moved to the NIC, were received during this period.
Further renewals were granted during December 2009, and January and February 2010, when it was reported that there was resistance by other prisoners to the appellants integration into the mainstream.
Further orders were made during March, April and May 2010.
It was explained that the feasibility of reintegration at the NIC had again been explored but was considered to be unsafe.
The papers also record that the appellant had indicated his unwillingness to be subject to a protection regime.
There was further intelligence of a threat to his safety during that period.
By this time, the appellant had complained to the Scottish Public Services Ombudsman.
In its report, dated 21 April 2010, it found that it was clear that the ECMDP was not regularly reviewing the appellants case, and that there was no evidence of its having been reviewed at all between May 2007 and January 2008.
It recommended that the SPCC should urgently establish from the SPS whether there was any long term plan for the appellants management and reintegration.
At an ECMDP meeting on 18 May 2010 it was noted that the attempts made at Shotts to integrate the appellant into mainstream conditions had not gone well, and that Edinburgh had agreed to take him.
On 11 June 2010 the appellant was returned to Edinburgh and immediately segregated.
Authority for continued segregation was granted during June and July 2010.
As I have explained, the Scottish Public Services Ombudsman had recommended that the SPCC urgently establish whether there was any long term plan for the appellants management and reintegration.
During June 2010, legal aid was also granted for the present proceedings.
Following the appellants transfer to Edinburgh, management there undertook an appraisal of how he might be integrated into the mainstream.
On 7 July 2010 a management plan for the appellant was prepared.
It set out a carefully staged series of measures, designed to result in the appellants integration during August 2010.
As counsel for the Ministers acknowledged, no similar plan had been drawn up earlier.
It was successfully implemented.
The appellant gradually spent greater amounts of time in the mainstream over a period of weeks, with appropriate supervision and support from staff, until he was ultimately able to be integrated into the mainstream on 13 August 2010.
Before this court, counsel for the Ministers explained that the appellant had been successfully integrated on that occasion, unlike the previous attempt at Shotts during 2007, in part because there was an active judicial review challenge.
As he put it, the judicial review proceedings forced the authorities hand.
Having summarised the factual background, it is necessary to return to the argument that the decisions made by local prison management under rule 94 were essentially a formality, the true decision making function being exercised by the ECMDP.
In considering this argument, the Lord Ordinary accepted that the role of the ECMDP did not fit easily within the Prison Rules, and that it was clear that the local governors were looking to that body for guidance.
He also expressed the view, however, that it was plain that the local governors and the Ministers were satisfied that the appellant should not be in the mainstream prison environment, and that the appropriate procedure was followed at the end of each month.
He concluded that, even if the role adopted by the ECMDP was outside the Prison Rules, it did not amount to a violation of article 8.
It is not entirely clear whether the Lord Ordinary accepted that the local management had not regarded it as their responsibility to make an independent judgment, but he appears to have considered that they had in any event shared the ECMDPs view that continued segregation was appropriate.
The Extra Division expressed their view somewhat more clearly, describing the role of the ECMDP as essentially advisory.
In relation to these conclusions, it should be noted that they were inferences drawn from the same documents as are before this court: no other evidence was adduced in relation to this matter, either orally or by affidavit.
The starting point, in considering this issue, is the rule of domestic administrative law that a statutory power of decision making must be exercised by the person on whom the power has been conferred.
The point is illustrated by R v Deputy Governor of Parkhurst Prison, Ex p Hague.
The case arose from the fact that the governor of one prison had purported to authorise the segregation of a prisoner on his arrival at another prison to which he was being transferred, as required by an instruction issued by the Home Office.
The prisoners continued segregation at his new prison, after the initial period of segregation expired, was then automatically authorised on behalf of the Secretary of State, in accordance with the same instruction.
Both authorisations were held by the Court of Appeal to be ultra vires: [1992] 1 AC 58, 102 et seq.
The governor of one prison had no power to order the segregation of a prisoner held in another prison: the decision could only be taken by the governor of the prison where the prisoner was currently held.
Nor could the Secretary of State lawfully authorise segregation as a matter of routine, without a genuine exercise of his discretion both as to whether his authority should be given and, if so, for how long.
The point is also illustrated by Leech v Deputy Governor of Parkhurst Prison [1988] AC 533, 563, where the House of Lords explained that the Home Office had no authority to direct a prison governor as to how to exercise his disciplinary functions.
The same is true, mutatis mutandis, of the SPS and the ECMDP vis vis the powers of the governor under rule 94.
In the present case, where neither party has sought to rely on any evidence other than the documents before the court, one has to draw reasonable inferences from those documents.
In the light of the documents, relevant extracts from which have been quoted, it would be unrealistic to view the role of the ECMDP as merely advisory, or to maintain that decisions whether it was appropriate for segregation to continue were left to the independent judgment of local management.
Counsel for the Ministers frankly described the ECMDP minutes as unsatisfactory, and indefensible if looked at in isolation.
I have quoted the minute of the meeting on 12 January 2006, recording, several months before the appellants trial, that he was to remain within segregation unit until trial commences.
I have quoted the minute of its meeting on 11 November 2008, recording a move to mainstream conditions cannot be considered at this time.
I have also quoted the minute of its meeting in May 2009: Stay Glenochil segregation.
Other documents appear to imply that transfers between segregation units were pre arranged, sometimes several months in advance.
Other documents imply that local management at some of the prisons proceeded on the basis that their decisions to segregate the appellant, or to apply for authority to continue his segregation, implemented decisions taken by the ECMDP, and that any change in his status had to be initiated by that committee.
For example, Edinburgh recorded that the appellant would be held in segregation until a decision was taken by the ECMDP to relocate [him] to a mainstream regime.
Perth recorded that he was admitted to its segregation unit as part of a national agreed programme and remained there subject to a national directive.
Barlinnie recorded more than once that the appellants admission into its segregation unit was part of an agreement at the recent ECMDP, and that the decision that he should remain under rule 94 conditions was a decision by ECMDP.
At the same time, it also appears from the documents that, at some prisons, during some periods of the appellants segregation, local management made independent assessments of the appropriateness of continued segregation in the light of the current risks to his safety.
The first period which the appellant spent at Shotts is not the only example, but it is the clearest.
It may not be coincidental that there was no consideration of the appellants case by the ECMDP during that period.
In these circumstances, it would be inappropriate to generalise.
The only reasonable conclusion which can be drawn, however, in the light of what was written by those involved, and in the absence of any other evidence, is that some of the decisions taken by local management to segregate the appellant under rule 94(1) or its predecessor, to apply for authority for his segregation to continue under rule 94(5), and to apply for the renewal of such authority under rule 94(6), were not taken in the exercise of their own independent judgment, but proceeded on the basis that the relevant judgment had already been made, or would be made, by the ECMDP.
They proceeded, in other words, not on the basis that the ECMDP was performing an advisory function, but that it was taking decisions which they were expected to follow.
Whether or not the ECMDP expected its decisions to be viewed in that way is beside the point.
What matters is whether the power of decision was in reality exercised independently by the person to whom it was entrusted by the legislation.
Nor does it matter if the subsequent decision to grant or renew authority was properly taken on behalf of the Ministers: their power of decision was predicated upon a valid application to them, which depended on the lawful exercise of the power conferred on local management.
Like the failure to obtain valid authorisation for some of the time spent in segregation, this breach of domestic law results in a violation of article 8.
It has not however been established that it caused any prejudice to the appellant.
Whenever local management carried out an independent assessment, the invariable conclusion was that segregation was necessary in order to protect the appellants safety.
When attempts were made by local management to reintegrate the appellant at Shotts and Glenochil, they were abandoned in the light of the hostile response of other prisoners and threats of violence.
It has not been argued, let alone established, that the appellants segregation might have been ended earlier if local management had not deferred to the ECMDP.
Proportionality
There is no doubt that the appellants case presented the SPS management with a very difficult problem.
Nevertheless, they had to apply their minds to find an appropriate solution.
In view of the length of the appellants segregation, a rigorous examination is called for by the court to determine whether the measures taken were necessary and proportionate compared with practicable alternative courses of action.
In its judgment in Razvyazkin v Russia (Application No 13579/09) given 3 July 2012, the European Court cited at para 89 the discussion of proportionality in the 21st General Report of the CPT, of 10 November 2011: Given that solitary confinement is a serious restriction of a prisoners rights which involves inherent risks to the prisoner, the level of actual or potential harm must be at least equally serious and uniquely capable of being addressed by this means.
This is reflected, for example, in most countries having solitary confinement as a sanction only for the most serious disciplinary offences, but the principle must be respected in all uses of the measure.
The longer the measure is continued, the stronger must be the reason for it and the more must be done to ensure that it achieves its purpose. (para 55)
The last sentence in that passage is reflected in a statement which the European Court has often repeated, for example in the Grand Chamber judgment in Ramirez Sanchez at para 139: that the reasons for segregation will need to be increasingly detailed and compelling the more time goes by.
The Extra Division commented that they had difficulty understanding what this meant: if a threat remained the same, it was difficult to see how greater detail could be given.
What is meant, as it appears to me, is that because the actual or potential harm which segregation may cause to the prisoner increases the longer that segregation is prolonged, the seriousness of the risk of harm required to justify his segregation becomes correspondingly greater.
In addition, the court will become correspondingly more demanding in scrutinising whether segregation is the only means of addressing the risk, given the increasing risk that segregation will itself cause serious harm to the prisoner.
The serious risks to the mental health of prisoners who are subject to prolonged segregation are well known, and are recognised both in international standards and domestically.
An interim report submitted to the UN General Assembly in August 2011 by Juan E Mndez, the Special Rapporteur of the Human Rights Council on torture and other cruel, inhuman or degrading treatment or punishment, expressed particular concern about prolonged solitary confinement (or segregation, as it was also termed), which he defined as solitary confinement in excess of 15 days.
He noted that after that length of time, according to the literature surveyed, some of the harmful psychological effects of isolation can become irreversible (para 26).
He also noted that lasting personality changes often prevent individuals from successfully readjusting to life within the broader prison population and severely impair their capacity to reintegrate into society when released from prison (para 65).
The previous Special Rapporteur, Manfred Nowak, annexed to an earlier report, submitted in July 2008, the Istanbul Statement on the Use and Effects of Solitary Confinement, adopted on 9 December 2007.
It stated, in a passage cited by the Special Rapporteur: It has been convincingly documented on numerous occasions that solitary confinement may cause serious psychological and sometimes physiological ill effects.
Research suggests that between one third and as many as 90% of prisoners experience adverse symptoms in solitary confinement.
A long list of symptoms ranging from insomnia and confusion to hallucinations and psychosis has been documented.
Negative health effects can occur after only a few days in solitary confinement, and the health risks rise with each additional day spent in such conditions.
Similar conclusions were reached by the CPT in its 21st General Report of 10 November 2011.
It referred to evidence that solitary confinement can have an extremely damaging effect on the mental, somatic and social health of those concerned, which increases the longer the measure lasts and the more indeterminate it is (para 53).
It considered the maximum period for which solitary confinement should be imposed as a punishment to be 14 days (para 56(b)).
The dangers of prolonged segregation have also been accepted by government within the United Kingdom.
In relation to England and Wales, the relevant Prison Service Order (PSO 1700, first issued in 2003) states at p 29: Research into the mental health of prisoners held in solitary confinement indicates that for most prisoners there is a negative effect on their mental wellbeing and that in some cases the effects can be serious.
A study by Grassian & Friedman (1986) stated that, Whilst a term in solitary confinement would be difficult for a well adjusted person, it can be almost unbearable for the poorly adjusted personality types often found in a prison.
The study reported that the prisoners became hypersensitive to noises and smells and that many suffered from several types of perceptual distortions (eg hearing voices, hallucinations and paranoia).
The risks involved in prolonged segregation are also acknowledged by the SPS.
The guidance document issued in November 2006, referred to earlier, states that there should be awareness of the impact that segregation may have on a prisoners mental health.
It states that it is an established principle that segregation should be used sparingly and for the minimum time necessary, in order to protect the physical and mental health of segregated prisoners.
Every prison system has prisoners who are unable, for a variety of reasons, to serve their sentences in the mainstream.
This may be because they require protection from other prisoners, because of the nature of their offence, their co operation with the criminal justice authorities, inter gang rivalries, debts inside or outside the prison, or the general vulnerability of the person.
It may be because they themselves present a threat to the safety of other prisoners, or because their behaviour is liable to jeopardise the good order of the prison.
In the first instance, such prisoners can be removed from association under rule 94 and located in a segregation unit.
As the European Court has emphasised, however, they cannot be held in segregation indefinitely: Ramirez Sanchez, para 145.
The basic obligation which the prison system attempts to secure by the segregation of prisoners for the purpose of protection to provide a safe environment for those confined to prison is ultimately inconsistent with the use of segregation as a long term measure.
There are however ways in which states can fulfil this obligation over the long term, in respect of prisoners who remain at risk of harm.
One option is to identify particular locations as accommodation for prisoners who are likely to be unsuitable for mainstream accommodation for a prolonged period.
Such locations might accommodate small groups of prisoners with reduced levels of association and increased officer supervision.
Locations of that nature existed in Scottish prisons until relatively recently, at the Barlinnie Special Unit and similar units at Perth, Peterhead and Shotts.
Broadly analogous locations continue to exist in England and Wales, in the form of High Supervision Units and Close Supervision Centres.
In the absence of any such unit in Scotland during the period in question, the only option considered in the appellants case was his segregation until a long term management plan [is] put in place via ECMDP, as the applications for authority repeatedly stated.
There was however no meaningful plan put in place until the appellant had been in segregation for 55 months.
Whether a successful plan might have been put in place earlier is uncertain, but by no means impossible.
It is noteworthy that the appellant was accommodated safely in the mainstream remand population at Edinburgh between September and November 2006, and that he was able to be integrated into the mainstream population there within a short time of his transfer there in June 2010.
The possibility cannot be excluded that he might have been integrated there earlier, if a suitable plan had been devised and implemented.
It is also noteworthy that his co accused were integrated into the mainstream at Dumfries while the appellant continued to be segregated in establishments in west central Scotland, where attitudes towards him might have been expected to be most hostile.
It has not been explained why the appellant could not have joined his co accused, or indeed could not have been placed with them during the years when all three were in segregation.
Quite apart from the possibility of the appellants being successfully transferred to a prison in another part of Scotland, it is also accepted that no consideration was given to the possibility of transferring him to a prison elsewhere in the United Kingdom, under the provisions of Schedule 1 to the Crime (Sentences) Act 1997.
In deciding whether the Ministers have complied with the standards laid down in the Convention, the scope for them to find appropriate accommodation for prisoners elsewhere in the United Kingdom has to be borne in mind (Mathew v The Netherlands (2005) 43 EHRR 444, para 204).
It is however unnecessary to speculate about these and other possibilities.
What is apparent is that no meaningful plan was devised until a very late stage.
It is for the Ministers to establish that the appellants segregation for 56 months was proportionate.
In my judgment, in the absence of any evidence that serious steps were taken by the SPS management to address the issues arising from his segregation until four and a half years after it had begun, they have failed to do so.
Just satisfaction
Where the court finds that an act of a public authority is unlawful under section 6(1) of the Human Rights Act, as in the present case, section 8(1) of the Act enables the court to grant such relief or remedy, or make such order, as it considers just and appropriate.
Under section 8(3) of the Act, no award of damages is to be made unless, taking account of all the circumstances of the case, including any other relief or remedy granted, the court is satisfied that the award is necessary to afford just satisfaction to the person in whose favour it is made.
Section 8(4) requires the court, in determining whether to award damages, or the amount of an award, to take into account the principles applied by the European Court under article 41 of the Convention.
The approach which should be adopted was explained by the House of Lords in R (Greenfield) v Secretary of State for the Home Department [2005] UKHL 14; [2005] 1 WLR 673, and by this court in R (Faulkner) v Secretary of State for Justice; R (Sturnham) v Parole Board of England and Wales (Nos 1 and 2) [2013] UKSC 23 and 47; [2013] 2 AC 254.
The European Court has considered the application of article 41 in a number of cases concerned with violations of article 8 where prisoners were subject to segregation.
In some cases, modest awards have been made in respect of non pecuniary damage arising not from the segregation itself, but from other restrictions imposed.
For example, in Glmez v Turkey (Application No 16330/02) given 20 May 2008, an award was made in respect of a restriction on the prisoners right to receive family visits.
In other cases, the court declined to make an award in respect of non pecuniary damage, holding that the finding of a violation of the Convention in itself constituted sufficient just satisfaction: see, for example, Messina v Italy (No 2) (Application No 25498/94) given 28 September 2000.
On general principles, however, there is no doubt that an award may be made in respect of the costs and expenses necessarily incurred in order to establish the violation, or for its prevention or redress.
In the present case, it is not suggested that the appellant was prejudiced by the breaches of the time limit under rule 94(5), which invalidated the authorisation of 14 months of his segregation.
His segregation would without doubt have continued during those periods even if the procedures had been carried out timeously.
Nor has it been established that the deference of local management to the ECMDP was prejudicial to the appellant.
Whether the failure to develop a management plan for his integration into the mainstream, or to consider possible transfers, resulted in the prolongation of his segregation is possible but uncertain.
Three matters are however clear.
One is that it is not suggested that he suffered any severe or permanent injury to his health as a consequence of the prolongation of his segregation.
Another is that the degree of interference with his private life which resulted from his removal from association with other prisoners was relatively limited, given the attitude of the other prisoners towards him.
The third is that he was not isolated from all contact with other prisoners, and remained entitled to receive visits and to make telephone calls.
In these circumstances, just satisfaction can be afforded by making a declaratory order, establishing that the appellants Convention rights were violated, and by making an appropriate award of costs.
Conclusion
For these reasons, I would allow the appeal and grant declarator (1) that the appellant was segregated without lawful authority (a) between 11.15 am on 31 January 2007 and 9.55 am on 3 April 2007, (b) between 6 pm on 5 July 2007 and 4 pm on 15 January 2008, and (c) between 4.30 pm on 12 September 2009 and 4.30 pm on 13 March 2010, and (2) that the circumstances of the appellants segregation violated his Convention rights under article 8.
I would in addition find the appellant entitled to the costs of this appeal, and invite submissions in relation to the expenses of the proceedings in the Court of Session.
| UK-Abs | In 2006 the appellant and his two co accused were convicted of the racially aggravated abduction and murder of a 15 year old boy.
Upon being remanded in custody, from 7 October 2005 the appellant was removed from association with other prisoners and placed in solitary confinement (segregation).
It was considered that the appellant and his co accused were liable to attack by other prisoners, and there were persistent fears for their safety if accommodated in mainstream conditions.
Apart from a period immediately prior to and during his trial, the appellant remained in continuous segregation until 13 August 2010.
Altogether he spent 56 months in segregation.
The appellant was segregated pursuant to the Prisons and Young Offenders Institution (Scotland) Rules 1994 and the subsequent Prisons and Young Offenders Institution (Scotland) Rules 2006, the relevant provisions of which are identical.
Rule 94 of the 2006 Rules permit a Governor to authorise segregation for up to 72 hours for the purpose of maintaining good order or discipline, protecting the interests of any prisoner, or ensuring the safety of other persons.
Segregation beyond 72 hours for a further month must be authorised by the Scottish Ministers, prior to the expiry of the said period of 72 hours, on the application of a Governor.
The Scottish Ministers may renew the authority for further monthly periods, again on the application of a Governor.
The appellant sought orders declaring that certain periods of his segregation were in breach of the relevant Prison Rules, and that his segregation violated article 3 of the European Convention on Human Rights, the prohibition against torture, inhuman and degrading treatment, and article 8, the right to respect for private life.
His judicial review challenging the lawfulness of his segregation was refused by both the Outer House and the Inner House of the Court of Session.
The Supreme Court unanimously allows the appeal, granting a declarator (1) that the appellant was segregated unlawfully during three separate periods totalling 14 months; and (2) that his article 8 rights were violated.
Lord Reed gives the only judgment with which Lord Neuberger, Lady Hale, Lord Sumption and Lord Hodge agree.
There are three issues in the appeal: (1) whether the authorities admitted failure to comply with the time limits imposed by the Prison Rules invalidated the continued segregation; (2) whether the appellants segregation breached article 3 of the Convention; and (3) whether his segregation violated article 8.
On the first issue, rule 94(5) means that segregation should not continue beyond the initial 72 hours unless the Ministers authority has been granted before the 72 hours have expired [15].
Rule 94(6) makes it clear that the Ministers authority takes effect from the expiry of the 72 hour period [16].
A late authority by the Ministers, granted after the expiry of the 72 hour period, cannot have effect [17].
This is consistent with the purpose of the legislation: to provide a safeguard for the protection of the prisoner, by ensuring that the need for segregation is reviewed within a short time by officials external to the prison and that segregation is maintained only for so long as is necessary [18].
On the three occasions when authority for the appellants segregation was granted late, that authority was invalid, and incapable of renewal.
Consequently, the appellants segregation for periods totalling about 14 months lacked authorisation under the Prison Rules [28].
It is however accepted that the appellant was not prejudiced as a result [29].
On the second issue, the conditions of segregation and the measures imposed were not in themselves in breach of article 3 [32 33].
The appellant was placed in segregation in the interests of his own safety, and there was a genuine and reasonable concern that he was at risk of serious injury or worse [34].
The appellant did not suffer any severe or permanent injury to his health.
The isolation he experienced was partial and relative.
Whilst the duration of his segregation was undesirable, and the conditions could have been improved, the appellants segregation did not attain the minimum level of severity required for a violation of article 3 [36 37].
On the third issue, the Ministers accepted that segregation is an interference with the right to respect for private life under article 8(1).
It must therefore pursue a legitimate aim, be in accordance with the law, and be a proportionate means of achieving the aim pursued [39].
The segregation pursued a legitimate aim, namely the protection of the appellants safety [40].
However, during the periods in which the appellant was segregated without valid authorisation under the Prison Rules, his segregation was not in accordance with the law [41].
Additionally, some of the decisions taken by Governors to segregate the appellant or to apply for Ministers authorisation for his continued segregation were not taken in the exercise of their own independent judgment.
Instead, they proceeded on the basis that the decision had already been made by the Executive Committee for the Management of Difficult Prisoners (ECMDP), a body which was not entrusted with the power to make such a decision.
This invalidated subsequent decision making by the Ministers, as their power of decision was predicated on a valid application being made to them.
This breach of domestic law also results in a violation of article 8, although it does not appear to have prejudiced the appellant, as when Governors did carry out an independent assessment, they reached the conclusion that segregation was necessary to protect the appellants safety [66 73].
In relation to proportionality, the seriousness of the risk of harm required to justify segregation becomes greater as time goes by, and increased scrutiny will be applied as to whether segregation is the only means of addressing the risk [76].
Other potential accommodation options, providing reduced association and greater supervision for prisoners who remain at risk of harm, were not available in Scotland during the period in question.
No consideration was given to the possibility of transferring the appellant to a prison elsewhere in the UK.
No meaningful plan was put in place until the appellant had been in segregation for 55 months.
Accordingly, the Scottish Ministers have failed to establish that the appellants segregation for the entire period was proportionate [83 86].
In the circumstances, just satisfaction can be afforded by making a declaratory order [89].
|
When is it lawful for a local housing authority to accommodate a homeless person a long way away from the authoritys own area where the homeless person was previously living? There is no doubt that, for a variety of reasons, such out of borough placements have become increasingly common in recent years.
The latest national statistics show that in September 2014 a quarter of all temporary accommodation for homeless people was provided in a different council area, an increase from 21% in September 2013.
The great majority of these were from London Boroughs (Department for Communities and Local Government, Statutory Homelessness: July to September Quarter, England, National Statistics, Housing, Statistical Release, 11 December 2014).
However, local authorities have a statutory duty to provide accommodation in their own area so far as reasonably practicable: Housing Act 1996 (the 1996 Act), section 208(1).
And if that is not practicable, statutory guidance requires them where possible, to try to secure accommodation as close as possible to where the applicant was previously living.
This case is about the import of those duties for individual households who are offered an out of borough placement.
The facts
The appellant is a 51 year old single mother of five children, aged between eight and 14.
She has many long standing health problems: she is HIV positive, and suffers from Type II diabetes, hypertension, diabetic retinopathy and perhaps depression.
She has lived in London since at least January 2000.
From December 2008 to November 2012, the family lived in a privately rented four bedroomed house in Westminster.
Her rent of 1,150 per week was covered by housing benefit.
In 2012, however, a cap (known as the local housing allowance) was placed on the amount of housing benefit payable for privately rented properties according to their size and locality (known as the local housing allowance).
Her maximum housing benefit was dramatically reduced.
This meant that she was no longer able to afford the rent.
The landlord was not prepared to reduce it and so she was evicted from her home in November 2012.
She applied to Westminster City Council under the homelessness provisions in Part 7 of the 1996 Act and the family were temporarily housed in two rooms in a hotel in the Royal Borough of Kensington and Chelsea on a bed and breakfast basis.
This was near enough for the children to continue in their schools.
On 17 January 2013, she was notified that Westminster had decided that she was homeless, eligible for assistance, in priority need, not intentionally homeless, and that they should not refer her case to another local authority where she was more closely connected.
Hence they accepted that they owed her what is usually termed the main homelessness duty under section 193(2) of the 1996 Act, as they put it a duty to ensure that you have somewhere suitable in which to live.
Their temporary lettings team would be contacting her shortly with an offer of self contained temporary accommodation in discharge of that duty.
On Thursday 24 January, the authority wrote offering her temporary accommodation in a five bedroomed house in Bletchley, near Milton Keynes.
They had arranged for her to view the property at 12 pm on Monday 28 January.
The letter explained: There is a severe shortage of accommodation in Westminster and it is not reasonably practicable for us to offer a Westminster home for everyone who applies for one.
That is why we have had to offer you accommodation in Milton Keynes.
Although it is outside Westminster, having considered your circumstances, we believe this accommodation is suitable for you.
The appellant rejected this offer because it was too far away.
It was too far from people helping her with her children.
There would be nobody there she knew.
She had high blood pressure and wanted to stay with her GP.
It would mean changing the childrens schools.
She had lived in Westminster for a long time.
The authoritys immediate response, by letter of Friday 25 January, was that none of the children was of GSCE age, so it was suitable for them to move schools.
The average journey time from the Bletchley property to Westminster was around one hour and 15 minutes.
The property was of a suitable size for the family and based on your circumstances theres no reason for us to place you within the borough of Westminster.
Because she had refused the offer, their duty under section 193 had ended and they were no longer required to provide her with accommodation.
The letter was headed Notice that our housing duty has come to an end.
This was no doubt because the duty under section 193(2) does not come to an end automatically when the applicant refuses to accept an offer of accommodation which the authority are satisfied is suitable; under section 193(5), the authority must serve notice that the duty has come to an end.
The appellant sought a review of the authoritys decision under section 202 of the 1996 Act.
She was interviewed for the purpose of the review, where she repeated her concerns and gave some more details of the help she received from her friends.
Three of her friends were also interviewed.
Two medical certificates were obtained which confirmed that her chronic conditions [were] incurable and likely to worsen with further complications and that she needed safe accommodation to be able to take medication and stay well; but a medical assessment could not find anything medical to preclude residing in Milton Keynes.
The review was completed on 27 May 2013 and the reviewing officer confirmed the decision that the property in Bletchley was suitable and the duty towards her discharged.
The decision letter dealt in detail with the familys personal circumstances.
As to these, the officers conclusions were: I am not satisfied that the accommodation was unsuitable on the grounds that your medical and support needs are such that you have to live in Westminster; the length of time she had lived in Westminster was not a particularly long time and does not mean that you cannot live anywhere else; none of her children were currently sitting national exams and could move schools without their education suffering; and the accommodation offered was suitable and affordable.
The letter then refers to the duty in section 208 of the 1996 Act and states: As you are aware Westminster is currently suffering from a severe shortage of both temporary and permanent accommodation.
It is therefore not reasonably practicable to offer temporary accommodation in the borough for everyone who applies for it and therefore we have to offer some people temporary accommodation located outside Westminster.
The Councils Temporary Lettings team carefully assesses each application based on the individual circumstances of each household member and decides what type of accommodation would be suitable for the household.
Given the shortage of housing in Westminster and all of your circumstances, including those above, I believe that it was reasonable for the Council to offer your household this accommodation outside the Westminster area.
This appears to be a standard paragraph which has appeared in a number of other decision letters emanating from the City of Westminster.
The authority have produced no evidence of their policy in relation to the procurement of accommodation in order to fulfil their obligations under the 1996 Act, nor of the location of that accommodation, nor of the instructions given to the temporary lettings team as to how they are to decide which properties are offered to which applicants.
The appellant then appealed to the county court under section 204 of the 1996 Act.
The appeal was heard in October 2013.
The authority adduced evidence that at that date 52% of Westminsters temporary accommodation units were in borough and 48% out of borough.
Also produced was a report dated May 2012, from the Strategic Director of Housing, Regeneration and Property, produced for the relevant Cabinet Members approval.
This reviewed the demand for and supply of social rented housing and low cost home ownership for the previous year and made supply and demand projections for the coming year.
It revealed that in the nine months to the end of 2011 there had been 1072 homelessness applications and 394 acceptances; there was a total of 1783 households in temporary accommodation, of which 478 were stage 2 (that is, after the main homelessness duty had been accepted); the housing benefit cap was leading to an increase in homelessness resulting from the loss of a private sector tenancy; at the same time it was becoming increasingly difficult to source self contained temporary accommodation from the private sector, particularly in high rent areas; but at that time around 70% of their temporary accommodation was in borough, with the majority of the non Westminster stock in East London; it would continue to be secured in borough so far as reasonably practicable but would also be sourced out of borough in areas where it was available.
The appeal was unsuccessful.
HHJ Hornby commented that: I appreciate that there appears to be no reference in particular to the fact that consideration was given to the particular area within Westminster or those areas nearer than Milton Keynes, but it seems to me almost inevitable that the team must have had regard to all the stock that there was and allocated what was the most suitable property available to them for that particular person.
The authority had been continuing to provide interim accommodation for the appellant and her children during the review and appeal process.
But they refused to do so pending her application for permission to appeal to the Court of Appeal.
After she was refused permission for a judicial review of that decision, the authority ceased to provide that accommodation.
The childrens services department refused to accommodate the whole family and so on 24 February 2014, the appellant asked the childrens services department to provide accommodation for her children under the Children Act 1989.
The children were separated between three different foster families and care proceedings were begun.
The appellant was granted permission to appeal to the Court of Appeal, but that appeal was also unsuccessful, for reasons which were essentially the same as those of Judge Hornby: [2014] EWCA Civ 1383, [2015] PTSR 211 (see paras 33 and 34 below).
The 1996 Act and Guidance
Sections 206 and 208 of the 1996 Act impose distinct but related requirements upon the local authority.
Section 206(1) provides that the authority may discharge their housing functions only by securing suitable accommodation, albeit by a variety of routes.
Section 208(1) provides that: So far as reasonably practicable a local housing authority shall in discharging their housing functions under this Part secure that accommodation is available for the occupation of the applicant in their district.
By virtue of section 205(1) of the 1996 Act, their housing functions refers to their functions under Part 7 to secure that accommodation is available for a persons occupation.
It is clear, therefore, that these are duties owed to the individual person to whom the main homelessness duty is owed.
The accommodation offered has to be suitable to the needs of the particular homeless person and each member of her household and the location of that accommodation can be relevant to its suitability: see R (Sacupima) v Newham London Borough Council [2001] 1 WLR 563, CA.
This has since been fleshed out in statutory guidance.
Under section 182(1) of the 1996 Act, local housing authorities are required to have regard to such guidance as may from time to time be given by the Secretary of State.
The current general guidance is contained in the Homelessness Code of Guidance for Local Authorities (Department for Communities and Local Government, 2006).
As to the duty in section 208(1), this provides: 16.7.
Section 208(1) requires housing authorities to secure accommodation within their district, in so far as is reasonably practicable.
Housing authorities should, therefore, aim to secure accommodation within their own district wherever possible, except where there are clear benefits for the applicant of being accommodated outside of the district.
This could occur, for example, where the applicant, and/or a member of his or her household, would be at risk of domestic or other violence in the district and need to be accommodated elsewhere to reduce the risk of further contact with the perpetrator(s) or where ex offenders or drug/alcohol users would benefit from being accommodated outside the district to help break links with previous contracts which could exert a negative influence.
As to suitability, the Code says this about the location of the accommodation: 17.41.
The location of the accommodation will be relevant to suitability and the suitability of the location for all the members of the household will have to be considered.
Where, for example, applicants are in paid employment account will need to be taken of their need to reach their normal workplace from the accommodation secured.
The Secretary of State recommends that local authorities take into account the need to minimise disruption to the education of young people, particularly at critical points in time such as close to taking GCSE examinations.
Housing authorities should avoid placing applicants in isolated accommodation away from public transport, shops and other facilities, and, wherever possible, secure accommodation that is as close as possible to where they were previously living, so they can retain established links with schools, doctors, social workers and other key services and support essential to the well being of the household.
This has since been expanded upon.
Under section 210(2), the Secretary of State may by order specify (a) the circumstances in which accommodation is or is not to be regarded as suitable, and (b) the matters to be taken into account or disregarded in determining whether accommodation is suitable for a person.
During the passage of the Localism Act 2011, the Government undertook to remain vigilant to any issues that arose around suitability of location.
It had come to light that some local authorities were seeking accommodation for households owed the main homelessness duty far outside their own district.
The Government was therefore willing to explore whether protections around location of accommodation need to be strengthened and how this might be done (Department for Communities and Local Government, Homelessness (Suitability of Accommodation) (England) Order 2012 Consultation, May 2012, para 38).
A full consultation exercise showed widespread support for strengthening that protection (Department for Communities and Local Government, Homelessness (Suitability of Accommodation)(England) Order 2012 Governments Response to Consultation, November 2012): Government has made it clear that it is neither acceptable nor fair for local authorities to place households many miles away from their previous home where it is avoidable.
Given the vulnerability of this group it is essential that local authorities take into account the potential disruption such a move could have on the household.
The method chosen was to make it a matter of statutory obligation to take the location of the accommodation into account when determining whether accommodation is suitable.
Hence, in October 2012, shortly before the decisions were taken in this case, the Secretary of State made the Homelessness (Suitability of Accommodation) (England) Order 2012 (SI 2012/2601).
Article 2 provides: In determining whether accommodation is suitable for a person, the local housing authority must take into account the location of the accommodation, including (a) where the accommodation is situated outside the district of the local housing authority, the distance of the accommodation from the district of the authority; (b) the significance of any disruption which would be caused by the location of the accommodation to the employment, caring responsibilities or education of the person or members of the persons household; (c) the proximity and accessibility of the accommodation to medical facilities and other support which (i) are currently used by or provided to the person or members of the persons household; and (ii) are essential to the well being of the person or members of the persons household; and (d) the proximity and accessibility of the accommodation to local services, amenities and transport.
The Governments response to consultation had emphasised that the Order does not prevent or prohibit out of borough placements where they are unavoidable nor where they are the choice of the applicant.
However, the Department also issued Supplementary Guidance on the homelessness changes in the Localism Act 2011 and on the Homelessness (Suitability of Accommodation) (England) Order 2012 (November 2012), which strengthened the obligation to secure accommodation as close as possible to where the household had previously been living: 48.
Where it is not possible to secure accommodation within district and an authority has secured accommodation outside their district, the authority is required to take into account the distance of that accommodation from the district of the authority.
Where accommodation which is otherwise suitable and affordable is available nearer to the authoritys district than the accommodation which it has secured, the accommodation which it has secured is not likely to be suitable unless the authority has a justifiable reason or the applicant has specified a preference. 49.
Generally, where possible, authorities should try to secure accommodation that is as close as possible to where an applicant was previously living.
Securing accommodation for an applicant in a different location can cause difficulties for some applicants.
Local authorities are required to take into account the significance of any disruption with specific regard to employment, caring responsibilities or education of the applicant or members of their household.
Where possible the authority should seek to retain established links with schools, doctors, social workers and other key services and support. (Emphasis supplied) The guidance goes on to deal with employment, caring responsibilities, education, medical facilities and other support, and also with cases where there may be advantages in the household being accommodated somewhere outside the local authoritys district, including employment opportunities there.
The effect, therefore, is that local authorities have a statutory duty to accommodate within their area so far as this is reasonably practicable.
Reasonable practicability imports a stronger duty than simply being reasonable.
But if it is not reasonably practicable to accommodate in borough, they must generally, and where possible, try to place the household as close as possible to where they were previously living.
There will be some cases where this does not apply, for example where there are clear benefits in placing the applicant outside the district, because of domestic violence or to break links with negative influences within the district, and others where the applicant does not mind where she goes or actively wants to move out of the area.
The combined effect of the 2012 Order and the Supplementary Guidance changes, and was meant to change, the legal landscape as it was when previous cases dealing with an out of borough placement policy, such as R (Yumsak) v Enfield London Borough Council [2002] EWHC 280 (Admin), [2003] HLR 1, and R (Calgin) v Enfield London Borough Council [2005] EWHC 1716 (Admin), [2006] HLR 58, were decided.
An applicant who is dissatisfied with any of the local authoritys decisions listed in section 202(1) of the Act can request a review of that decision.
The decisions listed do not in terms include a decision to place out of borough despite section 208(1).
But they do include, at (f), any decision of a local housing authority as to the suitability of accommodation offered in discharge of their duty under, inter alia, section 193(2).
They also include, at (b), any decision as to what duty (if any) is owed, inter alia, under section 193(2).
It is common ground that (b) includes a decision that the duty is no longer owed because it has been discharged.
Under section 204, an applicant who has requested a review under section 202 and is dissatisfied with the decision may appeal to a county court on any point of law arising from the decision (alternatively, if the review decision has not been notified within the prescribed time, arising from the original decision).
The childrens welfare
Shelter Childrens Legal Service have helpfully intervened to remind the court that the exercise of the local authoritys functions under the 1996 Act is covered by section 11(2) of the Children Act 2004.
This requires each person or body to whom the section applies (which includes a local housing authority) to make arrangements for ensuring that: (a) their functions are discharged having regard to the need to safeguard and promote the welfare of children; and (b) any services provided by another person pursuant to arrangements made by the person or body in the discharge of their functions are provided having regard to that need.
Section 11 does not define welfare, but section 10 provides a statutory framework for co operation between the local authority and relevant agencies with a view to improving the well being of children in the area.
Well being for this purpose is defined as (a) physical, mental and emotional well being; (b) protection from harm and neglect; (c) education, training and recreation; (d) the contribution made by children to society; and (e) social and economic well being (section 10(2)).
The welfare of the child has long been given a broad meaning in family proceedings, encompassing physical, psychological, social, educational and economic welfare.
It has been held that section 11 applies, not only to the formulation of general policies and practices, but also to their application in an individual case.
As Pitchford LJ put it, in R (Castle) v Metropolitan Police Commissioner [2011] EWHC 2317 (Admin), [2014] 1 All ER 953, para 51: The chief officers statutory obligation is not confined to training and dissemination of information.
It is to ensure that decisions affecting children have regard to the need to safeguard them and to promote their welfare.
However, he went to point out that: This does not mean that the duties and functions of the police have been re defined by section 11 the guidance accurately states the obligation of chief officers of police to carry out their existing functions in a way which takes into account the need to safeguard and promote the welfare of children.
In the homelessness context, there is a distinction between the factual decisions which the authority have to make and an exercise of discretion or evaluation.
Thus it has been held that section 11 has no part to play in the decision as to whether a persons actions are deliberate for the purpose of deciding whether she is intentionally homeless.
As Moses LJ pointed out in Huzrat v Hounslow London Borough Council [2013] EWCA Civ 1865, para 26: The statutory questions are clear; was the action or omission in question deliberate? The answer to that question cannot differ [according to] whether the local authority takes into account the duty under section 11 of the Childrens [sic] Act or not.
Some statutory questions do leave room for the consideration of the childs welfare.
Where the question relates to the eligibility of a third country national for homelessness assistance under the Regulations implementing the decision of the Court of Justice of the European Union in Ruiz Zambrano v Office national de lemploi (Case C 34/09) [2012] QB 265, the test is whether the EU citizen child of that third country national would be unable to reside in the UK or another EEA state if the third country national were obliged to leave.
It was held in Hines v Lambeth London Borough Council [2014] EWCA Civ 660, [2014] 1 WLR 4112, that the childs welfare had obviously to be taken into account, but it could not be the paramount consideration as this would be inconsistent with the statutory language.
The question of whether the accommodation offered is suitable for the applicant and each member of her household clearly requires the local authority to have regard to the need to safeguard and promote the welfare of any children in her household.
Its suitability to meet their needs is a key component in its suitability generally.
In my view, it is not enough for the decision maker simply to ask whether any of the children are approaching GCSE or other externally assessed examinations.
Disruption to their education and other support networks may be actively harmful to their social and educational development, but the authority also have to have regard to the need to promote, as well as to safeguard, their welfare.
The decision maker should identify the principal needs of the children, both individually and collectively, and have regard to the need to safeguard and promote them when making the decision.
However, section 11 does not in terms require that the childrens welfare should be the paramount or even a primary consideration.
As the Joint Committee on Human Rights pointed out (19th Report of Session 2003 2004, Children Bill, HL Paper 161, paras 69 to 77), it does not in terms reproduce the wording of article 3(1) of the United Nations Convention on the Rights of the Child (UNCRC): 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.
Where Convention Rights under the Human Rights Act 1998 are engaged, it is well established that they have to be interpreted and applied consistently with international human right standards, including the UNCRC: see ZH (Tanzania) v Secretary of State for the Home Department [2011] UKSC 4, [2011] 2 AC 166, H(H) v Deputy Prosecutor of the Italian Republic Genoa (Official Solicitor intervening), [2012] UKSC 25, [2013] 1 AC 338, Stevens v Secretary of State for Communities and Local Government [2013] EWHC 792 (Admin), [2013] JPL 1383, approved in Collins v Secretary of State for Communities and Local Government [2013] EWCA Civ 1193, [2013] PTSR 1594.
It is not suggested in this case that any of the Convention rights are engaged: compare Yumsak (para 19 above), where it was conceded that placing the mother and her children in Birmingham interfered with their rights under article 8 of the Convention.
We have not heard argument on the interesting question of whether, even where no Convention right is involved, section 11 should nevertheless be construed consistently with the international obligations of the United Kingdom under article 3 of the UNCRC.
That must be a question for another day.
It is also the case that there will almost always be children affected by decisions about where to accommodate households to which the main homelessness duty is owed.
Such households must, by definition, be in priority need, and most households are in priority need because they include minor children.
The local authority may have the invidious task of choosing which household with children is to be offered a particular unit of accommodation.
This does not absolve the authority from having regard to the need to safeguard and promote the welfare of each individual child in each individual household, but it does point towards the need to explain the choices made, preferably by reference to published policies setting out how this will be done (as to which see further below).
Evidencing and explaining the authoritys decisions
The Secretary of State for Communities and Local Government has also intervened in this case, in order to emphasise that when making decisions about where to accommodate homeless persons, local authorities have a number of duties to evidence and explain their decisions.
They are required to take the Code and Supplementary Guidance into account.
If they decide to depart from them they must have clear reasons for doing so: see R (Khatun) v Newham London Borough Council [2004] EWCA Civ, [2005] QB 37, para 47.
Very good reasons are required to depart from a policy formulated after public consultation: Royal Mail Group plc v Postal Services Commission [2007] EWHC 1205 (Admin), para 33.
This is especially so where the Code is designed to protect vulnerable people: R (Munjaz) v Mersey Care NHS Trust [2005] UKHL 58, [2006] 2 AC 148.
By definition, any homeless household in priority need will be vulnerable in this sense.
The authority must also have a proper evidential basis for their decision: R (Calgin) v Enfield London Borough Council [2005] EWHC 1716 (Admin), [2006] HLR 58, para 32.
It must be clear from the decision that proper consideration has been given to the relevant matters required by the Act and the Code.
While the court should not adopt an overly technical or nit picking approach to the reasons given in the decision, these do have to be adequate to fulfil their basic function.
It has long been established that an obligation to give reasons for a decision is imposed so that the persons affected by the decision may know why they have won or lost and, in particular, may be able to judge whether the decision is valid and therefore unchallengeable or invalid and therefore open to challenge: see R v City of Westminster, Ex p Ermakov (1996) 28 HLR 819, at 826 827.
Nor, without a proper explanation, can the court know whether the authority have properly fulfilled their statutory obligations.
The Secretary of State is concerned that the Court of Appeal was too ready to assume that the authority had properly complied with their statutory obligations.
Thus, at para 21, it was said that the reviewing officer must be taken to have been aware of the resources available to the council and the pressures on them.
It is not necessary in a decision letter of this kind for the reviewing officer to describe in detail what those resources and pressures are.
If, as I think, Westminster was entitled to take a broad range of factors into account in deciding whether it was reasonably practicable to provide accommodation to [the applicant] within its own district, it was sufficient for the reviewing officer to describe the circumstances which led her to that conclusion in general terms.
I am therefore not persuaded that her decision was irrational in the sense that it lacked an evidential base.
Then, at para 25, when it came to providing accommodation as close as possible to the home district: The guidance produced by the Secretary of State is lengthy and detailed in my view there is no basis for inferring that [the reviewing officer] did not have it in mind or that she was unaware of the desirability of accommodating [the applicant] as close to Westminster as was reasonably practicable.
It was not necessary for her to explain in detail what other accommodation was available to Westminster outside its own district and why it had not been offered to [her].
The Secretary of State complains that the effect of this approach would be to encourage courts to infer, on no other basis than the assumed experience and knowledge of a local authority, that the authority knew of the Code and Guidance and had taken it into account; that the authority had considered and rejected the possibility of providing closer accommodation than that offered; and that the authority had good reasons for their decision in this particular case.
If the courts are prepared to assume all this in the authoritys favour, this would immunise from judicial scrutiny the automatic decisions to house people far from their home district, which was just what the 2012 Order and Supplementary Guidance were designed to prevent.
This case
The Secretary of State has, of course, made no submissions as to the effect of these criticisms in this particular case.
Mr Peacock, on behalf of the Local Authority, does not dispute the applicable principles but has valiantly tried to defend the decision letter.
But it is apparent that this decision suffers from all of those defects and more.
There is little to suggest that serious consideration was given to the authoritys obligations before the decision was taken to offer the property in Bletchley.
At that stage, the temporary lettings team knew little more than what was on the homelessness application form.
This did not ask any questions aimed at assessing how practicable it would be for the family to move out of the area.
Nor were any inquiries made to see whether school places would be available in Bletchley and what the appellants particular medical conditions required.
Those inquiries were only made after the decision had been taken.
The review decision is based on the premise that, because of the general shortage of available housing in the borough, the authority could offer accommodation anywhere else, unless the applicant could show that it was necessary for her and her family to remain in Westminster.
There was no indication of the accommodation available in Westminster and why that had not been offered to her.
There was no indication of the accommodation available near to Westminster, or even in the whole of Greater London, and why that had not been offered to her.
There was, indeed, no indication that the reviewing officer had recognised that, if it was not reasonably practicable to offer accommodation in Westminster, there was an obligation to offer it as close by as possible.
It follows that the authority cannot show that their offer of the property in Bletchley was sufficient to discharge their legal obligations towards the appellant under the 1996 Act.
Moreover, their notification to the appellant that their duty towards her had come to an end was purportedly given in circumstances where she did not know, and had no means of knowing, what, if any, consideration had been given to providing accommodation in or nearer to the borough, apart from the general standard paragraph in the letter offering her the Bletchley accommodation the previous day.
I would add that they also cannot show that they have properly discharged their obligation under section 11 of the Children Act 2004.
The appeal must be allowed and the decision that their duty to secure that accommodation was made available to her had come to an end must be quashed.
Guidance
But how, it may be asked, are local authorities to go about explaining their decisions as to the location of properties offered? It is common ground that they are entitled to take account of the resources available to them, the difficulties of procuring sufficient units of temporary accommodation at affordable prices in their area, and the practicalities of procuring accommodation in nearby authorities.
It may also be acceptable to retain a few units, if it can be predicted that applicants with a particularly pressing need to remain in the borough will come forward in the relatively near future.
On the other hand, if they procure accommodation outside their own area, that will place pressures on the accommodation, education and other public services available in those other local authority areas, pressures over which the receiving local authority will have no control.
The placing authority are bound to have made predictions as to the likely demand for temporary accommodation under the 1996 Act and to have made arrangements to procure it.
The decision in any individual case will depend upon the policies which the authority has adopted both for the procurement of temporary accommodation, together with any policies for its allocation.
Ideally, each local authority should have, and keep up to date, a policy for procuring sufficient units of temporary accommodation to meet the anticipated demand during the coming year.
That policy should, of course, reflect the authoritys statutory obligations under both the 1996 Act and the Children Act 2004.
It should be approved by the democratically accountable members of the council and, ideally, it should be made publicly available.
Secondly, each local authority should have, and keep up to date, a policy for allocating those units to individual homeless households.
Where there was an anticipated shortfall of in borough units, that policy would explain the factors which would be taken into account in offering households those units, the factors which would be taken into account in offering units close to home, and if there was a shortage of such units, the factors which would make it suitable to accommodate a household further away.
That policy too should be made publicly available.
This approach would have many advantages.
It would enable homeless people, and the local agencies which advise them, to understand what to expect and what factors will be relevant to the decision.
It would enable temporary letting teams to know how they should go about their business.
It would enable reviewing officers to review the decisions made in individual cases by reference to those published policies and how they were applied in the particular case.
It would enable reviewing officers to explain whether or not the individual decision met the authorities obligations.
It would enable applicants to challenge, not only the lawfulness of the individual decision, but also the lawfulness of the policies themselves.
Indeed, it would also enable a general challenge to those policies to be brought by way of judicial review.
In some ways this might be preferable to a challenge by way of an individual appeal to a county court.
But it may not always be practicable to mount a judicial review of an authoritys policy, and an individual must be able to rely upon any point of law arising from the decision under appeal, including the legality of the policy which has been applied in her case.
No doubt there are other ways in which an authority could ensure that their decisions are properly evidenced and properly explained.
But a standard paragraph of the sort that was used in this case is not one of them.
| UK-Abs | The question arising in this appeal is whether it is lawful for a local housing authority to accommodate a homeless person a long way away from the authoritys own area where the homeless person was previously living.
Local authorities have a statutory duty to provide accommodation in their own area so far as reasonably practicable under section 208(1) Housing Act 1996 (the 1996 Act).
The accommodation must be suitable to the needs of the homeless person and each member of the household, and the location can be relevant to its suitability.
Regard must be given to any guidance given by the Secretary of State for Communities and Local Government.
While out of borough placements are not prohibited, the Homelessness (Suitability of Accommodation) (England) Order 2012 (the 2012 Order) requires authorities to take into account the distance of the accommodation being offered from its district and the disruption to caring responsibilities or the education of any member of the household.
The obligation to secure accommodation as close as possible to where the household had previously been living was strengthened by Supplementary Guidance on the homelessness changes in the Localism Act 2011 and on the Homelessness (Suitability of Accommodation) (England) Order 2012 (the Supplementary Guidance), including the need to seek to retain established links with schools, doctors, social workers and other key services and support.
The appellant is a single mother of five children aged between 8 and 14.
She has serious health problems.
In 2012 she was evicted from her privately rented home, in which she had been living since 2008, following the introduction of a cap on housing benefit, which left her unable to pay the rent.
The respondent housing authority (Westminster) accepted that she was unintentionally homeless and that it owed a duty to provide her with suitable accommodation.
It offered her temporary accommodation in a house in Bletchley, near Milton Keynes, with a brief explanation that due to a severe shortage of accommodation it was not reasonably practicable to offer her a home in Westminster, but that this house was suitable in view of her circumstances.
The children were not of GCSE age so Westminster considered it suitable for them to move schools.
The appellant refused the accommodation and Westminster served notice that its duty to house her had come to an end.
Her application for a review of the decision was unsuccessful.
Her appeals to the County Court and Court of Appeal were also dismissed.
The Supreme Court unanimously allows the appeal and quashes Westminsters decision that it had discharged its duty to house the appellant because she had refused suitable accommodation.
Lady Hale gives the only judgment.
The 1996 Act and Guidance Local authorities have a statutory duty to accommodate persons within their area so far as this is reasonably practicable.
Reasonable practicability imports a stronger duty than simply being reasonable.
Where it is not reasonably practicable to accommodate in borough they must generally try to place the household as close as possible to where they were previously living.
The combined effect of the 2012 Order and the Supplementary Guidance has changed the legal landscape when dealing with out of borough placement policies [19].
As an aspect of the suitability of the accommodation being offered, a decision to place an applicant out of borough falls within the grounds on which a review can be sought under section 202 of the 1996 Act [20].
The childrens welfare The exercise of the local authoritys functions under the 1996 Act is subject to section 11(2) of the Children Act 2004, which requires it to have regard to the need to safeguard and promote the welfare of children.
Welfare encompasses physical, psychological, social, educational and economic welfare [23] and the duty applies both to the formulation of general policies and practices and to their application in an individual case [24].
The duty is clearly relevant to the question of the suitability of the accommodation being offered [27].
It does not, however, require that the childrens welfare should be the paramount or even a primary consideration [28].
There will almost always be children affected by decisions about where to accommodate households to which the main homelessness duty is owed, and invidious choices between them must sometimes be made, but this points towards the need to explain the choices made, preferably by reference to published policies [30].
Evidencing and explaining the authoritys decisions The Secretary of State intervened in the case to emphasise the duties on local authorities to evidence and explain their decisions [31].
It must be clear from the decision that proper consideration has been given to the relevant matters required by the 1996 Act and accompanying Code.
The courts below were too ready to assume that Westminster had properly complied with its statutory obligations, which had the effect of immunising from judicial scrutiny automatic decisions to house people far from their home district [35].
This case The decision made in the appellants case suffers from these defects and more.
No enquiries were made to assess the practicability of moving the family to Bletchley or as to the childrens needs, and no consideration seems to have been given to the duty to offer accommodation as close by as possible or explanation given [36].
It follows that Westminster still owes the appellant a duty to secure suitable accommodation.
Guidance Ideally each local authority should have an up to date publically available policy for securing sufficient units of temporary accommodation to meet the anticipated demand for the coming year, reflecting its obligations under the 1996 Act and the Children Act 2004.
It should also have a policy for the allocation of those units to individual homeless households, to which reference would be made in explaining any decisions to accommodate a household out of the area [39].
This way decisions will be properly evidenced and explained, and can be challenged if required [41].
|
This is another round in the series of important points of law which arise as preliminary issues in actions brought by people who claim to have been wrongfully detained or mistreated by British or American troops in the course of the conflicts in Iraq and Afghanistan.
The litigation is being expertly managed by Leggatt J, but so far there have been no trials and so the points of law are being decided mainly on the basis of assumed facts.
To summarise the issues which have so far been heard in this court: (1) Mr Rahmatullah is a Pakistani national who was captured by the British forces in Iraq on 28 February 2004, transported to a United States detention facility that same day, and transferred by the US to a detention facility in Afghanistan on 29 March 2004, where he remained until his release on 15 May 2014.
He is suing the Ministry of Defence and the Foreign and Commonwealth Office, first in respect of the United Kingdoms own treatment of him, and second in respect of the UKs alleged complicity in his detention and treatment by the United States.
In relation to the second aspect of his claim, the UK government has raised the defences of state immunity and foreign act of state.
The arguments relating to these defences were heard together with the claims of Mr Belhaj and his wife, Mrs Boudchar, against Mr Jack Straw and a number of UK officials and agencies, for alleged complicity in their rendition by Malaysian, Thai and US officials to Libya and their detention and torture there, where the same defences were raised.
Judgment is given today: see Belhaj and another (Respondents) v Straw and others (Appellants) and Rahmatullah (No 1) (Respondent) v Ministry of Defence and another (Appellants) [2017] UKSC 3.
In relation to the first aspect of his claim, which is based on both the Iraqi law of tort and the UK Human Rights Act 1998, the UK Government has raised the doctrine of Crown act of state in relation to the tort claim, and this judgment is concerned with that doctrine. (2) A large number of Iraqi citizens have made claims similar to that of Mr Rahmatullah in respect of their detention and treatment by UK troops and transfer to the US authorities at various times during the UKs military presence in Iraq.
In relation to many of these claims, the UK Government raised the defence that they were statute barred by the Iraqi law of limitation.
Judgment on that issue was given on 12 May 2016: see Iraqi Civilians v Ministry of Defence [2016] UKSC 25; [2016] 1 WLR 2001.
The UK Government has also raised the doctrine of Crown act of state.
Three of the claimants, known as XYZ, ZMS and HTF, have been chosen as representative for the purpose of deciding this issue. (3) Mr Serdar Mohammed is an Afghan national who was captured in a planned International Security Assistance Force (ISAF) operation targeting a senior Taliban commander on 7 April 2010.
He was detained by British troops until 25 July 2010 when he was transferred into Afghan custody.
He was subsequently tried, convicted and sentenced to ten years imprisonment for offences relating to the insurgency in Afghanistan.
He too claims that his detention was unlawful both under the Afghan law of tort and the Human Rights Act 1998.
In relation to his Human Rights Act claim, the UK Government argues that his detention was not in breach of article 5 of the European Convention on Human Rights, because article 5 has to be modified to take account of detention during armed conflict which is permitted, either under resolutions of the United Nations Security Council or under International Humanitarian Law.
The argument about article 5 was heard together with a similar argument raised against the Ministry of Defence by Mr Al Waheed, an Iraqi national detained in the course of the conflict in Iraq.
Judgment is given today: see Abd Ali Hameed Al Waheed (Appellant) v Ministry of Defence (Respondent) and Serdar Mohammed (Respondent) v Ministry of Defence (Appellant) [2017] UKSC 2.
In relation to Mr Mohammeds tort claim, the UK Government has raised the same doctrine of Crown act of state as is raised in Mr Rahmatullahs and the Iraqi civilians cases, and with which this judgment is concerned. (4) For completeness, there should also be mentioned the claims brought by the PIL three under both the Human Rights Act 1998 and UK public law in respect of their detention in Afghanistan.
They bring no claim under the Afghan law of tort and so the question of Crown act of state does not arise in their cases.
The issues relating to Crown act of state
So what is this doctrine of Crown act of state? An act of state has been very widely defined, for example, by ECS Wade (in Act of State in English Law: Its Relations with International Law (1934) 15 British Yearbook of International Law 98, at p 103): Act of state means an act of the Executive as a matter of policy performed in the course of its relations with another state, including its relations with the subjects of that state, unless they are temporarily within the allegiance of the Crown.
That definition is cited, not entirely approvingly, in the leading case of Nissan v Attorney General [1970] AC 179, at 212 (Lord Reid), 218 (Lord Morris) and 231 (Lord Wilberforce).
It is also cited in the footnotes to the current issue of Halsburys Laws of England, with the comment that act of state is not a term of article Halsbury refines the definition slightly: An act of state is a prerogative act of policy in the field of international affairs performed by the Crown in the course of its relationship with another state or its subjects.
No doubt it is a necessary component of the doctrine that the act in question falls within some such definition.
But, as Lord Wilberforce pointed out in Nissan, that does not tell us what the doctrine is, or to what rule or rules of law it gives rise.
The doctrine is very rarely pleaded and so recent authority is scant.
In this century, it has been raised in the context of the conflicts in Iraq and Afghanistan, first in Al Jedda v Secretary of State for Defence (No 2) [2010] EWCA Civ 758; [2011] QB 773, which was decided on other grounds, and now in the current cases.
In the 20th century, there are only two reported House of Lords cases in which it was raised, Johnstone v Pedlar [1921] 2 AC 262 and Nissan v Attorney General, above, and in neither of them was it successful, although it did succeed in a number of Indian appeals before the Judicial Committee of the Privy Council.
We have therefore to go back to the 19th century and beyond to discover its origins and rationale.
The starting point is that English law does not recognise that there is an indefinite class of acts concerning matters of high policy or public security which may be left to the uncontrolled discretion of the Government and which are outside the jurisdiction of the courts (H Street, Governmental Liability, A Comparative Study, Oxford University Press, 1953, p 50).
That there is no general defence of state necessity to a claim of wrongdoing by state officials was firmly established in the landmark case of Entick v Carrington (1765) 19 St Tr 1029, following on from Leach v Money (1765) 19 St Tr 1001 and Wilkes v Wood (1763) 19 St Tr 1029.
This principle was reiterated by Viscount Finlay in Johnstone v Pedlar, at 271: It is the settled law of this country, applicable as much to Ireland as to England, that if a wrongful act has been committed against the person or the property of any person the wrongdoer cannot set up as a defence that the act was done by the command of the Crown.
The Crown can do no wrong, and the Sovereign cannot be sued in tort, but the person who did the act is liable in damages, as any private person would be.
It was thus no defence to a claim for the return of money and a cheque, taken by the police from a person arrested in Ireland for illegal drilling in 1918, that the Chief Secretary for the Treasury had signed a certificate formally to ratify, adopt and confirm the said seizure and detention of the said cash and cheque as an act of state for the defence of the realm and for the prevention of crime.
It made no difference that the person arrested was a US citizen: the United Kingdom was not at war with the United States.
As a friendly alien resident here he was a subject by local allegiance with a subjects rights and obligations, per Viscount Cave at 276.
However, there was an exception, which Viscount Finlay stated in very wide terms, at 271: This rule of law has, however, been held subject to qualification in the case of acts committed abroad against a foreigner.
If an action be brought in the British Courts in such a case it is open to the defendant to plead that the act was done by the orders of the British Government, or that after it had been committed it was adopted by the British Government.
In any such case the act is regarded as an act of state of which a municipal court cannot take cognizance.
The foreigner who has sustained injury must seek redress against the British Government through his own Government by diplomatic or other means.
The question for this court is whether there is indeed a qualification such as that expressed by Viscount Finlay and, if so, how far that qualification goes.
It is not contended on behalf of the Government that it is so broad as to cover any act committed against a foreigner abroad which is authorised or ratified by the Crown.
The contention of the Government is that the doctrine of Crown act of state covers two distinct principles.
The first is a principle of non justiciability: this is that certain acts committed by a sovereign state are, by their very nature, not susceptible to adjudication in the courts.
The obvious examples (given by Lord Pearson in Nissan v Attorney General, at 237) are making war and peace, making treaties with foreign sovereigns, annexations and cessions of territory.
The second is a defence to an action in tort: that a foreigner cannot sue the Government, or its servants or agents, in the courts of this country in respect of certain acts committed abroad pursuant to deliberate UK policy in the conduct of its foreign affairs.
The respondent claimants, on the other hand, argue that there is only the first rule, a narrow rule of non justiciability whereby certain acts of government in the conduct of foreign affairs are by their very nature not justiciable in the courts.
The decision to go to war in Iraq, and to remain there after the cessation of hostilities between the allied invaders and the state of Iraq in order to bring about internal peace and stability, and the decision to contribute to the International Security Assistance Force in Afghanistan, were of that nature.
But the decision to detain these particular individuals in the course of those operations was of a completely different character.
The question of whether the detention of an individual is lawful, under whichever system of law is applicable, is quintessentially a matter for a court (per Leggatt J, in Mohammed v Ministry of Defence [2014] EWHC 1369 (QB), para 381).
None of the reasons that might make it non justiciable (helpfully summarised at para 377, referring to Buttes Gas and Oil Co v Hammer (No 3) [1982] AC 888 and R (Al Haq) v Secretary of State for Foreign and Commonwealth Affairs [2009] EWHC 1910 (Admin); see also Shergill v Khaira [2014] UKSC 33; [2015] AC 359) apply: there is no absence of judicial or manageable standards by which to judge it; the courts have the relevant expertise; and this is not a matter of high policy, which is constitutionally in the hands of Government Ministers who are accountable to Parliament and not in the hands of the courts.
For those reasons, in Mr Mohammeds case, Leggatt J held that the non justiciability rule did not apply.
However, he went on to hold that the tort defence did apply, at para 395: It is not the business of the English courts to enforce against the UK state rights of foreign nationals arising under Afghan law for acts done on the authority of the UK government abroad, where to do so would undercut the policy of the executive arm of the UK state in conducting foreign military operations.
He went on to emphasise how narrow this second rule was: it applied only to executive acts done abroad pursuant to deliberate UK foreign policy and might well be confined to acts involving the use of military force (para 397).
It was analogous to the conflict of laws rule that English courts will not enforce a right arising under the law of a foreign country if to do so would be contrary to English public policy, and to the rule that English courts will not enforce the penal, revenue and public law of a foreign state (para 396).
He returned to this question in the case of Mr Rahmatullah and the Iraqi civilians and rejected the argument that there was no good authority for such a rule; he also rejected the arguments that, if there were, it had been abolished by the Crown Proceedings Act 1947 or was incompatible with the right to a fair hearing under article 6 of the European Convention on Human Rights: Rahmatullah v Ministry of Defence and Foreign and Commonwealth Office; R (Rahmatullah and Ali) v Secretary of State for Defence and Secretary of State for Foreign and Commonwealth Affairs [2014] EWHC 3846 (QB), paras 179 223.
The cases were taken together in the Court of Appeal: Mohammed (Serdar) v Ministry of Defence, Qasim v Secretary of State for Defence, Rahmatullah v Ministry of Defence, Iraqi Civilians v Ministry of Defence [2015] EWCA Civ 843; [2016] 2 WLR 247.
That court also accepted that there was a tort defence as well as a non justiciability rule.
But it was an exception to the general principle that proceedings may be brought in this country founded on a tort which is actionable under the law of a foreign country where the law of that country is the applicable law.
They agreed with the judge that the rationale for the exception was to be found in domestic public policy (para 349).
Accordingly, it was necessary to identify, in each case, the public policy interests which justified denying access to the courts in this way (para 352).
In Mr Mohammeds case there were no compelling considerations of public policy which should prevent reliance on Afghan law as the basis of his tort claims (para 364).
In the other cases, the relevant facts and evidence had not yet been pleaded.
The court held that claims would be barred by the doctrine of act of state only if the defendant is able to establish that there are compelling grounds of public policy to refuse to give effect to Iraqi law (para 377).
On the Governments appeal against those decisions, therefore, the parties have defined the issues thus: (i) Is the doctrine of Crown act of state limited to a non justiciability rule or does it also encompass a tort defence? (ii) If it does encompass a tort defence, what is its scope? (iii) In particular, is the test to be applied, by analogy with section 14(3)(a) of the Private International Law (Miscellaneous Provisions) Act 1995, whether there are compelling grounds of public policy to refuse to give effect to the local law of tort? (iv) Was the tort defence extinguished by the Crown Proceedings Act 1947? (v) Is the tort defence incompatible with article 6 of the European Convention on Human Rights?
It may well be, however, that issues (i), (ii) and (iii) can be reduced to a single issue, that is, the circumstances in which a claim is not cognisable in the courts of England and Wales because it relates to a Crown act of state.
The following issues are not now in dispute: (i) if the doctrine is limited to a narrow non justiciability rule, of the sort identified before Leggatt J and the Court of Appeal, it is not applicable in these cases, for the reasons given by the judge; (ii) the doctrine is not a defence to claims made under the Human Rights Act 1998 and so those will continue in any event.
For the purpose of the Crown act of state issue, it is to be assumed that the claimants detentions were in fact contrary to the Afghan or Iraqi laws of tort, although that too is in issue in the case of Serdar Mohammed.
Some context
In order to discover the nature and content of the doctrine, it will be necessary to look at some old authorities which, although culminating in Nissan v Attorney General, were decided against a legal landscape which was very different from the legal landscape of today.
The conduct of foreign affairs, making treaties, making peace and war, conquering or annexing territories, are all aspects of the Royal prerogative.
Until the decision of the House of Lords in Council of the Civil Service Unions v Minister for the Civil Service [1985] AC 374 (the GCHQ case), the general position was that the courts would review whether what had been done fell within the scope of the Royal prerogative but would not review how that prerogative had been exercised.
After that case, the exercise of executive power might be excluded from the scope of judicial review, not because of its source, whether statute or the prerogative, but because of its subject matter: hence the need to distinguish between certain acts of high policy, which by their very nature are not subject to judicial review, and other actions taken in pursuance of that policy, which are.
Second, the old cases were decided against the backdrop of the principle that the King can do no wrong.
The King could not be sued in his own courts.
The officials who carried out his policies could be sued for their unlawful actions, and the practice developed of nominating an official as a defendant to claims in tort.
But the courts had to grapple with the circumstances in which the Kings prior authority or subsequent ratification might import the doctrine that the King could do no wrong and thus afford a defence to such a claim.
We have already seen how the courts distinguished between acts done to foreigners abroad and acts done to citizens or residents here.
The Crown Proceedings Act 1947 abolished the general immunity of the Crown from liability in tort and enabled litigants to sue Government departments such as the defendants in these cases.
Thirdly, it may be worth bearing in mind that until the Private International Law (Miscellaneous Provisions) Act 1995, a tort committed abroad could only be the subject of a claim in the English courts if the conduct complained of was tortious, both by the law of the place where it took place and by the law of this country.
This rule was abolished by the 1995 Act, which established the general rule that the applicable law in an action in tort is the law of the country in which the events took place.
Hence it is now accepted that the tort claims have to be determined according to the law of Afghanistan or Iraq respectively, subject to the doctrine of Crown act of state if applicable, while the human rights claims have to be determined according to the Human Rights Act 1998.
Finally, as already noted, the term act of state is also used in a completely different context, that of whether the courts of this country will adjudicate upon the acts of a foreign legislature or executive.
Sometimes, of course, both doctrines may arise in the same case (they are both, for example, discussed by Lord Wilberforce in the leading case of Buttes Gas and Oil Co v Hammer (No 3) [1982] AC 888).
And insofar as the doctrine of foreign act of state covers governmental acts outside the territory of the state concerned, there may be some similarities, as Lord Mance has shown.
But Crown act of state was not raised as a defence in Belhaj v Straw and foreign act of state is not the subject matter of this judgment.
Does the Crown act of state doctrine encompass two rules?
The clearest judicial statement that the doctrine does encompass two rules is that of Lord Wilberforce in Nissans case, at 231: The first rule is one which provides a defendant, normally a servant of the Crown, with a defence to an act otherwise tortious or criminal, committed abroad, provided that the act was authorised or subsequently ratified by the Crown.
It is established that this defence may be pleaded against an alien, if done abroad, but not against a friendly alien if the act was done in Her Majestys Dominions.
It is supported in its positive aspect by the well known case of Buron v Denman (1848) 2 Exch 167 and in its negative aspect by Johnstone v Pedlar [1921] 2 AC 262.
The second rule is one of justiciability: it prevents British municipal courts from taking cognisance of certain acts.
The class of acts so protected has not been accurately defined: one formulation is those acts of the Crown which are done under the prerogative in the sphere of foreign affairs (Wade and Phillipss Constitutional Law, 7th ed (1956), p 263).
As regards such acts it is certainly the law that the injured person, if an alien, cannot sue in a British court and can only have resort to diplomatic protest.
How far this rule goes and how far it prevents resort to the courts by British subjects is not a matter on which clear authority exists.
From the terms of the pleading it appears that it is this aspect of the rule upon which the Crown seeks to rely.
It would appear, however, that the case was only concerned with the second, the non justiciability rule.
The United Kingdom had made a treaty with the government of Cyprus (then an independent country) to provide troops in order to restore peace between the Greek and Turkish Cypriot communities.
The claimant, a British subject, ran a successful luxury hotel near Nicosia.
The British troops took over the hotel as their headquarters.
No claim in tort was made in respect of the occupation of the hotel, to which the claimant had apparently consented.
There was a tort claim in respect of damage to furniture and other chattels, but it was accepted that this should go to trial.
The main claim was that there was a contractual right to compensation, which was disputed.
But if there was such a contract, act of state could not be a defence.
The disputed claim was one in restitution, for compensation for the use and occupation of the hotel.
To this the government pleaded that the actions of the British forces in Cyprus were acts of state of Her Majesty on the territory of an independent sovereign performed in pursuance of an agreement with the Cyprus government and as such not cognisable by the court.
The House of Lords unanimously rejected this defence, Lord Reid on the ground that it could not be pleaded against a British subject, but the other members of the House on the ground that the occupation of the hotel did not have the character of an act of state.
A distinction should be drawn between the making of the treaty with Cyprus, which was an act of state, and the actions of the troops complained about, which were not so closely connected with the treaty as to amount to an act of state.
Lord Morris regarded Professor Wades definition of an act of state (para 2 above) as helpful but went on to explain why it did not apply (at 218): I do not think that such actions as securing food or shelter in peace time for troops situate abroad are to be regarded as acts of the executive performed in the course of relations with another state within the conception of the above definition.
But, even if they were, I would be surprised if the contention were advanced that it was a matter of policy on the part of the executive to take food or shelter and not to make payment.
It is worth noting that the House rejected the contention that the UK was acting as agent for the government of Cyprus.
But, as Lord Wilberforce pointed out at p 230, if it had been, then the doctrine of foreign act of state might well have applied: they would have been acts attributable to a foreign government in its own territory.
As Lord Mance has shown in his judgment in Belhaj, that doctrine may extend to a states appropriation of property within its own territory even if this is illegal by the law of that state.
The question for us is not whether the type of rule, with which Nissan was concerned, exists: there is no reason to doubt that it does.
The question is whether a different type of rule, affording a tort defence even though the subject matter is entirely suitable for adjudication by a court, also exists.
Although its existence was acknowledged in Nissan, and indeed Lord Morris stated that it was so recognised that it cannot now be overthrown (at 220), the foundations upon which it is built are very shaky.
The source of such a rule is the direction to the jury by Parke B in the well known case of Buron v Denman (1848) 2 Exch 167, 154 ER 450 (the background is explained by C Mitchell and L Turano in C Mitchell and P Mitchell (eds), Landmark Cases in the Law of Tort (Hart, 2010) and also by A Perreau Saussine, British Acts of State in English Courts [2008] British Yearbook of International Law 176).
Briefly, in 1835, as part of its campaign to suppress the slave trade, Britain made a treaty with Spain, which allowed British ships to stop and search Spanish vessels on the high seas if they were suspected of trading in slaves.
Commander Denmans patrol was looking for slaving ships at the mouth of the Gallinas river in West Africa.
He was asked by the Governor of Sierra Leone to liberate two British subjects who were being held as slaves in one of the barracoons (slave pens) on islands at the mouth of the river.
Denman and his crew landed on the islands, chased away the Spanish slavers, and liberated the slaves they were trying to take with them.
Denman then made a treaty with the local chiefs, outlawing slavery in their lands, handed over the slavers trade goods in return, took possession of the barracoons, liberated the slaves and burned the barracoons down.
He carried several hundred former slaves back with him to Sierra Leone.
He also rescued some of the slavers, who were fleeing local retribution, one of whom was Seor Buron.
All of this was greeted with great jubilation when the news reached England, the Colonial Secretary and the Foreign Secretary exchanged letters praising Denmans actions, Parliament voted a bounty to him and his crew, and he was promoted to Captain.
Seor Buron, however, brought an action in trespass against him, claiming damages for the loss of his chattels, including the slaves.
Parke B directed the jury that, slave owning not being shown to be against the law in the Gallinas, Denmans actions could amount to a trespass; but their subsequent ratification by the Government turned them into an act of state, for which he could not be sued (although the judge left open whether Seor Buron might able to proceed against the Crown by petition of right or whether he could only pursue a remedy by diplomatic means, because this was irrelevant to the action he was trying).
It appears that the only act of state case cited in argument was Elphinstone v Bedreechund (1830) 1 Kn 316, 12 ER 340.
But that was essentially a non justiciability case: the issue was whether the Supreme Court of Bombay had jurisdiction to hear a claim for damages for the seizure of property of the governor of a fortress conquered in the course of military hostilities.
There is a whole series of cases, not all of them easy to reconcile (helpfully discussed by Perreau Saussine, loc cit), concerning the appropriation of property in the course of annexing territory in India (and on occasions in Africa) supporting the proposition that the transactions of independent states between each other are governed by other laws than those which municipal courts administer: such courts have neither the means of deciding what is right, nor the power of enforcing any decision which they may make (Secretary of State in Council of India v Kamachee Boye Sahaba (1859) 7 Moore Ind App 476, at 529, 19 ER 388, at 407; Cook v Sprigg [1899] AC 572, at 578).
The leading case is Kamachee, where the East India Company, as agent for the British Crown, had seized the Raj of Tanjore, and the whole of the property of the Rajah, who had died without male issue, under Treaties authorising the annexation of the Raj.
The Rajahs widow sued for the return of his private property.
She succeeded in the Supreme Court of Madras but failed before the Judicial Committee of the Privy Council.
No distinction could be drawn between private and public property for the purpose of such an act of state.
Most of the discussion relates to the character of the act, but there is a brief reference to Buron v Denman.
The subject matter of Buron v Denman, however, was something different.
It was not a transaction between states.
Denmans actions were not carried out on the high seas in accordance with the treaty with Spain.
Britain was not at war with another state or conquering territory (although it could be said to be conducting a war on the slave trade).
His actions were by ordinary standards, both of the local law and of English law, unlawful.
The case has therefore been treated as establishing a defence to an action in tort over which the ordinary courts would otherwise have jurisdiction.
It was so regarded by the House of Lords in Johnstone v Pedlar, in which the scope of such a defence was directly in point, and also in Nissan v Attorney General, where it was not.
No doubt it was so regarded, in part at least, because this was how it was regarded by some eminent academic authorities.
For example, Lord McNair, in International Law Opinions (1956) in a chapter dealing with The Position of the United Kingdom Government, its Servants and Agents, as Defendants instituted in Actions in British Courts, distinguished between (a) the defence called act of state available to certain defendants in British courts and (b) the rule which entirely excludes from British courts certain areas of British governmental action in the realm of foreign affairs.
As to (a): Act of state has been defined in a standard text book as follows: The plea, act of state, can be raised as a defence to an act, otherwise tortious or criminal, committed abroad by a servant of the Crown against a subject of a foreign State or his property, provided that the act was authorised or subsequently ratified by the Crown. (citing Wade and Phillips, Constitutional Law (4th ed (1950), 193 196)) To this very wide definition McNair added the slight qualification: Its scope of operation is the whole field of governmental or official activity in relation to the Crowns dealings with foreign states.
The only authorities cited are Buron v Denman, Johnstone v Pedlar, where the argument that it could be relied upon in claims brought by friendly aliens was rejected, and Commercial and Estates Co of Egypt v Board of Trade [1925] 1 KB 271, at 290 and 297, where the argument that it could be relied upon in respect of actions within the realm was rejected; however, Scrutton LJ noted that the owners of the cargo of timber on a British ship which had been requisitioned abroad during the first world war and brought to this country did not rely on any dealings with the cargo outside the realm for the probable reason that on the authority of such cases as Buron v Denman a claim by a foreigner for such acts would be successfully met by the defence that the interference was an act of state.
The doctrine was also relied upon in Al Jedda v Secretary of State for Defence (No 2) [2010] EWCA Civ 758; [2011] QB 773.
This was another tort claim arising from detention by British forces in Iraq, this time of a person with dual British and Iraqi nationality.
As here, the applicable law was the law of Iraq and Underhill J held that the detention was lawful under the law of Iraq.
But he also held that the defence of act of state would have been available.
In the Court of Appeal, Lord Dyson JSC and Elias LJ agreed with the judge that the detention was not unlawful under Iraqi law.
Lord Dyson declined to deal with the act of state issue, on the ground that it did not arise and raised points of very considerable difficulty, on which they had not heard full argument (para 127).
Elias LJ did discuss it (paras 192 226) and his tentative view was that it would not be an answer to the claim (para 193).
The act did fall into the category of act of state, in that it would have removed the jurisdiction of the courts to question the detention of a foreign subject (para 195); but the courts would be failing in their constitutional duty if they were to leave the executive with unfettered powers to intern British citizens merely because the act of internment occurred abroad (para 216); however, he did float an intermediate possibility, that even if this were to be an act of state, and thus not to give rise to liability for damages in tort, it would be amenable to judicial review on conventional principles.
Arden LJ, on the other hand, agreed with Underhill J that act of state was a defence; but this was on the basis of the House of Lords decision in R (Al Jedda) v Secretary of State for Defence [2007] UKHL 58; [2008] AC 332, that the UK was entitled and bound under its obligations under article 103 of the United Nations Charter and the applicable UN Security Council Resolution to intern people where this was necessary for the internal security of Iraq (para 108); thus, not only was the decision to join the Multi National Force an act of state, but acts required to be done pursuant to that decision were also acts of state; the fact that the claimant was a British national made no difference.
Clearly, therefore, Al Jedda (No 2) is of very little help in resolving the issue between the parties here.
Both Underhill J and Arden LJ appeared to be treating the case as non justiciable, because internment was required under international law; Elias LJ appears to have agreed with them, but considered that this afforded no defence to the internment of a British citizen.
In the cases before us, both Leggatt J, at [2014] EWHC 3846, para 197, and the Court of Appeal, at [2016] 2 WLR 247; [2015] EWCA Civ 843, para 330, thought that the issue in Al Jedda (No 2) was better analysed under the tort defence than under the non justiciability rule.
In the light of these shaky foundations, it is scarcely surprising that the respondent claimants argue that the tort rule does not, in fact, exist.
The only rule is that certain decisions of high policy in the conduct of foreign relations are non justiciable.
The arguments to the contrary are of two kinds: first, that the existence of a wider rule is long established both in the case law and in academic commentaries and texts, as already discussed; and second, that there are good reasons for it, certainly in the context of military operations abroad.
As I understand it, we are not asked to consider whether it exists outside that context.
Sir James Fitzjames Stephen, in his History of the Criminal Law (1883), Vol II, argued that where an injurious act done to a foreigner is an act of open war, duly proclaimed, there can be no doubt at all that it does not amount to a crime the very essence of war is that it is a state of things in which each party does the other all the harm they possibly can.
The same should apply to acts which are in their nature warlike done in time of peace: I think that if such acts are done by public authority, or, having been done, are ratified by public authority, they fall outside the sphere of the criminal law (pp 62 63).
He could cite no criminal law authority but relied upon Buron v Denman and Secretary of State for India v Kamachee Boye Sahaba.
Of course, in those days, the criminal law was even more territorially limited than it is today and so only killings by British subjects abroad would be within the jurisdiction of the English courts.
But the point is, if act of state is a defence to the use of lethal force in the conduct of military operations abroad, it must also be a defence to the capture and detention of persons on imperative grounds of security in the conduct of such operations.
It makes no sense to permit killing but not capture and detention, the military then being left with the invidious choice between killing the enemy or letting him go.
There are conceptual advantages in confining the doctrine to a non justiciability rule; but in doing so, a rather broader concept of non justiciability would be required than that which was espoused in the courts below.
It would have to encompass aspects of the conduct of military operations abroad as well as the high policy decision to engage in them, and perhaps also some other aspects of the conduct of foreign relations, even though their subject matter was entirely suitable for determination by the court.
It is necessary that the courts continue to recognise that there are some acts of a governmental nature, committed abroad, upon which the courts of England and Wales will not pass judgment.
They may, of course, have to hear evidence and find facts in order to determine whether the acts in question fall into that category.
It is also necessary to confine that category within very narrow bounds.
Contrary to the impression given in some accounts (for example, J Collier, Act of state as a Defence against a British Subject (1968) 26 CLJ 102) it cannot give carte blanche to the authorities to authorise or ratify any class of tortious acts committed abroad in the conduct of the foreign relations of the state.
Is this aspect of the doctrine one of public policy?
The approach of the Court of Appeal has very real attractions.
It is consistent with the policy of the Private International Law (Miscellaneous Provisions) Act 1995, that where the English courts have jurisdiction over a tort committed abroad, the applicable law is the law of the state where the conduct took place, unless to apply that law would conflict with principles of public policy (section 14(3)(a)).
It would enable a case by case approach depending upon a range of policy factors, such as those identified by the Court of Appeal.
There is, however, no hint of such an approach in the cases concerned with act of state.
In essence, public policy may be the reason why the courts of this country will apply the domestic doctrine of act of state rather than the tort law of the state where the events took place, but it cannot tell us what the content of that defence is to be.
It is not enough to say that it is not for the courts of this country to enforce the tort laws of another state, because that is exactly what the 1995 Act expects us to do.
The question is in what circumstances we should decline to do so.
The Court of Appeal, when considering Mr Mohammeds case, concluded that there was no authority to detain him, either under the regime established by the United Nations, or under local Afghan law, and the UK government had deliberately decided to apply a policy outside both of these without promoting UK legislation to permit this.
The public interest that not doing harm to the nation by precluding HM Armed Forces from detaining a commander in the Taliban for more than 96 hours because it appeared that questioning him would provide significant new intelligence vital for force protection purposes was not sufficiently compelling to outweigh the public interest in the protection of liberty.
In effect, therefore, military necessity, however compelling, provided no defence.
If this aspect of the doctrine is to have any content at all, this cannot be right.
What is its scope?
It would be unwise for this court to attempt a definitive statement of the circumstances in which this aspect of the doctrine might apply.
The question is whether it applies in the circumstances of Mr Mohammeds case, some of which have been explored in pleadings and evidence, and how it might apply in the circumstances of Mr Rahmatullah and the Iraqi civilians cases, which have not yet been explored in pleadings and evidence.
For the reasons already given, it cannot apply to all torts committed against foreigners abroad just because they have been authorised or ratified by the British Government.
It can only apply to acts which are by their nature sovereign acts, acts which are inherently governmental, committed in the conduct of the foreign relations of the Crown.
The Government accepts that it cannot apply to acts of torture, even supposing that the Government of the United Kingdom would ever authorise or ratify such acts.
The Government also accepts that it cannot apply to the maltreatment of prisoners or detainees, such as happened in Baha Moussas case.
Bearing in mind that this is a doctrine of the law of the United Kingdom, I would prefer to regard this as an acknowledgement that such acts are not inherently governmental, rather than creating exceptions to a general rule.
The Government of the United Kingdom can achieve its foreign policy aims by other means.
Nor would it generally apply to the expropriation of property, for which compensation can always be paid, but there could be circumstances in which the expropriation, or more probably the destruction, of property, for example in the course of battle, was indeed a governmental act.
We are left with a very narrow class of acts: in their nature sovereign acts the sorts of thing that governments properly do; committed abroad; in the conduct of the foreign policy of the state; so closely connected to that policy to be necessary in pursuing it; and at least extending to the conduct of military operations which are themselves lawful in international law (which is not the same as saying that the acts themselves are necessarily authorised in international law).
For the purpose of these cases, we do not need to go further and inquire whether there are other circumstances, not limited to the conduct of military operations which are themselves lawful in international law, in which the defence might arise.
Buron v Denman was at the borderline.
The slaves were freed in the conduct of military operations pursuant to British foreign policy.
Commander Denman was clever enough to negotiate a treaty with the local chiefs outlawing slavery before he freed most of them and burned down the barracoons but that did not necessarily render his acts lawful by local law.
Nor do we need to decide whether the doctrine can ever be pleaded against British citizens: it was freely acknowledged in the courts below that there are arguments either way.
They do not arise in these cases.
The Crown Proceedings Act 1947
The respondents argue that the defence was abolished by section 2(1) of the Crown Proceedings Act 1947.
This provides: Liability of the Crown in tort E+W+S+N.I. Subject to the provisions of this Act, the Crown shall be subject to all those liabilities in tort to which, if it were a private person of full age and capacity, it would be subject: in respect of torts committed by its servants or (a) agents; (b) in respect of any breach of those duties which a person owes to his servants or agents at common law by reason of being their employer; and (c) in respect of any breach of the duties attaching at common law to the ownership, occupation, possession or control of property: Provided that no proceedings shall lie against the Crown by virtue of paragraph (a) of this subsection in respect of any act or omission of a servant or agent of the Crown unless the act or omission would apart from the provisions of this Act have given rise to a cause of action in tort against that servant or agent or his estate.
Both Leggatt J and the Court of Appeal held that the 1947 Act had not had the effect of abrogating the defence of act of state.
Section 2(1)(a) made the Crown vicariously liable for the torts of its servants or agents.
The proviso makes it clear that this does not apply where the act or omission would not have given rise to a cause of action in tort against the servant or agent.
The servant or agent could claim the defence of Crown act of state before the Act and the effect is, now, that the Crown can do so too.
That is certainly how it was understood at the time, for example, by Professor Glanville Williams, in Crown Proceedings (Stevens, 1948, p 44), although he also suggested that the proviso was an unnecessary bludgeon as the so called defence meant that there was no liability in any event.
The claimants argue that the purpose of the 1947 Act was to put the Crown in the same position as any other litigant in civil proceedings.
Other litigants did not enjoy the benefit of the defence of Crown act of state.
It would be illogical if a provision intended to put the Crown on the same footing as anyone else had a proviso having precisely the opposite effect.
It is also odd to do so by a proviso aimed at the agent rather than the Crown.
Where the Act intended to create immunities or restrictions, or preserve existing common law rules, or make savings, it did so clearly and expressly; an example is section 2(5), which gives the Crown immunity from liability for anything done by any person while discharging responsibilities of a judicial nature.
There is, however, nothing odd about preserving the previous law by means of a proviso aimed at the agent.
The Act imposed vicarious liability for the acts of its servants or agents upon the Crown.
It is natural, therefore, to make it clear that the Act is not making any difference to the previous law relating to the liability of that servant or agent, even if the previous law in question is one which applies only to Crown servants or agents.
It may be that the proviso was unnecessary but there is no reason to doubt that the previous law of Crown act of state, whatever it was, was left intact.
Article 6
The respondents accept that if, as held by the Court of Appeal, Crown act of state is only a defence where there are overriding reasons of public policy not to apply the tort law of a foreign state, this would be a proportionate interference with the right of access to a court and thus compatible with article 6 of the European Convention on Human Rights.
However, they argue that any wider defence would be an unjustifiable impediment to that right of access.
This depends upon two questions: first, whether the defence is an aspect of the substantive law or whether it is a procedural restriction on the right to go to court to vindicate a right; secondly, if it is merely a procedural bar, whether it is justified as a proportionate means of pursuing a legitimate aim.
The respondents argue that the defence is not an aspect of a substantive right, akin to the rule of Italian law considered by the Grand Chamber of the European Court of Human Rights in Markovic v Italy (2006) 44 EHRR 52.
Claims had been brought in an Italian court against the Prime Minister, Ministry of Defence and Commander of NATO forces in southern Europe in respect of deaths caused by military action in the former Yugoslavia in 1999.
The Cour de Cassation had held that the Italian court had no jurisdiction, under a rule very like the non justiciability aspect of our own Crown act of state doctrine, that certain acts of government, including the conduct of hostilities, did not give rise to civil liability.
The Grand Chamber held that the claimants had not been deprived of access to a court: their claims had been fairly examined in the Italian courts in the light of the applicable domestic legal principles.
Those principles marked out the bounds of the law of tort so that the inability to sue was not the result of an immunity but of the principles governing the substantive right of action.
By contrast, argue the respondents, the Crown act of state defence is a procedural bar, which prevents the United Kingdom courts from enforcing rights and liabilities in tort which would otherwise be justiciable.
This means, they argue, that the government must justify it and this they cannot do.
It cannot be justified on the basis that it pursues the legitimate aim of ensuring that the government and the courts speak with one voice on matters of foreign policy.
As the Court of Appeal pointed out (para 372), they are not required to do so in public law claims or in claims under the Human Rights Act.
Leggatt J held that it serves the legitimate aim of protecting the interests of the nation abroad, in particular where military action is considered necessary by the executive in the national interest (Rahmatullah, para 217) and was proportionate to that aim (para 218).
The respondents accept that it might be justified on the basis that it pursued the legitimate aim of enabling the legality of the Governments conduct of foreign affairs, and in particular military operations abroad, to be determined by international law rather than the law of the place where those operations took place.
Thus it enables the Government to comply with its obligations in international law without having to concern itself with local domestic law.
But the rule as contended for by the Government goes wider than is necessary to meet that aim and is thus disproportionate to it.
The Government, on the other hand, contends that article 6 is not engaged.
This is a Markovic case.
Article 6 does not guarantee any particular content to the civil rights and liabilities protected by domestic law.
It merely guarantees a right of access to the courts to have those rights and liabilities determined: Z v United Kingdom (2001) 34 EHRR 3, paras 87, 92.
The claimants have the right to a fair hearing of whether the doctrine of Crown act of state, in either of its aspects, applies.
But that doctrine defines the content of their rights.
It means that there are certain actions which do not give rise to civil liability.
It is not simply a procedural bar.
Even if it were, they argue, it pursues the legitimate aim identified by Leggatt J and is proportionate to that aim for the reasons he gave: it applies only to acts done pursuant to deliberate United Kingdom foreign policy and only to claims arising under foreign law.
It does not therefore apply to claims under the Human Rights Act.
In my view, this is clearly a rule of the substantive law rather than a procedural bar.
It does not confer an immunity on a particular class of actors.
It defines the circumstances in which there may be liability for a particular type of activity.
The rules are the same whether that activity is governed by English law or by foreign law.
As these cases show, the claimants do have access to a court to determine the scope of their rights.
This court is concerned with the question of law as to how far their rights extend.
In Mr Mohammeds case, the facts necessary to determine the extent of his rights have already been examined.
In the other cases, the facts have yet to be fully pleaded and evidence filed.
When they have, the court will have to decide what the facts are and whether they fall within the defence of Crown act of state as defined by this court.
There has been no procedural bar to the claimants bringing these claims and fighting them vigorously through the courts.
It is the substantive law which will determine whether, on the facts found, they succeed.
Conclusion
I would therefore allow the Governments appeal.
I would substitute a declaration to the effect that, in proceedings in tort governed by foreign law, the Government may rely on the doctrine of Crown act of state to preclude the court passing judgment on the claim if the circumstances are such as stated in paras 36 and 37 above.
It may well be that the declarations made by Leggatt J should be restored.
In the case of Serdar Mohammed, he declared that, on the assumption that the facts relating to his arrest and detention pleaded by the Government were true, and without prejudice to his right to challenge the factual basis of his arrest and detention at any further trial, the defendants could rely on the doctrine of Crown act of state to preclude the enforcement of a claim under Afghan law.
In the case of Yunus Rahmatullah, he declared that the claims in tort in relation to his arrest and detention by UK armed forces were barred by the doctrine of Crown act of state, if the defendants established that his arrest and detention was authorised pursuant to lawful UK policy.
He made a declaration in similar terms in the Iraqi Civilian Litigation.
I would, however, invite further submissions as to the precise form of declaration which would be appropriate in each of these cases.
LORD MANCE: (with whom Lord Hughes agrees)
Crown act of state certainly presents terminological and conceptual difficulties.
But I think it clear that the underlying principle is one of non justiciability or (as I would prefer to say: see para 54 below) abstention or restraint.
It creates unnecessary confusion to suggest that the principle has two branches, one non justiciability, the other a defence based on Buron v Denman (1848) 2 Exch 167.
Lord Sumption suggests a dichotomy between two rules (para 79).
But he ends with a proposition that, in the present context, the two rules merge into one (para 81).
This is achieved by defining non justiciability in the present context as going to the existence or scope of legal rights (para 80) and so as a defence (para 81).
To my mind, this involves confusion.
Lord Sumption seeks to support it in para 80 by suggesting that the case of R (Campaign for Nuclear Disarmament) v Prime Minister [2002] EWHC 2777 (Admin) proceeded on the footing that the Divisional Court had both jurisdiction and competence to determine whether a resolution of the United Nations Security Council authorised military operations against Iraq but that it declined to do so because there were no relevant domestic law rights.
This, however, in my opinion, misreads the Divisional Courts judgment.
The essential ground of the decision in Campaign for Nuclear Disarmament was that the subject matter was non justiciable: see per Simon Brown LJ at para 47(ii), Maurice Kay LJ at para 50, and Stephen Richards LJ at paras 59 60.
Absence of domestic foothold was a separate and (as Maurice Kay and Stephen Richards LJJ make clear in these passages) lesser objection to the claim (see also Simon Brown LJ at paras 35 36).
The case of Campaign for Nuclear Disarmament therefore lends no support to a proposition that Crown act of state involves a defence.
On the contrary, it places Crown act of state, involving foreign policy action including the deployment of armed forces, firmly within the domestic principle of non justiciability or abstention, and this is so whether the Crown or its agent is being impleaded.
Crown act of state is at the same time (as Lady Hale notes: paras 43 45) a principle of substantive law outside the scope of article 6 of the European Convention on Human Rights.
Crown act of state is in short based on the same underlying principle of abstention that can in some circumstances also apply to preclude adjudication of the third type of foreign act of state identified in my separate judgment on that topic handed down concurrently with this judgment in the present case and in Belhaj v Straw [2017] UKSC 3.
That is not to suggest that the principle of abstention applies with the same force or by reference to the same considerations in relation to the latter context.
Because of the way in which the issues in these cases were identified and divided for determination, this was not an aspect on which the submissions before us focused.
I will say some provisional words about it.
Both Crown act of state and the third type of foreign act of state are based on an underlying perception of the role of domestic courts.
The constitutional relationship of a domestic court with its own State differs from its relationship with that of any foreign sovereign state.
Crown act of state is reserved for situations of sovereign authority exercised overseas as a matter of state policy.
In these circumstances a straight forward principle of consistency directly underpins Crown act of state (as identified by Lord Sumption in para 87).
In contrast, if and when the third type of foreign act of state applies, its underpinning is a more general conception of the role of a domestic court, and, more particularly, the incongruity of a domestic court adjudicating upon the conduct of a foreign sovereign state, even though the foreign state is neither directly or indirectly impleaded or affected in its rights.
However, concern for the international relations of the domestic with the foreign state, and in that sense a concern that the domestic courts stance should not be out of line with that of its own states, may probably in some cases play some part: see the discussion in paras 103 to 105 of my judgment in Belhaj v Straw.
This analysis is supported by what Lord Wilberforce said in Buttes Gas, 938A C, quoted in para 42, as well as with my own observations in para 91, of my judgment in Belhaj v Straw.
But to immunise the home state of the domestic court from action anywhere (or, in a Buttes Gas type case to refuse to adjudicate upon civil litigation between third parties), by reference to the conduct of a foreign state, is self evidently an extreme step.
This is no doubt why the principle of abstention recognised in Buttes Gas has rarely found application.
These differences in underpinning and analysis between Crown act of state and foreign act of state mean, in my opinion, that it must 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 the third type of foreign act of state.
The relationship is closer and the threshold of sensitivity lower in the case of the former than the latter.
It is necessary to grasp the considerations which may make a case non justiciable.
A consideration which in the past may have encouraged an overly narrow view is Lord Wilberforces pithy references in Buttes Gas & Oil Co v Hammer [1982] AC 888, 938B C to an absence of judicial or manageable standards by which to judge the issues in that case, placing the court in a judicial no mans land.
But it is clear that these references do not represent the definitional limit of non justiciability in the present context.
They represent as Lord Sumption pointed out in Shergill v Khaira [2014] UKSC 33; [2015] AC 359, para 40 only one of two reasons why the issue in Buttes Gas was political or non justiciable.
The other was that the issue trespassed on the proper province of the executive, as the organ of the state charged with the conduct of foreign relations, a consideration which takes one back to the discussion in the previous paragraphs.
Bearing in mind the potential for misunderstanding the concept of non justiciability in the light of Lord Wilberforces aphorisms in Buttes Gas, it may be preferable to refer instead, as I have done above, to a principle of abstention or restraint, whereby Crown decisions and/or activities of a certain nature in the conduct of foreign affairs are not open to question (or are not cognisable) in domestic civil proceedings, at the instance of anyone injured thereby (except, perhaps, someone owing allegiance to the Crown a point which can be left open on this appeal).
I have already indicated that I do not accept what was the primary case of the appellants, the Ministry of Defence and the Foreign and Commonwealth Office, namely that there is a dichotomy between two rules (non justiciability and a tort defence).
However, the appellants never committed themselves to bringing their case within either rule.
On the contrary, they submitted in paras 101, 107 and 173(4) and (5) of their written case: that each of the claims should be dismissed on the grounds that Crown act of state operates as a separate defence and/or a jurisdictional bar: that the Court of Appeal mischaracterised the scope of the justiciability limb of the Crown act of state doctrine, and consequently concluded that it did not apply in the present case; that the Court of Appeal erred in holding that the non justiciability rule only applies in circumstances where the issue is one which the court is constitutionally incompetent to determine; and that in any event, the tort defence and/or non justiciability rule applies to each of the cases.
In his oral submissions, Mr Eadie QC maintained this position, in submissions to the effect that how you characterise the doctrine, whether as a defence or non justiciability, does not matter; its criteria and effect are what matters.
There is good sense in this.
It is, nonetheless, helpful to identify the conceptual basis of Crown act of state.
In my view, there is, as I have stated, a single doctrine based on non justiciability or, in the terms which I prefer, judicial abstention or restraint.
I turn to examine further the core rationale behind cases where courts will abstain from adjudicating upon civil claims against the Crown or its servants.
This is also discussed in some detail in the passages from Campaign for Nuclear Disarmament cited above.
Since Council of Civil Service Unions v Minister for the Civil Service (GCHQ) [1985] AC 374, reinforced by R (Bancoult) v Secretary of State for Foreign and Commonwealth Affairs (No 2) [2008] UKHL 61; [2009] 1 AC 453, the exercise of prerogative powers, including prerogative legislation in the form of an order in council, has not enjoyed any general immunity from judicial scrutiny.
But the nature and subject matter of the particular prerogative power being exercised may make it inappropriate for adjudication before a domestic court.
Thus in GCHQ Lord Roskill said, at p 418, that Prerogative powers such as those relating to the making of treaties, the defence of the realm, the prerogative of mercy, the grant of honours, the dissolution of Parliament and the appointment of ministers as well as others are not, I think, susceptible to judicial review because their nature and subject matter are such as not to be amenable to the judicial process.
In Shergill v Khaira, para 42, Lord Sumption referred to this category of case as beyond the constitutional competence assigned to the courts under our conception of the separation of powers, and included within it the non justiciability of certain transactions of foreign states and of proceedings in Parliament.
The thinking behind all these concepts is linked in Blackstones Commentaries on the Laws of England (vol 1) pp 251 and 257 258.
There, the non justiciability of the royal prerogative of making war and peace or treaties is explained on the basis that the appropriate forum for its control is Parliament (including, in the last resort, as Blackstone notes, by impeachment).
In the case of certain foreign activities of the British state, there is in my view an additional parallel aspect at the international level to their non justiciability in domestic courts.
That is that representations and redress in respect of activities involving foreign states and their citizens may be more appropriately pursued at a traditional state to state level, rather than by domestic litigation brought by individuals.
In any event, it is, as already shown, wrong to regard either Lord Roskill in GCHQ or the Supreme Court in Shergill v Khaira as basing this category of case on an absence of judicial or manageable standards or the presence of a judicial no mans land.
When there is an appropriate domestic foothold and the matter is otherwise justiciable, domestic courts are well able to adjudicate upon and give effect to international law (see the citations from Campaign for Nuclear Disarmament, above).
Indeed, customary international law was long said to be automatically incorporated into domestic law: see the discussion in R (Keyu) v Secretary of State for Foreign and Commonwealth Affairs [2015] 3 WLR 1665, paras 117 122 and 144 151.
As Lord Sumption also recognised in Shergill v Khaira, para 43, a private claim may require adjudication upon issues of international law, where there is a domestic foothold in the sense of a prima facie domestic law right under whatever may be the relevant law: see eg Republic of Ecuador v Occidental Exploration Production Co [2005] EWCA Civ 1116; [2006] QB 432.
The Report of William Murray (later Lord Mansfield) and other Law Officers on the Rules of Admiralty Jurisdiction, etc in time of war dated 18 January 1753 and the decision in The Rolla (1807) 6 Robinson 364, to which Lord Sumption refers (para 83), do no more than exemplify the same point.
Both concerned the civil rights of neutrals whose property had been seized during the blockade of an enemy port.
They turn on the customary international law of war and prize, treated as incorporated into domestic law.
The Law Officers Report was thus sought concerning the consistency of certain Prussian prize proceedings with the Law of Nations, and any Treaties , the established Rules of Admiralty Jurisdiction, and the Laws of this Kingdom (p 889).
The Report was given on the basis that By the Maritime Law of Nations, universally and immemorially received, there is an established method of determination, whether the Capture be or be not lawful Prize (p 890), and that In this method, by Courts of Admiralty acting according to the Law of Nations and particular Treaties, all captures at sea have immemorially been judged of, in every Country of Europe (p 892).
The Admiralty Court had immemorially held trading with enemy subjects to be illegal: see Oppenheims International Law (7th ed) paras 101, footnote 2, and 192; and see also McNair and Watts, The Legal Effects of War (1966) pp 336 337.
Neither the Law Officers Report nor The Rolla bears on the issue currently under discussion.
They concern the application of customary international law as and where incorporated into domestic law, giving rise to a foothold for domestic adjudication, as there was for example in the case of The Rolla, where the issue concerned a claim to seize and condemn a ship as prize for contravention of a legal blockade.
The Secretary of State in Council of India v Kamachee Boye Sahaba (1859) 7 Moore Ind App 476 is, in contrast, an example of a case falling within the conduct of foreign affairs which the Privy Council held was unsuitable for adjudication in a domestic court.
It concerned the annexation by the East India Company (exercising sovereign power on behalf of the British Government) of a foreign territory and the taking of its late rulers public and private property.
The late rulers eldest widow brought an action claiming to be entitled to the private property which (the Privy Council was ready to accept) would under Hindoo law pass and belong to the late rulers eldest widow.
In relation to the appropriation of the private property, there was clearly a domestic foothold for the claim.
But the claim failed in its entirety.
This was not because it was non justiciable in some narrow sense, involving absence of judicial or manageable standards.
A domestic court could, if necessary, identify standards and rules of international law by reference to which to adjudicate upon such a dispute.
It was because the whole case fell within the category of non justiciability identified by Lord Roskill in GCHQ and the Supreme Court in Shergill v Khaira, para 42.
It was a case upon which domestic courts should not adjudicate because of its nature and subject matter.
It was a classic case of intervention by forces acting for the British Crown intervening in and taking over a foreign territory and property of its subjects.
Attempts at a bifurcation in this area between (a) cases of non justiciability (or cases not open to question) in a domestic court and (b) cases falling within the so called rule in Buron v Denman are in my view incorrect and confusing.
The correct analysis is that the rule applied in Buron v Denman is no more than a corollary of the principle of non justiciability, abstention or restraint.
In short, the rule applied protects the Crowns servants or agents in circumstances where that principle precludes a claim against the Crown itself.
A claim which is non justiciable against the Crown itself cannot be justiciable against the servants or agents who, with the Crowns authority or subsequent ratification, undertook the relevant acts.
Otherwise, the principle of Crown act of state could and would be subverted.
The point is illustrated by the case of Secretary of State in Council of India v Kamachee Boye Sahaba itself.
The action there was not against the Crown, but for an act done, as Lord Kingsdown said, by the East India Company as its delegate, over which act domestic courts had no jurisdiction and of the propriety or justice of that act, neither the court below nor the Judicial Committee have the means of forming, or the right of expressing, if they had formed, any opinion (p 540).
See also, in the quotations from Lord Kingsdowns judgment that Lord Sumption sets out in para 86: such [viz municipal] courts have neither the means of deciding what is right and an act not affecting to justify itself on grounds of municipal law; over which the Supreme Court of Madras has no jurisdiction and 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.
This is the language of non justiciability, abstention or restraint.
The authorities relied on by counsel for the East India Company also demonstrate the same point.
They included Tandy v Earl of Westmoreland (1792) 27 State 1246, in which the official acts of the Lord Lieutenant of Ireland were considered acts of state, and not within the cognizance of the Municipal jurisdiction, and Mostyn v Fabrigas (1775) Cowp 161, where Lord Mansfield laid it down that no Governor of a Colony could be sued while he is exercising the functions of a Governor.
In each case, the principle identified is one of non justiciability.
Further, in Lord McNairs magisterial and influential work International Law Opinions vol 1 (1956), from which Lord Wilberforce quoted in Nissan v Attorney General [1970] AC 179, at p 234C F, the general principle of non justiciability is described in terms making clear that it protects the Crowns servants and agents as much as the Crown.
The reality is that the rule in Buron v Denman is a necessary aspect of the principle of abstention or non justiciability.
Likewise, in the analogical context of state immunity, not only the Crown, but also its servants and agents are protected, or otherwise the rule would be subverted: see Jones v Saudi Arabia [2007] 1 AC 270.
Equally, it cannot be open to a Crown servant or agent by waiving a plea of Crown act of state to enable a domestic court to adjudicate upon an area falling within the scope of the concept.
Yet that would seem the consequence if Crown act of state were a mere defence, rather than a bar to adjudication based upon a principle of abstention or restraint.
There were only two issues in the Court of Exchequer case of Buron v Denman.
One, swiftly dispatched by Parke B in summing up (p 187), was whether the plaintiff could show sufficient property or possession in slaves.
The other, the main issue, was whether a Crown servant or agent could by ratification of his acts by the Crown be put in the same position as if those acts had been authorised by the Crown from the outset.
Had there been prior authorisation, it is clear from the way that Buron v Denman was argued, that there would have been no doubt that the action was not maintainable.
The Attorney General cited briefly in this connection at the end of his submissions (p 185) Elphinstone v Bedreechund, which concerned British forces seizure of a military fortress during military hostilities and is, correctly, analysed by Lady Hale in para 25 as a case of non justiciability.
Conversely, without prior authorisation or ratification, it was well established before Buron v Denman that a Crown servant could be held liable for unauthorised naval action taken against foreign slavers conducting a trade which remained lawful under the (Spanish) law of the flag of the ship they were using.
In Madrazo v Willes (1820) 3 B & Ald 353, relied on by counsel for the plaintiff in Buron v Denman, Captain Willes, commanding a Royal Navy vessel, had without authority taken possession of a Spanish brig engaged in the slave trade between Africa and Cuba, detaining her, her stores and other goods as well as 300 slaves, and preventing her from further trading.
The Spanish owner sued Captain Willes, maintaining (consistently with the principle in Entinck v Carrington (1765) 19 State Tr 1029) that he was personally liable.
The only question which arose was as to the measure of damages.
Reluctantly, the Court of Kings Bench found itself obliged to award Seor Madrazo damages which included not merely the deterioration of the ships stores and goods, but also the alleged profit which would have been made from the ships cargo of slaves.
When Buron v Denman was argued nearly 30 years later, the only substantial question was therefore whether a different result could and should follow if the Crown had, after the event, purported to ratify what its naval captain had done.
There was a faint suggestion, which led to nothing, that Lord John Russells and Viscount Palmerstons commendations of Captain Denmans very spirited and able and highly meritorious conduct and their expressions of desire that such conduct should be repeated, whenever occasion arose, were insufficient to amount to ratification in fact.
The plaintiffs real argument was that ratification was only permissible if the act would have been justified, if done by the principal, whereas here it was not for the purpose of showing that the act was justifiable, but for the purpose of protecting the party committing it against examination as to whether it was right or wrong.
That ratification was permissible, if the act done would under domestic law have been justified if done by the principal, was in fact demonstrated by The Rolla.
There a British blockade of Monte Video (a Spanish enemy port) was in principle legal under international and domestic law, had however actually been imposed by the local British fleet commander, Sir Home Popham, without governmental authority, but was ratified by the British government after the event.
Parke B was in Buron v Denman concerned by the plaintiffs submission that a plea of Crown act of state was of a different character, since it did not turn on any conclusion that the act would, if authorised by the Crown be lawful (but simply withdrew it from domestic adjudication).
Ultimately, however, he joined with the other members of the Court in holding that ratification was in this context also equivalent to prior authorisation even if it left the plaintiff without remedy against the Crown because the injury would count as an act of state without remedy (p 189).
there is only one principle of Crown act of state; In summary: (i) (ii) Buron v Denman is simply authority for the proposition that conduct capable by its nature of being an act of state may be so not only when authorised in advance but also when subsequently ratified by the Crown; and (iii) Crown servants or agents committing an act of state with prior authorisation or subsequent ratification by the Crown enjoy the same immunity from liability that the Crown does otherwise, indeed, the doctrine of Crown act of state would have very little bite at all.
In support of this analysis, I note the following further points: (i) The suggestion that there are two separate rules of Crown act of state, operating somehow in parallel but at different levels, stems essentially from dicta of Lord Wilberforce in Nissan v Attorney General [1970] AC 179, 231C E. Nothing said by other members of the House supports such a bifurcation: see eg per Lord Reid at pp 207G, 208C G and 212C D and Lord Morris at pp 219B 221B.
Both analysed the issue in Nissan as turning on the scope of the rule in Buron v Denman ie as treating the rule in Buron v Denman and the principle of non justiciability as interdependent.
(ii) It is far from clear that Lord Wilberforce intended the conceptual distinction now proposed between two separate rules.
He himself spoke of Crown act of state as a principle that includes within itself two conceptions or rules.
His first conception or rule can be seen to have been focused on the liability or immunity of Crown servants whose acts have been authorised or subsequently ratified by the Crown.
On that basis, his second conception or rule represents the sole principle focusing on the case of a claim against the Crown itself. (iii) A precursor to Lord Wilberforces dicta consists in Lord McNairs International Law Opinions vol 1 (1956), from which, as I have already noted, Lord Wilberforce quoted at p 234C F in Nissan.
Lord McNair confined discussion of the rule in Buron v Denman to circumstances where a claim is made against a Crown servant, and dealt with non justiciability as a wider and more fundamental principle precluding claims against the Crown, its servants or agents (pp 111 112).
But, in circumstances where Crown servants are protected under the rule in Buron v Denman, the Crown itself must also be protected.
The inference again is that the rule in Buron v Denman is simply an aspect of the protection afforded by the wider and more fundamental principle of non justiciability.
The two rules cover different facets of the same situation. (iv) Further, in so far as Buron v Denman addressed the Crowns immunity from suit in relation to foreign military activity at all, it was based on authority addressing circumstances of non justiciability and has subsequently been analysed in the same terms.
Thus: (a) the Attorney General in Buron v Denman successfully advanced Crown act of state as a defence by referring to circumstances which were and are clearly non justiciable, referring (at p 184) to acts under a treaty and, as I have already noted, by referring (at p 185) to Elphinstone v Bedreechund, which concerned seizure of a military fortress during military hostilities and is a case of non justiciability; (b) the rationale of Buron v Denman is clearly identified in later authority at the highest level as being that it concerned non justiciable activity, that is (in the light of the ratification) state activity undertaken abroad as a matter of policy at an inter state level or in the course of something like military operations against a foreign state or its subjects: see Johnstone v Pedlar [1921] AC 262, per Viscount Finlay, p 271 foot; per Viscount Cave, p 275 foot; per Lord Atkinson, p 279; and per Lord Sumner, p 290 and pp 291 292.
In these passages, both Viscount Cave and Lord Atkinson assimilated Buron v Denman and Kamachee Boye Sahaba, which is another case correctly analysed by Lady Hale at para 25 as an instance of non justiciability.
In addition, no rationale for or explanation of the contours of any distinction between circumstances of non justiciability and circumstances falling within a supposedly separate rule to be derived from Buron v Denman is available.
Indeed, Lord Sumption argues that the two rules are in the present context one (para 80), but only (as I have pointed out in para 48 above) by assigning to non justiciability the unnatural meaning of a defence.
He suggests that, contrary to contemporary and later views, Buron v Denman was a case of a tort law defence.
Taking the criteria for activities which are non justiciable or inappropriate to be questioned in domestic civil proceedings, they clearly include all those identified by Lord Sumption in para 82, that is they must involve an exercise of sovereign power, inherently (i) governmental in nature; (ii) done outside the United Kingdom; (iii) with the prior authority or subsequent ratification of the Crown; and (iv) in the conduct of the Crowns relations with other states or their subjects (possibly excluding persons owning allegiance to the Crown).
I add two points.
First, Crown act of state must be potentially applicable as much to acts in the execution of policy makers decisions as it is to the decisions themselves.
It would not otherwise be a coherent doctrine.
In this, I am at one with Lady Hale (para 33) and Lord Sumption (para 90).
Second, in relation to the availability of Crown act of state as a plea in relation to conduct towards the subjects of foreign states: see eg the citations which Lady Hale gives in her para 2, the first of which was also quoted and endorsed by Lord Wilberforce in Nissan at p 231B; see also per Lord Reid at p 212C D.
The upshot is that the criteria suggested for the rule in Buron v Denman are the same criteria as lead to a conclusion that circumstances are non justiciable or inappropriate for adjudication in domestic civil proceedings.
The reason is clear.
There is only one principle, though it has different aspects protecting Crown servants or agents (Buron v Denman) and the Crown more generally.
What matters in any case is therefore its scope and application in relation to the particular circumstances the subject of the relevant civil proceedings.
As to this, I agree with Lady Hale and Lord Sumption that the present claimants detention by Her Majestys forces and their transfer from British to United States and Afghan custody were, as such, Crown acts of state which are not justiciable or open to question in domestic proceedings for common law damages such as the present.
They were, on the actual or presently assumed facts, steps taken pursuant to or in implementation of deliberately formed policy against persons (none owing any allegiance to the Crown) reasonably suspected to be insurgents or terrorists in the context and furtherance of foreign military operations during a time of armed conflict.
I also agree with Lady Hales conclusions regarding the Crown Proceedings Act 1947 and article 6 of the European Convention on Human Rights.
As she observes, the rule of Italian law considered by the European Court of Human Rights in Markovic v Italy (2006) 44 EHRR 52 was effectively a rule of non justiciability.
The Italian Court of Cassation had before it claims by relatives of persons killed in the NATO bombing of Belgrade, in which Italian forces had participated.
The Court of Cassation categorised the impugned act as an act of war, and said that since such acts were a manifestation of political decisions, no court possessed the power to review the manner in which that political function was carried out (para 106).
The European Court of Human Rights said, at para 114, that the Court of Cassations ruling 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.
It comes to the conclusion that the applicants inability to sue the state was the result not of an immunity but of the principles governing the substantive right of action in domestic law.
This statement fits precisely the circumstances of the present case on my approach to Crown act of state.
Further, in the light of the above, I agree that there should be a declaration in each appeal as Lady Hale proposes in her para 46, and that we should invite further submissions on its precise form.
In the cases of Yunus Rahmatullah and the Iraqi Civilian Litigation, I would specifically invite further assistance as to the effect and appropriateness of the qualifying adjective lawful quoted by Lady Hale in her para 46.
LORD SUMPTION:
In Nissan v Attorney General [1970] AC 179, 231, Lord Wilberforce, whose speech comes closest to supplying a coherent judicial statement of the doctrine of Crown act of state, reviewed the main relevant authorities on the doctrine and concluded that it comprised two rules.
One was a rule of non justiciability, by which he meant a rule which prevents British municipal courts from taking cognisance of certain acts.
The other was a rule which provides a defendant, normally a servant of the Crown, with a defence to an act otherwise tortious or criminal, committed abroad, provided that the act was authorised or subsequently ratified by the Crown.
The dichotomy between these two rules had previously been suggested by Lord McNair in International Law Opinions (1956), pp 111 116.
Non justiciability is a treacherous word, partly because of its lack of definition, and partly because it is commonly used as a portmanteau term encompassing a number of different legal principles with different incidents.
Strictly speaking, as this court observed in Shergill v Khaira [2015] AC 359 at para 41, it should be reserved for cases where an issue is said to be inherently unsuitable for judicial determination by reason only of its subject matter.
This may result in a court declining to determine an issue notwithstanding its relevance to the dispute between the parties, for example because there are no juridical standards by which to determine it, as in Buttes Gas and Oil Co v Hammer (No 3) [1982] AC 888; or because its determination is not within the constitutional competence of the courts, for example because it would trespass on Parliamentary privilege, as in Prebble v Television New Zealand Ltd [1995] 1 AC 321.
These are mandatory rules of public policy, originating in the laws recognition of the separation of powers between different organs of the state.
They define the limits of the courts jurisdiction or juridical competence.
But there are other principles, also originating in the separation of powers and described as principles of non justiciability, which do not go to the courts jurisdiction or competence but to the existence or scope of legal rights.
Thus in R (Campaign for Nuclear Disarmament) v Prime Minister [2002] EWHC 2777 (Admin), the court proceeded on the footing that it had both jurisdiction and competence to determine whether a resolution of the United Nations Security Council authorised military operations against Iraq, but declined to do so because, among other reasons, there were no relevant rights, interests or duties under domestic law: paras 14 15, 36.
I venture to suggest that if domestic law rights, interests or duties had been engaged, the court would not have regarded the issues as non justiciable.
Crown act of state is a rule of substantive law which belongs in this latter category.
The court is not disabled from adjudicating on a Crown act of state by virtue of its subject matter.
The acts of the Crown and its agents are always in principle subject to the adjudicative power of the courts.
They unquestionably have both jurisdiction and competence to determine the legal effects of a Crown act of state on the rights of those adversely affected by it.
The real question is what are those rights.
The rule of law relating to Crown acts of state defines the limits which as a matter of policy, the law sets upon certain categories of rights and liabilities, on the ground that they would otherwise be inconsistent with the exercise by the executive of the proper functions of the state.
In principle an agent of the Crown is liable as a matter of English law for injury or detention of persons or goods without lawful authority.
But that liability does not extend to a limited class of acts constituting Crown acts of state.
It follows that the agent has a defence if his acts fall within that class.
Like other members of the court, I doubt whether it helps to treat the doctrine as comprising two rules.
But in this context, it can fairly be said that Lord Wilberforces two rules merge into one.
I agree with Lady Hale that a Crown act of state gives rise to no liability on the part of the Crown or its agents.
I also agree with her upon the essential elements of a Crown act of state in this context.
They are (i) that the act should be an exercise of sovereign power, inherently governmental in nature; (ii) done outside the United Kingdom; (iii) with the prior authority or subsequent ratification of the Crown; and (iv) in the conduct of the Crowns relations with other states or their subjects.
There may be a fifth requirement, that the alleged tort should have been committed against a person not owing allegiance to the Crown.
But that raises a distinct and controversial question which does not need to be decided on these appeals.
The claimants in these proceedings did not owe allegiance to the Crown.
Although the label act of state is modern, the concept is very ancient.
The earliest illustrations relate to the right to seize ships or cargoes at sea.
The right, without incurring liability under English law, to seize property under letters of marque and reprisal issued on the authority of the Crown, even in peacetime, dates back to the 13th century.
It was not, however, until the 18th century that the underlying rationale of the doctrine began to emerge.
The growth of British seapower made it necessary to consider the interrelation between international and municipal law concerning captures at sea.
In a celebrated opinion of 1753, written by Sir William Murray, later Lord Mansfield, the law officers of the Crown advised that a belligerent power was entitled in international law to seize not only enemy property but the property of neutrals destined for an enemy: British and Foreign State Papers, 20 (1836), 889ff.
The result was that the seizure of the property on behalf of the Crown gave rise to no right to damages or possession at the suit of the former owner.
In The Rolla (1807) 6 Robinson 364, 365 367, Sir William Scott, perhaps the greatest British international lawyer of his day, identified the basis of the rule as being the authority or ratification of the Crown in the exercise of its sovereign power.
The result was that the American owner of a cargo had no rights under English municipal law in respect of the seizure of his property by Admiral Sir Home Popham in the course of his highly irregular (but ratified) blockade of the River Plate in 1806.
Greater definition was brought to this area of law in two seminal cases decided in the middle of the 19th century: Buron v Denman (1848) 2 Exch 167, and Secretary of State in Council of India v Kamachee Boye Sahaba (1859) 7 Moo Ind App 476.
Buron v Denman is one of those cases which is more significant for what it has always been understood to have decided, than for anything Parke B actually said in the course of his summing up to the jury.
Its significance is that Captain Denmans act in seizing the plaintiffs slaves and destroying his property in the Gallinas in West Africa was not a valid act of war, since Britain was at peace with Spain.
Nor was it justifiable in international law, since the slave trade had been held to be lawful by the law of nations: see Le Louis (1817) 2 Dod 210.
Although the indigenous ruler of the Gallinas had undertaken by treaty with Captain Denman to destroy the barracoons and surrender the slaves, he had not authorised Captain Denman to do these things, which was presumably why the treaty was not relied upon by Captain Denman and ignored by Parke B. There was therefore no legal basis whether in international or municipal law for the invasion of Seor Burons proprietary rights.
In those circumstances, the only plea available to Captain Denman was that by virtue of the Crowns adoption of his acts, they were acts of state.
The judge took it to be axiomatic that the prior authority of the Crown would have constituted a defence.
The defendant would in that case be irresponsible (p 190), ie not liable.
The only contentious issue was whether subsequent ratification was equivalent to prior authority.
He held that it was.
Parke B did not explain why it went without saying that the authority of the Crown was a defence, but the basis of the rule became clearer a decade later in the advice of the Privy Council in Secretary of State in Council of India v Kamachee Boye Sahaba.
Lord Kingsdown, delivering the advice of the Board, applied the principle in Buron v Denman (see pp 539 540) to the annexation of the Indian state of Tanjore and the seizure of the late Rajahs property there by the East India Company in the exercise of the sovereign power of the Crown.
He declared, at p 529: The general principle of law was not, as indeed it could not, with any colour of reason be disputed.
The transactions of independent states between each other are governed by other laws than those which Municipal Courts administer: such courts have neither the means of deciding what is right, nor the power of enforcing any decision which they may make.
Lord Kingsdown went on, at p 531, to inquire what was the nature of the act of the East India Companys officers: Was it a seizure by arbitrary power on behalf of the Crown of Great Britain, of the dominions and property of a neighbouring state, an act not affecting to justify itself on grounds of municipal law? Or was it, in whole or in part, a possession taken by the Crown under colour of legal title of the property of the late Rajah of Tanjore, in trust for those who, by law, might be entitled to it on the death of the last possessor? He concluded (p 540) that the property now claimed, by the respondent has been seized by the British Government, acting as a Sovereign power, through its delegate the East India Company; and that the act so done, with its consequences, is an act of state over which the Supreme Court of Madras has no jurisdiction.
Of the propriety or justice of that act, neither the court below nor 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.
Leggatt J regarded this as a perverse doctrine under which the executive can be held to account if it purports to act legally, but not if it openly flouts the law.
But I think that the judge has misunderstood Lord Kingsdowns reasoning.
Lord Kingsdown was not saying that the East India Company could not be held to account because it had openly flouted the law.
He was doing two things.
In the first place he was pointing out that even if the Crowns annexation of Tanjore was unlawful in international law that could not of itself give rise to any legal rights in municipal law.
Secondly, he was distinguishing between the sovereign and non sovereign acts of the Crown.
If the seizure of the late Rajahs property had been carried out under colour of municipal law, for example as a taking of possession by a trustee, it would not have been a sovereign act but an act such as any non sovereign could have done.
As it was, it was an extraterritorial exercise of sovereign power, and as such an act of state.
It therefore gave rise to no actionable duty owed to the late Rajahs heirs.
The judgment of Lord Kingsdown has been treated by the House of Lords and the Privy Council on many occasions since it was decided as an authoritative statement of the law: see, among other cases, Sirdar Baghwan Singh v Secretary of State for India [1874] LR 2 Ind App 38, 47; Cook v Sprigg [1899] AC 572; Johnstone v Pedlar [1921] 2 AC 262, 275 (Viscount Cave), 278 279 (Lord Atkinson), 290 291 (Lord Sumner); Vajesingji Joravarsingji v Secretary of State for India [1924] LR 51 Ind App 357; Secretary of State for India v Sardar Rustam Khan [1941] AC 536; Nissan v Attorney General [1970] AC 179, 218 (Lord Morris of Borth y Gest), 225 (Lord Pearce), 231 232 (Lord Wilberforce), 238 (Lord Pearson).
The reason why the liabilities of the Crown in municipal law do not extend to sovereign acts done in the course of military operations outside the United Kingdom is essentially a principle of consistency.
The deployment of armed force in the conduct of international relations, or the threat of its deployment (express or implicit) is one of the paradigm functions of the state.
The law vests in the Crown the power to conduct the United Kingdoms international relations, including the deployment of armed force in support of its objectives.
Constitutionally, as Blackstone observed, the result is that what is done by the royal authority with regard to foreign powers is the act of the whole nation: Commentaries, para 252.
Or, as Willes J put it a century later in Esposito v Bowden 7 EL & BL 763, 781 (1857), speaking of a declaration of war, as an act of state, done by virtue of the prerogative exclusively belonging to the Crown, such a declaration carries with it all the force of law.
In the nature of things, the use of armed force abroad involves acts which would normally be civil wrongs not only under English law but under any system of municipal law.
People will be detained or killed.
Their property will be damaged or destroyed.
It would be incoherent and irrational for the courts to acknowledge the power of the Crown to conduct the United Kingdoms foreign relations and deploy armed force, and at the same time to treat as civil wrongs acts inherent in its exercise of that power.
In this respect, Crown act of state differs from foreign act of state.
When the courts consider an exercise of sovereign authority by a foreign state, no question of consistency arises because the sovereign authority of the foreign state is not derived from English law.
Foreign act of state operates purely as a rule of non justiciability.
Its effect in the very limited class of cases to which it applies is not to afford a defence but to preclude the courts from taking cognisance of an alleged civil wrong if it necessarily depends on determining the lawfulness of a foreign act of state.
None of this means that whatever an agent of the Crown does pursuant to its decisions in the conduct of the United Kingdoms foreign relations gives rise to the defence of act of state.
The boundaries are admittedly difficult to draw.
The only extended discussion appears in the speeches in the House of Lords in Nissan v Attorney General [1970] AC 179.
But the inconsistencies between them, the unsatisfactory terms of the pleading on which the argument was based and the obscurity of the facts combine to make it hard to extract any very clear ratio from this decision.
It is unquestionably right to say, as Lord Pearson did at p 237F, that an act of state must be something exceptional.
He cited the making of war and peace, the making of treaties and annexations or cessions of territory as obvious examples (p 237F G), and the dispatch of a peacekeeping force to the territory of an independent sovereign as having to some extent the character of acts of state even if it did not follow that everything that it did there was an act of state (pp 239F 240B).
But this brings one no closer to a workable criterion on which to decide cases like the present ones.
In my opinion, the main relevant limitations on the act of state doctrine are implicit in the doctrine itself.
In particular, they are implicit in the requirement that the act must be inherently governmental in nature, and either specifically authorised or ratified by the Crown or inherent in what the Crown has authorised or ratified.
Without seeking to formulate a comprehensive definition of a rule whose application is inevitably fact sensitive, I consider that the following points can fairly be made.
The first is that an act does not need to raise questions of high policy in order to give rise to a plea of Crown act of state.
This is because the rule extends not just to the decisions of policy makers, but to actions taken by the Crowns agents in the execution of those decisions, often at a relatively low level, far below the level of policy making.
Moreover, as Lord Reid pointed out in Nissan, at p 212, acts which are unauthorised but ratified after the event are unlikely to have been done in accordance with any high policy of the Crown.
Secondly, it is sometimes said that the act must be the necessary consequence of a decision made by the Crown through its ministers.
I think that this is right, provided that we are careful about what we mean by necessary.
In rejecting the Crowns reliance on act of state in Nissan, two members of the Appellate Committee observed that while the agreement with the government of Cyprus to station troops on the island was itself an act of state, the occupation of the Cornaro Hotel was not necessary to its implementation: pp 216 217 (Lord Morris of Borth y Gest), 227B C (Lord Pearce).
But it is important to guard against the suggestion that the availability of the act of state defence depends on a judicial assessment of the political or tactical alternatives, an exercise which must be left to the judgment of the executive or its officers on the spot.
As Sir William Scott observed in The Rolla, at p 366, a commander going out to a distant station may reasonably be supposed to carry with him such a portion of sovereign authority delegated to him, as may be necessary to provide for the exigencies of the service on which he is employed.
In my opinion, the question depends on the character of the act.
It is whether an act of that character is inherent in what the Crown has authorised or ratified.
It is in this sense that the concept of necessity is used in this context.
Thirdly, however, the fact that the act is of a kind which is inherent in what the Crown has authorised or ratified, although undoubtedly a necessary condition, cannot be a sufficient one.
It must also be by its nature a sovereign, ie an inherently governmental act, for the Crown to be capable of authorising or ratifying it as an act of state.
In his speech in Nissan (p 218F), Lord Morris, after quoting the definition of act of state in the then current edition of Halsburys Laws of England (an act of the executive as a matter of policy performed in the course of its relations with another state including its relations with the subjects of that state), observed, at p 218F: I do not think that such actions as securing food or shelter in peace time for troops situate abroad are to be regarded as acts of the executive performed in the course of relations with another state within the conception of the above definition.
I think that this was the true ratio of the decision.
The appropriation of the hotel was not an inherently governmental act in the circumstances pleaded.
It was an ordinary case of the army acquiring accommodation in peacetime, in respect of which they were in no different position from any other organisation acquiring accommodation.
They therefore had to pay like any one else.
As Lord Pearson suggested at p 240B, the position might be different if there had been an urgent military necessity to occupy the hotel.
I would prefer to reserve my opinion on the question whether the appropriation of property, with or without compensation, can be an act of state.
I think that the answer would be likely to depend on the circumstances.
In Buron v Denman and in Kamachee Boye Sahaba and other colonial annexation cases, the seizure of property without compensation was held to be an act of state.
The same would, I suspect, be true of most appropriations of property in the course of active military operations.
In other circumstances, like those in Nissan, the position would be different.
We have heard no argument on this question.
In the present cases, Crown act of state is raised by the Secretary of State only so far as the allegations are based on the mere fact of the claimants detention by Her Majestys forces or the mere fact of their transfer from British custody to that of the United States.
In my opinion these were acts of state so far as they were authorised by the United Kingdoms detention policy or required by the United Kingdoms agreements with the United States, these being the only particulars of authority relied upon.
If these criteria were satisfied, they were both inherently governmental in character and authorised by the Crown in the conduct of the United Kingdoms international relations.
The Crown and its servants could not therefore be liable for them in tort.
I would make a declaration to that effect.
The Secretary of State denies that the claimants were maltreated, but does not contend that any maltreatment which may have occurred was an act of state.
That is as one would expect.
Any maltreatment of detainees was not authorised by the United Kingdoms detention policy.
It is not alleged to have been authorised in any other way, or to have been ratified.
It is therefore unnecessary to address the question whether the maltreatment of detainees ever could be an act of state, in the highly improbable event of its being done with the authority of the Crown.
I would merely record my reservations about Lady Hales suggestion that the torture or maltreatment of prisoners is not an inherently governmental act, although I agree that in the light of the governments statements on the subject this is a moot point.
As an international crime and a statutory offence in the United Kingdom, torture is by definition a governmental act: see Jones v Saudi Arabia [2007] 1 AC 270, paras 19 (Lord Bingham of Cornhill) and 81 85 (Lord Hoffmann).
There are, unfortunately, well documented modern instances across the world of the use of torture and other forms of maltreatment as an instrument of state policy authorised at the highest levels.
There is a more satisfactory answer to the hypothetical problem of governmental torture and deliberate governmental maltreatment.
Given the strength of the English public policy on the subject, a decision by the United Kingdom government to authorise or ratify torture or maltreatment would not as a matter of domestic English law be a lawful exercise of the royal prerogative.
It could not therefore be an act of state.
Nor would there be any inconsistency with the proper functions of the executive in treating it as giving rise to civil liability.
I have nothing to add to Lady Hales analysis of the Crown Proceedings Act 1947, or her conclusions about article 6 of the European Convention on Human Rights, with which I entirely agree.
LORD NEUBERGER: (with whom Lord Hughes agrees)
This aspect of these proceedings concerns the principle or doctrine of Crown act of state, which has been raised by the defendants in circumstances which have been explained by Lady Hale in paras 1 14 above.
Crown act of state, like foreign act of state, is a doctrine which has been developed by judges over the years, as explained in the judgments of Lady Hale, Lord Mance and Lord Sumption.
It would be a fruitless exercise to try and reconcile all the judicial dicta, even from the House of Lords, on this doctrine.
Indeed, it is very difficult to identify a comprehensive definition of the doctrine, as is clear from the somewhat different approaches in the speeches of Lord Reid, Lord Morris and Lord Wilberforce in the most recent decision of the House of Lords on the topic, Nissan v Attorney General [1970] AC 179.
A remarkable aspect of this doctrine is the weight that has been given to Buron v Denman (1848) 2 Exch 167, given that it was a direction to a jury where the nature and extent of the doctrine was not really in issue.
The fact that the judge concerned was Baron Parke no doubt helps to explain why the ruling has been accorded particular respect.
However, in agreement with Lord Mances analysis of the report, it seems to me that, to the extent that the case is strictly an authority, it is simply for the proposition that an action which would have been an act of state if it had been authorised in advance, will (or at least may) be treated by the court as an act of state if it is subsequently ratified by the Crown.
Nonetheless, Buron was cited with approval by Lord Reid, Lord Morris and Lord Wilberforce in Nissan, and by Viscount Finlay, Viscount Cave, and Lord Sumner in Johnstone v Pedlar [1921] 2 AC 262, in relation to what Baron Parke said about the doctrine of Crown act of state.
The fact that any attempt to define the precise nature and extent of the principle of Crown act of state is doomed to failure is unsurprising.
The doctrine is ultimately based on judicial decisions and dicta as to when the judiciary should decline to rule on the lawfulness of an act on the ground that any challenge to the act should be left to the executive, at least normally where the act is based on the Royal prerogative.
However, it is only in relation to some acts based on the Royal prerogative that when a court will decline to adjudicate, namely acts which, because of their nature or circumstances, call for judicial self restraint.
There have been very few cases in the past 100 years when the doctrine has been considered and hardly any in which it has been held to apply.
And decisions given even 50 years ago may reflect a somewhat different approach to that which appears appropriate today, following the growth of judicial review and the introduction of human rights into our domestic law.
The difficulty in identifying or delimiting the doctrine is reinforced by the flexibility and imprecision of the United Kingdoms constitutional settlement.
And it appears to me that any observation on the doctrine prior to the decision of the House of Lords in Council of the Civil Service Unions v Minister for the Civil Service [1985] AC 374 must be considered with particular caution, essentially for the reason given by Lady Hale in para 15.
However, despite these points, there is no doubt that the doctrine of Crown act of state remains a constitutionally important, if rarely invoked, feature of the common law.
For the reasons already given, I agree with Lady Hale (in para 36) that it would be unwise for us to propound a definitive statement as to when the Crown act of state doctrine can be invoked.
However, I entirely endorse the attempts in the preceding judgments to give as much guidance as we can on the extent of the doctrine.
In that connection, I consider that the formulations of Lady Hale (in paras 32 and 36 37), of Lord Mance (in paras 56 58 and 64) and of Lord Sumption (in paras 88 93) provide helpful guidance as to what may constitute (or may not constitute) a Crown act of state, as do the definitions cited in para 2 of Lady Hales judgment.
That leaves the question of the proper characterisation of the doctrine.
In those rare cases where an issue involving a Crown act of state arises, it does not mean that a judge lacks the information or expertise to resolve the issue (although in some exceptional cases that may be a different reason for the court not determining an issue).
As Lady Hale says in para 45, this is not because the doctrine bestows any sort of immunity, or indeed because of any judicial discretion: it is because there are certain acts of the UK government (sc the executive) which, owing to their nature or circumstances, are not susceptible to judicial assessment.
As Lord Sumption says in para 88, the doctrine is ultimately based on the need for consistency or coherence in the distribution of functions between the executive and the judiciary in the United Kingdoms constitutional arrangements.
Accordingly, if a claim depends on establishing the unlawfulness of a Crown act of state, then, as a matter of United Kingdom law, the claim must fail, as a Crown act of state cannot give rise to a legal liability.
When Crown act of state applies to a particular act, that act is often described as being non justiciable.
However, as Lord Sumption explains in para 79, the expression non justiciable can have a number of different meanings, and, for that very reason it seems to me that it is one which is best avoided if one is seeking to explain precisely why an issue cannot be resolved because the doctrine of Crown act of state applies.
Thus, the expression non justiciable could well be understood as suggesting that the court is incapable of determining, or choosing not to determine, the lawfulness of the act in question, or that the court is declining to address any legal liability flowing from that act.
But, as I have just explained (and is explained more fully in the preceding judgments), none of those analyses represents the basis of Crown act of state.
I agree with Lady Hale, for the reasons which she gives, that neither the Crown Proceedings Act 1947 nor article 6 of the European Convention on Human Rights assists the respondents.
However, I also agree with her, Lord Mance and Lord Sumption, for the reasons which they all give, that the doctrine of Crown act of state can be relied on by the defendants in this case, and accordingly I would join them in allowing this appeal.
LORD CLARKE:
I have read all these judgments with interest and admiration.
There has been much debate as to whether Crown act of state involves one or two principles.
However nobody has so far suggested a case in which it would make a difference as to which of the two principles applied.
Like Lord Sumption (the principal proponent of the two principles approach), at the end of para 80, I doubt whether it helps to treat the doctrine as comprising two rules or one.
I also agree with him that in this context it can fairly be said that Lord Wilberforces two rules merge into one.
The only point that I would stress is this.
It does seem to me that whether there is one principle or two, the question whether a defendant can successfully rely upon Crown act of state does not involve the court exercising a discretion or anything approaching a discretion.
The defendant either has a legal right to rely upon Crown act of state or it does not.
Only in the former case will it succeed, whether it is held that it does so by way of defence or by the application of the principle of non justiciability.
I agree that the disposition of this appeal should be as proposed by the other members of the court for the reasons they give.
In so far as there may be differences between them, I do not detect any difference which is critical to the resolution of this appeal.
| UK-Abs | This appeal concerns the nature and content of the doctrine of Crown act of state.
The question arises from proceedings brought against the Ministry of Defence and the Foreign and Commonwealth Office (the Government) by a large number of people (the respondents) who claim to have been wrongfully detained or mistreated by UK or US forces in the course of the conflicts in Iraq and Afghanistan.
Insofar as the proceedings include claims based on the Iraqi or Afghan law of tort, the Government has (along with other defences) raised the doctrine of Crown act of state.
The question of whether the doctrine is applicable in these cases was ordered to be determined as a preliminary issue, before the individual cases are heard by the lower courts.
The Government argues that certain acts of high policy committed by a sovereign state are not susceptible to adjudication in the courts (they are non justiciable), but also that Crown act of state is a defence to an action in tort where a foreigner seeks to sue the Government in the courts of this country in respect of certain acts committed abroad, pursuant to UK policy in the conduct of its foreign affairs.
The respondents argue that the doctrine of Crown act of state is only a narrow rule of non justiciability for acts of high policy in the conduct of foreign relations, which does not extend to decisions made to detain or transfer particular individuals.
In the High Court, Leggatt J held that the claims were justiciable, but declared that the Crown act of state doctrine provided a defence to the tort claims.
The Court of Appeal allowed the respondents appeals.
It held that the doctrine provided a tort defence as well as a non justiciability rule, but that the defence would only apply when the Government could establish that there were compelling grounds of public policy to refuse to give effect to the local tort law.
No such grounds arose in the case of Mr Mohammed, which is the only claim so far in which the relevant facts and evidence have been pleaded.
The Supreme Court unanimously allows the Governments appeals, holding that, insofar as the respondents tort claims are based on acts of an inherently governmental nature in the conduct of foreign military operations by the Crown, these were Crown acts of state for which the Government cannot be liable in tort.
Lady Hale (with whom Lord Wilson agrees) gives the main judgment.
Lord Mance, Lord Sumption, Lord Neuberger and Lord Clarke each give concurring judgments.
Lord Hughes agrees with Lady Hale, Lord Mance and Lord Neuberger.
The court will seek further submissions from the parties as to the appropriate form of declaration in each of these cases.
A Crown act of state is a prerogative act of policy in the field of international affairs performed by the Crown in the course of its relationship with another state or its subjects [2].
The principle that there is no general defence of state necessity to a claim of wrongdoing by state officials has been established since the eighteenth century [4].
The early cases, however, indicated that there was an exception in the case of acts committed abroad against a foreigner which were authorised or ratified by the Crown [6]; it was also suggested that this doctrine encompassed two rules: one of non justiciability for certain prerogative acts of the Crown in sphere of foreign affairs and a second providing the Government or its servants with a defence to claims arising from acts of state committed abroad [19].
There is no reason to doubt that the first rule exists but the question for the Supreme Court is whether, as the Government submits, the doctrine also provides a defence to a claim which is otherwise suitable for adjudication for a court [22].
If the doctrine is to be confined to a non justiciability rule, a broader concept of non justiciability is required, which encompasses aspects of the conduct of military operations abroad as well as the high policy decision to engage in them.
The courts may need to hear evidence and find facts in order to determine whether the acts in question fall within this category [33].
But the doctrine must be narrowly confined to a class of acts which involve an exercise of sovereign power, inherently governmental in nature, committed abroad, with the prior authority or subsequent ratification of the Crown, in the conduct of foreign relations of the Crown.
The class of acts must be so closely connected to that policy to be necessary in pursuing it.
It extends at least to the conduct of military operations which are themselves lawful in international law.
The Government accepts that it cannot apply to acts of torture or to the maltreatment of detainees [36 37, 72, 81].
On the presently assumed facts, the respondents detention by Her Majestys forces and transfers out of British custody were steps taken pursuant to deliberately formed policy against persons reasonably suspected to be insurgents, in the context and furtherance of foreign military operations during a time of armed conflict, and were thus Crown acts of state for which the Government cannot be held liable in proceedings for common law damages [75, 95].
Lord Mance considers that the underlying principle of Crown act of state is one of non justiciability (or judicial abstention or restraint) and it creates unnecessary confusion to suggest that it has two branches [47].
Lord Sumptions analysis is that Crown act of state does offer a defence, but he doubts whether it helps to treat the doctrine as comprising two rules, and in any event in the present context the two rules merge into one [80].
Lord Neuberger agrees with Lord Sumption that the doctrine is ultimately based on the need for consistency or coherence in the distribution of functions between the executive and the judiciary in the United Kingdoms constitutional arrangements.
It is not that a judge lacks the information or expertise to resolve the issue, but rather that there are certain governmental acts which owing to their nature or circumstances are not susceptible to judicial assessment [104].
The doctrine was not abolished by the Crown Proceedings Act 1947, which preserved the previous law by the proviso in section 2(1) [41].
It is also compatible with the right to a fair trial protected by article 6 of the European Convention on Human Rights, as it is clearly a rule of substantive law rather than a procedural bar [45].
The appeal is therefore allowed and a declaration substituted to the effect that, in proceedings in tort governed by foreign law, the Government may rely on the doctrine of Crown act of state to preclude the court passing judgment on the claim if the circumstances are such as stated in paragraphs 36 37 of this judgment [46].
|
This is an appeal from an order of the Court of Appeal (Longmore, Kitchin and Vos LJJ) dated 4 December 2014, which set aside an order of the Chancellor dated 28 February 2014 staying the present proceedings.
The points raised are novel and difficult, and the focus of submissions has shifted at each instance.
The proceedings are brought by a Cayman Islands company, Saad Investments Co Ltd, in liquidation, (SICL) and its Joint Official Liquidators (the Liquidators), appointed as such in winding up proceedings commenced in the Cayman Islands on 30 July 2009.
The English Companies Court has recognised the Cayman Islands winding up proceedings as a foreign main insolvency proceeding by orders under the Cross Border Insolvency Regulations 2006 (SI 2006/1030).
The proceedings are against Samba Financial Group (Samba), which was served as of right within the jurisdiction on 19 August 2013, but which then applied for the proceedings to be stayed.
The ground then given was that there exists another forum which is clearly and distinctly more appropriate than England.
In the course of the appeals leading to the Supreme Court, the ground has effectively transmuted into a case that SICLs claim has no prospect of success, for a reason or reasons which will appear.
The parties have argued the appeal, and the Supreme Court will address it, on that basis.
Before the Supreme Court many of the issues which required attention below are no longer relevant.
The appeal can as a result be approached on the basis of assumed facts and matters which can be shortly stated.
They include the following.
Mr Al Sanea, a Saudi Arabian citizen and resident closely involved with SICL, was the legal owner of shares, valued at around US$318m, in five Saudi Arabian banks, one of them Samba itself.
He was registered as their owner in the Saudi Arabian Securities Depositary Centre.
SICL claims that Mr Al Sanea had agreed to hold these Saudi Arabian shares at all material times on trust for SICL.
The trusts arose allegedly as a result of six transactions.
In the first transaction in 2002, Mr Al Sanea by share sale agreement agreed to transfer to SICL the beneficial ownership of the relevant shares, but to continue to hold the legal title in order to comply with legal requirements in Saudi Arabia.
In a second transaction in 2003, Mr Al Sanea agreed to hold legal ownership of [the relevant] shares as nominee for SICL in order to comply with the legal requirements in Saudi Arabia.
In the remaining four transactions, in respectively 2006, 2007 and on two occasions in 2008, Mr Al Sanea made declarations of trust for SICL in respect of the relevant shares.
It is now common ground, for the purposes of this appeal, that all six transactions by which Mr Al Sanea purported to constitute himself a trustee for SICL can be treated as subject to Cayman Islands law.
It is also common ground that the law of Saudi Arabia, where the shares are sited, does not recognise the institution of trust or a division between legal and equitable proprietary interests, although it does recognise a different institution, amaana, the precise implications of which have not been explored in evidence.
On 16 September 2009, Mr Al Sanea transferred all the Saudi Arabian shares to Samba, purporting thereby to discharge personal liabilities which he had towards Samba.
The present proceedings are brought by SICL and the Liquidators against Samba in reliance on section 127 of the Insolvency Act 1986, which provides: Avoidance of property dispositions, etc.
In a winding up by the court, any disposition of the companys property, and any transfer of shares, or alteration in the status of the companys members, made after the commencement of the winding up is, unless the court otherwise orders, void.
By section 436 of the 1986 Act the concept of property is defined in wide terms: property includes money, goods, things in action, land and every description of property wherever situated and also obligations and every description of interest, whether present or future or vested or contingent, arising out of, or incidental to, property;
In the courts below, and when the matter first came before the Supreme Court, the critical issue was identified as being whether SICL had equitable proprietary interests in the shares in respect of which Mr Al Sanea had purportedly constituted himself trustee.
It appears to have been assumed that, if SICL had such interests, then they were disposed of by Mr Al Saneas transfer of title in the shares to Samba.
Sambas submission was that SICL could have no such equitable proprietary interests, since the law of Saudi Arabia, the lex situs of the shares, does not recognise purely equitable proprietary interests.
Following the oral hearing before it, the Supreme Court invited and received two sets of supplementary written submissions focusing more precisely on the questions (a) whether there was any disposition within section 127, even if SICL had equitable proprietary interests in the shares, and (b) why, if there was, it could not also be said that there was such a disposition, even if SICL only enjoyed personal rights in respect of the shares.
At all instances of this case, detailed submissions have been addressed on the Convention on the Law Applicable to Trusts and on their Recognition, scheduled to the Recognition of Trusts Act 1987.
These submissions focused, before the Chancellor, on article 15 and, before the Court of Appeal and Supreme Court, on both articles 4 and 15 of that Convention.
The 1987 Act states in section 1(1) that The provisions of the Convention set out in the Schedule shall have the force of law in the United Kingdom.
The Convention as scheduled contains the following provisions: CHAPTER I SCOPE Article 1 This Convention specifies the law applicable to trusts and governs their recognition.
Article 2 For the purposes of this Convention, the term trust refers to the legal relationship created inter vivos or on death by a person, the settlor, when assets have been placed under the control of a trustee for the benefit of a beneficiary or for a specified purpose.
A trust has the following characteristics the assets constitute a separate fund and are not a (a) part of the trustees own estate; (b) title to the trust assets stands in the name of the trustee or in the name of another person on behalf of the trustee; the trustee has the power and the duty, in respect (c) of which he is accountable, to manage, employ or dispose of the assets in accordance with the terms of the trust and the special duties imposed upon him by law.
The reservation by the settlor of certain rights and powers, and the fact that the trustee may himself have rights as a beneficiary, are not necessarily inconsistent with the existence of a trust.
Article 3 The Convention applies only to trusts created voluntarily and evidenced in writing.
Article 4 The Convention does not apply to preliminary issues relating to the validity of wills or of other acts by virtue of which assets are transferred to the trustee.
Article 5 The Convention does not apply to the extent that the law specified by Chapter II does not provide for trusts or the category of trusts involved.
CHAPTER II APPLICABLE LAW CHAPTER III RECOGNITION Article 11 A trust created in accordance with the law specified by the preceding Chapter shall be recognised as a trust.
Such recognition shall imply, as a minimum, that the trust property constitutes a separate fund, that the trustee may sue and be sued in his capacity as trustee, and that he may appear or act in this capacity before a notary or any person acting in an official capacity.
In so far as the law applicable to the trust requires or provides, such recognition shall imply in particular that personal creditors of the trustee shall have no (a) recourse against the trust assets; (b) that the trust assets shall not form part of the trustees estate upon his insolvency or bankruptcy; (c) that the trust assets shall not form part of the matrimonial property of the trustee or his spouse nor part of the trustees estate upon his death; (d) that the trust assets may be recovered when the trustee, in breach of trust, has mingled trust assets with his own property or has alienated trust assets.
However, the rights and obligations of any third party holder of the assets shall remain subject to the law determined by the choice of law rules of the forum.
Article 12 Where the trustee desires to register assets, movable or immovable, or documents of title to them, he shall be entitled, in so far as this is not prohibited by or inconsistent with the law of the state where registration is sought, to do so in his capacity as trustee or in such other way that the existence of the trust is disclosed.
Article 14 The Convention shall not prevent the application of rules of law more favourable to the recognition of trusts.
CHAPTER IV GENERAL CLAUSES Article 15 The Convention does not prevent the application of provisions of the law designated by the conflicts rules of the forum, in so far as those provisions cannot be derogated from by voluntary act, relating in particular to the following matters the protection of minors and incapable parties; the personal and proprietary effects of marriage; succession rights, testate and intestate, especially (a) (b) (c) the indefeasible shares of spouses and relatives; (d) interests in property; (e) insolvency; (f) acting in good faith. the protection of creditors in matters of the transfer of title to property and security the protection, in other respects, of third parties If recognition of a trust is prevented by application of the preceding paragraph, the court shall try to give effect to the objects of the trust by other means.
Article 16 The Convention does not prevent the application of those provisions of the law of the forum which must be applied even to international situations, irrespective of rules of conflict of laws.
Article 17 In the Convention the word law means the rules of law in force in a state other than its rules of conflict of laws.
Article 18 The provisions of the Convention may be disregarded when their application would be manifestly incompatible with public policy.
In the Court of Appeal, the first issue under article 4 was whether this article excludes the application of the Convention to the trusts created or declared by Mr Al Sanea, bearing in mind that Saudi Arabian law does not recognise any division of legal and beneficial interests.
Secondly, assuming the Convention to apply, SICL relied on its provisions regarding applicable law in Chapter II in submitting that the trusts were governed by Cayman Islands law.
That is an issue that has, for present purposes, disappeared, since the present appeal proceeds on the basis that the transactions creating or declaring the trusts were subject to Cayman Islands law.
Thirdly, assuming the Convention otherwise to apply, Samba argued in the courts below that the effect of article 15(d) was to remit the question whether, under the trusts, SICL acquired any equitable proprietary interest in the shares to Saudi Arabian law, being, it submits, the lex situs designated by English common law as the law governing questions of title.
Samba succeeded on this point before the Chancellor (para 63), but lost before the Court of Appeal on the basis that there were triable issues whether under Saudi Arabian law the arrangements constituted by the six transactions were valid and whether any rule precluding the separation of legal and equitable title or precluding foreigners from owning Saudi Arabian property was mandatory, in the sense that it could not be derogated from within the meaning of that term in article 15.
The first issue, whether or not the Convention applies to the trusts, focuses on the exclusion introduced by article 4.
SICL submits that the concept of preliminary issues relating to the validity . of other acts by virtue of which assets are transferred to the trustee goes no further than to exclude issues about the alienability, or transferability, of the assets to the trustee.
It submits that article 4 leaves all further issues concerning the capacity of the trustee to declare a trust in respect of the shares or to create a beneficial interest in the shares under such a declaration to be governed under the Convention by the governing law of the trust, ie for present purposes, Cayman Islands law.
Samba on the other hand submits, drawing on passages in the travaux prparatoires, that all these issues are excluded from the Convention by article 4, and remitted accordingly to the common law, under which it submits Saudi Arabian law, as the lex situs of the shares, governs them.
On this issue, the Court of Appeal accepted SICLs case.
It held (para 55) that: Provided that the property that is made the subject of a trust can be alienated at all under the lex situs, questions as to the validity and effect of placing such assets in trust, even though the assets are shares in a civil law jurisdiction, can be determined by the governing law of the trust.
To put the matter in the context of this case, the declarations of trust will not be dividing the equitable and legal interests in the shares under Saudi Arabian law.
That is not possible.
But the declarations of trust may give SICL rights under the trust in respect of those shares that will have to be determined by the governing law of the trust, taking into account that under Saudi Arabian law a division of equitable and legal interests is not possible.
All these matters will have to be worked out at the next stage of this litigation when the court comes to consider the effect on the rights granted by the declarations of trust of the transfer to Samba which took effect under Saudi Arabian law.
On the present appeal, Samba criticises this passage as obscure, and submits that, in so far as it suggests that an equitable proprietary interest can exist in an asset sited in a jurisdiction which knows no such concept, it is wrong.
In the light of the further and more broadly ranging submissions which the Supreme Court has now received, I doubt if it matters for present purposes either whether the Convention applies or even whether SICLs interests in relation to the shares can properly be described as proprietary.
The limited focus in the courts below, on the issue whether the trusts gave SICL equitable proprietary interests in the shares, is largely subsumed in a more general question whether, whatever the nature of SICLs interests under the trusts, there was any disposition of property within the meaning of section 127.
As to what constitutes property, this is always heavily dependent on context something can be proprietary in one sense while also being non proprietary in another sense: M Conaglen, Thinking about proprietary remedies for breach of confidence (2008) Intellectual Property Quarterly 82, 89, referring to R Nolan, Equitable Property (2006) 122 LQR 232, 256 257.
As the Chancellor noted (para 62), there is a school of thought (which can be dated to FW Maitland, Equity a Course of Lectures (1936)) which analyses the equitable interests created by a common law trust not as proprietary, but as personal or obligational, even as against third parties.
The issue whether trusts are properly seen as part of the law of property or as an aspect of the law of obligations is described by Swadling in Burrows, English Private Law (3rd ed) (2013) para 4.140 as a difficult question; see also Burrows, The Law of Restitution, (3rd ed) (2011), pp 191 193, Nolan, Equitable Property (2006) 122 LQR 232.
Supporters of a personal analysis include B McFarlane, The Structure of Property Law (2008); see also Watt, The Proprietary Effect of a Chattel Lease (2003) Conveyancer and Property Lawyer 61.
A recent discussion of the pros and cons of each analysis appears by P Jaffey in Explaining the Trust (2015) 131 LQR 377.
Jaffey concludes that, although a trust involves personal rights against the trustee, only a proprietary analysis explains satisfactorily those aspects which concern the beneficiarys position vis vis third parties, such as the trustees creditors and recipients of unauthorised transfers of trust property.
As before the Chancellor, so before the Supreme Court, the parties were content to proceed on the basis of the conventional analysis that a trust creates a proprietary interest, at least to the extent that such an interest is capable of existing and being recognised in the relevant asset.
In this judgment, I am also content, without expressing any view about the appropriate analysis, to proceed on the same basis.
At common law, the nature of the interest intended to be created by a trust depends on the law governing the trust.
This law therefore determines whether the intention is to give a beneficiary an equitable proprietary interest in an asset held on trust or a mere right against the trustee to perform whatever functions the trust imposes upon him with regard to the use and disposal of foreign shares and income derived from them: see Dicey, Morris & Collins, The Conflict of Laws (15th ed) (2012), vol 2, para 22 048, citing Archer Shee v Garland [1931] AC 212.
Where the intention is to create an equitable proprietary interest, then the common law position is as stated in Westdeutsche Landesbank Girozentrale v Islington London Borough Council [1996] AC 669, 705F, per Lord Browne Wilkinson: Once a trust is established, as from the date of its establishment the beneficiary has, in equity, a proprietary interest in the trust property, which proprietary interest will be enforceable in equity against any subsequent holder of the property (whether the original property or substituted property into which it can be traced) other than a purchaser for value of the legal interest without notice.
The initial inquiry is therefore whether an equity subsists, which it will prima facie do at common law, so long as the relevant property (original or substitute) does not pass into the hands of a transferee for value of the legal interest without notice of the equity.
But a further issue may arise under the law of the situs of the relevant property.
The situs or location of shares and of any equitable interest in them is in the jurisdiction where the company is incorporated or the shares are registered (which is presently unimportant, since in this case they coincide in Saudi Arabia): Dicey, op cit paras 22 044 and 22 048, Underhill and Hayton, Law of Trusts and Trustees (19th ed) para 100.128, both citing In re Berchtold [1923] 1 Ch 192, Philipson Stow v Inland Revenue Comrs [1961] AC 727, 762, per Lord Denning.
It is established by Court of Appeal authority (and was not challenged on this appeal) that, where under the lex situs of the relevant trust property the effect of a transfer of the property by the trustee to a third party is to override any equitable interest which would otherwise subsist, that effect should be recognised as giving the transferee a defence to any claim by the beneficiary, whether proprietary or simply restitutionary: Macmillan Inc v Bishopsgate Investment Trust plc (No 3) [1996] 1 WLR 387.
In that case, bona fide chargees for value of shares situated in New York and held on trust for Macmillan were thus able, by application of New York law, to take the shares free of Macmillans prior equitable interest of which the chargees had had no notice.
As will appear, I do not consider that any different position would result under the Convention.
That does not mean that a common law trust cannot or will not exist in respect of shares, simply because the lex situs may treat a disposition of the shares to a third party as overriding any interest of the beneficiary in the shares.
A trust existed in respect of the shares in issue in Macmillan v Bishopsgate until they were disposed of under the lex situs by transfer to bona fide purchasers for value without notice.
But a common law trust can also exist in respect of shares, such as the Saudi Arabian shares presently in issue, even though Saudi Arabian law does not recognise equitable proprietary interests at all and may not (though this has not been investigated) give any effect at all to a common law trust.
A common law court concerned with Cayman Islands trusts in respect of Saudi Arabian shares will give them their intended effect to the greatest extent possible, having regard to the overriding effect of any disposition under their lex situs.
This is so both at common law and under the Convention.
Thus, as between the immediate parties to the present trusts, Mr Al Sanea and SICL, Mr Al Sanea cannot deny the validity or effect of the trusts, or assert a right to deal with assets subject to a trust or their proceeds as his own, simply because Saudi Arabian law does not recognise the trusts as giving rise to the separate equitable proprietary interest that would exist if the shares were situated in, say, the United Kingdom or Cayman Islands.
If Mr Al Sanea were to be the subject of bankruptcy proceedings or a receivership in the United Kingdom or Cayman Islands, it is equally clear that his creditors could not claim that the Saudi Arabian shares formed part of his estate in bankruptcy.
The Supreme Court was referred to Attorney General v Jewish Colonization Association [1901] 1 QB 123 and Marlborough (Duke) v Attorney General [1945] 1 Ch 78.
In these cases the issue was whether foreign shares held on trust were taxable as on a succession, in the first case on the death of the settlor and the termination of his life interest, and in the second case on the death of the beneficiary of the trust.
This issue turned on the application of general words in section 2 of the Succession Duty Act 1853: every past, or future disposition of property shall be deemed to confer a succession.
The courts held these general words to be limited to property held on trust under an English law trust, but applied them even though the property consisted of foreign shares.
In the former case, a contrary argument raised by the taxpayer was that, under the Austrian law of the domicile of settlor (which may also have been the situs of some or all of the shares), an Austrian father cannot divest himself of property so as to impair the rights of his children to legitim, and any alienation at any time having that effect may on the death of the father be set aside (p 133).
It was argued that Austrian law must govern accordingly.
Both AL Smith MR and Collins LJ (pp 133 and 137) noted that, if such an event had occurred, then to that extent the settlement might have been ineffective.
But, in circumstances where it had not occurred, they held the trust to be an effective English law trust giving rise to a taxable succession on the settlors death, while recognising that the actual implementation of the trust in respect of foreign assets might in some circumstances be affected by foreign law.
While these are cases from a different area of the law, their recognition of English law trusts in respect of foreign shares, subject only to any possible qualifications on their implementation arising under foreign law, is generally consistent with the analysis which I have indicated in the preceding paragraphs.
The validity and enforceability of English law trusts in respect of foreign assets has also been considered in an instructive series of English authorities.
First, the English courts have regularly stated their willingness to enforce in personam trusts in respect of property abroad.
As the Earl of Selborne LC said in Ewing v Orr Ewing (1883) LR 9 App Cas 34, 40: The Courts of Equity in England are, and have always been, courts of conscience, operating in personam and not in rem; and in the exercise of this personal jurisdiction they have always been accustomed to compel the performance of contracts and trusts as to subjects which were not either locally or ratione domicilii within their jurisdiction.
They have done so as to land, in Scotland, in Ireland, in the Colonies, in foreign countries: Penn v Baltimore (Lord) (1750) 1 Ves Sen 444.
Second, they have exercised such jurisdiction, applying the principles of English law to enforce contracts and trusts relating to foreign property, even though the lex situs did not recognise such principles.
Thus, in British South Africa Co v De Beers Consolidated Mines Ltd [1910] 2 Ch 502, the Court of Appeal held that the equitable rule against clogging the equity of redemption of a mortgage applied to a contract governed by English law and would be enforced against a contracting party as regards land abroad in a state where the equity of redemption may not be recognised.
Cozens Hardy MR stated (pp 513 514): For centuries the Court of Chancery has, by virtue of its jurisdiction in personam, applied against parties to a contract or trust relating to foreign land the principles of English law, although the lex situs did not recognize such principles.
He cited in support Lord Cottenhams words in Ex p Pollard Mont & Ch 250: If indeed the law of the country where the land is situate should not permit or not enable the defendant to do what the court might otherwise think it right to decree, it would be useless and unjust to direct him to do the act; but when there is no such impediment the courts of this country, in the exercise of their jurisdiction over contracts made here, or in administering equities between parties residing here, act upon their own rules, and are not influenced by any consideration of what the effect of such contracts might be in the country where the lands are situate, or of the manner in which the courts of such countries might deal with such equities.
He continued: To take a simple case, if A by an English contract agreed to give a mortgage to secure an English debt upon land in a foreign country, the law of which country does not recognize the existence of what we call an equity of redemption, which was the case of our common law, and if a mortgage was given and duly perfected according to the lex situs, I feel no doubt that our courts would restrain the mortgagee from exercising the rights given by the foreign law and would treat the transaction as a mortgage in the sense in which that word is used by us.
In doing this our courts would not in any way interfere with the lex situs, but would by injunction, and if necessary by process of contempt, restrain the mortgagee from asserting those rights.
Similar observations would apply to a trustee, if the lex situs does not recognize trusts.
Thirdly, the situation envisaged by the last sentence of this last quotation is directly covered by Court of Appeal authority in Lightning v Lightning Electrical Contractors Ltd (1998) 23(1) Tru LI 35.
It concerned a claim by Mr Lightning to be the beneficiary under a resulting trust in respect of land in Scotland, bought by an English company to which he had advanced the purchase price.
Scots law, the lex situs of the land, did not recognise any equitable interest.
The company having gone into receivership, Mr Lightning obtained a declaration in English proceedings that the property or its proceeds of sale were held on trust for him.
Peter Gibson LJ, giving the lead judgment, applied the Earl of Selbornes words in Ewing and endorsed the statement by Parker J in Deschamps v Miller [1908] 1 Ch 856, 863, that the court would act where there was some personal obligation arising out of contract or implied contract, fiduciary relationship or fraud, or other conduct which, in a view of a Court of Equity in this country, would be unconscionable and that whether it would do so did not depend on the law of the locus of the immovable property.
Peter Gibson LJ also recognised that the lex situs can, under the principle recognised in Macmillan v Bishopsgate, have a significance in the case of a third party transfer.
He said, at p 38, that the English court had not unnaturally regarded English law as applicable to the relationship between the parties before it in the absence of any event governed by the lex situs destructive of the equitable interest being asserted.
The English court would thus accept jurisdiction and apply English law as the applicable law, even though the suit relates to foreign land, but: In contrast if the equity which is asserted does not exist between the parties to the English litigation, for example where there has been a transfer of the property to a third party with notice of an equity but by the lex situs governing the transfer, the transfer extinguished the plaintiffs equity, the English court could not then give relief against the third party even though he is within the jurisdiction.
In Lightning itself, as Peter Gibson LJ pointed out: No event governed by Scottish law [had] occurred whereby any equity arising under English law was destroyed.
Henry and Millett LJJ agreed, the latter putting the position forcefully as follows, at p 40: If A provides money to B, both being resident in England, to purchase landed property in his own name but for and on As behalf, and B does so, the consequences of that transaction are governed by English law.
It would be absurd if they were governed by the law of the place where the property in question happened to be located.
Such a rule would lead to bizarre results if, for example, As instructions were to buy properties in more than one jurisdiction, for the consequences of the same arrangement might then be different in relation to the different properties acquired.
It would also lead to bizarre results if A left it to Bs discretion to choose the property to be acquired, since that would give B the unilateral power to decide on the legal consequences of the transaction which he had entered into with A.
Fourthly, all these authorities were recently and instructively examined by Roth J in Luxe Holding Ltd v Midland Resources Holding Ltd [2010] EWHC 1908 (Ch).
The case concerned an agreement by Midland to sell to Luxe shares in 20 companies, 17 of which were incorporated in Russia or the Ukraine, with the lex situs of the shares in them being also there.
Midland defaulted, sold the shares in the Russian and Ukrainian companies elsewhere and, when sued by Luxe, argued that, since Russian and Ukrainian law did not recognise the concept of a beneficial interest at all, and since questions of ownership and therefore proprietary interests in shares are governed by the lex situs of the companies, it followed that whatever might have been the position if these had been shares in English companies, there were no beneficial interests in the shares which could pass to Luxe under the share sale agreement (para 30).
Addressing this argument, Roth J noted that the sort of trust, and thus beneficial interest which arises on the sale of land or of shares in private companies, arises only because the agreement is specifically enforceable and is In a sense, therefore, the corollary of the remedy of specific performance and is not a full trust in the classic sense (para 31).
He continued, citing Lake v Bayliss [1974] 1 WLR 1073:
It is by reason of this trusteeship that the vendor who breaks his contract of sale by reselling to someone else has been held to be accountable to the first intended purchaser for the proceeds of sale. 32.
Roth J then engaged in the following analysis, which is worthwhile quoting in extenso: 35.
Is the application of these principles precluded by the fact that the property is held through subsidiaries in a country the law of which does not recognise the concept of a lesser proprietary interest or that it does not recognise a beneficial interest at all? The fact that Midland held the shares through subsidiaries does not in itself preclude the sale and purchase agreement from being specifically enforceable, as Midland for present purposes accepts.
The obligation to be enforced would be that Midland must procure that the shares are transferred.
I do not see that this in itself would prevent the qualified trust relationship from arising. 36.
Does the applicability of the lex situs to questions of ownership alter the position as between the contracting parties? It is trite but nonetheless important to recall that equity acts in personam.
The parties here have chosen to govern the relationship as between themselves according to English law.
Unless precluded by authority, it seems to me that as a matter of principle where the parties have expressly chosen English law and the exclusive jurisdiction of the English court, they have voluntarily subjected themselves to the English system of remedies.
In my judgment, it is at the very least well arguable, and if necessary I would hold, that this includes the qualified trusteeship that applies as the corollary in such a case to the availability of specific performance, unless that gave rise to a situation that was directly contrary to the lex situs in the sense of interfering with the operation of the local law.
After considering British South Africa Co v De Beers Consolidated Mines Ltd and Lightning v Lightning Electrical Contractors Ltd, Roth J continued: 41.
I do not consider that the reasoning in Lightning is confined to the particular case of a resulting trust.
On the contrary, it seems to me of general application.
And the observation made by Millett LJ resonates in the present case, since three of the 20 companies of which Midland sold its shareholding were Guernsey or Irish companies, for which as I apprehend the lex situs recognises a beneficial interest.
As it happens, those companies are of negligible value, but that obviously cannot affect the principle.
If Midlands analysis were correct, the English court would find that Luxe had acquired as against Midland a beneficial interest in those shares but not in the shares of the other companies incorporated under a different system of law, and that it would thus have a very limited proprietary claim. 42.
Moreover, it is accepted by Luxe that any beneficial interest in the shares sold to Troika was destroyed or terminated by that sale.
Its claim is to the proceeds in Midlands hands.
Thus no interference with property transfers under Ukrainian (or Russian) law is involved.
There is no reason why equity, acting on the conscience of Midland as a proper defendant to English proceedings, cannot require that Midland holds those moneys for the benefit of Luxe.
It is clear therefore, that in the eyes of English law, a trust may be created, exist and be enforceable in respect of assets located in a jurisdiction, the law of which does not recognise trusts in any form.
In non common law jurisdictions, a similar approach may also be expected.
In Scotland, the civil law concept of patrimony has been developed to explain the protection of trust property held by a trustee against claims by the trustees personal creditors: Glasgow City Council v Board of Managers of Springboig St Johns School [2014] CSOH 76, para 17 per Lord Malcolm.
Following Italys ratification of the Convention, Italian courts have also recognised common law trusts as creating a separate patrimony, rather than a new kind of property right: see Italy: The Trust Interno by Alexandra Braun in Haytons The International Trust (3rd ed) (2011).
Whether Saudi Arabian law would, in any proceedings before a Saudi Arabian court, adopt a similar approach, by treating the relevant transactions as amounting to amaana, even though Saudi Arabia is not a party to the Convention and its law does not recognise distinct equitable proprietary interests, is, as the Court of Appeal noted (para 75), presently unknown: see also para 5 above.
The decision by Lord Hodge sitting in the Outer House in the Scottish case of Joint Administrators of Rangers Football Club Plc, Noters 2012 SLT 599 concerned contracts, made in 2011 and subject to English law, between Rangers and two English limited liability partnerships (collectively Ticketus).
Under the contracts, Ticketus had paid Rangers large sums for future tranches of season tickets in respect of a defined number of seats of different types at specified future matches in each of the seasons from 2011 2012 to 2014 2015.
Rangers having gone into administration, its administrators applied for directions as to whether they could be prevented from terminating the contracts.
Ticketus argued that they had acquired rights which were more than mere personal rights, and which could be enforced by specific performance.
Lord Hodge held, first, relying on the travaux prparatoires (in particular paras 55 to 57 of the Explanatory Report prepared by Professor Alfred E von Overbeck), that the concept in article 4 of the Convention of a preliminary issue relating to the validity of an act by which assets were transferred to a trustee included an issue relating to the validity of a declaration of trust.
He held, second, that whether the agreements between Rangers and Ticketus in respect of season tickets gave Ticketus more than purely personal rights was such an issue, and, third, that this issue fell accordingly outside the Convention and was to be determined under Scots private international law rules by reference to Scots law, as the lex situs of the future tickets to be issued and the stadium seats to which they related.
He went on (para 33): If I am correct in my conclusion that Scots law applies, the difficulty which Ticketus faces in asserting a trust over the proceeds of sale of the season tickets agreement tickets is that the proceeds do not yet exist.
On the assumption that the Ticketus agreements are sufficient to amount to a declaration by Rangers of a trust over the STA tickets and the proceeds of their sale, the non existence of both is fatal to the creation of a trust.
Where the truster and trustee are the same person it is our law that there must be constructive delivery of the trust subjects to himself as trustee of an irrevocable trust: see Allans Trustees v Lord Advocate 1971 SC (HL) 45, in which Lord Reid at p 64 spoke of the doing of something equivalent to delivery or transfer of the trust fund.
The essence of the decision was, therefore, that there was nothing which, at least in Scots law, was capable of giving rise to any form of proprietary interest or as being the subject of any trust, which was what Ticketus were claiming.
The decision, under Scots law, to apply Scots law to this question, does not determine the common law position or detract from Roth Js analysis in Luxe.
The approach taken in the second and third steps of Lord Hodges reasoning set out above is open to question, at least through English legal eyes (see also the query raised about its correctness by George L Gretton, Lord President Reid Professor at Edinburgh University, in The Laws of the Game [2012] Edinburgh Law Review 414, 418).
But it is unnecessary to consider this further on this appeal.
On an English appeal relating to common law trusts, it is the approach indicated by Roth J in Luxe and by the Court of Appeal in Lightning that is correct and applicable.
In the light of the above, to regard a trust as falling outside the Convention under article 4, simply because its assets consist of assets in a jurisdiction which does not recognise a division between legal and equitable proprietary interests, is wrong.
Even if the Court of Appeal was wrong to limit article 4 to the question whether the assets were alienable, in the sense of being capable of transferable to the trustee or anyone else (see paras 12 13 above), an issue on which it is unnecessary to reach any final conclusion, there was nothing invalid about the declarations of trust.
There is nothing in the Convention to suggest that it was intended to be inapplicable to a trust simply because the trust was in respect of assets in a jurisdiction which does not recognise some form of separation of legal and equitable interests.
Rather, the contrary since one object of the Convention was to provide for the recognition of trusts in jurisdictions which did not themselves know the institution.
There must be many common law trusts which have or acquire assets in civil law or other jurisdictions which do not recognise the concept of an equitable proprietary interest in the English common law sense.
All that the provisions for recognition of a trust in article 11 of the Convention contemplate, as a minimum is that the trust property constitutes a separate fund.
But that does not mean that there must exist a concept of equitable proprietary interest or any separation of legal and equitable proprietary interests under the lex situs of the relevant assets.
The further provisions of article 11 remit to the law governing the trust the further consequences of recognition of a trust.
But article 11(d) also recognises that third parties may have acquired rights in respect of trust assets under, in particular, the lex situs of the assets, which may prevent the recovery for the benefit of the trust of trust assets which the trustee has, in breach of trust, alienated.
The provision in article 15 that, if recognition of a trust is prevented by the application of a provision of the law designated by the conflicts law of the forum which cannot be derogated from by voluntary act, the court shall try to give effect to the objects of the trust by other means is a further pointer towards the Conventions general aim of accommodating the institution of trust, so far as possible, with other systems.
Article 15 itself appears as designed to address the impact of relationships or transactions separate from the trust itself.
The Explanatory Report by Professor von Overbeck, which is part of the travaux prparatoires, notes (para 136) that the first paragraph of article 15 preserves the mandatory rules of the law designated by the conflicts rules of the forum for matters other than trusts.
Paragraph 138 of the Report proceeds to draw a parallel with the last sentence of article 11(d), noting that this is general, whereas article 15 is limited in application to mandatory rules.
In the present context, it is in my opinion the last sentence of article 11(d), not article 15(e) or (f), which is primarily applicable when determining what, if any, rights and obligations Samba may have in relation to the shares as a result of their transfer to Samba by Mr Al Sanea.
On the face of it, this last sentence of article 11(d) would remit to Saudi Arabian law the question whether Samba acquired free of SICLs interests under the trusts, whether or not those interests can be categorised as proprietary.
The existence under Saudi Arabian law of the institution of amaana might in this context prove relevant.
That is not however an issue presently before the Supreme Court.
The issue before the court in the light of the expanded submissions which it has received is whether SICL has any basis for alleging that there was a disposition of property within the meaning of section 127.
Viewing the matter in the light of the common law principles set out in paras 21 to 34 above, I would regard the present trusts not only as intended to create, but also as creating equitable proprietary interests in the Saudi Arabian shares, enforceable at common law at least as between SICL and Mr Al Sanea and anyone else other than a transferee from Mr Al Sanea in circumstances giving the transferee a good title under Saudi Arabian law.
But, in the context of the present issues under section 127, there is to my mind a considerable case to be made for saying that it cannot matter.
The definition of property in section 436 is wide enough to embrace both equitable proprietary and purely personal interests.
Sir Nicholas Browne Wilkinson V C said of section 436 in Bristol Airport Plc v Powdrill [1990] Ch 744, 759D, that It is hard to think of a wider definition of property.
The case concerned a chattel lease, which it was argued gave rise only to contractual rights.
The Vice Chancellor said (p 759E F): Although a chattel lease is a contract, it does not follow that no property lease is created in the chattel.
The basic equitable principle is that if, under a contract, A has certain rights over property as against the legal owner, which rights are specifically enforceable in equity, A has an equitable interest in such property.
I have no doubt that a court would order specific performance of a contract to lease an aircraft, since each aircraft has unique features peculiar to itself.
Accordingly in my judgment the lessee has at least an equitable right of some kind in that aircraft which falls within the statutory definition as being some description of interest arising out of, or incidental to that aircraft.
Any equitable proprietary interest arises out of, or is incidental, to the shares.
In my view, a purely personal interest in having the shares dealt with by the trustee and holding the trustee to account in accordance with the trust might equally well be said to be an interest arising out of, or incidental to, property.
If so, the appeal could be approached on the basis that SICLs rights under the trust constituted relevant property within section 436, whether they were equitable proprietary or purely personal rights.
In either case, the question would arise whether the transfer by Mr Al Sanea of the shares to Samba constituted a disposition within the meaning of section 127, bearing in mind that the disposition would not affect the interests involved, unless they were overridden under Saudi Arabian law by Sambas acquisition of the shares.
However, even if it is only equitable proprietary interests that are capable of being regarded as relevant property for present purposes, the key question remains whether there was any disposition of them within the meaning of section 127.
I have found this a difficult issue.
On the one hand, it can be said that trust assets have been misappropriated, misapplied, dissipated or, in terms of article 11(d) of the Convention, alienated.
Such phrases can be found in academic textbooks.
Thus, Snells Equity (33rd ed) (2015) para 30 013 reads, under the head Misapplication: Where the breach consists in a misapplication of trust assets, the first question is whether the trustee should specifically restore the assets to the trust or restore their value by making a money payment.
If the trustee still has the original assets, he may effect restoration in specie by transferring them back to the trust fund.
If the original assets are no longer available, then the beneficiary may elect to assert a proprietary remedy over any traceable proceeds in the hands of the trustee or a third party.
Likewise, Swadling in Burrows, English Private Law, para 4.151 reads: The recipient of rights dissipated in breach of trust does not automatically step into the trustees shoes, inheriting the powers and duties of his transferee [sic, this should presumably be transferor].
He is only liable to restore the rights dissipated in breach of trust, either to the former trustee, or, more likely, to other persons nominated by the beneficiaries.
This right of the beneficiaries to recover the trust rights is good against all transferees of rights dissipated in breach of trust bar one, the transferee of a common law right who takes in good faith, for value, and without notice, actual, implied, or constructive, of the fact of the dissipation being in breach of trust.
If the transferee is such a person, compendiously known as equitys darling, then the effect of the transfer will be to destroy the beneficiarys right to reconveyance.
SICL submits that it is misleading to regard a beneficiary as owning only the equitable interest, and that he or it is entitled to the entirety of the interest in the relevant property.
They point out that, in other contexts, such as tax, the courts have held trust beneficiaries to be assessable to income tax on trust income on the basis that they owned the trust income: see eg Baker v Archer Shee [1927] AC 844, Corbett v Inland Revenue Comrs [1937] 1 KB 567.
Further, although the trustee remains accountable as such, a wrongful disposition by a trustee of trust assets does not give to the beneficiary as against the recipient of trust property the same rights as the beneficiary had under the trust as against the trustee.
As explained by Nolan, Equitable Property (2006) 122 LQR 232, 243, 247 and 250 and by Jaffey, Explaining the Trust, above, p 383, the beneficiary has only the right to have the trust assets restored to the original trustee, or, if the trust was a bare trust to which the rule in Saunders v Vautier (1841) 4 Beav 115, applies, to himself; see also the citation from Swadling in Burrows, English Private Law, in the previous paragraph of this judgment.
More generally, it can be said that section 127 introduces a prima facie right to recover any property disposed of in which SICL had the legal title, subject only to a power in the court to validate the disposition by order; and that it is well established, in the light of the pari passu principle operating in insolvency, that validation will, save in exceptional circumstances, only be ordered in relation to a disposition occurring after the inception of the winding up if there is some special circumstance which shows that the disposition in question will be (in a prospective application case) or has been (in a retrospective application case) for the benefit of the general body of unsecured creditors : Express Electrical Distributors Ltd v Beavis [2016] 1 WLR 4783, para 56, per Sales LJ.
On the other hand, SICLs case can be said to overlook the considerable difference which exists between an unrestricted legal title to an asset, which can normally be disposed of to a third party, and a legal title in relation to which a beneficiary has trust rights, which continue to exist and be enforceable unless and until overridden by a transfer under the lex situs as recognised in Macmillan v Bishopsgate.
In Ayerst v C & K (Construction) Ltd [1976] AC 167, 177G H Lord Diplock referred to the legal ownership of property subject to a trust as held by the trustee not for his own benefit but for the benefit of the cestui que trust or beneficiaries, but went on to say that Upon the creation of a trust in the strict sense as it was developed by equity the full ownership in the trust property was split into two constituent elements the legal ownership in the trustee, what came to be called the beneficial ownership in the cestui que trust.
The metaphor of a division or split of title needs to be approached with some caution.
Swadling in Burrows, English Private Law, para 4.149, speaks of: the falsity of statements which talk in terms of a division or separation of rights when rights are held on trust, or even worse, of legal and equitable titles existing before the creation of the trust.
Swadling, citing Australian authority, suggests an analysis according to which an equitable interest is not carved out of a legal estate but impressed or engrafted onto it (para 4.150).
Likewise, in Fiduciary Ownership and Trusts in a Comparative Context (2014) ICLQ 901, Daniel Clarry refers to the concept of fiduciary ownership whenever title is held by a person in respect of property that is designated for a purpose protected by law (p 930), and suggests a concerted effort to move away from the use of dual or split ownership metaphors in trusts discourse towards the fiduciary ownership of trust property in both the common and civil law traditions (p 933).
Jaffey, op cit, p 386, also notes that one of the difficulties about the proprietary approach (which he advocates) is that it has sometimes been understood in a way that makes it seem paradoxical.
That is the dual ownership or split ownership approach.
On this approach, it is said that both the trustee and the beneficiary are owners of the trust property, the trustee at law and the beneficiary in equity.
Considering the position overall, clearly one cannot say that the trustee and the beneficiary are both separately the owners of the trust property, at least in the ordinary sense of ownership.
Rejecting any idea of simultaneous allocation of all the elements of ownership to both the trustee and the beneficiary, he however opts (p 387) for an analysis of distribution according to which the trustee has the right of control over the property, carrying with it the power to manage the property and to deal with it as owner vis vis other parties, signified by legal title, and the beneficiary, where there is a single beneficiary, has the right to all the benefit and enjoyment of the property, which is beneficial ownership.
It is unnecessary on this appeal to examine these slightly differing analyses further.
What is clear, on any analysis, is that, where a trust exists, the legal and beneficial interests are distinct, and what affects the former does not necessarily affect the latter.
Where an asset is held on trust, the legal title remains capable of transfer to a third party, although this undoubted disposition may be in breach of trust.
But the trust rights, including the right to have the legal title held and applied in accordance with the terms of the trust, remain.
They are not disposed of.
They continue to be capable of enforcement unless and until the disposition of the legal title has the effect under the lex situs of the trust asset of overriding the protected trust rights.
If the trust rights are overridden, it is not because they have been disposed of by virtue of the transfer of the legal title.
It is because they were protected rights that were always limited and in certain circumstances capable of being overridden by virtue of a rule of law governing equitable rights, protecting in particular (under common law) bona fide third party purchasers for value (equitys darling in the terms of para 4.151 in Swadling in Burrows, English Private Law, cited in para 45 above).
The position was neatly summarised by Lloyd LJ in Independent Trustee Services Ltd v GP Noble Trustees Ltd [2012] EWCA Civ 195; [2013] Ch 91, para 106: a transferee of the legal title to property under a disposition made in breach of trust, or a successor in title to such a person, does not have the beneficial title to the property, which remains held on the original trusts, unless either the transferee, or a successor in title, was a bona fide purchaser for value without notice.
The trustee acting in breach of trust can transfer the legal title, but cannot vest the beneficial interest in the property in a bona fide purchaser for value without notice, since he does not own that title and is not acting in a way which enables him, under the trust, to overreach the beneficiaries equitable interest.
Despite that inability, the availability of the bona fide purchaser defence means that a transaction in favour of a bona fide purchaser for value without notice is as effective as it would be if he could vest the beneficial title in the purchaser.
Thereafter the purchaser can deal with the asset free from any prior claim of the beneficiaries.
In these circumstances, I conclude that section 127 is neither aimed at, nor apt to cover, the present situation.
Section 127 addresses cases where assets legally owned by a company in winding up are disposed of.
The section is necessary to enable the company to recover them, by treating the disposition as void.
The courts power to validate the disposition is a necessary safety valve, to cater for situations in which validation would be appropriate, bearing in mind the position of creditors as well as that of the other party to the transaction.
Any such disposition will involve issues which arise directly between the company (embracing in that concept its creditors in liquidation) whose property is disposed of and the other party to the transaction, although the section embraces situations where the companys property is held by, for example, a director or agent and is disposed of by him to a third party: In re J Leslie Engineers Co Ltd [1976] 1 WLR 292.
The holder of interests such as SICLs does not need protection on the lines of section 127, in order to protect its property or to protect or enforce its interests.
Mr Al Sanea disposed of his legal interest in the shares.
That involved him in a breach of trust.
But it did not involve any disposition of SICLs property.
SICLs property, whether it consisted of an equitable proprietary interest or personal rights to have the shares held for its benefit, continued, despite the disposal of the legal title, unless and until that disposal overrode it.
If the disposal overrode SICLs interest as regards a third party transferee of the legal title such as Samba, that was not because of any disposal of SICLs interest.
It was because SICLs interest was always limited in this respect.
In some circumstances, the term disposition may, as Lord Neuberger demonstrates, embrace destruction or extinction of an interest.
In the present context, one might also pray in aid academic descriptions of the wrongful alienation of trust property (even if it did not override any beneficial interest in such property) as a misapplication of trust assets (see Snells Equity (33rd ed), paras 30 013, 30 050 and 30 067) and a disposition in breach of trust (see Swadling in Burrows, English Private Law (3rd ed), para 4.151).
But the natural meaning of disposition in the context of section 127 is in my view that it refers to a transfer by a disponor to a disponee of the relevant property (here the beneficial interest), not least when the section goes on to render any disposition void unless the court otherwise orders.
I agree with Lord Neubergers and Lord Sumptions further reasoning on this point.
I do not, in these circumstances, see any basis for extending, or any need to extend, section 127 to cover three party situations where legal title is held and disposed of to a third party by a trustee, and the beneficiarys beneficial interest either survives or is overridden by virtue of the disposition of the legal title to the third party.
The law regulates, protects and circumscribes beneficial interests under a trust in a manner which is separate from and outside the scope of section 127.
It follows that I would allow the appeal, set aside the order made by the Court of Appeal, and declare that for the purposes of section 127 of the Insolvency Act 1986 there was no disposition of any rights of SICL in relation to the shares by virtue of their transfer to Samba.
On the way the case has been put to date, it would appear to follow that there should be an order either to restore the judges order of a stay of the proceedings brought by SICL and the Liquidators, or to strike out the proceedings.
But I would allow the parties 21 days in which to make written submissions inviting any other order, including an order for remission of the matter to the High Court to enable an application to save the proceedings by amendment of the pleadings.
LORD NEUBERGER:
The assumed facts and the issue can be very shortly summarised.
Mr Al Sanea held certain shares on trust for the benefit of Saad Investments Co Ltd (SICL), and, six weeks after the compulsory winding up of SICL commenced, he transferred those shares to Samba Financial Group (Samba) in discharge of some of his liabilities to Samba.
The question which arises is whether, if Samba was a bona fide purchaser for value of the shares without notice of SICLs beneficial interest, the transfer, at least in so far as it relates to SICLs beneficial interest, is to be treated as void for the purposes of section 127 of the Insolvency Act 1986.
Section 127(1) provides that a disposition of the companys property made after the commencement of the winding up is, unless the court otherwise orders, void.
In the case of a compulsory liquidation, the commencement of the winding up is, at least in a domestic case, the date of the presentation of the petition to wind up see section 129 of the 1986 Act.
In this case, however, SICL is a Cayman Islands company and the winding up petition was made to, and the winding up order was made by, the Grand Court of the Cayman Islands.
The case has accordingly proceeded on the basis that the commencement of the winding up was at the latest, the date of recognition of [those] foreign proceedings by the High Court of England and Wales per Sir Terence Etherton C at first instance, (2014) 16 ITELR 808, para 11.
There is no doubt but that SICLs equitable interest in the shares constituted property in the light of the very wide definition of that expression in section 436 of the 1986 Act, which is set out in para 7 of Lord Mances judgment.
As Sir Nicolas Browne Wilkinson V C said in Bristol Airport Plc v Powdrill [1990] Ch 744, 759, [i]t is hard to think of a wider definition of property.
Having said that, I do not think one actually needs to rely on the width of the statutory definition in section 436: one only has to consider whether section 127 would apply if SICL had purported to transfer its equitable interest in the shares after its winding up had commenced, to realise how inappropriate it would be if the definition in section 436 did not extend to equitable interests.
The more difficult question is whether there is in circumstances such as the present a disposition of the equitable interest in the shares, assuming that Samba was a bona fide purchaser for value of the shares without notice of that interest.
As Lord Mance says, where a legal estate is sold to a bona fide purchaser for value without notice, any equitable interest is not transferred to the purchaser: it is overridden, or to put it more colloquially, it is lost or disappears.
Lloyd LJ accurately summarised the position in Independent Trustee Services Ltd v GP Noble Trustees Ltd [2013] Ch 91, para 106, when he said that a trustee acting in breach of trust cannot vest the beneficial interest in the property in a bona fide purchaser for value without notice, since he does not own that title and is not acting in a way which enables him, under the trust, to overreach the beneficiaries equitable interest; but, nonetheless, the availability of the bona fide purchaser defence means that a transaction in favour of a bona fide purchaser for value without notice is as effective as it would be if he could vest the beneficial title in the purchaser.
As Lord Mance also points out, where the legal owner transfers the legal estate to a bona fide purchaser for value with no notice of the beneficial interest in breach of trust, the person who owned the beneficial interest does not by any means lose all its other rights.
In particular, it retains all its personal rights against the trustee, ie the party who sold the legal estate.
In other words, following the transfer of the shares in this case, SICL retained its personal rights against Mr Al Sanea, but (assuming Samba was a bona fide purchaser for value without notice and subject to section 127), SICL lost any proprietary rights or interest it had in the shares.
The fact that SICL retains its personal rights against Mr Al Sanea notwithstanding the loss of its beneficial interest in the shares appears to me to be irrelevant to the issue whether section 127 applies.
If a transaction would otherwise be a disposition within the section, there is no reason for disapplying the section merely because the company in question would not be deprived of its personal rights by the disposition.
Similarly, the fact that an equitable interest is more precarious than a legal interest appears to me to be nothing to the point.
The very purpose of section 127 is to impeach transactions which would otherwise be effective, and it seems to me to be inconsistent with that purpose to exclude from its ambit a transaction which would otherwise be lawful, and to which a particular right or interest is otherwise susceptible of being defeated.
There is undoubtedly a powerful argument for saying that a transfer by the legal owner of the legal estate for value in an asset to a bona fide purchaser who has no notice of the existence of an equitable interest in that asset cannot amount to a disposition of that equitable interest.
As already mentioned, and as Lord Mance demonstrates, there is no question of Mr Al Sanea having transferred SICLs equitable interest in the shares to Samba: he simply transferred his legal ownership of the shares to Samba, and, on the assumption that Samba was a bona fide purchaser for value without notice, the equitable interest effectively disappeared.
In those circumstances, at least on the basis of the meaning which it naturally conveys, section 127 simply does not apply: a disposition normally involves a disponor and a disponee, and so there has simply been no disposition.
Indeed, in an Australian first instance decision, In re Mal Bowers Macquarie Electrical Centre Pty Ltd (in liquidation) [1974] 1 NSWLR 254, 258, Street CJ in Eq expressly so stated, albeit in a very different context from the present.
However, it is fair to say that the word disposition is linguistically capable of applying to a transaction which involves the destruction or termination of an interest.
Etymological analyses can fairly be said to be suspect in this sort of context, but it seems to me to involve a perfectly natural use of language to describe SICLs interest in the shares as having been disposed of by the transfer of those shares to a bona fide purchaser.
And it is possible to claim support for such a view in relation to section 127 from respected authors.
Thus, Professor Sir Roy Goode in Principles of Corporate Insolvency Law, 4th ed (2011) at para 13 127 states that [s]ection 127 bites on beneficial ownership, not necessarily on the legal title.
And at para 13 128, he says that [t]he word disposition must be given a wide meaning if the purpose of the section is to be achieved, particularly in view of the fact that there is no exception in favour of transfers for full value; particularly relevantly for present purposes, this passage continues: [d]isposition should therefore be considered to include not only any dealing in the companys assets by sale, exchange, lease, charge, gift or loan but also any other act which in reducing or extinguishing the companys rights in an asset, transfers value to another person.
Sir Roy then explains that on this basis disposition includes an agreement whereby the company surrenders a lease or gives up contractual rights.
And McPhersons Law of Company Liquidation, 3rd ed (2013), para 7 015, states that section 127 only [applies to] property which belongs in equity to the company and is confined to the companys beneficial interest in property.
There is also some judicial support for the notion that disposition can extend to extinguishment.
Thus, Wynn Parry J said in In re Earl Leven, Inland Revenue Comrs v Williams Deacons Bank Ltd [1954] 1 WLR 1228, 1233, that [t]he word disposition, taken by itself, and used in its most extended meaning, is no doubt wide enough to include the act of extinguishment.
However, he rejected such a wide interpretation of that word in the Finance Act 1940, partly because it produced a quite unexpected result and partly because in other sections of that Act it is clear that where the legislature intended that disposition should include extinguishment, it was at pains to make express provision.
Accordingly, the extinguishment of a liability to pay insurance premiums did not amount to a disposition for the purposes of section 44(1) of the 1940 Act.
In another revenue case, Inland Revenue Comrs v Buchanan [1958] Ch 289, the Court of Appeal held that the surrender of a life interest under a will trust in favour of those people entitled in remainder operated as a disposition of that life interest for the purposes of sections 20 and 21 of the Finance Act 1943.
At p 298, Jenkins LJ specifically rejected the argument that there was no disposition because a surrender of a life interest destroys the interest and there is nothing left.
This again provides support for the notion that the fact that property ceases to exist as a result of a transaction does not prevent the transaction involving a disposition of that property.
But, of course, all depends on the statutory context and how they apply to the facts of the particular case.
There is also a policy argument for concluding that in a case such as the present, the equitable interest is the subject of a disposition for the purposes of section 127, particularly bearing in mind the fact that the court has a dispensing power.
The purpose of section 127 is to ensure that, at least once the winding up procedure has been started, a companys property is retained, in particular for the purpose of being available in order to be distributed pro rata, ie fairly, among its creditors.
On the face of it, at any rate, that should apply as much to property which is held for it by a third party as to property which it holds in its own name.
It would appear that Mr Al Sanea was a bare trustee of the shares ie the whole of the beneficial interest in the shares was vested in SICL.
A transfer of the bare legal estate by the trustee to a purchaser with notice of the trust would not be caught, because he would only acquire the bare legal interest, which would normally be worth nothing, and no disposition of the companys property would have occurred.
And a transfer by the company of its equitable interest would undoubtedly be caught by section 127 as it would involve a disposition by the company of that interest.
It can therefore be said to be surprising if a transfer by the trustee which involved the transferee effectively obtaining the whole of the equitable interest previously owned by the company was not caught by the section.
Nonetheless, I have reached the conclusion, in agreement with Lord Mance, that there is no disposition of an equitable interest within section 127, when there is a transfer by the legal owner of the legal estate, which is subject to that equitable interest, to a bona fide purchaser for value without notice of that equitable interest.
As already mentioned, the natural meaning of section 127 appears to me to carry with it the notion of a disponor transferring property to a disponee, and on that basis there was no disposition of SICLs equitable interest in the shares in this case.
Although, as explained above, there are arguments for departing from the natural meaning of section 127, I consider that they are outweighed by the arguments the other way.
In my view, Sir Roy Goode is right when he says that the surrender of a lease or the giving up of contractual rights by a company would be a disposition within section 127, as would a surrender of a life interest (and a company can no doubt have such an interest, at least if it is contingent on an individuals life) as discussed in Buchanan.
However, there are differences between a surrender (whether of a lease, contractual rights, or a life interest) and the loss of a beneficial interest on a transfer of the legal estate to a bona fide purchaser for value without notice of that interest.
In the former case, the person who is the disponor is the same as the person who loses the property; whereas in the latter case the disponor is, ex hypothesi, not the person who loses the property.
And, in the former case the disponee is well aware of the property which is ceasing to exist: as far as he is concerned, its extinction is the purpose of the transaction; in the latter case, the disponee is, by definition, unaware of the property which is being disposed of.
Section 127 can operate harshly so far as people dealing in good faith with a company are concerned.
In many cases, a person dealing with a company will be unaware that a petition has been presented (particularly if the presentation occurred very recently), and the section contains no exception for transactions in the ordinary course of business or for transactions for which the company receives full value.
The fact that the court will often sanction transactions in the ordinary course of business under its statutory dispensing power is by no means a wholly satisfactory answer to this.
As Fox LJ explained in In re SA & D Wright Ltd [1992] BCC 503, 505, when deciding whether to validate a disposition under section 127, the court must always do its best to ensure that the interests of the unsecured creditors will not be prejudiced, and, where there is said to have been a benefit in validating, the court must carry out a balancing exercise.
And, as Sales LJ put it more recently in Express Electrical Distributors Ltd v Beavis [2016] 1 WLR 4783, para 56, validation will ordinarily only be granted if there is some special circumstance which shows that the disposition in question has been for the benefit of the general body of unsecured creditors.
But it would not merely be harsh, but positively unfair for a bona fide purchaser of a legal estate from a third party to find that, because of section 127, the transaction in question was liable to be held void owing to the existence of an equitable interest held by a company of which he had no notice.
As explained in para 74 above, the position is very different from the surrender of a lease or of contractual rights.
A person taking a surrender of a lease or contractual rights from a company knows both that he is dealing with the company and that he is dealing in the lease or the rights.
A bona fide purchaser for value of an asset without notice of a companys equitable interest in the asset would be unaware both of the company (or at least that it had an equitable interest) and of the equitable interest (as if he knew about it he would be bound by it, as he would not be a bona fide purchaser).
So far as the passages in the books quoted in para 67 above are concerned, it seems to me that, read in context, they do not support the view that section 127 applies in a case such as this.
The authors were not directing their minds to a case where the disponor was someone other than the company concerned or its agent.
As already mentioned, Sir Roys examples all involved the company as disponor, and the passage quoted from McPherson was directed to explaining why completion by a company of a prior contract to sell its property does not fall within section 127.
The dicta and decisions in the two cases referred to in paras 68 69 above must, of course, also be assessed by reference to their respective legal and factual contexts.
In both Earl Leven and Buchanan, the courts were construing a revenue statute, and, more importantly, the transaction involved disponors transferring property which they owned beneficially.
As to the other issues discussed in the judgments of Lord Mance, Lord Sumption and Lord Collins, I agree with what they say and there is nothing I can usefully add.
LORD SUMPTION:
The facts to be assumed for the purposes of this appeal are that Mr Al Sanea held shares in various Saudi Arabian banks on trusts governed by Cayman Islands law for the claimant Saad Investments Co Ltd (SICL); and that on 16 September 2009, six weeks after SICL went into liquidation, he transferred them to the defendant Samba Financial Group in discharge of personal liabilities which he owed to them.
The transfer is said to be void under section 127 of the Insolvency Act 1986 as a disposition of the companys property made after the commencement of the winding up.
The appeal arises out of what is, in point of form, an application by Samba to stay the proceedings on the ground of forum non conveniens.
But the real ground of the application is that the proceedings are bound to fail.
There are four critical steps in Sambas argument: (1) The transmission of property is governed by the lex situs, which in the case of registered shares is the law of the companys incorporation, in this case Saudi Arabia.
This proposition is well established and was not seriously disputed: see Macmillan Inc v Bishopsgate Investment Trust Plc (No 3) [1996] 1 WLR 387.
It applies as much to the transmission of an equitable as to a legal interest in shares: Underhill & Hayton, The Law Relating to Trusts and Trustees, 18th ed (2010), para 100.128. (2) The law of Saudi Arabia does not recognise trusts or any other distinction between the legal and beneficial interests in property.
It treats the registered owner of shares in a Saudi Arabian company as their sole and entire owner.
This was found as a fact by the Chancellor of the High Court, and is no longer disputed. (3) It follows that an instrument purporting to create a trust over shares in a Saudi Arabian company was ineffective to do so, even though governed by a law (that of the Cayman Islands) which recognised trusts. (4) Accordingly SICL can have had no equitable interest in the shares capable of being disposed of within the meaning of section 127 of the Act.
The real issues raised by this argument have been obscured by the narrow basis on which it was presented in the courts below.
The focus of the argument was on point (3).
Although point (4) was perhaps the most critical step of all, it was left to one side, and this court was initially told that it was agreed not to be in issue at this stage.
This was unfortunate, for it meant that the oral argument proceeded on an artificial basis.
There could be no proper analysis of the nature of the proprietary interest said to have been disposed of within the meaning of section 127, or of the way in which that provision operates in relation to such an interest.
The omission was ultimately made good after the conclusion of argument by the service of written submissions at the request of the court.
This means that it is possible for us to address the issue on a rather broader basis of principle than the courts below.
It also means that a number of the issues which featured in argument below can be seen not to arise.
As the beneficiary of a trust, SICL had two main legal rights.
First, it had a right to have the trust administered according to its terms.
This was a personal right against the trustee.
The only relevant condition for its enforceability is that Samba should be before the court.
Since it has been properly served with the proceedings, that condition is satisfied.
Secondly, SICL had a true proprietary right.
The proprietary character of an equitable interest in property has sometimes been doubted, but in English law (which is in this respect the same as Cayman Islands law), the position must be regarded as settled.
An equitable interest possesses the essential hallmark of any right in rem, namely that it is good against third parties into whose hands the property or its traceable proceeds may have come, subject to the rules of equity for the protection of bona fide purchasers for value without notice: see Westdeutsche Landesbank Girozentrale v Islington London Borough Council [1996] AC 669, 705 (Lord Browne Wilkinson).
There are a number of reasons why the proprietary interest of the beneficiary may not be effective or enforceable.
Obvious examples include cases where the property or its traceable proceeds have been transferred to a bona fide purchaser for value without notice; and cases where the property has been consumed or destroyed, or has ceased to be traceable.
But that will not affect the beneficiarys personal rights, if any, against the trustee or his amenability to personal remedies.
Those rights will remain enforceable, for example by an action for the restoration of the trust assets or for equitable compensation for their loss.
The personal and proprietary rights of the beneficiary exist independently, and neither is dependent on the continued existence of the other.
For this reason, the beneficiarys proprietary interest in property is of limited practical importance.
It is relevant only as between the beneficiary and a third party, or for the purpose of asserting a prior claim to specific assets in an insolvency.
Even then, equity acts in personam by requiring the trustee to perform his trust or a relevant third party to account.
The question whether some species of proprietary interest is capable of existing is necessarily a question for the general law.
Unless the general law recognises the possibility of such an interest, it is self evident that the parties cannot create or transfer it.
That necessarily provokes the question: the general law of which jurisdiction? Normally, it will be the lex situs.
This would be obvious in the case of land, but is equally true of shares.
Shares in a company are legal rights against that company, dependent on the law of its incorporation.
The principle is the same as that which applies where a person assumes a contractual obligation to transfer an interest which is incapable of existing under the lex situs.
It is stated in Antons Private International Law, 3rd ed (2011) at para 21.61, in a passage adopted by Lord Hodge in In re Joint Administrators of Rangers Football Club Plc 2012 SLT 599, para 19: while the contractual aspects of a contract to assign corporeal moveables are governed by the law applicable to the contractual obligation, the final question of proprietary right must be determined by the lex situs.
None of this, however, means that where a person assumes the liabilities of a trustee under an instrument governed by another law which recognises the concept, that instrument is void or cannot be enforced according to its terms.
It remains effective to create personal rights against the trustee, who may be ordered to give effect to the trust, either by specifically performing it where that can be done, or making good his breach of duty financially.
The law of Saudi Arabia will treat the trustee as the owner of the entire interest in the shares with all the rights that that entails, but equity will exercise its personal jurisdiction to compel him to deal with the shares in accordance with his trust.
The same is true of equitable obligations in respect of property which are imposed by law, where the amenability of the defendant to the personal jurisdiction of the court has always been enough to justify the enforcement of his obligations.
In El Ajou v Dollar Land Holdings Plc [1993] BCC 698, 715 716, the question was whether the recipient of trust money was accountable as a constructive trustee on the footing of knowing receipt when before reaching him the property had passed through the hands of persons in a number of civil law jurisdictions where equitable interests were not recognised and the legal owner was treated as having the entire interest in the property.
The reason was that as between the alleged constructive trustee and the beneficiary, the formers amenability to personal remedies was unaffected by any issue as to existence of rights in rem: Although equitable rights may found proprietary as well as personal claims, it has long been settled that they are classified as personal rights for the purpose of private international law.
The doctrine was stated by Lord Selborne LC in Ewing v Orr Ewing (1883) 9 App Cas 34 at p 40 as follows: The Courts of Equity in England are, and always have been, Courts of conscience, operating in personam and not in rem: and in the exercise of this personal jurisdiction they have always been accustomed to compel the performance of contracts and trusts as to subjects which were not either locally or ratione domicilii within their jurisdiction.
They have done so as to land, in Scotland, in Ireland, in the Colonies, in foreign countries In Cook Industries Inc v Galliher [1979] Ch 439, Templeman J entertained an action in which the plaintiff claimed a declaration that the defendants held a flat in Paris together with its contents in trust for the plaintiff, and made an order compelling the defendants to allow the plaintiff to inspect the flat.
The fact that the subject matter of the alleged trust was situate in France, a civil law country, was no bar to the jurisdiction.
DLH is, therefore, answerable to the courts equitable jurisdiction as regards assets situate abroad, even in a civil law country An English court of equity will compel a defendant who is within the jurisdiction to treat assets in his hands as trust assets if, having regard to their history and his state of knowledge, it would be unconscionable for him to treat them as his own.
Where they have passed through many different hands in many different countries, they may be difficult to trace; but in my judgment neither their temporary repose in a civil law country nor their receipt by intermediate recipients outside the jurisdiction should prevent the court from treating assets in the legal ownership of a defendant within the jurisdiction as trust assets.
In the present case, any obligation on the part of DLH to restore to their rightful owner assets which it received in England is governed exclusively by English law, and the equitable tracing rules and the trust concept which underlies them are applicable as part of that law.
There is no need to consider any other system of law.
A similar analysis was applied by the Court of Appeal in Lightning v Lightning Electrical Contractors Ltd [1998] NPC 71 and more recently by Roth J in Luxe Holding Ltd v Midland Resources Holding Ltd [2010] EWHC 1908 (Ch).
Section 436 of the Insolvency Act 1986 defines property as including money, goods, things in action, land and every description of property wherever situated and also obligations and every description of interest, whether present or future or vested or contingent, arising out of, or incidental to, property.
These are exceptionally wide words.
It is plain that an equitable proprietary interest in property under a trust and a personal right to have the trusts of that property administered according to their terms are both property for the purposes of the Act, including section 127.
SICLs problem is not that it lacked a beneficial interest in the shares but that Mr Al Sanea did not dispose of that interest by transferring the shares to Samba.
Mr Al Sanea purported to transfer the legal interest to Samba.
That was the only interest that he had.
He did not purport to dispose of SICLs interest.
Only SICL could do that, and it did not do so.
The disposition of the legal interest did not itself extinguish any equitable interest of SICL in the shares.
It only meant that that interest fell to be asserted against Samba, subject to the usual equitable defences.
Sambas position in law was that it took the shares on a bare trust to restore them to the beneficial owner, unless it was a bona fide purchaser for value without notice.
Since Samba gave value in the form of the discharge of Mr Al Saneas debt, its liability to restore the shares must depend on whether they are accountable on the basis of notice.
Section 127 is irrelevant to the disposition of the only interest which matters for present purposes, namely SICLs equitable interest in the shares.
It is arguable, as Lord Neuberger observes, that the transfer of the legal interest in movables may constitute a disposition of an equitable interest if its effect is that the equitable interest is extinguished.
But the difficulty about the argument, and the reason why I would reject it, is that equitable interests arise from equitys recognition that in some circumstances the conscience of the holder of the legal interest may be affected.
When the asset is transferred to a third party, the question becomes whether the conscience of the transferee is affected.
On the facts pleaded in the present case, the equitable interest of SICL was defeated not by the act of the transferor (Mr Al Sanea) but by absence of anything affecting the conscience of the transferee (Samba).
The rules of equity which protect transferees acquiring in good faith and without notice are among the fundamental conditions on which equitable interests can exist without injustice.
The reality is that the transaction of 16 September 2009 was simply a transfer of the shares in breach of trust, and any rights of SICL against Samba depend on the law relating to constructive trusts and not on section 127 of the Insolvency Act.
The law relating to constructive trusts has achieved a high level of development, reflecting a careful balance between the competing interests engaged in such cases.
Wide as the term disposition is, the coherence of the law in this area would not be assisted by giving it a meaning inconsistent with the basic principles governing the creation and recognition of equitable interests and founded on a very different balance of the relevant interests.
There is no claim in this case to make Samba accountable as a constructive trustee, and no allegation of notice.
For that reason, the proceedings as presently framed must fail.
I arrive at this conclusion without reference to the Convention on the Law Applicable to Trusts and on their Recognition.
The purpose of the Convention is to procure the recognition of the main incidents of a trust by contracting parties whose law would not otherwise recognise them.
It is therefore of limited significance in jurisdictions such as England and the Cayman Islands which do recognise trusts.
It might have modified the law of Saudi Arabia if Saudi Arabia had been party to the Convention, but it is not.
The argument before us turned mainly on articles 4 and 15, both of which are set out in the judgment of Lord Mance.
But neither of them is in point.
Article 4 provides that the Convention does not apply to issues as to the validity of instruments creating a trust.
But there is no question as to the validity of the trusts in issue here, since they are certainly valid under the law of the Cayman Islands which governs them.
Sambas argument relates not to the validity of the trusts themselves but to the existence of a proprietary interest in the trust assets having regard to the legal characteristics of those assets in Saudi Arabian law.
But that is irrelevant given the undoubted validity and legal sufficiency of the trustees personal obligations under Cayman Islands law.
As to article 15, that provision is concerned only to preserve the effect of mandatory rules of a relevant law which may be inconsistent with the recognition of some incidents of a trust.
It follows that the only potentially relevant provision of the Convention is article 11, which determines the extent to which obligations under a trust are to be effective in England.
But as between SICL and Samba it does no more than refer the latters liabilities to the law selected in accordance with the choice of law rules of the forum, in this case the law of the Cayman Islands: see article 11(d).
I would accordingly allow the appeal.
Subject to argument about the precise form of order, I would declare that for the purpose of section 127 of the Insolvency Act 1986 there was no disposition of any rights of SICL in relation to the shares by virtue of their transfer to Samba.
Logically, it follows that the proceedings should be struck out.
But I would remit the matter to the High Court to deal with any consequential matters, in case it be contended that they can be saved by an appropriate amendment to the pleadings.
LORD COLLINS:
I agree with Lord Mance that this case does not raise the interesting and difficult questions on the Hague Convention which were argued, first before the Chancellor and the Court of Appeal, and then in the oral argument in this court before the parties were asked to provide written submissions on the combined effect of sections 127 and 436 of the Insolvency Act 1986.
This appeal came to this court as a preliminary issue on a wholly artificial basis, namely that the liability of Samba (which was in fact the whole point of the proceedings) was agreed not to be in issue at this stage (as it was put several times in the oral argument) and that the sole question was whether as between SICL and Mr Al Sanea the declarations of trust by SICL had a proprietary effect.
Because the liability of Samba had been expressly and artificially excluded, there was no full analysis in the full context of the question of what is meant by the expression proprietary interest, since both parties proceeded on the basis that there was a prior question as to whether SICL itself ever acquired a proprietary interest from Mr Al Sanea in the light of the assumption that Saudi Arabian law had no trust concept.
It is understandable why the original application before the Chancellor was for a stay of the proceedings with the ultimate object of ensuring that, if the proceedings were in Saudi Arabia, they would be bound to fail.
It is also understandable why a discretionary jurisdictional route was taken, since the defendant approached it as if it were a case of personal jurisdiction based solely on the presence in London of a branch of Samba, which had nothing to do with the transfer of the shares in Saudi Arabia.
As the Chancellor pointed out (at para 54), the claim could have been put on the basis of constructive trust if there were a sufficient factual basis, and the failure to do so emphasises the artificially narrow basis of the claim.
But in the light of the way the claim was formulated, the real question was not one of the proper exercise of judicial jurisdiction, but rather a question of legislative jurisdiction, namely the extra territorial scope of section 127 of the Insolvency Act 1986 and its application to the shares.
The combined effect of sections 127 and 436 of the Insolvency Act 1986 is that the avoidance provisions of section 127 apply to property wherever situated.
If this were a purely domestic case there would be no possible doubt of the effect of the declarations of trust: they give the beneficiary the paradigm of an equitable interest in property: Snells Equity, para 2 002.
Once a trust is established, as from the date of its establishment the beneficiary has, in equity, a proprietary interest in the trust property, which proprietary interest will be enforceable in equity against any subsequent holder of the property (whether the original property or substituted property . ): Westdeutsche Landesbank Girozentrale v Islington London Borough Council [1996] AC 669, at 705.
It was only after further submissions were requested after the hearing of the appeal that there was any exploration of the issues under section 127 of the Insolvency Act 1986.
For the reasons given by Lord Mance, I do not consider that there was any disposition of SICLs property.
It follows that the scope and effect of the Hague Convention do not fall to be decided.
The Hague Convention was promoted by the United Kingdom.
It was particularly intended to build bridges between countries of common law and countries of civil law and for common law states the principal interest [was] obviously to have the trusts created under their laws recognized in the countries which do not have this institution (von Overbeck Explanatory Report, January 1985, paras 12, 14).
There was exceptional interest in the Convention from states, and its conclusion owed much to the work of the fine scholar Professor Alfred von Overbeck, who died in April 2016, Mr Adair Dyer and Mr Hans van Loon (respectively later Deputy Secretary General and Secretary General of the Hague Conference on Private International Law) and Professor A E Anton and (particularly) Professor David Hayton of the UK delegation.
But in the event although 32 member states of the Hague Conference adopted the draft Convention, only 12 states are now parties to the Convention, and it says much about the likely principal uses of the Convention that they include Liechtenstein, Luxembourg, Monaco, San Marino and Switzerland.
There was considerable discussion in the travaux of the Hague Conference about whether the Convention was to apply to declarations of trust (because article 2 refers to assets being placed under the control of the trustee).
But there can be no doubt that it applies to declarations of trust, not only because the travaux make it clear that it was so intended, but more importantly, that is the clear effect of the Recognition of Trusts Act 1987, section 1(2), which provides that the scheduled provisions of the Hague Convention apply not only to the trusts described in articles 2 and 3, but also to all other trusts under United Kingdom law.
There has never been any suggestion in the authorities that an effective declaration of trust could not be made over shares in a company incorporated, or shares registered, in a country which does not recognise the trust concept.
Attorney General v Jewish Colonisation Association [1901] 1 QB 123 and Duke of Marlborough v Attorney General [1945] Ch 78 are only indirect authority, but they have been, correctly, regarded as recognising English trusts over foreign shares irrespective of whether the place of incorporation or place of registration recognises the trust concept: cf Luxe Holding Ltd v Midland Resources Holding Ltd [2010] EWHC 1908 (Ch) (Roth J).
But for the reasons given by Lord Mance, this is not the occasion for considering the effect on third parties.
I would therefore allow the appeal, and I agree with the order which Lord Mance proposes.
| UK-Abs | The appeal has proceeded on the basis of assumed facts which include the following.
Mr Al Sanea held on trust for Saad Investments Co Ltd (SICL) shares to the value of around US$318m in various Saudi Arabian banks.
SICL went into liquidation and Mr Akers is one of its Joint Official Liquidators.
Six weeks after the liquidation, Mr Al Sanea transferred the shares to Samba Financial Group (Samba) in discharge of personal liabilities he owed to Samba.
It is assumed that (i) the trusts are governed by Cayman Islands law and (ii) the law of Saudi Arabia, where the shares are sited (the lex situs), does not recognise the institution of trust or a division between legal and proprietary interests.
In these proceedings brought against Samba, SICL and its Joint Official Liquidators contend that the transfers of shares were and are void under section 127 of the Insolvency Act 1986 as a disposition of the companys property made after the commencement of the winding up.
The appeal arises out of Sambas application to stay the proceedings on the basis that Saudi Arabia is a more appropriate forum than England, although this ground has evolved into a case that SICLs claim had no prospect of success.
Below, and when the matter first came before the Supreme Court, argument focused on whether an equitable proprietary interest can exist in an asset sited in a jurisdiction which knows no such concept.
It appears to have been assumed that, if SICL had such an interest, it was disposed of by Mr Al Saneas transfer of title in the shares to Samba.
In the Court of Appeal, detailed submissions were made on the Convention on the Law applicable to Trusts and on their Recognition (the Hague Convention), scheduled to the Recognition of Trusts Act 1987.
The Court of Appeal held that as Cayman law, unlike Saudi law, recognised the division of the legal and beneficial interests in shares, the trusts were arguably valid.
Following the oral hearing before it, the Supreme Court invited and received two sets of supplementary written submissions focusing more precisely on the ultimately critical question of whether there was any disposition within section 127 even if (i) SICL had equitable interests in the shares and/or (ii) SICL only enjoyed personal rights in respect of the shares.
The Supreme Court allows Sambas appeal.
The transfer to Samba did not dispose of any rights belonging to SICL within the meaning of section 127.
Lord Mance gives the lead judgment, with which Lord Neuberger, Lord Sumption, Lord Collins and Lord Toulson agree.
Lord Neuberger, Lord Sumption and Lord Collins also give separate concurring judgments.
At common law, the nature of the interest intended to be created by a trust depends on the law governing the trust [17 18].
The lex situs may treat a disposition of shares to a third party as overriding
any interest of the beneficiary in the shares.
That does not mean, however, that a common law trust cannot or will not exist in respect of those shares [19 21].
A trust may be created, exist and be enforced in respect of assets located in a jurisdiction such as Saudi Arabia, the law of which does not recognise trusts in any form [22 34].
Nothing in the Hague Convention alters this conclusion, unsurprisingly given that one of its aims was to provide for the recognition of trusts in jurisdictions which did not themselves know the institution [39 40].
Lord Collins (with whom Lord Sumption agrees [91]) considers that the case does not raise the interesting and difficult questions on the Hague Convention which were argued at each stage of the proceedings [93 102].
The definition of property in section 436 of the Insolvency Act 1986 is plainly wide enough to embrace both equitable proprietary and purely personal interests [42 43; 60; 87].
The question of whether there was any disposition of these interests is more difficult.
It can be argued that the concept extends to misappropriation of assets subject to a trust [45 50] or destruction or extinction of an equitable interest in such assets, but this is not in context the natural meaning [55].
Where a trust exists, the legal and beneficial interests are distinct, and what affects the former does not necessarily affect the latter.
Where an asset is held on trust, the legal title remains capable of transfer to a third party, although this undoubted disposition may be in breach of trust.
But the trust rights, including the right to have the legal title held and applied in accordance with the terms of the trust, remain.
They are not disposed of and continue to be capable of enforcement.
If the trust rights are overridden (or, as Lord Neuberger puts it, they are lost or disappear [62]), this is not attributable to the transfer of the legal title.
It is because they were protected rights that were always limited and in certain circumstances capable of being overridden by virtue of a rule of law governing equitable rights, protecting in particular bona fide third party purchasers for value (equitys darling) [51 52; 83; 89].
Section 127 enables companies in winding up to recover assets legally owned by them by treating the disposition as void (subject to the courts power to validate the disposition).
It is neither aimed at, nor apt to cover, the present situation [53; 56].
Since on the assumed facts Samba gave value in the form of the discharge of Mr Al Saneas debt, its liability to restore the shares depends not on section 127, but on whether it is accountable on the basis of notice [54; 56; 88].
Lord Neuberger considers that the word disposition may in some circumstances embrace destruction or extinction of an interest, notably where there has been a surrender of a lease, contractual rights or a life interest [66 69].
There may also be reasons of policy for concluding that section 127 applies equally in respect of property held for a company by a third party as it does to property which it holds in its own name [70].
However, there are important differences between a surrender and the loss of a beneficial interest on a transfer of the legal estate to a bona fide purchaser for value without notice which would make it unfair for section 127 to apply in the latter as well as former case so as to render the transaction void.
Unlike a person taking a surrender of a lease or contractual rights from a company, a bona fide purchaser for value without notice would, by definition, be unaware of both the company (or at least that it had an equitable interest) and of the equitable interest [74 76].
Lord Sumption notes that the law relating to constructive trusts has achieved a high level of development.
Its coherence would not be assisted by giving the term disposition a meaning inconsistent with basic principles governing the creation and recognition of equitable interests, founded on a very different balance of the relevant interests [90].
The parties have 21 days to make submissions on the consequences of these conclusions, in particular as to whether the proceedings should be stayed or struck out or remitted to the High Court with a view to possible amendment to enable them to proceed on an alternative basis [57; 92; 103].
|
In July 2012, a new Appendix FM was inserted into the Immigration Rules, dealing with the entry requirements for non-EEA family members to join their relatives here.
Section EC-P dealt with entry clearance and leave to remain as the partner of a British citizen in the United Kingdom, or a person settled in the United Kingdom, or a refugee or person with humanitarian protection in the United Kingdom.
By partner is meant a spouse or fianc(e), a civil partner or proposed civil partner or a person living in a relationship akin to marriage or civil partnership for at least two years.
Section E-ECP dealt with the financial requirements.
These were more precise and stringent than anything which had gone before (and are here referred to as the Minimum Income Requirement or MIR).
Put shortly, they required that the sponsoring partner have a gross annual income of at least 18,600, with an additional 3,800 for the first dependent non-EEA national child and 2,400 for each additional such child.
Only the sponsors earnings are to be taken into account: the prospective earnings of an entering partner, and any support from third parties, are ignored.
Alternatively, the couple are required to have substantial savings, 16,000 plus two and a half times the shortfall in the sponsors earnings.
Estimates differ as to the proportion of the adult population who can meet these requirements but it is clear that a substantial number cannot do so, especially if they have children.
Median full-time gross earnings in the UK in 2012 were 26,500 but for men they were 28,700 and for women 23,100.
There were also substantial regional differences, with people in London and the south-east earning above the national median and people in Northern Ireland, Wales, and the north east earning considerably below (Office for National Statistics, Statistical Bulletin: Annual Survey of Hours and Earnings: 2012 Provisional Results, November 2012); the 2015 Provisional Results were published in November 2016.
301 out of the 422 occupations listed had average annual earnings below 18,600.
Among those earning below that figure were many providing essential public services.
Four of the cases before us, MM, AF, AM and SJ (for convenience we shall refer to all the parties by initials), are claims for judicial review of the MIR launched around the time that Appendix FM was first introduced.
The MIR is challenged on the ground that it is incompatible with the rights of the claimants and their partners (and a child living with one of them) under articles 8, 12 and/or 14 of the European Convention on Human Rights and also that it is unreasonable and ultra vires on common law principles.
The claimants enjoyed a measure of success before Blake J in the Administrative Court: [2013] EWHC 1900 (Admin); [2014] 1 WLR 2306.
The Court of Appeal allowed the Home Secretarys appeal: [2014] EWCA Civ 985; [2015] 1 WLR 1073.
The fifth case, SS, is an appeal against the refusal of entry clearance because of failure to meet the MIR.
The appeal succeeded on article 8 grounds in both the First-tier Tribunal and the Upper Tribunal.
The Court of Appeal heard the Entry Clearance Officers appeal, along with five other selected test cases, and the appeal was allowed: [2015] EWCA Civ 387; [2016] 1 All ER 706.
The Supreme Court directed that all five appeals be heard together.
The MIR and the background to its introduction
Before the introduction of the MIR, the Immigration Rules required broadly that the parties would be able to maintain and accommodate themselves and any dependants adequately in the UK without recourse to public funds, which included social housing and most welfare benefits but not the NHS, education and social care.
This is still the criterion which applies if the applicants partner is in receipt of disability living allowance or similar disability-related benefits (see Appendix FM, para E-LTRP 3.3).
In KA and others (Pakistan) [2006] UKAIT 00065; [2007] AR 155, the Upper Tribunal adopted income support as the test of adequate maintenance - at that level it could not be said that the family were not properly maintained but neither should it be contemplated that immigrants would live below that level.
This reasoning was approved by the Court of Appeal in AM (Ethiopia) v Entry Clearance Officer [2008] EWCA Civ 1082, [2009] Imm AR 254, para 78.
This amounted to around 5,500 a year after deduction of tax and housing costs.
Problems were encountered with that approach.
The assessment did not depend upon a set income threshold but on a consideration of current and prospective employment income of both parties, the extent of any other financial means, including the support of third parties, and their housing costs.
Entry clearance officers and case workers found that it was difficult to apply the test consistently and for applicants and sponsors to assess whether they would meet it.
It was complex to administer, particularly in respect of any benefits which the sponsor might claim, as it was difficult to know whether these were the result of admitting the partner.
It did not prevent burdens on the system arising over the longer term once the partner had qualified for settlement and thus for full access to welfare benefits.
Hence the Home Office set about devising an alternative policy.
A consultation paper proposing a new minimum income threshold for sponsors wishing to bring a non-EEA national spouse or partner or dependants into the UK, set at a higher level than the safety net of income support, was published in July 2011.
At the same time the Government asked the Migration Advisory Committee to consider what the minimum threshold should be in order to ensure that the sponsor could support a partner and any dependants independently without their becoming a burden on the state.
The Committees Report, Review of the minimum income requirement for sponsorship under the family migration route, was published in November 2011.
The Committee based its calculations on the gross income received by the sponsor in the United Kingdom, without deducting housing costs, which it believed were open to manipulation and difficult to verify (paras 4.24-4.26).
It acknowledged, however, that there was a strong case in principle for including the future earnings of the sponsored migrant as it is the total household income which determines whether they will be a burden on the state (para 4.20).
It then developed three options: benchmarking to levels of pay, such as the national minimum wage, the living wage, the 25th percentile of UK wage distribution and so on; or benchmarking to the benefits system, that is to the level of income beyond which the family would not be entitled to income-related benefits, including tax credits; or benchmarking to the net fiscal contribution, the point at which more is paid in tax than is consumed in public services, such as health and education, as well as welfare benefits.
The pay approach was rejected because, although simple to calculate and understand, it did not relate directly to the question asked, nor was there any clear economic basis for selecting one threshold over another (para 5.2, 5.3).
Under both the benefits and the net fiscal approaches, the lowest possible threshold was 13,400 a year and the highest was 40,000.
Under the benefits approach, the committees preferred threshold was 18,600 a year, the point at which the family would not be entitled to any income-related benefits, including tax credits and housing benefit, assuming a two adult household (because the additional adult increases benefit entitlement) and housing costs of 119 per week (para 5.5).
Under the net fiscal approach, the preferred threshold was 25,700 a year, assuming a one adult household (because only one adults income is taken into account) (para 5.6).
The Committee therefore recommended that the income threshold be set between 18,600 and 25,700 gross annual income (para 5.7).
The Committee also considered two methods of adjusting the income threshold to account for dependent children, the first of which reflected income-related benefits that the family would derive from their dependent children.
Based on what was known about recent sponsors of spouse or partner applicants, it was estimated that 45% of them would not be able to meet the 18,600 threshold and 64% would not be able to meet the 25,700 threshold (para 5.18).
The Committee emphasised that its recommendation was based solely on economic considerations and not on the wider legal, social or moral issues (para 5.7).
The Governments conclusions were announced in the Home Offices Statement of Intent: Family Migration (June, 2012).
The Government had decided to adopt the gross annual income threshold of 18,600 for a British citizen or settled person to sponsor a non-EEA fianc(e), proposed civil partner, spouse, civil partner, or unmarried partner, with an additional 3,800 for the first dependent child and 2,400 for each further child.
These would apply at every application stage - for entry clearance or leave to remain, for further leave to remain (after 30 months) and for indefinite leave to remain (after five years) (para 74).
The same rules would apply to refugees and people granted humanitarian protection who wished to sponsor a post-flight partner and dependent child or children, because they should not be in a better position than people settled here (para 131).
But sponsors in receipt of specified disability-related benefits or carers allowance would continue to be covered by the old rules (para 75).
Caseworkers were to have no discretion or flexibility in respect of the threshold (para 83c).
Specified non-employment income, pensions and savings of both parties would be taken into account (para 82), but the previous, current or prospective employment and earnings of migrant partners would not be taken into account at the entry clearance stage (para 83e), although their earnings would be taken into account where or once they were here with permission to work (para 83f).
Sponsors or partners must have been earning at the required level for six months in the same employment or for 12 months if they had changed employment (para 83h).
Sponsors returning from abroad would have to show that they had earned at the required level while abroad and had a firm, verifiable job offer or signed contract of employment to start work here within three months of their return at the required level (para 83j).
Cash savings of both partners of more than 16,000 could be taken into account to make up the shortfall in income multiplied by 2.5 for the probationary period and simply to make up the shortfall at the indefinite leave to remain stage; thus if there was no income, they would need savings of 62,000 in cash at the entry clearance and leave to remain stages, but 34,600 at the indefinite leave to remain stage (para 83l).
These savings might have come as a gift from a third party but they must be real resources for the couple to use as they see fit, not a loan or an undertaking to subsidise or support if needed.
Promises of support from third parties would not be accepted (para 83m).
The detailed requirements and the evidence which would be required were set out in Appendix B.
The Statement of Intent also announced that the new rules on family migration would reflect fully the factors which can weigh for and 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 (para 7)
This was fleshed out by a Home Office statement which accompanied the new Immigration Rules on Family and Private Life (HC 194), Grounds of Compatibility with article 8 of the European Convention on Human Rights.
This explained that, while the Rules were amended in 2000 to require all Home Office staff to carry out their duties in compliance with the provisions of the Human Rights Act, there had been no substantive change to the family life part of the Rules to reflect any consideration of proportionality under article 8 or to align them with developing case law (para 12).
Staff and courts had had to make their own decisions on an individual basis, which had led to unpredictability and inconsistency which are anathema to good administration (para 11).
Hence the purpose of the new rules was said to be - to fill the 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 19)
The Rules themselves would state how the balance should be struck between the public interest and individual rights, taking into account the relevant case law.
If the Rules were proportionate, decisions taken in accordance with them, would, other than in exceptional cases, be compatible with article 8 (para 20).
The role of the courts should shift from reviewing the proportionality of individual administrative decisions to reviewing the proportionality of the Rules themselves: The starting-point of such a review will be that Parliament has decided how the balance should be struck.
Although Parliaments view is subject to review, it should be accorded the deference due to a democratic legislature.
If proportionality has already been demonstrated at a general level, it need not, and should not, be re-determined in every individual case.
(para 22)
impact assessment and an equality impact assessment.
In addition to these documents, the Government also published a general
The aims of the MIR, as consistently stated both in the Statement of Intent and in the Grounds of Compatibility were that those who choose to establish their family life in the UK should have the financial wherewithal to be able to support themselves and their partner without being a burden on the taxpayer.
Moreover, the sponsor should bear the financial responsibility of ensuring that the migrant is well enough supported to be able to integrate and play a full part in British society (Grounds of Compatibility, para 52).
This policy has a legitimate aim of safeguarding the economic well-being of the UK and it is considered that there is enough flexibility in the policy to prevent the policy from being a disproportionate interference with article 8 rights (para 55).
The evidence of Mr Clive Peckover, for the Secretary of State, is that the MIR forms part of an overall programme of reform intended to reduce net migration and restore public confidence in the immigration system (Witness Statement 2, para 8).
But this was not its primary objective: there is no cap on the number of spouses, partners and would-be partners who can be admitted, provided that the couple can meet the MIR.
Nevertheless, it was anticipated that it would lead to a fall in the numbers admitted by this route, which would bring substantial savings in welfare benefits, and to the NHS, education and other public services.
40,500 spouse or partner visas were issued in 2010 and it was estimated that a MIR of 18,600 would, taken with the other proposed reforms, reduce family route visas by approximately 16,100 per year and net migration by 9,000.
The new Rules and Guidance
The MIR in the new Rules laid before Parliament reflected those policy choices.
In June 2012, the Home Secretary laid before Parliament HC 194, which introduced a new Appendix FM to the Immigration Rules dealing with applications from family members.
Unusually, the new Rules were unanimously approved by a positive resolution of the House of Commons.
When the Rules were tabled in the House of Lords, a motion of regret was withdrawn and there was no negative resolution.
The new Rules came into force on 9 July 2012.
They were further amended by CM 8423 which inserted a new Appendix FM-SE dealing with the procedural and evidential requirements and came into force on 20 July 2012.
Appendix FM as updated in 2016 begins by stating (para GEN.1.1): It sets out the requirements to be met and, in considering applications under this route, it reflects how, under article 8 of the Human Rights Convention, the balance will be struck between the right to respect for private and family life and the legitimate aims of protecting national security, public safety and the economic wellbeing of the UK; the prevention of disorder and crime; the protection of health or morals; and the protection of the rights and freedoms of others (and in doing so also reflects the public interest considerations as set out in Part 5A of the Nationality, Immigration and Asylum Act 2002).
It also takes into account the need to safeguard and promote the welfare of children in the UK, in line with the Secretary of States duty under section 55 of the Borders, Citizenship and Immigration Act 2009.
(italicised words added by Statement of Changes in Immigration Rules (2012) (Cm 8423))
Nevertheless, the Appendix contemplates that the Rules will not cover all the situations 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 provide for what is to happen if an applicant does not meet the requirements of the Appendix but the decision-maker grants entry clearance or leave to enter or remain outside the rules on article 8 grounds.
The Rules governing the pre-entry language requirement, which was the subject of this Courts decision in R (Bibi) v Secretary of State for the Home Department [2015] UKSC 68; [2015] 1 WLR 5055, grant an express exemption where there are exceptional circumstances which prevent the applicant from being able to meet the requirement prior to entry to the UK (paras E-ECP 4.2(c) and E- LTRP 4.2(c)).
There is no equivalent exemption, or reference to exceptional circumstances, in the Rules governing the MIR at the entry clearance stage.
Given the obligation to respect Convention rights, therefore, there can be no question of the rules relating to the MIR being a complete code.
However, there is an exception EX.1 to the MIR and language requirements for applicants for limited or indefinite leave to remain (not leave to enter) as a partner if (a) the applicant has a genuine and subsisting parental relationship with a child under 18 in the UK who is a British citizen or has lived here continuously for seven years and it would not be reasonable to expect the child to leave the UK; or (b) the applicant has a genuine and subsisting relationship with a partner in the UK who 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.
Insurmountable obstacles is said to mean very significant difficulties faced by either which could not be overcome or would entail very serious hardship to either.
The source of the exceptional circumstances requirement where the MIR is not met is the Immigration Directorate Instruction: Family Migration: Appendix FM Section 1.0a: Family Life (as a Partner or Parent): 5-year Routes and Appendix FM Section 1.0b: Family Life (as a Partner or Parent) 10-Year Routes.
(We have been supplied with the versions published in August 2015.
) Section 14 of the former requires Entry Clearance Officers, where an application does not meet the requirements in the Rules, to consider whether there may be exceptional circumstances which make refusal a breach of article 8 rights, or whether there are compelling compassionate reasons which might justify a grant of entry clearance, because refusal would result in unjustifiably harsh consequences for the applicant or their family.
However, Entry Clearance Officers are not allowed to grant entry clearance outside the Rules, so an officer who thinks that the case might meet this very high threshold must refer the case to the Referred Casework Unit (RCU) in London.
The Instructions go on to state that the Rules themselves reflect the position of the Secretary of State on proportionality and reflect how the balance should be struck between individual rights and the public interest.
Only in exceptional circumstances will a decision taken in accordance with the Rules lead to a disproportionate outcome.
This is likely to occur only rarely.
Section 14.1 of the 2015 Instructions gives an almost identical explanation of exceptional circumstances to that given in the December 2012 Instructions current at the time of the decision of Blake J: Exceptional does not mean unusual or unique.
Whilst all cases are to some extent unique, those unique factors do not and generally render them exceptional.
For example, a case is not exceptional just because the criteria set out in the Immigration Rules have been missed by a small margin.
Instead exceptional means circumstances in which refusal would result in unjustifiably harsh consequences for the individual or their family such that refusal of the application would not be proportionate under article 8.
The fact that refusal may, for example, result in the continued separation of family members does not of itself constitute exceptional circumstances where the family have chosen to separate themselves.
Cases that raise exceptional circumstances to warrant a grant of entry outside the Rules are likely to be rare.
Decision-makers are also told that the consideration of exceptional circumstances must include consideration of any factors relevant to the best interests of a child in the UK; but that requiring the Rules to be met is likely to lead to a disproportionately detrimental effect on the best interests of the child in the UK only rarely.
The key issue is whether there are any factors involving the child in the UK that can only be alleviated by the presence of the applicant in the UK.
Consideration needs to be given to the effective and material contribution that the applicants presence in the UK would make to safeguarding and promoting the welfare of the child.
This contribution needs to be of a significant kind, eg: Support during a major medical procedure, particularly if this is unforeseen or likely to lead to a permanent change in the childs life.
Prevention of abandonment where there is no other family member in the UK to care for a child.
Simply reducing the time and resource spent on a childs case by agencies such as childrens services is unlikely to be sufficient.
The applicants presence in the UK must form part of achieving a durable solution for the child that is in his or her best interests.
The Guidance goes on to state that: Other means of meeting the childs best interests need to have been considered and ruled out.
The normal need for a child to be given genuine and effective care by both parents is reflected in the Immigration Rules and there must be substantive reasons why the childs best interests in this regard can only be met by granting entry clearance outside the Rules.
So the fact that parents have chosen to travel at different times, or maintained separate life-styles in two countries, will not amount to a degree of separation that amounts to exceptional circumstances.
On the other hand the impact of natural disaster on the overseas parents housing or employment making it impossible for the child to return to live with him or her may count.
From 2012 to 2014, only 52 cases were referred to the RCU for consideration of leave outside the Rules, of which 26 succeeded.
In the same period, some 30,000 applications were refused.
The guidance quoted above applies to applications from outside the country for entry clearance.
Instruction Appendix FM section 1.0b gives guidance on in- country applications for leave to remain outside the Rules.
There are differences between the two, but the initial assumption that the Rules cover the ground, so that refusals will only be disproportionate in exceptional circumstances likely to be rare, and the definition of exceptional circumstances, are the same.
The cases before the court
The cases before us are samples of some of the situations in which the MIR may cause problems for partners who wish to live together in this country.
In only one of them (SS) have there been findings of fact in legal proceedings.
The others (MM, AF, AM, and SJ) have been dealt with on the basis of assumed facts.
MM, AF, AM, SJ: the facts and decisions below
MM is a 37-year old national of Lebanon.
He entered the UK in 2001 and has been granted limited leave to remain in the UK as a refugee until June 2017.
He lives with his sister, EM, who has discretionary leave to remain (for the background see EM (Lebanon) v Secretary of State for the Home Department [2008] UKHL 64; [2009] 1 AC 1198).
She has a son, AF, who was aged 16 when these proceedings began and looks to MM as a father figure.
In 2010 MM became engaged to a Lebanese woman whom he met in Syria.
They spent five months together in Cyprus between September 2012 and January 2013.
They were married by proxy in Lebanon in 2013.
He is reading for a PhD at the University of Wolverhampton and working with three different agencies as a quality inspector.
He earns approximately 15,600 gross per annum.
His wife has a BSc in nutrition and is employed in Lebanon as a pharmacist.
She speaks fluent English and inquiries indicate that she would be likely to find skilled employment here.
MMs brother has covenanted to provide them with 80 per week for five years.
Alternatively his father has promised to remit an equal amount from Lebanon.
AF has been included as an interested party to MMs claim because of the adverse impact upon him of MMs difficulties in achieving family unity in this country.
This, he contends, is not only in breach of his Convention rights but also of the Secretary of States duty, in section 55 of the Borders, Citizenship and Immigration Act 2009 (the 2009 Act), to have regard to the need to safeguard and promote the welfare of children when making decisions which affect them.
AM is a British citizen of Pakistani heritage and has lived here since 1972.
In 1991 he married a Pakistani woman who lives in Kashmir although the marriage was not formally registered until 2006.
They have five children who are British citizens, four of whom have lived in this country since 2001 and the youngest of whom lives with his mother in Kashmir.
AM has been out of work since 2006 and is dependent on benefits.
His wife was refused leave to enter under the old Rules because of this.
He believes that his employment prospects would be improved if his wife were admitted and could look after the children.
He also argues that he has relatives who could support them until they become self-sufficient.
He complains about the application of the MIR to the parents of children settled here, who are seeking to enter or remain as spouses or partners.
(He also complained about the contrast between the Rules governing parents seeking to enter or remain as spouses or partners and those governing parents seeking to enter or remain as lone parents or separated parents having contact with their children, but the Court of Appeal refused him permission to appeal on this ground.)
SJ is a British citizen who was born here and is also of Pakistani heritage.
She lives with her family in Birmingham, has no qualifications and an intermittent employment history with no prospect of employment at the required level of earnings.
In 2012 she married a Pakistani man who lives and works as a civil servant in Pakistan.
In 2013 she sponsored his application to come to this country, but following the Court of Appeal decision in 2014 the application was refused on the ground that the MIR and accommodation requirement were not met and there were no exceptional circumstances leading to the grant of entry clearance outside the Rules.
She contends that the MIR is not only a violation of her Convention rights under articles 8 and 12 but also that it is indirectly discriminatory against women, and in particular British Asian women, who suffer from significantly lower rates of pay and employment than others.
Blake J declined to strike down the Rules introducing the MIR, because they were capable of leading to an article 8 compatible result.
Claims of individual violations should be examined in the context of an application where the relevant facts could be established and factors weighed (para 120).
These included the best interests of any children involved (para 119).
He also rejected the discrimination challenge on the ground that it would be impracticable and inappropriate to introduce different rules for, for example, women sponsors or sponsors living in lower paid regions (para 114).
Nevertheless he found that, when applied to the partners of British citizens or of recognised refugees, the combination of more than one of five features of the Rules was so onerous in effect as to be an unjustified and disproportionate interference with a genuine spousal relationship (para 123).
Those five features were: setting the income level at above 13,400, the lowest threshold identified by the MAC and close to the national minimum wage, then 13,600; requiring savings of 16,000 before they could be used to make up a shortfall; using a 30-month period for forward income projection as opposed to a 12-month period; disregarding credible and reliable undertakings of third party support; and disregarding the spouses own earning capacity during the 30-months after entry (para 124).
While the MIR was rationally connected to a legitimate aim, these features went further than necessary to promote it (para 144).
But he declined to seek to encapsulate the nuances of this judgment in a formal declaration (para 154).
The Court of Appeal rejected the applicants argument that the MIR was not rationally connected to its legitimate aims: it was enough that the Secretary of State had a rational belief that the policy would overall achieve the identified aim (para 142).
The Court went on to hold that, while proportionality had to be judged objectively by the Court, as held by the House of Lords in R (SB) v Governors of Denbigh High School [2006] UKHL 15; [2007] 1 AC 100, appropriate weight had to be given to the judgment of the Secretary of State, particularly where she had acted on the basis of independent research and wide consultation (para 149).
She had shown that the interference was both the minimum necessary and struck a fair balance between the interests of the groups concerned and the community in general.
It was not the courts job to impose their own view of the minimum income required to accomplish the stated policy aim unless the level chosen was irrational or inherently unjust or inherently unfair, which it was not (para 151).
Given this conclusion, it was unnecessary to consider the exceptional circumstances provisions in the Instructions.
Both these and the duty to safeguard the welfare of children might be factors in individual cases but were not the basis for a challenge to the Rules themselves (paras 161 and 164).
SS: the facts and the decisions below
SS is a citizen of the Democratic Republic of Congo (DRC) and resident there.
She is married to NT, who is also from the DRC, but was granted refugee status here and later became a naturalised British citizen.
They met in 2010 on one of NTs visits to the DRC and married in September 2012.
In November 2012 SS applied for entry clearance under Appendix FM.
This was refused by the Entry Clearance Officer on the ground that the MIR was not met and the correct documents had not been supplied.
She appealed to the First-tier Tribunal.
The Tribunal found that the documentation showed that NTs gross annual income for the tax year 2011/2012 was 16,194.
New information showed that his earnings were roughly 17,000 per annum.
This did not meet the MIR, but the appeal was allowed on article 8 grounds.
The couple would not be able to live together in the DRC.
NT earned well above the minimum wage (amounting to 13,600 per annum).
They would be able to live on his income without placing additional strain on the public purse.
SS had suffered a miscarriage after her application had been refused which had left her traumatised and deeply distressed that NT was unable to visit her for fear of losing his employment.
She needed to be admitted to the United Kingdom so that she can take solace with her husband and begin to form family life with him here.
In reaching this conclusion the Tribunal applied the approach of Blake J in MM (Lebanon) to assessing the proportionality of the interference.
The Upper Tribunal dismissed the Entry Clearance Officers appeal.
It held that the First-tier Tribunal had been wrong to take into account events since the refusal, but that since there were insurmountable obstacles to family life continuing in the DRC on a permanent basis it followed that there were exceptional circumstances resulting in an unjustifiably harsh situation for the couple.
The Court of Appeal allowed the Entry Clearance Officers appeal on the basis that the First- tier Tribunal had been wrong to apply the reasoning of Blake J in MM (Lebanon), had given inadequate weight to the MIR in the article 8 assessment and too much weight to the near-miss aspect, and had failed to identify valid compelling circumstances requiring the grant of leave to enter.
However, the First-tier Tribunals findings of fact, including that the couple could not live together in DRC, were not challenged and the case was remitted to the Upper Tribunal.
The case law
This Court has considered the inter-relationship between the Human Rights Act 1998 and the Immigration Rules affecting people who apply to join spouses, partners and other family members in the United Kingdom on several occasions, beginning with Huang, above, and most recently in Bibi, above, and Agyarko v Secretary of State for the Home Department, decided at the same time as this case.
The starting point is, of course, that any state has the right, in international law, to control the entry of foreigners and how long they may remain after entry.
Nevertheless, that right has to be exercised consistently with the obligations of the European Convention on Human Rights.
In Abdulaziz, Cabales and Balkandali v United Kingdom (1985) 7 EHRR 471, the European Court of Human Rights held that refusing to admit the foreign spouses of British citizens or persons settled here was not a breach of the article 8 right to respect for family life; there was no general obligation to respect a married couples choice of country to live in; and there were no obstacles to establishing family life in their own or their husbands home countries.
However, the refusal did engage article 8 rights sufficiently to bring the case within the article 14 requirement that there be no unjustified discrimination in the enjoyment of those rights; in that case, there was unjustified discrimination on grounds of sex.
The majority in that case went so far as to say that there was no lack of respect for the couples family life.
Since then, however, the Strasbourg case law has moved on, and recognised that such refusals do amount to a lack of respect, as this Court held in R (Aguilar Quila) v Secretary of State for the Home Department (AIRE Centre intervening) [2011] UKSC 45; [2012] 1 AC 621.
The Home Secretary clearly accepts this, as she acknowledged in Appendix FM itself that article 8 required a fair balance to be struck between individual rights and the public interest.
Nevertheless, the Strasbourg case law has long drawn a distinction between the expulsion of settled migrants with rights of residence in the host country and the refusal to admit, or the removal of, migrants with no such rights.
The former involves an interference with the right to respect for family or private life which has therefore to be justified under article 8(2), as being necessary in a democratic society in pursuance of a legitimate aim.
The context has typically been the commission of criminal offences by a migrant who has been living lawfully in the host country for a long time, sometimes since birth or early childhood.
The Strasbourg case law is discussed in the recent decision of this Court in Hesham Ali v Secretary of State for the Home Department [2016] UKSC 60; [2016] 1 WLR 4799.
In summary, the factors to be taken into account were explained in Boultif v Switzerland (2001) 33 EHRR 1179: the nature and seriousness of the offence; the length of the applicants stay in the host country; the time elapsed since the offence and his conduct in the meantime; the nationalities of the people concerned; the applicants family situation, such as the length of the marriage and other factors expressing the effectiveness of a couples family life; whether the spouse knew of the offence when entering the relationship; whether there are any children and their age; and not least the seriousness of the difficulties which the spouse is likely to encounter in the [applicants] country of origin, although the mere fact that a spouse might face certain difficulties cannot in itself exclude an expulsion (para 48).
These were approved and expanded by the Grand Chamber in ner v The Netherlands (2007) 45 EHRR 421, which emphasised 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 the social, cultural and family ties with the host country and with the country of destination (para 58).
Refusing to admit, or removing, migrants with no settled rights of residence involves the potential breach of a positive obligation to afford respect to private or family life by allowing a person to enter or remain in the host country.
Technically, therefore, the question is whether the host country has such an obligation rather than whether it can justify interference.
Hence, as the Grand Chamber said in the recent case of Jeunesse v The Netherlands (2015) 60 EHRR 789, the criteria developed in the courts case law for assessing whether a withdrawal of a residence permit of a settled migrant is compatible with article 8 cannot be transposed automatically to the situation of an alien seeking admission, even where, as in that case, the applicant had in fact lived for many years in the host country (para 105).
Nevertheless, the court went on to repeat, as had been said in many previous cases dating back at least as far as Gul v Switzerland (1996) 22 EHRR 93, that the principles applicable to the states negative and positive obligations under article 8 were similar: In both contexts regard must be had to the fair balance that has to be struck between the competing interests of the individual and of the community as a whole; and in both contexts the state enjoys a certain margin of appreciation (para 106; note that the margin has consistently been said to be certain rather than wide).
There is no general obligation to respect a married couples choice of country in which to reside or to authorise family reunification.
It will depend upon the particular circumstances of the persons concerned and the general interest.
Factors to be taken into account are the extent to which family life would effectively be ruptured; the extent of the ties in the host country; whether there are insurmountable obstacles (or, as it has sometimes been put in other cases, major impediments: see, for example, Tuquabo-Tekle v The Netherlands [2006] 1 FLR 798, para 48; IAA v United Kingdom (2016) 62 EHRR 233, paras 40 and 48) in the way of the family living in the aliens home country; and whether there are factors of immigration control (such a history of breaches of immigration law) or public order weighing in favour of exclusion (para 107).
If family life was created at a time when the people involved knew that the immigration status of one of them was such that persistence of family life in the host state would from the outset be precarious, 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; note that this was expressed as a prediction rather than a requirement).
All of this had already been said in the similar family reunification case of Rodrigues da Silva v The Netherlands (2007) 44 EHRR 729.
However, since then, the Grand Chamber had decided, in Neulinger v Switzerland (2012) 54 EHRR 1087, that the best interests of any child whose family life was involved had to be taken into account in article 8 cases, and in Nunez v Norway (2014) 58 EHRR 511, this had tipped the balance in an immigration case.
In Jeunesse, therefore, the Grand Chamber went on to say: Where children are involved, their best interests must be taken into account.
On this particular point, the Court reiterates that there is a broad consensus, including in international law, in support of the idea that in all decisions concerning children, their best interests are of paramount importance.
Whilst alone they cannot be decisive, such interests certainly must be afforded significant weight.
Accordingly, national decision- making bodies should, in principle, advert to and assess evidence in respect of the practicality, feasibility and proportionality of any removal of a non-national parent in order to give effective protection and sufficient weight to the best interests of the children directly affected by it.
(para 109)
In Jeunesse, the Court found that the circumstances were exceptional and a fair balance had not been struck (para 122).
The applicants spouse and children were all Netherlands nationals with the right to enjoy family life together in the Netherlands (para 115).
The applicant had been living in the Netherlands for 16 years and had no criminal record.
Her presence had been tolerated by the Netherlands authorities (para 116).
There were no insurmountable obstacles to the family relocating to her home country, but the family would experience a degree of hardship if forced to do so (para 117).
The authorities had not given sufficient weight to the interests of the children; the applicant was their mother and primary carer while the father worked full time to support the family and they were deeply rooted in the Netherlands (paras 118-120).
The central issue, according to the Court, was whether a fair balance had been struck between the personal interests of all members of the family in maintaining their family life in the Netherlands and the public interest in controlling immigration (para 121).
This was nothing new: the Court has referred to striking a fair balance between those interests in numerous family reunion cases, with varying results depending on the individual circumstances: Gul v Switzerland, above, para 38; Ahmut v The Netherlands (1997) 24 EHRR 62, paras 63, 73; Sen v The Netherlands (2003) 36 EHRR 81, para 31; Tuquabo-Tekle v The Netherlands (para 41 above); Konstantinov v The Netherlands [2007] ECHR 1635/03, paras 46, 53; Rodriguez da Silva v The Netherlands, above; Y v Russia (2010) 51 EHRR 531, paras 39, 44; Nunez v Norway, above, para 68; IAA v United Kingdom (2016) 62 EHRR 233, paras 38, 40, 42, 47.
However, while the Strasbourg court has not found it necessary to carry out the article 8(2) proportionality analysis in family reunification cases, this Court has adopted that approach in Huang, above, EB (Kosovo) v Secretary of State for the Home Department [2008] UKHL 41; [2009] AC 1159, Quila, above, Zoumbas v Secretary of State for the Home Department [2013] UKSC 74; [2013] 1 WLR 3690, and in Bibi, above.
As this Court has also held in Hesham Ali v Secretary of State for the Home Department, above, para 49, there is no objection to our employing this useful analytic tool.
The issue is always whether the authorities have struck a fair balance between the individual and public interests and the factors identified by the Strasbourg court have to be taken into account, among them the significant weight which has to be given to the interests of children.
Best interests of children
There is a further reason in this country for giving significant weight to the interests of children.
This country is party to the United Nations Convention on the Rights of the Child.
As is well known, article 3(1) provides that: 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.
Originally, the United Kingdom had entered a reservation in respect of immigration matters, but this was lifted in 2008 and section 55(1) and (2) of the 2009 Act requires the Secretary of State to make arrangements for ensuring that her own functions in relation to immigration, asylum and nationality, and those conferred upon immigration officers by the Immigration Acts, are discharged having regard to the need to safeguard and promote the welfare of children who are in the United Kingdom.
It is common ground that this duty applies, not only to the making of decisions in individual cases, but also to the function of making the Immigration Rules and giving guidance to officials.
Section 55(3) requires persons exercising those functions to have regard to any guidance given by the Secretary of State in relation to this duty.
Statutory guidance has been given in Every Child Matters: Change for Children (2009).
In paragraph 1.4: Safeguarding and promoting the welfare of children is defined as: preventing impairment of childrens health or development (where health means physical or mental health and development means physical, intellectual, emotional, social or behavioural development); ensuring that children are growing up in circumstances consistent with the provision of safe and effective care; and undertaking that role so as to enable those children to have optimum life chances and to enter adulthood successfully.
Additionally, although section 55 only applies to children in the United Kingdom, the guidance states that UK Border Agency staff working overseas must adhere to the spirit of the duty and make inquiries when they have reason to suspect that a child may be in need of protection or safeguarding, or presents welfare needs that require attention (para 2.34).
As already seen, Appendix FM itself purports, in para GEN.1.1, to reflect both the article 8 rights of the parties and the Secretary of States duty under section 55.
The Explanatory Memorandum laid before Parliament states that the purpose of the new rules was to set requirements which correctly balance the individuals right to respect for private and family life with the public interest in safeguarding the economic well-being of the UK by controlling immigration (para 2.1); further that the assessment of the best interests of the child is intrinsic to the proportionality assessment under article 8, and has therefore also been incorporated into the Immigration Rules (para 7.4).
Immigration Rules and policy
The legal and policy background of the immigration rules has been discussed in detail by Lord Reed in Hesham Ali and Agyarko.
As he explains, the statutory basis for the modern system of immigration control starts from the Immigration Act 1971.
Section 1(4) gives authority to the Secretary of State to make rules as to the practice to be followed in the administration of the Act for regulating the entry and stay of persons not having the right of abode.
Section 3(2) makes detailed provision for statements of the rules, or changes, to be laid before Parliament.
The 1971 Act has been described as a constitutional landmark.
It is the modern embodiment of the powers previously exercised under the Royal prerogative, and now entrusted to the Secretary of State, who has constitutional responsibility under Parliament for immigration control and policy.
The rules are to be seen as statements by the Secretary of State as to how she proposes to control immigration, the scope of that duty being defined by the statute (see R (Alvi) v Secretary of State for the Home Department [2012] UKSC 33; [2012] 1 WLR 2208 paras 31, 33 per Lord Hope).
By the HRA section 6 the Secretary of State is bound to exercise her powers under the Act in a way which is compatible with the European Convention on Human Rights.
Although some reliance has been placed upon article 12 - the right to marry and found a family - and on article 14 - enjoyment of the Convention rights without discrimination on status grounds - the principal focus in these cases has been on article 8 - the right to respect for private and family life.
Challenging the rules under article 8
In this case (unlike Hesham Ali or Agyarko) we are asked to consider the legality of the rules as such, rather than simply their application to individual cases.
In both situations, however, it is legitimate to follow the familiar four-stage test adopted in Quila, above, and in Bibi, above.
Immigration rules made for legitimate objectives were held disproportionate and therefore unlawful in R (Baiai) v Secretary of State for the Home Department [2008] UKHL 53; [2009] AC 287; and in effect (although the challenge was to two individual decisions) in Quila, above.
The former required a person subject to immigration control to obtain a prior certificate of approval to enter a marriage otherwise than in accordance with the rites of the Church of England.
The latter sought to deter forced marriages, by requiring both parties to a marriage to be aged 18 (later 21).
The latter was seen as a very strong case.
As Lord Wilson observed the number of unforced marriages which [the scheme] obstructs vastly exceeds the number of forced marriages which it deters, an issue which the Secretary of State had failed to address: On any view it is a sledge-hammer but she has not attempted to identify the size of the nut.
At all events she fails to establish that the interference with the rights of the claimants under article 8 is justified.
(Quila para 58)
In the same case (paras 78-79) Lady Hale summarised the reasons for holding both schemes unlawful, noting in particular the blanket character of the prohibition in each case (a factor also emphasised by the Strasbourg court in respect of the first scheme: ODonoghue v United Kingdom (2011) 53 EHRR 1, para 89).
In Bibi the court declined to hold unlawful amendments to the rules requiring a foreign spouse or partner of a British citizen or a person settled in this country to pass a test of competence in the English language before coming to live here.
The court upheld the rules as a whole as satisfying the requirements of proportionality under article 8, while (with differing degrees of emphasis) expressing concern about the potential operation of the guidance in individual cases.
In the leading judgment Lady Hale commented on the difficulties of challenges to the rules as such: It may well be possible to show that the application of the rule in an individual case is incompatible with the Convention rights of a British partner It is much harder to show that the rule itself is inevitably unlawful, whether under the Human Rights Act 1998 or at common law (para 2)
As those cases show, rules prepared by the Secretary of State will rarely fail to satisfy the first two tests, which closely resemble conventional Wednesbury principles (see per Laws LJ, SS (Nigeria) v Secretary of State for the Home Department [2013] EWCA Civ 550; [2014] 1 WLR 998, para 39), while the third and fourth tests generally overlap.
In practice the main emphasis is likely to be on the fourth test: do the measures strike a fair balance between the rights of the individual and the interests of the community? Nor is it enough that the rule may lead to infringements of that principle in individual cases.
As Lord Hodge said (Bibi, para 69, approving the approach of Aikens LJ in the present case: [2015] 1 WLR 1078, paras 133-134): The court would not be entitled to strike down the rule unless satisfied that it was incapable of being operated in a proportionate way and so was inherently unjustified in all or nearly all cases.
That observation reflects the fact that, as a general rule, it is the decision in an individual case which may be incompatible with the Convention rights, rather than the relevant general rules or policies.
That applies also to the Secretary of States duty under section 6 of the Human Rights Act 1998 not to act in a way which is incompatible with a Convention right.
Compliance in an individual case does not necessarily depend on the rules.
As Laws LJ has said (Mahad (Ethiopia) v Secretary of State for the Home Department [2008] EWCA Civ 1082; [2009] Imm AR 254, para 39, agreed by Pill and Carnwath LJJ): The immigrants article 8 rights will (must be) protected by the Secretary of State and the court whether or not that is done through the medium of the immigration rules.
It follows that the rules are not of themselves required to guarantee compliance with the article.
There would no doubt be a breach of that duty if the rules were to be couched in a form which made non-compliance in individual cases practically inevitable.
But that is not the position in the present context.
Even features which make compliance more difficult, in particular the insistence that Entry Clearance Officers cannot themselves take decisions outside the rules but must refer them to the RCU in London, are not the product of the rules but of the administrative arrangements.
As already explained (para 19 above), the general provisions of the rules envisage a two-stage process, the second involving consideration of the human rights issues outside the rules (appendix FM GEN.1.1 and GEN.1.10-11).
Unsurprisingly, therefore, Miss Giovannetti for the Secretary of State accepts in her printed case (para 38) that failure to meet the MIR does not in itself lead to an application for entry clearance being refused, since (in her words): The Secretary of State retains a discretion to grant entry clearance outside the rules in appropriate cases, which must be exercised in accordance with section 6 of the Human Rights Act 1998.
Consistently with that approach, when dealing with the appeal in SS (Congo) (para 256), she accepts as uncontroversial the appellants submission that the requirements of rules do not absolve decision-makers from carrying out a full merits based fact-sensitive assessment outside the rules.
This position is reinforced by the nature of the right of appeal against any adverse decision of the Secretary of State, whether made by reference to the rules or the Convention.
As was made clear in Huang (paras 6, 17), the structure of the appeal provisions draws a clear distinction between the two.
Thus the grounds on which an appeal may be brought (Nationality, Immigration and Asylum Act 2002 section 84(1)) include: (a) that the decision is not in accordance with immigration rules ... (c) that the decision is unlawful under section 6 of the Human Rights Act 1998 (c 42) as being incompatible with the appellants Convention rights ... Failure to qualify under the rules is not conclusive; rather it is (in Lord Binghams words) - the point at which to begin, not end, consideration of the claim under article 8.
The terms of the rules are relevant to that consideration, but they are not determinative.
(para 6) Thus, whatever the defects there may be in the initial decision, it is the duty of the tribunal to ensure that the ultimate disposal of the application is consistent with the Convention.
This analysis provides a simple answer to the central issue in the case.
It removes any substantial basis for challenging the new rules as such under the HRA.
(The treatment of children under section 55 of the 2009 Act raises different issues, to which we shall return.) It follows that such a challenge in the present context must stand or fall under common law principles.
The question in short is whether, taking account of the fact that those rules are only one part of the decision-making process, they are in themselves based on a misinterpretation of the 1971 Act, inconsistent with its purposes, or otherwise irrational.
Under the HRA the main focus of attention shifts to the instructions issued by the Secretary of State to entry clearance officers for dealing with cases outside the rules (described at paras 20ff above).
The question then is whether there is anything in those instructions which unlawfully prevents or inhibits them from conducting a full merits-based assessment as required by the HRA.
As to how that question should be approached, we now have authoritative, up-to-date guidance in the judgment of the Grand Chamber in Jeunesse (paras 42- 43 above) which conveniently draws together earlier Strasbourg jurisprudence.
As we have explained, in agreement with Lord Reed in Hesham Ali, para 42, and Agyarko, para 42, the ultimate issue is whether a fair balance has been struck between individual and public interests, taking account the various factors identified.
The changing case for the Secretary of State
In fairness to the appellants, and their arguments based on common law illegality, it must be acknowledged that they have been faced with something of a moving target.
The position now adopted by counsel for the Secretary of State represents a significant change from statements made at the time the rules were laid before Parliament.
The governments thinking at that time was explained most clearly in the Grounds of Compatibility statement, submitted to Parliament at the same time as the new rules.
The salient passages have already been described at para 11 above.
However, the more prescriptive approach in the new rules was triggered by the governments reaction to the decision of the House of Lords in Huang.
Further comment on what was said about that case in the statement is called for, in the light of the way the case is now put.
The statement noted that previous Secretaries of State had taken the position that, if the rules were thought to produce disproportionate results in a particular case, the court should itself decide the proportionate outcome on the facts before it, rather than hold that the rule itself was incompatible with article 8.
This approach had been adopted by the courts, and confirmed by the House of Lords in Huang, with the result, whatever the intention of the House of Lords, that when assessing compatibility in individual cases the courts cannot have recourse to the Rules themselves but must make their own decisions on an individual basis.
This had led to unpredictability and inconsistency which are anathema to good administration.
(para 11) Accordingly, under the new, more prescriptive, scheme, the role of the courts would shift from reviewing the proportionality of individual administrative decisions to reviewing the proportionality of the rules.
Those passages appear to reflect a distorted account of the legislative scheme and of the reasoning in Huang, which, had it been left uncorrected, would in our view have involved a misdirection in law.
In the first place the opinion in Huang was not, as the author of the statement seems to have thought, a decision about the relationship of the Secretary of State with the courts.
On the contrary it was a decision about the relationship of the Secretary of State with the specialist appellate system set up by Parliament to hear appeals by disappointed applicants.
It was Parliament which had laid down the rules governing that system.
In particular, it was Parliament, not the courts, which had required separate consideration by the tribunal of issues under article 8, and had placed no express restriction on the scope of that consideration.
The House in Huang was simply giving effect to Parliaments intention.
That position remained unchanged until the Immigration Act 2014, which post-dated the decisions in the present appeals.
Secondly, it was wrong to interpret the House as indicating that individual decisions should be made entirely on a case-by-case basis, without regard to the Secretary of States policy, or to the need for predictability and consistency.
Paragraph 16 of the opinion is quite clear as to the importance of such factors: There will, in almost any case, be certain general considerations to bear in mind: the general administrative desirability of applying known rules if a system of immigration control is to be workable, predictable, consistent and fair as between one applicant and another; the damage to good administration and effective control if a system is perceived by applicants internationally to be unduly porous, unpredictable or perfunctory As was said, the giving of weight to such factors is part of the ordinary judicial task of weighing up the competing considerations and according appropriate weight to the judgment of a person with responsibility for a given subject matter and access to special sources of knowledge and advice.
A third misconception is the implication that article 8 considerations could be fitted into a rigid template provided by the rules, so as in effect to exclude consideration by the tribunal of special cases outside the rules.
As is now common ground, this would be a negation of the evaluative exercise required in assessing the proportionality of a measure under article 8 of the Convention which 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, para 12, per Lord Bingham).
Although Miss Giovannetti made some attempt to defend the statement, we remain unconvinced that its approach could be reconciled with the correct legal analysis, as now accepted by her: that is, that the rules are only the starting point for consideration under the Convention.
But for the Governments altered stance, the rules read with the grounds of compatibility statement would have faced a serious challenge on grounds of error of law.
However, the change in the Governments stance means that the error is of historical interest rather than current relevance, so long as the rules are capable of being operated in a manner consistent with the Convention.
Regardless of what was said in the statement, the rules themselves have always made clear that they left open the possibility of separate consideration under article 8.
That said, it remains the Secretary of States position, as we understand it, that a principal objective of the new rules was to achieve Convention-compliant decisions in the generality of cases.
Thus, as already explained, the current instructions reflect the view that a decision in accordance with the rules will not involve a breach of article 8 save in exceptional circumstances; which expression is equated with circumstances where a refusal would lead to unjustifiably harsh consequences for the individual or their family.
An important issue in the case is whether that is an acceptable approach.
But that is an issue as to the legality of the relevant instructions, not of the rules.
The need for consistency in decision-making
Notwithstanding the criticisms which can be made of some of its reasoning, there is force in the underlying concerns expressed in the Grounds of Compatibility statement.
Decision-making on the scale required by the immigration system depends on the judgements made on a daily basis by large numbers of individual entry clearance officers, and on appeal by individual tribunal judges.
As the House recognised in Huang, fairness and consistency are important considerations at both levels.
Before 2000, the position was reasonably clear.
The Immigration Act 1971 established the principles governing immigration control.
The principal machinery for achieving consistency was found in rules made by the Secretary of State under section 3(4).
They provided the framework both for decisions by entry clearance officers and also for the then appellate authorities.
The Secretary of State retained a residual discretion to allow entry outside the rules, but unconstrained by the Convention.
The entry into force of the Human Rights Act was not reflected in any change to section 3.
The Secretary of States duty under that Act to comply with the Convention was reflected in a direction to officials in the rules (see Agyarko, para 6).
At appellate level, the assumption seems to have been that it would be enough to add a new ground of appeal by reference to the Convention.
As the statement says, nothing was done to address the problem of achieving consistency in its application at either level.
The Secretary of State can give guidance to entry clearance officers and expect it to be followed, but has no such power to influence the decisions of tribunal judges in respect of the Convention.
Frustrating though it may be for the Secretary of State, under the present legislation the task of promoting consistency at that level falls to the tribunals themselves.
The role of the tribunals
It is perhaps understandable that, while recognising the general objective of fairness and consistency, the House in Huang did not in terms address the mechanisms by which it was to be achieved within the appellate system.
The immigration appeal system was then in a process of transition.
At the time of the relevant appeals the system had provided for an initial appeal to immigration adjudicators, with an onward appeal on points of law to the Immigration Appeal Tribunal.
By the time of the House of Lords hearing this arrangement had been supplanted by an appeal to a single-tier Asylum and Immigration Tribunal.
Since then there has been more radical change to the tribunal system under the Tribunals Courts and Enforcement Act 2007.
In 2010 immigration appeals were brought within the new two-tier system created by the Act, with a specialist Immigration and Asylum chamber at each level.
Part of the function envisaged for the Upper Tribunal within that system is the giving of guidance to the First-tier Tribunal on issues of principle (see Jones v First-tier Tribunal [2013] UKSC 19; [2013] 2 AC 48).
The Immigration and Asylum Chamber of the Upper Tribunal has well-established practices for selecting test cases to give authoritative guidance on particular issues.
We have not heard detailed submissions on this aspect, and it is in any event a matter of practice for the Presidents of the relevant Chambers of the First-tier and Upper Tribunals, rather than this court, as to what if any guidance should be given to tribunal judges.
However, the system so described does point the way to a means of promoting consistency in the approach to questions arising under article 8, at both levels of decision-making.
The experience built up by tribunals in dealing with individual cases can provide a basis on which the Upper Tribunal may develop a consistent approach to the handling of cases at the first tier.
Their guidance in turn should help to inform the evolution of departmental policy.
The result is not a confrontation between the executive and the courts or tribunals, but rather a partnership between two agencies each charged by the legislature with a specific role in administering a system which is to be fair both to the public and to individual applicants.
Policy and expertise
As Lord Reed has shown (Hesham Ali, paras 46f), although the tribunal must make its own judgment, it should attach considerable weight to judgments made by the Secretary of State in the exercise of her constitutional responsibility for immigration policy.
He cites Lord Binghams reference in Huang to the need to accord appropriate weight to the judgment of a person with responsibility for a given subject matter and access to special sources of knowledge and advice.
As that passage indicates, there are two aspects, logically distinct: first, the constitutional responsibility of the Secretary of State for setting national policy in this area; and secondly the expertise available to her and her department in setting and implementing that policy.
Both are relevant in the present case, but the degree of respect which should be accorded to them may be different.
The weight to be given to the rules or Departmental guidance will depend on the extent to which matters of policy or implementation have been informed by the special expertise available to the Department.
A good illustration in a different factual context is to be found in the Denbigh High School case, above, on which Lord Wilson in Quila (para 46ff) placed particular reliance as explaining the nature of the courts inquiry under the fair balance part of the four-stage test.
Lord Bingham (para 30) referred to the value judgment required, in which proportionality was to be judged objectively, by the court It is notable however that the objective inquiry actually undertaken by Lord Bingham in that case (concerning school uniform policy as applied to Muslim girls) involved giving substantial weight to the judgment of the school: It would in my opinion be irresponsible of any court, lacking the experience, background and detailed knowledge of the head teacher, staff and governors, to overrule their judgment on a matter as sensitive as this.
The power of decision has been given to them for the compelling reason that they are best placed to exercise it, and I see no reason to disturb their decision.
(para 34) By contrast in Quila itself, as Lord Wilson held (para 58), the Secretary of State had failed to show any adequate evidentiary support for the policy choices reflected in the rules under challenge.
As Lord Reed explains (Agyarko, para 47), this approach is consistent with the margin of appreciation permitted by the Strasbourg court on an intensely political issue, such as immigration control.
However, this important principle should not be taken too far.
Not everything in the rules need be treated as high policy or peculiarly within the province of the Secretary of State, nor as necessarily entitled to the same weight.
The tribunal is entitled to see a difference in principle between the underlying public interest considerations, as set by the Secretary of State with the approval of Parliament, and the working out of that policy through the detailed machinery of the rules and its application to individual cases.
The former naturally include issues such as the seriousness of levels of offending sufficient to require deportation in the public interest (Hesham Ali, para 46).
Similar considerations would apply to rules reflecting the Secretary of States assessment of levels of income required to avoid a burden on public resources, informed as it is by the specialist expertise of the Migration Advisory Committee.
By contrast rules as to the quality of evidence necessary to satisfy that test in a particular case are, as the committee acknowledged, matters of practicality rather than principle; and as such matters on which the tribunal may more readily draw on its own experience and expertise.
Analysis
The initial challenges brought by MM, AF, AM and SJ were to the Rules introducing the MIR.
Orders were sought quashing the Rules, declaring them incompatible with the Convention rights, and unreasonable and ultra vires at common law.
At that stage there were no Instructions giving guidance on how the new Rules were to be applied by entry clearance officers and in-country decision- makers.
Instructions were, however, issued in December 2012 and have to be taken into account as part of the overall scheme: on the one hand, they might so mitigate the effects of the Rules as to make them compatible with the Convention rights when they would not otherwise have been so; on the other hand, they might, taken in conjunction with the Rules, serve to create or exacerbate the incompatibility.
Against that background we make no apology for not attempting to cover all the points made in the copious submissions on both sides.
In this case, more than many, there is a serious danger of missing the wood among the trees.
We have already indicated why the central challenge - to the validity of the rules as such under the HRA - must fail.
We also agree with Aikens LJ in the Court of Appeal, for reasons also articulated by Blake J (paras 112-130), that no separate issue arises in respect of discrimination under article 14.
For completeness we mention here the cross-appeal of Mr Majid.
The Court of Appeal refused permission to appeal (for the reasons given at paras 165-172).
Although Mr de Mello attempted to persuade us otherwise, that is determinative in this court also.
The remaining issues can be considered under three heads: i) The principle of a minimum income requirement; ii) The treatment in the rules and instructions of children; iii) The treatment in the rules and the instructions of alternative sources of funding.
(i) Acceptability in principle of the MIR
There can be no doubt that the MIR has caused, and will continue to cause, significant hardship to many thousands of couples who have good reasons for wanting to make their lives together in this country, and to their children.
There are several types of family, not illustrated in the cases before us, upon whom the MIR will have a particularly harsh effect.
These include British citizens who have been living and working abroad, have married or formed stable relationships there, and now wish to return to their home country.
Many of these relationships will have been formed before the new Rules were introduced or even publicly proposed.
They also include couples who formed their relationships before the changes in the Rules were introduced and who had every expectation that the foreign partner would be allowed to come here.
Of particular concern is the impact upon the children of these couples, many or even most of whom will be British citizens themselves.
These are illustrated in a Report commissioned by the Office of the Childrens Commissioner for England, Family Friendly: The Impact on Children of the Family Migration Rules: A Review of the Financial Requirements (2015, Middlesex University and the Joint Council for the Welfare of Immigrants).
But the fact that a rule causes hardship to many, including some who are in no way to blame for the situation in which they now find themselves, does not mean that it is incompatible with the Convention rights or otherwise unlawful at common law.
As far as the Convention rights are concerned, the arguments have concentrated on article 8, the right to respect for private and family life, either alone or in conjunction with article 14, the right to enjoy the Convention rights without discrimination, rather than on article 12, the right to marry and found a family.
The MIR does not, as such, prevent a couple marrying.
It does, however, present a serious obstacle to their enjoying family life together.
Further, unlike the temporary impediment held to be unlawful in Quila, the MIR may constitute a permanent impediment to many couples, because the sponsor will never be able to earn above the threshold and the couple will not be able to amass sufficient savings to make good the shortfall.
Female sponsors, who have constituted as many as a third of the total, are disproportionately affected, because of the persisting gender pay gap, as are sponsors from certain ethnic groups whose earnings tend to be lower, and those from parts of the country where wages are depressed.
In Quila, however, there was no immigration dimension: although the measure in question was contained in the Immigration Rules, its purpose was not to control immigration, but to deter or prevent forced marriages.
In this case, there undoubtedly is an immigration dimension.
The MIR is part of an overall strategy aimed at reducing net migration.
Its particular aims are no doubt entirely legitimate: to ensure, so far as practicable, that the couple do not have recourse to welfare benefits and have sufficient resources to be able to play a full part in British life.
As accepted by the courts below, those aims are sufficient to justify the interference with, or lack of respect for, the article 8 right.
In agreement with both Blake J and the Court of Appeal, we would also reject the suggestion that there is no rational connection between those legitimate aims and the particular income threshold chosen.
The work of the Migration Advisory Committee is a model of economic rationality.
Even though it had to make certain assumptions, it was careful to identify and rationalise these.
Making those assumptions, it arrived at an income figure above which the couple would not have any recourse to welfare benefits, including tax credits and housing benefits.
That being a legitimate aim, it is also not possible to say that a lesser threshold, and thus a less intrusive measure, should have been adopted.
It may, of course, have a disproportionate effect in the particular circumstances of an individual case, but that is not the claim currently before us (save in relation to SS, discussed below).
That view of the acceptability in principle of the MIR is reinforced by the treatment of a similar issue by the Strasbourg court in Konstatinov v Netherlands [2007] 2 FCR 194, which also concerned minimum income requirements.
The applicant was of Roma origin with a rather mixed background, including several aliases, an expulsion from the Netherlands in 1987 for unspecified reasons, and a string of convictions for robbery and theft in the 1990s.
The immediate issue for the court concerned the ministers refusal in November 1998 of her request for a residence permit to enable her to live with her husband (entitled to permanent residence since 1988) and their son (born in 1989).
The grounds of refusal, unsurprisingly, included public order grounds, but also her husbands failure to satisfy the minimum income requirements under the rules (para 15).
The refusal was upheld by the domestic courts on both grounds (para 21), and by Strasbourg.
In its decision given in April 2007, the court noted that the relationship had been developed at a time when her status was precarious (para 49).
It also accepted the principle of a minimum income requirement: In principle, the Court does not consider unreasonable a requirement that an alien having achieved a settled status in a Contracting State and who seeks family reunion there must demonstrate that he/she has sufficient independent and lasting income, not being welfare benefits, to provide for the basic costs of subsistence of his or her family members with whom reunion is sought.
(para 50) Having regard to her criminal record, the fact that her son would come of age in April 2007, and the lack of any insurmountable obstacles to her own return to Serbia where she had lived until the age of seven (paras 51-52), it could not be said that the Netherlands authorities had failed to strike a fair balance between her interests and its own interest in controlling immigration and public expenditure and in the prevention of disorder and crime (para 53).
Miss Giovannetti is entitled to rely on para 50 as confirming that a minimum income requirement, such as in the present case, is in principle acceptable, and a matter properly taken into account in the balancing process.
The case is also significant as showing how national policy choices may inform the courts consideration of the case under article 8.
Mr Drabble QC for SS (case para 149ff) relies on the case as showing that precariousness was a variable rather than binary consideration, a matter to be taken into account rather than one leading automatically to a requirement of exceptionality.
However, that was before Jeunesse brought a greater measure of clarity to that issue.
We conclude that the challenge to the acceptability in principle of the MIR must fail.
(ii) Treatment of children
The only case before us directly concerning a child is that of AF.
Blake J was clearly unimpressed by that case on its facts, saying: the proposition that denial of admission of MMs wife interferes unduly with AFs best interests because it leads MM to spend time in Cyprus away from his nephew and de facto child, is a challenging one to substantiate.
It is not possible to do so in the context of a generic challenge to legality of the rules as such.
(para 115) On the material before us, we would find it difficult to disagree with that assessment of the particular case.
It does however provide the opportunity for us to deal with the position of children under the rules as a matter of general principle.
We have already explained how the internationally accepted principle requiring primary attention to be given to the best interests of affected children is given clear effect in domestic law and policy.
The same principle is restated as part of the considerations relevant to the article 8 assessment in Jeunesse (see para 40 above), requiring national decision-makers to: advert to and assess evidence in respect of the practicality, feasibility and proportionality [of any such removal of a non- national parent] in order to give effective protection and sufficient weight to the best interests of the children directly affected by it.
(para 119) In Jeunesse itself the determining factor for the court seems to have been the authoritys failure to give adequate weight to the impact on the children of the removal of their mother, who was the homemaker and primary carer of the children who are deeply rooted in the Netherlands (para 41 above).
In the new Appendix FM to the rules, paragraph GEN.1.1 asserts that it takes into account the Secretary of States duties in respect of children.
Miss Giovannetti (case para 233) relies on that statement.
Apart from some references to specific categories, she prays in aid the proposition that it will be for the entry clearance officer to ensure that appropriate consideration is given to the interests of any relevant children, it being axiomatic that this can only be decided on the facts of a particular case.
That is clearly correct.
As Blake J said: alongside the rules there are also legal duties towards children, that can be applied on a case-by-case basis when the relevant facts are established.
There is a statutory duty on the entry clearance officer to have regard to the best interests and welfare of a child in the UK when considering the admission of someone whose presence or absence impacts on the child.
(paras 113-114) However, her reliance on that principle does nothing to support the assertion in GEN.1.1 that those aspects are sufficiently taken into account in the appendix itself.
In our view the instructions in their present form (quoted at para 24 above) do not adequately fill the gap left by the rules.
Rather than treating the best interests of children as a primary consideration, taking account of the factors summarised in Jeunesse, they lay down a highly prescriptive criterion requiring factors that can only be alleviated by the presence of the applicant in the UK, such as support during a major medical procedure, or prevention of abandonment where there is no other family member .
It seems doubtful that even the applicant in Jeunesse itself would have satisfied such a stringent test.
Furthermore, although section 55 is in terms directed to children in the UK, the Secretary of State has accepted that the same approach should be applied to the welfare of children elsewhere (see para 46 above).
We have no doubt therefore that the guidance is defective in this respect and needs to be amended in line with principles stated by the Strasbourg court.
Furthermore, the statement in GEN.1.1 that the duty has already been taken into account in the rules is wrong in law.
Nor is the gap filled by GEN.1.10-11 which refer to the separate consideration under article 8, but not section 55.
This is not simply a defect of form, nor a gap which can be adequately filled by the instructions.
The duty imposed by section 55 of the 2009 Act stands on its own feet as a statutory requirement apart from the HRA or the Convention.
It applies to the performance of any of Secretary of States functions including the making of the rules.
While the detailed guidance may be given by instructions, it should be clear from the rules themselves that the statutory duty has been properly taken into account.
We would grant a declaration that in this respect both the rules and the instructions are unlawful.
(iii) Treatment of alternative sources of funding
We have described the restrictions in the rules on taking into account prospective earnings of the foreign partner or guarantees of third party support.
The most striking example, in the cases before us, is found in that of MM and his wife (paras 28ff above).
On the face of it there is a strong case on the merits for admitting her consistently with the general objectives of the new rules.
The couple have no realistic prospect of living together in any other country, and, although his earnings on their own are below the MIR, she is a pharmacist with good prospects of finding skilled employment here, and they have apparently credible promises of support from other family members.
They are unlikely to be a burden on the state, or unable, due to lack of resources, to integrate.
Yet the strict application of the rules will exclude them.
As noted above (para 29) they had not applied, it seems, because they saw no point in incurring the substantial cost of an application bound to fail.
As already noted, the Migration Advisory Committees report considered the issue of accounting for different sources of income (paras 4.15-4.19), and income of the sponsored migrant (paras 4.20-4.23).
Under the former they observed that it might be appropriate to include in the calculation third party support received by the sponsors family, but thought that it could be difficult for UKBA to verify the extent of support and whether it would continue (para 4.18).
They had accordingly assumed that such sources should be excluded for reasons of practicality, emphasising that this assumption was made for practical rather than economic reasons, adding: in principle a case can be made for taking other income streams into account, if an operationally feasible way of doing so can be found.
(para 4.19)
Similarly it saw a strong case in principle for taking account of future income of the sponsored migrant recognising that it is total household income that will determine whether the household is a burden on state, but had excluded it in recognition of the substantial risks and uncertainties attached to such calculations (paras 4.20-4.22).
In his second witness statement, Mr Peckover confirms that the Secretary of State did not take up the committees offer to advise on how the threshold could be adjusted to take account of the migrant partners prospective earnings, commenting that no adjustment could remove the precariousness of such an assumption (para 33).
He also confirms that she fully explored the scope of including third party support, but decided to allow in two forms: accommodation, reflecting the need or preference to live with family or friends, and gifts of cash savings held for at least six months (para 37).
Similar issues were discussed by this court in Mahad v Entry Clearance Officer [2009] UKSC 16; [2010] 1 WLR 48.
There the issue was different: it turned, not on whether such sources could properly be excluded from the assessment, but whether, as a matter of construction of the pre-2012 rules (which were in different form), they had been so excluded.
However, questions of practicality arose also in that context.
The court rejected the argument that a narrow construction should be adopted to reflect the relative precariousness of such sources, and difficulties of verification.
In the leading judgment, Lord Brown said: Whilst I readily acknowledge the legitimacy of each of these concerns, their strength seems to me much diminished by a number of considerations.
First, whilst I accept that generally speaking unenforceable third party promises are likely to be more precarious and less easily verifiable than a sponsors own legal entitlements, that will not invariably be so.
And it would surely be somewhat anomalous if ECOs could accept promises of continuing accommodation and/or employment and yet not promises of continuing payments, however regularly they can be shown to have been made in the past and however wealthy the third party can be seen to be.
Are rich and devoted uncles (or, indeed, large supportive immigrant communities such as often assist those seeking entry) really to be ignored in this way? A second consideration, never to be lost sight of, is that it is always for the applicant to satisfy the ECO that any third party support relied upon is indeed assured.
If he fails to do so, his application will fail.
That this may be difficult was recognised by Collins J himself in the Arman Ali case [2009] INLR 89, 103: I do not doubt that it will be rare for applicants to be able to satisfy an entry clearance officer, the Secretary of State or an adjudicator that long-term maintenance by a third party will be provided so that there will be no recourse to public funds.
But whether or not such long- term support will be provided is a question of fact to be determined on the evidence.
Of course there may be difficulties of investigation.
But that is already so with regard to many different sorts of application and, indeed, is likely to be so with regard to some of the kinds of third party support already conceded to be acceptable.
(para 19)
Lord Kerr said: The vaunted precariousness of support from a third party source is, in my opinion, no greater than that which might arise in the course of the ordinary vagaries and vicissitudes of life.
Promised employment may not materialise or may last for only a short time.
Dependence on benefits received by the family member who is settled in the United Kingdom may cease it is entirely conceivable that support from a number of family members and friends of the person seeking to enter will be a more dependable resource and a more effective prevention of dependence on public funds than prospective employment (paras 54-55)
It is apparent from the MAC report, and the evidence of Mr Peckover, that the reasons for adopting a stricter approach in the new rules were matters of practicality rather than wider policy, reflecting what the MAC acknowledged to be the relative uncertainty and difficulty of verification of such sources.
That did not make it unreasonable or irrational for the Secretary of State to take them into account in formulating the rules.
The MAC recognised the strength of the case for taking account of other sources, but it did not in terms advise against the approach ultimately adopted by the Secretary of State.
In considering the legality of that approach, for the reasons already discussed (para 59 above) it is necessary to distinguish between two aspects: first, the rationality of this aspect of the rules or instructions under common law principles, and secondly the compatibility with the HRA of similar restrictions as part of consideration outside the rules.
As to the first, while the application of these restrictions may seem harsh and even capricious in some cases, the matter was given careful consideration by both the MAC and the Secretary of State.
As Aikens LJ said (para 154), the decision was not taken on a whim.
In our view, it was not irrational in the common law sense for the Secretary of State to give priority in the rules to simplicity of operation and ease of verification.
Operation of the same restrictive approach outside the rules is a different matter, and in our view is much more difficult to justify under the HRA.
This is not because less intrusive methods might be devised (as Blake J attempted to do: para 147), but because it is inconsistent with the character of evaluation which article 8 requires.
As has been seen, avoiding a financial burden on the state can be relevant to the fair balance required by the article.
But that judgment cannot properly be constrained by a rigid restriction in the rules.
Certainly, nothing that is said in the instructions to case officers can prevent the tribunal on appeal from looking at the matter more broadly.
These are not matters of policy on which special weight has to be accorded to the judgment of the Secretary of State.
There is nothing to prevent the tribunal, in the context of the HRA appeal, from judging for itself the reliability of any alternative sources of finance in the light of the evidence before it.
In doing so, it will no doubt take account of such considerations as those discussed by Lord Brown and Lord Kerr in Mahad, including the difficulties of proof highlighted in the quotation from Collins J. That being the position before the tribunal, it would make little sense for decision-makers at the earlier stages to be forced to take a narrower approach which they might be unable to defend on appeal.
As already explained, we do not see this as an issue going to the legality of the rules as such.
What is necessary is that the guidance to officers should make clear that, where the circumstances give rise to a positive article 8 duty in the sense explained in Jeunesse, a broader approach may be required in drawing the fair balance required by the Strasbourg court.
They are entitled to take account of the Secretary of States policy objectives, but in judging whether they are met, they are not precluded from taking account of other reliable sources of earnings or finance.
It is open to the Secretary of State to indicate criteria by which reliability of such sources may be judged, but not to exclude them altogether.
We conclude therefore that, while the rules as such are not open to challenge, there are aspects of the instructions to entry clearance officers which require revision to ensure that the decisions made by them are consistent with their duties under the HRA.
In the light of that conclusion, the Secretary of State might wish to consider whether it would be more efficient to revise the rules themselves, to indicate the circumstances in which alternative sources of funding should or might be taken into account, rather than simply to revise the guidance.
But that would be a matter for her.
SS (Congo)
We turn to the only individual appeal before us, the facts of which have been set out above (para 35ff).
The crucial finding was that there were insurmountable obstacles to the couple living together in DRC (para 61).
Although this may seem a little surprising on the evidence as we have it, the finding was not challenged in the Upper Tribunal, and (as Miss Giovannetti realistically accepts) it cannot be challenged in this court.
Certain aspects of the reasoning of First-tier Tribunal were flawed, as the Upper Tribunal found, but they were held not to be material.
The Upper Tribunal concluded: Clearly, if there are insurmountable obstacles to the couple carrying on family life in the DRC it follows that there are exceptional circumstances which would mean that refusal of the application results in unjustifiably harsh consequences for the sponsor and the claimant.
The only factor weighing against them in the stage two assessment is the claimants inability to meet the income threshold of 18,600 per annum.
The sponsor's income was however well above ... the lower appropriate threshold of 13,400 per annum.
This was the case at the date of the hearing and it was probably also well above this threshold at the date of decision.
Accordingly, although there are some flaws in the judges reasoning, she reached the sustainable conclusion that the interference with family life consequential upon the refusal decision was disproportionate; and that the insistence in this particular case on the claimant meeting the minimum income threshold of 18,600 per annum (albeit a requirement lawfully prescribed by the new rules) had unjustifiably harsh consequences which justified the claimant being accorded exceptional treatment outside the rules.
(paras 24-25)
The only criticism which might be made of this passage is the reliance on the figure of 13,400 adopted as a guide by Blake J (see para 33 above), but not ultimately upheld by the Court of Appeal.
The tribunals reliance on that part of Blake Js judgment was erroneous, though of course entirely proper at the time.
However, in considering after this long delay whether the error is such as to require remission to the tribunal, fairness requires that that we should also take account of the more recent guidance of the Strasbourg court in Jeunesse.
The issue is not whether there has been a near miss from the figure in the rules, but the weight to be given to any factors weighing against the policy reasons relied on by the Secretary of State to justify an extreme interference with family life.
One such factor may be the extent to which the family, while not complying with the MIR, would in practice be a burden on the state.
The other Jeunesse factors pointed strongly in favour of the applicants.
Taking the factors listed in Jeunesse: family life would effectively be seriously ruptured, because they could spend only short periods of time together; while both spouses originated from the DRC, the sponsor has been here for many years and was naturalised as a citizen here as long ago as 2006; he also has two children who are both British citizens, so his ties to this country are extensive; the First-tier Tribunal has found what are insurmountable obstacles in the way of their living in DRC; there are no factors of immigration control or public order weighing in favour of exclusion.
The only factor pointing the other way is the fact that this is a post-flight relationship, formed when there was no guarantee that the applicant would be admitted, although it began in 2010 before the Rules were changed, and the sponsor would easily have met the old adequate maintenance test.
The reason for including refugees and those granted humanitarian protection in the MIR on the same terms as others is that their relationships developed post- flight should not be treated more favourably than the relationships of British citizens and others settled here.
But neither should such individuals be treated less favourably.
If there were insurmountable obstacles to a non-refugee British citizen going to live in his partners home country, and there were nowhere else for them to go, it would be necessary to weigh the precariousness aspect against the extent to which the couple would, in fact, be able to support themselves.
Even if the tribunals adoption of the guide figure of 13,400 was misdirected, that should not be determinative.
In the unusual circumstances of this case, after long delay due to legal arguments which were of no direct concern to the applicants, it would be unfair to subject them to the uncertainties of a rehearing unless there were substantial grounds for thinking that a different result would be reached.
That is far from the case.
The considerations listed above provide ample support for the conclusion reached by the First-tier Tribunal, and for the view of the Upper Tribunal that any legal errors were not material.
It is no doubt desirable that there should be a consistent approach to issues of this kind at tribunal level, but as we have explained there are means to achieve this within the tribunal system.
As was said in Mukarkar v Secretary of State for the Home Department [2006] EWCA Civ 1045, para 40 (per Carnwath LJ): It is of the nature of such judgments that different tribunals, without illegality or irrationality, may reach different conclusions on the same case The mere fact that one tribunal has reached what may seem an unusually generous view of the facts of a particular case does not mean that it has made an error of law Nor does it create any precedent, so as to limit the Secretary of States right to argue for a more restrictive approach on a similar case in the future.
However, on the facts of the particular case, the decision of the specialist tribunal should be respected.
Conclusion
We would allow all the appeals to the limited extent indicated above.
In SS(Congo) this has the effect that the decision of the Upper Tribunal will be restored.
We would also declare that the rules fail unlawfully to give effect to the duty of the Secretary of State in respect of the welfare of children under section 55 of the 2009 Act.
Save to that extent we would dismiss the challenge to the validity of the rules.
So far as concerns the instructions, we have indicated those aspects which require revision.
However, given the passage of time, including new legislation, it would be wrong for this court to attempt to indicate how those defects should now be corrected.
It is preferable to adjourn the question of remedies to allow time for the Secretary of State to consider her position, and to indicate to the appellants and to the court how she proposes to amend the instructions or other guidance to accord with the law as indicated in this judgment.
The court will receive written submissions on such proposals, and consider whether a further hearing is necessary.
| UK-Abs | In July 2012 the Immigration Rules (the Rules) were amended to establish new entry requirements for non EEA applicants to join their spouses or civil partners in the United Kingdom.
These included a minimum income requirement (MIR) of at least 18,600 per annum with additional sums for dependent children, to be satisfied by the sponsoring spouse or civil partner.
In four appeals the appellants claim that the Rules themselves, and the Immigration Directorate Instruction on family migration giving guidance to entry clearance officers (the Instructions), are incompatible with the rights protected by the European Convention on Human Rights (ECHR), principally the right to family life in article 8, and unlawful under common law principles.
One of the appellants is a child, and it is contended that the Rules fail to take account of the Secretary of States duty under section 55 of the Borders, Citizenship and Immigration Act 2009 (the s 55 duty) to have regard to the need to safeguard and promote the welfare of children when making decisions which affect them.
The fifth appeal, brought by SS, is against the refusal of entry clearance because of a failure to meet the MIR on the facts of her case.
The claims to strike down the Rules partly succeeded in the High Court, but this decision was reversed by the Court of Appeal.
SS appealed successfully against the refusal to grant her entry clearance to the First tier Tribunal, which found that she and her husband would not be able to live together in the Democratic Republic of Congo, where she was a citizen, but from which he had been granted asylum in the UK.
He could not meet the MIR but the refusal was found to be a breach of article 8.
The Entry Clearance Officers appeal failed in the Upper Tribunal but was allowed by the Court of Appeal.
The Supreme Court unanimously (i) allows SSs appeal, restoring the decision of the Upper Tribunal in her case, and (ii) allows the other four appeals to a limited extent.
The court holds that the MIR is acceptable in principle but that the Rules and the Instructions unlawfully fail to take proper account of the s 55 duty.
The Instructions also require amendment to allow consideration of alternative sources of funding when evaluating a claim under article 8.
Lady Hale and Lord Carnwath give a joint judgment, with which all the other Justices agree.
Challenge to the validity of the Rules under the Human Rights Act 1998 (HRA) The Secretary of State is bound by s 6 HRA to exercise her powers under the Immigration Act 1971 compatibly with the ECHR.
In a challenge to the legality of the Rules as such, as well as to their application to individual cases, it is legitimate to follow the four stage proportionality test to decide whether the Secretary of State has struck a fair balance between the individual and public interests, taking into account the relevant factors identified by the European Court of Human Rights (ECtHR) and the significant weight to be given to the interests of children [52, 56].
The general provisions of the Rules envisage a two stage process, the second involving a fact sensitive consideration of any human rights issues outside the Rules.
The duty of the tribunal hearing appeals against any adverse decision of the Secretary of State is to ensure that the ultimate disposal of the application is consistent with the ECHR.
This means that there is no basis for challenging the new Rules as such under the HRA [58, 60].
The principle of an MIR The fact that the MIR may cause hardship to many does not render it unlawful [81].
It has the legitimate aim of ensuring that the couple do not have recourse to welfare benefits and have sufficient resources to play a full part in British life.
The income threshold chosen was rationally connected to this aim [83] and the acceptability in principle of an MIR has been confirmed by the ECtHR [86].
Treatment of children The Rules assert that the Secretary of States s 55 duty has been taken into account but nothing in the relevant section gives direct effect to it [90].
The Instructions in their current form do not adequately fill the gap left by the Rules.
They are defective and need to be amended in line with the principles established by the ECtHR.
The s 55 duty stands on its own and it should be clear from the Rules themselves that it has been taken into account.
In this respect the Supreme Court grants a declaration that the Rules and the Instructions are unlawful [92].
Treatment of alternative sources of funding There are restrictions in the Rules on taking into account the prospective earnings of the foreign spouse or partner or guarantees of third party support when deciding whether the MIR has been met.
Although harsh, it is not irrational for the Secretary of State to give priority in the Rules to simplicity of operation and ease of verification [98].
Operation of the same restrictive approach outside the Rules is a different matter and inconsistent with the evaluative exercise required by article 8.
A tribunal on an appeal can judge for itself the reliability of any alternative sources of finance and it makes little sense for decision makers at an earlier stage to be forced to take a narrower approach [98].
In this respect aspects of the Instructions require revision to ensure that decisions are taken consistent with the duties under the HRA.
It will be a matter for the Secretary of State to decide if it is more efficient to revise the Rules themselves to achieve this [101].
Appeal by SS In the light of the crucial finding by the tribunal that there were insurmountable obstacles to the couple living together in DRC, any errors in the tribunals judgment did not after this long delay require the appeal to be remitted for rehearing.
Applying the correct test, the extreme interference with family life would not be found to be justified on the facts of SSs case [106].
|
In the language of the criminal law a person who assists or encourages another to commit a crime is known as an accessory or secondary party.
The actual perpetrator is known as a principal, even if his role may be subordinate to that of others.
It is a fundamental principle of the criminal law that the accessory is guilty of the same offence as the principal.
The reason is not difficult to see.
He shares the physical act because even if it was not his hand which struck the blow, ransacked the house, smuggled the drugs or forged the cheque, he has encouraged or assisted those physical acts.
Similarly he shares the culpability precisely because he encouraged or assisted the offence.
No one doubts that if the principal and the accessory are together engaged on, for example, an armed robbery of a bank, the accessory who keeps guard outside is as guilty of the robbery as the principal who enters with a shotgun and extracts the money from the staff by threat of violence.
Nor does anyone doubt that the same principle can apply where, as sometimes happens, the accessory is nowhere near the scene of the crime.
The accessory who funded the bank robbery or provided the gun for the purpose is as guilty as those who are at the scene.
Sometimes it may be impossible for the prosecution to prove whether a defendant was a principal or an accessory, but that does not matter so long as it can prove that he participated in the crime either as one or as the other.
These basic principles are long established and uncontroversial.
In the last 20 years a new term has entered the lexicon of criminal lawyers: parasitic accessory liability.
The expression was coined by Professor Sir John Smith in a lecture later published in the Law Quarterly Review (Criminal liability of accessories: law and law reform [1997] 113 LQR 453).
He used the expression to describe a doctrine which had been laid down by the Privy Council in Chan Wing Siu v The Queen [1985] AC 168 and developed in later cases, including most importantly the decision of the House of Lords in R v Powell and R v English [1999] 1 AC 1.
In Chan Wing Siu it was held that if two people set out to commit an offence (crime A), and in the course of that joint enterprise one of them (D1) commits another offence (crime B), the second person (D2) is guilty as an accessory to crime B if he had foreseen the possibility that D1 might act as he did.
D2s foresight of that possibility plus his continuation in the enterprise to commit crime A were held sufficient in law to bring crime B within the scope of the conduct for which he is criminally liable, whether or not he intended it.
The appellants Jogee and Ruddock were each convicted of murder after directions to the jury in which the trial judges sought to apply the principle deriving from Chan Wing Siu.
In these appeals the court has been asked to review the doctrine of parasitic accessory liability and to hold that the court took a wrong turn in Chan Wing Siu and the cases which have followed it.
It is argued by the appellants that the doctrine is based on a flawed reading of earlier authorities and questionable policy arguments.
The respondents dispute those propositions and argue that even if the court were now persuaded that the courts took a wrong turn, it should be a matter for legislatures to decide whether to make any change, since the law as laid down in Chan Wing Siu has been in place in England and Wales and in other common law jurisdictions including Jamaica for 30 years.
The two appeals, Jogee in the Supreme Court and Ruddock in the Judicial Committee of the Privy Council, were heard together.
History
The Accessories and Abettors Act 1861, section 8 (as amended), provides that: Whosoever shall aid, abet, counsel or procure the commission of any indictable offence shall be liable to be tried, indicted and punished as a principal offender.
For summary offences the corresponding provision is in section 44 of the Magistrates Courts Act 1980.
In its original form section 8 of the 1861 Act referred to any misdemeanour rather than any indictable offence.
It was amended by the Criminal Law Act 1977 on the abolition of the previous distinction between felonies and misdemeanours.
Prior to the abolition of that distinction, the substantive law about who could be convicted of an offence as a secondary party was the same for felonies and misdemeanours, but for historical reasons the terminology was different.
The purpose of section 8 was to simplify the procedure for the prosecution of secondary parties.
It did not alter the substance of the law governing secondary liability.
Its language was consistent with a line of earlier statutes.
Foster commented in his Crown Law, re published 3rd ed (1809), pp 130 131, that the precise language used in those statutes was not always identical but was to the same effect.
The effect of the language of section 8 was accurately summarised by the Law Commission in its report on Participating in Crime (2007) (Law Com 305), paragraph 2.21: Disregarding procuring, it is generally accepted that these specified modes of involvement cover two types of conduct on the part of D, namely the provision of assistance and the provision of encouragement.
Although the distinction is not always made in the authorities, accessory liability requires proof of a conduct element accompanied by the necessary mental element.
Each element can be stated in terms which sound beguilingly simple, but may not always be easy to apply.
The requisite conduct element is that D2 has encouraged or assisted the commission of the offence by D1.
Subject to the question whether a different rule applies to cases of parasitic accessory liability, the mental element in assisting or encouraging is an intention to assist or encourage the commission of the crime and this requires knowledge of any existing facts necessary for it to be criminal: National Coal Board v Gamble [1959] 1 QB 11, applied for example in Attorney General v Able [1984] QB 795, Gillick v West Norfolk and Wisbech Area Health Authority [1986] AC 112 and Director of Public Prosecutions for Northern Ireland v Maxwell [1978] 1 WLR 1350 per Lord Lowry at 1374G 1375E, approved in the House of Lords at 1356A; 1358F; 1359E; 1362H and echoed also at 1361D.
If the crime requires a particular intent, D2 must intend to assist or encourage D1 to act with such intent.
D2s intention to assist D1 to commit the offence, and to act with whatever mental element is required of D1, will often be co extensive on the facts with an intention by D2 that that offence be committed.
Where that is so, it will be seen that many of the cases discuss D2s mental element simply in terms of intention to commit the offence.
But there can be cases where D2 gives intentional assistance or encouragement to D1 to commit an offence and to act with the mental element required of him, but without D2 having a positive intent that the particular offence will be committed.
That may be so, for example, where at the time that encouragement is given it remains uncertain what D1 might do; an arms supplier might be such a case.
With regard to the conduct element, the act of assistance or encouragement may be infinitely varied.
Two recurrent situations need mention.
Firstly, association between D2 and D1 may or may not involve assistance or encouragement.
Secondly, the same is true of the presence of D2 at the scene when D1 perpetrates the crime.
Both association and presence are likely to be very relevant evidence on the question whether assistance or encouragement was provided.
Numbers often matter.
Most people are bolder when supported or fortified by others than they are when alone.
And something done by a group is often a good deal more effective than the same thing done by an individual alone.
A great many crimes, especially of actual or threatened violence, are, whether planned or spontaneous, in fact encouraged or assisted by supporters present with the principal lending force to what he does.
Nevertheless, neither association nor presence is necessarily proof of assistance or encouragement; it depends on the facts: see R v Coney (1882) 8 QBD 534, 540, 558.
Once encouragement or assistance is proved to have been given, the prosecution does not have to go so far as to prove that it had a positive effect on D1s conduct or on the outcome: R v Calhaem [1985] QB 808.
In many cases that would be impossible to prove.
There might, for example, have been many supporters encouraging D1 so that the encouragement of a single one of them could not be shown to have made a difference.
The encouragement might have been given but ignored, yet the counselled offence committed.
Conversely, there may be cases where anything said or done by D2 has faded to the point of mere background, or has been spent of all possible force by some overwhelming intervening occurrence by the time the offence was committed.
Ultimately it is a question of fact and degree whether D2s conduct was so distanced in time, place or circumstances from the conduct of D1 that it would not be realistic to regard D1s offence as encouraged or assisted by it.
An early example is the case of Hyde (1672), described in Hales Pleas of the Crown (1682), vol 1, p 537, and in Fosters Crown Law, p 354.
This was Fosters description and explanation: A, B and C ride out together with intention to rob on the highway.
C taketh an opportunity to quit the company, turneth into another road, and never joineth A and B afterwards.
They upon the same day commit a robbery.
C will not be considered an accomplice in this fact.
Possibly he repented of the engagement, at least he did not pursue it; nor was there at the time the fact was committed any engagement or reasonable expectation of mutual defence and support so far as to affect him.
In other words, on the particular facts A and B were not regarded as having committed the robbery with Cs encouragement or assistance.
Any original encouragement was regarded as having been spent and there was no other assistance. (It appears from Hales account that C parted from A and B at Hounslow and that the later robbery took place three miles away.)
With regard to the mental element, the intention to assist or encourage will often be specific to a particular offence.
But in other cases it may not be.
D2 may intentionally assist or encourage D1 to commit one of a range of offences, such as an act of terrorism which might take various forms.
If so, D2 does not have to know (or intend) in advance the specific form which the crime will take.
It is enough that the offence committed by D1 is within the range of possible offences which D2 intentionally assisted or encouraged him to commit (Maxwell).
In Maxwell the defendant was a member of a terrorist organisation, the Ulster Volunteer Force (UVF).
Under UVF instructions he took part in what he knew was a planned military mission, by guiding a car containing three or four other men on a cross country journey to a country inn on a winter evening.
He knew that they were intending to carry out some form of violent attack on the inn, whether by shooting, bombing or some incendiary device, and he intentionally acted in order to help them to carry out the mission.
He did not know the precise form of attack that they were intending to carry out (which was in fact an explosion), but it was held to be enough that he knew that they were intending to carry out a violent attack on the inn and that he intended to assist them to do so.
The decision in Maxwell did not derogate from the principle identified in para 9 that an intention to assist or encourage the commission of an offence requires knowledge by D2 of any facts necessary to give the principals conduct or intended conduct its criminal character.
In Johnson v Youden [1950] 1 KB 544 a builder committed an offence by selling a house for 250 more than the maximum permitted under a statutory regulation.
The 250 was paid to him in advance by the purchaser.
The builder then instructed a firm of solicitors to act for him in the sale.
Two of the partners in the firm had no knowledge of the earlier payment, but they were convicted by the magistrates of aiding and abetting the builders offence.
Their convictions were quashed by the Divisional Court because they had no knowledge of the facts which gave the transaction its criminal character.
They therefore lacked the mens rea to be guilty as accessories.
Secondary liability does not require the existence of an agreement between the principal and the secondary party to commit the offence.
If a person sees an offence being committed, or is aware that it is going to be committed, and deliberately assists its commission, he will be guilty as an accessory.
But where two or more parties agree on an illegal course of conduct (or where one party encourages another to do something illegal), the question has often arisen as to the secondary partys liability where the principal has allegedly gone beyond the scope of what was agreed or encouraged.
For Foster it was an objective question, firstly, what in substance was agreed or encouraged, and secondly, what was likely to happen in the ordinary course of events.
As to first question, Foster wrote at p 369 (in a passage much cited in later authorities): Much hath been said by writers who have gone before me, upon cases where a person supposed to commit a felony at the instigation of another hath gone beyond the terms of such instigation, or hath, in the execution, varied from them.
If the principal totally and substantially varieth, if being solicited to commit a felony of one kind he wilfully and knowingly committeth a felony of another, he will stand single in that offence, and the person soliciting will not be involved in his guilt.
For on his part it was no more than a fruitless ineffectual temptation.
The fact cannot with any propriety be said to have been committed under the influence of that temptation.
But if the principal in substance complieth with the temptation, varying only in circumstance of time and place, or in the manner of execution, in these cases the person soliciting to the offence will, if absent, be an accessary before the fact, if present a principal. (Emphasis added.
At the time when Foster wrote, the word fact was used when we would use the word act.) So where the principal goeth beyond the terms of the solicitation, if in the event the felony committed was a probable consequence of what was ordered or advised, the person giving such orders or advice will be an accessary to that felony [Foster proceeded to give three examples.
One is enough for present purposes.] A adviseth B to rob C, he doth rob him, and in so doing, either upon resistance made, or to conceal the fact, or upon any other motive operating at the time of the robbery, killeth him.
A is accessary to this murder.
As to the second question, Foster continued at p 370: These cases are all governed by one and the same principle.
The advice, solicitation, or orders in substance were pursued, and were extremely flagitious on the part of A.
The events, although possibly falling out beyond his original intention, were in the ordinary course of things the probable consequences of what B did under the influence, and at the instigation of A.
And therefore, in the justice of the law, he is answerable for them. (Fosters emphasis)
Fosters original edition was published in 1762, the year before his death, and so he was writing about the law in the mid 18th century. (The edition quoted was a re publication.) Cases in the 19th century show that there was a significant change of approach.
It was no longer sufficient for the prosecution to prove that the principals conduct was a probable consequence, in the ordinary course of things, of the criminal enterprise instigated or agreed to by the secondary party.
The prosecution had to prove that it was part of their common purpose, should the occasion arise.
In R v Collison (1831) 4 Car & P 565 two men went out by night with carts to steal apples.
They were detected by the landowners watchman.
One of the thieves attacked him with a bludgeon which he was carrying and caused the man severe injury.
On the trial of the second thief for assault and wounding with intent to murder, Garrow B ruled at p 566: To make the prisoner a principal, the Jury must be satisfied that, when he and his companion went out with a common illegal purpose of committing the felony of stealing apples, they also entertained the common guilty purpose of resisting to death, or with extreme violence, any persons who might endeavour to apprehend them; but if they had only the common purpose of stealing apples, and the violence of the prisoners companion was merely the result of the situation in which he found himself, and proceeded from the impulse of the moment, without any previous concert, the prisoner will be entitled to an acquittal.
This ruling highlighted the importance of identifying the common purpose.
If it was only to steal apples, the defendant was not guilty of the greater offence with which he was charged.
He was guilty of that offence only if the common purpose included using severe violence to resist arrest, should the occasion arise.
Other authorities were consistent with the direction in Collison: see R v Macklin (1838) 2 Lewin 225, R v Luck (1862) 3 F & F 483, and R v Turner (1864) 4 F & F 339, 341 (on a charge of murder there must be evidence not only of a common design to commit a felony, but a common design quoad the homicidal act itself, per Channell B).
The position in England and Wales was at one time complicated by the doctrine of constructive murder known as felony murder.
Under this doctrine a person was guilty of murder if he used violence in furtherance of a felony which resulted in death, whether or not he intended to cause death or serious harm.
The doctrine did not apply to misdemeanours, which included poaching.
Pollock CB explained the law as it affected accessories in R v Skeet (1866) 4 F & F 931, 936 937 (a case in which poachers were stopped by a gamekeeper, who was shot by one of them): the doctrine of constructive homicide does not apply where the only evidence is that the parties were engaged in an unlawful purpose: not being felonious.
It only applies in cases where the common purpose is felonious, as in cases of burglary: where all the parties are aware that deadly weapons are taken with a view to inflict death or commit felonious violence, if resistance is offered.
That doctrine arose from the desire on the part of old lawyers to render all parties who are jointly engaged in the commission of a felony responsible for deadly violence committed in the course of its execution.
But that doctrine has been much limited in later times, and only applies in cases of felony, where there is no (sic) evidence of a felonious design to carry out the unlawful purpose at all hazards, and whatever may be the consequences.
The possession of a gun would not be any evidence of this, for a gun is used in poaching.
And poaching itself is only an unlawful act and a mere misdemeanour.
The inclusion of the word no in this passage appears to be an error, because it is contrary to the general sense of the passage and to the case reporters commentary at p 934 on the judgment: It is the common design or intention to kill in the prosecution of the unlawful object, whether it be misdemeanour or felony, which involves the others in the guilt of homicide.
For, even if the common purpose is felonious, if only the actual perpetrator of the act had the intention to kill in the prosecution of the purpose, the others, who did not concur in the act, are not guilty of the offence of homicide.
It will be seen that the expression common design is here treated as synonymous with shared intention. (It would have been more strictly accurate to add or cause grievous bodily harm after the word kill.)
R v Spraggett [1960] Crim LR 840 is a more modern example of the principle that where violence is used in furtherance of a criminal venture, a co adventurer will be liable only if he shared an intention to use violence to resist interference or arrest.
Three men were involved in the burglary of a sub post office.
Two of them went into the building while the third waited outside.
During the burglary the owner of the shop came on the scene and was knocked down.
The appellant was convicted of burglary and assault with intent to rob.
The judge directed the jury that if the defendants jointly decided to break into premises, each was liable for any incidental violence.
The appellants conviction was quashed.
Lord Parker CJ said that the summing up treated it as a presumption of law that where a person was found to be acting in concert with others to commit a burglary, it should be presumed that he was also acting in concert with others to use violence in the course of the crime, whereas the jury had to be satisfied on the evidence that there was such a preconceived intention to use violence. (The commentary in the Criminal Law Review noted that under the trial judges direction, a burglar who had no intention to do anything to anyone might find himself guilty of murder.)
The evidential relevance of the carrying of a weapon on a criminal venture has been a common theme in the case law.
Its evidential strength depends on the circumstances.
As Pollock CB observed in Skeet, a poachers possession of a gun did not of itself then point to more than an intent to use it to kill game.
In other circumstances it might provide powerful evidence of an intent to use it to overcome resistance or avoid arrest.
See Professor Glanville Williams Criminal Law, The General Part, 2nd ed (1961), p 397: The knowledge on the part of one criminal that his companion is carrying a weapon is strong evidence of a common intent to use violence, but is not conclusive.
In a line of cases the courts recognised that even where there was a joint intent to use weapons to overcome resistance or avoid arrest, the participants might not share an intent to cause death or really serious harm.
If the principal had that intent and caused the death of another he would be guilty of murder.
Another party who lacked that intent, but who took part in an attack which resulted in an unlawful death, would be not guilty of murder but would be guilty of manslaughter, unless the act which caused the death was so removed from what they had agreed as not to be regarded as a consequence of it: R v Smith (Wesley) [1963] 1 WLR 1200, R v Betty (1964) 48 Cr App R 6, R v Anderson and R v Morris [1966] 2 QB 110 and R v Reid (1976) 62 Cr App R 109.
In Wesley Smith (see pp 1205 1206) the trial judge directed the jury: Manslaughter is unlawful killing without an intent to kill or do grievous bodily harm.
Anybody who is party to an attack which results in an unlawful killing which results in death is a party to the killing. a person who takes part in or intentionally encourages conduct which results in a criminal offence will not necessarily share the exact guilt of the one who actually strikes the blow.
His foresight of the consequences will not necessarily be the same as that of the man who strikes the blow, the principal assailant, so that each may have a different form of guilty mind, and that may distinguish their respective criminal liability.
Several persons, therefore, present at the death of a man may be guilty of different degrees of crime one of murder, others of unlawful killing, which is manslaughter.
Only he who intended that unlawful and grievous bodily harm should be done is guilty of murder.
He who intended only that the victim should be unlawfully hit and hurt will be guilty of manslaughter if death results. (Emphasis added.)
Smith was convicted of manslaughter.
Because he appealed against that conviction, it fell to a Court of Criminal Appeal of five judges to consider the direction as a whole, including the passage relating to murder.
They praised the judge for his clear summing up, which they described as legally unassailable.
They added that it was possible to hypothesise a case where what was done was wholly beyond the defendants contemplation, but that could not be said in that case, where the death resulted from use of a knife which the appellant knew that the principal offender was carrying. (We will consider later in more detail the relevance of objective foreseeability in relation to manslaughter.)
In Betty Lord Parker CJ quoted the passage from the summing up in Wesley Smith emphasised above and noted that the court of five judges had approved it.
In Anderson and Morris, a fatal stabbing resulted in the conviction of Anderson for murder and Morris for manslaughter.
The evidence of Morriss role, if any, in the attack was unclear.
The judge directed the jury that if there was a common design to attack the victim, but without any intent by Morris to kill or cause grievous bodily harm, and if Anderson, acting outside the common design, produced a knife about which Morris had no knowledge and used it to kill the victim, Morris was liable to be convicted of manslaughter.
The defendants appeal was heard by a Court of Criminal Appeal of five judges, presided over by Lord Parker CJ.
Mr Geoffrey Lane, QC for Morris submitted that the authorities from about 1830 onwards established the principle that (see p 118): where two persons embark on a joint enterprise, each is liable for the acts done in pursuance of that joint enterprise, that that includes liability for unusual consequences if they arise from the execution of the agreed joint enterprise but (and this is the crux of the matter) that, if one of the adventurers goes beyond what has been tacitly agreed as part of the common enterprise, his co adventurer is not liable for the consequences of that unauthorised act. (Emphasis added)
It was submitted that the judge had therefore misdirected the jury in saying that Morris could be liable if Anderson had acted outside the common design.
Accepting counsels proposition as set out above and allowing Morris appeal, Lord Parker said at p 120: It seems to this court that to say that adventurers are guilty of manslaughter when one of them has departed completely from the concerted action of the common design and has suddenly formed an intent to kill and has used a weapon and acted in a way which no party to that common design could suspect is something which would revolt the conscience of people today Considered as a matter of causation there may well be an overwhelming supervening event which is of such a character that it will relegate into history matters which would otherwise be looked on as causative factors.
The court in that case did not call into question what had been said in Wesley Smith, and Lord Parker noted that it had been approved by the court in Betty.
The court was not therefore resiling from the general statement that where a person takes part in an unlawful attack which results in death, he will be guilty either of murder or of manslaughter according to whether he had the mens rea for murder.
But the court recognised that there could be cases where the actual cause of death was not simply an escalation of a fight but an overwhelming supervening event.
That there had been such an event in Anderson and Morris may have been a charitable view on the facts, but the principle was endorsed by the court in Reid (of which the former Mr Geoffrey Lane QC was a member).
Reid and two others were tried for the murder of a colonel who was the commander of an army training camp.
The three men were alleged to be supporters of the IRA.
They went to the colonels house in the early hours of the morning and rang the doorbell.
The door was opened by the colonel, and one of the other defendants immediately shot him dead.
The other two men were convicted of murder and Reid was convicted of manslaughter.
All three were also convicted of joint possession of a revolver, knife and imitation gun.
Reids defence was that he was not an IRA supporter and that he went with the others as an interested but innocent spectator with no intention of causing any harm.
The jury must have rejected that defence, but must also have accepted it as possible that he did not intend the victim to suffer death or serious harm.
Reid appealed against his conviction for manslaughter on the ground that there was no evidence for finding that he intended to cause some harm but not serious harm, and reliance was placed on Anderson and Morris.
The appeal was dismissed in a reserved judgment of a strong Court of Appeal (Lawton and Geoffrey Lane LJJ and Robert Goff J).
Lawton LJ distinguished Anderson and Morris on the basis that the court in that case on its facts had regarded the act which caused death as an overwhelmingly supervening event.
Dealing with Reid, he said at p 112: The intent with which the appellant was in joint possession of the weapons with the others has to be inferred from the circumstances.
He did not share the murderous intent.
The first problem for us is whether this court would be entitled to infer from the fact of joint possession an intent to do some harm to Colonel Stevenson If men carrying offensive indeed deadly weapons go to a mans house in the early hours of the morning for no discernible lawful purpose, they must, in our judgment, intend to do him harm of some kind, and the very least kind of harm is of causing fright by threats to use them.
The second problem is whether, on the evidence in this case, Colonel Stevensons death resulted from the unlawful and dangerous act of being in joint possession of offensive weapons.
The appellant did not intend either death or serious injury.
On the jurys findings OConaill must have gone beyond anything he may have intended .
When two or more men go out together in joint possession of offensive weapons such as revolvers and knives and the circumstances are such as to justify an inference that the very least they intend to do with them is to use them to cause fear in another, there is, in our judgment, always a likelihood that, in the excitement and tensions of the occasion, one of them will use his weapon in some way which will cause death or serious injury.
If such injury was not intended by the others, they must be acquitted of murder; but having started out on an enterprise which envisaged some degree of violence, albeit nothing more than causing fright, they will be guilty of manslaughter. (Emphasis added.)
Chan Wing Siu [1985] AC 168
The three appellants went, each armed with a knife, to a flat used by a prostitute, where her husband was habitually present.
The prosecutions case was that they planned to rob the husband.
In written statements they admitted going to the flat to get money from him, which they said that he owed to one of them.
The husband was stabbed to death and his wife was slashed across the head.
The appellants were all convicted of murder and wounding with intent to cause grievous bodily harm.
Complaint was made of the trial judges direction to the jury that an accused was guilty on each count if proved to have had in contemplation that a knife might be used by one of his co adventurers with intent to inflict serious bodily injury.
It was conceded by the appellants that if the contingency in which knives were used (such as resistance to a robbery) was foreseen by an accused, it was not necessary that he should have regarded the occurrence of that contingency as more probable than not; but it was submitted that it was necessary to prove that he foresaw a more than 50% likelihood that one or other of his co accused would act with intent to cause death or really serious harm.
This submission was unsurprisingly rejected.
It is also unsurprising that the appeals were dismissed.
There was an overwhelming case for inferring that the appellants foresaw the likelihood of resistance and that their plan included the possible use of knives to cause serious harm.
However, the Privy Council upheld the convictions on a different basis.
Sir Robin Cooke, delivering the judgment of the Board, said at p 175: In the typical case [of aiding and abetting] the same or the same type of offence is actually intended by all the parties acting in concert.
In view of the terms of the directions to the jury here, the Crown does not seek to support the present convictions on that ground.
The case must depend rather on the wider principle whereby a secondary party is criminally liable for acts by the primary offender of a type which the former foresees but does not necessarily intend.
That there is such a principle is not in doubt.
It turns on contemplation or, putting the same idea in other words, authorisation, which may be express but is more usually implied.
It meets the case of a crime foreseen as a possible incident of the common unlawful enterprise.
The criminal liability lies in participating in the venture with that foresight.
Sir Robin Cooke cited Anderson and Morris.
He noted that the Court of Criminal Appeal had reviewed a line of relevant authorities from 1830, but no reference was made to any of them.
He referred to Anderson and Morris only for the case of one adventurer going beyond what had been agreed.
He said that in England it appeared not hitherto to have been found necessary to analyse the test which the jury had to apply more elaborately than in the formulation by Mr Geoffrey Lane QC which the Court of Criminal Appeal had accepted.
He drew on the judgments of the High Court of Australia in Johns v The Queen [1980] HCA 3; (1980) 143 CLR 108 and Miller v The Queen (1980) 55 ALJR 23.
The only other English case to which he referred was Davies v Director of Public Prosecutions [1954] AC 378.
In Davies v Director of Public Prosecutions [1954] AC 378 a fight between two groups of youths resulted in a fatal stabbing.
The appellant was convicted of murder.
One of the prosecution witnesses was a youth named Lawson.
He gave evidence of an oral admission by the appellant after the event.
One of the grounds of appeal was that the judge ought to have given the jury a warning that Lawson could be regarded as an accomplice, and therefore was someone whose evidence required to be treated with special caution.
Lawson admitted being involved in the fight at some stage, but he denied all knowledge of a knife and there was no evidence that he was present when it was produced.
He was initially charged with murder, but no evidence was offered against him.
The House of Lords rejected the argument that an accomplice warning was required.
Lord Simonds LC said at p 401: I can see no reason why, if half a dozen boys fight another crowd, and one of them produces a knife and stabs one of the opponents to death, all the rest of his group should be treated as accomplices in the use of the knife and the infliction of mortal injury by that means, unless there is evidence that the rest intended or concerted or at least contemplated an attack with a knife by one of their number, as opposed to a common assault.
If all that was designed or envisaged was in fact a common assault, and there was no evidence that Lawson, a party to that common assault, knew that any of his companions had a knife, then Lawson was not an accomplice in the crime consisting in its felonious use.
This was not a ruling that, as a matter of law, knowledge by Lawson that one of his companions had a knife would make him an accessory to murder.
Nor was Lord Simonds addressing the question of when contemplation of an attack with a knife would do so.
He was speaking in the context of considering the need for an accomplice warning.
The question was whether there was evidence on which the person concerned could be regarded as an accomplice.
Evidence that he knew that one of his companions was armed with a knife would plainly have been evidence from which it would be open to a jury to infer a common intent to use it (see para 26 above).
There is a major difference between saying that in the absence of evidence of knowledge of the knife there was no cause to give an accomplice warning, and saying that knowledge of the knife and the possibility of its use would of itself constitute the mens rea needed for guilt of murder as an accessory.
In Johns v The Queen the appellant was convicted of murder and assault with intent to rob.
His role was to drive the principal offender, W, to a rendezvous with a third man, D.
The appellant was to wait at the rendezvous while the other two men robbed a known receiver of stolen jewellery.
Afterwards the appellant was to take possession of the proceeds and hide them in return for a share.
The appellant knew that W was carrying a pistol, and W told him that he would not stand for any nonsense if he met any obstacle during the robbery.
In the event the victim resisted and W shot him dead.
The judge directed the jury that the appellant and D would be guilty if the act constituting the offence committed was within the contemplation of the parties as an act done in the course of the venture on which they had embarked.
It was argued on the appellants behalf that while this was an appropriate direction in the case of D, who was present and therefore a principal in the second degree, it was a misdirection in the case of the appellant, who was an accessory before the fact.
It was submitted that in his case it was necessary for the jury to conclude that it was a likely or probable consequence of the way in which the crime was to be committed that the gun would be discharged so as to kill the deceased.
The High Court unanimously rejected the argument that any distinction was to be drawn between the liability of a principal in the second degree and an accessory before the fact.
The majority judgment was given by Mason, Murphy and Wilson JJ.
They said (at p 125) that there was no reason as a matter of legal principle why such a distinction should be drawn.
They also said (at p 131): 26.
The narrow test of criminality proposed by the applicant is plainly unacceptable for the reason that it stakes everything on the probability or improbability of the act, admittedly contemplated, occurring.
Suppose a plan made by A, the principal offender, and B, the accessory before the fact, to rob premises, according to which A is to carry out the robbery.
It is agreed that A is to carry a revolver and use it to overcome resistance in the unlikely event that the premises are attended, previous surveillance having established that the premises are invariably unattended at the time when the robbery is to be carried out.
As it happens, a security officer is in attendance when A enters the premises and is shot by A. It would make nonsense to say that B is not guilty merely because it was an unlikely or improbable contingency that the premises would be attended at the time of the robbery, when we know that B assented to the shooting in the event that occurred. 27.
In the present case there was ample evidence from which the jury could infer that the applicant gave his assent to a criminal enterprise which involved the use, that is the discharge, of a loaded gun, in the event that [the victim] resisted or sought to summon assistance.
We need not recapitulate the evidence to which we have already referred.
The jury could therefore conclude that the common purpose involved resorting to violence of this kind, should the occasion arise, and that the violence contemplated amounted to grievous bodily harm or homicide.
This was an orthodox approach in line with the authorities going back to Collison (1831) 4 Car & P 565.
In Miller v The Queen the defendant regularly drove the principal offender, W, on outings to pick up girls.
He would drive to a deserted spot and walk away while W satisfied his sexual desires.
Sometimes the sex was consensual and the girl would be returned unharmed, but on seven occasions W murdered the girl and the defendant helped him to dispose of her body.
The defendant was convicted of murder on all but the first occasion.
The judge directed the jury that the defendant would be guilty of murder if he and W acted in concert to pick up a girl and it was within his contemplation that the particular girl might be murdered.
The defendant argued that this was a misdirection.
The court held that the direction should reasonably have been understood as referring to a plan between the parties which included the possible murder of the girls, and as such the direction was unobjectionable.
It is worth noting, as did the High Court, that this was not a case of a plan to carry out crime A, in which one party carried out crime B.
There was nothing illegal about the venture of picking up girls for consensual sex.
It became illegal if and when the common purpose came to include murder as an eventuality.
(at p 177): In Chan Wing Siu Sir Robin Cooke touched briefly on public policy saying What public policy requires was rightly identified in the submissions for the Crown.
Where a man lends himself to a criminal enterprise knowing that potentially murderous weapons are to be carried, and in the event they in fact are used by his partner with an intent sufficient for murder, he should not escape the consequences by reliance on a nuance of prior assessment, only too likely to have been optimistic.
It is not necessary to refer to all the cases which have followed Chan Wing
Siu but some call for mention.
R v Slack [1989] QB 775, R v Wakely [1990] Crim LR 119 and R v Hyde [1991] 1
QB 134
Reserved judgments of the Court of Appeal, expressed to follow Chan Wing Siu, were given in these cases by Lord Lane CJ.
In Slack he said, at p 781, that for a person to be guilty of murder as an accessory it had to be proved that he lent himself to a criminal enterprise involving the infliction of serious injury or death or that he had an express or tacit understanding with the principal that such harm or death should, if necessary, be inflicted.
In Wakely he added that mere foresight of a real possibility of violence being used was not, academically speaking, sufficient to constitute the mental element of murder.
Professor Smith in a commentary on Wakely in the Criminal Law Review at pp 120 121 suggested that the Court of Appeal had failed properly to follow Chan Wing Siu.
He identified the question raised by Slack and Wakely as being whether it was sufficient to prove that a party to a joint enterprise knew that another party might use the violence that was used, or whether it was necessary to prove that it was understood between them expressly or tacitly that, if necessary, such violence would be used.
The problem arose from the elision by Sir Robin Cooke in Chan Wing Siu at p 175, of contemplation and authorisation which may be express but is more usually implied.
Professor Smith commented that contemplation is not the same thing as authorisation, because one may contemplate that something will be done by another without authorising him to do it, but that the general effect of Chan Wing Siu was that contemplation or foresight was enough.
In Hyde Lord Lane said that in Slack and Wakely the court had been endeavouring to follow Chan Wing Siu, but on reconsideration he accepted Professor Smiths criticism.
Contrary to Wakely, foresight of the possibility that B might kill or intentionally inflict serious injury would amount to a sufficient mental element for B to be guilty of murder.
Hui Chi Ming v The Queen [1992] 1 AC 34
and expressly endorsed the following statement in the judgment in Hyde: If B realises (without agreeing to such conduct being used) that A may kill or intentionally inflict serious injury, but nevertheless continues to participate with A in the venture, that will amount to a sufficient mental element for B to be guilty of murder if A, with the requisite intent, kills in the course of the venture.
In Hui Chi Ming the Privy Council, at p 50, affirmed the correctness of Hyde
R v Powell and R v English [1999] 1 AC 1
The House of Lords at p 27 held in answer to a question certified by the Court of Appeal that (subject to a qualification in the case of English) it is sufficient to found a conviction for murder for a secondary party to have realised that in the course of the joint enterprise the primary party might kill with intent to do so or with intent to cause grievous bodily harm.
The leading judgment was given by Lord Hutton, with whom the other judges agreed.
It was argued by the appellants that this was inconsistent with the mens rea requirement for murder laid down in R v Moloney [1985] AC 905 and R v Hancock [1986] AC 455, but those cases were distinguished on the basis that they applied only to the principal offender.
Lord Hutton, at p 18, considered that there was a strong line of authority, beginning with Wesley Smith, that participation in a joint criminal enterprise, with foresight or contemplation of an act as a possible incident of that enterprise, is sufficient to impose criminal liability for that act carried out by another participant in the enterprise.
He held, at p 19, that in that case the Court of Appeal had recognised that the secondary party will be guilty of unlawful killing committed by the primary party with a knife if he contemplates that the primary party may use such a weapon.
He added that the judgment in Anderson and Morris was not intended to depart from that principle.
Lord Hutton recognised that as a matter of strict analysis there is a difference between a party to a common enterprise contemplating that in the course of it another party may use a gun or knife and a party tacitly agreeing to the use of such a weapon, but he said that it was clear from a number of decisions in addition to Wesley Smith that a party embarking on a joint criminal enterprise was liable for any act which he contemplated might be carried out by another party even if he had not tacitly agreed to that act.
Lord Hutton recognised that as a matter of logic there was force in the argument that it was anomalous that foreseeability of death or really serious harm was not sufficient mens rea for the principal to be guilty of murder, but was sufficient in a secondary party.
But he said that there were weighty and important practical considerations related to public policy which prevailed over considerations of strict logic.
He saw considerable force in the argument that a party who takes part in a criminal enterprise (for example, a bank robbery), with foresight that a deadly weapon may be used, should not escape liability for murder because he, unlike the principal party, is not suddenly confronted by the security officer so that he has to decide whether to use the gun or knife or have the enterprise thwarted and face arrest.
In a concurring judgment, Lord Steyn recognised at p 13, that foresight and intention are not synonymous, but he held that foresight is a necessary and sufficient ground of the liability of accessories.
He too recognised that there was at first sight substance in the argument that it was anomalous that a lesser form of culpability was required in the case of a secondary party involved in a criminal enterprise, viz foresight of the possible commission of the greater offence, than in the case of the primary offender, who will be guilty of murder only if he intended to kill or cause really serious injury.
But he held at p 14, that the answer to the supposed anomaly was to be found in practical and policy considerations: If the law required proof of the specific intention on the part of a secondary party, the utility of the accessory principle would be gravely undermined.
It is just that a secondary party who foresees that the primary offender might kill with the intent sufficient for murder, and assists and encourages the primary offender in the criminal enterprise on this basis, should be guilty of murder.
The criminal justice system exists to control crime.
A prime function of that system must be to deal justly but effectively with those who join with others in criminal enterprises.
Experience has shown that joint criminal enterprises only too readily escalate into the commission of greater offences.
In order to deal with this important social problem the accessory principle is needed and cannot be abolished or relaxed.
Lord Mustill agreed with the decision, but with evident unease.
He said that throughout the modern history of the law on secondary liability, in the type of case under consideration, the responsibility of the secondary party, D2, had been founded on participation in a joint enterprise of which the commission of the crime by the principal offender, D1, formed a part.
If D2 foresaw D1s act, this would always, as a matter of common sense, be relevant to the jurys decision on whether it formed part of a course of action to which D2 and D1 agreed, albeit often on the basis that the action would be taken if particular circumstances should arise.
In cases where D2 could not rationally be treated as party to an express or tacit agreement to commit the greater offence, but continued to participate, he would have favoured some lesser form of culpability; but that could not be fitted in to the existing concept of a joint venture.
For his part he would not have favoured the abandonment of a doctrine which had for years worked adequately in practice and its replacement by something which he conceived to be new.
But since the other four members of the panel saw the matter differently, and for the sake of clarity in the law, he was willing to concur in their reasoning.
English, who was aged 15, and another young man, W, took part in attacking a police sergeant with wooden posts.
In the course of the attack W drew a knife and stabbed him to death.
Both youths were convicted of murder.
It was a reasonable possibility on the evidence that English did not know that W was carrying a knife.
The judge directed the jury that English would nevertheless be guilty of murder if he foresaw a substantial risk that W might cause serious injury to the sergeant with a wooden post.
It was submitted on behalf of English, and the House of Lords agreed, that the use of a knife was fundamentally different to the use of a wooden post.
The summing up was therefore defective and his conviction was quashed.
Lord Hutton added at p 30: if the weapon used by the primary party is different to, but as dangerous as, the weapon which the secondary party contemplated he might use, the secondary party should not escape liability for murder because of the difference in the weapon, for example, if he foresaw that the primary party might use a gun to kill and the latter used a knife to kill, or vice versa.
In later cases which proceeded on the assumption that the law was as stated in Chan Wing Siu, courts have endeavoured to clarify the test of what is to be regarded as fundamentally different for this purpose; such cases include R v Rahman [2008] UKHL 45; [2009] 1 AC 129 and R v Mendez [2011] QB 876.
The need to address a concept of fundamental departure assumed great importance because guilt was based, under the Chan Wing Siu and Powell and English rule, on foresight of what D1 might do.
Australia
Chan Wing Siu was followed by the High Court of Australia in McAuliffe v The Queen (1995) 183 CLR 108, which was in turn followed by the High Court in Gillard v The Queen (2003) 219 CLR 1 and Clayton v The Queen (2006) 231 ALR 500.
In Clayton the majority adopted the theory (at para 20) that what is there described as extended common purpose liability differs as a matter of jurisprudential foundation from secondary liability as aider or abettor, the first being grounded in common embarkation on crime A and the second in contribution to anothers crime.
There was a dissenting judgment by Kirby J, who pointed, among other considerations, to the disparity between the mental element required of an aider or abettor and that required by the rule of extended common purpose (para 102).
Analysis
The court has had the benefit of a far deeper and more extensive review of the topic of so called joint enterprise liability than on past occasions.
From our review of the authorities, there is no doubt that the Privy Council laid down a new principle in Chan Wing Siu when it held that if two people set out to commit an offence (crime A), and in the course of it one of them commits another offence (crime B), the second person is guilty as an accessory to crime B if he foresaw it as a possibility, but did not necessarily intend it.
We have referred (at paras 31 33 and 39 45) to the authorities on which the Privy Council placed reliance in laying down that principle: Davies v Director of Public Prosecutions, R v Anderson and R v Morris, Johns v The Queen and Miller v The Queen.
What Lord Simonds said in Davies was in a very different context and does not provide support for the Chan Wing Siu principle for the reasons which we have explained.
In Anderson and Morris the Court of Appeal affirmed Wesley Smith including the rule that if an adventurer departed completely from what had been tacitly agreed as part of an agreed joint enterprise his co adventurer would not be liable for the consequences of that unauthorised act.
In such a situation, the effect of the overwhelming supervening event is that any assistance is spent.
The issue was whether that applied to Morris.
The court did not otherwise address the question of what is necessary to establish joint responsibility, and specifically whether what is required is intention to assist or mere foresight of what D1 might do.
Still less did it address the meaning of contemplation (foresight) and authorisation.
It provided no foundation for the rule in Chan Wing Siu.
The Privy Council judgment, moreover, elided foresight with authorisation, when it said that the principle turns on contemplation or, putting the same idea in other words, authorisation, which may be express but is more usually implied.
But as Professor Smith observed, contemplation and authorisation are not the same at all.
Nor can authorisation of crime B automatically be inferred from continued participation in crime A with foresight of crime B. As Lord Brown accurately pointed out in R v Rahman at para 63, the rule in Chan Wing Siu makes guilty those who foresee crime B but never intended it or wanted it to happen.
There can be no doubt that if D2 continues to participate in crime A with foresight that D1 may commit crime B, that is evidence, and sometimes powerful evidence, of an intent to assist D1 in crime B.
But it is evidence of such intent (or, if one likes, of authorisation), not conclusive of it.
In Johns v The Queen the ratio decidendi of the majority was that there was ample evidence from which the jury could infer that the defendant gave his assent to a criminal enterprise which involved the discharge of a firearm, should the occasion arise.
This was an entirely orthodox approach.
So too was the decision in Miller v The Queen, where the High Court held that the judges direction to the jury would reasonably have been understood as saying that the defendant would be guilty of murder if he acted in concert with the principal offender in a plan which included the possible murder of the victims.
As already noted, that case did not involve a plan to carry out crime A, in the course of which crime B was committed.
In Powell and English Lord Hutton placed considerable reliance on Wesley Smith, which had been cited in Chan Wing Siu but was not mentioned in the judgment.
Lord Hutton said that he considered that in Wesley Smith the Court of Appeal recognised that the secondary party will be guilty of unlawful killing committed by the primary party with a knife if he contemplates that the primary party may use such a weapon (p 19).
But the unlawful killing to which the Court of Appeal was referring was manslaughter, not murder, and it is very important to understand its reasoning.
The defendant in Wesley Smith was one of a group of four men who became involved in a row in a public house.
He and one other went outside and threw bricks at the building.
One of the two who remained inside stabbed the barman with a knife which Smith knew he carried.
Smith was acquitted of murder but convicted of manslaughter.
The question in Wesley Smith was whether his conviction for manslaughter was unsafe in the light of his acquittal of murder.
The starting point was that anyone who takes part in an unlawful and violent attack on another person which results in death is guilty (at least) of manslaughter.
There might conceivably have been an intervening act by another person of such a character as to break any connection between the defendants conduct and the victims death (as, for example, in Anderson and Morris); but the fact that it must have been within Smiths contemplation that the principal might act in the way that he did was fatal to the argument that he was not guilty even of manslaughter. (See para 96 below).
Although Lord Hutton quoted part of the judges summing up in Wesley Smith he ended his quotation with the first part of the passage set out at para 28 above. (Anybody who is party to an attack which results in an unlawful killing is a party to the killing.) He did not go on to refer to the critical passage which followed, including the statement: Only he who intended that unlawful and grievous bodily harm should be done is guilty of murder.
He who intended only that the victim should be unlawfully hit and hurt will be guilty of manslaughter if death results.
Moreover, as we have explained at para 29, the Court of Appeal had explicitly praised the summing up as a correct statement of the law.
Far from supporting the Chan Wing Siu principle, Wesley Smith was an authority contrary to it.
Wesley Smith was not the only authority inconsistent with the Chan Wing Siu principle.
We have referred to other authorities from Collison to Reid, which were not cited in Chan Wing Siu.
Reid was cited in Powell and English, but it was not mentioned in any of the judgments, although it was a reserved judgment of a strong Court of Appeal which reiterated that a secondary party could not be convicted of murder unless he had the mens rea for murder.
In Chan Wing Siu Sir Robin Cooke referred, at p 176, to the modern emphasis on subjective tests of criminal guilt.
There has indeed been a progressive move away from the historic tendency of the common law to presume as a matter of law that the natural and probable consequences of a mans act were intended, culminating in England and Wales in its statutory removal by section 8 of the Criminal Justice Act 1967.
Since then in England and Wales the foreseeability of the consequences has been a matter of evidence from which intention may be, but need not necessarily be, inferred; whether the evidential approach differs in Jamaica is a topic not addressed in argument before us.
But in any event the proper subjective counterpart to Fosters objective test (whether the events, although possibly falling out beyond his original intention, were in the ordinary course of things the probable consequence of what B did under the influence, and at the instigation of A) would have been intention, as was held to be necessary in Wesley Smith and Reid.
Foresight may be good evidence of intention but it is not synonymous with it, as Lord Steyn acknowledged in Powell and English at p 13.
It was, of course, within the jurisdiction of the courts in Chan Wing Siu and Powell and English to change the common law in a way which made it more severe, but to alter general principles which have stood for a long time, especially in a way which has particular impact on a subject as difficult and serious as homicide, requires caution; and all the more so when the change involved widening the scope of secondary liability by the introduction of new doctrine (since termed parasitic accessory liability).
In Chan Wing Siu the Privy Council addressed the policy argument for the principle which it laid down in two sentences (see para 46 above).
The statement at p 177 Where a man lends himself to a criminal enterprise knowing that potentially murderous weapons are to be carried, and in the event they in fact are used by his partner with an intent sufficient for murder, he should not escape the consequences may be thought to oversimplify the question of what is the enterprise to which he has intentionally lent himself, but it also implies that he would escape all criminal liability but for the Chan Wing Siu principle.
On the facts postulated, if the law remained as set out in Wesley Smith and Reid he would be guilty of homicide in the form of manslaughter, which carries a potential sentence of life imprisonment.
The dangers of escalation of violence where people go out in possession of weapons to commit crime are indisputable, but they were specifically referred to by the court in Reid, when explaining why it was right that such conduct should result in conviction for manslaughter if death resulted, albeit that the initial intention may have been nothing more than causing fright.
There was no consideration in Chan Wing Siu, or in Powell and English, of the fundamental policy question whether and why it was necessary and appropriate to reclassify such conduct as murder rather than manslaughter.
Such a discussion would have involved, among other things, questions about fair labelling and fair discrimination in sentencing.
In Powell and English Lord Hutton referred to the need to give effective protection to the public against criminals operating in gangs (at p 25), but the same comments apply.
There does not appear to have been any objective evidence that the law prior to Chan Wing Siu failed to provide the public with adequate protection.
A further policy reason suggested by Lord Hutton for setting a lower mens rea requirement for the secondary party than for the principal was that the secondary party has time to think before taking part in a criminal enterprise like a bank robbery, whereas the principal may have to decide on the spur of the moment whether to use his weapon.
But the principal has had an earlier choice whether to go armed or not.
As for the secondary party, he may have leisure to think before going out to rob a bank, but the same is not true in many other cases (for example, of young people who become suddenly embroiled in a fight in a bar and may make a quick decision whether or not to help their friends).
We respectfully differ from the view of the Australian High Court, supported though it is by some distinguished academic opinion, that there is any occasion for a separate form of secondary liability such as was formulated in Chan Wing Siu.
As there formulated, and as argued by the Crown in these cases, the suggested foundation is the contribution made by D2 to crime B by continued participation in crime A with foresight of the possibility of crime B. We prefer the view expressed by the Court of Appeal in Mendez, at para 17, and by textbook writers including Smith and Hogans Criminal Law, 14th ed (2015), p 260 that there is no reason why ordinary principles of secondary liability should not be of general application.
The rule in Chan Wing Siu is often described as joint enterprise liability.
However, the expression joint enterprise is not a legal term of article As the Court of Appeal observed in R v A [2011] QB 841, para 9, it is used in practice in a variety of situations to include both principals and accessories.
As applied to the rule in Chan Wing Siu, it unfortunately occasions some public misunderstanding.
It is understood (erroneously) by some to be a form of guilt by association or of guilt by simple presence without more.
It is important to emphasise that guilt of crime by mere association has no proper part in the common law.
As we have explained, secondary liability does not require the existence of an agreement between D1 and D2.
Where, however, it exists, such agreement is by its nature a form of encouragement and in most cases will also involve acts of assistance.
The long established principle that where parties agree to carry out a criminal venture, each is liable for acts to which they have expressly or impliedly given their assent is an example of the intention to assist which is inherent in the making of the agreement.
Similarly, where people come together without agreement, often spontaneously, to commit an offence together, the giving of intentional support by words or deeds, including by supportive presence, is sufficient to attract secondary liability on ordinary principles.
We repeat that secondary liability includes cases of agreement between principal and secondary party, but it is not limited to them.
It will be apparent from what we have said that we do not consider that the Chan Wing Siu principle can be supported, except on the basis that it has been decided and followed at the highest level.
In plain terms, our analysis leads us to the conclusion that the introduction of the principle was based on an incomplete, and in some respects erroneous, reading of the previous case law, coupled with generalised and questionable policy arguments.
We recognise the significance of reversing a statement of principle which has been made and followed by the Privy Council and the House of Lords on a number of occasions.
We consider that it is right to do so for several reasons.
Firstly, we have had the benefit of a much fuller analysis than on previous occasions when the topic has been considered.
In Chan Wing Siu only two English cases were referred to in the judgment Anderson and Morris and Davies.
More were referred to in the judgments in Powell and English, but they did not include (among others) Collison, Skeet, Spraggett or notably Reid.
Secondly, it cannot be said that the law is now well established and working satisfactorily.
It remains highly controversial and a continuing source of difficulty for trial judges.
It has also led to large numbers of appeals.
Thirdly, secondary liability is an important part of the common law, and if a wrong turn has been taken, it should be corrected.
Fourthly, in the common law foresight of what might happen is ordinarily no more than evidence from which a jury can infer the presence of a requisite intention.
It may be strong evidence, but its adoption as a test for the mental element for murder in the case of a secondary party is a serious and anomalous departure from the basic rule, which results in over extension of the law of murder and reduction of the law of manslaughter.
Murder already has a relatively low mens rea threshold, because it includes an intention to cause serious injury, without intent to kill or to cause risk to life.
The Chan Wing Siu principle extends liability for murder to a secondary party on the basis of a still lesser degree of culpability, namely foresight only of the possibility that the principal may commit murder but without there being any need for intention to assist him to do so.
It savours, as Professor Smith suggested, of constructive crime.
Fifthly, the rule brings the striking anomaly of requiring a lower mental threshold for guilt in the case of the accessory than in the case of the principal.
As to the argument that even if the court is satisfied that the law took a wrong turn, any correction should now be left to Parliament, the doctrine of secondary liability is a common law doctrine (put into statutory form in section 8 of the 1861 Act) and, if it has been unduly widened by the courts, it is proper for the courts to correct the error.
It is worth attention that the Westminster Parliament has legislated over inchoate criminal liability in the Serious Crime Act 2007.
Section 44 provides: (1) A person commits an offence if (a) he does an act capable of encouraging or assisting the commission of an offence; and (b) he intends to encourage or assist its commission. (2) But he is not to be taken to have intended to encourage or assist the commission of an offence merely because such encouragement or assistance was a foreseeable consequence of his act.
Section 45 creates a parallel offence if a person does such an act believing that the offence will be committed and that his act will encourage or assist his commission, but both sections are subject to a statutory defence if the defendant acted reasonably in the circumstances as he believed them to be.
It is a noteworthy feature of the present law in England and Wales that Parliament has provided that foresight is not sufficient mens rea for the offence of intentionally encouraging or assisting another to commit an offence; whilst at present under Chan Wing Siu if that other person goes on to commit the offence, such foresight is sufficient mens rea for the secondary party to be regarded as guilty of the full offence at common law.
The correction of the error in Chan Wing Siu brings the common law back into recognition of the difference between foresight and intent, consistently with Parliaments approach in section 44(2) of the 2007 Act and more generally in section 8 of the Criminal Justice Act 1967 (referred to at para 73 above).
It would not be satisfactory for this court simply to disapprove the Chan Wing Siu principle.
Those who are concerned with criminal justice, including members of the public, are entitled to expect from this court a clear statement of the relevant principles.
We consider that the proper course for this court is to re state, as nearly and clearly as we may, the principles which had been established over many years before the law took a wrong turn.
The error was to equate foresight with intent to assist, as a matter of law; the correct approach is to treat it as evidence of intent.
The long standing pre Chan Wing Siu practice of inferring intent to assist from a common criminal purpose which includes the further crime, if the occasion for it were to arise, was always a legitimate one; what was illegitimate was to treat foresight as an inevitable yardstick of common purpose.
We address below the potential impact on past convictions.
Restatement of the principles
We have summarised the essential principles applicable to all cases in paras 8 to 12 and 14 to 16.
In some cases the prosecution may not be able to prove whether a defendant was principal or accessory, but it is sufficient to be able to prove that he participated in the crime in one way or another.
In cases of alleged secondary participation there are likely to be two issues.
The first is whether the defendant was in fact a participant, that is, whether he assisted or encouraged the commission of the crime.
Such participation may take many forms.
It may include providing support by contributing to the force of numbers in a hostile confrontation.
The second issue is likely to be whether the accessory intended to encourage or assist D1 to commit the crime, acting with whatever mental element the offence requires of D1 (as stated in para 10 above).
If the crime requires a particular intent, D2 must intend (it may be conditionally) to assist D1 to act with such intent.
To take a homely example, if D2 encourages D1 to take anothers bicycle without permission of the owner and return it after use, but D1 takes it and keeps it, D1 will be guilty of theft but D2 of the lesser offence of unauthorised taking, since he will not have encouraged D1 to act with intent permanently to deprive.
In cases of concerted physical attack there may often be no practical distinction to draw between an intention by D2 to assist D1 to act with the intention of causing grievous bodily harm at least and D2 having the intention himself that such harm be caused.
In such cases it may be simpler, and will generally be perfectly safe, to direct the jury (as suggested in Wesley Smith and Reid) that the Crown must prove that D2 intended that the victim should suffer grievous bodily harm at least.
However, as a matter of law, it is enough that D2 intended to assist D1 to act with the requisite intent.
That may well be the situation if the assistance or encouragement is rendered some time before the crime is committed and at a time when it is not clear what D1 may or may not decide to do.
Another example might be where D2 supplies a weapon to D1, who has no lawful purpose in having it, intending to help D1 by giving him the means to commit a crime (or one of a range of crimes), but having no further interest in what he does, or indeed whether he uses it at all.
them of the difference between intention and desire.
In cases of secondary liability arising out of a prior joint criminal venture, it will also often be necessary to draw the jurys attention to the fact that the intention to assist, and indeed the intention that the crime should be committed, may be conditional.
The bank robbers who attack the bank when one or more of them is It will therefore in some cases be important when directing juries to remind armed no doubt hope that it will not be necessary to use the guns, but it may be a perfectly proper inference that all were intending that if they met resistance the weapons should be used with the intent to do grievous bodily harm at least.
The group of young men which faces down a rival group may hope that the rivals will slink quietly away, but it may well be a perfectly proper inference that all were intending that if resistance were to be met, grievous bodily harm at least should be done.
Juries frequently have to decide questions of intent (including conditional intent) by a process of inference from the facts and circumstances proved.
The same applies when the question is whether D2, who joined with others in a venture to commit crime A, shared a common purpose or common intent (the two are the same) which included, if things came to it, the commission of crime B, the offence or type of offence with which he is charged, and which was physically committed by D1.
A time honoured way of inviting a jury to consider such a question is to ask the jury whether they are sure that D1s act was within the scope of the joint venture, that is, whether D2 expressly or tacitly agreed to a plan which included D1 going as far as he did, and committing crime B, if the occasion arose.
If the jury is satisfied that there was an agreed common purpose to commit crime A, and if it is satisfied also that D2 must have foreseen that, in the course of committing crime A, D1 might well commit crime B, it may in appropriate cases be justified in drawing the conclusion that D2 had the necessary conditional intent that crime B should be committed, if the occasion arose; or in other words that it was within the scope of the plan to which D2 gave his assent and intentional support.
But that will be a question of fact for the jury in all the circumstances.
In cases where there is a more or less spontaneous outbreak of multi handed violence, the evidence may be too nebulous for the jury to find that there was some form of agreement, express or tacit.
But, as we have said, liability as an aider or abettor does not necessarily depend on there being some form of agreement between the defendants; it depends on proof of intentional assistance or encouragement, conditional or otherwise.
If D2 joins with a group which he realises is out to cause serious injury, the jury may well infer that he intended to encourage or assist the deliberate infliction of serious bodily injury and/or intended that that should happen if necessary.
In that case, if D1 acts with intent to cause serious bodily injury and death results, D1 and D2 will each be guilty of murder.
If a person is a party to a violent attack on another, without an intent to assist in the causing of death or really serious harm, but the violence escalates and results in death, he will be not guilty of murder but guilty of manslaughter.
So also if he participates by encouragement or assistance in any other unlawful act which all sober and reasonable people would realise carried the risk of some harm (not necessarily serious) to another, and death in fact results: R v Church [1965] 1 QB 59, approved in Director of Public Prosecutions v Newbury [1977] AC 500 and very recently re affirmed in R v F (J) & E (N) [2015] EWCA Crim 351; [2015] 2 Cr App R 5.
The test is objective.
As the Court of Appeal held in Reid, if a person goes out with armed companions to cause harm to another, any reasonable person would recognise that there is not only a risk of harm, but a risk of the violence escalating to the point at which serious harm or death may result.
Cases in which D2 intends some harm falling short of grievous bodily harm are a fortiori, but manslaughter is not limited to these.
The qualification to this (recognised in Wesley Smith, Anderson and Morris and Reid) is that it is possible for death to be caused by some overwhelming supervening act by the perpetrator which nobody in the defendants shoes could have contemplated might happen and is of such a character as to relegate his acts to history; in that case the defendant will bear no criminal responsibility for the death.
This type of case apart, there will normally be no occasion to consider the concept of fundamental departure as derived from English.
What matters is whether D2 encouraged or assisted the crime, whether it be murder or some other offence.
He need not encourage or assist a particular way of committing it, although he may sometimes do so.
In particular, his intention to assist in a crime of violence is not determined only by whether he knows what kind of weapon D1 has in his possession.
The tendency which has developed in the application of the rule in Chan Wing Siu to focus on what D2 knew of what weapon D1 was carrying can and should give way to an examination of whether D2 intended to assist in the crime charged.
If that crime is murder, then the question is whether he intended to assist the intentional infliction of grievous bodily harm at least, which question will often, as set out above, be answered by asking simply whether he himself intended grievous bodily harm at least.
Very often he may intend to assist in violence using whatever weapon may come to hand.
In other cases he may think that D1 has an iron bar whereas he turns out to have a knife, but the difference may not at all affect his intention to assist, if necessary, in the causing of grievous bodily harm at least.
Knowledge or ignorance that weapons generally, or a particular weapon, is carried by D1 will be evidence going to what the intention of D2 was, and may be irresistible evidence one way or the other, but it is evidence and no more.
Where the offence charged does not require mens rea, the only mens rea required of the secondary party is that he intended to encourage or assist the perpetrator to do the prohibited act, with knowledge of any facts and circumstances necessary for it to be a prohibited act: National Coal Board v Gamble.
Past convictions
The effect of putting the law right is not to render invalid all convictions which were arrived at over many years by faithfully applying the law as laid down in Chan Wing Siu and in Powell and English.
The error identified, of equating foresight with intent to assist rather than treating the first as evidence of the second, is important as a matter of legal principle, but it does not follow that it will have been important on the facts to the outcome of the trial or to the safety of the conviction.
Moreover, where a conviction has been arrived at by faithfully applying the law as it stood at the time, it can be set aside only by seeking exceptional leave to appeal to the Court of Appeal out of time.
That court has power to grant such leave, and may do so if substantial injustice be demonstrated, but it will not do so simply because the law applied has now been declared to have been mistaken.
This principle has been consistently applied for many years.
Nor is refusal of leave limited to cases where the defendant could, if the true position in law had been appreciated, have been charged with a different offence.
An example is Ramsden [1972] Crim LR 547, where a defendant who had been convicted of dangerous driving, before Gosney (1971) 55 Cr App R 502 had held that fault was a necessary ingredient of the offence, was refused leave to appeal out of time after that latter decision had been published.
The court observed that alarming consequences would flow from permitting the general re opening of old cases on the ground that a decision of a court of authority had removed a widely held misconception as to the prior state of the law on which the conviction which it was sought to appeal had been based.
No doubt otherwise everyone convicted of dangerous driving over a period of several years could have advanced the same application.
Likewise in Mitchell (1977) 65 Cr App R 185, 189, Geoffrey Lane LJ re stated the principle thus: It should be clearly understood, and this court wants to make it even more abundantly clear, that the fact that there has been an apparent change in the law or, to put it more precisely, that previous misconceptions about the meaning of a statute have been put right, does not afford a proper ground for allowing an extension of time in which to appeal against conviction.
For more recent statements of the same rule see Hawkins [1997] 1 Cr App R 234 (Lord Bingham CJ) and Cottrell and Fletcher [2007] EWCA Crim 2016; [2007] 1 WLR 3262 (Sir Igor Judge P) together with the cases reviewed in R v R [2006] EWCA Crim 1974; [2007] 1 Cr App R 150.
As Cottrell and Fletcher decides, the same principles must govern the decision of the Criminal Cases Review Commission if it is asked to consider referring a conviction to the Court of Appeal: see in particular para 58.
On 28 March 2012 Jogee and a co defendant, Hirsi, were each convicted at Nottingham Crown Court of the murder of a man named Fyfe.
His appeal to the Court of Appeal Criminal Division was dismissed.
The cause of death was a stab wound inflicted by Hirsi.
The stabbing took place shortly before 2.30 am on 10 June 2011 at the home of a woman called Naomi Reid in Leicester.
Jogee and Hirsi spent the evening of 9 June 2011 together at various places, taking drink and drugs.
They became increasingly intoxicated and their behaviour became increasingly aggressive.
Shortly before midnight they arrived at Miss Reids house.
The prosecutions case about what happened after that was based on her evidence.
According to her account, Jogee was angry about a recent encounter with another man.
He picked up a large knife from a kitchen block and waved it about, saying that they should go and shank him.
Miss Reid wanted them to leave.
She was in a relationship with the deceased and told them that she was expecting him home shortly.
They replied that they were not scared of him and would sort him out.
They left after Jogee received a call from someone wanting to buy cocaine, but said that they would be back.
Hirsi later returned alone to Miss Reids house and was there when the deceased arrived.
Miss Reid phoned Jogee and told him to take Hirsi away.
Jogee arrived, and he and Hirsi left.
After they had gone, Miss Reid sent Jogee a text telling him not to bring Hirsi to her house again.
Within minutes the two men returned.
Hirsi entered the house, shouting.
The deceased came downstairs and there was an angry exchange.
The deceased went upstairs to put on his jeans.
While that was happening, Hirsi took the knife from the kitchen.
According to Miss Reid, the deceased came down and tried to get Hirsi and Jogee to leave.
The deceased was in the hallway.
Hirsi was inside the front door, armed with the knife.
Jogee was outside, striking a car with a bottle and shouting encouragement to Hirsi to do something to the deceased.
At some stage Jogee came to the doorway, with the bottle raised, and leaned forward past Hirsi towards the deceased, saying that he wanted to smash it over the deceaseds head, but he was too far away.
The deceased told them to go, but both men said that they were not going anywhere.
Miss Reid threatened to call the police.
Hirsi pointed the knife at her chest and grabbed her by the throat.
Miss Reid backed away and went to the kitchen, but she saw Hirsi make a stabbing motion towards the deceaseds chest and both men ran off.
The deceased had been stabbed by Hirsi and died of his wounds.
At the close of the prosecutions case a submission was made that the appellant had no case to answer.
The judge, Dobbs J, rejected the submission.
She held that, set against the background of the behaviour of the defendants during the evening, it was open to jury to find that the appellant realised that Hirsi might use a knife, intending to cause at least serious bodily harm, and that by his conduct he encouraged Hirsi to act with the requisite intent.
Neither defendant gave evidence.
The judge directed the jury that the appellant was guilty of murder if he participated in the attack on the deceased, by encouraging Hirsi, and realised when doing so that Hirsi might use the kitchen knife to stab the deceased with intent to cause him really serious harm.
This was an orthodox direction in accordance with the Chan Wing Siu principle.
Mr John McGuinness QC on behalf of the prosecution properly accepted that the appellants conviction could not stand if we were to conclude, as we do, that the Chan Wing Siu principle was wrong.
Ms Felicity Gerry QC submitted on behalf of the appellant that he could not properly have been convicted either of murder or of manslaughter.
We regard that submission as hopeless.
The jurys verdict means that it was sure, at the very least, that the appellant knew that Hirsi had the knife and appreciated that he might use it to cause really serious harm.
In returning to the house, after 2.00 am, in the circumstances which we have summarised, the appellant and Hirsi were clearly intent on some form of violent confrontation.
The appellant was brandishing a bottle, striking the car and shouting encouragement to his co defendant at the scene.
There was a case fit to go to the jury that he had the mens rea for murder.
At a minimum, he was party to a violent adventure carrying the plain objective risk of some harm to a person and which resulted in death; he was therefore guilty of manslaughter at least.
The choice of disposal is whether to quash the appellants conviction for murder and order a re trial or whether to quash his conviction for murder and substitute a conviction for manslaughter.
We invite the parties written submissions on that question.
Ruddock
On 26 January 2010 Ruddock was convicted at Montego Bay Circuit Court of the murder of Pete Robinson.
A co defendant, Hudson, pleaded guilty to murder at the beginning of the trial.
Ruddocks appeal to the Court of Appeal of Jamaica was dismissed.
The prosecutions case was that the murder was committed in the course of robbing the deceased of his Toyota station wagon.
The deceased was a taxi driver.
His body was found on the morning of 1 July 2007 on a beach in the fishing village of White House.
His hands and feet were tied with cloth and his throat had been cut.
On 4 July 2007 the deceaseds son saw the Toyota being driven in the town of Maggotty.
He immediately reported it to the police.
Soon afterwards two police officers came across the vehicle parked in Maggotty.
Hudson was in the drivers seat, a woman was in the front passenger seat and Ruddock was in the back seat.
They were told that the police had information that the vehicle had been stolen and the owner murdered, and they were taken to Maggotty police station.
The prosecutions case against Ruddock was based on what he was alleged to have told the police.
The investigating officer, DC Spence, gave evidence that he interviewed Ruddock under caution on 5 July 2007.
He said that Ruddock stated that he was not the one who cut the deceaseds throat, that this was done by Hudson with a ratchet knife, but that he had tied the deceaseds hands and feet.
The officer then recorded a statement from him, which was not adduced in evidence.
After taking Ruddocks statement, DC Spence interviewed a woman whose picture appeared on Hudsons mobile phone.
He was asked by prosecuting counsel what the woman said, but at this point the judge rightly intervened to warn the prosecution against hearsay evidence.
DC Spence told the jury that he then went back to see Ruddock and, despite the judges warning, he continued: I told him that the female had explain (sic) to me that, told me all what they have done to her and the deceased, Pete Robinson, while they were on the beach at White House in St James.
DC Spence said that he subsequently arrested Ruddock, and that under caution he repeated that he had tied up the deceaseds hands and feet and that Hudson used a ratchet knife to cut his throat.
Ruddock allegedly added that they then drove away in the car with the female, which the jury is likely to have understood to mean the female about whom DC Spence had been speaking.
The female was not called as a witness.
Ruddock did not give evidence, but he made an unsworn statement from the dock to the effect that he had not been present at the murder and had no knowledge of it.
He gave an explanation for being in the car when he was picked up by the police.
He said that he told the police that he knew nothing about the murder, but that they beat him and offered him a bribe to build a case against Hudson.
The judge directed the jury that the prosecution had to prove that each defendant shared a common intention to commit the offence, and that common intention included a situation in which the defendant, whose case you are considering, knew that there was a real possibility that the other defendant might have a particular intention and with that knowledge, nevertheless, went on to take part in it.
The judge reminded the jury that it was the prosecutions case that the two defendants intended to rob the deceased of his car, and that in so doing they tied him up and cut his throat.
He invited the jury to consider the evidence of the state in which the deceaseds body was found (bound hands and feet and throat cut) and he posed the question for their consideration whether this was the work of one man or more than one.
The judge also reminded the jury of DC Spences evidence of what he told Ruddock about what the female had said regarding what they did to her at White House on the beach and what they did to Mr Robinson.
He commented that the jury would have to look at that, together with the fact that there seemed to have been no reply from Ruddock.
There are three problems about the summing up.
The first is the direction based on the Chan Wing Siu principle.
Secondly, that the judge failed to tell the jury that if they were sure that Ruddock was a party to carrying out the robbery, it did not automatically follow that he was also party to the murder of the deceased.
That question required separate and further consideration.
Ruddocks alleged statements to the police were, or were at least capable of being understood as, a denial that he was responsible for the deceaseds murder.
He admitted to tying up the deceased, but that was consistent with a simple intent to rob.
The fact that the defence advanced by Ruddock at trial was a total denial of involvement in the incident did not remove the judges obligation to point out to the jury that there was evidence in Ruddocks words to the police which was intended to exculpate himself from the murder.
Thirdly, and less significantly, the judges treatment in his summing up of what DC Spence said to Ruddock about the female in the photograph was unsatisfactory.
It was potentially prejudicial.
The judge should have told the jury that they had not heard from the woman, and that they should ignore altogether any reference to what she had said.
Mr Howard Stevens QC properly accepted on behalf of the prosecution that if the Board concluded that the Chan Wing Siu principle is wrong, the appeal must be allowed on that ground.
It is therefore unnecessary to consider further the consequences of the other defects on the safety of the conviction.
The Board invites the parties written submissions as to the advice which it should humbly tender to Her Majesty regarding the disposal of the appeal.
| UK-Abs | The legal issue in these cases concerned the mental element of intent which must be proved when a defendant is accused of being a secondary party to a crime.
The question of law was whether the common law took a wrong turning in two cases, Chan Wing Siu v The Queen [1985 1 AC 168 and Regina v Powell and English [1999] 1 AC 1.
The appellant Jogee was convicted at Nottingham Crown Court of the murder of Paul Fyfe.
Mr Fyfe was the boyfriend of Naomi Reid and he was stabbed to death in the hallway of her home in the early hours of 10 June 2011 by the appellants co defendant, Mohammed Hirsi.
Hirsi was convicted of murder.1 The appellant and Hirsi spent the previous evening at various places, taking drink and drugs.
They became increasingly intoxicated and increasingly aggressive.
Shortly before midnight they arrived at Ms Reids house.
She told them to leave and that she was expecting Mr Fyfe to return.
They said that they were not scared of him and would sort him out.
They left but Hirsi returned and was there when Mr Fyfe arrived.
Ms Reid called the appellant and told him to fetch Hirsi, which he did, but soon afterwards Hirsi and the appellant came back to her house.
Hirsi entered the house and there was an angry confrontation between him and Mr Fyfe.
The appellant was outside with a bottle and shouting to Hirsi to do something to Mr Fyfe and at one stage the appellant came to the door and threatened to smash the bottle over Mr Fyfes head.
The fatal stabbing was done by Hirsi with a knife which he took from the kitchen.
The judge directed the jury that the appellant was guilty of murder if he took part in the attack on Mr Fyfe and realised that it was possible that Hirsi might use the knife with intent to cause serious harm.
The appellant Ruddock was convicted in the Circuit Court at Montego Bay, Jamaica, of the murder of Peter Robinson.
The appellants co defendant, Hudson, pleaded guilty to the murder.
Mr Robinson was a taxi driver and the prosecutions case was that the murder was committed in the course of robbing him of his station wagon.
The police evidence was that the appellant made a statement under caution which amounted to an admission that he was involved in committing the robbery and that he was present when Hudson killed the victim by cutting his throat but a denial that the appellant was responsible for the killing.
The judge directed the jury that Ruddock was guilty of murder if he took part in the robbery and knew that there was a possibility that Hudson might intend to kill the victim. 1 Hirsi pleaded guilty to murder. amended to Hirsi was convicted of murder. on 3rd March 2016 [see judgment para 101]
In each case the direction to the jury derived from Chan Wing Siu and Reg v Powell and English which were binding on the trial judges.
The unanimous conclusion of the court is that Chan Wing Siu and Powell and English did take a wrong turning and these appeals should therefore be allowed.
The correct rule is that foresight is simply evidence (albeit sometimes strong evidence) of intent to assist or encourage, which is the proper mental element for establishing secondary liability.
The court has been concerned with a part of the law of secondary liability for crime.
It concerns the person who did not himself forge the document, fire the gun or stab the victim (the person who did is called the principal), but who is said to have encouraged or assisted the principal to do so.
There is no question that persons who are indeed together responsible for a crime are all guilty of it, whether as principals or secondary parties.
Sometimes it is not possible to determine exactly whose hand performed the vital act, but this does not matter providing that it is proved the each defendant either did it himself of intentionally assisted or encouraged it.
These cases do not affect that basic rule at all.
Within this part of the criminal law, the court has been concerned with a narrower sub part.
This concerns secondary parties who have been engaged with one or more others in a criminal venture to commit crime A, but in doing so the principal commits a second crime, crime B.
In many of the reported cases crime B is murder committed in the course of some other criminal venture, but the rule of law is not confined to cases of homicide, or indeed to cases of violence.
The question is: what is the mental element which the law requires of the secondary party? This narrower area of secondary responsibility has sometimes been labelled joint enterprise, but this is to misuse that expression.
To speak of a joint enterprise is simply to say that two or more people were engaged in a crime together.
That, however, does not identify what mental element must be shown in the secondary party.
The particular narrower area of secondary responsibility here in question where crime B is committed during the course of crime A has been, in the past, more precisely been labelled parasitic accessory liability.
The two cases of Chan Wing Siu and Reg v Powell and English held that in the kind of situation described, the mental element required of the secondary party (D2) is simply that he foresaw the possibility that D1 might commit crime B.
If D2 did foresee this, the cases treated his continued participation in crime A not simply as evidence that he intended to assist crime B, but as automatic authorisation of it.
So D2 was guilty under this rule, even if he did not intend to assist crime B at all.
This set a lower test for D2 than for D1, who will be guilty of crime B only if he has the necessary mental element for that crime, usually intent.
And it is in contrast to the usual rule for secondary parties, which is that the mental element is an intention to assist or encourage the principal to commit the crime.
The conclusion of this court is that once the two questioned decisions are fully analysed, it is plain that they did take a wrong turning in their reasoning, even if the outcome might well have been the same if the error had not been made.
The prior cases which were relied on were only part of the history and important cases were not discussed.
The decisions departed from the well established rule that the mental element required of a secondary party is an intention to assist or encourage the principal to commit the crime.
They also advanced arguments based on the need that co adventurers in crimes which result in fatality should not escape conviction, without considering whether the secondary parties would generally be guilty of manslaughter in any event.
The law in this field has always been a matter of the common law rather than of statute, and so it is right for the courts, which have created it, to investigate whether a wrong turning was taken.
The court holds, in a unanimous judgment, that the law must be set back on the correct footing which stood before Chan Wing Siu.
The mental element for secondary liability is intention to assist or encourage the crime.
Sometimes the encouragement or assistance is given to a specific crime, and sometimes to a range of crimes, one of which is committed; either will suffice.
Sometimes the encouragement or assistance involves an agreement between the parties, but in other cases it takes the form of more or less spontaneous joining in a criminal enterprise; again, either will suffice.
Intention to assist is not the same as desiring the crime to be committed.
On the contrary, the intention to assist may sometimes be conditional, in the sense that the secondary party hopes that the further crime will not be necessary, but if he nevertheless gives his intentional assistance on the basis that it may be committed if the necessity for it arises, he will be guilty.
In many cases, the intention to assist will be co terminous with the intention (perhaps conditional) that crime B be committed, but there may be some where it exists without that latter intention.
It will remain relevant to enquire in most cases whether the principal and secondary party shared a common criminal purpose, for often this will demonstrate the secondary partys intention to assist.
The error was to treat foresight of crime B as automatic authorisation of it, whereas the correct rule is that foresight is simply evidence (albeit sometimes strong evidence) of intent to assist or encourage.
It is a question for the jury in every case whether the intention to assist or encourage is shown.
This brings the mental element of the secondary party back into broad parity with what is required of the principal.
The correction is also consistent with the provision made by Parliament in a closely related field, when it created (by the Serious Crime Act 2007) new offences of intentionally encouraging or assisting the commission of a crime, and provided that a person is not to be taken to have had that intention merely because of foreseeability.
The court makes clear what the present cases do not decide.
First, they do not affect the law that a person who joins in a crime which any reasonable person would realise involves a risk of harm, and death results, is guilty at least of manslaughter.
Manslaughter cases can vary in their gravity, but may be very serious and the maximum sentence is life imprisonment.
Secondly, they do not affect the rule that a person who intentionally encourages or assists the commission of a crime is as guilty as the person who physically commits it.
Thirdly, they do not alter the fact that it is open to a jury to infer intentional encouragement or assistance, for example, from weight of numbers in a combined attack, whether more or less spontaneous or planned, or from knowledge that weapons are being carried.
It is a commonplace for juries to have to decide what inferences they can properly draw about intention from an accused persons behaviour and what he knew.
This necessary correction to the wrong turning taken by the law does not mean that every person convicted in the past as a secondary party, where the law as stated in Chan Wing Siu was applied, will have suffered an unsafe conviction.
A correction to the law does not have this effect.
The outcome may in many cases have been the same.
Those whose convictions are outside the time limit for appealing would require the exceptional leave of the Court of Appeal, Criminal Division, to challenge them out of time.
It is for that court to enquire whether substantial injustice would occur in any particular case, but it is not the law that that is shown simply because the rules which then prevailed have now been declared to have contained a flaw.
The same rules apply where the Criminal Cases Review Commission is asked to consider referring a case to the Court of Appeal.
In these two cases, the convictions for murder must be set aside because the law was wrongly understood and the appeals were brought in time.
In Jogee it was argued on his behalf that he ought not to have been convicted of either murder or manslaughter and that his conviction should simply be quashed.
That argument was quite unrealistic.
On the evidence and the jurys verdict he was unquestionably guilty at least of manslaughter, and there was evidence on which the jury could have found him guilty of murder on a proper direction.
The court will ask for written submissions from both parties whether there should be a re trial for murder or whether the conviction for murder should be replaced by a conviction for manslaughter.
In the case of Ruddock there were other, unrelated, misdirections.
The Board asks for written submissions from both sides, now that the correct position in law has been identified, as to what should be the appropriate disposal.
This summary is provided to assist in understanding the Courts decision.
It does not form part of the reasons for the decision.
The full judgment of the Court is the only authoritative document.
Judgments are public documents and are available at: http://supremecourt.uk/decided cases/index.html
|
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.
| UK-Abs | 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].
|
In 2008 Lord Bingham of Cornhill and I were the dissenting minority when the majority in R (Bancoult) v Secretary of State for Foreign and Commonwealth Affairs (No 2) [2008] UKHL 61, [2009] AC 453 (Bancoult No 2) allowed the Secretary of States appeal and upheld the validity of section 9 of the British Indian Ocean Territory (Constitution) Order 2004 (the 2004 Constitution Order).
Section 9 provides that, since the British Indian Ocean Territory (BIOT) was set aside for defence purposes, no person shall have any right of abode there (section 9(1)) and further that no person shall be entitled to enter or be present there except as authorised by the Order itself or any other law.
I have not changed my opinion as to what would have been the appropriate outcome of the appeal to the House of Lords.
But that is not the issue before us.
The issue before us is whether the majority decision should be set aside, not on the grounds that it was wrong in law, but on grounds that the Secretary of State failed, in breach of his duty of candour in public law proceedings, to disclose relevant documents containing information which it is said would have been likely to have affected the factual basis on which the House proceeded.
That was that the Secretary of State, when enacting section 9, could justifiably rely on the stage 2B report prepared by Posford Haskoning Ltd (Posford) for its conclusion that any long term resettlement on the outlying Chagos Islands was infeasible, other than at prohibitive cost.
In addressing the issue now before us, we are bound by the legal reasoning which led the majority to its conclusion indeed, strictly bound without possibility of recourse to the Practice Statement (Judicial Precedent) [1966] 1 WLR 1234, since this is an application in the same proceedings.
The relevant documents are conveniently described as the Rashid documents, after Ms Rashid, the deponent from the Treasury Solicitors Department who by witness statement dated 1 May 2012 first produced them.
She did this without commentary in Administrative Court proceedings in Bancoult (No 3), regarding the declaration of a Maritime Protected Zone (MPA) in the high seas around BIOT.
Ms Rashid made clear that she had no personal knowledge of events leading to the earlier failure to disclose.
That the failure to disclose the Rashid documents in the Bancoult No 2 proceedings was culpable is not, and could not be, disputed.
On the other hand, it is accepted that it was not intentional and did not involve any bad faith.
I shall address the circumstances, the contents of the documents and their significance in due course.
In addition to relying on the alleged breach of candour, Mr Bancoult also seeks to adduce four heads of new material, put forward as constituting evidence unavailable at the time of the House of Lords decision.
All are said to go to the reliability of the stage 2B report, to undermine or invalidate the basis on which the House proceeded and to constitute an independent justification for re opening the decision.
I will revert to this ground of application later in this judgment, and focus in the meanwhile on the alleged breach of candour.
The jurisdiction to set aside in cases of unfair procedure and fresh evidence
Unfair procedure: There is no doubt that the Supreme Court has inherent jurisdiction to correct any injustice caused by an earlier judgment of itself or its predecessor, the House of Lords, though it is also clear that it will not re open any appeal save in circumstances where, through no fault of a party, he or she has been subjected to an unfair procedure and that there can be no question of that decision being varied or rescinded by a later order made in the same case just because it is thought that the first order is wrong: R v Bow Street Metropolitan Stipendiary Magistrate, Ex p Pinochet Ugarte (No 2) [2000] 1 AC 119, per Lord Browne Wilkinson.
One partys failure to disclose relevant documentary information is clearly capable of subjecting the other party to an unfair procedure.
However, a decision to re open an appeal also has important evaluative as well as discretionary aspects.
The present applicant was, in its application to set aside (paras 109 130), content to express the evaluative aspect in terms used in an analogous context in the Court of Appeal in Taylor v Lawrence [2002] EWCA Civ 90; [2003] QB 528 and followed by the Privy Council in Bain v The Queen [2009] UKPC 4.
As the Privy Council said in the latter case at para 6, quoting Lord Woolf CJ at p 547 in the former case: What will be of the greatest importance is that it should be clearly established that a significant injustice has probably occurred and that there is no alternative effective remedy.
Fresh evidence: That the jurisdiction to set aside also extends to situations where fresh evidence is discovered after a judgment has been rendered which is not susceptible of appeal is also recognised in Court of Appeal authority: In re U [2005] EWCA Civ 52; [2005] 1 WLR 2398 Feakins v Department of Environment, Food and Rural Affairs [2006] EWCA Civ 699.
The latter was a case where it was discovered that a DEFRA official had provided materially incorrect information to the court in a witness statement.
In each case, however, it was emphasised that it was not sufficient simply to rely on the principles in Ladd v Marshall [1954] 1 WLR 1489, which apply when fresh evidence is sought to be adduced for or on an appeal.
Rather, as it was put in In re U, para 22, it must at least be shown, not merely that the fresh evidence demonstrates a real possibility that an erroneous result was arrived at in the earlier proceedings , but that there exists a powerful probability that such a result has in fact been perpetrated.
This statement was quoted from and accepted in the application to set aside, para 121.
Further, as to the discretionary aspect, the court noted in Feakins: The court [in In re U] held that, although that was a necessary condition, it was not sufficient; the court would have also to consider the extent to which the complaining party was author of his own misfortune and that there was no alternative remedy.
In oral submissions, Mr Edward Fitzgerald QC did not directly challenge the above principles as stated in In re U, stating in his reply that there was nothing between the parties on jurisdiction.
However, in his written speaking note, directed specifically to jurisdiction in response to the courts invitation to focus on this, the matter was put differently, and as follows (para 2.4(iv)): As to whether there would now be a different outcome, it is submitted that it is only necessary to show at this threshold stage that there may well be a different outcome on a reconsideration.
See also, eg the submission (para 8.8) that Dr Shepherd may well have had an axe to grind.
For my part, particularly where, as here, a party has failed to disclose the documents which it is now submitted constituted important evidence, I prefer to leave open whether a test of probability or, in the context of fresh evidence, powerful probability is too inflexible to cater for all possibilities.
The egregiousness of a procedural breach and/or the difficulty of assessing the consequences of such a breach or of the significance of fresh evidence might, it seems to me, in some situations militate in favour of a slightly lower test, perhaps even as low as (though I do not decide this) whether the breach may well have had a decisive effect of the outcome of the previous decision.
I shall consider the present application in that light also, although I do not in the event consider that the outcome of this application depends at any point on the test applied.
The course of events leading to the present application
The regrettable facts lying behind these and other proceedings such as R (Bancoult) v Secretary of State for Foreign and Commonwealth Affairs (No 1) and (No 3) were outlined by Lord Hoffmann in paras 1 30 of his judgment in Bancoult No 2, in terms which both Lord Bingham and I accepted with only a few (presently immaterial) qualifications: see paras 68 and 137 139.
BIOT consists of the Chagos Islands, the largest being Diego Garcia.
In 1966 the United Kingdom agreed in principle to make BIOT available to the United States for at least 50 years for defence purposes, and with effect from July 1971 the United States took over Diego Garcia as a base.
At the same time, by the Immigration Ordinance 1971, the Commissioner of BIOT prohibited any person from entering or being in BIOT without a permit issued by an immigration officer.
Mr Bancoult represents Chagossians (or Ilois), indigenous inhabitants of BIOT, whose removal and resettlement the United Kingdom procured between 1968 and 1973 by various non forceful means with a callous disregard of their interests (Lord Hoffmann, para 10).
Compensation, initially in the 1970s of 650,000 and then in 1982 of a further 4m in a trust fund set up under a Mauritian statute, was paid and accepted in satisfaction of all claims by most (some 1,340) Chagossians, though a few refused to sign.
A challenge to this settlement was later made but struck out as an abuse of process by Ouseley J in Chagos Islanders v Attorney General [2003] EWHC 2222 (QB), leave to appeal being refused by the Court of Appeal [2004] EWCA Civ 997.
Ouseley Js judgment made clear that there was no further economic obligation on the United Kingdom to fund resettlement in BIOT.
A challenge to the Immigration Ordinance 1971 was on the other hand successful.
In R (Bancoult) v Secretary of State for Foreign and Commonwealth Affairs (No 1) [2001] QB 1067, the Divisional Court decided that the Commissioner for BIOTs power to legislate for the peace, order and good government of BIOT did not include a power to expel its inhabitants.
The then Foreign Secretary, Mr Robin Cook, stated publicly that he accepted this decision, and revoked the 1971 Ordinance by the Immigration Ordinance 2000.
This confined the restriction on entry or presence to persons not British Dependent Territories citizens by virtue of their connection with BIOT.
Mr Cook also announced that a recently completed feasibility study into the prospects of resettling the Ilois would now proceed to a second stage.
This was originally intended to involve two phases, the first (Phase 2A) relating to hydrological monitoring, the second (Phase 2B) to a more general examination, prior to a cost benefit analysis (Phase 3).
The second stage reports were undertaken by Posford as project managers.
In the event, the first two phases were amalgamated, leading to a report entitled stage 2B published in July 2002.
Its General Conclusions, para 1.11, stated: To conclude, whilst it may be feasible to resettle the islands in the short term, the costs of maintaining long term inhabitation are likely to be prohibitive.
Even in the short term, natural events such as periodic flooding from storms and seismic activity are likely to make life difficult for a resettled population.
The Secretary of State in this light decided not to proceed with Phase 3, terminated consideration of re settlement and on 10 June 2004 introduced a new prohibition on residence in BIOT by section 9 of the 2004 Constitution Order, to the effect set out in para 1 above.
A new Immigration Order 2004 was at the same time also enacted, but needs no separate treatment here.
The present proceedings were begun for judicial review to quash section 9 of the Constitution Order.
They succeeded before the Divisional Court and Court of Appeal, but failed by a majority of three to two before the House of Lords.
All members of the House accepted that the 2004 Constitution Order was susceptible to judicial review on ordinary principles of legality, rationality and procedural impropriety.
But the majority (Lord Hoffmann, Lord Rodger of Earlsferry and Lord Carswell) held: that, although the Chagossians had had important common law rights of abode, they were not so fundamental that they could not be removed by section 9; that the Secretary of States decision to remove such rights, to reimpose immigration control and to prevent resettlement was in the circumstances neither unreasonable nor an abuse of power; and that the previous Foreign Secretarys statements in 2000 (para 11 above) did not amount to a clear and unambiguous promise that the Chagossians would be permitted to return and settle permanently creating any legitimate expectation on which they could now rely.
Lord Bingham and I took the opposite view on these points, and would have dismissed the Secretary of States appeal.
During the proceedings no challenge was made or suggested to the stage 2B report or its findings.
The Secretary of State relied on its findings in para 106 of his skeleton argument before the Administrative Court dated 25 November 2004, stating: in any event, the defendant submits that it cannot conceivably be said to be irrational for steps to be taken to ensure that the BlOT is not resettled in circumstances where no viable long term resettlement can be supported; where the costs of resettlement would be extensive, prohibitively expensive and potentially open ended; and where the UKs defence interests and treaty obligations strongly militate against permitting resettlement of the archipelago.
Sir Sydney Kentridge QC expressly disavowed any challenge to the reports conclusions when opening the Chagossians case before the Divisional Court on 6 December 2005; and amended particulars put before that Court on 13 December 2005 on the issue of irrationality likewise made no such challenge.
Before the House of Lords the stage 2B report and its findings were equally uncontentious.
All members of the House proceeded on that basis.
The argument on behalf of the Chagossians was throughout that the findings did not justify the making of the 2004 Constitution Order.
Lord Bingham and I accepted that argument, but the majority rejected it and, to differing extents, deployed the relevant findings in their reasoning.
Lord Hoffmann at para 53 said this: 53.
I think it is very important that in deciding whether a measure affects fundamental rights or has profoundly intrusive effects, one should consider what those rights and effects actually are.
If we were in 1968 and concerned with a proposal to remove the Chagossians from their islands with little or no provision for their future, that would indeed be a profoundly intrusive measure affecting their fundamental rights.
But that was many years ago, the deed has been done, the wrong confessed, compensation agreed and paid.
The way of life the Chagossians led has been irreparably destroyed.
The practicalities of today are that they would be unable to exercise any right to live in the outer islands without financial support which the British government is unwilling to provide and which does not appear to be forthcoming from any other source.
During the four years that the Immigration Ordinance 2000 was in force, nothing happened.
No one went to live on the islands.
Thus their right of abode is, as I said earlier, purely symbolic.
If it is exercised by setting up some camp on the islands, that will be a symbol, a gesture, aimed at putting pressure on the government.
The whole of this litigation is, as I said in R v Jones (Margaret) [2007] 1 AC 136, 177, the continuation of protest by other means.
No one denies the importance of the right to protest, but when one considers the rights in issue in this case, which have to be weighed in the balance against the defence and diplomatic interests of the state, it should be seen for what it is, as a right to protest in a particular way and not as a right to the security of ones home or to live in ones homeland.
It is of course true that a person does not lose a right because it becomes difficult to exercise or because he will gain no real advantage by doing so.
But when a legislative body is considering a change in the law which will deprive him of that right, it cannot be irrational or unfair to consider the practical consequences of doing so.
Indeed, it would be irrational not to. (italics added for emphasis)
Lord Rodger at paras 110 114 said: 110.
Section 9 of the Constitution Order removes any right of abode on the Chagos Archipelago which the claimant or anyone else may have had.
It is a stark provision.
But the Secretary of States decision to have it enacted and the effect of that decision have to be judged against the circumstances at the time it was taken.
No one was then actually living on the outer islands and, even though the islanders had enjoyed a right to return since November 2000, none of them had done so.
They were instead seeking support from the UK and US governments to financially assist their return or alternatively to provide compensation: Feasibility Study Phase 2B, Executive Summary, para 1.1.
More importantly, there was no prospect that anyone would be able to live on the outer islands, except on a subsistence basis, in the foreseeable future: Feasibility Study Phase 2B, Executive Summary, para 1.11.
Sir Sydney did not dispute this, but contended that it was irrelevant.
In other words, the position was just the same as if people had actually been living on the islands when the Orders were made.
I am unable to accept that submission.
The impact of the legislation on the people concerned would be very different in the two situations.
In my view, in reviewing the Secretary of States decision to remove the right of abode, it is relevant that there was actually no prospect of the Chagossians being able to live on the outer islands in the foreseeable future.
The government accepts, of course, that they can apply for permits to visit the islands and that an unreasonable refusal could be judicially reviewed.
Such visits have taken place in the past. 111.
Against that background, can it be said that no reasonable Secretary of State could have decided to have section 9 enacted? 112.
On 15 June 2004 a junior minister, Mr Rammell, made a written statement to Parliament.
His good faith has not been impugned by the respondent.
The statement shows that, in deciding to legislate to prevent people resettling on the outer islands, the government took into account the fact that the economic conditions and infrastructure which had once supported the way of life of the Chagossians had ceased to exist.
Something new would have to be devised.
The advice was that the cost of providing the necessary support for permanent resettlement was likely to be prohibitive and that natural events were likely to make life difficult for any resettled population.
Human interference within the atolls was likely to exacerbate stress on the marine and terrestrial environment and would accelerate the effects of global warming.
Flooding would be likely to become more frequent and would threaten the infrastructure and the freshwater aquifers and agricultural production.
Severe events might even threaten life.
The minister recorded that, for these reasons, the government had decided to legislate to prevent resettlement.
Although he made no mention of it, the decision to legislate and to introduce immigration controls at that particular time appears to have been prompted by the prospect of protesters attempting to land on the islands.
In addition, Mr Rammell said that restoration of full immigration control over the entire territory was necessary to ensure and maintain the availability and effective use of the territory for defence purposes.
He referred to recent developments in the international security climate since November 2000 when such controls had been removed. 113.
The ministerial statement indicates that a decision to legislate was taken on the basis of the experts (second) report on the difficulties and dangers of resettling the islands, these difficulties and dangers being dangers and difficulties which would affect the Chagossians themselves, if they were to try to live on the outer islands.
Given the terms of that report alone, it could not, in my view, be said that no reasonable government would have decided to legislate to prevent resettlement.
In particular, the advice that the cost of any permanent resettlement would be prohibitive was an entirely legitimate factor for the government, which is responsible for the way that tax revenues are spent, to take into account.
In addition, the government had regard to defence considerations, the views of its close ally, the United States, and the changed security situation after 9/11.
These additional factors reinforce the view that the decision to legislate was neither unreasonable nor irrational. 114.
Of course, the decision was adverse to the claim of the Chagossians to return to settle on the outer islands.
But that does not mean that their interests had been ignored: a realistic assessment of the long term position of any potential Chagossian settlers on the outer islands was central to the expert report on which the government relied.
In addition, the government considered the overall interests of the United Kingdom.
It was entitled to do so.
In the absence of any relevant legal criteria, judges are not well placed to second guess the balance struck by ministers on such a matter. (italics added)
Lord Carswell said (para 120) that he agreed with very little qualification with the reasoning of Lord Hoffmann and Lord Rodger, but his specific reasoning focused on the lack of long term feasibility.
He said that the Chagossians expressed wish to return to their homeland was: put on an abstract basis by their counsel, for it is quite clear that for them to resettle in the islands is wholly impracticable without very substantial and disproportionate expenditure.
They are not in a position to meet such a cost.
It could only be shouldered by the British government, which has made it clear that it is willing to permit and fund from time to time short visits to the outlying islands, but not to support a large scale permanent resettlement.
One might ask the question why this campaign is being pursued, for the Chagossians already can pay visits and there is no realistic prospect of resettlement unless it is funded for them at huge expense.
I do not find it necessary to seek an answer to that question, but the practical difficulties in the way of resettlement are in my view relevant to the rationality of the governments decision to make the 2004 Orders in Council. (italics added)
On the present application, Mr Bancoult submits that, had the Rashid documents been available prior to the hearing before the Divisional Court, the Court of Appeal or the House of Lords, they would have led to a challenge being mounted to stage 2B report, the conclusions drawn in that report would have been discredited, and the majority reasoning in the above extracts would have been impossible.
This brings me to a consideration of the Rashid documents.
The Rashid documents:
(a) Circumstances of late disclosure
By letter dated 5 December 2005 disclosure had been made on behalf of the Secretary of State to Sheridans, solicitors acting for Mr Bancoult, of a copy letter dated 23 May 2002 sent by Mr Charles Hamilton of BIOT to Ms Alex Holland, the senior environmental scientist who was Posfords project manager.
This raised questions and made comments on a draft stage 2B report.
Between November 2005 and February 2006, requests were made on behalf of Mr Bancoult for disclosure of this draft report as well as any draft of the earlier feasibility study.
The Treasury Solicitor, while replying that these requests did not go to any issue in Bancoult No 2, made searches, but was in the event only able to locate a draft feasibility study which was disclosed in early December 2005.
By letter dated 13 January 2006 (E1472) Mr Bancoults solicitors, Sheridans, questioned, in relation to the stage 2B report, whether there had been official input into the work of consultants which undermines its authority.
The Treasury Solicitor responded that this was an extremely serious allegation and needed to be particularised.
It was not particularised and, as stated, no challenge to the stage 2B report was then made.
A further allegation that, in the absence of the draft stage 2B report, the General Conclusions must be assumed not to be the unguided advice of independent consultants was made by note dated 13 March 2009.
On 7 October 2010 an email dated 29 May 2002 sent by Mr Charles Hamilton to Ms Holland advising that the final draft omit development scenarios (advice not in fact followed: para 40 below) was disclosed on behalf of the Secretary of State in the context of the issues arising in Bancoult (No 3).
By letter dated 21 December 2010 Clifford Chance (now acting for Mr Bancoult as a result of the move to that firm of Mr Gifford the individual partner handling Mr Bancoults affairs) wrote asserting that the total absence of any records of meetings in May June 2000 and June/July 2002 regarding what became respectively the feasibility study and stage 2B report casts grave doubts on the ability of FCO to explain its conduct or to justify what appears to be serious and concerted influence practised to achieve a conclusion which reflected the views of officials and contradicted the unguided advice of consultants.
Clifford Chance referred in this connection to the disclosure of the email dated 29 May 2002 and to statements made to them in a letter dated 11 February 2010 by Mr Stephen Akester, one of the Phase 2B consultants, that resettlement was always feasible within reasonable cost parameters, but that he was not in the committee that drafted the stage 2B report.
On 10 October 2011 Clifford Chance wrote in the light of the above urging a yet further search for documents pursuant to the Secretary of States duty of candour in the context of both Bancoult (No 2) and Bancoult (No 3).
The further search then made led to the Treasury Solicitor discovering previously undisclosed documents, including the draft stage 2B report, in circumstances described in its letter dated 15 March 2012 to Clifford Chance as follows: In the context of the aforementioned matters, TSol recalled archived files held by a third party document storage company that were generated during the conduct of the Bancoult (No 2) litigation.
In the course of reviewing these files, it has become apparent that they contain certain documents concerned with the drafting of the Phase 2B report which originate from the FCO but are no longer retained by the FCO on its own files as a result of its document retention.
It was subsequently further explained that there was clearly a point, occurring during 2005, when the FCO no longer held the draft Phase 2B Executive Summary on its files, as it was removed according to the FCOs document retention policies, and yet TSol retained a copy on its Bancoult (No 2) files.
The documents so discovered, including the draft stage 2B report, were then disclosed by Ms Rashids witness statement dated 1 May 2012.
The Secretary of State accepts that, in the light of the requests made and despite the absence of any challenge to the stage 2B report, the Rashid documents should have been capable of location and should have been located and disclosed pursuant to his general duty of candour in public law proceedings.
The failures in this regard were and are highly regrettable.
But there is, as stated previously, no basis for attributing them to any deliberate misconduct.
The question is what significance would or might have attached to, and what consequences would or might have flowed from, their disclosure. (b) Alleged significance of the Rashid documents
In Mr Bancoults written case, it is alleged that the Rashid documents would
have been significant under four heads: (i) As showing that, instead of being independent as understood, the final report was subject to extensive alterations to reflect FCO views.
Head (iv) below concerns one particular difference alleged to be centrally important to the stage 2B reports conclusions. (ii) As revealing that Dr Sheppard, the FCOs scientific adviser, had criticised the draft stage 2B report in an email sent to Charles Hamilton on 14 May 2002 and had, after the issue of the final report, also endorsed criticisms of it made by a resettlement anthropologist, Jonathan Jenness, instructed on behalf of Mr Bancoult. (iii) As revealing evidence of lack of objectivity in Dr Sheppards input into the stage 2B report before it was finalised.
More specifically, it is said that the documents show that Dr Sheppard was the only reviewer of the whole draft, that heavy reliance on only one specialist made the report unsafe and that, as a coral reef specialist well known to be strongly dedicated to their conservation, there is concern whether he could reasonably be regarded as an objective assessor on the issue of reintroducing human settlement. (iv) As showing alterations between the draft and final version of the stage 2B report in a manner which conflates and distorts the consultants original finding in relation to storms creating difficulties for resettlement.
Taken together, it is submitted that it is certain that, had the Rashid documents been disclosed, they would have caused the applicants representatives to challenge the reliability of the feasibility study, that it is highly likely that the challenge would have succeeded and that, if the House of Lords judgment is set aside, a new hearing will reach a different conclusion.
The focus of the first and fourth heads of alleged significance of the Rashid documents is alterations alleged to have been made and to have distorted the final stage 2B report.
The focus of the second and third heads is Dr Sheppard.
The second relies on his criticisms of the draft.
The third suggests that his input lacked objectivity and was unreliable.
(c) The first and fourth heads
These two heads stand or fall together.
They are reproduced in the speaking note which Mr Edward Fitzgerald QC used at the hearing before the Supreme Court.
That speaking note refers to extensive alterations to the original draft in the final draft, which it suggests are likely to have reflected FCO views and input and to have been unsupported by evidence in the body of the study.
According to Clifford Chances letter dated 10 October 2011, there were 94 revisions over a period when the document was open for editing for a total of seven and a half hours.
The speaking note says that some of the key changes are summarised in a summary note dated 17 February 2015 prepared by counsel for Mr Bancoult.
This was based in turn on a lengthy Analysis Note prepared by Mr Bancoults solicitor, Mr Gifford, in conjunction with a coral scientist, Mr Dunne.
In addition to the change relating to storms and re settlement identified in head (iv), the summary note identifies three further key amendments.
That alterations would or might be made in the final report following comments by the FCO and BIOT on the draft report cannot come as any surprise to those representing Mr Bancoult, or be regarded as in any way unnatural.
The stage 2B report was prepared by Posford under a contract expressed to be between the Commissioner for BIOT and Posford Duvivier Environment dated 10 December 2001.
The Terms of Reference set out in section 4 of the contract provided by clause 6 for monthly reporting and further by clause 6.3 that A draft final report, containing an account of the work done, conclusions and recommendations will be submitted within four months of commencing the assignment.
Within two weeks of the receipt of comments on the draft from recipients, consultants will submit a Final Report.
In this respect clause 6.3 echoed the provisions of clause 17 of the terms of reference for the earlier contract dated 13 April 2000 made with David Crapper for the feasibility study, which, when made was according to its terms intended also to cover stage 2.
Clause 17 provided: 17.
A draft report will be produced for the government of the BIOT.
On receiving comments on the draft report from the government of the BIOT, the consultant will finalise the report and provide the text in both paper and electronic form to the government of the BlOT.
Sheridans received a copy of this earlier contract, and in a letter dated 28 November 2005 noted and set out clause 17 specifically, not by way of objection, but in order to ask for the draft report and for any comments on it made by the FCO and the government of BIOT.
Whether any of the actual alterations made can be described as extensive or as reflecting FCO views, or be seen to have unbalanced the report as a result, are matters to which I will come.
Before doing so, it is convenient to examine events in more detail to identify any overt trace of undue executive influence over the final report.
After entry into force of the contract dated 10 December 2001, Posford set about preparing for field studies in BIOT, in particular on the two outlying islands of Ile de Coin and Ile Boddam, as contemplated by its terms.
These took place in February 2002, after which Posford submitted a second progress report dated 1 March 2002.
This was tabled and discussed at a meeting with the FCO and BIOT on 6 March 2002.
There is no suggestion or likelihood that the draft executive summary was available to anyone at this stage, and Ms Hollands letter dated 12 April and Mr Hamiltons email dated 15 April 2002 (E2404) indicate that, once drafted and reviewed, such a draft was only submitted to the FCO in early April 2002.
It is convenient at this point to introduce the fourth piece of new evidence on which the applicant seeks to rely.
It is a note of the 6 March 2002 meeting made by Posford dated 7 March 2002.
It was only obtained by the applicants advisers, after a chance meeting, from Mr Stephen Akester of MacAlister Elliott & Partners (MEP), sub contractors to Posford who arranged the on site investigations in the Chagos in early 2002.
As such it is not a document which was at any relevant time in the possession of or available to the executive.
But it records a meeting at which FCO and BIOT representatives were present, and, taking it as an accurate record of what took place at that meeting, what it records was within their knowledge, and may also throw light on their roles in relation to the re drafting and finalisation of the stage 2B report.
Mr Huckle of the FCO is reported as reiterating the political importance of the forthcoming feasibility report which he stressed had been heightened in recent weeks because the Ilois are currently pursuing legal action against the British and American governments.
He went on to point out that the outcome of the court case will either be compensation, or financial assistance to the Ilois in resettling the islands and that the questions were how much, and what forms of livelihood development will the British government permit, which he said was where the feasibility report comes in.
There is nothing here which appears to be anything other than a genuine explanation as to the reports current relevance couched if anything in terms anticipating that it would accept the possibility of resettlement.
The FCO appears a little later as saying that it had hoped that Phase II would negate the need for Phase III, ie if it concluded that resettlement wasnt feasible, but realistically, that was never likely to be the outcome.
The FCO is hoping that the section on Climate Change will resolve its difficulties, but Brian [Little] and I pointed out that a considerable amount of money could be made in 25 100 years, and lets not assume that the Ilios are considering a return to subsistence or reliance on natural resources .
Again this confirms, if anything, that the FCO was resigned to a report accepting the feasibility of some form of resettlement, and that Posford was well capable of standing up for what it believed correct.
Indeed, earlier in the note Posford recorded that allegedly, a number of those whom we competed against in the bidding process have been taking pot shots at our approach within earshot of important people.
Sounds like sour grapes.
That all said, our findings and arguments must be tight and convincing.
There is no suggestion that the FCO was inviting changes to bolster any sort of findings or conclusions in either the draft and the final report, and no basis for regarding Posford as susceptible to any such invitation.
The express purpose of the 6 March meeting was, as stated, to provide a de briefing on Posfords recent field studies on Ile du Coin and Ile Boddam.
In all the circumstances, the 7 March 2002 note provides no real support to a suggestion that the content even of the draft stage 2B report was unduly interfered with or influenced by the FCO or BIOT, still less that any subsequent alterations between the draft submitted in April and the stage 2B report as finalised in June were the result of any such undue interference or influence.
The follow up exchanges after Posford had completed and submitted all sections of the draft report in April 2002 (E2403) are evidenced by the Rashid documents as well as the previously disclosed messages dated 23 and 29 May 2002 from Mr Hamilton to Ms Holland.
They are also significant.
Dr Sheppard had on 14 May 2002 sent Mr Hamilton very detailed comments on the draft report (E2409 on).
In relation to the Executive Summary, he wrote: This important section does not always reflect the content of the volumes very well.
This is doubtless due to haste and short deadlines.
Several key issues missed out are stated in the text and in the conclusions.
I suggest that after a period of reflection this is revisited.
Several conclusions are apparently at odds either with each other or with other, known facts.
During the rewrite, these apparent contradictions in the text can be resolved.
They make parts of the report somewhat vulnerable.
One example is the widely varying estimates of numbers of people that could be sustainably supported.
Dr Sheppard went on in sections dealing with the body of the draft report to note (a) the risk of water contamination, observing that the draft did not clearly state how such contamination could be prevented through the thin roof of the aquifers, (b) a contradiction between statements that Water recharge of aquifers would increase by vegetation clearing (Groundwater resources section) But: water recharge would decrease with clearance of plants and development (from volume IV), and (c) under Other points: The point about Chagos is that it lies in the most nutrient poor part of the Indian Ocean.
The Chagos bank fishery potential is estimated to be half that of other banks (p 146).
Mr Hamilton then wrote to Ms Holland on 23 May 2002, noting that he had studied the drafts of the report in some detail, that it and any recommendations which followed from it would be carefully examined and that we are particularly anxious therefore that its scientific content is as complete and watertight as possible.
He made detailed comments on the draft, drawing heavily on Dr Sheppards comments, particularly when writing this in relation to the Executive Summary: This important section does not always reflect the content of the volumes very well.
Several key points and conclusions in the main text are important and stand out, but are not well reflected in the summary.
Further, several conclusions are apparently at odds either with each other or with other known facts.
During your revision, I would be grateful if you would resolve these apparent contradictions as they make parts of the report unclear.
Examples of issues needing reconciliation include widely varying estimates of numbers of people that could be sustainably supported, issues of water contamination and the balances of water use for different activities, whether plants increase or decrease water recharge, and the Chagos bank fishery potential.
Synthesis would doubtless resolve many of these.
I understand that different consultants wrote different sections, so I think that this summary may be a suitable place for an overall, concise synthesis, which would also include overall environmental management recommendations.
Many of these points are noted in the attachments relating to different sections, but are crucial for the writer of this Executive Summary.
As is apparent, Mr Hamilton was here picking up points made by Dr Sheppard as indicated above.
In attachment 7, relating to volume III of the draft dealing with resettlement issues, Mr Hamilton discussed three scenarios which had been included, noting various issues and that nothing had been said either on scenario 3 (based partly around expensive tourism), although this appeared to be the only attractive development option for interested parties, or on a possible scenario 4 (non residential, but settled seasonally for some fishing).
The discussion ended Possibly use of the three scenarios just adds confusing complexity and begs several questions which are not answered.
He ended by underlining the importance attaching to the overall synthesis (Executive Summary) which should clearly highlight the main points which are brought out in the text, and indicated that following the drafts revision he would call a meeting of all concerned to finalise the report.
Posford then prepared its own detailed comments on Mr Hamiltons letter which were sent to him by Ms Holland under cover of a faxed letter dated 28 May 2002.
Her letter stated: To summarise the attached, we consider that some of the comments are valid and we will revise our report in light of these suggestions.
However, we feel that others are somewhat inaccurate and do not reflect the understanding we had with the BlOT Administration on our approach.
I should like to discuss these comments with you at your earliest convenience.
In the body of the comments, Posford replied to the points made on the three scenarios as follows: Three scenarios: There was much debate during the drafting of the report as to whether the three scenarios should be included, but several of those involved considered that these helped to develop conclusions about whether certain resettlement activities would be possible, particularly in the drafting of the environmental appraisal.
We stopped at three hypothetical scenarios, but recognise that there could be many more combinations of activities.
The suggestion of scenario 4, which is based on non residential and non development, does not actually constitute resettlement and was therefore not considered as a scenario.
However, you will note that Option 1 for fisheries development (p 165) does refer to this form of livelihood activity.
We would be grateful if you would give direction as to whether you wish us to include or exclude the development scenarios from the final report.
To this last request, Mr Hamilton simply replied by email on 29 May 2002: You asked about the inclusion of development scenarios in the final report.
Our advice is that it would be better if these are excluded.
However, as Mr Giffords and Mr Dunnes Analysis Note acknowledges, this advice was not in fact taken up in the final stage 2B report, where the Development Scenarios can be seen to be crucial to several parts of the study.
Nevertheless, the Analysis Note seeks to portray Mr Hamiltons letter and comments dated 23 May 2002 as an exercise of editorial control, and his email of 29 May 2002 as yet further attempts to exercise editorial control over the final report.
To my mind, there is nothing untoward about them at all.
The impression conveyed is one of independently minded exchanges, passing between people whose genuine concern was to have as thorough, accurate and watertight a final report as possible.
Posfords comments dated 28 May 2002 were evidently also sent to Dr Sheppard, since he commented on them by email on 31st May 2002 (E2450 2451).
There were further technical exchanges between Brian Little, who had been appointed as FCO Feasibility Study Project Manager under contract dated 29 January 2001, and Posford in late May and early June (E2452 2458 and E2465 2467), and a further set of comments by Tony Falkland of Posford responding on 9th June to Dr Sheppards comments (E2459 2464) as well as to Brian Littles comments (E2465 2468).
Dr Sheppard noted Mr Littles comments on 11 June (E2469), and Mr Little sent an email commenting on Posfords response on 12 June (E2470).
A meeting was set up to discuss the final report on Friday 12 June, in relation to which Mr Hamilton invited Dr Sheppard to act as a devils advocate.
This he evidently did (E2476 2477).
Some changes/deletions were made, leading to the final report.
Reading all these exchanges, nothing in them suggests anything but a proper, professionally oriented and independent process, with all involved seeking to arrive at objective and sustainable findings and conclusions.
I turn to the alterations which can now be seen to have been made between the original draft and the final report.
The General Conclusions, to which Sheridans rightly attached importance in their note dated 13 March 2009 (para 21 above), are now available in both their draft and their final form in the executive summary.
A fundamental point which risks being overlooked in discussion about differences elsewhere in the executive summary or body of the text is that the General Conclusions can now be seen to have been in identical terms in both their draft and their final versions.
Their terms have been set out in para 12 above.
They represent the critical conclusions, on which the majority in the House of Lords relied as justifying the Secretary of States decision to make the 2004 Constitution Order, and they were unaltered between the original draft and final versions.
following section headed Vulnerability: Immediately preceding these General Conclusions also appeared the There appear to be sufficient groundwater, soils, fisheries, and environmental (eg limited tourism) resources to support a small population on a subsistence basis with some commercial opportunity, but there are some more fundamental issues surrounding the feasibility of resettlement.
These relate to the vulnerability of a resettled population to current and predicted climatic conditions, and the fragility of the environment to human induced disturbance.
Under the present climate, it is assumed, based on historic meteorological patterns and observations, that the islands are already subject to regular overtopping events, flooding, and erosion of the outer beaches.
As global warming develops, these events are likely to increase in severity and regularity.
In addition, the area is seismically active, and the possibility of a tsunami is a concern.
These events would threaten both the lives and infrastructure of any people living on the islands.
Whilst it might be possible to protect the islands to some extent in the short term through coastal defence measures, it is likely to be cost prohibitive and non pragmatic to consider this form of defence in the long term.
The environment of the Chagos Archipelago is highly diverse and yet very susceptible to human disturbance.
Coral reefs, which are one of the most important ecosystems within the Archipelago, are already exhibiting signs of stress from increased sea surface temperatures and other climatic phenomenon.
Predictions from climate change experts indicate that mass mortality of reef building corals in the Indian Ocean is likely to occur as global warming increases, may be as soon as within the next 20 years.
This will not only have huge implications for the long term coastal defence of the islands, and hence their very existence, but will also adversely affect livelihoods, particularly fisheries and tourism, which are likely to be the mainstay of any resettled population.
Human interference within the atolls, however well managed, is likely to exacerbate stress on the marine and terrestrial environment and will accelerate the effects of global warming.
Thus resettlement is likely to become less feasible over time.
Again this passage was in identical form in the draft and final stage 2B report, and, as the Analysis Note acknowledges, it constitutes the basis for the overall negative assessment in the General Conclusions.
The identity of these core sections of the Executive Summary in the draft and final reports raises obvious problems for the present application.
But it is said that these key sections refer back in turn to section 1.8.
It is in section 1.8 that the summary note dated 15 February 2015 identifies in total four key amendments.
The following passages underlined and marked A, B or C in the following extracts from the draft report are passages on which Mr Bancoult relies in support of his case of inappropriately motivated or influenced alteration: 1.8 CLIMATE CHANGE The reports of the International Panel on Climate Change were evaluated to determine the latest projections on climate change.
Global sea levels are expected to rise by about 38cm between 1990 and the 2080s.
Indian and Pacific Ocean islands face the largest relative increase in flood risk.
Although there will be regional variation, it is projected that sea level will rise by as much as 5mm per year, with a range of 2 9mm per year, over the next 100 years [B].
With a rise of 0.5 metres in sea level, the implications of climate change on the Chagos Archipelago are considerable, given that mean maximum elevation of the islands is only two metres; the diversity of livelihoods available is limited; and the relative isolation and exposure of the islands to oceanic influences and climatic events.
These implications are discussed in the light of biodiversity and resettlement. 1.8.1 Implications for Biodiversity The impacts of climate change on highly diverse and productive coastal ecosystems such as coral reefs and atoll islands will depend upon the rate of sea level rise relative to growth rates and sediment supply.
In addition, space for and obstacles to horizontal migration, changes in the climate ocean environment such as sea surface temperatures and storminess as well as human pressures will influence the capacity of ecosystems to adapt to the impacts of' climate change. [Two paragraphs dealing with coral bleaching and reefs] Species that occupy terrestrial habitats for all or part of their life cycle, such as birds, turtles and coconut crabs, will also be adversely affected by sea level rise.
There is considerable uncertainty about how climate change will affect the natural environment in the Chagos Archipelago, but that the outcome is likely to be an unfavourable shift in biodiversity. 1.8.2 Implications for Resettlement The most significant and immediate consequences of climate change on a resettled population within the Chagos Archipelago are likely to be related to changes in sea levels, rainfall regimes, fresh water resources, soil moisture budgets, prevailing winds (direction and speed) and short term variation in regional and local patterns of wave action.
At present, the Chagos Archipelago lies just north of an active cyclone belt, however, a small northward shift of this belt could lead to frequent cyclones in the area [A].
This would lead to more frequent flooding of the islands, with corresponding risk to life and any infrastructure.
It would also reduce agricultural potential and the freshwater contained within the island aquifers would experience higher levels of salinity.
Irrespective of whether the Chagos Archipelago becomes subjected to regular cyclones, the general increase in storminess that may accompany climate change would result in increased wave energies and an increasing frequency of over topping events [C].
Based on a 0.5m rise in sea level scenario, models of overtopping events demonstrate an increase of between 20 50% of the frequency of severe events.
Of further significance is the probability that sea level rise and overtopping events would threaten the characteristics and sustainability of the fresh groundwater lens.
The rate of erosion of the ocean coasts are likely to increase with sea level rise andincreased storminess, and would be accompanied by an increase in sediment transport, which would have implications for shoreline infrastructure.
On islands where physical space is limited, as in Chagos, coastal defences are likely to be low key and would need to be developed with a view to sustainability.
It is advised that future settlers on the outer atolls should be made aware of the risks of climate change in terms of their own safety and that of any physical investment.
Should people wish to return, it would be prudent to provide specialist assistance in the preparation of appropriate and sustainable land use and coastal defence policies, which would ensure that the vulnerability of the resettled population was minimised as far as possible.
In the final stage 2B report, section 1.8 of the executive summary reads as follows.
Again, the passages underlined and marked A, B and C are passages on which Mr Bancoult relies in support of his case of inappropriately motivated or influenced alteration: CLIMATE CHANGE According to the International Panel on Climate Change global sea levels are expected to rise by about 38cm between 1990 and the 2080s.
Indian and Pacific Ocean islands face the largest relative increase in flood risk.
Although there will be regional variation, it is projected that sea level will rise by an average of 5mm per year over the next 100 years [B].
The implications of these predictions for resettlement of the Chagos Archipelago are considerable, given that mean elevation of the islands is only two metres.
The most significant and immediate consequences of climate change for the Chagos Archipelago are likely to be related to changes in sea level, rainfall regimes, soil moisture budgets, prevailing winds, and short term variation in regional and local patterns of wave action.
As a consequence, most islands will experience increased levels of flooding, accelerated erosion, and seawater intrusion into freshwater sources.
The extent and severity of storm impacts, including storm surge floods and shore erosion are predicted to increase [A].
Although the risks associated with climate change are not easily established the implications of these issues to resettlement of the outer atolls of the Chagos Archipelago are outlined briefly below.
Implications for water resources: Rising sea level would not have a significant effect on island freshwater lenses in the Chagos archipelago unless land is lost by inundation.
If rising mean sea level causes land to be permanently inundated, then there will be a consequent loss in fresh groundwater.
Increased storminess [C]: The Chagos islands have a small storm surge envelope thus even small changes in sea level and storm surge height implies an increase in the area threatened with inundation.
It has been predicted that the flooding severity for a 1 in 50 year storm event with 0.5m of sea level rise is almost as high as the present day 1 in 1000 year event.
Inundation can cause seawater intrusion into freshwater lenses.
This not only reduces the availability of water for human consumption, but if salinity concentrations are high enough it can lead to decreased agricultural production.
Biological systems and biodiversity: Climate change is predicted to have a significant impact on the marine and terrestrial environments of the Archipelago.
Coral reefs are one of the most important ecosystems likely to be affected, and their ability to cope will depend upon the rate of sea level rise relative to their growth rate.
The Chagos coral reefs were severely affected by the 1998 El Nino event, therefore any future sea surface warming would increase pressure on already stressed coral reefs.
The added pressure of human interference within the marine environment would further weaken the ability of these systems to cope with climate change.
Fisheries and aquaculture: It is predicted that climate change may have a severe impact on the abundance and distribution of reef fish populations.
In addition, there is strong evidence of a correlation between the annual incidence of ciguatera (fish poisoning) and local warming of the sea surface, which will have an impact on fisheries potential, for subsistence and commercial purposes.
Climate change is expected to have both positive and negative impacts on aquaculture; but the implications for seaweed farming (as investigated during this study) is not positive, with increased temperatures leading to reductions in productivity [D].
Human health, settlement and infrastructure: Populations, infrastructure and livelihoods are likely to be highly vulnerable to the impacts of climate change.
Sustainability in food and water availability will be among the most pressing issues, together with the vulnerability of infrastructure to flooding and storm surges.
Vulnerability and adaptation: There is a wide range of adaptation strategies that could be employed by a resettled population in response to climate change.
Integrated coastal management has been strongly advocated as the key planning framework for adaptation.
Adapting to island instability: There are two issues that need to be taken into account in adapting to island instability: shoreline erosion and sediment inundation of the island surface.
Adaptation can fall within three broad categories depending on the level of infrastructure and population density on islands: no response; accommodation (infrastructure and dwellings are replaced at a rate commensurate with island migration); or protection (maintenance of infrastructure through coastal protection measures).
The latter is likely to be the most costly strategy, and should be avoided through wise land use planning.
Adaptation to inundation: Response to inundation will vary depending on the level of development on islands.
On islands that will have little infrastructure, as is likely to be the case in Chagos, the costs to protect against inundation are likely to be prohibitive.
Adaptation measures will include siting of infrastructure in low risk areas and the application of appropriate infrastructure designs, such as revised floor levels and open structures.
More robust measures to prevent inundation, such as seawalls, are not recommended as they necessitate costly maintenance and future vertical extension as sea level rises, and they can lead to adverse impacts on coastal habitats.
Adaptation to reef response: Discussion of the possible response of coral reefs to sea level rise indicates that at worst reef food and sediment resources diminish and at best they are maintained at similar levels or may even increase.
The importance of reefs as both natural coastal protection structures and providers of food means that any adaptation measures against climate change, and any human livelihood activities, should not compromise the health of the reef system.
Minimising adverse effects on reefs will require robust pollution control measures and effective waste management.
From an examination of projected climate change scenarios, it is likely that the Chagos Archipelago, and any population settled on the outer atolls, will be vulnerable to its effects.
The main issue facing a resettled population on the low lying islands will be flooding events, which are likely to increase in periodicity and intensity, and will not only threaten infrastructure but also the freshwater aquifers and agricultural production.
Severe events may even threaten life.
Increases in sea surface temperatures are likely to have adverse effects on coral reefs and consequently their ability to act as a coastal defence to the islands, and to support fisheries.
This will place more pressure on resettled populations to not only counteract the pressures of climate change but also to ensure that their subsistence and income needs are met.
The key amendments relied upon therefore fall under four heads.
It is worth emphasising their limited extent in the overall context of the report, and particularly in the light of the unaltered General Conclusions and Vulnerability sections.
Whatever the suggestion whether it is that the alterations were the product of undue executive influence or that they in some way demonstrate that the final report was unreliable or that the Secretary of State would have reached a different decision regarding the making of the 2004 Constitution Order if he had only been shown the draft rather than the final report the limited extent of the alterations in the overall context of the report points to my mind sharply against giving it credence or weight.
However, I must also examine the amendments more closely.
Taking first the change identified at [A] the main criticism is that The effect of this change is to delete from the feasibility study the important fact that the Chagos Islands are not within the cyclone belt at present, but to the North of it.
There is no information anywhere in the Phase 2B study to indicate that (1) the cyclone belt has moved, either northward or in any other direction, in the past; or (2) that it is likely to move in the future; or (3) that if it were to move it would move closer to the Chagos Islands as opposed to moving further away from them.
This is not however correct.
Both the Gifford/Dunne Analysis Note and Mr Jennesss report demonstrate that the passage removed from the draft executive summary remained in the body of the report: see E1330, citing passages from Part III which set out the same information as appeared in the draft about the effect of a small shift north in the cyclone belt.
A second criticism addressed to the change at [A] relates to the addition of new sentences stating that As a consequence [of climate change], most islands will experience increased levels of flooding, accelerated erosion, and seawater intrusion into freshwater sources and that The extent and severity of storm impacts, including storm surge floods and shore erosion are predicted to increase.
For the latter, it is said, There is no factual basis and it is not supported by a close reading of the body of the report.
As to this, two points arise.
First, both the draft and the final reports start by stating that the most significant and immediate consequences of climate change for the Chagos Archipelago are likely to be related to changes in sea levels, rainfall regimes, soil moisture budgets, prevailing winds and wave action.
The statements in the final version that As a consequence most islands will experience increased levels of flooding, accelerated erosion, and seawater intrusion into freshwater sources and that the extent and severity of storm impacts, including storm surge floods and shore erosion are predicted to increase follow unsurprisingly from this initial sentence.
Second, as to the criticism of lack of evidential support, no basis appears for doubting that these statements were fully endorsed, and if anything regarded as understated, by Dr Sheppard.
Dr (now Professor) Sheppard was at the time Head of Biological Sciences at Warwick University, and was (unlike Mr Jenness, who was a resettlement anthropologist) an acknowledged expert on climate change and marine science in general and on BIOT in particular.
He supported Posfords conclusions in this area and believed that they were, if anything, understated: see eg E2409, where on 14 May 2002 he commented on the draft report: Oceanographic, climate, groundwater and soils sections are scientifically sound (with some queries and revisions suggested).
These broadly show that development in the islands is not sensible, long term nor sustainable (and may even become dangerous) for the first two development scenarios.
See further E2461, where on 31st May Dr Sheppard noted, in relation to rainfall and recharging of the lenses and in view of changes to future rainfall projected by the Hadley Centres website, that the consequences to sustainable settlement numbers could be considerable; and E2519 to E2523 where in October 2002 he responded to Mr Jennesss criticisms of the final version, stating, in particular, that past lack of flooding, lack of erosion, steady temperature, are no guide at all to conditions from now on and that our climatic entry into the unknown is difficult to accept for those who are unversed in such matters, as seems to be the case with Jenness. (E2519)
Dr Sheppard went on (E2520): The climate modelling section, which is the part which most effectively supports the notion that resettlement will be hazardous is the most criticised by Jenness.
In fact the model is pretty rigorous and is probably correct.
It does miss some detail, but its general tenet is almost certainly, unhappily for the Chagos islands, quite accurate, and fits well with climate modelling and predictions from many other sources.
Again, Jenness is unaware just how much change is forecast. (If he is aware, he is writing propaganda, not a scientific critique.)
If anything, it is clear that Dr Sheppard thought that Posford should have gone further.
Thus at E2463 he is recorded as having advised on 31 May 2002 that following should be further addressed or resolved in the final report, viz Effects of sea level rise on the boundaries or depths of the lenses, especially in islands whose central parts are near sea level (two islands were levelled and this could be usefully incorporated).
Posfords response was that The effects of sea level rise on the groundwater systems was not in the TOR for the groundwater section.
As a further example, commenting on Mr Jenness views at E2522, Dr Sheppard records: Cyclones and Earthquakes Posford do go on a lot about cyclones and earthquakes, which is validly criticised by Jenness.
Whatever weather changes will occur, cyclones (and certainly earthquakes) are not expected to change at all.
Jenness is correct to say that Posford went overboard unjustifiably on this. (Posford should as was recommended to them have made more on sea level rise and warming, which is touched on, and would have been unassailable.) Dr Sheppards view about cyclones quite probably led to the removal of the reference to cyclones from the executive summary to the body of the text.
The final bracketed sentence also speaks against any idea that Posford were engaged in a whitewash, or that the consultants were not acting independently.
Dr Sheppard went on (E2522): Erosion and overtopping Jenness says that there is no need to defer any plans (for resettlement) before rates of island erosion are established.
That is plain daft, unless all constructions are moveable.
Jenness says that lack of overtopping damage in the past means that estimates of increased overtopping in future are exaggerated.
The climate is changing, and the past is now no guide to the future in this respect.
Jenness acknowledges elsewhere that climate change is occurring and that things may get worse.
But he says that this is no reason to not develop.
All that is needed is that development should use careful land use planning and management with strong components for costal management and reef health.
What does he mean? This sweeps a huge issue (the issue) under the carpet.
The only land which will be above projected flooding is a rim around part of most islands.
He says it should not preclude resettlement of the Chagos in a prudently planned fashion.
Where?
A final quotation from Dr Sheppard reads (E2524): Jenness has much to say about the omissions on health, economics etc.
Some are valid.
But he really should go and stand on one of the islands, holding a copy of the islands profile above sea level, before he says Land loss may be inevitable and should be planned for.
Loss of groundwater can be planned for . and . can be managed with modest investment.
This may be true for, say 20 years.
But beyond that we are talking here not about a little loss of a beach, but possibility of broaching of the rims and flooding of large inland areas.
The upshot is in my opinion that there is no basis for regarding as suspicious or actually or potentially significant in any way either (a) the removal in the final version of paragraph 1.8 of the reference to the possibility of a small northward shift of the cyclone belt or (b) the inclusion of (i) a reference to increased levels of flooding, accelerated erosion and seawater intrusion into freshwater sources or (ii) the predicted increase in severity of storm impacts, including storm surge floods and shore erosion.
I can take the other three key amendments, [B], [C] and [D] quite briefly.
The first, a change in respect of future sea water level rises from a range of 2 9mm per year to an average of 5mm a year cannot conceivably be sinister or significant, or, if it had been known to or focused on by any decision maker, have led to a change in any ministerial decision.
The second is a complaint that the draft executive summary referred to the general increase in storminess that may accompany climate change (E2397) while the final executive summary contained a paragraph starting Increased storminess (E2498).
The Summary Note does not record that the latter paragraph continues the Chagos islands have a small storm surge envelope thus even small changes in sea level and storm surge height implies an increase in the area threatened with inundation.
To my mind, there is therefore nothing in the difference.
But, if there is, it is clear from Dr Sheppards views, already set out, that he would support the reported threat.
The third and last point relates to a new paragraph noting that it is predicted that climate change may have a severe impact on the abundance and distribution of reef fish populations (E2499).
The complaint is that the body of the report is expressed in more nuanced terms.
Again, it is clear that Dr Sheppard took a clear view of the likely effects of climate change, and there is no reason to suspect that the final version represented anything other than a genuine prediction.
Any difference in nuance should also have been apparent and, whether or not so, cannot conceivably support an argument that the minister acted irrationally in making the Orders he did on the basis of the final report.
Heads (ii) and (iii)
These two heads face in opposite directions.
Both aim at undermining the stage 2B report.
But head (ii) does so by relying on Dr Sheppard and his alleged endorsement of criticisms by Mr Jenness, the resettlement anthropologist instructed on behalf of Mr Bancoult to consider the stage 2B report in autumn 2002, while head (iii) suggests that Dr Sheppards input into the stage 2B report lacked objectivity and was unreliable.
As to the latter suggestion, the applicant has through his representatives been prepared for a long time to cast wide ranging aspersions on a large number of people, including Dr Sheppard.
But I do not think that they are made good, and that includes the suggestions that Dr Sheppard allowed his interest in preserving coral reefs to influence the advice he gave government.
On the contrary, Dr Sheppard comes across in the material as a forthright and very independent character, not hesitating to comment bluntly on those working for government or for the applicant: see eg his email of 14 May at E2406, comments of 14, 30 and 31 May 2002 set out or reported at E2409 2422, E2450 2451 and E2460 2464 and further comments on Mr Jenness (some cited above) at E2518 2525.
I also see no basis for regarding the stage 2B report as unreliable or for treating reliance on it as irrational in 2004, simply because Dr Sheppard had been the sole outside reviewer instructed by the executive, in addition to Mr Little, who had been appointed as FCO Feasibility Study Project Manager.
As to the former suggestion, although Dr Sheppard agreed with aspects of Mr Jennesss report, it is apparent from his comments on that report which I have already set out that he disagreed fundamentally with any suggestion that Mr Jennesss report undermined the conclusions in the stage 2B report, and that he would himself have gone, if anything, further in discounting the risks of climate change that underlay those conclusions.
Conclusion relating to the Rashid documents
The essential issues, as summarised in Mr Fitzgerald QCs speaking note, are (i) whether due disclosure of the Rashid documents would have led to a challenge by Mr Bancoults representatives to the stage 2B report in the original judicial review proceedings, and, if so, (ii) whether it is likely that such a challenge would have resulted in a different outcome in the House of Lords on the rationality of the removal by the 2004 Constitution Order of the right of abode.
The two questions are of course inter connected, since any decision whether or not to challenge the stage 2B report would have depended on an assessment of the prospects of such a challenge succeeding.
As to the first question, some caution is in my view required before accepting outright the submission that it is certain that there would have been such a challenge.
Mr Bancoults advisers had in December 2005 had disclosure of Mr Hamiltons extensive letter dated 23 May 2002 evidencing the nature of the FCOs involvement in and input into the process of re drafting and finalisation of the report (see paras 20 and 37 38 above).
Mr Bancoults solicitors felt able, from January 2006 onwards, to make serious allegations about lack of independence of the stage 2B report as well as about allegedly significant alterations between the draft and final versions of the preliminary study from January 2006 onwards (see eg E1472 and E1487).
Yet, at the same time, the applicant through Sydney Kentridge QC was expressly disclaiming before the Divisional Court any challenge to the study or its outcome: see E1482.
Mr Bancoults advisers did not at that stage think they could or should even try to overcome the first hurdle.
Further, they maintained this attitude for years, including after disclosure in October 2010 of the email dated 29 May 2002 (paras 21 and 39 40 above), despite continuing to make serious allegations in correspondence of lack of independence and invalidity.
For present purposes, I am however prepared to assume without deciding that a challenge would have been made, and to proceed directly to a consideration of the second.
In Mr Fitzgeralds formulation, that is whether it is likely that such a challenge would have resulted in a different outcome but in my judgment it makes no difference ultimately whether the test should be formulated at the slightly higher level of a requirement to show a probability that it would have done so or at the perhaps slightly lower level of whether it may well have done so.
The second question reduces itself ultimately to a question whether it is probable or likely, or whether it may well be, that the material now available would have led the court (at whichever level the case was being considered) to conclude that it was irrational or unjustified for the Secretary of State to accept and act on the General Conclusions set out in the stage 2B report.
Those were the General Conclusions on which the Secretary of State acted when making, and which the majority in the House of Lords regarded as justifying his decision to make, section 9 of the 2004 Constitution Order.
In addressing this question, I proceed on the basis that it is necessary and appropriate to treat the Secretary of State, when deciding in June 2004 whether to make section 9 of the 2004 Constitution Order, as having available to him or within his knowledge all the contemporary material which in fact existed in the possession of the executive.
That includes the draft report and all the exchanges taking place and advice received in the process of its redrafting and finalisation.
Is it either probable or likely, or may it well be, that the court would have concluded that the material now shown to have been within the executives possession or knowledge at the relevant date in June 2004 undermines the rationality or justifiability of the Secretary of States decision to rely on such Conclusions?
The answer in my opinion is clear.
The General Conclusions, and the section on Vulnerability immediately preceding them remained unaltered from the draft to the final stage 2B report.
There is no probability, likelihood or prospect (and, for completeness, in my view also no real possibility) that a court would have seen or would see, in the process of preparation, re drafting and finalisation of the stage 2B report and in the associated material which can now be seen to have existed, anything which could, would or should have caused the Secretary of State to doubt the General Conclusions, or which made it irrational or otherwise unjustifiable to act on them in June 2004.
On that basis, the application to set aside the House of Lords judgment by reference to the Rashid and other documents disclosed late must fail.
Additional evidence
The first head consists of the Analysis Note.
This, as its name indicates, consists essentially of an analysis of primary material and/or submissions on it.
Its development has taken place over years starting originally it seems as early as 2006 and continuing up to at least 2012.
We have it in various forms.
It is not conceived or presented as evidence, though I have taken its contents into account in considering the parties respective cases and submissions on the material which is admissible and relevant.
The second head consists of information provided by Mr Stephen Akester, who, after their chance meeting, wrote to Mr Gifford a letter dated 11 February 2011 explaining the role of his company, MEP, as a sub contractor to Posford.
MEP was principally concerned with water resources and fisheries, and organised the site visit to the Chagos in early 2001.
Mr Akester explains that his own experience was in regional development.
In his letter, Mr Akester said that after the site visit, MEP reported and it appears provided Posford with the three development scenarios, after which Posford and he had no further involvement.
But he explained: Because I and our team considered that resettlement was feasible, I prepared a draft of the different levels of development that would be appropriate to support such resettlement, given the fragility of the islands and bearing in mind that there had, in contravention of the normal practice of consulting potential settlers, been no consultation with the Chagossians themselves (this was excluded from our terms of reference).
After submitting our report via PH to BIOT, I was surprised that we heard nothing further concerning the text of it either from PH or from BIOT.
I was not invited to any further meetings with BIOT, did not receive any draft prior to its critique by BIOT on 23 May 2002, and heard nothing more about the terms of the report until the final Executive summary had been approved by BIOT and sent to me.
By then, it was of course too late to make any further comments.
We were therefore unable to modify the terms of the General Conclusion which I find to be wrong in its claim that resettlement involves obstacles which cannot be overcome by reasonable measures.
Such issues are inherent in small island development and are regularly resolved within reasonable cost parameters.
That Posfords sub contractor may have disagreed with conclusions drawn by Posford is a matter outside any conceivable sphere of information or knowledge that the Secretary of State or executive may be treated as having had at any material time.
The material is thus correctly analysed as potential fresh evidence.
But fresh evidence going to what issue? The ultimate issue is whether the Secretary of State was justified in acting as he did on the material which was or should have been available to him at the time, not whether his decision could be justified on a revisiting of the whole issue of resettlement in the light of any other material which either party could adduce now.
In any event, the views expressed by Mr Akester in the letter dated 11 February 2010 cannot meet the test, however relaxed the terms in which this might be expressed, for setting aside the House of Lords judgment, even if they were material to any issue.
I say this quite apart from the fact that, despite complaints regarding suggested lack of independence, no step was taken to set aside that judgment in the years following receipt of such letter, until after the Rashid documents had been disclosed.
The third piece of evidence is a further review of the report, prepared for the applicant by Professor Paul Kench of the University of Auckland dated 5 October 2012.
According to the applicants case: He concludes that not only were the findings of the ocean and coastal processes section in the feasibility study unsound, because of lack of specialist understanding and methodological flaws, but also that the relevant summary (section 1.6) in the Executive Summary was not supported by those findings.
This conclusion casts grave doubt on the pivotal findings of the feasibility study with regard to increased risk of sea water flooding, which influenced the decision of the majority in the
House of Lords
Like the information in Mr Akesters letter, this material does not go to any issue relevant to the question whether the Secretary of State acted rationally in the light of the material to be treated as available or within his or the executives knowledge in June 2004.
It would be relevant if the issue were whether the conclusions in the stage 2B report were sustainable today.
But that is not the issue.
I add for completeness that I am also unpersuaded that any good reason has been shown for not obtaining such an experts report at any time prior to the disclosure of the Rashid documents, having regard to the serious allegations of inadequacy and lack of independence of the report that were being made at such time, both before and after receipt of Mr Akesters letter dated 11 February 2010.
The fourth piece of evidence is Posfords memorandum dated 7 March 2002, the information in which I am, for reasons already explained, prepared to take into account as material within the executives knowledge, but which does not persuade me that there is any basis for setting aside the House of Lords judgment.
Other relevant considerations
There is one other factor, which would have been both relevant and in my opinion decisive, had I reached a conclusion that the threshold test for setting aside was or might otherwise have been satisfied.
The applicant submits that nothing other than a reversal of the House of Lords decision (in so far as it proceeded on the basis that the stage 2B report could be relied on) will overturn the constitutional bar on their return to the Chagos.
But there has been a new 2104 2015 feasibility study, published by KPMG in March 2015, which assesses the risks differently from the prior report and finds that, at some cost and taking into account (for the first time) the possibility of resettlement on Diego Garcia itself (E925 926), there would be scope for supported resettlement: see E917 918.
In practical terms, the background has shifted, and logically the constitutional ban needs to be revisited.
As Mr Steven Kovats QC expressly accepted during oral submissions, it is open to any Chagossian now or in the future to challenge the failure to abrogate the 2004 Orders in the light of all the information now available.
That is in my opinion a factor militating strongly against the setting aside of the House of Lords judgment and ordering a rehearing either of the whole appeal or of the limited issue whether it was rational for the Secretary of State to make the 2004 Constitution Order in the light of the material available to him or the executive generally in 2004.
Even the latter issue could lead to further lengthy litigation and, quite possibly, a completely fresh hearing at first instance about a factually superseded study report.
There has been a yet further development consisting of the declaration by the Secretary of State on 1 April 2010 of the Marine Protected Area (MPA) in the high seas surrounding the Chagos Islands.
That declaration is the subject of a challenge by Mr Bancoult by way of judicial review in Bancoult (No 3).
The challenge failed before the Divisional Court on 11 June 2013, [2013] EWHC 1502 (Admin), and before the Court of Appeal on 23 May 2014, [2014] EWCA Civ 708.
It is now the subject of a combined application to the Supreme Court for permission to appeal and for a protective costs order without which it is said that it will not be possible to pursue any appeal.
The Secretary of States notice of objection dated 6 February 2015 in respect of this application supports the Court of Appeals statement that the MPA (the only practical effect of which according to the Divisional Court was to prohibit commercial fishing in BIOT waters) had no meaningful or real effect at all on the economic, cultural or social development of BIOT, basically because there never had been commercial fishing there and there is no resident population in BIOT outside the US naval defence facility.
Having said that, the notice goes on to state that: The MPA does not preclude resettlement in the event that Her Majestys government concludes that it is appropriate to permit and/or support resettlement of the islands.
Whilst that decision is being considered in the light of an ongoing Feasibility Study commenced in January 2014 (and expected to be the subject of an imminent report by a panel of experts), the possibility of commercial fishing within the BIOT by a resident population is not realistic without resettlement and without a resident population.
The Court of Appeal was right to note that it was therefore the prohibition on residential settlement on the BIOT which directly impacted upon the economic, social and cultural development of the BIOT.
But that was not the decision that was under challenge in Bancoult (No 3).
That decision was unsuccessfully challenged in Bancoult (No 2), culminating in a
decision of the House of Lords
These passages confirm that resettlement is not precluded by the MPA, if the outcome of the new KPMG feasibility study of the ensuing public consultation on resettlement options, and of the ongoing governmental policy review persuades the government that it is appropriate to permit and support resettlement.
If the outcome of that study, consultation and review does not persuade the government, then Mr Bancoult will be able, in principle, to apply to challenge the governments refusal to permit and/or support resettlement as irrational, unreasonable and/or disproportionate, whichever may in context be the right test, by way of judicial review.
If the MPA does prove to prejudice or limit the prospects of resettlement or the nature of any resettlement that may be permitted by the government or on judicial review by the Court, that will be a result of the MPA, which can only be avoided or removed by a successful challenge in the Bancoult (No 3) proceedings.
Conclusion
For all the reasons I have given, this application to set aside the House of Lords judgment and to direct a rehearing of the appeal to the House of Lords in Bancoult (No 2) fails in my opinion and must be dismissed.
LORD CLARKE:
I am in many ways sympathetic to the case advanced by Mr Bancoult.
Indeed, I was a member of the Court of Appeal which decided the appeal in his favour.
In these circumstances it is not perhaps surprising that I much prefer the reasoning of the minority to that of the majority in the House of Lords.
It is however common ground that the question now before the court is not whether the majority were correct but whether the issue should be re opened.
I have read the judgments of Lord Kerr and Lady Hale on one side and of Lord Mance, supported by Lord Neuberger, on the other.
I have reluctantly concluded that Lord Mances analysis is to be preferred and that the application should be refused for the reasons he gives.
One of the factors which has led me to that conclusion is that, as I see it, that is not the end of the road.
I agree with Lord Mances conclusion in para 72 that there is a critical factor which is in any event conclusive.
The background to much of the debate between the parties had been the feasibility of the Chagossians returning to the Chagos Islands.
The 2014 2015 feasibility study considers, among other things, the possibility of resettlement on Diego Garcia.
Given that new factor, the study concludes that there would be scope for supported resettlement.
As Lord Mance puts it, the background has now shifted and logically the constitutional ban needs to be revisited.
The outcome of the new (and ongoing) feasibility study will no doubt consider the prospects of resettlement.
In the light of the results of the study the government will no doubt consider whether it is (as Lord Mance puts it at para 75) appropriate to permit and support resettlement.
It was expressly accepted on behalf of the government that it will be open to any Chagossian to challenge the failure to abrogate the 2004 Orders in the light of all the information which is now available or becomes available in the light of the ongoing study.
For example, it will, at any rate in principle, be open to Mr Bancoult to institute judicial review proceedings to challenge any future refusal of the government to permit or support resettlement as, in Lord Mances words irrational, unreasonable or disproportionate.
In all these circumstances I do not think that it would be right now to set aside the judgment of the House of Lords and to direct a rehearing.
It would be disproportionate to do so without having regard to the new circumstances taking into account the possibility of resettlement on Diego Garcia.
LORD KERR: (dissenting) (with whom Lady Hale agrees)
Introduction
The Chagos Islands are in the middle of the Indian Ocean.
Since the early 19th century they had been part of the British colony of Mauritius but they were detached from that country before Mauritius gained its independence in 1968.
The islands consist of a group of coral atolls.
The largest of these, Diego Garcia, has a land area of approximately thirty square kilometres.
To the north of this are Peros Banhos (thirteen square kilometres) and the Salomon Islands (five square kilometres).
In 1962 a Seychelles company acquired the coconut plantations on these three islands.
The gathering of coconuts and the extraction and sale of the copra or kernel from them was the main form of employment for the inhabitants.
After the acquisition of the plantations, it appears that the company exercised a paternalistic, even feudal, control of the islands affairs.
Company officers acted as justices of the peace and generally administered most aspects of civilian life.
Partly as a consequence of that, Chagossians had what might be considered to be a simple existence.
They were largely illiterate and their skills were confined to those that the activities on the islands required.
But it was an existence which they valued and, especially when contrasted with what transpired after 1971, one which was unquestionably worthwhile.
Apart from indigenous inhabitants, some workers on the plantations came from Mauritius and the Seychelles.
But the settled population of the three islands was some 1,000 in 1962.
Many of the families which comprised that population had lived in the islands for generations.
Their living conditions, although not at all affluent, were far from deprived.
Every family had a house and some land.
They grew vegetables on the land and kept poultry or pigs to supplement the imported provisions which the company supplied.
Some fishing also took place.
All who wanted to have and were capable of employment had a job.
This was principally in the copra industry but employment was also to be had in construction, boat building and domestic service.
The Chagossians therefore enjoyed what Lord Hoffmann (in R (Bancoult) v Secretary of State for Foreign and Commonwealth Affairs (No2) [2009] AC 453) described as a rich community life.
World affairs were soon to interrupt that simple but rich community life.
Events are well described in para 6 of Lord Hoffmanns speech: Into this innocent world there intruded, in the 1960s, the brutal realities of global politics.
In the aftermath of the Cuban missile crisis and the early stages of the Vietnam War, the United States felt vulnerable without a land based military presence in the Indian Ocean.
A survey of available sites suggested that Diego Garcia would be the most suitable.
In 1964 it entered into discussions with Her Majestys government which agreed to provide the island for use as a base.
At that time the independence of Mauritius and the Seychelles was foreseeable and the United States was unwilling that sovereignty over Diego Garcia should pass into the hands of an independent, non aligned government.
The United Kingdom therefore made the British Indian Ocean Territories Order 1965 (the BIOT Order) which, under powers contained in the Colonial Boundaries Act 1895 (58 & 59 Vict c 34), detached the Chagos Archipelago (and some other islands) from the colony of Mauritius and constituted them a separate colony known as
In 1966, in an exchange of notes between the British and United States governments, the United Kingdom agreed in principle to make BIOT available to the United States for defence purposes.
Later in the same year it was agreed that a military base on Diego Garcia would be established and that the United States would be allowed to occupy the other islands if they wished.
In 1967, the UK government bought all the lands held by the Seychelles company.
Although the company was granted a lease which allowed it to continue to run the coconut plantations, it was stipulated that this would come to an end whenever the United States needed the islands.
In 1970 the US government gave notice that it would need Diego Garcia in July 1971 and, acting under powers granted to him by the British Indian Ocean Territories Order 1965, the Commissioner for BIOT promptly made the Immigration Ordinance 1971.
It provided (in section 4(1)) that no person shall enter the territory or, being in the territory, shall be present or remain in the territory, unless he is in possession of a permit [issued by an immigration officer].
Even before the making of this Ordinance, the UK authorities were active in preparing for the occupation of Diego Garcia by the United States.
Between 1968 and 1971 they secured the removal of the inhabitants of the island, mainly to Mauritius and the Seychelles.
A small population remained for a short time on Peros Banhos and the Salomon Islands, but they too were evacuated by the middle of 1973.
The islanders were told that the company was closing down its activities and that unless they accepted transportation elsewhere, they would be left without supplies.
In effect, therefore, although they were not forcibly removed, they were given no choice but to leave their homes.
The Chagossians were resettled mainly in Mauritius.
There they were largely left to their own devices.
Since that country suffered high unemployment and considerable poverty, the conditions in which the displaced Chagossians were required to live, principally in the slums of St Louis, were miserable and squalid.
It is now beyond question that their interests had not been considered by the British authorities to any extent.
Indeed, one might say that the removal of the Chagossians from their homes was cynically engineered by ensuring that the Seychelles company could no longer continue its commercial activities and that the inhabitants means of livelihood was thereby brought to an inevitable end.
As Lord Hoffmann put it (in para 10 of his speech), the removal and resettlement of the Chagossians was accomplished with a callous disregard of their interests.
Legal proceedings
In 1975 proceedings were issued by a former inhabitant of Diego Garcia, Michael Vencatessen, against the Foreign Secretary, the Defence Secretary and the Attorney General.
Damages were claimed for intimidation and deprivation of liberty associated with the circumstances in which he had been required to leave Diego Garcia.
In negotiations between the UK government and Mr Vencatessens advisers, the latter were treated as acting on behalf of all the Chagossians.
An initial purported settlement of the claim failed to win the approval of the Chagossian community and negotiations resumed in which the Mauritius government was also involved.
Finally in July 1982 it was agreed that the UK government would pay 4m into a trust fund for the Chagossians, set up under a Mauritian statute.
The agreement was signed by the two governments in the presence of Chagossian representatives.
It provided that individual beneficiaries should sign forms renouncing all their claims arising out of their removal from the islands.
The vast majority of the displaced persons signed.
Matters did not end there.
On 30 September 1998 Mr Bancoult applied for judicial review of the Immigration Ordinance 1971 and a declaration that it was void because it purported to authorise the banishment of British Dependent Territory citizens from the Chagos Islands.
He also sought a declaration that the policy which prevented him from returning to and residing in the territory was unlawful.
The UK government reacted to these proceedings by commissioning an independent feasibility study to examine whether it would be possible to resettle some of the Chagossians on Peros Banhos and the Salomon Islands.
Return to Diego Garcia was regarded as unfeasible because, under the arrangements made with the UK government, the United States was entitled to occupy that island until 2016 at least.
On 3 November 2000 the Divisional Court (Laws LJ and Gibbs J) gave judgment in favour of Mr Bancoult: R (Bancoult) v Secretary of State for Foreign and Commonwealth Affairs [2001] QB 1067 (Bancoult (No 1)).
An order was made quashing section 4 of the Immigration Ordinance 1971 as ultra vires.
The government did not appeal this decision.
Instead the Foreign Secretary issued a statement in which he referred to the feasibility study, Phase 2 of which was, he said, well under way.
As a result of the courts judgment, the statement said, the feasibility of resettling the Chagossians took on a new importance and a new Ordinance allowing them to visit the outer islands would be made.
On the same day that the statement was issued, the commissioner revoked the 1971 Immigration Ordinance and made the Immigration Ordinance 2000.
This largely repeated the provisions of the previous Ordinance but contained a new section 4(3) which provided that the restrictions on entry or residence imposed by section 4(1) should (with the exception of Diego Garcia) not apply to anyone who was a British Dependent Territories citizen by virtue of his connection with BIOT.
Some Chagossians visited the outer islands to tend family graves or to re familiarise themselves with the lands that they had been forced to leave.
No one attempted to resettle there.
Before the feasibility study was published, a group action was begun on behalf of the Chagossians.
This claimed compensation and restoration of the property rights of the islanders and declarations of their entitlement to return to all the Chagos Islands and to measures facilitating their return.
The action was taken against the Attorney General and other ministers.
On 9 October 2003 Ouseley J in Chagos Islanders v Attorney General [2003] EWHC 2222 struck out this action on the grounds, inter alia, that the claim to more compensation after the settlement of the Vencatessen case was an abuse of process, and that the claims were in any case statute barred.
An application for leave to appeal against that order was refused on 22 July 2004 (Dame Elizabeth Butler Sloss P, Sedley and Neuberger LJJ) [2004] EWCA Civ 997.
The feasibility report was published in June 2002.
Its findings were summarised by Lord Hoffmann in para 23 of his speech: It concluded that agroforestal production would be unsuitable for commercial ventures.
So there could be no return to gathering coconuts and selling copra.
Fisheries and mariculture offered opportunities although they would require investment.
Tourism could be encouraged, although there was nowhere that aircraft could land.
It might only be feasible in the short term to resettle the islands, although the water resources were adequate only for domestic rather than agricultural or commercial use.
But looming over the whole debate was the effect of global warming which was raising the sea level and already eroding the corals of the low lying atolls.
In the long term, the need for sea defences and the like would make the cost of inhabitation prohibitive.
On any view, the idyll of the old life on the islands appeared to be beyond recall.
Even in the short term, the activities of the islanders would have to be very different from what they had been.
In light of the feasibility report the government decided that it would not support resettlement of the islands.
In any event, in their perception, Diego Garcia would have to be excluded from any resettlement plans because of what was considered to be the UKs treaty obligations to the United States.
Added to these considerations were reports of planned direct action by various groups who intended to launch landing expeditions to the islands.
These factors combined to prompt the government to restore full immigration control.
The British Indian Ocean Territory (Constitution) Order 2004 (the Immigration Order) was made.
This included section 9 which provided: (1) Whereas the territory was constituted and is set aside to be available for the defence purposes of the government of the United Kingdom and the government of the United States of America, no person has the right of abode in the territory. (2) Accordingly, no person is entitled to enter or be present in the territory except as authorised by or under this Order or any other law for the time being in force in the territory.
A challenge to the validity of section 9 by way of judicial review was made.
The Divisional Court [2006] EWHC 1038 (Admin), paras 120 122 held that it was invalid because its rationality had to be judged by the interests of BIOT.
That meant the people who lived or used to live on BIOT.
The Court of Appeal (Sir Anthony Clarke MR, Waller and Sedley LJJ) [2008] QB 365 affirmed that decision but on somewhat different grounds.
The Master of the Rolls and Sedley LJ held that there had been an abuse of power in enacting the 2004 Order because the interests of the Chagossians had not been taken into account.
All three members of the Court of Appeal agreed that the Foreign Secretarys statement after the judgment in Bancoult (No 1) and the Immigration Ordinance 2000 constituted promises to the Chagossians which gave rise to a legitimate expectation that, in the absence of a relevant change of circumstances, their rights of entry and abode in the islands would not be revoked and there had been no such change.
The Court of Appeals decision was appealed to the House of Lords and by a majority (Lord Hoffmann, Lord Rodger and Lord Carswell, Lord Bingham and Lord Mance dissenting) R (Bancoult) v Secretary of State for Foreign and Commonwealth Affairs (No 2) [2009] AC 453 the appeal was allowed and the decision of the Court of Appeal was reversed.
The present application
By this application, Mr Bancoult, the respondent in the appeal before the House of Lords, seeks to have its decision set aside on the ground of material non disclosure.
He claims that documents held by the defendant which should have been produced in the course of the earlier proceedings are likely to have made a significant difference to the outcome of those proceedings.
Before examining that claim, it is necessary to say something about the various stages and phases that were planned for the feasibility study and how those stages and phases changed in the course of its progress.
It will also be necessary to consider the opinions of the House of Lords before assessing whether disclosure of the documents is likely to have affected its decision.
The various stages of the feasibility study and the process of disclosure
The report on stage 1 of the feasibility study had been published in June 2000 just before the hearing of Bancoult (No 1).
It was, the applicant claims, largely in favour of resettlement.
It identified fishing as a major means of subsistence for a resettled population.
Shortly after the Foreign Secretarys statement following the decision in Bancoult (No 1), the stages of the feasibility study were re named.
Stage 1 was now referred to as the preliminary study.
Phase 2A was to be a technical report on hydrogeological monitoring on the Salomon and Peros Banhos atolls.
A more substantial Phase 2B was to be a general examination of some pre requisites to re settlement, prior to the full cost benefit analysis that was originally intended to come at stage 2 but which would now be a stage 3 of the report.
Phase 2A, the hydrogeological survey, was started in 2001 but was never published as a separate report, its work being subsumed into Phase 2B.
The latter phase was begun in late 2001 and completed in mid 2002.
A report on it was published in July 2002.
The full cost benefit analysis, contemplated as stage 3 was never carried out.
Phase 2B reported that resettlement would be precarious and that its cost would be prohibitive.
The government decided not to proceed with the planned stage 3 (the cost benefit analysis).
It terminated consideration of resettlement, and introduced the 2004 Order prohibiting residence on the islands.
Richard Gifford was a partner in the firm of solicitors which acted for Mr Bancoult in the litigation which culminated in the decision of the House of Lords.
In advance of the hearing before the Divisional Court he sought disclosure of the drafts of the three phases of the feasibility study and of any comments made on these by officials.
Correspondence was exchanged with the Treasury Solicitor in which the relevance of some of the material sought was disputed but it is unnecessary to review this.
Comments on the draft of the preliminary study could not be located at first.
They were then discovered and supplied.
Mr Gifford claims that they revealed clear evidence of a crude re writing of the important General Conclusion from an entirely positive statement to a qualified one.
It might be thought that since the document which is said to have prompted the 2004 Order was the report on the Phase 2B study, the re writing of the preliminary reports conclusion is of no particular importance.
The fact that it was rewritten, however, when set against the now known position that there was extensive rewriting of the draft Phase 2B report may indicate a greater need for caution in examining the reasons for this rewriting.
On 6 December 2005 the Treasury Solicitor had written to Mr Gifford stating that draft reports for the preliminary feasibility study and the Phase 2B study report had been located and were available for inspection.
In a letter of 13 December, however, this statement was corrected and it was stated that only a draft of the preliminary study had been found.
No draft for the Phase 2B report had been found.
This was confirmed in a letter of 23 December 2005.
During the hearing before the Divisional Court a number of inquiries were made by the judges of the defendant as to whether all relevant documents had been disclosed.
The court was informed that if any further relevant documents were found these would be disclosed.
Subsequently, on 3 February 2006, Mr Bancoults solicitor wrote to the defendant, specifically asking for the disclosure of all documents and materials which demonstrate and support your counsels assertion that resettlement of the Chagos Islands is not feasible.
This was met with the response that the material was not relevant but, when the appeal against the Divisional Courts decision was pending, the UK Chagos Support Association asked for a copy of the draft of the Phase 2B report, and was informed by letter from the Foreign and Commonwealth Office on 6 October 2006 that no copy of the draft report had been retained on their files.
This was confirmed on 9 November 2006, in response to a Freedom of Information request.
The applicant claims that, faced with the absence of relevant documentation relating to the production and acceptance of the feasibility study, it was considered that a challenge to the reliability of the study could not be made.
Counsel for the claimant in the Court of Appeal therefore stated that the governments entitlement to terminate the feasibility study after the Phase 2B report and to decline to support a return to the islands was not contested.
In view of the appellants knowledge at that time, I do not consider that this was in any sense unreasonable.
In any event, the stance taken by counsel did not make the feasibility study irrelevant to the case, however.
The report remained relevant as being the alleged good reason relied on for not proceeding with resettlement and for denying Chagossians the right to return.
But the challenge to the governments decision would have been, the applicant claims, of a very different stripe, if the existence of highly critical comments on the Phase 2B report had been known.
Then the rationality of the decision not only not to fund resettlement but to deny Chagossians the right to return to the islands would have been strongly contested.
That challenge would have been founded directly on the lack of reasonableness in relying on a report which was so obviously flawed and open to criticism.
The existence of undisclosed documents first became known in the course of the hearing before the High Court of a case called R (Bancoult) v Secretary of State for Foreign and Commonwealth Affairs (No 3) [2013] EWHC 1502 (Admin).
That case concerned the creation of a no take marine protected reserve around the Chagos Islands on 1 April 2010.
In those proceedings Mr Bancoult challenged the legality of the creation of the reserve.
Exhibited to a witness statement filed on behalf of the Foreign Secretary (the defendant in the proceedings) was a bundle of documents.
The statement to which the documents were exhibited was that of Zaqia Rashid, a solicitor in the Treasury Solicitors department.
She observed that she produced the documents without comment as to the reasons that they had not been disclosed earlier.
Before Ms Rashids statement in Bancoult (No 3) had been received, Mr Bancoult had made a number of freedom of information requests to the Foreign and Commonwealth Office concerning drafts of the feasibility reports.
He was not satisfied with the replies that he received and lodged a complaint with Information Commissioner and a subsequent appeal to the First tier Tribunal General Regulatory Chamber Chagos Refugees Group (in Mauritius) v Information Comr (Case EA/2011/0030).
The hearing of the appeal took place after the documents attached to Ms Rashids statement had been received and was therefore principally concerned with two memoranda which had not been included in those documents.
It also touched on explanations given for the failure to disclose the documents, however.
The Foreign Office explained that this was due to a combination of factors.
There had been a clerical oversight in relation to some of these and a recall of archived material which was more rigorously reviewed in the course of the Bancoult (No 3) litigation led to others being disclosed.
What have become known as the Rashid documents (ie those exhibited to Ms Rashid statement) contained a draft version of the executive summary of the Phase 2B feasibility study; and a covering letter from Posford (Royal) Haskoning (the consultants appointed to carry out the study) forwarding the remaining draft volumes.
They also contained a number of documents generated during the preparation and finalisation of the feasibility study.
These included (1) documents relating to the scope of work to be undertaken both for the first part of the original two stage study, later re named the preliminary study under the Phase 2A contract and under the Phase 2B contract; (2) a memorandum of a meeting between BIOT officials and the consultants; (3) correspondence between the FCO and an external scientific adviser in relation to the Chagos Archipelago, Dr Charles Sheppard; (4) correspondence between the Foreign Office and the consultants and (5) details of the amendments to the draft Phase 2B report.
The House of Lords decision
The appeal to the House of Lords from the Court of Appeals decision ranged over three principal areas, only one of which is relevant to this application.
The first concerned the scope of the courts power to review the validity of an Order in Council legislating for a colony.
What were described as the extreme positions adopted by the parties were both rejected by Lord Hoffmann.
It had been argued on behalf of the government that no review of the making of an Order in Council was legally legitimate since this involved the exercise of a legislative power.
On behalf of the Chagossians it was claimed that the right of abode in ones homeland was so sacred that the Crown did not have power to remove it in any circumstances.
Lord Hoffmann decided that there was a power of review and that the main point in the appeal was the application of the ordinary principles of judicial review (para 52).
The question whether there had been any contravention of those principles was the second principal area involved in the appeal and it is this ground which underpins the current application.
I will consider it presently.
The other two members of the majority, Lord Rodger and Lord Carswell, agreed with Lord Hoffmann on his rejection of the extreme positions of the parties on whether the government had power to make the Order.
They also agreed that the courts had power to review the making of the 2004 Order on the normal judicial review grounds (paras 105 and 122).
The third area of dispute was whether a legitimate expectation on the part of the Chagossians had been created by the Foreign Secretarys statement and the 2000 Ordinance.
Lord Hoffmann held that this argument failed at the first hurdle that there had to be a promise which was clear, unambiguous and devoid of relevant qualification per Bingham LJ in R v Inland Revenue Comrs, Ex p MFK Underwriting Agents Ltd [1990] 1 WLR 1545, 1569.
Lord Rodger and Lord Carswell agreed.
In powerful dissenting speeches, Lord Bingham and Lord Mance concluded that the government did not have power by Order in Council to exclude the Chagossians from their homeland (Lord Bingham at para 71 and Lord Mance at para 160).
They also held that the Foreign Secretarys statement and the making of the 2000 Ordinance created a legitimate expectation on the part of the Chagossians that they would be allowed to return to the outer islands unless or until the United Kingdoms treaty obligations might at some later date forbid it Lord Bingham at para 73.
These findings and their conflict with the conclusions of the majority are not relevant to this application.
The findings of Lord Bingham and Lord Mance in relation to the rationality of the decision to make the 2004 Order most certainly are, however.
But before examining their reasons for determining that that decision was irrational, it is necessary to look at the speeches of the majority in order to see precisely why they considered that the charge of irrationality had to fail.
The summary of the findings of the feasibility report contained in para 23 of Lord Hoffmanns speech has been set out above (para 16).
This provided the backdrop to his examination of the issue of irrationality.
Having accepted Sir Thomas Bingham MRs statement of principle in R v Ministry of Defence, Ex p Smith [1996] QB 517, 554, to the effect that where a measure affects fundamental rights or has profoundly intrusive effects, the courts will anxiously scrutinise the decision to introduce it, Lord Hoffmann said this at para 53: However, I think it is very important that in deciding whether a measure affects fundamental rights or has profoundly intrusive effects, one should consider what those rights and effects actually are.
If we were in 1968 and concerned with a proposal to remove the Chagossians from their islands with little or no provision for their future, that would indeed be a profoundly intrusive measure affecting their fundamental rights.
But that was many years ago, the deed has been done, the wrong confessed, compensation agreed and paid.
The way of life the Chagossians led has been irreparably destroyed.
The practicalities of today are that they would be unable to exercise any right to live in the outer islands without financial support which the British government is unwilling to provide and which does not appear to be forthcoming from any other source.
During the four years that the Immigration Ordinance 2000 was in force, nothing happened.
No one went to live on the islands.
Thus their right of abode is, as I said earlier, purely symbolic.
If it is exercised by setting up some camp on the islands, that will be a symbol, a gesture, aimed at putting pressure on the government.
The whole of this litigation is, as I said in R v Jones (Margaret) [2007] 1 AC 136, 177 the continuation of protest by other means.
No one denies the importance of the right to protest, but when one considers the rights in issue in this case, which have to be weighed in the balance against the defence and diplomatic interests of the state, it should be seen for what it is, as a right to protest in a particular way and not as a right to the security of ones home or to live in ones homeland.
It is of course true that a person does not lose a right because it becomes difficult to exercise or because he will gain no real advantage by doing so.
But when a legislative body is considering a change in the law which will deprive him of that right, it cannot be irrational or unfair to consider the practical consequences of doing so.
Indeed, it would be irrational not to.
Some observations can be made about this passage.
In the first place it clearly implies that a decision to remove the Chagossians from their homeland with little or no provision for their future would indeed be a profoundly intrusive measure and one for which compelling justification would be required.
And, of course, this is precisely what happened between 1968 and 1973.
The Chagossians were removed.
The islanders need to accept that removal must have been seen by them as a matter of survival.
Whatever one might think of the argument that the evacuation of the islands was necessary (and, therefore, justified) in order to accommodate the American bases, it is impossible to defend the failure to ensure that the Chagossians were adequately housed and provided for in their new surroundings.
In accordance with the standard set by Lord Hoffmann, the decision to remove the Chagossians without making adequate provision for them and their subsequent actual removal when that provision was not in place must therefore have been irrational when those events occurred.
The fact that their removal, when it in fact occurred, was unreasonable cannot, in my opinion, be left out of account in assessing whether the subsequent decision to perpetuate the Chagossians exile was rational.
I will give my reasons for that conclusion later.
Secondly, it appears that Lord Hoffmann considered that the importance of the right to live in the outer islands, because it could not be fulfilled without financial help, was diminished because it was purely symbolic.
This was a view strongly challenged in the speech of Lord Mance.
In para 138 he said: [The wish of the Chagossians] for recognition of their historic connection, and on their case rights of abode, in relation to the Chagos Islands is deep felt, longstanding and, in my view, understandable.
Arguments that any right of abode is symbolic, since it would be impracticable to exercise without expensive government support to which it is accepted that there is no right and which would not be forthcoming, in my view miss the point.
If anything, they indicate that the right claimed could be recognised without this being likely to have any practical effect on the present state of the Chagos Islands.
These islands (apart from Diego Garcia) appear to exist as an unspoilt nature paradise to which an increasing number of long distance yachtsmen venture to spend periods of months without noticeable disturbance to the operations of the United States base at Diego Garcia many miles away.
This passage throws into sharp focus the question whether the practicability of fulfilment of an undeniable right affects its intrinsic worth.
It also emphasises the need to look closely at the question whether it was necessary to deny the Chagossians the right to live on the outer islands in order to avoid responsibility for funding such an option.
At a theoretical level at least, a clear distinction can be drawn between, on the one hand, a refusal to underwrite the costs of resettlement, and, on the other, depriving the Chagossians of the right to return to their homeland.
If all that the British government wanted to avoid was paying for the cost of resettlement, why should it not simply say so? But the riposte to an argument that it was unnecessary to forbid return to the islands and that refusing to fund such a return was enough to achieve the governments aims might be that given by Lord Hoffmann himself.
This was that to permit an unfunded return would merely assist in the campaign on which the Chagossians were embarked.
In order to frustrate that campaign, it was necessary to remove from the Chagossians their right to return to the place where they and their ancestors were born and had lived.
Lord Mance suggested (also in para 138 of his speech) that it had not been shown that that the Chagossians have been, in Bancoult (No 1) or the present proceedings, engaged in a mere campaign to obtain the UK government support for resettlement or to embarrass the United Kingdom and United States governments.
Whether or not there was evidence from which to infer that there was such a campaign, it is clear from Lord Hoffmanns speech that the rationality of the decision to enact the 2004 Order depended crucially on its being shown that the conclusion that it was necessary in order to forestall a campaign by the Chagossians was not unreasonable.
This is also clear from the speeches of Lord Rodger and Lord Carswell.
At para 112, Lord Rodger said that the decision to legislate and to introduce immigration controls appears to have been prompted by the prospect of protesters attempting to land on the islands.
And at para 132 Lord Carswell expressed his full agreement with Lord Hoffmann and Lord Rodger.
Does the decision of the majority on the issue of irrationality preclude any re examination of the question of whether the right of the Chagossians to go and live where they were born was merely symbolic or, if it was, that its importance was thereby devalued? Is the second question set out above (whether the purpose of the Chagossians challenge was to advance a campaign to obtain financial support from the UK government and to embarrass the UK and US governments) forever settled by the decision of the majority? In my opinion, the answer to these questions is a conditional no.
The conclusion that the decision to enact the 2004 Order could withstand the charge of irrationality was multi factorial.
If it now transpires that one of the bases for that conclusion was reliance on information that has now proved to be wrong or incomplete, this inevitably reflects on the cogency of the other grounds on which the conclusion was based.
The various reasons for a decision such as this are, of their nature, interlinked.
They may also be interdependent.
Weight given to one factor may be affected by the discovery that the weight given to another can no longer be sustained.
If, therefore, it emerges that the decision on the feasibility of resettlement was reached on information that was plainly wrong or open to serious challenge and that it is at least distinctly possible that a different decision on that question would have been formed had the full picture been known, it seems to me that the rationality of the enactment of the 2004 Order should be re examined generally.
Leaving that debate aside for the present, however, it is necessary to focus directly on the feasibility of a return to the islands and the various views expressed about that.
Lord Hoffmanns summary of his conclusions (para 23 of his speech) on this question have already been discussed.
He also relied on the written statement to the House of Commons on 15 June 2004 by the Foreign Office Under Secretary of State, Mr Bill Rammell, that in the light of the feasibility report it would be impossible for the government to promote or even permit resettlement to take place.
Lord Rodger also relied on the contents of the feasibility report and Mr Rammells statement.
At paras 112 and 113 he said this: 112.
On 15 June 2004 a junior minister, Mr Rammell, made a written statement to Parliament.
His good faith has not been impugned by the respondent.
The statement shows that, in deciding to legislate to prevent people resettling on the outer islands, the government took into account the fact that the economic conditions and infrastructure which had once supported the way of life of the Chagossians had ceased to exist.
Something new would have to be devised.
The advice was that the cost of providing the necessary support for permanent resettlement was likely to be prohibitive and that natural events were likely to make life difficult for any resettled population.
Human interference within the atolls was likely to exacerbate stress on the marine and terrestrial environment and would accelerate the effects of global warming.
Flooding would be likely to become more frequent and would threaten the infrastructure and the freshwater aquifers and agricultural production.
Severe events might even threaten life.
The minister recorded that, for these reasons, the government had decided to legislate to prevent resettlement.
Although he made no mention of it, the decision to legislate and to introduce immigration controls at that particular time appears to have been prompted by the prospect of protesters attempting to land on the islands.
In addition, Mr Rammell said that restoration of full immigration control over the entire territory was necessary to ensure and maintain the availability and effective use of the territory for defence purposes.
He referred to recent developments in the international security climate since November 2000 when such controls had been removed. 113.
The ministerial statement indicates that a decision to legislate was taken on the basis of the experts (second) report on the difficulties and dangers of resettling the islands these difficulties and dangers being dangers and difficulties which would affect the Chagossians themselves, if they were to try to live on the outer islands.
Given the terms of that report alone, it could not, in my view, be said that no reasonable government would have decided to legislate to prevent resettlement.
In particular, the advice that the cost of any permanent resettlement would be prohibitive was an entirely legitimate factor for the government which is responsible for the way that tax revenues are spent to take into account.
In addition, the government had regard to defence considerations, the views of its close ally, the United States, and the changed security situation after 9/11.
These additional factors reinforce the view that the decision to legislate was neither unreasonable nor irrational.
Although Lord Rodger noted that factors other than those outlined in the experts second report were in play, it is clear from these paragraphs that he acknowledged that the report was the principal influence in the governments decision.
He identified a number of features from it as being of particular importance: 1. the cost of permanent resettlement was likely to be prohibitive; 2. natural events would make life difficult for the inhabitants; 3. stress on the marine and terrestrial environments would be aggravated; 4. the effects of global warming would be increased; 5. flooding was likely to become more frequent and fresh water supplies and agricultural production would be endangered; and 6. severe events might even threaten life.
By any standard, these were anticipated consequences of considerable moment.
Lord Carswell also relied heavily on the report.
At para 121 he said that it was quite clear that resettlement was wholly impracticable without very substantial and disproportionate expenditure.
The practical difficulties in the way of resettlement were in his view relevant to the rationality of the governments decision.
The claims made for the rationality of the decision to introduce the 2004 Order were forthrightly rejected in a lucid and strong passage of Lord Binghams speech.
At para 72 he said: section 9 was irrational in the sense that there was, quite simply, no good reason for making it. (1) It is clear that in November 2000 the re settlement of the outer islands (let alone sporadic visits by Mr Bancoult and other Chagossians) was not perceived to threaten the security of the base on Diego Garcia or national security more generally.
Had it been, time and money would not have been devoted to exploring the feasibility of resettlement. (2) The United States government had not exercised its treaty right to extend its base to the outer islands. (3) Despite highly imaginative letters written by American officials to strengthen the Secretary of States hand in this litigation, there was no credible reason to apprehend that the security situation had changed.
It was not said that the criminal conspiracy headed by Osama bin Laden was, or was planning to be, active in the middle of the Indian Ocean.
In 1968 and 1969 American officials had expressly said that they had no objection to occupation of the outer islands for the time being. (4) Little mention was made in the courts below of the rumoured protest landings by LALIT.
Even now it is not said that the threatened landings motivated the introduction of section 9, only that they prompted it.
Had the British authorities been seriously concerned about the intentions of Mr Bancoult and his fellow Chagossians they could have asked him what they were. (5) Remarkably, in drafting the 2004 Constitution Order, little (if any) consideration appears to have been given to the interests of the Chagossians whose constitution it was to be. (6) Section 9 cannot be justified on the basis that it deprived Mr Bancoult and his fellows of a right of little practical value.
It cannot be doubted that the right was of intangible value, and the smaller its practical value the less reason to take it away.
Now, it is true that none of the reasons outlined in this paragraph touches on the question of feasibility as such but they provide a powerful and, in my view, unanswered case for rejecting the claim that the decision to introduce the 2004 Order was rational unless it could be shown that the feasibility argument was so strong as to outweigh it.
This is crucial.
If significant doubt could have been cast on the claims made in relation to feasibility, then the case for the government that its decision was rational would have been thrown into considerable disarray.
Lord Mance was unimpressed by the use of the feasibility report as a basis for denying the Chagossians their fundamental right of abode in their homeland.
At para 168 he pointed to the central incongruity of using a report published in 2002 to justify the enactment of the 2004 Order, two years later and to the circumstance that the government had been found to be under no legal obligation to fund resettlement: The report is in fact dated 28 June 2002, so the BIOT Order 2004 was enacted two years after the report, and nine months after Ouseley Js decision that the government had no duty to fund resettlement, although a month before the Court of Appeal finally refused permission to appeal against that decision.
In the absence of any legal obligation to fund resettlement, the prospective cost of doing so appears to me (as it did to Sedley LJ in the Court of Appeal: para 71) an unconvincing reason for withdrawing any right of abode and any right to enter or be present in BIOT.
The Secretary of State notes in his written case that, even in the absence of any legal obligation to fund resettlement (and although the United Kingdom has made clear its determination to resist any suggestion that it should provide such funds on a voluntary basis), there could be public and political pressure claiming that the United Kingdom should provide funding for the cost of resettlement.
That is not a reason articulated at the time or supported by any reference in the written case.
The logic of this reasoning is, in my opinion, irresistible.
At its height, the feasibility report spoke to the impracticability of resettlement and the inordinate cost of funding any attempt by the Chagossians to resettle in their homeland.
But it had been held that the government was under no legal obligation to fund a resettlement.
As a justification for denying the fundamental right of abode in the country of ones birth, therefore, the report could be relied on only to forestall public and political pressure on the United Kingdom that the government should meet what the feasibility report said was the inordinate cost of resettlement.
Quite apart from the consideration that, as Lord Mance pointed out, this was not a reason proffered by the government either by way of explanation of the reason for the 2004 Order or in its written case, this was a heavy burden for the report to bear.
It was not enough that it be shown that the cost was exorbitant or that resettlement was impracticable; these had to be so great that the risk of the government coming under pressure to meet the cost and permit resettlement was such that the Chagossians had to be refused the right to return to their traditional home.
Against that background, any reservations about the veracity of the claims made in the report assume an unmistakable significance.
Unless the report was compelling and irrefutable in its conclusions, its capacity to act as the sole justification for the denial of such an important right was, at least, suspect.
Many criticisms of the reliability of the Phase 2B feasibility study have been made on behalf of the applicant.
These have included examination of 1. the approach of the consultants to their task; 2. the editorial control exercised by the FCO; 3. the avowedly misleading representation that the consultants acted wholly independently; 4. the alterations to the terms of reference of the preliminary study; 5. the criticisms made of the scientific value of the Phase 2B report; and 6. the changes to the text of the report.
Many documents prepared to support the applicants case have been submitted.
While I have read and closely considered all of these, I do not find it necessary or helpful to set all of them out in any detail.
What follows is a summary of the principal matters to emerge from all this material which are pertinent to the central issue to be determined viz whether this appeal should be re opened.
The draft preliminary report and some of the changes made to it
An examination of the background to the Phase 2B report must begin with the preliminary stage report.
As mentioned (para 102 above) Mr Gifford claimed that there had been a crude rewriting of the conclusion of this report from the version in the original draft.
In its original conception the feasibility study was intended to comprise two stages, the first of which was to see whether settlement appears possible and environmentally acceptable (with an estimate of the numbers who might wish to return to the outlying islands).
Consultants delivered a draft report in May 2000.
The principal conclusion was contained in para 5.1.1: The conclusion of this preliminary study is that there is no obvious physical reason why one or both of the two atolls should not be repopulated, by the sort of numbers (up to or around one thousand) of Ilois [Chagossians] who are said to have expressed an interest in re settlement.
Carrying capacity is largely a function of the nature of economic activity which accompanies re settlement, and its capability of financing the necessary amount of resources to ensure adequate supplies of water and to minimise the environmental impact.
It was recognised that further feasibility studies would have to be undertaken and so the draft report continued at para 5.1.13: If a decision is taken to examine further the feasibility of re settlement, the next stage of the feasibility study should be largely concerned with examining the technical, financial, economic and environmental aspects of specific development proposals put forward by groups of islanders who are serious about re settlement and who have proper financial and technical backing for their proposed enterprises.
When the report reached its final form, there was a notable alteration to the principal conclusion.
In the published version it read in para 5.1: The conclusion of this preliminary study is that resettlement of one or both of the two atolls is physically possible, but only if a number of conditions are met.
These include confirmation that: the nature and scale of settlement will not a sustainable and affordable water resource can be developed; damage the environment; and basic services; and one or more private investors are willing to develop viable enterprises which can generate sufficient incomes to pay for the investment and recurrent costs of re settlement.
public money is available to finance infrastructure
Taken on its face, this change may not appear especially significant.
But, apart from the difference in language and structure, it had incorporated as essential pre conditions matters which the draft report had indicated should be the subject of further study and investigation.
Again, however, this may betoken no more than a recognition of a need for caution about future planning.
It is perhaps on this account that these changes did not feature to any great extent in the presentation of Mr Bancoults case at any of the stages of the proceedings which ended in the appeal to the House of Lords.
In light of changes to and criticisms of the draft Phase 2B report, it may be that greater importance should be attached to them and that they could be regarded as heralding a reluctance on the part of the government to countenance any return of the Chagossians to Peros Banhos and the Salomon Islands.
Certainly, it is not difficult to conclude that such an argument would have been made, had the criticisms of the draft Phase 2B report and the changes made to it been known.
What would have been made of such an argument is now perhaps difficult to say but the fact that it could have been but was not advanced should weigh in the balance as to whether the decision of the House of Lords should be set aside.
The draft Phase 2B report and the criticisms made of it
In his statement to the House of Commons Mr Rammell had said that the government had commissioned a feasibility study by independent experts to examine and report on the prospects for re establishing a viable community in the outer islands of the territory.
While it is strictly true that the consultants were independent, the terms of reference for the study made it clear that the BIOT government (for convenience, in the next sections this will be referred to as BIOT) retained the right to see and comment on a draft of the final report.
In particular, para 6.3 of the terms of reference for Phase 2B of the study provided that a draft final report, containing a report of the work done, conclusions and recommendations, had to be submitted to BIOT within four months of the assignment starting.
After BIOT received the draft, it was then able to make comments on it and it was only after these had been received that the final version of the report would be published.
All of this might be regarded as, if not standard government practice, at least not untoward.
But the applicant suggests that the way that the procedure in fact operated in this case robbed the final report of any claim to true independence.
He claims that when the extent of the widespread changes to the draft originally submitted became known (after the Rashid documents became available) what might have appeared as a wholly independent report took on a very different complexion.
It is further suggested that this conclusion is reinforced by a consideration of the contents of a memorandum of a meeting between on 6 March 2002 between Alex Holland of the consultants, Alan Huckle (head of the Overseas Territories Department and BIOT Commissioner), Louise Savill (BIOT Administrator) and Brian Little (FCO Feasibility Study Project Manager).
This followed 21 days of field work in Peros Banhos and the Salomon Islands.
A progress report covering the period from 25 January to 28 February 2002 was considered at the 6 March meeting.
This report laid down the future work programme, with draft reports from individual consultants due at Posford Haskoning by 22 March 2002, followed by submission of the entire first draft to BIOT on 31 March 2002.
The memorandum of this meeting was prepared by Ms Holland.
In it she recorded Mr Huckle as saying: The FCO had hoped that Phase II would negate the need for Phase III, ie if it concluded that resettlement wasnt feasible.
The comment is then made, realistically, that was never likely to be the outcome.
Lord Mance has stated at para 33 that there is no suggestion that the FCO was inviting changes to bolster any sort of findings or conclusions in either the draft and the final report, and no basis for regarding Posford as susceptible to any such invitation.
It is true that there is no record of an explicit invitation to bolster or change findings.
But it is telling that the memorandum recorded that FCO is hoping that the section on climate change will resolve its difficulties.
In my view, while these statements might be supposed not to entirely undermine the subsequent findings of the consultants, it is clear that the consultants were being given an unmistakable steer as to what FCO wanted the outcome of the report to be and, inevitably, whatever one might think about Posfords susceptibility to suggestions, this at least raises questions about the independence and impartiality of the judgment that the consultants ultimately made.
Those questions in turn play into the validity of the scientific analysis made by the consultants.
The Executive Summary of the draft report was received by BIOT in the week beginning 8 April 2002.
The remaining sections of the draft arrived on 15 April.
On 24 April 2002 Charles Hamilton (who had just succeeded Louise Savill as BIOT Administrator) asked Dr Charles Sheppard (a tropical marine ecologist at Warwick University who had extensive previous work experience in the Chagos) to carry out a peer review of the consultants report.
This was provided on 14 May 2002.
Dr Sheppard wrote an email to accompany his report.
In this he excoriated some parts of the consultants work.
Some sections of the report were, he said, quite hopeless.
These related principally to the resources section.
Importantly, however, Dr Sheppard endorsed the consultants conclusions on the practicability of resettlement largely on account of anticipated climatic conditions.
The consultants views on this were, Dr Sheppard said, supported by emerging science connected with tropical science generally.
It might therefore be said that on the central issue which influenced the majority in the House of Lords, viz whether resettlement was a feasible option, the consultants assessment was essentially supported by Dr Sheppard.
The applicant points to a more general criticism voiced by Dr Sheppard, however.
This, he says, is bound to have prompted his advisers to mount a wholesale and direct challenge to the methodology and reliability of the feasibility report generally.
In this connection, the applicant relies particularly on a sharp criticism of the report by Dr Sheppard in the following strongly worded terms: the present Posford report should not in my view be released in its present form; some of its science would be badly savaged by anyone not happy with your conclusions, and so, by implication, could some of the conclusions themselves.
The claim that if this comment had been known by the applicants advisers, it would have led to a more direct challenge to the feasibility report must be approached with caution in light of the fact that the applicant had engaged a resettlement anthropologist, Jonathan Jenness.
He was asked to conduct a review of the feasibility report primarily to provide input on the resettlement issues which were excluded from the Phase 2B study, but Mr Jenness also made some strong criticisms of the claimed conclusions of the study, without knowing how those conclusions had been arrived at.
Mr Jenness report was submitted to FCO.
The applicant and his advisers were unaware that it had been subjected to a critique by Dr Sheppard until FCO wrote to his solicitors on 2 December 2002 enclosing Dr Sheppards report.
He challenged and criticised a number of Mr Jenness conclusions but he said that many of his points about the inadequacies and errors in the Posford report were valid.
There must be some doubt, however, that Dr Sheppards acknowledgment that parts of Mr Jenness criticisms of the feasibility study were sound would have led to a markedly different strategy on the part of Mr Bancoults advisers, not least because of the astringency of Dr Sheppards other observations on Mr Jenness report.
Whether disclosure of Dr Sheppards critique of Mr Jenness would have led to a different conclusion by the majority in the House of Lords calls for rather more subtle consideration, however.
As I have said, the essential issue for the House of Lords was whether the cost of resettlement was so exorbitant or that resettlement was so impracticable that the risk of the government coming under pressure to meet the cost and permit resettlement was such that the Chagossians had to be refused the right to return to their traditional home.
It seems to me that, in light of Dr Sheppards general criticisms of the consultants report and his endorsement of some of Mr Jenness disparagement of it, it is at least questionable that such heavy reliance would have been placed by the majority on its conclusions.
Alterations made to the draft Phase 2B report
The draft report contained a supremely important passage at the second part of para 1.8, which was originally included in the section on resettlement.
It reads: the most significant and immediate consequences of climate change on a resettled population within the Chagos Archipelago are likely to be related to changes in sea levels, rainfall regimes, fresh water resources, soil moisture budgets, prevailing winds (direction and speed) and short term variation in regional and local patterns of wave action.
At present the Chagos archipelago lies just north of an active cyclone belt, however, a small northward shift of this belt could lead to frequent cyclones in the area.
This would lead to more frequent flooding of the islands, with corresponding risk to life and any infrastructure.
It would also reduce agricultural potential and the freshwater contained within the island aquifers would experience higher levels of salinity. (emphasis added)
The final version of the report in the equivalent section was in the following terms: The most significant and immediate consequences of climate change for the Chagos Archipelago are likely to be related to changes in sea levels, rainfall regimes, soil moisture budgets, prevailing winds and short term variation in regional and local patterns of wave action.
As a consequence most islands will experience increased levels of flooding, accelerated erosion, and seawater intrusion into freshwater sources.
The extent and severity of storm impacts, including storm surge floods and shore erosion are predicted to increase.
Although the risks associated with climate change are not easily established the implications of these issues to resettlement in the outer atolls of the Chagos Archipelago are outlined briefly below (emphasis added).
The most obvious and significant points to be made about these two passages is in (i) the transformation of a conditional forecast of frequent flooding etc, predicated on a possible northward shift of the active cyclone belt, into a firm prediction that these and other consequences will occur; (ii) the omission of any reference to the cyclone belt in the final version; and (iii) the new wording in the final version predicting an increase in storm surge floods and shore erosion unconnected with cyclones.
A new sentence has been added stating that [t]he extent and severity of storm impacts, including storm surge floods and shore erosion are predicted to increase.
No evidence was provided to support the assertion contained in this sentence.
The significance of translating the prediction of possible consequences of climate changes into a positive statement that these will occur lies, of course, in the impetus that it gives to the notion that there really was no practical means of resettling the islands.
As it happens, there is no evidence that these consequences have begun to materialise even now, although that may not be taken into account on the issue of whether the application to re open the appeal should be allowed.
But the essential message of the final report that these consequences would occur cannot but have influenced the decision of the majority of the House of Lords that the perceived need to enact the 2004 Order was not irrational.
It is one thing to say that it is rational to forbid Chagossians to return to their homeland if the dire consequences that were spoken of were going to occur.
It is quite another to say that it was reasonable if it was merely possible that they might happen.
The jurisdiction to set aside a decision of the House of Lords and the test to be
applied
It is possible, at least theoretically, to distinguish between the question whether this court has jurisdiction to set aside a decision of its predecessor and the test to be applied in deciding whether to do so.
In practice, however, these concepts overlap because the jurisdiction tends to be defined in terms of the conditions which justify its invocation.
In R v Bow Street Metropolitan Stipendiary Magistrates, Ex p Pinochet Ugarte (No 2) [2000] 1 AC 119, 132D, Lord Browne Wilkinson said: 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.
There is likewise no relevant statutory limitation on the jurisdiction of this court.
And its inherent jurisdiction must comprehend the right to correct an injustice caused by an earlier order made by it or however such injustice arises.
This point was made by Lord Hope, delivering the judgment of the panel in R (Edwards) v Environment Agency (No 2) [2011] 1 WLR 79 where he said at para 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
Of course, in this context, what is meant by injustice is the critical issue.
Providing a comprehensive definition of the circumstances in which it would be appropriate to exercise this jurisdiction is impossible but one can begin with the uncontroversial statement that it must be sparingly invoked.
Lord Browne Wilkinson was careful to make that point in emphatic terms.
At 132E of Pinochet he said: it should be made clear that the House will not re open any appeal save in circumstances where, through no fault of a party, he or she has been subjected to an unfair procedure.
Where an order has been made by the House in a particular case there can be no question of that decision being varied or rescinded by a later order made in the same case just because it is thought that the first order is wrong.
By wrong in this connection one may safely assume that Lord Browne Wilkinson had in mind a conclusion that the earlier courts decision was, in the minds of the subsequent panel, one which should not have been reached on the particular facts and legal issues before it.
So it is not sufficient to show that the earlier decision was wrong in that sense.
But is it necessary to show that, not only was a party subjected to an unfair procedure but that a wrong decision was thereby procured? On one view, the statement in the earlier passage quoted above, that the jurisdiction should be invoked to correct any injustice might indicate this, for how could an injustice occur if the outcome of the proceedings would have been the same in any event? But Lord Browne Wilkinsons later reference to Broome v Cassell (No 2) suggests that the jurisdiction is not so confined.
This appears to indicate that where parties have not had a fair opportunity to address argument on a relevant point, an injustice, sufficient to animate the jurisdiction, is present.
The question remains, however, whether it is a necessary prerequisite that the earlier decision would not have been, or is likely not to have been, reached, if the defect in procedure or other irregularity had not occurred.
The applicant has accepted that it must be shown that the non disclosure probably had, or may well have had, a decisive effect on the outcome.
This concession was based largely on Court of Appeal jurisprudence.
The respondent agreed with the applicants formulation of the appropriate test.
In Taylor v Lawrence [2002] EWCA Civ 90; [2003] QB 528, it was held that the Court of Appeal could re open proceedings which it had already heard and determined if it was clearly established that a significant injustice has probably occurred and that there is no alternative effective remedy.
It is apparent that significant injustice in that case connoted an actual injustice (in the form of an adverse result which should not have occurred), although, as it happens, no such injustice was held to have happened there.
A tangible injustice in the form of the probably wrong outcome was considered to be necessary.
This approach was followed in Feakins v Department of the Environment, Food and Rural Affairs [2006] EWCA Civ 699.
After Taylor v Lawrence was decided, CPR 52.17 headed Re opening of Final Appeals was promulgated on 6 October 2003.
It provided: The Court of Appeal . will not re open a final determination of any appeal unless it is necessary to do so in order to avoid real (a) injustice; (b) appropriate to re open the appeal; and (c) there is no alternative effective remedy.
the circumstances are exceptional and make it
No such provision exists in the Supreme Court Rules.
Obviously, there will customarily be no alternative effective remedy where the decision that is sought to be re opened is one of the Supreme Court.
Should the approach of this court be the same as that otherwise indicated in this provision? For reasons earlier given, the power to re open should be invoked sparingly and the need for exceptional circumstances is unobjectionable.
The requirement that the circumstances are such as to make it appropriate to re open the appeal is somewhat general and rather begs the question, when is it appropriate that the appeal should be re opened.
This is an issue on which, I think, it is quite impossible to be prospectively prescriptive.
It seems to me, therefore, that the truly important condition in CPR 52.17 is that the re opening of an appeal should be necessary in order to avoid injustice and that this is the touchstone which this court should adopt as a guide to when this exceptional course should be followed.
Does real injustice involve a conclusion that the circumstance which prompts the application to re open the appeal probably had, or may well have had, a decisive effect on the outcome? I am content to say that this should normally be required.
But I enter two caveats to that proposition.
In the first place, it may not always be possible to forecast that such a decisive effect would probably or might well accrue.
In that event, I would not preclude in every circumstance the possibility of a re opening of the appeal.
The second possible exception to the general rule might arise where the behaviour of the party whose failure to place before the court relevant material was so egregious that, even if it was not considered likely that the outcome of the appeal would be affected, it would nevertheless be appropriate that the appeal be re opened in order to demonstrate that all pertinent information had been fully considered and that due process had been followed.
Neither situation arises here.
I am satisfied, therefore, that it is incumbent on the applicant to show that if the material in the Rashid documents had been available to the House of Lords they would have had, or may well have had, a decisive effect on the outcome of the appeal.
I am entirely satisfied, however, that it is enough that it be established that there is a real possibility that a different outcome would have occurred had the information been available at the time of the original hearing.
How could it be otherwise? If it is shown that it is distinctly possible that a party might have achieved a different result had relevant material been available to it, I cannot understand how it could be said that that party has not suffered an injustice by being denied the material and thereby being denied the opportunity of securing the outcome that they sought.
If I might have persuaded the court that it should reach a different view if I had material that could have influenced that view, have I not suffered an injustice by being deprived of that chance? Of course I have.
To the extent that Taylor v Lawrence and Feakins v Department of the Environment, Food and Rural Affairs suggest otherwise I emphatically disagree with them.
It is, therefore, my firm belief that it is not necessary to show that it was probable that a different outcome would have been brought about; it is enough that there exists a distinct possibility that this would be so.
Furthermore, the formulation whether it was irrational or unjustified for the Secretary of State to accept and act on the General Conclusions does not focus on the essential issue here.
It was not simply a question of the Secretary of State accepting the conclusions; it was a matter of using those conclusions as a basis for denying a right of abode to the Chagossians solely in order to deter a campaign by the Chagossians to be allowed to return to their homeland.
The House of Lords was not addressing in the abstract the question of the rationality or justifiability of the Secretary of States decision to rely on such conclusions (Lord Mance in the final sentence of para 64).
What it was about was an examination of the sufficiency of his reliance on those reasons as a basis for denying the Chagos Islanders entitlement to return to live in their homeland, when there was no question of any legal obligation on the part of the government to fund that return.
It is therefore, I am afraid, not enough to say that there was nothing in the re drafting and finalisation of the stage 2B report which could, would or should have caused the Secretary of State to doubt the General Conclusions or which made it irrational or otherwise unjustifiable to act on them in June 2004 Lord Mance para 65.
The critical issues were the nature of the action taken and the background against which it occurred.
It might not be irrational to accept the conclusions of the report but that, with respect, is simply not the point.
The question is whether it was rational to deny these islanders their fundamental right to live where they and their ancestors were born for the sole reason of seeking to avoid a potentially embarrassing campaign that the British government should put right the callous disregard that had been shown them when they were effectively forced from the islands between 1968 and 1973.
The House of Lords was not merely considering whether it was reasonable for the Secretary of State to accept the reports findings.
The rationality challenge was to the action that he took, having accepted those findings.
In the knowledge that the British government was not under any legal obligation to fund resettlement and that the most it had to fear was a campaign by the islanders that they be allowed to return home and that the government should facilitate that, the minister decided that they should be denied their right of abode in their homeland.
That is the true nature of the rationality challenge.
And that is why (as I explain at para 165 below) that it is necessary to recognise how severe the challenge to justify the 2004 Order truly was.
When that central truth is confronted, it becomes clear how any doubt on the authority of the report was likely to or certainly should have caused the majority of the panel to question the rationality of the decision.
And that is why there is, at the very least, a distinct possibility that there would have been a different outcome.
Would the Rashid documents have had, or may they well have had a decisive effect?
In my view the principal relevant documents exhibited to Ms Rashids statement were: 1. the memorandum of the meeting of 6 March 2002 in which the governments hopes for the outcome of the feasibility study were made clear; 2.
Dr Sheppards critique of the draft Phase 2B report; 3.
Dr Sheppards endorsement of some of Mr Jenness criticism of the feasibility study; 4.
The draft Phase 2B report which, when contrasted with the final report, illustrated the distinct change in emphasis in the prediction of climate changes, especially since these bore directly on the question of the feasibility of resettlement.
In deciding whether the disclosure of these documents before the appeal was heard by the House of Lords would or might well have had a decisive effect on the outcome, one must keep closely in mind the real issue on rationality.
This was whether it was rational to deny the Chagossians the right to return to their homeland in order to deflect or prevent a campaign that the UK government should fund resettlement costs.
The issue was not whether it would be reasonable for the government to meet those costs.
It had been decided that there was no legal obligation on them to do so.
It could not, therefore, be sought to justify the decision to introduce the 2004 Order on the basis that it was not reasonable that the UK government should have to fund the resettlement costs.
The government did not need to defend a decision that it would not pay for resettlement.
It had been told by a court that it was not legally obliged to do so.
What motivated the decision to categorically forbid the Chagossians the right to go back to live in their homeland was an anticipated campaign that might have been politically embarrassing for the government.
When this apprehended harm is pitted against the importance of the right to be denied, it is not difficult to recognise how severe the challenge to justify the 2004 Order truly was.
People were told that they could not go back to live where they and their ancestors had lived.
Moreover, that denial took place against a background that they had been evacuated from the islands in circumstances which were plainly unjustified.
When the decision came to be made in 2004 whether they should be allowed to return to live in the outlying islands, the fact that their removal from them had been organised with callous disregard of their interests was a plainly relevant circumstance.
It could not have been properly left out of account by a conscientious decision maker.
There is no evidence that regard was had to that factor.
Irrespective of whether it was or not, however, the circumstances in which the Chagossians were originally removed from their homeland rendered any subsequent decision to refuse to allow them to return all the more difficult to justify.
If the Rashid documents had been before the House of Lords, the following matters would have had to be squarely confronted: the draft report had to be submitted to BIOT officials who had the (i) despite the claims for their independence, the consultants had been told in unequivocal terms what the government hoped would be the outcome of their report; (ii) opportunity to approve or require amendment of its contents; (iii) much of the science of the report (although not that relating to climatic changes) had been severely criticised by Dr Sheppard; (iv) many of the criticisms of the report by Mr Jenness had been endorsed by Dr Sheppard (even though he was also extremely critical of Mr Jenness); (v) most importantly, the draft reports central findings in relation to climate change, couched in conditional terms, had been altered to provide a firm prediction that such changes would take place.
In my view, the collective effect of these revelations is that the appeal might well have been decided differently.
The passages from the speeches of the majority which have been quoted earlier, for perfectly understandable reasons, bear no trace of reservation or doubt as to the anticipated consequences of any attempt to resettle the islands.
If the members of the House of Lords knew that much of the science of the report was considered to be suspect by the scientist retained by the FCO; that the consultants had been given a clear indication of what the government hoped the report would deliver; that the changes to the conclusions of the preliminary study (which were known) proved to be a mild herald of the more radical changes to the Phase 2B report; that the Chagos Islands were not in an active cyclone belt and that this had a direct bearing on the predictions contained in the report, is it likely that the speeches of the majority concerning the anticipated consequences of an attempt to resettle would have been expressed in such emphatic terms? In my judgment it is not.
And if the majority felt compelled, as it surely would, to recognise the lack of certainty in some of the central predictions, is it likely that they would have been prepared to hold as rational a decision to completely deny the Chagossians the right to return to their homeland, simply because a failure to do so would give rise to a campaign that the government should fund resettlement, when it had already been held that they were under no obligation to do so? In my opinion, it is at least distinctly possible that a different view would have been taken by the majority and that the outcome of the appeal would have been different.
I would therefore grant the application to re open the appeal.
Other matters
(i) New evidence
The applicant sought to introduce new evidence which, he claimed, would show that the dire consequences which the feasibility study predicted have not in fact materialised and were, in any event, highly suspect from the start.
Four species of evidence were involved: (i) a comprehensive analysis of the Phase 2 feasibility study based on a comparison of the original draft disclosed in the Rashid documents with the final published version of the study and on other information contained in the documents.
This was prepared by Richard Gifford and by a coral reef scientist, Richard Dunne; (ii) information provided to the applicant by Stephen Akester, who was one of the members of the team which prepared the feasibility study.
Mr Akester stated that he did not agree with the conclusion of the feasibility study that resettlement was not feasible, and that he was not consulted about the finalisation of the original draft of the study.
It is claimed that he was the only member of the team of consultants the only person with direct experience of re settlement on small coral atolls; (iii) a review of the feasibility study, prepared by Professor Paul Kench, of the University of Auckland, New Zealand, dated 5 October 2012.
He concluded that not only were the findings of the ocean and coastal processes section in the feasibility study unsound, because of lack of specialist understanding and methodological flaws, but also that the relevant summary in the executive summary was not supported by those findings.
This conclusion, it was claimed, cast grave doubt on the pivotal findings of the feasibility study especially in relation to increased risk of sea water flooding; (iv) the written note of 6 March 2002, referred to in para 138 above.
It is not open to an applicant for a re opening of an appeal to adduce evidence solely for the purpose of retrospectively impeaching the decision of the court whose judgment he seeks to have reviewed.
This would, in effect, allow an appeal against the decision based on information acquired for the purpose of undermining the judgment.
An application to re open an appeal must be based on the contention that if the original appeal had been conducted in the way that it ought to have been, it is probable or at least distinctly possible that there would have been a different outcome.
On this account, much of the material which the applicant seeks to introduce is not admissible, irrespective of whether it complies with the conditions which should be met, based on the principles of Ladd v Marshall [1954] 1 WLR 1489, for the introduction of fresh evidence.
In truth, an application to re open an appeal will rarely, if ever, be the occasion for an application to introduce fresh evidence in the conventional meaning of that term.
The essence of an application to re open an appeal, in so far as it relates to evidence, is that evidence which should have been before the original court was not.
For this reason, I consider that none of the so called items of evidence in the first three categories above is admissible.
The memorandum of 6 March 2002, by contrast constitutes material which ought to have been disclosed before the Divisional Court hearing.
If it had been, I consider that it would unquestionably have featured in that and subsequent proceedings in the case, bearing, as it undoubtedly did, on not only the independence of the consultants but also on the result that the Foreign Office hoped to obtain from the feasibility study. (ii) The paucity of the peer review of the feasibility study and Dr
Sheppards impartiality
It was argued on behalf of the applicant that, in light of the range of subjects covered by the feasibility study, a professional peer review of the draft study, carried out by up to six specialists was essential.
Unique reliance on the expertise of Dr Sheppard, whose specialism is coral reef ecology, was insufficient to give the report the authority that it required.
There is nothing in this point.
If the rationality of deciding to introduce the 2004 Order depended at all on the robustness of the peer review of the feasibility study, this point could have been made during the earlier proceedings.
But, in any event, while it may be good practice to have a comprehensive peer review of a report such as the feasibility study, that is a very far cry from saying that it was irrational to rely on the study in the absence of such a review.
It was suggested that Dr Sheppards input into the revision of the draft of the feasibility study was mainly composed of criticisms of those parts of the study which tended to suggest that resettlement was feasible.
Thus in his input to the final version he described the natural resources sections, which suggested a variety of ways in which natural resources could be exploited to provide a livelihood for the islands as dismal, while stating that the oceanographic, climate, groundwater and soils sections were scientifically sound.
This, it was claimed, reflected the fact that Dr Sheppard was well known to be strongly dedicated to [the] conservation [of coral reefs] and it was therefore questionable whether he could reasonably be regarded as an objective assessor of a study on the issue of reintroducing human settlement to the pristine and now deserted environment which he was so committed to protecting.
Even if one was prepared to take these highly contentious and untested claims at their height, they fall very far short of showing that taking Dr Sheppards views into account in deciding to introduce the 2004 Order was irrational.
The applicant does not dispute that Dr Sheppard was a well recognised expert in his field.
The suggestion that he might have allowed his interest in preserving coral reefs to influence the advice that he gave to the government is, at best, speculative.
I consider that this argument is without merit.
Is the application moot?
The respondent has argued that events occurring since the decision of the House of Lords and a further review of the feasibility of resettlement render this application unnecessary.
In July 2013 the respondent announced that a new feasibility study would be carried out.
The terms of reference for this study were published on 31 January 2014.
The new study was to consider a range of options for the re settlement of BIOT, including not just the outer Chagos Islands but also Diego Garcia where the United States military base is located.
These developments do not render the re opening of the appeal of merely academic interest.
If the original judgment of the House of Lords is not set aside, the starting point for all future consideration of the resettlement issue will be that section 9 of the Constitution Order is valid, and that the removal of the Chagos Islanders right of abode was lawful.
If it proves that there would have been a different outcome in the appeal before the House of Lords if the material from the Rashid documents had been before their Lordships, it would obviously not be right that the position concerning the Chagossians right to return to their homeland, recognised first by the Divisional Court, should not be retrospectively vindicated, with whatever legal consequences that this might entail.
Lord Mance in para 72 and Lord Clarke in para 78 of their judgments have characterised as conclusive the consideration that the 2014/5 feasibility study takes into account the possibility of resettlement on the islands, including Diego Garcia.
They both suggest that the background has now shifted and that the constitutional ban needs to be revisited.
With respect, whatever the outcome of the 2014/5 feasibility study, it cannot be right to suggest that this is relevant to a decision whether the appeal should be re opened, much less that it is conclusive of that issue.
The fallacy of the suggestion can be demonstrated in this way: let us suppose that timeous disclosure of the Rashid documents would have led the House of Lords to a different conclusion on the question of the rationality of the decision to make the 2004 Orders.
Could it seriously be suggested that the appeal should not be re opened because of the possibility that the Chagos Islanders might be allowed to resettle in entirely different circumstances and for completely different reasons than those which underlay the original decision? What is the juridical basis on which such a conclusion might be made? Is it an instance of the exercise of judicial discretion to deny a remedy to which the applicant is otherwise plainly entitled? For such a result, it would be necessary to demonstrate that the applicant would achieve the same result as would accrue on the successful re opening of the appeal.
Alternatively, it might be suggested that there are occasions where it is appropriate for a court to take a pragmatic view and dispose of a case in a particular way because of a new factual context.
Quite apart from the unfortunate imprecision of such an approach, it must surely only be permissible when the particular disposal allows the court to achieve justice in the changed circumstances.
Given the narrowness of the issue before the Supreme Court on this appeal, taking account of changed circumstances in the Chagos Islands does not achieve justice.
We are not in a position to make an order that vindicates the applicants right to resettle on Diego Garcia or elsewhere on the archipelago.
The suggestion that we need not re open this appeal because of the possibility that the 2014/5 feasibility study would permit resettlement depends on (a) the government changing its stance as a result of the study; failing which (b) the applicant or others of like mind having the appetite to bring forward yet further litigation, despite the unhappy previous experience of past proceedings; (c) their being able to secure the services of lawyers prepared to work for them pro bono or on some other uncertain basis; and (d) the courts deciding in favour of the Chagossians in that speculative litigation.
Even if it could be said that a favourable outcome of the 2014/5 feasibility study is possible, the Chagossians ability to obtain the result that the original appeal, if successful before the House of Lords, would have achieved is remote in the extreme.
That this should provide a basis for denying them an outcome to which they were otherwise entitled is in my view inconceivable.
The respondent has claimed that there was undue delay in making the application to re open the appeal.
I do not consider that there is any merit in that claim.
The Rashid documents were disclosed on 1 May 2012, in the course of the Bancoult (No 3) proceedings.
The applicant sought to raise the issue of their non disclosure in those proceedings.
He was not permitted to do so.
It was held that the feasibility study had not played a part in the decision to create a marine protected area paras 81 to 93 of judgment given on 11 June 2013.
That decision was appealed to the Court of Appeal, and judgment was given in the Court of Appeal on 23 May 2014 ([2014] EWCA Civ 708; [2014] 1 WLR 2921).
The applicant then sought to resolve the matter by inviting the respondent to agree that the judgment in the present action should be set aside by consent.
This request was made in a letter dated 5 December 2013.
It was refused on 5 January 2014.
Counsels opinion was obtained on 26 January 2014 and legal aid was applied for immediately.
It was eventually granted on 29 September 2014.
There is no suggestion that the applicant was in any way responsible for delay between the submission of the application for legal aid and its grant.
The application form was filed on 9 January 2015.
There was no culpable delay on the part of the applicant.
Duty of candour
A respondents duty of candour in judicial review proceedings is summarised at p 125 of Fordhams Judicial Review Handbook (Sixth Edition 2012): A defendant public authority and its lawyers owe a vital duty to make full and fair disclosure of relevant material.
That should include (1) due diligence in investigating what material is available; (2) disclosure which is relevant or assists the claimant, including on some as yet unpleaded ground; and (3) disclosure at the permission stage if permission is resisted.
A main reason why disclosure is not ordered in judicial review is because courts trust public authorities to discharge this self policing duty, which is why such anxious concern is expressed where it transpires that they have not done so.
In R (Quark Fishing Ltd) v Secretary of State for Foreign and Commonwealth Affairs [2002] EWCA Civ 1409 at para 50 Laws LJ said, There is a very high duty on public authority respondents, not least central government, to assist the court with full and accurate explanations of all the facts relevant to the issue which the court must decide.
The duty extends to disclosure of materials which are reasonably required for the court to arrive at an accurate decision Graham v Police Service Commission [2011] UKPC 46 at para 18.
The purpose of disclosure is to explain the full facts and reasoning underlying the decision challenged, and to disclose relevant documents, unless, in the particular circumstances of the case, other factors, including those which may fall short of public interest immunity, may exclude their disclosure R (AHK) v Secretary of State for Home Department (No 2) [2012] EWHC 1117 at para 22.
The Rashid documents should have been disclosed.
That is accepted by the respondent.
They contained material that was obviously germane to the issues between the parties.
The fact that they were not disclosed, despite numerous pointed requests for their production and the circumstance that, in some instances, their very existence was denied are deeply disturbing.
The failure to locate the documents throughout the proceedings before the Divisional Court, the Court of Appeal and the House of Lords is not merely unfortunate, it is plainly reprehensible.
But I am not persuaded that the non production of the documents until the hearing in Bancoult (No 3) was deliberate.
The applicant has accepted as much, having said in his written case that the non disclosure of the documents may conceivably have been due to an oversight.
I believe that the preponderance of evidence suggests that this is the most likely explanation, although it was a grievous oversight and one which, it is to be hoped, will be so regarded by the relevant authorities.
An omission by government to disclose such material as was contained in the Rashid documents and its failure thereby to discharge its duty of candour was wholly unacceptable when such a fundamental right was at stake.
The applicant has suggested that, in light of the seriousness of the failure to disclose these documents and in view of their high relevance, judicial criticism will not suffice and that the decision of the House of Lords should be set aside on account only of their non disclosure.
I do not agree.
If there are circumstances in which a failure to disclose documents would alone be cause for setting aside a judgment, they are not present here.
For the reasons earlier given, however, I consider that the decision should be set aside and the appeal re opened.
LADY HALE: (dissenting)
This is another chapter in the epic saga of the Chagossians, their expulsion from their homeland and their persistent attempts to secure, if not their actual return, then at least the recognition of their right to do so.
It is a saga which shows how the imperial common good is riven by competing theoretical justifications for empire: one, based in liberal imperialism, emphasises the civilising nature of empire and focuses on the good governance of colonies; the other, based in a utilitarian imperialism, instead focuses on how best to appropriate colonial possessions for the benefit of the imperial power (T Frost and CRG Murray, The Chagos Island cases: the empire strikes back (2015) 66 NILQ 263, 266).
Thus far, it is the latter which has not only driven the actions of government but has also triumphed in the courts: Lord Hoffmann acknowledged that a choice between the liberal and utilitarian faces of imperialism did rest with the court, and decisively affirmed the utilitarian importance of the imperial interests at stake (Ibid, 287).
Courts have, of course, to do justice according to law.
Any doubts about whether it is legally possible for the imperial power to exile a people from their homeland have to be rigorously suppressed.
That question of law has been finally resolved in these proceedings by the decision of the majority in Bancoult (No 2).
Nevertheless, the decision to exile a people has to be taken in accordance with the law; and the people to whom it is of such momentous importance are entitled to expect the highest standards of decision making and the most scrupulous standards of fairness from the institutions of imperial government.
The challenge in the main proceedings is to the rationality of the decision in 2004 to re impose the denial of the Chagossians right of abode in their homeland, the first denial in 1971 having been declared unlawful in Bancoult (No 1), a decision which was accepted by the government of the day.
The challenge in this application is to the decision of the majority in Bancoult (No 2) that the governments decision was rational.
The question for the appellate committee, as Lord Kerr has explained, was not whether it was rational to accept the conclusions of the feasibility study, but whether, on the basis of that report, it was rational to take the drastic decision to re impose the denial of the right of abode.
The question for us is not whether the majority got the answer to that question wrong.
We could no more set that decision aside on that basis than we could set aside their decision that the imperial government had the power to do this.
The basis upon which this court could set aside the earlier decision is that explained by Lord Browne Wilkinson in R v Bow Street Metropolitan Stipendiary Magistrate, Ex p Pinochet Ugarte (No 2) [2000] 1 AC 119, 132D: 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.
However, it should be made clear that the House will not re open any appeal save in circumstances where, through no fault of a party, he or she has been subjected to an unfair procedure.
When an order has been made by the House in a particular case there can be no question of that decision being varied or rescinded by a later order made in the same case just because it is thought that the first order is wrong.
The previous decision in that case was set aside because of Lord Hoffmanns connection with an intervener in the case.
He should not have decided the case without that connection being disclosed to the other parties.
The House did not therefore have to consider whether his participation made any difference to the result (although, given that the earlier decision had been reached by a majority of three to two and that at the re hearing a rather different decision was reached, there was surely a very real possibility that it did).
I accept that, even if it has power to do so, this court should not set aside a decision reached after an unfair procedure if the result would inevitably have been the same had the procedure been fair.
However, if it is clear that the procedure was unfair, this court should not struggle too hard to discover that the result would have been the same.
It is for the court which rehears the case to reach its own conclusions.
The parties are entitled to procedural as well as substantive justice.
It is a proud feature of the law of judicial review of administrative action in this country that the public authority whose actions or decisions are under challenge has a duty to make full and fair disclosure of all the relevant material.
Only if this is done can the court perform its vital role of deciding whether or not those actions or decisions were lawful.
There is no doubt in this case that the Rashid documents should have been disclosed.
They were obviously relevant to the issues in the case.
Not only that, the government was asked for them many times and denied their existence.
This is scarcely a good advertisement for the quality of government record keeping.
No doubt files are sometimes transferred to the Treasury Solicitor for litigation purposes and their existence forgotten.
But this should not happen in any well regulated system of file keeping.
It was deeply unfair to the applicant, and to the court, that these documents were not disclosed.
This was all the more unfair, given the sorry treatment of the Chagossians in the past and the importance of what was at stake for them.
Given that context, this court should not take much convincing that their disclosure might have made a difference to the decision in the case.
What light they do cast upon the rationality of the decision under challenge will be a matter for the court which does reconsider the case.
To my mind, it is quite obvious that they might have made a difference and we certainly cannot be satisfied that they would not.
They showed that the science of the report had been severely criticised both by the governments own expert and by an expert on behalf of the islanders; it matters not in what direction those criticisms had tended; what they did was cast doubt upon the authority of the report.
They showed that the government had made it plain to the consultants what it wanted the conclusions to be.
They showed that important changes had been made to the conclusion.
They showed that the central findings about climate change had been changed.
They showed that the islands were not in a cyclone belt.
The question whether this might have made a difference has to be answered objectively rather than by reference to the particular judges who were then sitting on the case.
Ultimately, this is a case about justice.
While I deeply admire the industry and intellectual honesty of Lord Mance, which has led him to the conclusion that the decision with which he disagreed at the time should not be set aside, for the reasons given by Lord Kerr, with which I agree, I would grant this application.
Justice to my mind demands that the applicant be given a fair chance to satisfy this court that the decision to re impose the denial of the islanders right of abode was not a rational one.
| UK-Abs | The Chagos Islands are otherwise known as the British Indian Ocean Territory (BIOT).
In 1962 they had a settled population of 1,000.
In 1966 the UK Government agreed to allow the USA to use the largest of the Chagos Islands, Diego Garcia, as a military base.
Pursuant to this arrangement, the Commissioner for BIOT made the Immigration Ordinance 1971 (the Ordinance).
Section 4 of the Ordinance made it unlawful for a person to be in the BIOT without a permit and empowered the Commissioner to make an order directing that persons removal.
Between 1968 and 1973 the UK Government procured the removal and resettlement of the Chagossians by various non forceful means.
In 2000 the appellant, Mr Bancoult, obtained a High Court order quashing section 4 of the Ordinance.
The then Foreign Secretary announced that he accepted this decision, such that the prohibition on the resettlement of BIOT was lifted.
He also announced that work on the second stage of a feasibility study into the resettlement of the former inhabitants would continue.
The second stage of the feasibility study was published in 2002.
Part B (the 2B report) concluded that the costs of long term inhabitation of the outer islands would be prohibitive and life there precarious.
In 2004 Her Majesty by Order in Council made the BIOT Constitution Order (the 2004 Order) which introduced a new prohibition on residence or presence in BIOT.
In 2008, the appellants challenge to the 2004 Order by judicial review was dismissed by a majority of 3 (Lord Hoffmann, Lord Rodger and Lord Carswell) to 2 (Lord Bingham and Lord Mance) in the House of Lords (R (Bancoult) v Secretary of State for Foreign and Commonwealth Affairs (No 2) [2008] UKHL 61) (the 2008 judgment).
In separate litigation concerning the Governments declaration of a Marine Protected Area (MPA) around BIOT, the respondent in 2012 disclosed certain documents relating to the drafting of the 2B report (the Rashid documents).
The appellant seeks to set aside the 2008 Decision on the grounds that (i) the Rashid documents cast doubt on the reliability of the 2B report and should, pursuant to the respondents duty of candour in public law proceedings, have been disclosed prior to the 2008 judgment, and (ii) four heads of new evidence have come to light, constituting independent justification for setting aside the 2008 judgment.
In 2014 15 a new feasibility study concluded that, assuming for the first time possible re settlement of Diego Garcia itself, scope existed for supported resettlement of BIOT (the 2014 15 study).
The Supreme Court dismisses the appeal by a majority of 3 to 2.
Lord Mance gives the majority judgment, with which Lord Neuberger agrees.
Lord Clarke gives a separate judgment, concurring with Lord Mance.
Lord Kerr gives a dissenting judgment, with which Lady Hale agrees in a separate dissent.
The Supreme Court has inherent jurisdiction to correct injustice caused by an unfair procedure which leads to an earlier judgment or is revealed by the discovery of fresh evidence, although a judgment cannot be set aside just because it is thought to have been wrong on points unrelated to such procedure or evidence [5, 154, 190].
The authorities indicate as the threshold for setting aside a previous judgment whether a significant injustice has probably occurred in case of non disclosure or whether there is a powerful probability of significant injustice in case of fresh evidence.
But Lord Mance leaves open the possibility of the egregiousness of the procedural breach and/or the difficulty of assessing its consequences militating in favour of a lower threshold, and considers the application on that basis too [8].
An applicant must also show that there is no alternative effective remedy [6].
As to the non disclosure, the essential questions are (i) whether due disclosure of the Rashid documents would have led to a challenge by Mr Bancoults representatives to the 2B report in the original judicial review proceedings, and, if so, (ii) whether it is likely that such a challenge would have resulted in a different outcome to the 2008 judgment [61].
Assuming without deciding that (i) was satisfied, Lord Mance concludes as to (ii), after reviewing the 2008 judgment [16 19] and the Rashid documents [20 64], that there is no probability, likelihood, prospect or real possibility that a court would have seen, or would now see, anything which could, would or should have caused the respondent to doubt the conclusions of the 2B report, or made it irrational or otherwise unjustifiable to act on them in June 2004 [65].
As to the alleged new evidence, the first head consists essentially of analysis and submissions which the majority takes into account, the second and third heads consist of material outside the respondents knowledge at the relevant times and neither they nor the fourth provide any basis for setting aside the 2008 judgment [66 71].
Even if the threshold for setting aside were crossed, circumstances have changed in the light of the 2014 15 study and/or governmental confirmation that the MPA does not preclude resettlement [72 75].
It is now open to any Chagossian to mount a fresh challenge to the failure to abrogate the 2004 orders in the light of the 2014 15 studys findings, as an alternative to further lengthy litigation and quite possibly a fresh first instance hearing about the factually superseded 2B report. [72 76, 78 79].
Lord Kerr, with whom Lady Hale agrees, would have set aside the 2008 Decision.
Although the appellant accepted that it must be shown that the non disclosure probably had, or may well have had, a decisive effect on the outcome [155], Lord Kerr would have held that it is enough for there to be a real possibility that a different outcome would have occurred had the information been available at the time of the original hearing [160 163].
The Rashid documents might well have caused the 2008 Decision to be different [168, 193].
Lord Kerr disagrees with the majority that the conclusions of the 2014 2015 feasibility study render the present application moot.
The mere possibility that the Chagossians might be allowed to resettle is insufficient.
It would be necessary to demonstrate that they would achieve the same result as would accrue on the successful re opening of the appeal [179].
Moreover, there is no question of pragmatic justice being done here as the Supreme Court in this appeal is unable to vindicate the appellants right to resettle in the BIOT [180].
|
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.
| UK-Abs | 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].
|
This appeal concerns the lawfulness of a bus companys policy in relation to the use of the space provided for wheelchair users on its buses.
The factual and procedural background
At around 9.35 in the morning of 24 February 2012, Mr Doug Paulley, who is a wheelchair user, arrived at Wetherby bus station, expecting to catch the 9.40 bus (the Bus) to Leeds.
On arrival at Leeds he intended to catch the train to Stalybridge to meet his parents for lunch.
The Bus was operated by a subsidiary of FirstGroup PLC (FirstGroup), which is the parent company of a group of companies which operates a total of about 6,300 buses.
The Bus was equipped with a lowering platform and a wheelchair ramp.
The Bus also had a space (a space) for wheelchairs, which included a sign that read Please give up this space if needed for a wheelchair user.
When Mr Paulley started to board the Bus, the driver, Mr Britcliffe, asked him to wait because the space was occupied by a woman with a sleeping child in a pushchair.
The space had a sign with the familiar designation of a wheelchair sign, and in addition it had a notice (the Notice) saying Please give up this space for a wheelchair user.
Mr Britcliffe asked the woman to fold down her pushchair and move out of the space so that Mr Paulley could occupy it in his wheelchair.
She replied that her pushchair did not fold down, and refused to move.
Mr Paulley then asked whether he could fold down his wheelchair and use an ordinary passenger seat.
Mr Britcliffe refused that request, because there was no safe way of securing the wheelchair and the Bus had to take a rather winding route.
As a result, Mr Paulley had to wait for the next bus, which left around 20 minutes later.
The consequence of this was that Mr Paulley missed his train at Leeds, and had to take a later train which arrived at Stalybridge an hour later than he had planned.
Although Mr Paulley was a frequent bus user, this was the first time that he was unable to get on a bus because someone refused to vacate the space.
Mr Paulley issued proceedings in the Leeds County Court against FirstGroup for unlawful discrimination against him on the ground of his disability.
His claim was based on the proposition that FirstGroup had failed to make reasonable adjustments to its policies contrary to section 29(2) of the Equality Act 2010.
The claim came on before Recorder Isaacs.
The evidence showed that FirstGroups published policy about wheelchairs and their users at the time of the incident was this:
By the time of the trial, the published policy had changed somewhat, and it was in these terms: As part of our commitment to providing accessible travel for wheelchair users virtually all our buses have a dedicated area for wheelchair users; other passengers are asked to give up the space for wheelchairs.
If the bus is full or if there is already a wheelchair user on board unfortunately we will not be able to carry another wheelchair user.
Wheelchairs do not have priority over buggies, but to ensure that all our customers are treated fairly and with consideration, other customers are asked to move to another part of the bus to allow you to board.
Unfortunately, if a fellow passenger refuses to move you will need to wait for the next bus.
As part of our commitment to providing accessible travel for wheelchair users virtually all our buses have a dedicated wheelchair area for wheelchair users; other passengers are asked to give up the space for wheelchairs.
Wheelchair users have priority use of the wheelchair space.
If this is occupied with a buggy, standing passengers or otherwise full, and there is space elsewhere on the vehicle, the driver will ask that it is made free for a wheelchair user.
Please note that the driver has no power to compel passengers to move in this way and is reliant on the goodwill of the passengers concerned.
Unfortunately, if a fellow passenger refuses to move you will need to wait for the next bus.
The evidence before the Recorder established that Mr Britcliffe had followed FirstGroups policy, by asking the woman with the pushchair to move from the space, but, when she refused, by taking the matter no further.
Mr Birtwhistle, FirstGroups UK Bus Projects Manager, told the Recorder that in the main passengers complied with a request to give up the space.
Mr Birtwhistle also explained why FirstGroup had adopted the policy set out in paras 7 and 8 above.
The company had carried out a review of the way it communicated with its customers, and found that many of them thought that it was putting up too many peremptory notices on buses.
FirstGroup had concluded that it would be better policy to use more pleasant and engaging notices which were friendlier to customers.
So far as FirstGroups policy about the space was concerned, Mr Birtwhistle said that it was designed to cause the customer to think Somebody else needs this space.
I will be reasonable.
I will move away from it.
The policy was intended to be non confrontational and placatory.
The Recorder found for Mr Paulley and awarded him 5,500 damages.
FirstGroup appealed to the Court of Appeal who allowed its appeal [2015] 1 WLR 3384.
Mr Paulley now appeals to this Court.
The legal requirements in relation to public service vehicles
Mr Paulleys claim was based on his allegation that FirstGroup had failed to comply with its duties under the Equality Act 2010, and it is therefore appropriate to set out the relevant provisions of that Act.
However, before doing so, I should refer to earlier legislation applicable to public service vehicles, as it was relied on by the Court of Appeal, and it was also canvassed in the arguments before this Court.
The Bus was a public service vehicle for the purposes of the Public Passenger Vehicles Act 1981 (the 1981 Act), and it was therefore required to comply with Schedule 1 to the Public Service Vehicles Accessibility Regulations 2000 (SI 2000/1970) (the Accessibility Regulations).
Paragraph 2 of that Schedule required the Bus to have at least one wheelchair space on the lower deck, which had to comply with para 3 or 4.
The Bus complied with para 4, which contains detailed specifications as to the size and other characteristics of the space, and also envisages that a folding or tip up seat may be placed in the space, and requires there to be a notice on or near such a seat stating Please give up this seat for a wheelchair user.
The Bus was also required to carry a sign adjacent to the space which showed a representation of a person in a wheelchair.
Paragraph 3 of Schedule 2 to the Accessibility Regulations requires there to be at least four seats designated as priority seats for use by disabled passengers, and a sign on or near a priority seat indicating that disabled persons have priority for the use of that seat.
Section 25 of the 1981 Act also enables regulations to be made authorising the driver of a bus or, at his request, a police constable to remove a passenger infringing what are known as the Conduct Regulations, namely the Public Service Vehicles (Conduct of Drivers, Inspectors, Conductors and Passengers) Regulations 1990 (the Conduct Regulations) (SI 1990/1020), which were made under these powers.
Para 5(2) of the Conduct Regulations provides: A driver, inspector and conductor shall take all reasonable steps to ensure that the provisions of these Regulations relating to the conduct of passengers are complied with.
Para 6(1) of the Conduct Regulations states that no passenger shall, inter alia: (b) put at risk or unreasonably impede or cause discomfort to any person travelling on or entering or leaving the vehicle (k) remain on the vehicle, when directed to leave by the driver, inspector or conductor on the following grounds: (i) that his remaining would result in the number of passengers exceeding the maximum seating capacity or maximum standing capacity (ii) (iii) cause offence to a reasonable passenger that he has been causing a nuisance; or
that his condition is such as would be likely to
Para 6(2) of the Conduct Regulations states that: [A] passenger on a vehicle who has with him [inter alia any bulky or cumbersome article] or any animal if directed by the driver, inspector or conductor (a) to put it in a particular place on the vehicle, shall put it where directed; and (b) driver, inspector or conductor, shall remove it.
if requested to move it from the vehicle by the
Para 8(2) of the Conduct Regulations provides that any passenger on a vehicle who contravenes any provision of those regulations may be removed from the vehicle by the driver or, on the request of the driver, by a police constable.
The Conduct Regulations were amended by the Public Service Vehicles (Conduct of Drivers, Inspectors, Conductors and Passengers) (Amendment) Regulations 2002 (SI 2002/1974), under powers conferred by the Disability Discrimination Act 1995, to deal with wheelchair users.
Para 12 of the Conduct Regulations as inserted by the amendments provides that: the wheelchair is of a type or size that can be (2) If there is an unoccupied wheelchair space on the vehicle, a driver and a conductor shall allow a wheelchair user to board if (a) correctly and safely located in that space, and (b) in so doing, neither the maximum seating nor standing capacity of the vehicle would be exceeded. (3) For the purpose of paragraph (2), a wheelchair space is occupied if (a) (b) passengers or their effects are in that space and they or their effects cannot readily and reasonably vacate it by moving to another part of the vehicle. (4)(e) [B]efore the vehicle is driven [the driver must ensure that] any wheelchair user is correctly and safely positioned in a wheelchair space. there is a wheelchair user in that space; or In addition a bus driver has duties to help wheelchair users to board and alight and, where appropriate, to fit wheelchair restraints.
When the Conduct Regulations were amended, the Government issued written guidance about their application.
The introduction said that the Government was committed to comprehensive and enforceable civil rights for disabled people.
Achieving a fully accessible public transport system is a key element of that policy.
Dealing with the space the guidance said: A wheelchair user must only be carried if there is a wheelchair space available and the seating and standing capacity of the vehicle will not be exceeded.
Because buses often carry more seated and/or standing passengers when the wheelchair space is unoccupied the opportunity for a wheelchair user to travel may depend on other passengers and how full the vehicle is at the time.
If there is space available and the seating and standing capacity will not be exceeded when the space is occupied then any passengers in the wheelchair space should be asked to move.
This may not be practical if, for example, the vehicle is nearing its capacity or passengers with baggage or a baby buggy are using the space.
The Equality Act 2010
The 2010 Act now governs cases of discrimination on the ground of a protected characteristic.
Disability is one such characteristic.
Section 6(3) provides: In relation to the protected characteristic of disability a reference to a person who has a particular (a) protected characteristic is a reference to a person who has a particular disability; (b) a reference to persons who share a protected characteristic is a reference to persons who have the same disability.
It is common ground that Mr Paulleys particular disability for the purposes of section 6(3)(a) is a physical condition which requires him to use a wheelchair.
Accordingly, this case is concerned with disadvantages faced by wheelchair users rather than people with other kinds of disability.
FirstGroup is a public service provider.
Accordingly it falls within section 29 of the 2010 Act, which provides: (1) A person (a service provider) concerned with the provision of a service to the public or a section of the public (for payment or not) must not discriminate against a person requiring the service by not providing the person with the service. (2) A service provider (A) must not, in providing the service, discriminate against a person (B) as to the terms on which A provides the service (a) to B; (b) by terminating the provision of the service to B; (c) by subjecting B to any other detriment.
In addition, under section 29(7) of the 2010 Act, as a public service provider, FirstGroup has a duty to make reasonable adjustments, and by virtue of section 20, that duty involves complying with three requirements, the first of which is in section 20(3), which is in these terms: (3) The first requirement is a requirement, where a provision, criterion or practice of As puts a disabled person at a substantial disadvantage in relation to a relevant matter in comparison with persons who are not disabled, to take such steps as it is reasonable to have to take to avoid the disadvantage.
According to section 21(1), the word substantial in subsection 20(3) means more than minor or trivial.
The applicable Schedule for the purposes of section 20(1) of the 2010 Act is in this case Schedule 2, paragraph 2 of which provides: (1) A must comply with the first, second and third requirements. (2) For the purposes of this paragraph, the reference in section 20(3), (4) or (5) to a disabled person is to disabled persons generally.
Again, it is common ground that paragraph 2(2) of Schedule 2 is, on the facts of this case, concerned with wheelchair users generally, rather than any wider class of disabled persons.
Section 21 provides: (1) A failure to comply with the first, second or third requirement is a failure to comply with a duty to make reasonable adjustments. (2) A discriminates against a disabled person if A fails to comply with that duty in relation to that person. (3) A provision of an applicable Schedule which imposes a duty to comply with the first, second or third requirement applies only for the purpose of establishing whether A has contravened this Act by virtue of subsection (2); a failure to comply is, accordingly, not actionable by virtue of another provision of this Act or otherwise.
When considering whether a proposed adjustment to a provision, criterion or practice (PCP) is reasonable in any particular case, the Code of Practice on Services, Public Functions and Associations issued by the Equality and Human Rights Commission states at para 7.30 that, without intending to be exhaustive, some of the factors which might be taken into account include: whether taking any particular steps would be effective in overcoming the substantial disadvantage that disabled people face in accessing the services in question; provider to take the steps; the extent to which it is practicable for the service the financial and other costs of making the adjustment; the extent of any disruption which taking the steps the extent of the service providers financial and other the amount of any resources already spent on making would cause; resources; adjustments; and the availability of financial or other assistance.
The judgments below
The Recorder considered that there was no difference of substance between FirstGroups policy at the time of the incident and its policy at the time of the hearing. (I am not sure that I agree, but the contrary was not argued, and it is not an issue which needs to be resolved on this appeal.
In so far as it is relevant, this judgment is directed to the current policy, ie as set out in para 8 above).
He found that this policy was a PCP, which he described as a policy of first come first served, whereby a non wheelchair user occupying the space on the bus would be requested to move but if the request was refused nothing more would be done.
The Recorder also found that this PCP was a policy which placed Mr Paulley and other wheelchair users at a substantial disadvantage by comparison with non disabled bus passengers.
Crucially for present purposes, the Recorder went on to hold that there were reasonable adjustments that FirstGroup could have made to the PCP which would have eliminated that disadvantage.
Those reasonable steps were, at least as I read his judgment, (i) an alteration to the Notice which would positively require a non disabled passenger occupying a space to move from it if a wheelchair user needed it, coupled with (ii) an enforcement policy that would require non disabled passengers to leave the bus if they failed to comply with that requirement.
In this connection, it is common ground that FirstGroups conditions of carriage do not give a driver power to require, let alone to force (as opposed to request) a non wheelchair user to move out of a space needed by a wheelchair user, or to leave the bus if she refuses to do so.
More particularly, the Recorder said that the contention that the system of priority given to wheelchair users should be enforced as a matter not of request to any non wheelchair user (to use the inelegant but convenient term), but of requirement was in his view a reasonable one, because: It could be incorporated into [FirstGroups] conditions of carriage so that any non disabled non wheelchair using passenger could be obliged to leave the space if requested to do so because a wheelchair user needed to use it; just as there are conditions of carriage which forbid smoking, making a nuisance or other anti social behaviour on pain of being asked to leave the bus then a refusal to accede to a requirement to vacate the space could have similar consequences.
In my view once the system had been advertised and in place there would be unlikely to be caused any disruption or confrontation as all passengers would know where they were.
Although such a policy might inconvenience a mother with a buggy that, I am afraid is a consequence of the protection that Parliament has chosen to give to disabled wheelchair users and not to non disabled mothers with buggies.
I agree with the claimant that the [Conduct] Regulations do not really assist the court in determining whether the proposed adjustment suggested by the claimant is reasonable or not. (para 21)
FirstGroups appeal to the Court of Appeal was due to be heard with another appeal in a case heard in the Middlesborough County Court involving virtually identical facts, Black v Arriva North East Ltd, where His Honour Judge Bowers had found an identical policy did not involve unlawful discrimination under the 2010 Act see [2013] EqLR 558.
However, that appeal was withdrawn.
Although FirstGroups appeal in this case was unanimously allowed, in one respect the reasons given by Lewison LJ (who gave the leading judgment) differed from those of Arden and Underhill LJJ.
While Underhill and Arden LJJ considered that the PCP put Mr Paulley and other wheelchair users at a substantial disadvantage in comparison with persons who were not [so] disabled, Lewison LJ was not convinced that this was so see paras 62 65 (Underhill LJ), 72 73 (Arden LJ), and paras 35 39 (Lewison LJ).
The majority view of the Court of Appeal is not challenged by FirstGroup in this Court (rightly, as I am currently inclined to think).
All three members of the Court of Appeal considered that the lawfulness of FirstGroups policy should be assessed on the basis that it had a PCP which they formulated in slightly different terms from the Recorder, although they accepted that this difference did not affect the outcome see per Lewison LJ at para 34.
They said that the proper approach started by accepting that FirstGroup had a PCP which involved operating its buses on a first come first served basis and then asking whether the modification to that PCP, namely to request but not to require non wheelchair users to vacate the space, and if necessary the bus, when a wheelchair user wants to use the space, is an adjustment that went far enough to comply with the duty to make reasonable adjustments.
There is no challenge in this Court to that proposition (again, rightly in my view).
The Court of Appeal decided that it was not reasonable to hold, as the Recorder had done, that FirstGroup should adjust its PCP so that its drivers required, rather than requested, non wheelchair users to vacate a space when it was needed by a person in a wheelchair, and then positively to enforce that requirement, with the ultimate sanction being removal from the bus.
The Court of Appeal considered that the adjustment which the Recorder upheld would be both unfair and impractical because: i) (a) It would be unreasonable for the adjustment to extend to all non wheelchair users including those whose refusal to vacate the space was reasonable, as such an adjustment could unfairly affect other passengers (para 55), and If the adjustment was limited to non wheelchair users who (b) unreasonably refused to vacate the space, it would be impracticable as it would require the driver to decide whether a passenger was being unreasonable (paras 48 and 52 53), and, in any event, ii) It would not be reasonable to expect a driver to try and enforce the proposed amended policy by seeking physically to remove such a person from the space or the bus, or by halting the bus until that person vacated the space or the police arrived (paras 49 50).
In addition, the Court of Appeal doubted that the proposed adjustment to the PCP could be enforced through the police, because a person who disobeyed it would not be guilty of criminal activity unlike a person who was in breach of the Conduct Regulations (paras 49 50 and 67).
The Court of Appeal also rejected the notion that the Notice in the space or the drivers request could have been more prescriptive.
Lewison LJ based this view on the grounds that the Recorder had accepted Mr Birtwhistles evidence that FirstGroups research had shown that the company achieved better results with more customer friendly signage and that negative prescriptive signage produced a worse outcome; yet he did not consider that evidence in his assessment of the effectiveness of the adjusted PCP that he endorsed (para 51).
Underhill LJ addressed this issue more fully at para 68.
He said that he would: hope and expect that, other things being equal, a driver whose first request to a non wheelchair user to vacate the wheelchair space was refused would not simply shrug his or her shoulders and go back to the cab, and that there would normally be some attempt at further persuasion or pressure (possibly even including a threat not to proceed with the journey until the space is cleared though this risks seriously inconveniencing other passengers).
However, he considered that: The circumstances in which such a refusal is encountered are liable to vary enormously.
In most cases further attempts at persuasion or pressure would be appropriate, but in some they might not be: as Lewison LJ has illustrated, there will be cases where it would be obviously unreasonable to expect the person occupying the space to vacate it, and there would be others where the question of whose need was the greater was at least debatable and where it would not be fair to expect the driver to have to make a decision.
Also, the temperaments and experience of different drivers are bound to vary: some would handle such a situation well, but others might find it difficult to cope with.
It would be unrealistic for a company to have a policy which prescribed calibrated responses covering the whole range of possible situations.
He added that he need not express a final view about any such half way house, since this was not the basis on which the judge decided the case.
Arden LJ also discussed this issue, saying at para 80: I consider that the bus company must provide training for bus drivers and devise strategies that bus drivers can lawfully adopt to persuade people to clear the wheelchair space when needed by a wheelchair user.
Bus drivers have to use their powers of persuasion with passengers who can move voluntarily.
The driver may even decline for a short while to drive on until someone moves out of the wheelchair space.
There is no risk of liability to such passengers in requesting them (firmly) to move, if they can, because if they cannot safely do so, they will not do so.
The bus company should also have an awareness campaign and put up notices designed to make other passengers more aware of the needs of wheelchair users.
However, she said in the following paragraph: These steps are not part of Mr Paulleys case: he has limited his case to requiring the bus company to require people to get off the bus when necessary so that a wheelchair user can get on.
In reaching their conclusion, the Court of Appeal considered that the Recorder was wrong to ignore the Conduct Regulations.
In para 49 of his judgment, in a passage with which Underhill and Arden LJJ agreed, Lewison LJ pointed out that each of the anti social activities identified by the Recorder in the passage quoted in para 12 above is expressly prohibited by the Conduct Regulations, and the police can be called in aid of the driver under regulation 8(2).
Accordingly, he continued, [i]n these cases the driver can truthfully say that the passenger is breaking the law.
Earlier in his judgment at para 21, Lewison LJ said that he would infer that the Government took the view that the guidance which accompanied the amended para 12 of the Conduct Regulations (and set out in para 19 above) struck the right balance between the interests of wheelchair users on the one hand, and other passengers on the other, and that FirstGroups policy follows this Government guidance.
He fairly added that this guidance pre dated the introduction of the duty to make reasonable adjustments which is now contained in the Equality Act 2010, although as he said the guidance has not been withdrawn or amended.
What did the recorder decide?
As Lewison LJ said in para 30 of his judgment, it follows from the provisions of 2010 Act set out above that if, on the morning of 24 February 2012, FirstGroup failed to comply with its duty to make reasonable adjustments to its PCP of first come first served, in order to avoid the substantial disadvantage which Mr Paulley suffered as a disabled person, it will have unlawfully discriminated against him.
As explained above, the Court of Appeal concentrated on the contention that the adjustment which it was said that FirstGroup had wrongly failed to make to its PCP was to have a policy of requir[ing] and if necessary enforc[ing] the requirement (as Mr Allen QC succinctly put it in his argument on behalf of Mr Paulley), as opposed to merely requesting, that non wheelchair users vacate the space if the space was needed by a wheelchair user.
This proposal involves two departures from FirstGroups PCP: first it involves the driver requiring, rather than requesting, a non wheelchair user to vacate a space; secondly, in the event of non compliance, it involves the driver, rather than doing nothing, enforcing the requirement by ejecting the non wheelchair user (or getting him or her ejected) from the space, and, if necessary, from the bus.
Before discussing the issues of substance, it is necessary to address the question of what the Recorder actually decided.
It appears that Lady Hale and Lord Kerr do not read the Recorders judgment as effectively requiring a policy that could lead to a non wheelchair user being ordered off the bus.
However, for my part, I accept the submission of Mr Chamberlain QC for FirstGroup that the Recorder did hold that such a policy was mandated.
I say that for a number of reasons.
First, the Recorder appears to me to have made it clear when he said that a non disabled passenger would either have to vacate the space by, for example, folding a buggy and sitting elsewhere, or by leaving the bus and taking the next bus available in the passage quoted in para 79 of Lord Toulsons judgment.
In addition, the Recorder said that the real adjustment alleged on behalf of the claimant was that there should be a clear practice/policy which not only paid lip service to the giving of priority but actually enforced such priority, so that non wheelchair users would realise that if there was competition for [a] space with a wheelchair user they would either have to vacate the space or [leave] the bus.
Consistently with this approach, the Recorder then considered the evidence relating to the possibility of enforcing a requirement to vacate the space on an unwilling non wheelchair user who was occupying it, and concluded that the real adjustment which he had identified should have been made by FirstGroup.
In addition, there is his reference to any requirement being enforced in the passage quoted at the beginning of para 30 above.
Secondly, in answer to a question from Lewison LJ, Mr Allen QC made it clear to the Court of Appeal on behalf of Mr Paulley that it was necessary to have a policy of require and if necessary, enforce, adding [t]hat was our case and that was the case that was put in cross examination.
Thirdly, it is quite clear that the hearing before the Court of Appeal, and the judgment of that court proceeded on the basis that the Recorder had accepted Mr Paulleys case, which was that, to be legally valid, any policy should be enforceable, if necessary, by requiring a non wheelchair user to get off the bus.
Lewison LJ said at para 41 of his judgment, the arguments on the appeal were limited to the question whether the judge was right to endorse the PCP that he did.
There was no Respondents Notice and no argument directed to some alternative and more limited form of PCP that FirstGroup should have adopted. (Mr Allen QC makes a fair criticism that the two references to PCP are mischaracterisations, but it is clear that Lewison LJ meant adjustment rather than PCP).
In particular, Lewison LJ said that Mr Paulleys case had involved an amendment to the PCP where no discretion is given to the driver.
And Underhill and Arden LJJ expressed views to the same effect see the passages quoted from their respective judgments at the end of paras 36 and 37 above.
Further, as Mr Chamberlain QC said, the point is also apparent from exchanges during the argument in the Court of Appeal, including that quoted in para 42 above.
Fourthly, Mr Allen QC accepted in his written case in this Court that this is how the case proceeded in the Court of Appeal, at any rate in his opening argument.
He said that at first instance there had been no discussion of compel[ling] all other passengers to vacate the wheelchair space irrespective of the reason why they are in it, but, although he contended that FirstGroup did not rely on exceptional circumstances before the Recorder, Mr Allen nowhere disputed the notion that the Recorder concluded that FirstGroups policy should include mandatory enforcement.
It is also clear from later passages in his written case that he accepted that the question of mandatory enforcement was floated in argument before the Recorder.
Indeed, in his written case, Mr Allen made the point that FirstGroup could enforce any policy by requiring drivers to turn off the bus a non wheelchair user who did not move from a space.
Finally, if a bus company must have a policy which actually forces a non wheelchair user to vacate the space, there can be no getting away from the fact that there will be occasions when that policy can only be complied with by forcing someone off the bus: eg when the bus is completely full, when the non wheelchair user cannot stay on the bus unless she remains in the space, or when the non wheelchair user simply refuses to move from the space.
A policy of require and if necessary enforce: discussion
In my judgment, it is very difficult to disagree with the reasoning of the Court of Appeal in rejecting this contention (the primary contention) advanced on behalf of Mr Paulley.
First, in so far as this adjustment involved an absolute rule (ie that any non wheelchair user must vacate the space if it is required by a wheelchair user), it would not be reasonable.
Secondly, whether it was an absolute rule or a qualified rule (ie that any non wheelchair user must vacate if it is reasonable), its implementation through the medium of mandatory enforcement would be likely to lead to problems on some occasions.
As to an absolute rule, it is true that there is nothing in the primary or secondary legislation which supports the notion that the space allocated for wheelchair users is to be exclusively used by such individuals, although it is clear that that was, in general terms at any rate, the primarily envisaged use.
It is also true that there is no absolutist legislative provision comparable to those relating to anti social activities as contained in the Conduct Regulations set out in paras 15 17 above.
However, it does not follow from either point that a court could not conclude that, on appropriate facts, an absolute rule such as that suggested by the Recorder would be requisite.
As Mr Allen QC argued, the 2010 Act accorded what Lady Hale has called an extra right consistent with the obligations which the United Kingdom has now undertaken under the United Nations Convention on the Rights of Persons with Disabilities Aster Communities Ltd (formerly Housing Homes Ltd) v Akerman Livingstone (Equality and Human Rights Commission intervening) [2015] AC 1399, paras 25 26.
Accordingly, I do not consider that, for instance, para 12(3)(b) of the Conduct Regulations (set out in para 18 above) or the guidance set out in para 19 above provides an automatic answer to the notion that, on appropriate facts, there should be an absolute rule.
Nonetheless, once one considers the effect of an absolute rule in relation to the use of spaces on buses, it is not difficult to conceive of circumstances in which it could be unreasonable to expect a non wheelchair user to vacate a space and, even more, to get off the bus even though the space is needed by a wheelchair user.
As Lewison LJ said (perhaps somewhat optimistically in some cases) in para 48 of his judgment, [a]lmost by definition, a person who refuses to vacate the wheelchair space when asked to do so [to accommodate a wheelchair user] will have a reason which (at least to them) seems to be a reasonable one.
Thus, it might be reasonable for a person to refuse to vacate the space, if he or she was disabled and needed the space to store disability aids, or was elderly and infirm, or was accompanying infants, especially, for instance, if that person had an urgent hospital appointment, or would find it physically very difficult to alight from the bus.
Or the space might be occupied by a vulnerable person who only felt safe in the space and could not reasonably be required to leave the bus in an unfamiliar or unsafe location.
Of course, in some of these types of circumstances, it might be possible for the non wheelchair user to move elsewhere on the bus, but that may be impossible in some cases, or it may only be possible if third parties, not occupying the space, alighted from the bus, which may be unacceptably difficult or even impossible to arrange.
Turning to the possibility of a qualified rule, it is right to record that Mr Allen accepted that, even if there was an absolute rule, there could be exceptions to it in cases of real emergency.
Such an approach is close to what I have called a qualified rule, viz a rule that non wheelchair users would only be required to vacate a space to accommodate a wheelchair user if it would be unreasonable for them not to do so.
I have some doubts whether it would be fair to impose on bus drivers the burden of deciding on the relative needs of a wheelchair user and a non wheelchair user in circumstances when the decision may result in his requiring the non wheelchair user to vacate the bus.
However, it is unnecessary to decide that point in the light of what I say in the next three paragraphs.
Whether the policy of requiring non wheelchair users to vacate the space, and, if necessary, the bus, is absolute or qualified, it seems to me to be a fair objection that it would often prove difficult (or worse) when it comes to enforcement.
As Mr Chamberlain QC put it, it would be likely to cause confrontation with other passengers and delay.
This is particularly relevant given the need to take into account practicability and disruption under para 7.30 of the Code of Practice (para 27 above).
As I have already mentioned, a non wheelchair user who refused to vacate the space, whether requested or required to do so, would often (indeed, I think, would normally) consider that he or she was entitled to refuse, and would often have arguably good, or at least understandable, reasons for the refusal.
Further, if the bus was full, enforcement of the request would require someone to get off the bus.
It would be bad enough if that involved the practically fraught requirement that the non wheelchair user who was occupying the space get off the bus; but in some cases, the driver might have to consider whether it would be more appropriate to require one or more third parties to get off, so that, because of her needs, the non wheelchair user could take their place.
Accordingly, any enforcement by a driver of the policy proposed by the primary contention would, possibly frequently, be likely to involve confrontation at best and violence at worst.
Further, it is by no means clear that there is any statutory obligation on a passenger to comply with a policy relating to use of the space.
This is in marked contrast with the situations dealt with in paras 5 and 6 of the Conduct Regulations (see paras 15 and 16 above), which impose a duty on a passenger, as well as on the operator and the driver, in relation to what the Recorder accurately described as anti social behaviour on the part of the passenger.
Further, in para 8, those Regulations provide for enforcement by the driver, and where appropriate by the police (see para 17 above).
I note what Lady Hale and Lord Kerr say about para 6(1)(b) of the Conduct Regulations.
I do not see how it could on any view be relied on if a non wheelchair user was required to get off the bus: reading paras 6(1)(b) and 12(3)(b) together, the most that a driver can require of such a person is that she move elsewhere in the bus.
Quite apart from this, I am by no means convinced that a non wheelchair user who unreasonably failed to comply with a request to move from the space would fall foul of para 6(1)(b).
Para 12 imposes duties on a driver, not on a passenger, whereas para 6 is concerned with the behaviour of passengers.
And para 6(1)(b) has a requirement of reasonableness, and, as mentioned in para 48 above, most non wheelchair users who refuse to vacate a space will believe that they are being reasonable.
And, in any event, even if para 6(1)(b) did apply, it would not answer the points made in paras 50 51 above.
The less aggressive policy of stopping the bus until the non wheelchair user vacates the space is, in my view, appropriate, provided that it is not required to be mandatory.
Again, I find it impossible to accept that a policy would not be held to be reasonable unless it required a driver to stop the bus until a non wheelchair user vacated a space.
It would be plainly unfair on the other passengers, particularly in a full bus or in a bus which was connecting with another service (eg a train or another bus), if the driver had to wait for a long time.
Indeed, it is not fanciful to think that such a policy could lead to violence.
As Buxton LJ said in Roads v Central Trains Ltd (2004) 104 Con LR 62, para 42, [s]teps might be unreasonable for a [service provider] to take if they unreasonably impact on third parties.
Again, I draw support from para 7.30 of the Code of Practice.
It is true that stopping the bus until a passenger ceased any anti social behaviour was, on the evidence of Mr Britcliffe, a course which a driver occasionally adopted where a passenger persisted in a breach of para 6 of the Conduct Regulations.
But it does not follow that it would therefore be reasonable to expect a driver to take the same course in every case where a non wheelchair user refuses to vacate a space needed by a wheelchair user, and may have to leave the bus if he does vacate the space.
In a case involving anti social behaviour, there would rarely if ever be a need for a difficult decision about competing needs, and the nature of any confrontation would be likely to be very different from that in a case involving competing claims to occupy the space.
Mr Britcliffe made the point in his evidence when he said that theres a lot of difference between a kebab and a new born baby, Im afraid.
Further, subject to the possible argument as to the applicability of para 6(1)(b) of the Conduct Regulations, in a case involving anti social behaviour, the police could be called under para 8 of the Conduct Regulations, whereas there is no such provision applicable to a case where a non wheelchair user refuses to vacate a space required by a wheelchair user.
A policy of require and pressurise: introductory
Rejection of Mr Paulleys primary contention that FirstGroup should have enforced a more prescriptive policy, requiring, rather than requesting, a non wheelchair user to vacate the space when it was required by a wheelchair user and enforcing that requirement, does not mean that it should not have had a more prescriptive policy than it actually had, so far as any notice and instructions from the driver are concerned.
Mr Paulleys alternative contention (the alternative contention) is that, even if one rejects his primary contention, FirstGroup should still have adjusted its PCP so that it expressed itself more prescriptively in writing through the Notice and/or orally through the driver.
Thus, on behalf of Mr Paulley it is contended that the Notice should have positively required anyone who was a non wheelchair user occupying the space to give it up to a wheelchair user, and that it should have stated that the obligation to vacate would be enforced.
It is also contended that Mr Britcliffe, the driver of the Bus, should have told the woman occupying the space that she had to vacate it now that Mr Paulley required it, and that Mr Britcliffe should have refused to drive on, at least for a period, if she did not comply.
It is further contended that there was no good reason why FirstGroup could not have adopted such a policy with regard to its notices and its instructions to its drivers.
The fact that such written and oral requirements would not be enforced by drivers or the police does not, it is argued, alter the fact that if such stipulations were expressed as requirements, rather than as requests, it is substantially more likely that any non wheelchair user would vacate the space if it was needed by a wheelchair user.
A policy of require and pressurise: a procedural problem
Although they discussed Mr Paulleys arguments on this point in the passages cited in para 35 37 above, the Court of Appeal took the view that it was not open to Mr Paulley to advance the alternative contention, and in any event that he was not doing so see paras 42 45 above in that connection.
They said that the only adjustment with which this case was concerned was that identified in paras 11 and 14 above, namely what I have called the principal contention, viz that, rather than simply requesting, FirstGroup should have required, and enforced the requirement, that persons not in wheelchairs vacate the space when it was needed by a person in a wheelchair.
However, the position appears to have been rather different at first instance.
Mr Paulleys pleaded case and his counsels skeleton argument advanced a number of potential reasonable adjustments, which FirstGroup should have made to its PCP, and they were advanced both on alternative and on cumulative bases.
Those alleged adjustments included the primary contention (ie forcing a recalcitrant non wheelchair user to leave the bus), but they also included a number of alternative contentions including (i) a more peremptory Notice, (ii) the driver insisting that the pushchair was folded and (iii) the driver refusing to move on until the space was vacated (as well as other suggestions).
The Recorder referred to the various suggested adjustments in his well constructed and clear judgment, but, as explained in para 42 above described the real adjustment alleged on behalf of the claimant as requiring and enforcing ie Mr Paulleys primary case which he went on to accept.
In these circumstances, there are two possible problems with this Court considering Mr Paulleys alternative contention.
First, it seems quite clear that the argument and judgments in the Court of Appeal proceeded on the basis that it was not part of Mr Paulleys case, as seems to have been accepted on his behalf.
On the other hand, the case was advanced much more broadly before the Recorder, because, as I have explained, a number of possible adjustments were put forward on the basis that they were alternatives or cumulative.
Nonetheless, because of the position adopted on behalf of Mr Paulley in the Court of Appeal, it can be said to be rather unsatisfactory for this Court to consider whether FirstGroup should have made an adjustment to its PCP which was less extreme than that found by the Recorder.
The second problem arises from the fact that, in order for Mr Paulley to succeed in his claim, he must not only establish that FirstGroup should have made an adjustment to its PCP, but also that, had that adjustment been made, there is at least a real prospect that it would have made a difference. (It is right to say that decisions of the Employment Appeal Tribunal express the real prospect test slightly differently (compare Lancaster v TBWA Manchester UKEAT/0460/10/DA, para 46 and Leeds Teaching Hospital NHS v Foster UKEAT/052/10, para 17).
However, the precise formulation of the test is not relevant for present purposes.
The essential point is that there is no finding by the Recorder that, if FirstGroup had phrased the Notice more peremptorily and/or required its drivers to be more forceful, this requirement would have been satisfied, given that there would have been no question of actual enforcement.
In particular, as Lord Toulson points out in para 85 below, there has been no formal appeal and no written or oral argument against the finding that the woman occupying the space refused to move after saying that her pushchair did not fold down.
There is therefore no satisfactory basis upon which this Court can, in fairness to FirstGroup, conclude that there would have been a real prospect that such an adjustment to its PCP would have resulted in Mr Paulley not being placed in the disadvantage that he was.
In my judgment, the solution which enables this Court both to be procedurally fair to the parties and to provide as much guidance as possible in this important field, is to decide whether the alternative contention should, on the evidence given to the Recorder and findings made by him, succeed but, in the event of our so deciding not to award Mr Paulley any damages.
The evidence and arguments in relation to the alternative contention were advanced before the Recorder, and, by accepting Mr Paulleys more extreme primary contention, it is very likely that he must or would have decided to reject FirstGroups arguments against the alternative.
Although the alternative contention was not advanced in the Court of Appeal, we have the benefit of some valuable thoughts on it from Underhill and Arden LJJ.
Accordingly, the fact that a case based on the alternative contention was not run in the Court of Appeal should not be fatal to Mr Paulleys ability to run it before this Court.
On the other hand, to award Mr Paulley any damages in the event of this Court accepting the alternative contention would be unwarranted as the Recorder made no finding as to whether he would have been disadvantaged had the PCP been adjusted accordingly. (The first instance finding that Mr Paulley was disadvantaged was based on the Recorders view as to what FirstGroups policy should have been, which, for the reasons which I have attempted to give, was too prescriptive.) It is true that this approach would make any finding as to the alternative contention somewhat hypothetical, and indeed arguably obiter, but that should not, in my opinion, stand in the way of our addressing it.
A policy of require and pressurise: discussion
Turning then to the substance of Mr Paulleys alternative contention, it has two components.
The first is that the Notice should have been more strongly expressed and that it should have stated that the obligation to vacate the space, if needed by a wheelchair user, would be enforced.
The second component is that FirstGroups bus drivers should have been required to do more than simply ask a non wheelchair user occupying the space to vacate if it was needed by a wheelchair user, in particular they should positively have expressed themselves as requiring the non wheelchair user to vacate the space and/or they should have refused to drive on until she did so.
As mentioned above, the space in the Bus contained a wheelchair sign, as specifically required by the Accessibility Regulations, and it also contained the Notice when no such notice was specifically required by those (or any other) Regulations (see paras 3 and 12 above).
I do not consider that FirstGroup can be criticised for not expressing the Notice in more peremptory terms.
In disagreement with the Recorder, it seems to me that, albeit politely, the Notice did require, rather than merely request, a non wheelchair user to vacate the space if it was needed by a wheelchair user.
Without the word Please it was a requirement, and the addition of the word Please at best makes it more polite and at worst softens the requirement.
Secondly, there is no reason to doubt the evidence of Mr Birtwhistle, FirstGroups manager, who said that the company had been advised that directive notices were a less effective means of communication with the public than more customer friendly and non confrontational notices. (It is right to mention that there was evidence that some other bus companies used more peremptory notices, but there was no evidence to suggest that they were more effective).
Thirdly, while I would not endorse it as a principle applicable in all cases, Underhill LJs statement at para 68 of his judgment that [l]egal liability ought not to depend on whether an employer has chosen to use specially emphatic language in expressing his policy has real force in relation to criticisms of the way the Notice was expressed.
If finding a more peremptory, persuasive or firmly worded notice in another companys buses was enough to undermine the reasonableness of the notice in this case, it could, as a matter of logic, lead to an absurd state of affairs the fact that another bus company used more aggressive language, a larger sign, bolder print, or more exclamation marks could presumably all be relied on.
And it is worth remembering that we are concerned with the question whether FirstGroups PCP makes reasonable adjustments, and, as is made clear by the Code of Practice, that involves taking practicality into account.
The Recorder also thought that the Notice should have made it clear that the priority of wheelchair users over the space would be enforced.
While that view has its attractions, I am ultimately not convinced by it.
First, having rejected Mr Paulleys primary case (unlike the Recorder), I am unenthusiastic about the notion of a court requiring a party to put up a notice containing a statement which would not be true and it would not be true once one rejects Mr Paulleys primary case.
Secondly, as I have already indicated, in the light of Mr Birtwhistles evidence as to what constituted effective notices, and in the absence of any evidence to the contrary, I would not be prepared to hold that FirstGroup was in breach of its duty to make reasonable adjustments by failing to express the Notice more aggressively.
Thirdly, there is the point made by Underhill LJ quoted at the end of para 36 above.
I turn finally to the contention that FirstGroup drivers should have been instructed to do more than simply request non wheelchair occupiers to move from a space when it was needed by a wheelchair user.
On this aspect, it seems to me that there is obvious force in the concerns, expressed by Underhill LJ in the second passage quoted from his judgment in para 36 above, about the difficulties of identifying any policy given the fact that the circumstances of the non wheelchair user and the character of the driver could be very different in different cases.
Nonetheless, I have concluded that it was not enough for FirstGroup to instruct its drivers simply to request non wheelchair users to vacate the space, and do nothing further if the request was rejected.
I accept that allowance must be made for the fact that there will be a variety of different circumstances in which a non wheelchair user refuses to vacate a space which is needed by a wheelchair user.
Thus, the appropriate approach of the driver could depend on (i) the reason for the refusal, including, in particular, the needs of the non wheelchair user; (ii) the surrounding circumstances, including whether the bus is full or has vacant places, whether the bus is on time, and the frequency of the service; and (possibly) (iii) the character of the driver.
However, in para 68 of his judgment, Underhill LJ was in my view right in describing as good practice, a policy to encourage drivers to go as far as they thought appropriate in the circumstances in legal language, use their best endeavours to induce the recalcitrant passenger to reconsider his or her initial refusal.
A driver may form the view that a non wheelchair user is reasonable in refusing to move from the space.
If the driver considers that that is so, or even probably so, then it would not, at least normally, be unreasonable for any request to move not to be taken further.
However, where the driver concludes that the non wheelchair users refusal is unreasonable, it seems to me that it would be unjustifiable for a bus operating company to have a policy which does not require some further step of the bus driver in any circumstances.
In particular, where there is some other place on the bus to which a non wheelchair user could move, I cannot see why a driver should not be expected to rephrase any polite request as a requirement, and, if that does not work and especially if the bus is ahead of schedule, why the driver should not be expected to consider whether there was any reason why the bus should not stop for a few minutes with a view to pressurising or shaming the recalcitrant non wheelchair user to move.
Because circumstances can vary so much, and because judges should plainly not impose a policy which is not practicable, I consider that this is as far as any adjustment required by this Court to be made to FirstGroups PCP could be expected to go (at least in the light of the evidence given at trial, the Recorders findings and the arguments we have heard).
It may well be, as Underhill LJ went on to say, that, at least in many cases, there is in reality no very deep gulf between a policy so expressed and one, like FirstGroups, which does not in terms go further than saying that the passenger should be asked to move.
However, in my opinion, there will undoubtedly be cases where the sort of good practice which he suggested, and which I have attempted to summarise in para 67 above, could be expected to produce positive results whereas FirstGroups current, more pallid, policy would not do so.
When a non wheelchair user is unreasonably refusing to move from the space, there are vacant places on the bus, (and the bus is ahead of schedule) a more forceful repetition of an initial unsuccessful request in the form of a requirement (coupled with a refusal to drive on for several minutes) may well persuade the unreasonable non wheelchair user to vacate the space.
The very fact that, under FirstGroups current PCP (set out in para 8 above), drivers were expected to request a non wheelchair user to vacate a space needed by a wheelchair user, at least if there is a place for the non wheelchair user to move to on the bus, demonstrates that drivers can be expected to show a degree of initiative and to see whether or not there are spare places on the bus.
I therefore find it hard to see how it could be unreasonable to expect FirstGroup to train its drivers to do a bit more, when appropriate, if and when an initial request is not complied with.
I also agree with Lord Toulson that this conclusion is supported by para 12(2) and (3) of the Conduct Regulations (set out in para 18 above), which show that those responsible for those Regulations did not consider it unreasonable to decide whether a non wheelchair user could readily and reasonably vacate a space and mov[e] to another part of the vehicle.
Such a conclusion seems to me to be consistent with what Underhill LJ hope[d] and expect[ed] in the first passage quoted in para 36 above, and what Arden LJ considered that FirstGroup should do in the passage quoted in para 37 above.
Conclusion
Since preparing the first draft of this judgment, I have had the opportunity of reading in draft the judgments of Lady Hale, Lord Kerr, Lord Clarke, Lord Sumption and Lord Toulson.
I agree with what Lord Toulson says in his concise judgment, as to the reasons for allowing this appeal, as to the interpretation of the Recorders judgment, and as to the advisability of reconsidering the state of the law in this area.
I think that Lord Kerr and I have arrived at the same view as to what the driver should be expected to do under a policy which complies with a bus companys equality duty.
In that connection, I would refer to the fourth and fifth sentences of para 129 and para 133 of his judgment and paras 66 and 67 above.
However, we disagree about the notice (compare his para 122 with paras 63 64 above).
Lady Hale (with whom Lord Clarke also agrees) prefers to limit any decision to saying whether FirstGroups PCP could have done more see the end of paras 101 and 108 of her judgment.
As to that, I accept that we could decide this appeal without expressing a view as to how much further FirstGroups PCP should have gone for instance, without deciding whether a requirement to move would have to be physically enforced.
However, that would, in my opinion, be regrettable.
Merely to decide that FirstGroups PCP fails to satisfy the requirements of the 2010 Act would leave bus companies in a state of real uncertainty as to their equality duties in connection with wheelchair users.
It is inevitable that any decision we reach will result in some grey areas, but it is one of the principal functions of this Court to clarify the law, and therefore to keep the grey areas as few and as small as possible.
As to Lord Sumptions judgment, I agree with him that, at least as a general rule, the law should not normally seek to sanction or otherwise deal with lawful but inconsiderate behaviour, and, similarly, it should not normally enforce basic standards of decency and courtesy.
However, we are here concerned with a statute whose purpose is to ensure, within limits, that behaviour is curbed when it results in discrimination under section 29 of the Equality Act 2010.
Accordingly, while it is essential that any judicial decision in this area seeks to take into account the realities of life and the interests of others, judges have to do their best to give effect to that purpose, even if it may involve a degree of departure from the general rule.
Accordingly, I would allow this appeal to the limited extent explained in paras 66 68 above, albeit on a point which was expressly not pursued in the Court of Appeal.
LORD TOULSON: (with whom Lord Reed agrees)
The majority of the Court of Appeal held that the respondent bus company applied a provision, criterion or practice (PCP), within the meaning of section 20(3) of the Equality Act 2010, that wheelchair users could use the wheelchair space on its buses on a first come first served basis, and that this PCP put wheelchair users at a substantial disadvantage compared with able bodied passengers.
There is no appeal against those findings.
The issue is whether there were reasonable steps which the bus company could have taken to avoid or ameliorate the disadvantage.
With effect from 1 October 2002, regulation 12(2) of the Public Service Vehicles (Conduct of Drivers, Inspectors, Conductors and Passengers) Regulations 1990, (SI 1990/1020) as amended by SI 2002/1724, provided that: If there is an unoccupied wheelchair space on the vehicle, a driver and a conductor shall allow a wheelchair user to board if (a) the wheelchair is of a type and size that can be correctly and safely located in that wheelchair space, and (b) in so doing, neither the maximum seating nor standing capacity of the vehicle would be exceeded.
Regulation 12(3) defined a wheelchair space as being occupied if there is a wheelchair user in that space; or (a) (b) passengers or their effects are in that space and they or their effects cannot readily and reasonably vacate it by moving to another part of the vehicle.
It follows from the fact that the obligation under regulation 12(2) was imposed on drivers (and conductors), and from the wording of the regulation, that drivers could have to decide whether a passenger who was using a wheelchair space could readily and reasonably vacate it by moving to another part of the vehicle, and this was obviously not considered to be an unreasonable thing for drivers to be expected to do.
It should also be noted that a non wheelchair user who was using a wheelchair space was not expected to have to vacate the bus, but rather to move to another part of the vehicle if that was readily and reasonably possible.
Regulation 12(4) required the driver to ensure before the vehicle was driven that any wheelchair was correctly and safely positioned in a wheelchair space.
There is therefore an apparent tension in the regulation, because regulation 12(2) requires the driver to permit a wheelchair user to board if there is an unoccupied wheelchair space, which includes a space physically occupied by a person who could readily and reasonably move elsewhere, but for as long as that person remains in the wheelchair space the vehicle must not be driven.
Where the space is taken by someone who could readily and reasonably vacate it by moving to another part of the bus, the driver could properly say to that person that he, the driver, is required by law to allow the wheelchair user to occupy the space and that for this to happen that person must move.
But there is a possibility that he may be ignored.
I would in such circumstances interpret the obligation under regulation 12(2) as an obligation on the driver to do as much as he practically can to enable a wheelchair user to occupy the wheelchair space, unless it is already occupied within the meaning of regulation 12(3), but if that task proves impossible he is not required to do more.
The Recorder accepted the claimants argument that the bus company could reasonably have adopted a policy of requiring other passengers to allow the wheelchair space to be used by a wheelchair user, even if it meant requiring the other passenger(s) to get off the bus.
It is right that I should explain why I interpret the Recorders judgment in that way, since there appears to be some difference of opinion among the members of the court on the point.
After setting out the various forms of adjustment pleaded in the claimants particulars of claim, the Recorder said at para 15 that: the most comprehensive adjustment alleged by the claimant was that it should be made clear to other passengers that the wheelchair space is for wheelchair users and that they will be required [underlined] to vacate the space if needed.
Once such a practice was put into effect with a proper system of notices, warnings and, if necessary, advertising then the culture will have changed and no non disabled passenger who wished to occupy the space could be under any illusion that if there was competition for such a space with a wheelchair user, then they would either have to vacate the space by, for example, folding a buggy and sitting elsewhere, or by leaving the bus and taking the next bus available.
At para 21 the Recorder said that the practice suggested by the claimant was a reasonable one.
I infer that the Recorder had in mind that the suggested practice was intended to apply even if it meant requiring other passengers to get off, because this was part of the claimants case and the Recorder referred, at para 17, to counsel for the bus company asking rhetorically whether we want a culture in which a parent with a child is removed from the bus to allow access for a wheelchair user.
However, more importantly than debating what precisely the Recorder meant in his full and careful judgment, the case has raised points on which those who are affected need a clear ruling from this Court.
They include not only the question whether the bus company should reasonably have adopted a general practice of requiring other passengers to allow the wheelchair space to be occupied by a wheelchair user, but also the question whether that should apply even if it would mean requiring the other passenger(s) to get off the bus.
On the latter point, I agree with the Court of Appeal that the Recorder went too far.
The risk that a bus may be fully occupied when it arrives at a bus stop is one shared by all travellers.
The risk may be greater for wheelchair users because there is likely to be only one wheelchair space, but if that space is occupied within the meaning of regulation 12(3) of the Conduct Regulations, I do not see that it would be reasonable to require the occupier to leave the bus midway through their journey.
By definition we are talking about someone who is already lawfully on the bus and who cannot readily and reasonably vacate [the wheelchair space] by moving to another part of the bus.
Moreover the person may also have protected characteristics, such as having a disability requiring the use of a walking frame or being a child.
As Lady Hale has demonstrated, 90% of people with disabilities do not use wheelchairs, and the evidence is that over half of those with disabilities have mobility problems, no doubt of varying severity.
Age is another protected characteristic, and there would be obvious objections to a policy which entailed telling a child that he or she was required to get off the bus, even more so if it were at an unfamiliar or unsafe location or after dark or for a lengthy or uncertain period of time.
Illustrations of passengers with particularly cogent reasons to object to being told that they were required to leave the bus could readily be multiplied.
If the law in this difficult and sensitive area becomes the subject of further Parliamentary consideration (to which I refer at the end of this judgment), there would doubtless be considerable argument about striking a fair balance.
The situation is different if the space is occupied by somebody who could readily and reasonably vacate it but refuses to do so.
There is a preliminary objection that a bus driver cannot reasonably be expected to judge whether a person could readily and reasonably vacate the space, but I do not regard that as a point of substance.
It is easy to make it sound complicated, but realistically it should not be difficult to tell whether there is another part of the bus which the person could readily and reasonably use.
The drafter of regulation 12(2) and (3) must have presupposed that this would not be too much for a bus driver or conductor, and the bus companys own policy, set out by Lord Neuberger at para 8, expected the driver to be able to tell if other space on the bus was available for a non wheelchair user who was occupying the wheelchair area (If this is occupied with a buggy, standing passengers or otherwise full, and there is space elsewhere on the vehicle, the driver will ask that it is made free for a wheelchair user).
It is a matter of looking.
I agree with Lord Neuberger that there are reasonable steps which a bus company could take beyond simply asking the occupant to move.
The driver could make it plain that it is a requirement and I do not see that it would be misleading or wrong for him to do so.
For one thing, if the place is taken by someone who could readily and reasonably vacate it by moving to another available space, the object of the duty placed on the driver by regulation 12(2) and (3) is to enable the wheelchair user to occupy it and in those circumstances it must be at least open to the bus company to stipulate that the non wheelchair user who could readily and reasonably vacate it should do so.
But in any event I am not aware of a legal principle which prevents a service provider from adopting a requirement just because securing compliance with it will or may depend on moral pressure.
Unless the bus is running late, the driver could also wait at least for a time for the passenger to comply.
The policy might not succeed in every case, and in that event the driver might have no practical alternative to refusing to allow the wheelchair user to remain on the bus, but the fact that the policy might not work in every case does not make it valueless.
The concept of reasonable adjustments under section 29(7) of the Equality Act 2010 is intensely practical.
Much human behaviour is governed by expectation and convention rather than legal enforcement.
Although this was not the primary case advanced by the claimant on this appeal, it is within it.
His lengthy printed case included, for example, the contention (at para 163) that the Court of Appeal was wrong to reject the submission that even a policy of request plus some attempt at further persuasion or pressure would have been better than what happened.
In the present case there was no finding of fact by the Recorder whether the lady with the child in a buggy could reasonably and readily have vacated the wheelchair space.
Lewison LJ said in his account of the facts that the driver asked her to move and to fold down her pushchair so that the claimant could use the space, but that she said that her pushchair did not fold down and refused to move.
There was no appeal against that finding.
Because it was not an issue in the appeal, the court heard no argument whether Lewison LJs account was correct or incorrect, but I note that it was consistent with the claimants own witness statement.
It would not be right in these circumstances for this Court to substitute a contrary finding, and I do not consider that the case merits being remitted to the judge for further consideration.
It follows that the award of damages in favour of the claimant cannot be sustained, but, like Lord Neuberger, I would allow the appeal to the extent of holding that the bus company ought to have adopted a policy of training its staff to make clear, in circumstances where a wheelchair user wanted to board the bus but the wheelchair space was occupied by somebody who could reasonably and readily move to another part of the bus, that the person occupying it must do so.
For those reasons as well as the reasons given by Lord Neuberger, I agree with his judgment.
By way of postscript, the Court of Appeal made critical comments about the present state of the law in this area.
The divisions of opinion in this Court may be thought to reinforce the desirability of it receiving fresh legislative consideration.
LORD SUMPTION:
If a wheelchair user wishes to occupy the designated wheelchair space on a bus, basic decency and courtesy require the non wheelchair user occupying it to move, unless he or she has a very good reason not to do so.
But the law cannot enforce basic decency and courtesy, save insofar as they correspond to legal standards of behaviour.
The difficulty in this case is that the Conduct Regulations deal with the obligations of passengers at paras 5 and 6, without imposing any obligation on them to vacate the wheelchair space when it is required by a wheelchair user.
FirstGroup cannot create such an obligation of passengers by the terms of their published wheelchair policy.
I agree with Lord Neuberger that in those circumstances it would be wrong to expect the bus company to rephrase the notice at the designated wheelchair space so as to suggest that a non wheelchair user was required to move.
It would simply not be true.
The difficulty is that the same objection might be said to apply to Lord Neubergers view that the drivers polite request having been rejected, he should rephrase it as a requirement.
That would not be true either.
One solution to the problem might be for FirstGroup to change their conditions of carriage so as to require a non wheelchair user to move to another part of the bus if there is space, or to get off the bus if there is not.
They would then have a contractual right to enforce a requirement by the driver to move.
The difficulties about this solution are (i) that it will not in all cases be reasonable to require the non wheelchair user to vacate the wheelchair space, even if there is space elsewhere on the bus; (ii) it would not in my view be reasonable in any case to require him or her to get off the bus if there is no space elsewhere; and (iii) a change in the conditions of carriage which were subject to a test of reasonableness in each case would simply give rise to argument with the more recalcitrant non wheelchair users, without being enforceable at the only point of time when enforcement would of be any use to wheelchair users.
I see the force of the argument that bus companies can reasonably expect their drivers not just to ask the non wheelchair user to move but to do their best to persuade him or her to do so unless he has good reason to stay or it is clear that persuasion will be unavailing.
The difficulties, as it seems to me, are (i) that if this is to be turned into a legally required policy, it is necessary to specify what, as a minimum, a driver ought to do; and (ii) that any alternative guidance must be in terms which are capable of practical application and reasonably likely to be effective in a bus full of people at the roadside.
This is a sensitive area in which the circumstances may be infinitely varied and techniques of persuasion are not susceptible to detailed legal prescription.
The ideal solution, if there is one, would be to change the law so as to create an obligation on the part of non wheelchair users, enforceable in the same way as the rule against anti social behaviour, to move unless the driver reasonably considers that they have a sufficient reason not to do so.
In the absence of such a change, we must recognise that there are limits to what law can achieve in amending lawful but inconsiderate behaviour.
Fortunately, the evidence suggests that the present problem rarely arises.
For these reasons, I confess that I have misgivings about aspects of the reasoning of Lord Neuberger and Lord Toulson, which would impose on drivers a duty to require the non wheelchair user to move and in some cases to stop the bus for a few minutes, thereby inconveniencing every other passenger in order to shame the non wheelchair user into doing something that the law does not require him to do.
But this is not a case in which it would be right to dissent.
In a situation where there is no ideal solution, but only more or less unsatisfactory ones, I think that the approach of Lord Neuberger and Lord Toulson comes as close to giving effect to the policy of this legislation as a court legitimately can.
I therefore agree with their proposed disposition of this difficult appeal.
In particular I agree with them that once one rejects, as I fear one must, the more abrasive policy required by the Recorder, there are no findings which could justify an award of damages.
LADY HALE: (dissenting in part)
The ability to travel and to get about is important to all of us.
Without it we cannot get to work, do the shopping, visit family and friends or places of entertainment, in short be part of the community.
Difficulties with transport are one of the two most common barriers to work for people with impairments.
Of the 12m disabled people in the United Kingdom, one tenth, that is 1.2m people, are wheelchair users and more than a quarter of these are under the age of 60 (Papworth Trust, Disability in the United Kingdom 2014, Facts and figures).
It scarcely needs stating that they face particular difficulties in getting about and thus playing as full a part as they can in the life of the community.
Without the ability to travel they risk becoming socially isolated and losing confidence in themselves.
But their journeys need even greater planning than do those of people who are not wheelchair users: will I be able to get to the bus stop, will I be able to get on the bus, when will the bus go, will I be able to get from the bus to the train station, will I be able to get on the train, when will the train go, will I be able to get to my destination at the other end?
Time was when the law did nothing to help.
But then along came the Disability Discrimination Act 1995.
This not only prohibited direct and indirect discrimination against disabled people; it also imposed duties upon the providers of employment, accommodation, goods and services, in certain circumstances, to make reasonable adjustments to cater for the needs of disabled people.
The object, as has been said time and again, is to level the playing field, to lower the barriers which prevent disabled people having access to employment, accommodation, goods and services on the same terms as non disabled people.
It is to produce equality of results rather than equality of treatment (see, for example, MM v Secretary of State for Work and Pensions [2013] EWCA Civ 1565; [2014] 1 WLR 1716, para 35, citing Archibald v Fife Council [2004] UKHL 32; [2004] ICR 954, paras 47, 57, and Roads v Central Trains Ltd (2004) 104 Con LR 62, para 30).
However, the general duty to make reasonable adjustments, imposed upon the providers of services by section 21 of the 1995 Act, did not apply to any service so far as it consists of the use of any means of transport (section 19(5)(b)).
Instead, Part V of the Act dealt with public transport and empowered the Secretary of State to make regulations for the purpose of securing that it is possible for disabled persons (a) to get on to and off regulated public service vehicles in safety and without unreasonable difficulty (and, in the case of disabled persons in wheelchairs, to do so while remaining in their wheelchairs); and (b) to be carried in such vehicles in safety and in reasonable comfort (section 40(1); now replaced by the Equality Act 2010, section 174).
It was pursuant to that and related powers that the Secretary of State made the Public Service Vehicles Accessibility Regulations 2000, which are still in force.
These impose detailed and technical requirements for the provision of access to, and wheelchair spaces and priority seating in, buses and coaches.
This was a big advance, making public transport much more accessible than it had been before.
The Public Service Vehicles (Conduct of Drivers, Inspectors, Conductors and Passengers) Regulations 1990 (SI 1990/1020) were made under powers contained in the Public Passenger Vehicles Act 1981.
In 2002, they were strengthened to impose specific duties to allow access by disabled people, and in particular by those accompanied by guide dogs and for wheelchair users.
Thus, drivers, inspectors and conductors are prohibited from preventing a disabled person accompanied by an assistance, guide or hearing dog being allowed to board and travel in the vehicle with his dog, subject to there being a suitable space available (regulation 5(7)); likewise, drivers and conductors are required to allow a wheelchair user to board if there is an unoccupied wheelchair space on the vehicle and to ensure that wheelchair users can gain access into and get out of a wheelchair space (regulation 12(2), (4)); a wheelchair space is occupied if (a) there is a wheelchair user in that space; or (b) passengers or their effects are in that space and they or their effects cannot readily and reasonably vacate it by moving to another part of the vehicle (regulation 12(3)).
The regulations already imposed upon drivers, inspectors and conductors a duty to take all reasonable steps to ensure that the regulations relating to the conduct of passengers are complied with (regulation 5(2)); and prohibited passengers, among many other things, from putting at risk or unreasonably impeding or causing discomfort to any person travelling on or entering or leaving the vehicle (regulation 6(1)(b)).
Any passenger who is reasonably suspected of contravening any of the regulations is required to give his name and address to the driver, inspector or conductor on demand (regulation 8(1)); and any passenger who actually contravenes the regulations may be removed from the vehicle by the driver, inspector or conductor, or, at their request, by a police constable (regulation 8(2)).
Contravention of the regulations, whether by drivers, inspectors or conductors or by passengers, is a summary offence punishable by a fine, but it is a defence to prove a reasonable excuse for the act or omission in question (1981 Act, sections 24(2), 25(3) and 68(1)).
Parliament must have considered that the 2000 and amended 1990 Regulations were not sufficient to enable disabled passengers to enjoy the same access to public transport as is enjoyed by non disabled passengers, because Parliament next passed the Disability Discrimination Act 2005.
Section 5 of that Act added a new section 21ZA to the Disability Discrimination Act 1995, providing for the application of sections 19 to 21 of that Act in modified form to providers of transport services.
Where such a provider had a policy, practice or procedure which made it impossible or unreasonably difficult for disabled persons to make use of a service which he provided to other members of the public, it was his duty to take such steps as is reasonable in all the circumstances of the case for him to have to take in order to change that practice, policy or procedure so that it no longer has that effect.
The duty of service providers to make reasonable adjustments to cater for the needs of disabled people is now contained in the Equality Act 2010.
The duty is imposed by paragraph 2(1) of Schedule 2, which requires the provider to comply with the first, second and third requirements in section 20, as modified by paragraph 2.
Relevant in this case is the first (in section 20(3)): The first requirement is a requirement, where a provision, criterion or practice of As puts disabled persons generally at a substantial disadvantage in relation to a relevant matter in comparison with persons who are not disabled, to take such steps as it is reasonable to have to take to avoid the disadvantage.
Failure to comply with this (or the other two requirements) is a failure to comply with a duty to make reasonable adjustments (section 21(1)); and A discriminates against a disabled person if A fails to comply with that duty in relation to that person (section 21(2)).
As has been pointed out, this is a prospective duty, owed to disabled persons generally, to take proactive steps to meet their needs, and if an individual suffers as a result, then it is discrimination against him.
Three general points can be made about the legislative framework which is now in place.
The first is that mere compliance with the earlier regulations, both as to the provision of the wheelchair space and affording access to it, is not necessarily enough.
Parliament must have contemplated, in passing the 2005 Act, that other adjustments to business as usual might be needed in order to reduce the difficulties faced by disabled people in using public transport services.
The second is that, as the Recorder pointed out, there is an enormous difference between imposing a criminal sanction upon a driver and the obligation upon a service provider not to discriminate by a failure to take reasonable steps to adjust a present policy which is having the effect of substantially disadvantaging a disabled person (para 18).
The third, and most obvious, is that service providers owe positive duties towards disabled people, including wheelchair users, which they do not owe to other members of the travelling public, including parents travelling with small children in baby buggies or other people travelling with bulky luggage.
The Court of Appeal, in my view, fell into the trap of assuming that the claims of disabled travellers were no different from the claims of any other person wishing to use the buses.
They are not.
Disabled people are, for very good reasons, a special case.
It is now not in dispute that the respondent had a provision, criterion or practice which put wheelchair users at a substantial disadvantage when compared with non disabled passengers.
This was their policy of making the wheelchair space provided on their buses available on a first come, first served basis and doing no more than request occupants to vacate the space if it was required by a wheelchair using passenger.
At the time of the incident in question, the policy was that wheelchair users had no priority over buggies and this infected both the content of the notices and the approach to enforcement.
The issue agreed between the parties for the purpose of this appeal is a simple one: Was the Recorder correct in concluding that FirstGroup was in breach of the 2010 Act?
The Recorder concluded that FirstGroup could reasonably be expected to adjust its policy.
It should have been made clear to passengers, and to their drivers, that wheelchair users had priority over anyone else in the occupation of the wheelchair space and that other passengers would be required, not merely requested, to move out of it if a wheelchair user needed it.
With a proper system of notices, making the position plain, backed up with firm statements from the driver, everyone would know where they stood.
The culture would change.
Disruption and confrontation would be unlikely.
It is obviously reasonable to expect bus operators to do more than FirstGroup did in this case.
One only has to travel on a London bus to find a different policy in operation.
The notice carried on London buses has two boxes side by side.
The left hand one is headed Buggy users and below this Please make space for wheelchair users.
Below this there is another heading: Priority wheelchair area and below this, This space is reserved for a wheelchair when needed.
It goes on to explain how the wheelchair must be placed and ends Please give up this space for a wheelchair.
Alongside this is another panel, headed Baby buggies.
This reads Buggies can use this area if it is not needed by a wheelchair user.
Please move out of the wheelchair priority area if necessary.
Buggies may need to be folded at busy times.
This may not go quite as far as the Recorder contemplated, but it is clear, polite and firm and a great improvement on the Please give up this space for a wheelchair sign adopted by the respondent.
Three sorts of objection have been raised to the Recorders conclusion.
One is that management had undertaken a review of the way in which the company communicated with its passengers.
They had been told that they were being too directive so the approach was changed to one which was more customer friendly.
The sign was intended to be non confrontational (para 7 of the Recorders judgment).
But that was merely the explanation given by the company for the current sign.
The evidence of Mr Birtwhistle, for the company, was that there was no reason why the signs which were in the form of a request could not be worded differently so as to make it clear to all passengers that wheelchair users not only had such priority but that that such priority would be enforced (para 19 of the Recorders judgment).
So he clearly did not consider the non confrontational practice to be an objection.
In any event, it is usually possible to be polite as well as clear and firm.
And if clarity and firmness cannot be achieved without a more peremptory tone, then it is reasonable to expect a more peremptory tone.
The point has to be got across that other people are required to vacate the wheelchair space if it is needed by a wheelchair user.
The second sort of objection is that there will be some circumstances in which it is not reasonable to expect an existing occupier to vacate the wheelchair space.
This is so, although it is important to bear in mind that non disabled people are not entitled to be treated in the same way as disabled people.
There is no duty to make reasonable adjustments for them.
There may be circumstances in which that duty, coming as it does after the Conduct Regulations, could go beyond what is required by regulation 12(2) and (3).
However, the adjustments to be expected for disabled people must be reasonable ones, and there will obviously be circumstances in which it is not reasonable to expect the space to be vacated.
There is nothing in the Recorders judgment to suggest that he was expecting an absolute rule of the sort that would brook no exceptions.
This may well be because this sort of objection was not raised before him, although it featured heavily in the Court of Appeal.
As already mentioned, the Recorder drew a clear distinction between the criminal liability of drivers under the Regulations and the providers duty to make reasonable adjustments.
The third sort of objection rests on the fact that the service provider is being expected to make adjustments which will bring about change in other peoples behaviour.
Hence a great deal of argument was directed towards how a priority policy might be enforced against recalcitrant passengers.
In my view this is something of a red herring.
Most people do what they are told to do if they are told sufficiently clearly what it is that they are required to do.
The possibility that some people will be disobedient should not deter the bus company from making it clear what the rules are and doing its best to persuade people to obey.
There are many steps short of physically removing the person from the bus which can be taken, including delaying the departure of the bus until the rule is obeyed (which I have observed being highly effective against rowdy behaviour on an underground train).
I do not read the Recorders references to enforcement as necessarily involving forcible ejection from the space or the bus.
In any event, it is highly arguable that to refuse, without a reasonable excuse, to move from a wheelchair space required by a wheelchair user is to unreasonably impede any person travelling on or entering or leaving the vehicle within the meaning of regulation 6(1)(b).
It is also difficult to see why the Recorder was wrong to say that the company could make the requirement to leave the space a term of its conditions of carriage, in breach of which a passenger could be required to leave the bus.
This is no more unreasonable than requiring passengers to refrain from eating messy or smelly foods or drinking alcohol.
Drivers are frequently required to make judgments of this kind and do their best to enforce them.
These points do not have to be decided for the purpose of deciding this case, but I agree with what Lord Kerr says about them in paras 123 to 128 of his judgment.
This case is about whether there were adjustments which the company could have made which would have enabled Mr Paulley to board this bus.
There clearly were.
Furthermore, in the Recorders judgment there is little doubt that had the practice suggested by the claimant been in force on 24 February 2012 then Mr Paulley would have been able to travel rather than having to leave the bus and wait until the next bus was due to leave the Wetherby bus station (para 21).
In my view, therefore, the answer to the single issue agreed between the parties (para 101 above) is yes: the Recorder was correct to conclude that FirstGroup was in breach of the 2010 Act.
That being so, I have difficulty in understanding how it can possibly be just to deprive Mr Paulley of the damages which the Recorder awarded him.
A variety of adjustments were canvassed before the Recorder and I agree with Lord Kerr (para 133) that his judgment did not partake of the absolute quality which the Court of Appeal thought that it did.
Even if it did, it should have been open to Mr Paulley to argue that lesser adjustments were appropriate.
He did not need to put in a respondents notice in order to do so.
And the sole issue for this Court is not whether the Recorder was correct in every particular, although I am inclined to think that he was, but whether he was correct to find that FirstGroup was in breach.
The view of this Court is that FirstGroup was in breach.
In agreement with Lord Kerr, therefore, I would allow the appeal and restore the order which the Recorder made.
LORD KERR: (dissenting in part)
It is now not in dispute that FirstGroup, in making wheelchair spaces on their buses available on a first come first served basis, applied a provision, criterion or practice (PCP) which placed wheelchair users at a substantial disadvantage.
This appeal therefore centres on the question of what reasonable adjustments were required to modify the PCP.
The Recorder considered that two types of adjustment to deal with the deficiencies in the PCP were entirely feasible.
First, the notice on the respondents buses could be changed to make it clear that a non disabled passenger was obliged to move from a wheelchair space if it was needed by a wheelchair user.
Secondly, passengers who failed to vacate the space when asked to do so, could be asked to leave the bus.
The Court of Appeal considered that these went further than was reasonable.
Lord Neuberger and Lord Toulson agree.
Unlike the Court of Appeal, however, they consider that adjustments which can properly be described as reasonable could be made to the respondents PCP.
These adjustments are quite different from those deemed by the Recorder to be reasonable.
The reasons that the Court of Appeal considered that the adjustments proposed by the Recorder went beyond what was reasonable have been set out by Lord Neuberger in paras 34 to 39.
In short summary, these are: (a) that it would be objectionable to require people to vacate the space whose refusal to do so was reasonable; (b) that it was impracticable to expect the driver to decide whether a passenger was being unreasonable in refusing to move; (c) that it was not feasible to expect a driver to remove such a person or wait for police to arrive and, in any event, police could not enforce the adjusted policy because someone who refused a direction to move would not have committed a criminal offence; and (d) that a more prescriptive notice on the bus was not realistic in light of research which suggested that better results would be achieved by a more customer friendly message.
Lord Neuberger takes the view that what he describes as an absolute rule of requiring a non wheelchair user to vacate the wheelchair space and, in the event of non compliance, ejecting the passenger from the space must be rejected (paras 40 and 41).
He accepts that establishing an absolute rule is not necessarily inconsistent with a wheelchair users rights under the Equality Act 2010 (para 41).
But he concludes that the enforcement of an absolute rule would not be reasonable in all conceivable circumstances.
So, for instance, a person who was disabled but who did not require the use of a wheelchair might reasonably refuse to move from the wheelchair space.
Likewise, a person who felt safe only in that space and who might otherwise be vulnerable could not reasonably be required to leave it.
In paras 43 46 Lord Neuberger has examined the possible difficulties in enforcing even a qualified rule.
He expresses doubt as to the fairness of requiring a bus driver to assess whether an objection to vacate the wheelchair space is reasonable.
Whatever of that, however, Lord Neuberger considers that the clinching argument is that enforcement of a rule that required a passenger to vacate the wheelchair space on the basis of an absolute or a qualified rule would involve unacceptable confrontation and, on that account, could not be regarded as a reasonable adjustment to the PCP.
What has been described as an alternative case that might be made on behalf of the appellant (and which was, apparently, advanced before the Recorder) is discussed by Lord Neuberger in paras 49 51.
This involved the consideration of a number of potential reasonable adjustments.
They included a more peremptory notice on the buses; the driver insisting that a pushchair be folded so as to accommodate the wheelchair; and the driver refusing to continue the journey until the space was vacated.
Lord Neuberger has taken the view that consideration of these alternative formulations was beset by two procedural problems.
The first was that the Court of Appeal had proceeded on the basis that the appellants case was confined to the absolute argument viz that a non wheelchair user should be required to vacate the wheelchair space and, in the event of non compliance, they should be ejected from the bus.
The second procedural difficulty identified by Lord Neuberger was the absence of any finding by the Recorder that, if one of these modified adjustments had been made, there was a real prospect that it would have made a difference.
Notwithstanding these procedural problems, Lord Neuberger considers that it is open to this Court to decide whether the alternative case should succeed but, in the event that it does, the appellant should not be awarded damages.
He has concluded that it was not enough for the respondent to instruct its drivers to request non wheelchair users to vacate the space and do nothing further if that request was not acted upon (para 59).
Various courses of action that a driver might take are adumbrated by Lord Neuberger at para 60.
Reasonable adjustments
What is a reasonable adjustment must be determined according to the context in which the assessment is made.
Here the context is the elimination of discrimination against disabled people.
That will require, in appropriate circumstances, able bodied people to accept restrictions that they may find irksome or inconvenient.
It will demand of those who police or enforce the adjustments that they be ready to make difficult decisions and that they be prepared to confront and require of those who may not wish to, to suppress selfish inclinations.
Moreover, difficulty in enforcement of those restrictions does not automatically determine that they are unreasonable.
There is a distinct exhortatory dimension to be recognised in deciding whether an adjustment to assist a disabled person to overcome the disadvantage that she or he has in comparison to an able bodied person is reasonable.
A more peremptory notice?
On the first issue, viz whether the notice in the bus should have been in more peremptory terms, Lewison LJ in the Court of Appeal said that the Recorder had accepted evidence that the respondents research had shown that the company achieved better results with more customer friendly signage and that negative prescriptive signage produced a worse outcome but that he had failed to reflect this in his assessment of what he considered should be the adjustment to the PCP.
What the Recorder said about this evidence is to be found at para 7 of his judgment: The sign on the bus relating to the wheelchair space is couched in terms which are entirely consistent with the first come first served policy.
Mr Birtwhistle [the project director of FirstGroup] agreed that it was merely a request to those passengers, other than wheelchair users, who might be using/occupying the wheelchair space to give up the wheelchair space if needed for a wheelchair user.
Mr Birtwhistle explained that the reason for the signs being by way of request rather than requirement was that the management had undertaken a review of the way in which the company communicated with its passengers.
They had been told that they were being too directive so the approach was changed to one which was more customer friendly.
The sign was intended to be non confrontational.
Leaving aside the question whether any distinction should be drawn between Lewison LJs description of this work as research rather than review (as the judge described it) a real issue arises as to whether a more customer friendly notice has anything to do with a reasonable adjustment under section 29(7) of the 2010 Act.
It may well be the case that customer relations might be improved if a less confrontational sign was erected but this is not a case about fostering good customer relations, at least not unless the better relations would assist in eliminating the discrimination that wheelchair users suffer in using the respondents buses.
Lewison LJ said that negative prescriptive signage would produce a worse outcome but it is not clear on what basis this was anticipated.
Is it suggested that non disabled customers were less likely to comply with a requirement to vacate the wheelchair space than they would to a request to do so? Such a conclusion is certainly not warranted by the Recorders account of Mr Birtwhistles evidence on the subject.
A person is surely more likely to vacate a space if he or she is aware that they will be required to do so rather than if they are merely going to be asked to move.
Customers may baulk at direct instructions but they cannot claim that they are entitled to exercise a choice in the matter.
A bus company which alerts its passengers that they will have to abide by certain rules if they wish to travel removes the element of choice or the occasion for discussion.
This may not be conducive to the best customer relations but it makes it clear that certain rules must be obeyed if the customer is to avail of the companys services.
A reasonable adjustment geared to removing discrimination against wheelchair users cannot be discounted simply because a less rigorous policy might promote good customer relations.
The question whether a notice which instructs rather than requests passengers to vacate a wheelchair space when it is required by a wheelchair user must be viewed solely in terms of whether this is a reasonable adjustment to make in order to avoid the discrimination that the wheelchair user would otherwise suffer.
Viewed in that way, the answer is plain.
It is an entirely reasonable adjustment.
It removes the element of choice on the part of the passenger occupying the space.
They know, and, importantly, know in advance, that they will have to move.
Some passengers may not like it but that is not the point.
Such a notice, as well as eliminating any scope for debate, constitutes a significant statement which accords precisely with the Governments policy of providing comprehensive and enforceable civil rights for disabled people and achieving a fully accessible public transport system for them see para 19 of Lord Neubergers judgment.
Refusing to move unlawful?
The Court of Appeal appears to have been influenced to its decision by the consideration that, under the Conduct Regulations (Public Service Vehicles (Conduct of Drivers, Inspectors, Conductors and Passengers) Regulations 1990 (SI 1990/1020)), it would not be unlawful for a passenger to refuse to obey an instruction to vacate a wheelchair space.
I consider that, although passengers are not expressly required to obey every instruction from the driver, a refusal to leave a wheelchair space when instructed to do so in order that it be made available for a wheelchair user would be unlawful.
Regulation 12(2) requires the driver to allow a wheelchair user to board the bus if the wheelchair space is unoccupied.
Regulation 12(3) provides that the space is deemed to be unoccupied if a passenger, who is not a wheelchair user, occupying the space can readily and reasonably vacate it by moving to another part of the vehicle.
In order to comply with his duty under regulation 12(2), the driver will have to make a judgment as to whether a non wheelchair using passenger occupying the wheelchair space can readily and reasonably move, if that person refuses to move.
The first step for a driver in deciding whether to permit a wheelchair user to board the bus is to ascertain if the wheelchair space is unoccupied.
Because of the deeming provision in regulation 12(3) it is not enough for the driver to discover whether there is someone in that space.
He must go further.
He has to decide if the person occupying the space can readily and reasonably move from it.
If he so concludes, his duty under regulation 12(2) is activated.
How, then, is he to comply with that duty if he does not at least direct the passenger deemed to be able to move to do so?
Quite apart from the effect of regulation 12, a passenger who is readily and reasonably able to move from a wheelchair space commits an offence under regulation 6(1)(b) if his refusal prevents a wheelchair user from being allowed to board the bus.
This regulation prohibits any passenger from unreasonably impeding another passenger from entering a bus.
The Court of Appeal was concerned that enforcing regulation 6(1)(b) would require the driver to assess whether the person occupying the wheelchair space was acting unreasonably in refusing to vacate it.
But I question whether this is a matter for significant apprehension.
Under regulations 6 and 8 a bus driver can be called on to assess whether a passenger is causing discomfort to other passengers, or is causing a nuisance or is in a condition that would be likely to cause offence to a reasonable passenger.
All of these are grounds for removal of passengers from buses and the judgment as to whether the conditions justifying such removal must be made, in the first instance at least, by the bus driver.
Even if it were the case that to refuse to obey an instruction to move did not amount to a criminal offence, this would not provide the inevitable answer to the question whether it is a reasonable adjustment to a PCP that drivers be required to instruct passengers to do so.
As the Recorder observed, this could be made expressly clear by an adjustment to the conditions of carriage.
And since it would not involve the driver making assessments which are markedly different from those which he is already required to undertake by virtue of regulations 6 and 8, it cannot be suggested that such an adjustment was other than reasonable.
Lewison LJ suggested that it would not be practical for a bus company to sue every passenger who refused to vacate a wheelchair space.
I, of course, agree.
Nor would it be appropriate for a driver to attempt to manhandle a recalcitrant passenger off the bus see para 50 of Lewison LJs judgment.
But these considerations do not detract from the reasonableness of an adjustment to the PCP whereby the driver is at least entitled to say to a passenger, you have to move.
If the passenger persists in refusal, the driver may decide not to proceed with the journey.
This would of course inconvenience other passengers and it might well lead to unpleasantness but these are not reasons to condemn as unreasonable a change to the PCP which gives drivers the responsibility of pointing out to a passenger obstinately refusing to move that it is the policy of the bus company (and, when the adjustment to them had been made, one of the conditions of carriage) that they must vacate the wheelchair space.
Lord Neuberger has stated (in para 46) that what he described as the absolute rule required not only that the passenger be instructed to move but, if he refused, that he be ejected.
I do not read the Recorders judgment as requiring that the reasonable adjustment must incorporate the need to eject a passenger refusing to move.
In para 13 of his judgment he outlined the various adjustments which the appellant had initially put forward as reasonable modifications that could be made to the companys PCP.
None of these suggested that passengers who refused to move would have to be ejected.
To the contrary, one suggestion was that the driver should try to persuade the passenger to move; another was that the driver should refuse to continue the journey until the passenger moved from the wheelchair space.
These are not consistent with a proposal that the driver be required to eject him.
At para 15 the Recorder said that it had become apparent during the hearing that the real adjustment which the appellant sought was a clear practice/policy which not only paid lip service to the giving of priority to the wheelchair user but actually enforced such priority.
It has been assumed that the Recorder intended that enforcement in this context connoted ejection but I do not consider that this is correct.
What he actually said was: the most comprehensive adjustment alleged by the claimant was that it should be made clear to other passengers that the wheelchair space is for wheelchair users and that they will be required to vacate the space if needed.
Once such a practice was put into effect with a proper system of notices, warnings and, if necessary, advertising then the culture will have changed and no non disabled passenger who wished to occupy the space could be under any illusion that if there was a competition for such a space with a wheelchair user, then they would either have to vacate the space by, for example, folding a buggy and sitting elsewhere, or by leaving the bus and taking the next bus available.
The extent to which the adoption of such a policy would also require an insistence that pushchairs be folded or that passengers should be asked to fold their buggies before boarding the bus or that drivers should be trained to enable them to better persuade passengers to move from the wheelchair area would be a matter of degree.
The most effective adjustment, which would remove the disadvantage occasioned by the competition for the wheelchair space, would require a change in the first come, first served/request approach. (original emphasis)
I do not construe the Recorders statement that the able bodied passenger should be under no illusion that he or she would have to sit elsewhere or leave the bus as endorsing a policy of forcible ejection in the face of refusal to move.
Ensuring that a passenger was under no illusion as to what was expected of him or her is quite a different matter from physically removing them from the bus against their will if they failed to meet that expectation.
Nor do I understand him to have suggested that passengers should in every case be required to vacate the wheelchair space, regardless of whether they were able to do so reasonably.
The Recorder articulated a reasonable adjustment designed to cover, among other circumstances, the case of a passenger who occupied a space with what she claimed was a buggy that would not fold.
It was never suggested that there was nowhere else on the bus for the passenger to sit.
The problem was, if her claim was true, where the buggy should be placed.
The necessary inference from the Recorders judgment was that, if the passenger was unable to fold the buggy and to store it somewhere away from the wheelchair space, it was reasonable to expect her to be asked to leave the bus in order that Mr Paulley could be allowed to board.
This, I suggest, is clear from para 15 of the Recorders judgment where he said that, if there was competition for such a space with a wheelchair user, then they would either have to vacate the space by, for example, folding a buggy and sitting elsewhere, or by leaving the bus and taking the next bus available.
That does no more than affirm the principle that the wheelchair space is to be regarded as an area in which priority be given to wheelchair users.
It is entirely consonant with the overall intention and legislative purpose of the Equality Act 2010 and the Accessibility Regulations.
Difficulty in enforcement
If the reasonable adjustments required to the PCP are that (i) the notice in the respondents bus should stipulate that the wheelchair space must be vacated when a wheelchair user wishes to use it; and (ii) that the driver be required to tell a non disabled passenger occupying the space that he must yield it to the wheelchair user (rather than that he be required to eject the passenger), many of the perceived difficulties in implementing the policy fall away.
The notice would give emphasis to the policy of the company that it is expected that able bodied passengers must yield the space to a wheelchair user.
There is no reason to suppose that drivers making that policy explicitly clear would not help to persuade reluctant passengers that it is pointless to refuse.
There is every difference between a passenger who says well, your policy allows me to refuse a request and I am refusing and the passenger who says, well, I know that your policy requires me to move but I am not moving.
Even without coercive back up, there is every reason to conclude that the number of passengers prepared to take the latter stance would be significantly smaller than in the former.
In any event, as I have said, difficulty in implementation should not be the lone yardstick against which its reasonableness should be measured.
The reasonableness of the adjustments is to be judged by the contribution which they make to redressing the imbalance between wheelchair users and able bodied members of the public in the opportunity they have to use public transport.
Of course, if it is utterly impossible to enforce an adjustment and if it is likely to be wholly ignored, it may be said that it is not reasonable to introduce it.
But there is no warrant for reaching such a conclusion in the present case.
The adjustment to the PCP would, at the very least, make an important statement about the companys commitment to ensuring equal treatment for its wheelchair bound customers.
And, for the reasons that I have given, I consider that it would also bring about an attitudinal change on the part of those passengers who might be inclined to refuse a request to move.
Without supporting evidence, I am not prepared to accept that a stipulation that a passenger was required to move would lead to confrontation or delay.
When members of the public congregate to use a generally available facility, there is always the possibility that there may be disagreement about who is entitled to what but is there any greater likelihood of discord and confrontation because a rule is clear, as opposed to one which allows the passenger to decide whether to accede to a request? I would certainly not take that as a given.
And, of course, there are situations that arise under the Conduct Regulations that do require drivers to give instructions.
It was not suggested that these gave rise to widespread problems of confrontation or delay.
Even if an instruction, as opposed to a request, prompted delay, such as where a driver might refuse to continue the journey until the refusing passenger yielded, that would not be a basis on which the adjustment could be condemned as unreasonable.
Wheelchair users face formidable difficulties in making use of facilities that the able bodied can take for granted.
If inconvenience to the travelling public because of delay is the price which has to be paid to allow those who depend on a wheelchair to make maximum use of the transport system which is made available to all, I do not consider that this is, in any sense, unreasonable.
Inflexible application of the adjusted policy
It is important to remember that what is sought is a reasonable adjustment to the PCP.
It is not demanded that there be a wholly unyielding application of it in every conceivable circumstance.
Even before the Court of Appeal, the appellant accepted that there would be circumstances in which it would not be appropriate to apply the adjusted policy in its full rigour.
But, just because there should be a measure of discretion as to when the adjusted policy should be applied, it does not follow that there should not be an adjustment.
The inevitable fact that there will be occasions when it would not be appropriate to require a passenger to leave a wheelchair space does not require that the correct policy should not be in place.
Of course, the decision when to enforce the adjusted policy rigidly and when to relax or modify it calls for judgment to be exercised by the bus driver.
But there is no reason to suppose that this will require exceptional powers of discretion.
It is in the nature of a bus drivers work that he or she will need to make decisions about how passengers should be handled or responded to in all manner of circumstances.
The fact that there will be circumstances in which a reasonable decision may be made not to enforce a policy strictly does not mean that the policy should not exist.
Nothing in the Recorders judgment suggests that he considered that the adjusted policy would have to be enforced in an unbending fashion, whatever circumstances were encountered.
I am afraid that I am unable to agree, therefore, with Lord Neubergers statement in para 55 that there is no basis on which to conclude that there would have been a real prospect that an adjustment to the respondents PCP would have resulted in Mr Paulley not being placed in the disadvantage that he was.
On my analysis, the Recorder had, at least implicitly, accepted that drivers would not be required to eject passengers who refused to move and he had not ruled out the possibility of drivers deciding that, in exceptional circumstances, the policy should not be strictly enforced.
The essential finding that he made was that what he described as the first come first served/request policy required adjustment.
It is an inescapable inference from that conclusion that, if the adjustment had been made, there was at least a real prospect that Mr Paulley would not have been prevented from travelling on the bus.
That seems to me to be an inescapable inference in any event.
If the young woman who refused to move had been told that she had to move and that the bus companys policy was that she must do so, how could it be said that there was not a real prospect that she would have moved? Was it open to the appellant to advance a qualified rule in the Court of Appeal?
For the reasons that I have given, I do not believe that the Recorders findings partook of the absolute quality which the Court of Appeal considered that they did.
He had not suggested that ejection of the refusing passenger from the bus was an indispensable ingredient of the required adjustment to the PCP.
Even if he had done, however, I do not consider that the appellant should have been deprived of the opportunity of arguing that a less rigorous adjustment was appropriate.
The essential case made by the appellant was that reasonable adjustments to the policy were required in order to overcome the disparity of treatment between him and able bodied passengers.
The case that he had to make was that the policy was deficient and that reasonable adjustments could have cured, or at least ameliorated, that position.
He was not required to adopt unshakeably one particular form of reasonable adjustment to the exclusion of all others.
That is, no doubt, the reason that a whole series of possible adjustments was adumbrated on his behalf before the Recorder, as detailed by him in para 13 of his judgment.
Even if it were the case that the Recorder had lighted on one particular form of adjustment, it surely does not follow that the appellant was fixed with that as the only possible avenue through which to advance his argument.
I do not consider that a respondents notice was required in order to allow the appellant to pursue a different line from that espoused by a lower court.
A respondents notice is needed where a finding made by a lower court is challenged or where a particular line of argument advanced by the respondent below had been rejected.
Neither situation obtained here.
Conclusion
I would allow the appeal and restore the order which the Recorder made.
LORD CLARKE: (dissenting in part)
I initially thought that the resolution of this appeal depended upon the application of regulation 12 of the Conduct Regulations (the Regulations) referred to by Lady Hale in para 96 of her judgment.
It seemed to me that, so far as relevant to this appeal, the critical provisions were contained in regulation 12.
In particular, regulation 12(2) provides for the use of an unoccupied wheelchair space.
Regulation 12(3) defines a wheelchair space as being occupied if: there is a wheelchair user in that space; or (a) Regulation 12(2) provides: (b) passengers or their effects are in that space and they or their effects cannot readily and reasonably vacate it by moving to another part of the vehicle.
If there is an unoccupied wheelchair space on the vehicle, a driver and conductor shall allow a wheelchair user to board if (a) the wheelchair is of a type and size that can be correctly and safely located in that wheelchair space, and (b) in so doing, neither the maximum seating nor standing capacity of the vehicle would be exceeded.
The express meaning of those provisions is that a wheelchair user must be permitted to board and use the space, provided that there is no wheelchair user already in the space or, if another passenger or passengers is or are in the space, he or they must be unable readily and reasonably to vacate it by moving to another part of the vehicle.
It follows that the Regulations do not themselves contemplate that such a person or persons would be asked or required to get off the bus.
The Regulations thus balance the interests of wheelchair users and other passengers in a specific way.
Since that balance does not contemplate that a person using the space would be asked or required to get off the bus altogether, I did not think that FirstGroup could have been in breach of any duty to Mr Paulley under regulation 12 to direct that the lady with the buggy leave the bus.
In so far as the Recorder concluded that FirstGroup owed Mr Paulley a duty to make adjustments to what is called a provision, criterion or practice (or PCP) under which he would have priority as a wheelchair user and that, in appropriate circumstances, another person using the wheelchair place who was not using a wheelchair would be required to leave the bus, I thought that his case was not established under regulation 12.
Assuming that those were the only relevant regulations governing the duty of the defendant (the company) in a case of this kind it seemed to me that the only way in which it could be said that it was in breach of duty to the claimant would be as follows.
First, the company should have ensured that its drivers considered whether, in circumstances like these, a person with a child and a buggy could (in the words of regulation 12(3)) readily and reasonably vacate the space by moving to another part of the bus.
For my part, I do not think that it was sufficient for the driver (or the lady concerned) to refuse to wake the child up if, as appears to have been the case on the facts, he or she was asleep.
Moreover, it was not, in my judgment, sufficient for the driver to do no more than ask the lady to move out of the wheelchair space.
In para 5 of his judgment the Recorder set out the companys policy, both at the time of the incident and at the time of the trial.
The first was in these terms: Wheelchairs do not have priority over buggies, but to ensure that all our customers are treated fairly and with consideration, other customers are asked to move to another part of the bus to allow you to board.
Unfortunately, if a fellow passenger refuses to move you will need to wait for the next bus.
That was on the website but was changed because the wheelchair policy on the website did not reflect the policy adopted by the company.
It was replaced by this.
Wheelchair users have priority use of the wheelchair space.
If this is occupied with a buggy, standing passengers or otherwise full, and there is space elsewhere on the vehicle, the driver will ask that it is made free for a wheelchair user.
Please note that the driver has no power to compel passengers to move in this way and is reliant on the goodwill of the passengers concerned.
Unfortunately, if a fellow passenger refuses to move you will need to wait for the next bus.
It is not now in dispute that neither of those terms is a satisfactory PCP.
The question is whether the bus company made reasonable adjustments to the PCP.
The reason that it is not now contested that those adjustments are not reasonable is that both leave the decision whether to vacate the space and to move to another part of the bus entirely to the person using the wheelchair space.
Under them, if that person refuses to move, that is the end of it.
For the reasons given by Lady Hale and Lord Kerr and (I think) by Lord Neuberger, Lord Toulson and Lord Reed, I agree that the failure to make further adjustments to the PCP was contrary to the law as it stood when the Regulations were introduced.
For these reasons, I would hold that the company was in breach of duty owed to Mr Paulley in failing to take more steps than it did in response to his request to use the wheelchair space in his wheelchair.
In short, I agree with Lord Toulson and Lord Neuberger that it should have gone further than it did.
See, in particular para 83 of Lord Toulsons judgment, with which I agree.
I further agree with him, and indeed with Lord Neuberger, that the appeal should be allowed, at least to the extent that they propose.
I also agree in this regard with Lady Hale and Lord Kerr.
The question then arises, or would arise, whether there is any basis upon which the order for damages should be sustained.
It is accepted by both Lord Neuberger and Lord Toulson that this alternative case was advanced by the claimant at first instance.
I agree that the claimant should be permitted to take the point, since (whatever may have been said in the Court of Appeal), all parties were in a position to argue the point before this Court.
The next question is whether, if the bus driver had taken further steps to put pressure upon the lady with the buggy, there was a sufficient prospect that she would have moved from her place to another part of the bus sufficient to satisfy the relevant test of causation.
Lord Kerr concludes that, if the policy had been more authoritative, and the lady had been told that she had to move and that the companys policy was that she must do so, there was at least a real prospect that she would have moved.
I agree.
It seems to me to be a reasonable inference from the facts that it was practicable for her to move to another part of the bus.
It was not the evidence of the driver that there was nowhere else she could go.
His requests were consistent only with the conclusion that it was both reasonable and practicable for her to move elsewhere on the bus.
There is no evidence that she was faced with only two alternatives, namely staying where she was in the wheelchair space or leaving the bus.
In these circumstances I agree with Lord Kerr that there is at least a real possibility that, if the position had been explained to her in clear terms, she would have moved elsewhere on the bus, even though it would have involved waking the child.
I would go further.
It seems to me that, if the problems and the policy had been put clearly to her, it is more likely than not that she would have agreed to do so.
The question then arises whether, if the driver had told the lady that she must move and if, as I think, it is more likely than not that she would have done so, it is clear that there was somewhere else in the bus she could (and would) have gone to.
It is common ground that the driver asked the lady if she would move elsewhere in the bus in order to accommodate the wheelchair.
It is I think clear that there was somewhere else for her to go on the bus.
The further question then arises whether the buggy would have been able to be folded up.
Again, it seems to me to be more likely than not that the buggy was foldable.
First, although there may be some exceptions, buggies are ordinarily foldable.
Secondly, the drivers evidence (in his statement) was that he asked the lady if she would fold her buggy up so that Mr Paulley could travel on the bus.
In his statement he added at paras 45 and 46: 45 The lady pointed out to me that her child was fast asleep within the buggy and that she had no intentions of waking the child or removing the child from the buggy.
It was clear to both me and Mr Paulley that the lady was 46. refusing to assist.
The driver did not say that the lady told him that it was not possible to fold up the buggy.
When he was asked whether there was anywhere else for the buggy and child to go if they moved out of the space, the driver said no.
However, he was then asked whether there was any alternative to asking the person with the buggy to get off the bus.
He said that the alternative was to fold down the buggy if possible, if the buggy would fold down.
It is true that he was then asked And they had refused to do that? and he replied yes.
There is however no evidence that he heard the lady say that.
As I see it, he inferred that from the reply recorded in his statement.
Ironically perhaps, the only evidence which might be said to support the conclusion that the buggy in question could not be folded up is in the evidence of Mr Paulley.
In his statement he said at para 24 that he appreciated that the wheelchair space is a good place for people to park their pushchairs, but they can at least fold them up.
That suggests that he thought that the buggy could be folded up.
However, earlier in his statement he said at para 14 that, while he was boarding the bus, the following exchange took place between the driver and the lady with the buggy: Of his own initiative, the driver turned to the lady and asked if she would fold it [ie the buggy] down so that I could use the wheelchair bay.
The lady (who was on her mobile phone) responded by saying that the pushchair did not fold down and so she wouldnt move.
It is true that in the Court of Appeal Lewison LJ at para 3 accepted that account, although he did not advert to the drivers evidence set out above.
I am bound to say that it seems unlikely to me that it was not possible to fold the buggy and that it is more likely than not that the true reason for her attitude was the inconvenience of moving the child and the buggy when the child was asleep, which was essentially the reason she gave.
If those conclusions are correct, Mr Paulley would be entitled to succeed even if the only relevant provisions were contained in regulation 12 of the Conduct Regulations.
However, Lady Hale and Lord Kerr place considerable weight upon the position as at the date of the incident.
Lady Hale has described the Regulations and their provenance in detail in her para 96, which she puts in their context in her paras 93 95 and 98.
Importantly, she also stresses the importance of section 21ZA of the Disability Discrimination Act 2005 in her para 98.
As she says, that section provided for the application of sections 19 to 21 of the DDA 1995 in modified form to providers of transport services.
I agree with her that in passing that Act, Parliament must have concluded that the earlier regulations were not sufficient to enable disabled passengers to enjoy the same access to public transport as is enjoyed by non disabled passengers.
As she says, those sections provide that, where providers of transport services had a policy, practice or procedure which would make it impossible or unreasonably difficult for disabled persons to make use of a service which they provided to other members of the public, it was their duty to take such steps as is reasonable in all the circumstances of the case for him to take in order to change that practice, policy or procedure so that it no longer has that effect.
I now appreciate that the critical point in this appeal is not whether there was a breach of regulation 12 of the Conduct Regulations.
As Lady Hale says at para 101, the issue agreed between the parties for the purpose of this appeal is a simple one, namely whether the Recorder was correct in concluding that the company was in breach of the Equality Act 2010.
In her paras 99 to 109 Lady Hale convincingly explains why the answer to that question is yes.
The essential points which have persuaded me are these, which are really no more than those made by Lady Hale.
The bus company as the service provider must comply with three requirements set out in paragraph 2(1) of Schedule 2 to the 2010 Act.
The first is in section 20(3) as modified by the Schedule.
It reads: The first requirement is a requirement, where a [PCP] of As puts disabled persons generally at a substantial disadvantage in relation to a relevant matter in comparison with persons who are not disabled, to take such steps as it is reasonable to have to take to avoid the disadvantage.
As Lady Hale explains in para 99, failure to comply with that requirement is a failure to make reasonable adjustments under section 21(1) and A discriminates against a disabled person if A fails to comply with that duty in relation to that person under section 21(2).
This is a prospective duty, owed to disabled persons generally, to take proactive steps to meet their needs, and if an individual suffers as a result, then that failure amounts to discrimination against him.
I agree with the general points made by Lady Hale in para 100.
In particular, the position under the 2010 Act is different from that under the Conduct Regulations.
Disabled people are a special case.
Their needs are to be treated differently from those of others, including those with buggies.
As Lady Hale puts it in paras 101 and 102, at the time of the incident the companys policy was that wheelchair users had no priority over buggies and that infected both the content of the notices and the approach to enforcement.
It should have been made clear to passengers that wheelchair users had priority over others, who should have been required to vacate the wheelchair space.
I agree with Lady Hale that disruption and confrontation would be unlikely.
As indicated above, it is my view that it is more likely than not on the facts here that, if the lady had been required to move, as opposed to merely being asked to do so, she would have done so.
I am also of the view that if, contrary to my view of the facts of this case, a buggy cannot be folded down, the PCP should have been adjusted to make it clear that, if necessary to enable a wheelchair user to use the wheelchair space, the buggy user (and not the wheelchair user) must get off the bus.
Only in this way will the statutory policy of priority for wheelchair users be carried out.
In reaching this conclusion, I do not disagree with the points made by Lady Hale in para 105.
As she says, while non disabled people are not entitled to the same treatment as disabled people, especially after the 2010 Act, the adjustments to be expected for disabled people must be reasonable ones, and there will obviously be circumstances in which it is not reasonable to expect the space (or indeed the bus) to be vacated.
However, this is not such a case.
In conclusion, I agree in particular with the reasoning of Lady Hale and Lord Kerr.
I too would allow the appeal.
I also would answer the question posed, namely whether the company was in breach of the 2010 Act in the affirmative.
I agree with Lady Hale that, whatever concession may have been made in the Court of Appeal, it cannot be just to deprive Mr Paulley of the damages which the Recorder awarded him.
As I say in para 148 above, all parties were in a position to argue the point before this Court.
I would therefore restore the order made by the Recorder.
| UK-Abs | The appeal concerns the lawfulness of a bus companys policy in relation to the use of the space provided for wheelchair users on its buses.
Mr Paulley is a wheelchair user who attempted to board a bus operated by a subsidiary of FirstGroup PLC on 24th February 2012.
The bus had a space marked by a wheelchair sign and a notice saying, Please give up this space for a wheelchair user (the Notice).
At the time Mr Paulley attempted to board, a woman with a sleeping child in a pushchair occupied this space.
She was asked by the driver to fold down the chair and move; however, she refused, stating that it did not fold down.
Mr Paulley had to wait for the next bus as a result.
Mr Paulley issued proceedings against FirstGroup for unlawful discrimination on the ground of his disability, claiming that FirstGroup had failed to make reasonable adjustments to its policies contrary to section 29(2) of the Equality Act 2010.
The Recorder found that FirstGroup operated a provision criterion or practice (PCP) consisting of a policy of first come first served whereby a non wheelchair user occupying the space on the bus would be requested to move, but if the request was refused nothing more would be done.
This placed Mr Paulley and other wheelchair users at a substantial disadvantage by comparison with non disabled passengers.
There were reasonable adjustments that FirstGroup could have made to eliminate the disadvantage: (i) altering the Notice positively to require non disabled passengers occupying a space to move if a wheelchair user needed it; and (ii) adopting an enforcement policy requiring non disabled passengers to leave the bus if they failed to comply.
The Recorder found in favour of Mr Paulley and awarded him 5,500 damages.
FirstGroups appeal was unanimously allowed by the Court of Appeal which held that it was not reasonable to hold that FirstGroup should adjust its policy so that its drivers required, rather than requested, non wheelchair users to vacate a space when it was needed by a person in a wheelchair, and then to positively enforce that requirement with the ultimate sanction being removal from the bus.
The Supreme Court unanimously allows Mr Paulleys appeal, albeit only to a limited extent.
Lord Neuberger gives the lead judgment (with which Lord Reed agrees) allowing the appeal but only to the extent that FirstGroups policy requiring a driver to simply request a non wheelchair user to vacate the space without taking any further steps was unjustified.
Where a driver who has made such a request concludes that a refusal is unreasonable, he or she should consider some further step to pressurise the non wheelchair user to vacate the space, depending on the circumstances.
Lord Toulson and Lord Sumption write concurring judgments.
On the issue of the order to be made, this majority declines to uphold an award of damages.
Lady Hale, Lord Kerr and Lord Clarke also allow the appeal but they would have restored the order of the Recorder in full, including upholding the award of damages.
Under section 29 of the 2010 Act, as a public service provider, FirstGroup must not discriminate against a person requiring its services by not providing the person with the service, and it must make reasonable adjustments to avoid substantial disadvantage to disabled persons [20 26].
The Recorders judgment effectively required a policy that could lead to a non wheelchair user being ordered off the bus [40 45].
The Court of Appeal was right to reject this.
An absolute rule that any non wheelchair user must vacate the space would be unreasonable: there are many circumstances in which it could be unreasonable to expect a non wheelchair user to vacate a space, and even more, to get off the bus, even where the space is needed by a wheelchair user [46 48].
Even a qualified rule (i.e. that any non wheelchair user must vacate if it is reasonable) implemented through mandatory enforcement would be likely to lead to confrontation with other passengers (not least where the non wheelchair user vacating the space affected other travellers) and delay [50 51].
Passengers are not clearly subject to a statutory obligation to comply with a policy relating to the use of the space, and would not appear to be under such an obligation to get off the bus if they fail to do so [52].
Even though the hearing in the Court of Appeal had proceeded on the basis that it was not part of Mr Paulleys case [59], the argument that FirstGroups PCP should have gone further than it did, albeit not as far as the Recorder concluded, has more force.
FirstGroup cannot be criticised for choosing not to express the Notice in more forceful terms: it was aimed at politely requiring non wheelchair users to vacate the space; there was evidence that directive notices are a less effective means of communication with the public; and the use of specially emphatic language should not determine legal liability in this case [63].
The suggestion that the Notice should state that priority of wheelchair users would be enforced would be false [64].
However, it was not enough for FirstGroup to instruct its drivers simply to request non wheelchair users to vacate the space and do nothing further if the request was rejected.
The approach of the driver must depend upon the circumstances, but where he or she concludes that the refusal is unreasonable, some further step to pressurise the non wheelchair user to move should be considered, such as rephrasing the request as a requirement (especially where the non wheelchair user could move elsewhere in the bus) or even a refusal to drive on for several minutes [67].
Lord Toulson agrees [83 85] adding that fresh legislative consideration is desirable [87].
Lord Sumption also agrees albeit with reservations [92].
So far as damages are concerned, Lord Neuberger (with whom Lords Sumption, Reed and Toulson agree) concludes that the Recorder did not specifically consider whether, if FirstGroup had simply required its drivers to be more forceful, there was a prospect that it would have made a difference in this case.
It is therefore not possible to conclude that there would have been a real prospect that such an adjustment would have resulted in Mr Paulley not being placed in the disadvantage that he was, and so an award of damages is not possible [60 61].
Lady Hale, Lord Kerr and Lord Clarke dissent in part.
As the Recorder found, it was reasonable to expect bus operators to do more than FirstGroup did [102 109].
His judgment did not necessarily require ejection of a passenger who refused to move from the bus nor did it create an absolute rule [106]; [129 131]; [137].
Had the practice suggested by the claimant been in force, there was at least a real prospect that Mr Paulley would likely have been able to travel [108]; [138].
This being so, it was unjust to deny Mr Paulley damages [109]; [160].
|
The issue in this appeal is whether the appellant is entitled to subsidiary protection status under articles 2 and 15 of EU Council Directive 2004/83/EC on the 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 granted (the Qualification Directive).
The main objectives of the Qualification Directive, identified in recital (6), are to ensure that EU member states apply common criteria for the identification of persons in need of international protection and that a minimum level of benefits is available to them.
Article 2 provides: international protection means the refugee and For the purposes of this Directive: (a) subsidiary protection status as defined in (d) and (f); . person eligible for subsidiary protection means a third (e) country national or stateless person who does not qualify as a refugee but in respect of whom substantial grounds have been shown for believing that the person concerned, if returned to his or her country of origin, or in the case of a stateless person, to his or her country of former habitual residence, would face a real risk of suffering serious harm as defined in article 15 and is unable, or, owing to such risk, unwilling to avail himself or herself the protection of that country; subsidiary protection status means the recognition by (f) a member state of a third country national or a stateless person
as a person eligible for subsidiary protection
Article 15 provides: Serious harm consists of (a) death penalty or execution; or (b) punishment of an applicant in the country or origin; or serious and individual threat to a civilians life or person (c) by reason of indiscriminate violence in situations of international or internal armed conflict.
torture or inhuman or degrading treatment or
The appellant is a national of Sri Lanka.
He arrived in the UK in January 2005, then aged 28, and was given leave to enter as a student.
His leave to remain was extended to 30 September 2008.
Shortly before its expiry he applied for a further extension.
This was refused on 11 December 2008.
He claimed asylum on 5 January 2009 on the grounds, in summary, that he had been a member of the Liberation Tigers of Tamil Eelam (LTTE), he had been detained and tortured by the Sri Lankan security forces, and, if returned to Sri Lanka, he was at risk of further ill treatment for the same reason.
The appellants application was refused by the respondent on 23 February 2009.
The respondent did not dispute the core of the appellants account, that he had been a member of the LTTE and had been detained and tortured for that reason, but she did not accept that he would be of continuing interest to the Sri Lankan authorities or at risk of further ill treatment if he were returned.
The appellant appealed against the respondents decision.
It is not necessary to set out full details of the procedural history, but ultimately his appeal formed part of a decision by the Upper Tribunal, dated 5 July 2013, giving Country Guidance on the risk to Tamils following the end of the Sri Lankan civil war: GJ and Others (post civil war: returnees) Sri Lanka CG [2013] UKUT 00319 (IAC).
The Upper Tribunal had medical evidence that the appellant bore scars on his chest and upper and lower limbs which were highly consistent with his account of being beaten with blunt instruments, burned with cigarettes and an iron bar, and his hand cut with a knife.
It also had evidence of a psychiatrist, who had examined the appellant and had access to his medical records in the UK, that he was suffering severe post traumatic stress disorder and severe depression, he showed a high degree of suicidality and he appeared to have a serious determination to kill himself if he were returned to Sri Lanka.
The appellant did not himself give evidence.
The psychiatrist did not consider him fit to do so.
The Upper Tribunal accepted that the appellant had a genuine fear of return to Sri Lanka, and that he had difficulty in trusting or interacting with official figures, even in the UK, because of his past torture, but it rejected his appeal under the Refugee Convention and the Qualification Directive because it did not accept that he was of any continuing interest to the authorities in Sri Lanka.
However, it allowed his appeal under article 3 of the European Convention on Human Rights.
It explained its reasoning in the following paragraphs: 453.
Although the appeal fails under the Refugee Convention and Qualification Directive, we must consider whether the suicide risk which this appellant presents is such as to engage article 3 ECHR.
Applying the J and Y principles [J v Secretary of State for the Home Department [2005] EWCA Civ 629 and Y (Sri Lanka) v Secretary of State for the Home Department [2009] EWCA Civ 362] and reminding ourselves of the gravity of the appellants past experience of ill treatment and his current grave mental health problems, with severe forms of both post traumatic stress disorder and depression, we have considered whether returning the appellant to Sri Lanka will breach the United Kingdoms international obligations under article 3. 454.
The evidence is that there are only 25 working psychiatrists in the whole of Sri Lanka.
Although there are some mental health facilities in Sri Lanka, at para 4 of the April 2012 UKBA Operational Guidance Note on Sri Lanka, it records an observation by Basic Needs that money that is spent on mental health only really goes to the large mental health institutions in capital cities, which are inaccessible and do not provide appropriate care for mentally ill people. 456.
We note that the appellant is considered by his experienced Consultant Psychiatrist to have clear plans to commit suicide if he is returned and that he is mentally very ill, too ill to give reliable evidence.
We approach assessment of his circumstances on the basis that it would be possible for the respondent to return to return the appellant to Sri Lanka without his coming to harm, but once there, he would be in the hands of the Sri Lankan mental health services.
The resources in Sri Lanka are sparse and limited to the cities.
In the light of the respondents own evidence in her OGN that there are facilities only in the cities and that they do not provide appropriate care for mentally ill people and of the severity of this appellants mental illness, we are not satisfied on the particular facts of this appeal, that returning him to Sri Lanka today complies with the United Kingdoms international obligations under article 3 ECHR.
The Upper Tribunals decision was upheld by the Court of Appeal: [2014] EWCA Civ 829.
Maurice Kay LJ, with whom the other members of the court agreed, said that in his judgment the Qualification Directive was not intended to catch article 3 cases where the risk is to health or of suicide rather than of persecution (para 48).
He referred to the decision of the European Court of Human Rights in N v United Kingdom (2008) 47 EHRR 39 (a case of an AIDS sufferer who claimed that her removal to Uganda would contravene article 3) as showing that cases where the risk to an applicant arose from his health were a special category to which article 3 applied only in very exceptional circumstances, because in such cases the alleged future harm would emanate not from the intentional acts or omissions of public authorities or non state bodies, but instead from a naturally occurring illness and the lack of sufficient resources to deal with it in the receiving country (para 43).
Counsel for the appellant submitted that it made a critical difference to the applicability of the Qualification Directive that the Sri Lankan state was responsible for his mental illness by its past ill treatment, but Maurice Kay LJ considered that this argument stretched the concept of subsidiary protection too far.
It is argued on the appellants behalf that the Upper Tribunal and the Court of Appeal took too narrow a view of the scope of the Qualification Directive.
It is his case that his mental illness should not be regarded as a naturally occurring illness, because it was caused by torture at the hands of the Sri Lankan authorities.
Instead, it is submitted that, just as the Upper Tribunal accepted that on the facts of this case the appellants return would cause him severe mental harm which, taking into account his history of ill treatment by the state and the inadequacy of facilities to treat its consequences, would amount to a violation of ECHR article 3, so for similar reasons it should have accepted that he was entitled to subsidiary protection status under the Qualification Directive.
According to this argument, it makes no difference to his entitlement to such protection that there is no longer a risk of repetition of the ill treatment which is the cause of his current state of health.
The respondent submits that the Upper Tribunal and Court of Appeal were right.
It is her case that it is a necessary component of subsidiary protection that there exists a risk of serious harm, as defined in article 15 of the Qualification Directive, in the country of origin for which the home state will be responsible, in that it will either inflict that harm or it will be inflicted by a non state actor against which the state is unable or unwilling to provide protection.
Put shortly, according to her argument, the Directive is aimed at providing international protection against the risk of serious harm from future ill treatment, either by the state or by a third party against which the state cannot or will not provide protection, and not at potential future consequences of past ill treatment of which there is no risk of repetition.
This court was referred to a number of authorities of the Court of Justice of the European Union, including MBodj v Kingdom of Belgium (Case C 542/13) [2015] 1 WLR 3059, and of the European Court of Human Rights, but none is precisely in point.
The question of principle which the appeal raises is debatable and should therefore be referred to the Court of Justice.
The question to be referred is: Does article 2(e), read with article 15(b), of the Qualification Directive cover a real risk of serious harm to the physical or psychological health of the applicant if returned to the country of origin, resulting from previous torture or inhuman or degrading treatment for which the country of origin was responsible?
| UK-Abs | The appellant is a Sri Lankan national who arrived in the UK in January 2005 aged 28.
He was given leave to enter as a student and his leave to remain was extended to 30 September 2008.
His application for an extension was refused.
He claimed asylum on 5 January 2009 on the grounds that he had been a member of the Liberation Tigers of Tamil Eelan (LTTE) and had been detained and tortured by Sri Lankan security forces.
He contended that on return he was likely to suffer similar ill treatment.
The issue is whether he is a person eligible for subsidiary protection under the EU Council Directive 2004/83/EC (the Qualification Directive).
He is such a person if there are substantial grounds for believing that upon return to Sri Lanka he will face a real risk of suffering serious harm and is unable, or, owing to such risk, unwilling to avail himself or herself the protection of that country (article 2(e)).
Serious harm in this case means, under article 15(b), torture or inhuman or degrading treatment or punishment.
On 23 February 2009 the Secretary of State for the Home Department refused his application for asylum on the basis that he would not be at risk of further ill treatment despite his membership of LTTE.
The applicant appealed.
The Upper Tribunal (UT) had evidence from a psychiatrist that he was suffering severe post traumatic stress disorder and severe depression and showed a high degree of suicidality.
The UT accepted that the appellant had a genuine fear of return to Sri Lanka.
It accepted that the mental health provision in Sri Lanka was insufficient.
But it did not accept that he was of any continuing interest to the authorities in Sri Lanka.
Therefore the UT rejected his appeal under the Qualification Directive.
In the Court of Appeal, Maurice Kay LJ rejected his appeal on the basis that the alleged future harm would emanate not from the intentional acts or omissions of public authorities or non state bodies, but instead from a naturally occurring illness and the lack of sufficient resources to deal with it in the receiving country (paragraph 43).
The Appellant appealed to the Supreme Court on the grounds that this is too narrow a view of the scope of the Qualification Directive and that his mental illness should not be regarded as naturally occurring because it was caused at the hands of the Sri Lankan authorities.
He argued it
makes no difference to his entitlement to such protection that there is no longer a risk of repetition of the ill treatment which is the cause of his current state of health.
None of the authorities from the Court of Justice of the European Union or the European Court of Human Rights are precisely on point [13].
Therefore the following question will be referred to the Court of Justice of the European Union: Does article 2(e), read with article 15(b), of the Qualification Directive cover a real risk of serious harm to the physical or psychological health of the applicant if returned to the country of origin, resulting from previous torture or inhuman or degrading treatment for which the country of origin was responsible?
|
This appeal arises out of the grounding of the OCEAN VICTORY (the vessel) in the port of Kashima in Japan on 24 October 2006.
She was a Capesize bulk carrier, built in China in 2005.
By a demise charterparty dated 8 June 2005, the vessels owners, Ocean Victory Maritime Inc (OVM or the owners), chartered the vessel to Ocean Line Holdings Ltd (OLH), which is or was a related company, on the widely used Barecon 89 as amended.
On 2 August 2006, OLH time chartered the vessel to China National Chartering Co Ltd (Sinochart) and on 13 September 2006, Sinochart in turn sub chartered her to Daiichi Chuo Kisen Kaisha (Daiichi or the charterers) for a time charter trip.
The demise charterparty and both time charterparties contained an undertaking (on materially identical terms) to trade the vessel between safe ports.
On 12/13 September 2006, Daiichi (and thus Sinochart) gave the vessel instructions to load at Saldanha Bay in South Africa and to discharge at Kashima.
Between 19 and 21 September she loaded 170,000 tonnes of iron ore.
She arrived off Kashima on 20 October and discharge began that afternoon.
The port of Kashima is entered from the sea through the northern end of a specially constructed channel known as the Kashima Fairway, which runs almost due north south, and is the only route into and out of the port.
The Kashima Fairway is bounded on one side (to the east) by the South Breakwater and on the other (to the west) by the land.
On 24 October the vessel sought to leave the port during a storm.
However, she allided with the northern end of the South Breakwater and grounded.
Shortly thereafter another Capesize vessel, the ELIDA ACE, also grounded in the Kashima Fairway while attempting to leave the port.
Salvors were engaged but the OCEAN VICTORY eventually broke in two.
Her wreck was subsequently removed in the course of a lengthy wreck removal operation.
Some two years later, on 15 October 2008, Gard Marine & Energy Ltd (Gard), one of the vessels hull insurers at the time of her loss, took assignments of the rights of OLH and OVM in respect of the grounding and total loss of the vessel.
In its capacity as assignee of those rights, Gard subsequently brought a claim against Sinochart (which Sinochart passed on to Daiichi) for damages for breach of the charterers undertaking to trade only between safe ports.
On 30 July 2013, Teare J (the judge) held that the casualty was caused by the unsafety of the port in breach of the safe port undertaking in the time charters.
He awarded Gard substantial damages, namely the agreed value of the vessel (US$88.5m), damages in respect of liability for SCOPIC expenses (US$12m), damages for wreck removal expenses (US$34.5m) and damages for loss of hire (US$2.7m).
Permission to appeal to the Court of Appeal on certain specific issues was granted.
On 22 January 2015, the Court of Appeal (Longmore, Gloster and Underhill LJJ) allowed the appeal and set aside the judgment of the judge on the grounds that the conditions which affected Kashima were an abnormal occurrence and that there was no breach of the safe port undertaking on the part of the charterers.
The Court of Appeal also held that, in the light of the insurance provisions of the demise charterparty, OVM and OLH (and Gard as their assignee) were not entitled to claim in respect of losses covered by the hull insurers.
On 20 May 2015 Gard were granted permission to appeal to this Court.
Issues in the appeal
The parties agreed the issues in this appeal as follows. 1.
Was there a breach of the safe port undertaking? In particular the following specific questions were agreed: (1) was the port unsafe within the meaning of the safe port undertaking, so that the charterers were in breach; or (2) was there an abnormal occurrence within the context of the safe port undertaking, which was no breach of the undertaking? If there was a breach of the safe port undertaking, do the provisions 2. for joint insurance in clause 12 of the Barecon 89 form preclude rights of subrogation of hull insurers and the right of owners to recover in respect of losses covered by hull insurers against the demise charterer for breach of an express safe port undertaking.
If there was a breach of the safe port undertaking, is Daiichi entitled 3. to limit its liability for Gards losses or any (and, if so, which) of them as against Sinochart (and Sinochart in turn against Gard) pursuant to section 185 and Schedule 7 article 2(1) of the Merchant Shipping Act 1995? It was agreed that in the event that the appeal succeeds (that is that the answer to issue 1(1) is yes), issues of time bar and causation should be remitted to the Court of Appeal.
In this judgment I will focus first on the safe port issue.
Safe port the facts
The events which led to the grounding and subsequent loss of the vessel are summarised in paras 127 and 128 of the judges judgment as follows: 127.
The danger facing OCEAN VICTORY was one which was related to the prevailing characteristics of Kashima.
The danger flowed from two characteristics of the port, the vulnerability of the Raw Materials Quay to long swell and the vulnerability of the Kashima Fairway to northerly gales caused by a local depression.
It may well be a rare event for these two events to occur at the same time but nobody at the port could, I consider, be surprised if they did.
There is no meteorological reason why they should not occur at the same time.
Long waves were clearly a feature of the port (as they must be of any port facing the Pacific) and low pressure systems generating gale force winds cannot, in my judgment, be regarded as abnormal.
I do not consider that the juxtaposition of long waves and a low pressure system generating gale force winds from the north amounts to an abnormal occurrence unrelated to the characteristics of Kashima.
Long waves may give rise to a need for a vessel to leave the port.
It may be a matter of chance whether at that time there is also a low pressure system generating gale force winds from the north but I am unable to accept that such winds are so rare that they cannot be said to be a feature of the port.
It is not without significance that the Guide to Port Entry notes that during periods of northerly swell the entry channel is fully exposed and that vessels at low speed generally have difficulty in steering. 128.
It may be that the storm which affected the port on 24 October 2006 was one of the most severe storms to have affected Kashima in terms of severity, speed of deterioration and duration as suggested by Mr Lynaghs analysis of its characteristics.
But the relevant characteristics are those which give rise to the danger, namely the occurrence of long waves and northerly gales.
Neither long waves nor northerly gales can be described as rare.
Even if the concurrent occurrence of those events is a rare event in the history of the port such an event flows from characteristics or features of the port.
The principles abnormal occurrence
In the Court of Appeal Longmore LJ (giving the judgment of the court) noted in para 14 that it was common ground between the parties that, if the damage sustained by the vessel at Kashima on 24 October 2006 was caused by an abnormal occurrence, then the charterers would not have been in breach of the safe port warranty.
That common ground was based on the classic dictum of Sellers LJ in The Eastern City [1958] 2 Lloyds Rep 127, 131 that: A port will not be safe unless, in the relevant period of time, the particular ship can reach it, use it and return from it without, in the absence of some abnormal occurrence, being exposed to danger which cannot be avoided by good navigation and seamanship .
Longmore LJ added in para 15 that what was in dispute between the parties on the appeal in relation to this issue was (i) what, as a matter of law, was the correct test for an abnormal occurrence; (ii) in particular, was the judge correct to hold (in paras 110, 127 128, 132 and 134 of his judgment) that the combination of two weather conditions on the casualty date (namely the phenomenon of swell from long waves, which might have forced the vessel to leave the berth, and a very severe northerly gale which meant that the vessel could not safely exit the port) was not to be characterised as an abnormal occurrence, notwithstanding that the coincidence of the two conditions was rare, because both conditions were physical characteristics or attributes of the port; and (iii) on the facts as found by, or undisputed before, the judge, did the weather conditions on the casualty date amount to an abnormal occurrence? It is important to note that it was not submitted that the relevant test could or should be other than that described by Sellers LJ in The Eastern City.
In any event that test has stood the test of time.
The question is what is meant by an abnormal occurrence.
The Court of Appeal summarised the charterers case in para 44 of their judgment as follows: (i) There was no breach of the safe port undertaking.
By the safe port undertaking, the charterers did not assume responsibility for loss from every foreseeable risk at the port to which the ship was ordered.
They assumed responsibility only for risks which were sufficiently regular or sufficiently foreseeable to amount to an attribute or feature of the port. (ii) The prospective nature of the undertaking was material to the test, because the right way to approach this test was to imagine a charterer with full knowledge of the port giving the order on the relevant day.
He had to ask himself: will the port be safe for the ship to reach, use and depart from? If he could say yes, then, barring some abnormal occurrence, there was no breach.
So a charterer did not assume the risk of loss from an unusual event which was not characteristic of the port at the time when the ship should be there.
The obligation to give indemnity for loss from such unusual events lay properly and legally with the owners hull insurers. (iii) The phrase abnormal occurrence was not a term of article An occurrence was just an event something that happened on a particular time at a particular place in a particular way.
Abnormal was something well removed from the normal.
It was out of the ordinary course and unexpected.
It was something which the notional charterer would not have in mind. (iv) A rare event could not be an attribute of a port.
It was, in the language of the cases, an abnormal occurrence and so outside the undertaking.
The judge erred in law in holding that a rare event was a feature of the port. (v) The judge erroneously held that it did not matter if the event was rare or unexpected, provided it arose from the combined occurrence of two or more characteristics or attributes of the port. (vi) Words such as characteristic or attributes of the port were tools to help identify what arose in the ordinary course.
They were not intended to bring events well out of the ordinary course into the scope of the charterers undertaking. (vii) The judge went wrong by breaking down the question into components instead of asking one unitary question, namely: would it be an unexpected event for Capesize vessels calling at Kashima to find it necessary to leave the berth due to danger from a long wave swell at the very time when it was dangerous to transit the Fairway? The judges approach was to consider whether long waves and strong northerly winds from low pressure storms affecting navigation in the Kashima Fairway were respectively attributes of the port.
Having reached the conclusion that they were attributes, he wrongly assumed that it did not matter how rare their combination was. (viii) On the facts, the combination of the two weather events (namely long waves and strong northerly winds from low pressure storms) had never apparently happened in the previous 35 years preceding the instruction to proceed to Kashima.
Accordingly the conditions on 24 October were an abnormal occurrence for which the charterers were not liable.
It was not in dispute that the question whether the port was unsafe must be tested as at the moment that the charterers instructed the owners to proceed to it.
It was submitted on behalf of the charterers that the appropriate test was whether a reasonable shipowner trading the ship for his own account and knowing the relevant facts would decline to proceed to the nominated port.
That is essentially the test set out in the Court of Appeals summary of the charterers case in sub para 44(ii) above.
To my mind the key points in this appeal are to be found in sub paras 44(i), (ii), (iii) and (iv).
It is important to note that the test is not whether the events which caused the loss were reasonably foreseeable.
Reasonable foreseeability is a well known test in some parts of the law of tort, notably negligence and remoteness of damage.
The courts could well have adopted such a test but they have not done so.
Instead they have asked whether the relevant event was an abnormal occurrence.
What then is meant by abnormal occurrence? The question is whether it has the meaning proposed by the charterers and set out in para 44(iii) quoted above or the meaning proposed by Gard in para 66 of its case as follows: The phrase abnormal occurrence in the Court of Appeals judgment took on its own momentum as a term of art or something to be construed as if in a statute.
It is not.
The phrase is not something that appears in the words of the charter.
It is a qualification derived from the authorities intended to assist the court, and the parties, to work out whether the port was safe within the contractual clause.
It is a description for an occurrence which does not result from the set up or characteristics of the port; the set up and characteristics of the port (tested at the time the order is given) being the concern of the safe port undertaking.
In other words, an abnormal occurrence is in contradistinction to an occurrence which results from the set up or characteristics of the port.
The result of the Court of Appeals approach is to widen the category of abnormal occurrences, so as to include occurrences which do result from the set up of the port, and in turn to narrow the circumstances in which a port will be regarded as unsafe (despite the obligation being a strict one).
I would accept the charterers submission recorded in sub para 44(iii) that an abnormal occurrence has its ordinary meaning.
It is not a term of article As stated in that sub paragraph, [a]n occurrence was just an event something that happened on a particular time at a particular place in a particular way.
Abnormal was something well removed from the normal.
It was out of the ordinary course and unexpected.
It was something which the notional charterer would not have in mind.
We were referred to a number of cases which seem to me to support that conclusion.
Sellers LJs famous dictum quoted above was taken from the judgment of Morris LJ in The Stork [1955] 2 QB 68, 105, which was a time charterparty case.
See also Reardon Smith Line Ltd v Australian Wheat Board (The Houston City) [1956] AC 266, which was a voyage charterparty case to which essentially the same principles were applied.
In Kodros Shipping Corpn v Empresa Cubana de Fletes (The Evia) (No 2) [1983] 1 AC 736, which was another time charterparty case, Lord Diplock said at p 749 that he regarded the nature of the contractual promise by the charterer in what he called the safe port clause as having been well settled for a quarter of a century at the very least.
He referred specifically to the expression abnormal occurrence used by Sellers LJ in The Eastern City which he said reflected the previous statement of Morris LJ in The Stork.
At p 749H, Lord Diplock referred to the distinction between damage sustained by a particular vessel in a particular port on a particular occasion caused by an abnormal occurrence and damage resulting from some normal characteristic of the particular port at the particular time of year.
He added that there were dangers that judges of first instance sometimes omitted important qualifications.
He was referring (at p 750A B) to what he called the heresy that, in the previous decade or so, had been embraced by judges in the commercial court culminating in that of Mustill J in Transoceanic Petroleum Carriers v Cook Industries Inc (The Mary Lou) [1981] 2 Lloyds Rep 272, 277.
Lord Diplock agreed with the judgment of Lord Roskill which had been prepared with the assistance of Lord Brandon.
The heresy to which Lord Diplock referred was that identified by Lord Roskill at p 757.
It arose in the construction of what he described as these eight words in clause 2 of the relevant time charterparty: The vessel to be employed between safe ports Those were essentially the same words as in the charterparties in the instant case.
The heresy identified by Lord Diplock was the conclusion of Mustill J in The Mary Lou and, indeed, of Robert Goff J in The Evia (No 2) that there was an absolute continuing contractual promise that at no time during her chartered service would the ship find herself in any port which was or had been unsafe for her: see Lord Roskill at p 756G.
On p 757 Lord Roskill gave his reasons for rejecting that approach as a matter of construction of the charterparty.
In particular, he said at p 757D that a charterer will exercise his contractual right to require the shipowner to carry out his contractual obligations by giving the shipowner orders to go to a particular port or place of loading or discharge.
He added that it was clearly at the point of time when that order is given that the contractual promise to the charterer regarding the safety of that intended port or place must be fulfilled.
Lord Roskill then said this at p 757E: The charterers contractual promise must, I think, relate to the characteristics of the port or place in question and in my view means that when the order is given that port or place is prospectively safe for the ship to get to, stay at, so far as necessary, and in due course, leave.
But if those characteristics are such as to make that port or place prospectively safe in this way, I cannot think that if, in spite of them, some unexpected and abnormal event thereafter suddenly occurs which creates conditions of unsafety where conditions of safety had previously existed and as a result the ship is delayed, damaged or destroyed, that contractual promise extends to making the charterer liable for any resulting loss or damage, physical or financial.
So to hold would make the charterer the insurer of such unexpected and abnormal risks which in my view should properly fall upon the ships insurers under the policies of insurance the effecting of which is the owners responsibility under clause 3 unless, of course, the owner chooses to be his own insurer in these respects.
Having expressed those views as a matter of construction of the charterparty, Lord Roskill analysed the cases and concluded that they strongly supported the views he had expressed.
The cases included Ogden v Graham (1861) 1 B & S 773 and GW Grace and Co Ltd v General Steam Navigation Co Ltd (The Sussex Oak) [1950] 2 KB 383 in addition to The Stork, The Houston City and The Eastern City.
He noted in particular the dissenting judgment of Sir Owen Dixon CJ in the High Court of Australia in The Houston City which was accepted as correct by the Privy Council.
Lord Roskill paid particular attention at p 760 to the reference to some abnormal occurrence by Morris LJ in The Stork, which, as he put it, was the foundation of the similar view of Sellers LJ in The Eastern City as described above.
Like Lord Diplock, Lord Roskill emphatically adopted that approach as correct.
As I read the remainder of his judgment, in which he refers to a number of other cases, they are all to substantially the same effect.
In all these circumstances, I would accept these three submissions made on behalf of the charterers arising out of the cases referred to above and, in particular The Evia (No 2) in the House of Lords.
First, the date for judging breach of the safe port promise is the date of nomination of the port.
A safe port promise is not a continuing warranty.
Second, the promise is a prediction about safety when the ship arrives in the future.
These propositions are not in dispute.
As I see it, such a promise necessarily assumes normality; given all of the characteristics, features, systems and states of affairs which are normal at the port at the particular time when the vessel should arrive, the question is whether the port is prospectively safe for this particular ship.
If the answer is yes unless there is an abnormal occurrence, the promise is fulfilled.
As Robert Goff J said at first instance in The Evia (No 2) [1981] 2 Lloyds Rep 613, 621, the formulation of a test whether the port is unsafe must assume normality, and must therefore exclude danger caused by some abnormal occurrence.
I would further accept the third submission made on behalf of the charterers that on the authorities to which I have referred, safe port disputes should be reasonably straightforward.
Was the danger alleged an abnormal occurrence, that is something rare and unexpected, or was it something which was normal for the particular port for the particular ships visit at the particular time of the year?
I would also accept the submission that this approach, that is the approach in The Eastern City as elaborated by Lord Roskill and Lord Diplock in The Evia (No 2), provides a coherent allocation of risk between the various interests as follows.
The owners are responsible for loss caused by a danger which is avoidable by ordinary good navigation and seamanship by their master and crew.
The charterers are responsible for loss caused by a danger which was or should have been predictable as normal for the particular ship at the particular time when the ship would be at the nominated port and was not avoidable by ordinary good seamanship.
The owners (and ultimately their hull insurers) are responsible for loss caused by a danger due to an abnormal occurrence.
As Lord Roskill put it at p 757E quoted above, charterers are not insurers of unexpected and abnormal risks.
On the contrary, the charterparty terms require owners to take out hull insurance (as they will invariably do) which is their protection against rare and unexpected events.
On the charterers case on the facts, the characteristics of the port were such that the ship was prospectively safe, but they unexpectedly combined in a critical way such as to create an exceptional, and apparently unprecedented danger.
This was within the letter and spirit of Lord Roskills description of an unexpected and abnormal risk.
It is to my mind important to note the emphasis in the cases upon the meaning of the expression abnormal occurrence.
I would accept the charterers submission in para 44(iii) of the Court of Appeals judgment that abnormal is something well removed from the normal.
It is out of the ordinary course and unexpected.
It is something which the notional charterer or owner would not have in mind.
In short, I would accept the charterers submission that the first question is whether a reasonable shipowner in the position of the particular shipowner trading the ship for his own account and knowing the relevant facts would proceed to the nominated port.
If the answer is yes unless there is an abnormal occurrence, the port is prospectively safe for the particular ship and the promise is fulfilled.
In a case where the vessel suffers loss or damage, a second question arises, namely whether there was damage caused by an abnormal occurrence as defined above.
Contrast between the approaches of the judge and of the Court of Appeal
This contrast can be seen in the judgment of the Court of Appeal.
Having summarised the essential facts at para 48, in para 49 the Court of Appeal described the core of the judges reasoning at paras 127 129 of his judgment thus: On analysis his approach appears to have been that, in deciding whether the casualty resulted from an abnormal occurrence: he did not need to consider the evidence relating (i) to how rare the critical combination of the two component dangers was, although, without analysing the evidence in any detail, he was prepared to hold that it may well be a rare event for these two events to occur at the same time; (ii) he did not need to consider whether the critical combination was rare, because [e]ven if the concurrent occurrence of those events is a rare event in the history of the port, what mattered was that: (a) separately the two component features of the critical combination were characteristics or attributes of the port; looked at separately, neither of the two b) component features could be said to occur rarely; long waves and northerly gale winds were at least foreseeable in Kashima; (c) there was no meteorological reason why the two component features should not occur at the same time; despite the fact that the storm which affected Kashima on 24 October 2006 may have been exceptional in terms of its rapid development, its duration and its severity, there was a clear risk of gale force winds from the northerly quadrant in the Kashima Fairway at the same time as long waves were affecting the Raw Materials Quay; (d) therefore, it was necessarily foreseeable that at some stage the critical combination would occur and nobody could be surprised if it did; and (e) the critical combination was accordingly an event which flow[ed] from the characteristics or features of the port; (iii) accordingly, in those circumstances the critical combination could not be said to be an abnormal occurrence; in the language of Mustill J (as he then was) in The Mary Lou , the critical combination was not something which could be said, if the whole history of the port were regarded, to have been out of the ordinary; again, adopting Mustill Js words, long waves and northerly gale winds were events of the type and magnitude in question [which were] sufficiently regular or at least foreseeable to say that their occurrence is an attribute or characteristic of the port, so as not to amount to an abnormal occurrence; the critical combination flowed from those characteristics and therefore could not be an abnormal occurrence.
In paras 50ff the Court of Appeal embarked upon a critique of the judges approach.
In para 50 they set out their conclusion that the judges approach was flawed.
They then referred in detail to the speeches of Lord Diplock and Lord Roskill in The Evia (No 2).
In the speech of Lord Roskill they highlighted in bold the passage at p 757E which I quoted at para 21 above.
It is to my mind important that that passage includes the proposition that where the characteristics of a port make the port prospectively safe, Lord Roskill did not think that if some unexpected and abnormal event thereafter suddenly occurs which creates conditions of unsafety where conditions of safety had previously existed and as a result the ship is delayed, damaged or destroyed, that contractual promise extends to making the charterer liable for any resulting loss or damage, physical or financial.
He added that so to hold would make the charterer the insurer of such unexpected and abnormal risks which should properly fall on the ships insurers.
Immediately after quoting an extensive passage from the speech of Lord Roskill in The Evia (No 2), most of which is quoted above, in para 52 the Court of Appeal said that its import was clear.
They said that charterers do not assume responsibility for unexpected and abnormal events which occur suddenly and which create conditions of unsafety after they have given the order to proceed to the relevant port.
They are the responsibility of the ships hull insurers (if owners have insured) or of owners themselves.
The Court of Appeal further noted in para 52 that the concept of safety is necessarily not an absolute one.
They did so by reference to the decision of the Court of Appeal in The Saga Cob [1992] 2 Lloyds Rep 545, 551, where, in the context of political risks, Parker LJ, giving the judgment of the court, said this: In the latter [the safe port warranty case] one is considering whether the port should be regarded as unsafe by owners, charterers, or masters of vessels.
It is accepted that this does not mean that it is unsafe unless shown to be absolutely safe.
It will not, in circumstances such as the present, be regarded as unsafe unless the political risk is sufficient for a reasonable shipowner or master to decline to send or sail his vessel there.
In the instant case the Court of Appeal, in my opinion correctly, held (at para 53) that a similarly realistic approach should be adopted to the determination of what it called the essentially factual question whether the event giving rise to the particular casualty is to be characterised as an abnormal occurrence or as resulting from some normal characteristic of the particular port at the particular time of year.
The Court of Appeal, emphasised the word normal in the term normal characteristic, noting that it was used by Lord Diplock when he observed in The Evia (No 2) at p 749 that: it is not surprising that disputes should arise as to whether damage sustained by a particular vessel in a particular port on a particular occasion was caused by an abnormal occurrence rather than resulting from some normal characteristic of the particular port at the particular time of year.
Importantly in the instant case, the Court of Appeal further observed (also at para 53) that, in what they described as an illuminating passage, in The Saga Cob the Court of Appeal at pp 550 551 emphasised that the fact that an event (in that case a guerrilla attack) was theoretically foreseeable did not make it a normal characteristic of the port.
They noted that on the facts in The Saga Cob the event relied upon could not be regarded as other than an abnormal and unexpected event.
This approach underlines the fact that foreseeability is not the test of the normality of an event.
The cases show that an abnormal occurrence or event is something that is unexpected when the vessel arrives at and remains in the port: see eg The Evia (No 2) per Lord Roskill quoted at paras 21 and 30 above.
In para 54 the Court of Appeal placed reliance upon the approach of Mustill J in The Mary Lou at p 278.
They noted that in his description of what constitutes an abnormal occurrence, Mustill J implicitly recognised the need to approach the identification of an abnormal occurrence realistically and having regard to whether the event had occurred sufficiently frequently so as to become a characteristic of the port.
At the end of the same paragraph, having recognised the difficulty of finding an appropriate turn of phrase, Mustill J said this: It may be said that the loss is not recoverable unless events of the type and magnitude are sufficiently regular or at least foreseeable to say that the risk of their occurrence is an attribute or characteristic of the port.
Or it may be said that abnormal or casual events do not found a claim.
The Court of Appeal identified a number of respects in which they concluded that the judge went wrong.
They summarised them in para 55 of their judgment: First of all he failed to formulate the critical and unitary question which he had to answer: namely, whether the simultaneous coincidence of the two critical features, viz (a) such severe swell from long waves that it was dangerous for a vessel to remain at her berth at the Raw Materials Quay (because of the risk of damage or mooring break out) and (b) conditions in the Kashima Fairway being so severe because of gale force winds from the northerly/north easterly quadrant), as to make navigation of the Fairway dangerous or impossible for Capesize vessels, was an abnormal occurrence or a normal characteristic of the port of Kashima? Or put even more simply, was it an abnormal occurrence or a normal characteristic of the port that a vessel might be in danger at her berth at the Raw Materials Quay but unable at the same time safely to leave because of navigation dangers in the Kashima Fairway arising from the combination of long waves and gale force northerly winds which, in fact, occurred?
The Court of Appeal added in para 56 that, instead of asking the unitary question directed at establishing the correct characterisation of the critical combination (abnormal occurrence or normal characteristic of the port), the judge merely addressed the respective constituent elements of the combination (swell from long waves making it dangerous for a vessel to remain at the Raw Materials Quay and gale force winds from the northerly/north easterly quadrant making navigation of the Fairway dangerous or impossible for Capesize vessels) separately.
He looked at each component and decided that, viewed on its own, neither could be said to be rare and both were attributes or characteristics of the port.
The Court of Appeal concluded that that was the wrong approach; what mattered was not the nature of the individual component dangers that gave rise to the events on 24 October, but the nature of the event (namely the critical combination of the two) which gave rise, on the judges findings, to the vessel effectively being trapped in port.
The Court of Appeal further held in para 57 that the judge was also wrong to hold that, even if the critical combination was rare, nonetheless it was a characteristic of the port, for two reasons.
The first (as stated in his para 127) was because, although it might well be rare for these two events to occur at the same time, nobody at the port could be surprised if they did, and there was no meteorological reason why they should not occur at the same time.
The second (as stated in his para 128) was because, even if the concurrent occurrence of those events was a rare event in the history of the port, such an event flowed from the characteristics or features of the port.
The Court of Appeal concluded that both reasons were fallacious.
In my opinion they were correct so to hold.
As to the first, the Court of Appeal noted in para 58 that the conclusion that nobody at the port could be surprised that both the above events occurred at the same time appears to have been based on the idea that, provided an event is theoretically foreseeable as possibly occurring at the relevant port, because of the ports location, then that is enough to qualify the event as a characteristic of the port.
The Court of Appeal correctly said at para 58 that the judge appears to have derived that test from dicta in the judgment of Mustill J in The Mary Lou at p 278, where (in the passage quoted at para 33 above) he referred to long waves and northerly gale winds as being at least foreseeable.
However the Court of Appeal, in my opinion correctly, held that satisfaction of the test of mere foreseeability was per se clearly not sufficient to turn what the judge himself described as a rare event in the history of the port into a normal characteristic or attribute of the port.
They held that the error made by the judge was to pick up on the words at least foreseeable in his citation from Mustill Js judgment, and to use minimum foreseeability, without more, as some sort of litmus test for establishing whether an event was a characteristic of a port, without having any regard to significant factors such as the actual evidence relating to the past history of the port, the frequency (if any) of the event, the degree of foreseeability of the critical combination and the very severe nature of the storm on the casualty date.
The Court of Appeal further held that in doing so the judge departed from the orthodox and practical approach of Mustill J in his judgment in The Mary Lou at p 278 and of Lords Diplock and Roskill in The Evia (No 2), to the question of whether an event was abnormal.
Such an approach necessarily includes an examination of the past history of the port and of whether, in that evidential context, the event was unexpected.
I agree.
The Court of Appeal also noted in para 58 that he took the phrase at least foreseeable as used by Mustill J out of context.
I agree with the Court of Appeal that it is clear that, when the passage is read in context, Mustill J was certainly not suggesting that mere, theoretical, foreseeability on its own was sufficient.
He was not setting up some sort of alternate test which excluded considerations of questions such as the frequency of past occurrences of the particular event, or the degree of likelihood that the event was to occur in the future.
Moreover, the Court of Appeal noted at para 59 that, as the Court of Appeal emphasised in The Saga Cob in the passage cited at para 32 above, one has to look at the reality of the particular situation in the context of all the evidence, to ascertain whether the particular event was sufficiently likely to occur to have become an attribute of the port.
Otherwise the consequences of a mere foreseeability test lead to wholly unreal and impractical results.
The Court of Appeal focused on these examples in the instant case: does the mere fact that it is foreseeable from the location of San Francisco that earthquakes may occur in its vicinity, or from the location of Syracuse, beneath Mount Etna, that there may be volcanic explosions in its vicinity, predicate that any damage caused to vessels in those ports from such events, were they to occur in the future, would flow from the normal characteristics or attributes of those ports, and therefore necessarily involve a breach of any safe port warranty? The answer given by the Court of Appeal was obviously not; whether, in such circumstances, there would be a breach of the safe port warranty, or the event would be a characterised as an abnormal occurrence, would necessarily depend on an evidential evaluation of the particular event giving rise to the damage and the relevant history of the port.
The Court of Appeal was particularly struck (at para 60) by the fact, as they put it, that the judge provides no evidential basis for his apparent factual conclusion that nobody at the port could, I consider, be surprised if the crucial combination occurred, or for the conclusion reached earlier in para 110 of the judgment that there must have been a clear risk of gale force winds from the northerly quadrant in the Kashima Fairway at the same time as long waves were affecting the Raw Materials Quay.
The final conclusion of the Court of Appeals on the first reason advanced by the judge and referred to by the Court of Appeal in para 57 was set out in para 61 of their judgment (which must be read in the context of para 60) as follows: 61.
In the light of the evidence to the effect that no vessel in the ports history had been dangerously trapped at the Raw Materials Quay, with a risk of damage or mooring break out, at the same time as the Kashima Channel was not navigable because of gale force winds, it is difficult to see how he reached this conclusion.
This may be because he did not adequately focus evidentially on the particular situation which he had to consider, namely one where a vessel was effectively trapped, because the swell from long waves affecting vessels berthed at the Raw Materials Quay was so severe that it was dangerous for a vessel to remain there (as opposed to merely a situation where long waves caused swell and a vessel decided to leave the Raw Materials Quay) and the Kashima Channel not being navigable because of gale force winds.
It may also be because he did not give adequate weight to the evidence of Mr Lynagh (which he gives no cogent reason for rejecting) that the storm which occurred on 24 October was exceptional in terms of its rapid development, its duration and its severity (see para 48(ix) above).
As to the second reason advanced by the judge, the Court of Appeal responded in this way in para 62: 62.
The second reason given by the judge (Even if the concurrent occurrence of those events is a rare event in the history of the port such an event flows from characteristics or features of the port) is, in our view, equally flawed.
As we have already stated in paras 55 and 56 above, what the judge had to decide was whether the concurrent occurrence of those events (ie the critical combination) was itself a normal characteristic of the port or an abnormal occurrence.
That was the relevant event which the judge had to characterise.
It simply did not follow, logically or otherwise, from the fact that that event arose from (or, as the judge said, flow[ed] from) the combination of two individual dangers, which he had held were normal characteristics or attributes of the port, that the concurrent occurrence of those events was also a normal characteristic or attribute of the port.
By way of postscript, I note that on behalf of the owners significant stress was placed upon the failure of the Kashima port authority to carry out a risk assessment and put in place a proper safety system to deal with the risk of the two types of weather conditions referred to by the judge occurring at the same time.
However, while it may be relevant in some cases, the question remains whether the event (or in this case the combination of natural events) which led to this casualty was an abnormal and unexpected occurrence or not.
For the reasons I have given I conclude that the Court of Appeal were entitled to reach the decision which they did.
The ultimate conclusion of the Court of Appeal was set out in paras 63 and 64 as follows: 63.
In deciding whether the critical combination was itself a normal characteristic of the port or an abnormal occurrence, what the judge should have done was to evaluate the evidence relating to the past frequency of such an event occurring and the likelihood of it occurring again.
He should have also, in our view, have taken into account what appears to have been the unchallenged evidence of Mr Lynagh referred to above relating to the exceptional nature of the storm that affected Kashima on 24 October 2006 in terms of its rapid development, its duration and its severity.
Had he done so, then, on the basis of his own finding that the concurrent occurrence of those events was rare, and on the basis of the evidence which we have summarised above, there would, in our view, have been only one conclusion which he could have reached namely that the event which occurred on 24 October 2006 was indeed an abnormal occurrence. 64.
For the above reasons we conclude that the conditions which affected Kashima on 24 October 2006 were an abnormal occurrence, that there was no breach by the charterers of the safe port obligation, and accordingly that the appeal should be allowed on this ground.
I agree with the Court of Appeal.
Conclusion on the safe port issue
In my opinion, the Court of Appeal reached the correct conclusions for the reasons they gave.
I initially questioned whether the Court of Appeal should have interfered with the decision of the judge at first instance.
However, in the light of the submissions made on both sides, I have concluded that this was one of those rare cases in which the correct conclusion is that the casualty was caused by an abnormal occurrence as that expression is explained in the cases.
I accept the reasoning of the Court of Appeal and prefer their approach to that of the judge.
I would accordingly dismiss the appeal on the safe port issue.
I would answer the questions raised on that issue by the parties and set out in para 8.1(1) and (2) as follows.
The port was not unsafe within the meaning of the safe port undertaking so that the charterers were not in breach of it.
The conditions at the port amounted to an abnormal occurrence as that expression is understood in the cases.
Joint insurance
Issue 2 summarised in para 8 above assumes (contrary to my view) that there was a breach of the safe port undertaking and asks whether the provisions for insurance in clause 12 of the Barecon 89 form preclude rights of subrogation of hull insurers and the right of owners to recover in respect of losses covered by hull insurers against the demise charterers for breach of the express safe port undertaking.
The judge held that the owners and hull insurers were entitled to recover notwithstanding clause 12, whereas the Court of Appeal held that they were not.
Lord Sumption agrees with the judge whereas Lord Toulson agrees with the Court of Appeal.
I agree with the judge and Lord Sumption, essentially for the reasons they give.
Lord Sumption has set out clauses 12 and 13, which I will not repeat.
I have been particularly struck by these considerations.
I agree with the judge (at para 185) that the demise charterparty must be given the meaning which, having regard to the background known to both parties, it would reasonably be understood to bear and that, in circumstances where, in clause 29, the demise charterparty contains a clear safe port warranty, one would expect any exemption of the demise charterers from liability in damages for breach of the safe port warranty to be clearly expressed.
In para 190 the judge observed that the charterers relied upon the The Evia (No 2), in which the question arose whether (as Lord Roskill put it at p 766) the war risks clause cast upon the owners and their insurers all war risks and thus freed the charterers from liability for them pursuant to the safe port clause.
It was held that the charterers were freed from any liability that they might otherwise have.
Lord Roskill identified the relevant question as being whether the war risks clause was a complete code exhaustive of the owners rights, which depended upon the construction of the time charterparty as a whole.
As the judge noted at para 191, the charterers adopted that reasoning here and said that it was applicable to the demise charterparty and, indeed, that it was a stronger case because, not only did the demise charterers pay for the cost of hull insurance, but they were also named as joint assureds and, generally speaking, an insurer cannot exercise rights of subrogation to pursue a claim in the name of one co assured against another.
The judge rejected that submission in these terms: 192.
Cases decided after The Evia (No 2) have emphasised that the decision in that case depended upon there being a clause which, on its true construction, provided an exhaustive code of the rights and liabilities of the parties; see The Concordia Fjord [1984] 1 Lloyds Reports 385 and The Chemical Venture [1993] 1 Lloyds Reports 508. 193.
In The Concordia Fjord the arbitrator, Mr MacCrindle QC, said that he was not aware of any principle exempting the Charterers from liability for their breaches of contract merely on the ground that they have directly or indirectly provided the funds whereby the Owners insured themselves against such damages.
Bingham J agreed; see pp 387 388.
Thus the mere fact that the charterer pays for the hull insurance is not enough to exempt him from liability for breach of his obligations under the charterparty.
There has to be an intention to create an exhaustive code which determines the parties rights and liabilities by reference to a claim on the insurance policy. 194.
If clause 12 of the demise charterparty were such a code it would apply, not just to a particular issue such as war risks as was the case in The Evia (No 2), but to all hull, war and P&I risks.
The charterparty contains a clear and express safe port warranty.
If clause 12 were to be construed as an exhaustive code that clause would be rendered nugatory with regard to insured risks.
It would in effect exempt the demise charterer from liability for breach of the safe port warranty in exchange for paying for the hull insurance.
For that to be the intention of the parties there would have to be clear words.
Counsel for Gard emphasised the rule of construction that clear words are necessary before the court will hold that a contract has taken away rights or remedies which one of the parties would otherwise have had; see Gilbert Ash (Northern) Ltd v Modern Engineering (Bristol) Ltd [1974] AC 689.
This rule of construction is usually expressed with regard to rights which a party would have at common law but it must also apply to valuable rights given by other parts of a contract.
Counsel submitted that there are no such words in clause 12 of the demise charterparty.
The sentences of clause 12(a) and 12(c) on which particular reliance is placed by Daiichi do not expressly remove the right to damages for breach of the safe port warranty.
They merely give the demise charterer certain rights with regard to proceeds of the insurance policy for which they have paid.
I entirely agree with the judge.
It follows from the fact that clause 12 contains no such express exclusion that any such exemption can only arise by necessary implication.
In short, there is nothing in clause 12 which provides that the demise charterers have no liability for breach of clause 29 and I see no basis for such a necessary implication, essentially for the reasons given by the judge and by Lord Sumption.
In particular, it seems to me to be striking that, as the judge observed in para 195, clause 13, which contained an alternative insurance and repairs clause which not only provided that hull insurance would be paid for by the registered owner but also expressly stated that the registered owners and/or insurers would not have any rights of recovery or subrogation against the demise charterers in respect of insured losses, was deleted from the printed form.
Thus the demise charterers chose not to be bound by clause 13.
After a detailed analysis (between paras 196 and the first part of para 198), the judge said that he did not consider that clause 12 codified the rights and liabilities of the parties with regard to insured risks.
He noted that it provides for the provision of insurance and who is to pay for it, for the demise charterers to be responsible for insured repairs and to reimburse themselves from the proceeds of the insurance policy, for the demise charterers to be responsible for other repairs and for the claims on a total loss to be paid to the mortgagee for distribution to the registered owners and demise charterers in accordance with their respective interests.
I agree with the judge that this does not in the required sense codify the rights and liabilities of the parties with regard to breach of the safe port warranty where the casualty caused by the breach has given rise to a claim on the insurance.
It is true that, as the judge put it in para 199, what clause 12 has, which neither the clause in The Evia (No 2) nor the clause in The Concordia Fjord (as expressly noted by Mr MacCrindle QC) had, is a provision that the owners and demise charterers were to be co assureds, thereby, on the face of it, bringing into play the principle that, generally, an insurer cannot exercise rights of subrogation to pursue a claim in the name of one co assured against another.
After referring (in para 200) to the decision and reasoning of Rix LJ in Tyco Fire and Integrated Solutions (UK) Ltd v Rolls Royce Motor Cars Ltd [2008] 2 All ER (Comm) 584, the judge concluded in para 201 as follows: In the present case there was an express safe port warranty by the demise charterers, there was no code of rights and obligations in clause 12 with regard to insured losses caused by a breach of the safe port warranty and there was no express ouster of the right of subrogation in clause 12.
Those features of the demise charterparty suggest to me that, construing the charter as a whole, it was intended that the demise charterer would be liable to the owner for breach of the safe port warranty, notwithstanding that they were joint assured and could take the benefit of the insurance in the manner set out in clause 12.
I agree.
For these reasons and those given by Lord Sumption, I would have answered the question or issue 2 summarised in para 8 above, namely whether the provisions for insurance in clause 12 of the Barecon 89 form preclude rights of subrogation of hull insurers and the right of owners to recover in respect of losses covered by hull insurers against the demise charterers for breach of the express safe port undertaking, in the negative.
I am not persuaded by the judgments of Lord Mance and Lord Toulson (with whom Lord Hodge agrees) to reach a different conclusion.
Limitation of liability
Introduction
Question or issue 3 summarised in para 8 above assumes (contrary to my view) that there was a breach of the safe port undertaking and asks whether Daiichi is entitled to limit its liability for Gards losses or any (and, if so, which) of them as against Sinochart (and Sinochart in turn against Gard) pursuant to section 185 and Schedule 7 article 2(1) of the Merchant Shipping Act 1995, which gave the force of law to the Convention on Limitation of Liability for Maritime Claims 1976 (the 1976 Convention).
Like the joint insurance issue, this issue does not arise in the light of our decision on the safe port issue.
However it raises a point of some potential importance and was fully argued before us.
Neither of the courts below considered it because it was accepted that they were both bound by the decision of the Court of Appeal in The CMA Djakarta [2004] 1 Lloyds Rep 460.
In that case Longmore LJ gave the only substantive judgment, with which Waller and Neuberger LJJ agreed.
As formulated on behalf of Daiichi, who were time charterers, the question at issue is whether Daiichi (hereinafter the charterers) can limit their liability for the loss of the vessel and consequential losses arising out of the loss of the vessel.
The answer to that question depends largely upon whether The CMA Djakarta was correctly decided in the Court of Appeal.
The limitation issue is a short but important one.
It concerns the correct interpretation of the 1976 Convention.
The Convention provides, so far as relevant, as follows: Article 1.
Persons entitled to limit liability Shipowners and salvors, as hereinafter defined, may 1. limit their liability in accordance with the rules of this Convention for claims set out in article 2. 2.
The term shipowner shall mean the owner, charterer, manager or operator of a seagoing ship. 3. 4.
If any claims set out in article 2 are made against any person for whose act, neglect or default the shipowner or salvor is responsible, such person shall be entitled to avail himself of the limitation of liability provided for in this Convention. 5.
In this Convention the liability of a shipowner shall include liability in an action brought against the vessel herself.
Article 2.
Claims subject to limitation Subject to articles 3 and 4 the following claims, 1. whatever the basis of liability may be, shall be subject to limitation of liability: (a) claims in respect of loss of life or personal injury or loss of or damage to property (including damage to harbour works, basins and waterways and aids to navigation) occurring on board or in direct connexion with the operation of the ship or with salvage operations, and consequential loss resulting therefrom; (b) (c) claims in respect of other loss resulting from infringement of rights other than contractual rights, occurring in direct connexion with the operation of the ship or salvage operations; (d) claims in respect of the raising, removal, destruction or the rendering harmless of a ship which is sunk, wrecked, stranded or abandoned, including anything that is or has been on board such ship; (e) the rendering harmless of the cargo of the ship; (f) claims of a person other than the person liable in respect of measures taken in order to avert or minimize loss for which the person liable may limit his liability in accordance with this Convention, and further loss caused by such measures. claims in respect of the removal, destruction or 2.
Claims set out in paragraph 1 shall be subject to limitation of liability even if brought by way of recourse or for indemnity under a contract or otherwise.
However, claims set out under paragraph 1(d), (e) and (f) shall not be subject to limitation of liability to the extent that they relate to remuneration under a contract with the person liable.
Article 3.
Claims excepted from limitation The rules of this Convention shall not apply to: (a) claims for salvage or contribution in general average Both parties rely principally upon article 2.1(a) quoted above.
However, as appears below, reliance is also placed upon articles 6 and 9 11.
Although I have included the references to salvors in the above quotation, it is common ground that those references are irrelevant to the issues in this appeal.
They were included in the Convention in order to depart from the decision of the House of Lords in The Tojo Maru [1972] AC 242.
The critical question for present purposes is whether The CMA Djakarta was correctly decided in the Court of Appeal.
Gard say that it was.
They rely upon the fact that it has not been criticised in any case since it was decided.
They thus rely upon the reasoning of the Court of Appeal in The CMA Djakarta.
They also rely upon some at least of the reasoning of David Steel J at first instance in that case, reported at [2003] 2 Lloyds Rep 50 and of Thomas J in The Aegean Sea [1998] 2 Lloyds Rep 39.
By contrast, the charterers say that both cases were wrongly decided.
I have reached the clear conclusion that the Court of Appeal were correct, essentially for the reasons they gave.
History of limitation
The 1976 Convention had of course been preceded by earlier Conventions, which David Steel J referred to as part of his historical analysis of the right to limit liability set out in detail in his judgment at first instance reported in [2003] 2 Lloyds Rep 50.
I entirely agree with his analysis (at pp 51 53) and will not repeat it here, save to note some key points.
He referred to the first relevant limitation statute, which was the Responsibility of Shipowners Act 1733 and then to the Merchant Shipping Act 1854, the Merchant Shipping Acts Amendment Act 1862 and the Merchant Shipping Act 1894, which consolidated the earlier legislation.
As David Steel J put it, section 503 of the 1894 Act furnished a limit to an owners liability in respect of certain categories of occurrence in these terms: 503.(1) The owners of a ship, British or foreign, shall not, where all or any of the following occurrences take place without their actual fault or privity; (that is to say,) (b) Where any damage or loss is caused to any goods, merchandise, or other things whatsoever on board the ship; (d) Where any loss or damage is caused to any other vessel, or to any goods, merchandise, or other things whatsoever on board any other vessel, by reason of the improper navigation of the ship; be liable to damages beyond the following amounts David Steel J added that section 71 of the Merchant Shipping Act 1906 provided that the expression owner would be deemed to include any charterer to whom the ship is demised.
He further noted that, even prior to that Act, owner was construed as being inclusive of a demise charterer: The Hopper No 66 [1908] AC 126.
The two Conventions to which David Steel J then specifically referred were the two Conventions for the Unification of Certain Rules relating to the Limitation of Liability of Seagoing Vessels in 1924 and 1957 (the 1924 Convention and the 1957 Convention respectively).
Although the United Kingdom signed the 1924 Convention, it never became part of English law and was replaced by the 1957 Convention as between states that ratified the 1924 Convention.
In para 20 David Steel J noted that the right of limitation was still afforded to owners for certain occurrences but the categories of occurrence were enlarged by article 1(1) to include (a) loss of, or damage to, any property on board the ship; and (b) loss of, or damage to any other property or infringement of any rights caused by the act, neglect or default of any person on board the ship for whose act, neglect or default the owner is responsible or any person not on board the ship for whose act, neglect or default the owner is responsible: provided however that in regard to the act, neglect or default of this last class of person, the owner shall only be entitled to limit his liability when the act, neglect or default is one which occurs in the navigation or the management of the ship or in the loading, carriage or discharge of its cargo In para 21 he added that the range of those entitled to limitation was also enlarged by article 6(2), which provided: the provisions of this Convention shall apply to the charterer, manager and operator of the ship, and to the master, members of the crew and other servants of the owner, charterer, manager or operator acting in the course of their employment, in the same way as they apply to an owner himself: provided that the total limits of liability of the owner and all such other persons in respect of personal claims and property claims arising on a distinct occasion, shall not exceed the amounts determined in accordance with article 3 of this Convention.
The impact of the 1957 Convention was enacted in the form of the Merchant Shipping (Liability of Shipowners and Others) Act 1958 (the 1958 Act) by way of amendment to the 1894 Act.
In purported compliance with article 1(1)(b), section 2 prescribed that a new subsection (d) should be substituted in subsection 1 of section 503 of the 1894 Act as follows: (d) Where any loss or damage is caused to any property (other than any property mentioned in paragraph (b) of this subsection) or any rights are infringed through the act or omission of any person (whether on board the ship or not) in the navigation or management of the ship, or in the loading, carriage, or discharge of its cargo or through any other act or omission of any person on board the ship Further, in purported compliance with article 6(2), section 3 of the 1958 Act provided: (1) The persons whose liability in connection with a ship is excluded or limited by Part VIII of the Merchant Shipping Act 1894 shall include any charterer and any person interested in or in possession of the ship, and, in particular, any manager or operator of the ship.
The Convention
At first instance in The CMA Djakarta David Steel J noted at para 25 that the Convention introduced radical changes as regards to both the size of the fund and the circumstances in which the entitlement to limit might be lost.
As he put it, in short, the Convention made available a significantly enhanced fund at what he said was perceived to be the maximum insurable level, but the entitlement to which could only be challenged in quite exceptional circumstances: see The Leerort [2001] 2 Lloyds Rep 291.
He said in para 26 that it was notable that the Convention left largely untouched the range of persons entitled to limit, although it expressed the category in somewhat different terms.
David Steel J identified the rival contentions of the parties succinctly in paras 28 and 29.
It was the charterers case, first that, as charterers, they fell squarely within the category of persons enabled to limit their liability as prescribed by article 1, and secondly that the entire claim for damages arising out of the casualty fell equally squarely within the category of qualifying claims under article 2.
By contrast, it was the owners case that it was clear from the overall context, having regard to the object and purpose of the Convention, that the entitlement to limit was restricted to those persons identified in article 1(2) whose liability for the qualifying claim arose qua owner and not otherwise.
On the facts, limitation was not available since it was common ground that no part of the claim arose from the role of the appellant charterers qua owners.
David Steel J essentially accepted the submissions made on behalf of the charterers and, in doing so, followed the decision and reasoning of Thomas J in The Aegean Sea.
General approach of the Court of Appeal in the CMA Djarkta
Longmore LJ set out his general approach to the Convention in paras 9 11.
He first identified what he concluded were errors made by David Steel and Thomas JJ.
In particular, he did not agree with them that, in order to succeed in limiting their liability, it was necessary for charterers claims to arise from their role qua owners.
I agree that Longmore LJs conclusions in that regard were correct for the reasons he gave and do not need to revisit them.
Longmore LJ then cited a number of cases which support the proposition that, given that the Convention is in its own words incorporated into English law, the task of the court is to construe the Convention as it stands without any English law preconceptions.
As he put it, the interpretation of international conventions must not be controlled by domestic principles but by reference to broad and general principles of construction.
He cited a number of well known cases: Stag Line Ltd v Foscolo, Mango & Co Ltd [1932] AC 328, 350, James Buchanan & Co Ltd v Babco Forwarding & Shipping (UK) Ltd [1978] AC 141, 152D E, Fothergill v Monarch Airlines Ltd [1981] AC 251, 272E, 282A and 293C, and Morris v KLM Royal Dutch Airlines [2002] 2 AC 628, 656 at para 78.
He added in para 10 that, while it may be difficult to know what are broad and acceptable principles, some principles are enshrined in articles 31 and 32 of the Vienna Convention on the Law of Treaties (1969), which was ratified by the United Kingdom in 1971 and came into force in 1980.
Those articles provide: ARTICLE 31 General rule of interpretation 1.
A treaty shall be interpreted in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in the light of its object and purpose. 2.
The context for the purpose of the interpretation of a treaty shall comprise, in addition to the text, including its preamble and annexes: (a) any agreement relating to the treaty which was made between all the parties in connexion with the conclusion of the treaty; (b) any instrument which was made by one or more parties in connexion with the conclusion of the treaty and accepted by the other parties as an instrument related to the treaty.
ARTICLE 32 Supplementary means of interpretation Recourse may be had to supplementary means of interpretation, including the preparatory work of the treaty and the circumstances of its conclusion, in order to confirm the meaning resulting from the application of article 31, or to determine the meaning when the interpretation according to article 31: (a) (b) unreasonable. leaves the meaning ambiguous or obscure; or
leads to a result which is manifestly absurd or
Longmore LJ summarised his conclusions derived from articles 31 and 32 in this way.
The duty of a court is to ascertain the ordinary meaning of the words used, not just in their context but also in the light of the evident object and purpose of the Convention.
The court may then, in order to confirm that ordinary meaning, have recourse to the travaux prparatoires and the circumstances of the conclusion of the Convention.
The 1957 Convention was signed by the United Kingdom.
Like Longmore LJ in para 10, I would regard the existence and terms of a previous international convention (even if not made between all the same parties) as one of the circumstances which are part of a conclusion of a new convention but recourse to such earlier convention can only be made once the ordinary meaning has been ascertained.
Such recourse may confirm that ordinary meaning.
It may also sometimes determine that meaning but only when the ordinary meaning makes the convention ambiguous or obscure or when such ordinary meaning leads to a manifestly absurd or unreasonable result.
Context, object and purpose
In para 11 Longmore LJ set out the object and purpose of the 1976 Convention as agreed between the parties as follows (omitting the reference to the Tojo Maru).
First, the general purpose of owners, charterers, managers and operators being able to limit their liability was to encourage the provision of international trade by way of sea carriage.
Second, the main object and purpose of the Convention was to provide for limits which were higher than those previously available in return for making it more difficult to break the limit.
Under the 1894 Act an owner was entitled to limit his liability if he showed that the casualty occurred without his actual fault or privity.
Under the 1976 Convention (and the 1995 Act) the (now higher) limit is to apply unless it can be shown that the loss resulted from the personal act or omission of the party relying on the limit committed with intent to cause such loss or recklessly with the knowledge that such loss would probably result.
It is thus particularly difficult to break the limit, but the amount available for compensation is higher than it was previously.
Longmore LJ added that it was not possible to ascertain with certainty any object or purpose beyond that common ground.
He therefore turned to the ordinary meaning of the Convention, beginning at the beginning.
Ordinary meaning
Leaving the position of salvors on one side, at para 13 Longmore LJ noted in the context of article 1 that the word shipowner was defined as the owner, charterer, manager or operator of a seagoing ship.
He then rejected the opinion of David Steel J and Thomas J that a charterer could only limit his liability if he was acting in the management or operation of the vessel.
In particular he expressed the view that the mere fact that charterer is part of the definition of the word shipowner cannot of itself mean that a charterer, which was an expression otherwise unqualified, has to be acting as if he were a shipowner (ie qua shipowner) before he can limit his liability.
He added: To my mind the ordinary meaning of the word charterer connotes a charterer acting in his capacity as such, not a charterer acting in some other capacity.
Longmore LJ then said in para 13 that there were two difficulties in the argument to the contrary.
I do not think that it is necessary for me to discuss them in any detail, since they were not relied upon on behalf of the charterers here.
In para 18, to my mind correctly, Longmore LJ said that he would not give any gloss to the word charterer in article 1(2) and that he would give it what seemed to him to be its ordinary meaning.
I agree with that approach.
Longmore LJ noted at para 21 that the issue was not resolved by a consideration of article 1 of the Convention because it was still necessary to ascertain whether a claim for damage to the ship by reference to which a charterer seeks to limit his liability is a claim which falls within article 2.
In paras 22 24 he considered loss or damage to the ship under article 2(1)(a), which he correctly held extends the right to limit, inter alia, to claims in respect of loss of or damage to property occurring on board, which is not apposite to include loss of or damage to the ship itself since neither the loss of a ship nor damage to a ship can be said to be loss or damage to property on board.
Property on board means something on the ship and not the ship itself.
The question then arises whether this is a claim in respect of loss of or damage to property occurring in direct connexion with the operation of the ship.
Longmore LJ held in para 23 that the most obvious reason for including this category of claim is to cater for cases of collision with another ship.
Loss or damage to that other ship (or its cargo) is not loss of or damage to property occurring on board but is loss of or damage to property occurring in direct connexion with the operation of the ship.
The critical part of his reasoning is to my mind in the next part of para 23, where he said that that wording was not apt to cater for a case where the very ship, by reference to the tonnage of which limitation is to be calculated, is lost or damaged because the loss envisaged is loss to something other than that ship herself.
He added at para 24 that it was not without interest that in order to describe this category of claim the framers had used the phrase occurring in direct connexion with the operation of the ship.
That was, he said, virtually the same phrase as that used by David Steel J to define what he meant by qua owner.
If one were to postulate the case of the vessel being in berth when the dangerous cargo exploded and damaged parts of the harbour, the harbour authority could sue for that damage but one would expect that the shipowners would be able to limit any liability for that claim.
In order to do so, however, they would have to assert that the loss or damage occurred in direct connexion with the operation of the ship.
The fact that dangerous cargo had with their permission been loaded on the ship would, one thinks, be enough for that purpose.
But if it would be sufficient for that purpose, it would be odd that a charterer pursuant to article 1 could not say of his own act in permitting such cargo to be loaded that it was an act in direct connexion with the operation of the ship.
Articles 9 to 11 of the Convention
Longmore LJ treated these provisions as of some importance in reaching his conclusion.
In my opinion he was correct to do so.
In para 25 he noted that Thomas J set them out in detail in The Aegean Sea and summarised them broadly in this way.
Article 9(1) provides for the claims against (a) the persons mentioned in article 1(2) (viz owner, charterer, manager or operator) to be aggregated if they arose on distinct occasions; likewise for claims against (b) the owner of a ship rendering salvage services and a salvor operating from that ship and (c) a salvor not operating from a ship.
Article 9(2) then deals with passenger claims.
Article 10 provides that liability can be limited without the creation of a fund.
Article 11 then provides for the constitution of a limitation fund when that is, in fact, done; it provides for separate funds for the shipowner category of those entitled to limit and the salvor categories (and for passenger claims) by providing: A fund constituted by one of the persons mentioned in paragraph 1(a), (b) or (c) or paragraph 2 of article 9 or his insurer shall be deemed constituted by all persons mentioned in paragraph 1(a), (b) or (c) or paragraph 2 respectively.
Thus through the references to article 9(1)(a) all those persons designated as shipowners in article 1(2) of the Convention are brought together as a single unit for the constitution of the fund.
Thomas J said this (p 49): In my view the combined effect of these articles is important.
As there is provision for a fund for those categorized as shipowners and that fund is to cover both charterers and owners, it is difficult to see how charterers can claim the benefit of limitation through that fund where a claim is brought against them by owners.
Owners are entitled to the benefit of limitation for a claim by charterers as that claim is being brought by charterers not when performing a role in the operations of the ship or when undertaking the responsibility of a shipowner, but in a different capacity, usually through their interest in the cargo being carried.
While I entirely agree with this passage from The Aegean Sea, the considerations advanced by the judge to my mind more effectively support a conclusion that the claims in respect of which an owner or a charterer can limit do not include claims for loss or damage to the ship relied on to calculate the limit rather than a conclusion that a charterer can only limit in respect of operations he does qua owner.
Further, at para 26 Longmore LJ approved Thomas Js view that, if he was wrong in his general conclusion that the charterers could only limit when the loss (a total loss in that case) was caused by an act normally performed by the shipowner, the claim for the loss of the vessel did not fall within article 2(1)(a) because the loss of the ship was not loss of property occurring in direct connection with the operation of the ship.
This in turn was because, as Thomas J put it at (p 51): it is the operation of the very ship that must cause the loss of property; the ship cannot be the object of the wrong.
Longmore LJ added that, similarly in The CMA Djakarta, which was a case of extensive repair rather than total loss, David Steel J upheld the shipowners argument that the vessel cannot be both the victim and the perpetrator and that the property envisaged in the article must be the property of a third party either on board the vessel (eg cargo) or external to the vessel, for example an SBM.
David Steel J said (at para 52): The property damaged cannot be the very same thing as the operation of which caused the damage.
I agree with both Thomas J and David Steel J in this respect and conclude that the ordinary meaning of article 2(1)(a) does not extend the right to limit to a claim for damage to the vessel by reference to the tonnage of which limitation is to be calculated.
Confirmation of the ordinary meaning of article 2(1)(a)
In para 27 Longmore LJ gave a further reason for his earlier conclusion based on the ordinary meaning of article 2(1)(a), with which I also agree.
I agree that the effect of giving the words their ordinary meaning is not absurd or unreasonable, nor is there ambiguity or obscurity.
As Longmore LJ pointed out, David Steel J considered the wording of the 1957 Convention and held that his conclusion derived support from article 1 of that Convention, which drew an express distinction between the ship and other property.
Longmore LJ held that it was, if anything, even clearer than the 1976 Convention on this point.
He held that that served to confirm the proposition since any intention to change the previous agreement so that damage to the ship itself would be subject to limitation would have been made much more explicitly.
I agree, although I do not regard this point as of any great significance.
I should add that, in my opinion, in agreement with David Steel J and the Court of Appeal in The CMA Djakarta, there is nothing in the travaux prparatoires which supports any other conclusion.
Some reliance was placed upon article 4(1)(iv) of the Liens and Mortgages Convention (1967), which provides: The following claims shall be secured by maritime liens on the vessel . (iv) claims against the owner, based on tort and not capable of being based on contract, in respect of loss of or damage to property occurring, whether on land or on water, in direct connection with the operation of the vessel .
No one suggested that loss or damage to property could include loss of or damage to the very vessel on which the maritime lien was secured.
I would accept the submission made on behalf of Gard that, when similar wording was exported to the 1976 Convention, the expression loss of or damage to property in direct connection with the operation of the ship was not intended to include loss of or damage to the very vessel on the basis of whose tonnage limitation was calculated.
Conclusion on limitation
For the reasons I have given, which are essentially the same as those of the Court of Appeal in The CMA Djakarta, I would hold that, if there were a breach of the safe port warranty, the charterers would not be entitled to limit their liability under the Convention in accordance with the limitation fund calculated by reference to the vessel.
CONCLUSIONS
On the safe port issue (question 1), I would hold that the port was not unsafe within the meaning of the safe port undertaking so that the charterers were not in breach of it.
The conditions in the port amounted to an abnormal occurrence as that expression is understood in the cases.
On the joint insurance issue, if (contrary to para 88 above) there were a breach of the safe port undertaking, I would have answered question or issue 2 summarised in para 8 above, namely whether the provisions for insurance in clause 12 of the Barecon 89 form preclude rights of subrogation of hull insurers and the right of owners to recover in respect of losses covered by hull insurers against the demise charterers for breach of the express safe port undertaking, in the negative.
However I recognise that this is a minority view.
On the limitation issue (question 3), again assuming that there were a breach of the safe port undertaking, I would hold that the charterers were not entitled to limit their liability in accordance with a limitation fund calculated by reference to the vessel.
It may be appropriate for declarations to be made reflecting the above.
The parties are invited to make submissions on the form of order and on costs within 21 days of the handing down of the judgments.
LORD SUMPTION:
I agree that there was no breach of the safe port warranty in this case, for the reasons given by Lord Clarke, which substantially correspond to those of the Court of Appeal.
On that footing, it was strictly speaking unnecessary for the Court of Appeal to decide whether, if there had been a breach, there would have been any liability in damages.
For the same reason, it is unnecessary for us to deal with it.
Nonetheless, I propose to do so, because the question is of some general importance and I am not persuaded that the Court of Appeal answered it correctly.
They held that the demise charterers suffered no loss by the destruction of the ship because, although there was a corresponding safe port warranty in the demise charter of which they were (on this hypothesis) in breach, they would have had no liability to pay damages representing the value of the ship.
This is said to be the result of clause 12 of the demise charter, which provided for the demise charterers to procure insurance for the vessel at their own expense against marine, war and protection and indemnity risks, for the joint interests of themselves and the head owners.
From this, and from the provisions of clause 12 relating to the distribution of the insurance proceeds upon a total loss, it is said to follow that the head owners were obliged to look exclusively to the insurance proceeds and not to the demise charterer to recover the value of their ship.
Therefore the demise charterers had no liability to pass on to the time charterers as damages for breach of the safe port warranty, and the insurers, as their assignees, had no greater right.
The same would, on this analysis, have been true if the insurers had brought a subrogated claim against the time charterers in the name of the demise charterers.
It is accepted that this argument applies only to that part of the loss which represents the value of the ship.
It does not apply to the claim for SCOPIC expenses (essentially salvage), wreck removal costs or loss of hire, which together accounted for rather more than a third of the claim.
It is necessary to draw attention at the outset to the limited basis on which this issue comes before the court.
There are three possible bases on which a demise charterer might be in a position to claim damages from a subcharterer for the loss of a ship of which he is the bailee but not the owner: (1) on the basis that he is himself liable to the head owner under the demise charter; (2) on the basis that as a bailee he has a possessory title which entitles him to recover in his own name, accounting to the head owner for any recovery exceeding his actual loss: Waters v Monarch Fire and Life Assurance Co (1856) 5 El & Bl 870; The Winkfield [1902] P 42; and (3) under what has sometimes been called the principle of transferred loss, which may permit a contracting party to recover substantial damages for breach of contract where the loss is foreseeably suffered by a third party and the latter has no direct claim against the wrongdoer: Linden Gardens Trust Ltd v Lenesta Sludge Disposals Ltd [1994] 1 AC 85, Alfred McAlpine Construction Ltd v Panatown Ltd [2001] 1 AC 518.
The recovery in such a case is held on trust for the third party.
For reasons which it is unnecessary to explore, the insurers have confined their case to basis (1).
The claim was argued on that basis in the courts below, and before us their counsel (Mark Howard QC) confirmed that the appeal would be argued on that basis alone.
The demise charter was on the Barecon 89 form.
The form was originally drafted in 1974 by the Documentary Committee of the Baltic and International Maritime Council, and revised in 1989.
It is said to have become, in one or other of its variants, the most commonly used form of bareboat charter world wide.
Under clause 9 of the form, the demise charterers have the usual obligation to maintain the vessel in good repair and efficient operating condition and to take immediate steps to have any necessary repairs carried out.
The form as printed contains no trading limits other than clause 5, which simply requires the vessel to be employed in conformity with the terms of its insurances, including any insurance warranties, unless the agreement of the insurers is obtained.
The insurances are governed by either clause 12 or clause 13, one of which must be selected.
Clause 12, which was selected in this case, provides (so far as relevant): 12. lnsurance and Repairs (a) During the Charter period the Vessel shall be kept insured by the Charterers at their expense against marine, war and Protection and indemnity risks in such form as the Owners shall in writing approve, which approval shall not be unreasonably withheld.
Such marine, war and P & I insurances shall be arranged by the Charterers to protect the interests of both the Owners and the Charterers and mortgagees (if any), and the Charterers shall be at liberty to protect under such insurances the interests of any managers they may appoint.
All insurance policies shall be in the joint names of the Owners and the Charterers as their interests may appear.
If the Charterers fail to arrange and keep any of the insurances provided for under the provisions of sub clause (a) above in the manner described therein, the Owners shall notify the Charterers whereupon the Charterers shall rectify the position within seven running days, failing which Owners shall have the right to withdraw the Vessel from the service of the Charterers without prejudice to any claim the Owners may otherwise have against the Charterers.
The Charterers shall, subject to the approval of the Owners and the Underwriters, effect all insured repairs and shall undertake settlement of all costs in connection with such repairs as well as insured charges, expenses and liabilities (reimbursement to be secured by the Charterers from the Underwriters) to the extent of coverage under the insurances herein provided for.
The Charterers also to remain responsible for and to effect repairs and settlement of costs and expenses incurred thereby in respect of all other repairs not covered by the insurances and/or not exceeding any possible franchise(s) or deductibles provided for in the insurances. (b) If the conditions of the above insurances permit additional insurance to be placed by the parties, such cover shall be limited to the amount for each party set out in Box 28 and Box 29, respectively.
The Owners or the Charterers as the case may be shall immediately furnish the other party with particulars of any additional insurance effected, including copies of any cover notes or policies and the written consent of the insurers of any such required insurance in any case where the consent of such insurers is necessary. (c) Should the Vessel become an actual, constructive, compromised or agreed total loss under the insurances required under sub clause (a) of clause 12, all insurance payments for such loss shall be paid to the Mortgagee, if any, in the manner described in the Deed(s) of Covenant, who shall distribute the moneys between themselves, the Owners and the Charterers according to their respective interests.
The Charterers undertake to notify the Owners and the Mortgagee, if any, of any occurrences in consequence of which the Vessel is likely to become a Total Loss as defined in this clause. (d) If the Vessel becomes an actual, constructive, compromised or agreed total loss under the insurances arranged by the Charterers in accordance with subclause (a) of this Clause, this Charter shall terminate as of the date of such loss. (e) (f) For the purpose of insurance coverage against marine and war risks under the provisions of sub clause (a) of this clause, the value of the vessel is the sum indicated in Box 27.
The alternative insurance clause, clause 13, was intended for short term demise charters and envisaged that the demise charterer would become entitled under existing insurance arrangements made by the head owner.
It accordingly provided for the vessel to be kept insured against marine and war risks by the owner at their expense under a policy in joint names, and against P & I risks by the charterers at their expense.
For present purposes, however, the most significant difference between the two clauses consists in the addition in clause 13(a) of an express provision dealing with the relationship between the liability of insurers and that of demise charterers.
It provided: The Owners and/or insurers shall not have any right of recovery or subrogation against the Charterers on account of loss of or any damage to the vessel or her machinery or appurtenances covered by such insurance, or on account of payments made to discharge claims against or liabilities of the Vessel or the Owners covered by such insurance.
In the present case, the Barecon 89 form was amended by deleting the trading limits clause (clause 5) and adding at clause 29 a safe port warranty in the following terms: 29.
Trading Exclusions Vessel to be employed in lawful trades for the carriage of lawful merchandises only between good and safe berths, ports or areas where vessel can safely lie always afloat, always accessible within IWL except NAABSA in River Plate where it is customary for similar size or similar dimension vessels to safely lie aground, specially excluding Abkhazia, Albania, Angola, Bosnia Herzegovina, CLS Pacific ports, Democratic Republic of Congo (formerly Zaire), Eritrea, Israel, North Korea, Lebanon, Liberia, Libya, Sierra Leone, Somalia, Sri Lanka, Federal Republic of Yugoslavia, Zimbabwe, in Arabian Gulf and adjacent waters including the Gulf of Oman North of 24 deg North, any United Nation embargo countries/ports.
Charterers have right to send vessel to the war/warlike zone or other zones for which additional insurance are levied by vessels war risk insurers.
In such event, Charterers are fully responsible to pay for all additional war risk premium upon demand by vessels underwriters and/or P+I club with all risks/consequences to be for Charterers account.
Charterers shall have right to break IWL in which case Charterers are fully responsible to pay for all additional premium upon demand by vessels underwriters and/or P+I Club for breaching IWL with all risks/consequences to be for Charterers account.
Any ice affected port(s) and/or place(s).
No direct sailing between PRC and Taiwan or vice versa.
It is not disputed that if Kashima was an unsafe port there was a breach of clause 29.
The provisions which are said to exclude a right to recover the value of the ship as damages for breach of clause 29 are clauses 12(a) and (c).
Clause 12(a) requires insurance to be in place for the parties joint account.
Clause 12(c) provides that all insurance payments for such loss shall be paid to the Mortgagee, if any, in the manner described in the Deed(s) of Covenant, who shall distribute the moneys between themselves, the owners and the charterers according to their respective interests.
The argument is that the clause as a whole is a complete code governing financial liability for loss or damage to the ship, and that the words quoted provide for the relief, and the only relief, available as between the head owner and the demise charterer for a total loss.
To address this argument, I propose to deal first with the law relating to rights as between co insured.
I shall then consider how, if at all, it applies to this demise charter.
The starting point is the general rule that insurance recoveries are ignored in the assessment of damages arising from a breach of duty: Bradburn v Great Western Railway Co (1874) LR 10 Ex 1; Parry v Cleaver [1970] AC 1.
This can conveniently be called the collateral payments exception.
It is a departure from the general principle that collateral benefits are brought into account, and is probably best regarded as being based on public policy.
Insurance recoveries are a benefit which the injured party has bought in consideration of his premiums, which are intended to inure to his benefit alone, not that of third party wrongdoers.
Moreover, the courts have traditionally been concerned to preserve the subrogation rights of insurers against those who are legally responsible for the loss, which are an important part of the economics of insurance.
The effect of the collateral payments exception is that as between the insured and the wrongdoer who has caused the loss, they are not treated as making good the formers loss or as discharging the latters liability.
The assumption underlying it is that as far as the wrongdoer is concerned, insurance is res inter alios acta, ie, loosely translated, none of his business.
The rule thus stated falls to be modified in a case where insurance manifestly is the wrongdoers business because, for example, he is a co insured and/or the insurance is taken out for his benefit.
The business context in which this has most commonly arisen is the co insurance of employer, contractor and subcontractors under standard forms of building contract.
It is well established, and common ground between the present parties, that where it is agreed that the insurance shall inure to the benefit of both parties to the contract, they cannot claim against each other in respect of an insured loss.
Co insurance is the paradigm case.
The principle first appears in the United States, but was successively adopted in early editions of MacGillivray on Insurance Law, by the Supreme Court of Canada in Commonwealth Construction Co Ltd v Imperial Oil Ltd [1978] 1 SCR 317 and by the English courts in a line of cases beginning with the decision of Lloyd J in Petrofina (UK) Ltd v Magnaload Ltd [1984] QB 127.
What is less clear is its juridical basis.
Lloyd J was inclined to think that it was based on the rule against circuity of action, which is difficult to accept given that the insurer will not be a party to any litigation between the co insureds.
The better view, which was endorsed by the House of Lords in Co operative Retail Services Ltd v Taylor Young Partnership Ltd [2002] 1 WLR 1419, paras 61 65 (Lord Hope), is that it is an implied term of the contract of insurance and/or of the underlying contract between the co insureds pursuant to which their interests were insured.
The implication is necessary because if the co insureds are both insured against the relevant loss, the possibility of claims between them is financially irrelevant.
It would be absurd for the insurer to bring a subrogated claim against a co insured whom he would be liable to indemnify against having to meet it.
It should be noted that this reasoning is relevant only to the position as between the co insureds.
In all of the English cases before this one the question arose between the co insureds and their insurer.
None of them raised the question how the principle about co insurance affects claims against a third party wrongdoer who is not himself a co insured and is not party to the arrangements between them.
There is no necessity to exclude a claim against him and indeed no reason why either of the co insureds or their insurer should wish to do so.
It is impossible to identify any contract whose business efficacy depends upon that result being achieved.
As between a co insured (or his insurer) and a third party wrongdoer, a different question arises which none of the existing English authorities purports to answer.
The question is this: when we say that one co insured cannot claim damages against another for an insured loss, is that because the liability to pay damages is excluded by the terms of the contract, or is it because as between the co insureds the insurers payment makes good any loss and thereby satisfies any liability to pay damages? The significance of this question may be illustrated by a hypothetical case.
Suppose that A and B are engaged in some contractual venture, involving the use of As property.
The property is insured in their joint names.
It is damaged in breach of some contractual duty owed to A by B, but the cause of the damage is some act of Bs agent, X.
If the effect of the co insurance is that Bs liability to pay damages to A is excluded, then B never had a relevant liability and has suffered no loss which he can claim over against X.
But if its effect is that payment by the insurer makes good As loss as between A and B and thereby satisfies any liability of B, the result is different.
The effect is to exclude the collateral payments exception, so as between A and B the receipt of the insurance proceeds must be taken into account.
However, the fact that the insurers payment has made good the loss as between A and B does not mean that it has done so as between B and the stranger, X.
As between B and X the insurance is res inter alios acta.
Indeed, its normal consequence is that the claim will survive to be pursued by the subrogated insurers.
Either analysis will achieve the object of the implication, namely to prevent claims between co insureds.
But they have radically different consequences for claims against third parties.
Which is the correct analysis must depend on the particular terms of the particular contract.
The answer will not necessarily be the same in every case.
I therefore return to the contractual arrangements between the head owners and demise charterers of the OCEAN VICTORY.
We have not seen the actual policy.
What matters, however, is not the actual policy but the policy envisaged in clause 12 of the demise charter.
The relevant insurance is the insurance against marine risks which is required by clause 12(a).
That is an insurance on property.
As far as the demise charterer is concerned, although it is not a liability insurance, he is treated as having an insured interest in the property as such, because his potential liability to the head owner as a bailee and time charterer means that he stands in [a] legal or equitable relation to the adventure or to any insurable property at risk therein, in consequence of which he may benefit by the safety or due arrival of insurable property, or may be prejudiced by its loss, or by damage thereto, or by the detention thereof, or may incur liability in respect thereof: see Marine Insurance Act 1906, section 5(2) (emphasis supplied); cf Arnould, Law of Marine Insurance and Average, 18th ed (2013), para 11.37 11.38.
If the ship is lost or damaged, the measure of any liability of the demise charterer will be the same as the measure of the owners loss, namely the diminution, partial or total, in the value of the ship.
There is no other basis on which he could be entitled to insure on the same basis as the owner.
When the OCEAN VICTORY was lost, the insurers were bound under clause 12(c) to pay its insured value to the head owner or, rather, to the mortgagee for the account of the head owner.
But the natural legal inference from (i) the fact that the demise charterer is insured for his interest in the ship, (ii) the implied prohibition of claims for damages between the co insured for loss of or damage to the ship, and (iii) the avoidance of double recovery, is that the insurers payment to the head owner makes good the head owners loss not just as between the insurer and the head owner but as between both of them and the demise charterer.
The demise charterers liability under the demise charter for the loss of the ship has not been excluded.
It has been satisfied.
It follows that the demise charterer may claim over against a time charterer who is not party to the insurance or any of the contractual arrangements connected with it.
This may be tested by asking what would happen if the insurer did not pay, for some reason which did not involve a breach of duty by either co insured, for example because the insurer became insolvent after the casualty.
The demise charterers obligation to insure ceases upon the termination of the demise charter: see clause 12(a).
And the demise charter terminates upon the total loss of the ship: see clause 12(d).
The result is that there is no effective insurance, no default of the demise charterer in there being no effective insurance, and no basis on which the head owner can be supposed to look exclusively to its proceeds to make good a loss arising from a breach of the safe port warranty.
The demise charterer would be bound to pay damages, not because he was responsible for the lack of insurance but because he was liable for the destruction of the ship in breach of his contract.
This can only be because it is the payment of the insurance proceeds which discharges the liability of the demise charterer by making good the head owners loss.
In the absence of payment, there is no discharge and no bar to a claim between the co insureds.
This does mean that if the insurer, being solvent, delays in paying the claim, the head owner can require the demise charterer to pay the loss at once.
But I do not regard that as undermining what I consider to be the way that clause 12 works.
Quite apart from the consideration that the contract must be construed on the assumption that the insurer will perform his obligations, an obligation to pay damages upon a breach of contract is a routine consequence of the chartered service.
It is no more unthinkable in the case of the demise charter than it is in the case of the time charter, where no question of co insurance arises.
This analysis derives strong support from a number of other features of this particular demise charter: In the Barecon 89 form as printed, the demise charterers sole (1) obligation in relation to the physical condition of the ship was the maintenance and repairing obligation in clause 9.
Breach of that obligation would not give rise to an insured loss.
The only trading warranty was in clause 5.
This did not give rise to an insured loss either, because it did no more than prohibit the trading of the vessel to places where she would not be insured.
Under the unamended Barecon 89 form, therefore, it is difficult to envisage circumstances in which an insured loss could arise from a breach of contract by the demise charterers.
The present issue simply could not arise.
The parties are therefore unlikely to have intended to address it.
The present issue arises only because the printed form has been modified by adding in clause 29 a contractual obligation not to trade the vessel to unsafe ports where she may suffer an insured loss.
In adding clause 29 to the printed form, the parties must have intended that in relation to loss or damage arising from the unsafeness of ports, the liability of the charterers and the insurers would coexist.
If, as the Court of Appeal thought, the liability of the charterers did not extend to damages, the parties must be taken to have included an elaborate trading warranty which is almost entirely redundant.
Its only effect, on this view of the matter, was to entitle the head owners to protest if they happened to learn in advance of the demise charterers intention to visit an unsafe port.
If the demise charterers persisted (as they were in a position to do since they were in operational control of the ship and employed the master and crew), and the ship was damaged or lost, there would be no consequences in damages.
This is not a realistic intention to impute to commercial parties in the absence of express words to that effect. (2) The only words of clause 12 which are said to have this effect are the words of clause 12(c) which deal with the distribution of the insurance proceeds upon a total loss.
They seem to me to be irrelevant to the present issue.
They deal with the mechanics of payment of the insurance proceeds and not the substantive rights of the parties.
The proceeds are to be paid in the first instance to the mortgagee bank, and thereafter to the head owner and demise charterer according to their respective interests.
This provision does not exclude a right to damages for breach of contract.
Its purpose appears to be (i) to protect the position of the mortgagee, and (ii) to distinguish the position where there is a partial loss (see the fourth paragraph of clause 12(a)) when the insurance proceeds will go to the demise charterer by way of indemnity against the cost of repairs. (3) It is right to add that in relation to war risks clause 29 expressly provides that all risks / consequences of breach are to be for charterers account, notwithstanding the obligation under clause 12 to maintain war risks insurance. (4) If clause 12(c) contains the decisive language, as the time charterers have suggested, then it becomes necessary to distinguish between insurance payments under the hull policy in respect of the loss of the ship and insurance payments under the P & I insurance representing other elements of the claim such as SCOPIC and wreck raising expenses.
The latter will be recoverable as damages in the ordinary way, as well as under the express indemnities at clauses 17 and 18 of the demise charter.
Logically, it also requires a distinction to be made between the insured value of the ship (in this case, $70m) and its market value (in this case $88.5m), the difference being recoverable as damages, as the time charterers accepted before Teare J.
It is very difficult to see why, if the principle underlying clause 12 was that the parties were to look exclusively to the insurance proceeds for compensation for a breach of clause 29, they should have intended this arbitrary distinction between different elements of the loss. (5) Finally, there are the terms of clause 13(a), which expressly exclude any right to recover damages in respect of insured loss of or damage to the ship.
If that option is chosen, the result for which the time charterers contend is achieved by the express words of the contract.
I recognise that clause 13 is designed for a very different kind of chartered service.
It is nonetheless a striking fact that when the draftsman of this contract wished to deal with the overlap between the liability of the insurers and that of the demise charterers, he did so in express terms, using language which finds no equivalent in clause 12. (6) Lord Clarke has made some further observations at paras 49 to 57 of his judgment, with which I agree.
In my judgment the Court of Appeal was wrong to hold that the demise charterers were relieved by the terms of the demise charter of the obligation to pay damages for the consequences of an order to an unsafe port.
I would therefore have allowed the appeal on this point if it had arisen.
On the limitation issue, I agree with Lord Clarke.
LORD MANCE:
I agree with the judgment prepared by Lord Clarke on the first and third issues and with the judgment of Lord Toulson on the second issue in this appeal.
In what follows, I set out some supplementary reasons of my own for agreeing with Lord Toulson on the second issue.
Clauses 12 and 13 are standard clauses of the Barecon 89 Standard Bareboat Charter issued by the Baltic and International Maritime Council (BIMCO).
It is relevant to consider how the scheme introduced by clause 12 (or, where used, clause 13) operates in circumstances where there is no clause 29.
A demise charter involves a bailment on whatever terms may be agreed.
Clauses 9 and 12 impose on charterers strict responsibility for having all necessary repairs done.
But a demise dharterer may well cause total loss of the demised vessel in circumstances constituting a breach of duty or of an express or implied contract term.
Printed clause 5, which was replaced in the present charter by clauses 29 and 30, could itself involve such a breach.
Its first and third paragraphs include, for example, various obligations relating to lawful trading and the carriage of suitable lawful merchandise.
Clause 12 (or, where used, 13) contains a scheme designed to address the possibility of the vessel requiring repairs or suffering a total loss.
First, and fundamentally, these clauses provide who is to take out marine, war risks and protection and indemnity (P&I) insurance.
Clause 12 deals with circumstances where the charterers are to do both, clause 13 with circumstances in which owners are to maintain marine and war risks insurance while demise charterers have to maintain P&I insurance.
Secondly, they provide for the nature of the insurance which is to be maintained.
Under clause 12 all the insurances are to be in such form as the owners shall in writing approve, which approval shall not be unreasonably withheld, whereas clause 13 provides for marine and war risks insurance under the form of policy attached hereto, while the P&I insurance to be arranged by charterers has again to be in such form as the owners shall in writing approve, which approval shall not be unreasonably withheld.
Under both clauses 12 and 13, the value of the vessel for marine and war risks insurance purposes is to be that stated in box 27 (here USD 70m), while boxes 28 and 29 are to specify whether either or both parties may take out additional insurance and if so for how much (each being, under the present charter, prohibited from so doing).
Thirdly, under clause 12 all the insurances are to be arranged to protect both the Owners and the Charterers and mortgagees (if any)and to be in the joint names of the Owners and the Charterers as their interests may appear.
Under clause 13, the marine and war risks insurances are likewise to be in the joint names of the Owners and the Charterers as their interests may appear, but there is also an express provision that: The Owners and/or insurers shall not have any right of subrogation against the Charterers on account of loss of or any damage to the Vessel or her machinery or appurtenances covered by such insurance, or on account of payments made to discharge claims against or liabilities of the Vessel or the Owners covered by such insurance.
Fourthly, both clauses 12 and 13 make the demise charterers responsible for effecting any repairs, securing reimbursement from underwriters to the extent of the insurance coverage, but remaining responsible for all repairs not covered by the insurance and/or falling within any possible insurance franchise or deductibles.
Fifthly, both clauses 12 and 13 address the possibility of the vessel becoming an actual, constructive, compromised or agreed total loss.
Clause 12(c) provides that in this event the marine or war risks insurance payments for such loss shall be paid to the Mortgagee (if any), who shall distribute the moneys between themselves, the owners and the charterers according to their respective interests.
Clause 13(h) provides that they shall be paid to the Owners, who shall distribute the moneys between themselves and the Charterers according to their respective interests.
The scheme of clause 12 (and 13) is clearly intended to be comprehensive.
Whatever the causes, both repairs and total losses fall to be dealt with in accordance with its terms, rather than by litigation to establish who might otherwise be responsible for undertaking them, for bearing the risk of their occurrence or for making them good.
This is reinforced by the provisions for marine and war risks insurances to be taken out to protect the interests of owners, charterers and any mortgagees, and to be in the joint names of owners and charterers, as their interests may appear.
It is well established, as Lord Sumption and Lord Toulson both acknowledge, that, where it is agreed that insurance shall inure to the benefit of both parties to a venture, the parties cannot claim against each other in respect of an insured loss.
This principle is now best viewed as resting on the natural interpretation of or implication from the contractual arrangements giving rise to such co insurance: Co operative Retail Services Ltd v Taylor Young Partnership Ltd (CRS) [2001] Lloyds Ins Law Rep 122 (CA), [2002] 1 WLR 1419, per Lord Bingham, para 7 (favouring the rationale suggested by Brooke LJ in the Court of Appeal at para 72) and Lord Hope, paras 61 to 65.
It is merely reinforced where, as here, the principal co insureds, owners and charterers, are in the same group and ultimate beneficial ownership.
Hull insurance covers losses whether or not it is due to the fault of any party, and it is, rightly, not suggested that the principle in CRS is subject to any exception where the loss is due to fault: see also on this point Mark Rowlands Ltd v Berni Inns Ltd [1986] QB 211, 232G 233B, per Kerr LJ.
Repairs were to be undertaken by charterers, regardless whether their cost was fully covered by insurance.
But the scheme of both clauses 12 and 13 was for marine and war risks insurances in agreed form to be taken out in a fixed amount, and for no more unless otherwise specifically agreed.
At the date of her total loss the OCEAN VICTORY is said to have been worth some USD 15m more than the amount for which she was valued for insurance under the demise charter.
It is in my opinion implausible to suggest that, having developed this careful scheme for specific protection of their respective interests, it should have been intended that owners should as against charterers, a company in the same group and beneficial ownership, be able to reopen the scheme by claims of breach, exposing charterers to paying damages for the hull loss based on a different alleged value to that which owners and charterers had agreed between themselves.
Just as parties must, for better or worse, accept a valuation agreed under a marine insurance (Marine Insurance Act 1906, sections 27(1) and (2)), so here the parties to this charter must be taken to have accepted the value they agreed for insurance purposes as conclusive as between themselves.
In this respect, the schemes of clauses 12 and 13 are in my opinion effectively mirror images of each other.
Clause 13 has an express exclusion of any right of recovery or subrogation on the part of owners and/or insurers against charterers.
That is explicable in the context of a clause dealing with insurance taken out by owners.
BIMCO in their observations on the Barecon 89 form explain the optional clause 13 on the basis that It has been felt that it may be useful to cover also the possibility which is believed may arise from time to time, that a vessel is bareboat chartered for a short period, say, four to six months.
BIMCO give the example of passenger vessels.
They continue: It is believed that it is normal practice that the Owners carry on with the insurances for their own account.
BIMCO also confirm that: The main difference between Clause 12 and Clause 13 is that in Clause 13 the responsibility for arranging and keeping the marine and war risks insurances has been shifted back to the Owners.
There is no suggestion by BIMCO that the responsibilities for repairs and total loss differ in any other respect as between clauses 12 and 13.
There is no reason to think that clauses 12 and 13 were devised as anything other than two routes to the same substantive allocation of responsibilities for repairs and total loss, irrespective of fault.
I conclude that the express exclusion of a right of recovery or subrogation in clause 13 was simply belt and braces in the context of insurances taken out by owners, and that the reason why no such express term appears in clause 12 was that it never occurred that there could be such claims in the context of insurances arranged by charterers to cover their own as well as owners interests.
It is inconceivable that the parties intended fundamentally to alter the incidence of risk by permitting or excluding breach based claims as between themselves in respect of a hull loss, depending upon whether it happened to be convenient to continue to use hull insurances taken out by owners or to rely on fresh insurances taken out by charterers.
The judges speculation (para 202) that the risk of insurers insolvency might have motivated such a distinction is unconvincing, where not only is such risk most unlikely to have been in the forefront of the parties minds, but the decision which party should be responsible for hull insurances has no connection with any such risk or with the question whether or not breach based liability should exist.
I do not consider that the substitution of printed clause 5 by typed clause 29 can have been intended to, or did, alter this basic scheme.
In many respects clause 29 simply makes different provision for the same subject matter as clause 5.
Clause 29 overlaps with clause 5, in so far as it requires employment in lawful trades.
It specifies (not entirely felicitously, in so far as it refers to Zimbabwe) certain trading limits.
Clause 5 contemplates that trading limits would be found in Box 19, but adds that the charterers must furthermore employ the vessel in conformity with the terms of her insurances.
Both clause 29 and clause 5 address additional insurance premiums, which a vessels trading might in some circumstances require to be paid.
Clause 29 has the provision for employment only between good and safe berths, ports or areas where vessel can safely lie always afloat on which Gard relies.
Owners could no doubt object if they learned of intended or actual trading contrary to clause 29, and a breach by charterers in this respect might have consequences outside the scope of hull insurance and so outside the scheme of clauses 12 and 13.
But it is, in my opinion, most unlikely that the safe port provision in clause 29 can have been meant to give rise to a system of recourse for loss of the hull, by way of damages for breach of contract, separate from and potentially counteracting the no fault scheme of responsibility and insurance recovery for a hull loss introduced by clause 12.
Teare J held that the owners, although indemnified by the insurers, had a subrogated right to claim against the demise charterers damages for breach of clause 29: judgment, paras 203 204.
That makes no sense in the context of a co insurance such as this, as Mr Recorder Jackson QC pointed out in Hopewell Project Management Ltd v Ewbank Preece Ltd [1998] 1 Lloyds Rep 448, 458, in a passage approved by Lord Hope in CRS at para 65.
It would mean treating the present co insurance as if it involved two separate and severable insurances, leaving charterers exposed, without liability cover, to claims for breach of charter or duty brought by owners in respect of loss of the hull.
That is obviously not what anyone contemplated by clause 12 or clause 13.
It is no answer that demise charterers might in turn have a back to back claim for damages against sub charterers.
They might equally well not have, eg if they were trading the vessel on their own account, so there was no sub charter, or the sub charter was on different terms or the sub charterer was not worth powder and shot.
I add, though no one suggested this as a correct analysis, that it is inconceivable that anyone contemplated that the co insurance to be arranged could give rise to successive payments of the same sum to different parties, with the second of such payments going to reimburse insurers for the first.
In these circumstances, Gard suggests an alternative basis for its claim, that liability exists in the first instance for any total loss attributable to a breach of the safe port warranty, but is then discharged to the extent of any recovery under the marine or war risks insurance taken out under clause 12.
This analysis has the twin results, that (i) owners could after a total loss call upon charterers to pay the value of the vessels hull, even though an insurance claim was on foot, but had not yet been paid, and (ii) owners could look to charterers in damages for any amount by which the vessels actual value at the date of loss exceeded her insured value, both before and after insurers had paid the insured value.
Both results are in my view inconsistent with the scheme of clause 12 (or 13), or with any sensible understanding of its evident purpose to cater comprehensively for responsibility for repairs and total loss.
Still more fundamentally, in the context of the present claim by Gard as assignees of demise charterers, there is no basis for treating payment of the vessels value under her marine or war risks insurance as discharging pro tanto any liability existing between owners and demise charterers.
Both the ordinary marine and the war risks insurances are property insurances on the vessels hull.
Payments made under them go to owners (or their mortgagees) and charterers for their respective interests in the hull.
They cannot be treated as satisfying, at one and the same time, any liability (if there were any) which charterers had to owners.
The contrary analysis involves the proposition that the parties were prepared to treat the hull insurance moneys as going in the first instance to charterers, not to the owners or their mortgagees, and then being passed up to owners.
That is clearly not what happened or would ever happen in fact, and it is only in a counter factual world and by contradicting the clear intent of clause 12 that it could be treated as if it had happened.
In my opinion, the reason why owners have no claim against charterers for damages for loss of the hull is not that such a claim exists under clause 29 but is at some point discharged.
It is that, under a co insurance scheme like the present, it is understood implicitly that there will be no such claim.
This understanding applies, in my opinion, whether or not the insurance moneys have yet been paid.
But, even if (contrary to my opinion) one were to treat this understanding as biting only upon payment of the insurance moneys, it still would not arise from or involve the proposition that some liability of the charterers to owners was discharged in the sense of paid or satisfied by the insurance moneys.
The understanding would simply be that, upon payment of the hull insurance proceeds to those interested in the hull for their respective interests, no further liability would exist inter se.
On that basis, charterers would still be unable to show that they had or had discharged any liability to owners, on the basis of which they could pursue a back to back claim against sub charterers.
But, as I have made clear, in my opinion the implied understanding arising from the co insurance scheme is that there would be no liability for the hull value in the event of a total loss, whether or not the insured value had yet been disbursed.
Lord Sumption raises the question what would happen if an insurer became insolvent after a loss.
This is in my view a remote eventuality which cannot be a guide to the meaning of clause 12 (or 13).
It also raises different considerations of risk and implications to any which require determination on this appeal.
Two views might be taken.
One is that, under a scheme where both parties have agreed to the particular form of policy, presumably by particular insurers, the risk lies where it falls.
It is to be noted that the risk could impact either party in different circumstances.
It could impact charterers, who undertake an absolute responsibility for repairs, irrespective of fault, and would be unable to recoup themselves from the hull insurance as contemplated by clause 12 or 13.
It could impact owners and charterers for their respective interests, in the event of a total loss occurring without fault.
There is no reason to think that the parties intended any different result in the event of a loss which might be attributed to a breach of clause 29 or any other clause.
But another view might be that the risk lies by implication on the party responsible for maintaining the insurance during the charter period, even though clauses 12 and 13 provide that the charter terminates as of the date of any total loss.
The former seems the more likely position, but it is unnecessary on this appeal to decide which applies, since the point cannot assist to determine the present, quite different issue as to the implications of the insurance scheme when it is effective, which is no doubt what the parties, and BIMCO, had in mind when using and devising it.
Finally, it is submitted that charterers must have some liability towards owners under clause 29, because otherwise there can be no back to back claim down the line under the equivalent clause in the sub charter between demise charterers and Sinochart, who in turn cannot pass on liability under the equivalent clause in the sub sub charter between Sinochart and Daiichi, who were and should be ultimately responsible.
The difficulty with this submission is that it has not been tested and I, for my part, regard it as entirely open.
Gards case before the Supreme Court has been put exclusively on the basis that charterers had a liability to owners, which in turn enables charterers to claim damages down the line.
Mr Howard QC, who did not appear for Gard below, very frankly acknowledged that it had occurred to him, when he came into the case, that there could have been other bases on which the claim could have been presented, but that it had been concluded that Gard was confined to the way in which the case had been argued on its behalf below.
Those other bases are (i) that the charterers possessory title gave them a sufficient interest to be able to maintain a claim for the hull loss: compare the principle in The Winkfield [1902] P 42, whereby a bailee can claim in tort in his own name, without showing that he has any liability to the head owner, but accounting to the head owner for any loss exceeding his own loss, and/or (ii) that there are circumstances in contract where a contracting party can claim substantial damages for loss of or damage to property, when another person has actually borne such loss or damage: Dunlop v Lambert (1839) 6 Cl & F 600, The Albazero [1977] AC 774, 846G 847F.
More recently, this latter possibility has been more widely recognised, by giving special treatment to contracts relating to property where loss due to a breach of the contract will be suffered by a holder of the property other than the contracting party: see Linden Gardens Trust Ltd v Lenesta Sludge Disposals Ltd and St Martins Property Corp Ltd v Sir Robert McAlpine Ltd (St Martins) [1994] 1 AC 85 where it was in the contemplation of the parties when the contract was made that the property, the subject of the contract and the breach, would be transferred to or occupied by a third party, who would in consequence suffer the loss arising from its breach: see also Darlington Borough Council v Wiltshier Northern Ltd [1995] 1 WLR 68 and the narrow ground of decision expressed by Lord Browne Wilkinson at p 114G H in St Martins, in which all members of the House joined.
In such a situation, the claimant is seen as suing on behalf of and for the benefit of the injured third party and is bound to account accordingly: see St Martins, per Lord Browne Wilkinson at p 115A B and McAlpine Construction Ltd v Panatown Ltd (Panatown) [2001] 1 AC 518, per Lord Clyde, at pp 530E F and 532D E. (An even broader principle was also suggested by Lord Griffiths in St Martins, at p 96F 97D and reviewed inconclusively by Lord Browne Wilkinson at pp 111F 112F as well as by the members of the House in Panatown, to the effect that a contracting party might itself have an interest in performance enabling it to claim damages without proving actual loss.)
In the absence of argument, it is not appropriate to reach any conclusion as to whether or how far either of these principles might have assisted Gard, had it been open to Gard to rely on them now.
Suffice it to say that, since their application has not been tested, I am not prepared to proceed on the basis that charterers must be recognised as having had liability to owners, in order to be able to claim down the line against Sinochart and so for Sinochart against Daiichi.
If the absence of such a liability is fatal to a claim by charterers down the line, it must be because neither alternative basis of claim identified in para 125 is available, and, if neither proved to be available, that would, presumably, be because the law did not regard this situation as one where considerations of justice comparable to those reflected in the reasoning in those cases militated in favour of recognising a right on the part of the charterers to claim down the line.
LORD HODGE:
I also agree with Lord Clarkes judgment on the first and third issues in this appeal.
On the second issue I agree with the judgments of Lord Toulson and Lord Mance.
LORD TOULSON:
I agree with the judgments of Lord Clarke and the Court of Appeal on the issue whether there was a breach of the safe port warranty, and I would therefore dismiss the appeal.
I agree also with Lord Clarke on the issue of limitation of liability and would affirm the decision of the Court of Appeal in The CMA Djakarta [2004] 1 Lloyds Rep 460.
On the issue as to the effect of the charters joint insurance provisions, I agree with the reasoning and conclusion of the Court of Appeal and disagree with Lord Clarke and Lord Sumption for reasons explained in the rest of this judgment.
It is a curious feature of this appeal that permission to appeal on the joint insurance issue was sought on the basis that the Baltic and International Maritime Council (BIMCO) form of bareboat charter codenamed Barecon 89 is a standard form of contract in common use and the effect of clause 12 is therefore a matter of general importance, but the argument turned on the relationship between that clause and clause 29, which is not part of the standard form.
It is nevertheless sensible to begin by considering the effect of clause 12 in the unamended version of Barecon 89.
It is important to understand its basic structure.
The standard terms, set out in Part II of the policy, contain nothing about safe ports.
Clause 5, headed Trading Limits, stipulates that the vessel is to be employed in lawful trades for the carriage of suitable lawful merchandise within trading limits which may be specified in the schedule which forms Part I of the policy, and that the vessel is not to be employed otherwise than in accordance with the terms of the insurance which is required to be maintained.
The insurance requirements are set out in clause 12 or its alternative, clause 13.
Clause 12 is headed Insurance and Repairs.
It provides: (a) During the Charter period the Vessel shall be kept insured by the Charterers at their expense against marine, war and Protection and Indemnity risks in such form as the Owners shall in writing approve, which approval shall not be unreasonably withheld.
Such marine, war and P and I insurances shall be arranged by the Charterers to protect the interests of both the Owners and the Charterers and mortgagees (if any), and the Charterers shall be at liberty to protect under such insurances the interests of any managers they may appoint.
All insurance policies shall be in the joint names of the Owners and the Charterers as their interests may appear.
If the Charterers fail to arrange and keep any of the insurances provided for under the provisions of sub clause (a) above in the manner described therein, the Owners shall notify the Charterers whereupon the Charterers shall rectify the position within seven running days, failing which Owners shall have the right to withdraw the Vessel from the service of the Charterers without prejudice to any claim the Owners may otherwise have against the Charterers.
The Charterers shall, subject to the approval of the Owners and the Underwriters, effect all insured repairs and shall undertake settlement of all costs in connection with such repairs as well as insured charges, expenses and liabilities (reimbursement to be secured by the Charterers from the Underwriters) to the extent of coverage under the insurances herein provided for.
The Charterers also to remain responsible for and to effect repairs and settlement of costs and expenses incurred thereby in respect of all other repairs not covered by the insurances and/or not exceeding any possible franchise(s) or deductibles provided for in the insurances.
All time used for repairs under the provisions of sub clause (a) of this Clause and for repairs of latent defects according to Clause 2 above including any deviation shall count as time on hire and shall form part of the Charter period. (b) If the conditions of the above insurances permit additional insurance to be placed by the parties, such cover shall be limited to the amount for each party set out in Box 28 and Box 29 respectively.
The Owners or the Charterers as the case may be shall immediately furnish the other party with particulars of any additional insurance effected, including copies of any cover notes or policies and the written consent of the Insurers of any such required insurance in any case where the consent of such insurers is necessary. (c) Should the vessel become an actual, constructive, compromised or agreed total loss under the insurances required under sub clause (a) of clause 12, all insurance payments for such loss shall be paid to the Mortgagee, if any, in the manner described in the Deed(s) of Covenant, who shall distribute the moneys between themselves, the Owners and the Charterers according to their respective interests.
The Charterers undertake to notify the Owners and the Mortgagee, if any, of any occurrences in consequence of which the Vessel is likely to become a Total Loss as defined in this Clause.
If the Vessel becomes an actual, constructive, (d) compromised or agreed total loss under the insurances arranged by the Charterers in accordance with sub clause (a) of this Clause, this Charter shall terminate as of the date of such loss. (e) The Owners shall upon the request of the Charterers, promptly execute such documents as may be required to enable the Charterers to abandon the Vessel to insurers and claim a constructive total loss. (f) For the purposes of insurance coverage against marine and war risks under the provisions of sub clause (a) of this Clause, the value of the Vessel is the sum indicated in Box 27.
Clause 13 applies in place of clause 12 if the parties so choose in part I of the policy.
In relation to P and I risks during the charter, clause 13 follows the provisions of clause 12, but in relation to marine and war risks clause 13(a) puts the responsibility for maintaining cover on the owner.
It provides: During the Charter period the Vessel shall be kept insured by the Owners at their expense against marine and war risks under the form of policy or policies attached hereto.
The Owners and/or insurers shall not have any right of recovery or subrogation against the Charterers on account of loss of or any damage to the Vessel or her machinery or appurtenances covered by such insurance, or on account of payments made to discharge claims against or liabilities of the Vessel or the Owners covered by such insurance.
All insurance policies shall be in the joint names of the Owners and the Charterers as their interests may appear.
The significant feature of bareboat chartering, or chartering by demise, is that during the period of the charter (in the words of BIMCOs explanatory notes to Barecon 89) the vessel comes in the full possession, at the absolute disposal, and under the complete control of the bareboat charterers.
The notes add that bareboat chartering is therefore entirely different from ordinary time chartering when it comes to the allocation of costs, liabilities and responsibilities.
Clause 12 in the unamended form deals comprehensively with the risks of loss or damage to the vessel and what is to happen in such an event.
In summary, the demise charterer is responsible for arranging and maintaining insurance, in a form approved by the owner, in the names of both parties for an agreed value; the charterer is responsible for effecting all insured repairs; the charterer is responsible for repairs not covered by the insurance, for example, due to deductibles under the terms of the insurance (or, for that matter, due to use of the vessel outside the terms of the insurance); and in the case of a total loss covered by the insurance, the clause provides for the processing of the insurance moneys.
BIMCOs explanation for the optional alternative of clause 13 was that sometimes a vessel is bareboat chartered for only a short period and it may make sense for the owners to carry on with the insurances which they are likely to have in place.
Clause 13 therefore provides that the vessel is to be kept insured by the owners against marine and war risks, and that the owners and their insurers are to have no right of recovery or subrogation against the charterers on account of loss or damage covered by such insurance.
It would be unnecessary to include equivalent words in clause 12.
It cannot have been the parties intention that the charterers exposure to liability should be greater under clause 13, where cover against marine and war risks was to be maintained at the owners expense than under clause 12, where it was to be maintained at the charterers expense.
Longmore LJ put the point pithily when he described the exclusion of rights of recovery or subrogation in clause 13 as a confirmation rather than a negation of such exclusion in the more usually adopted clause 12 for the longer term charters when it is the charterers who pay the premium (para 88).
The critical question then arises as to the effect, in relation to the operation of clause 12, of the substitution of clause 5 by clause 29, which provides that the vessel is to be employed in lawful trades for the carriage of lawful merchandises only between good and safe berths, ports or areas where the [vessel] can safely lie always afloat, etc.
On the hypothesis that Kashima was not prospectively a safe port for the OCEAN VICTORY when Daiichi gave instructions for her to discharge there, Daiichi was thereby in breach of the safe port undertaking in the time sub charter between itself and Sinochart, which in turn was in breach of the equivalent undertaking in the time charter between itself and the demise charterer, OLH, which in turn was in breach of clause 29 of the demise charter between itself and the owners, OVM.
The consequence of that breach was that the vessel was lost, but the demise charterer and the owners were co insured (as required by clause 12) and the insurers paid its insured value.
One of the insurers, Gard, claims to be entitled to recover that sum from the time charterers as assignee of the rights of the demise charterer.
The claim therefore depends on the demise charterer being liable to the owners for that sum by way of damages for breach of clause 29, and thus entitled to recover the same sum from the time charterer as loss suffered by the demise charterer.
Gards case is that the breach of clause 29 caused the loss of the vessel; therefore the demise charterer was liable to the owners for the vessels value, and the fact that the owners were paid that amount by the insurers is res inter alios acta as between the demise charterer and the time charterer.
The critical question is whether the contractual scheme between the owners and the demise charterer precluded any claim by the former against the latter for the insured loss of the vessel.
This is a matter of construction.
It has become a common practice in various industries for the parties to provide for specified loss or damage to be covered by insurance for their mutual benefit, whether caused by one partys fault or not, thus avoiding potential litigation between them.
The question in each case is whether the parties are to be taken to have intended to create an insurance fund which would be the sole avenue for making good the relevant loss or damage, or whether the existence of the fund co exists with an independent right of action for breach of a term of the contract which has caused that loss.
Like all questions of construction, it depends on the provisions of the particular contract: see, for example, Co operative Retail Services Ltd v Taylor Young Partnership Ltd [2002] 1 WLR 1419.
In that case a building owner entered into a standard form of building contract for the construction of office premises.
Under its terms the contractor was required to take out and maintain a policy in the names of the owner, the contractor and specialist electrical subcontractors, Hall, for all risks insurance covering loss or damage to the works from specified perils including fire.
Hall entered into a collateral contract with the owner warranting that it had exercised and would exercise all reasonable care and skill in the design and execution of the sub contract works.
A fire occurred causing extensive damage.
The owners sued their architects and mechanical and engineering consultants, who brought third party proceedings against Hall.
This raised the question whether Hall was liable to the owners in respect of the fire damage, alleged by the third party claimants to have been caused by Halls negligence and breach of warranty.
The House of Lords, upholding a decision by the first instance judge and the Court of Appeal, held that it cannot have been the parties intention that parties who were jointly insured under a contractors all risks policy could make claims against one another in respect of damage covered by the insurance, or that the insurers could make a subrogated claim in the name of the owners against Hall, and that the court would if necessary hold that there was an implied term to such effect (which I infer in relation to Hall must logically have taken effect as an implied term of the collateral contract between itself and the owners).
In so holding the House of Lords approved and applied the reasoning of Mr Recorder Jackson QC, as he then was, in Hopewell Project Management Ltd v Ewbank Preece Ltd [1998] 1 Lloyds Rep 448, 458, where he described it as nonsensical if those parties who were jointly insured under a contractors all risks policy would make claims against one another in respect of damage to the contract works.
The implied term presupposes, of course, that the party relying on it has not by his own conduct prevented recovery of the loss under the policy a point made by Jackson J (as he had by then become) in Board of Trustees of the Tate Gallery v Duffy Construction Ltd [2007] BLR 216.
In the present case the Court of Appeal followed the same reasoning in holding that the proper construction of clause 12 was that there was to be an insurance funded result in the event of loss or damage to the vessel by marine risks and that, if the demise charterers had been in breach of the safe port clause, they would have been under no liability to the owners for the amount of the insured loss because they had made provision for looking to the insurance proceeds for compensation.
It did not consider that the introduction of clause 29 was intended to alter the way in which clause 12 was to operate.
I agree with the Court of Appeal.
The demise charter allowed for a sub demise with the owners consent, which was not to be unreasonably withheld.
The risk existed that the vessel might be directed to an unsafe port, not necessarily by negligence on anyones part, so causing peril to the vessel, but the risk of consequential damage to the vessel was catered for by the insurance required to be maintained by the demise charterer in the joint names of itself and the owners.
The commercial purpose of maintaining joint insurance in such circumstances is not only to provide a fund to make good the loss but to avoid litigation between them, or the bringing of a subrogation claim in the name of one against the other.
I do not accept that by substituting clause 29 for clause 5 the parties intended to subvert that purpose.
If anything, the present case is stronger in this regard than Co operative Retail Services Ltd v Taylor Young Partnership Ltd, because in that case Halls obligation to use skill and care was in a separate contract from the contract between the owner and the contractor which contained the provisions about insurance whereas in the present case clauses 12 and 29 are part of a single contract.
Gards submission that clause 29 becomes pointless if clause 12 has the effect held by the Court of Appeal is fallacious.
It sets limits on the use of the vessel, breach of which may give rise to loss, but clause 12 deals with the consequences of loss or damage to the vessel, regardless of whether it resulted from negligence or other fault of the demise charterer (or a sub charterer).
Mr Mark Howard QC argued that this interpretation misapprehends the purpose of clause 12, which in a case of loss caused by a breach of contract by the charterer does no more than to ensure that the owners right to recover damages is backed by an available fund.
This in substance was the argument advanced unsuccessfully against Hall in Co operative Retail Services Ltd v Taylor Young Partnership Ltd. Lord Hope (paras 39 and 40) distinguished between a provision for insurance which curtails the means of recovering loss whether or not it was caused by a contracting co insureds default, and a provision which backs the other partys other obligations with an insuring obligation but leaves the other obligations enforceable against the other party by other means.
He agreed with the judges conclusion that the contractual insurance arrangements meant that if a fire occurred, the owners were to look to the joint insurance policy to provide the fund for the cost of restoring and repairing the fire damage rather than, in the judges words, indulge in litigation with each other.
In the present case, if one were to ask whether it would have accorded with the parties intentions that on the morning after the loss the owners would have been entitled to demand immediate payment from the demise charterers, rather than make a claim on the insurers and wait for it to be settled, my answer would be that they intended no such thing.
The insurance arrangements under clause 12 provided not only a fund but the avoidance of commercially unnecessary and undesirable disputes between the co insured.
It does not follow that the demise charterers (or their insurers in their shoes) necessarily had no available remedy against the time charterers.
The court was told that at one stage the insurers intimated a claim analogous to the claim which a bailee may bring under The Winkfield [1902] P 42.
However, the matter was not pursued, and it would be inappropriate to express a positive view about the likelihood of success of such a claim (or any alternative), about which the court has heard no argument.
For those reasons I would have upheld the decision of the Court of Appeal on the recoverability issue, if the demise charterers had been in breach of the safe port clause.
I have had the benefit of reading Lord Mances additional reasons, with which I agree.
Like him, I do not think it is necessary to reach a final conclusion about the position in the case of an insolvent insurer, which it is not reasonable to suppose was in the minds of the BIMCO drafters of Barecon 89 and ought not to affect its core interpretation.
| UK-Abs | This appeal arises out of the grounding of the Ocean Victory (the vessel).
By a demise charterparty the vessels owners, Ocean Victory Maritime Inc. (the owners) chartered the vessel to Ocean Line Holdings Ltd (the demise charterer) on the widely used Barecon 89 form, as amended [1].
It provided for the demise charterers to procure insurance for the vessel at their expense against marine, war and protection and indemnity risks for the joint interest of themselves and the owners [93].
The demise charterer time chartered the vessel to China National Chartering Co Ltd (Sinochart), who sub chartered the vessel to Daiichi Chuo Kisen Kaisha (Daiichi).
The demise charter and both time charters contained the same undertaking to trade the vessel between safe ports [1 2].
In September 2006, Daiichi gave the vessel instructions to load at Saldanha Bay in South Africa and discharge at the port of Kashima in Japan [3].
The quay at Kashima was vulnerable to long waves which can result in a vessel being required to leave the port.
The only route in and out of Kashima is by a narrow channel, the Kashima Fairway, which is vulnerable to northerly gales [3, 9].
There is no meteorological reason why these two events should occur at the same time [9].
However, on 24 October 2006, the vessel sought to leave the port due to long waves but, due to a severe northerly gale, was unable to safely navigate the fairway and was grounded, becoming a total loss [1, 4].
Gard Marine & Energy Ltd (Gard), one of the vessels hull insurers, took assignments of the rights of the owners and the demise charterer in respect of the grounding and total loss.
It brought a claim against Sinochart (which Sinochart passed on to Daiichi) for damages for breach of the charterers undertaking to trade only between safe ports [5].
In the High Court, Teare J held that there had been a breach of the safe port undertaking.
The combination of the two weather conditions was not an abnormal occurrence, even though the coincidence of the conditions was rare, because both conditions were physical characteristics of the port.
The Court of Appeal allowed Daiichis appeal on this issue (issue 1).
The Court of Appeal also held that, due to the joint insurance provisions, the owners were not entitled to claim against the demise charterparty in respect of insured losses (issue 2), reversing Teare Js finding on this issue.
Gard appealed on both these issues [7].
In addition, the Supreme Court considered whether Daiichi would be entitled to limit its liability for loss of the ship pursuant to the 1976 Convention on Limitation of Liability for Maritime Claims (the Convention) enacted into English law by the Merchant Shipping Act 1995.
This issue was not considered by the courts below as it was accepted that they were bound by the decision of the Court of Appeal in The CMA Djakarta [2004] 1 Lloyds Rep 460 which had held that such limitation was not possible (issue 3) [58 59].
The Supreme Court unanimously dismisses the appeal on the ground that there was no breach of the safe port undertaking.
Lord Clarke gives the lead judgment, with which all the justices agree on issue 1 and on issue 3; if there had been a breach of the safe port undertaking Daiichi would not have been entitled to limit its liability under the Convention.
In respect of issue 2, Lord Toulson and Lord Mance, in judgments with which Lord Hodge concurs, agree with the Court of Appeal, that the joint insurance would have precluded any claim by owners against the demise charterer, or therefore by the latter down the line.
Lord Clarke and Lord Sumption take the opposite view.
It was common ground that the test for breach of the safe port undertaking is whether the damage sustained by the vessel was caused by an abnormal occurrence [10], that the date for judging the breach of the safe port promise is the date of nomination of the port and the promise is a prediction about the safety of the port when the ship arrives in the future. [13, 24].
Abnormal occurrence should be given its ordinary meaning; something rare and unexpected that the notional charterer would not have in mind [16, 25, 27].
The test is not whether the events which caused the loss are reasonably foreseeable.
The fact that the combination of long waves and northerly gales was theoretically foreseeable does not make it a normal characteristic of the port.
Regard must be had to the reality of the situation in the context of all the evidence to ascertain whether the particular event was sufficiently likely to occur to have become an attribute of the port [14, 32, 37 40].
Teare J erred in failing to answer the unitary question of whether the simultaneous coincidence of the long waves and gales was an abnormal occurrence [34].
No vessel in the ports history had risked damage in the quay due to long waves at the same time the Kashima Fairway was unnavigable because of gale force winds.
There was also evidence regarding the exceptional nature of the rapid development, duration and severity of the storm.
On the basis of this evidence the conditions in question were an abnormal occurrence and there was therefore no breach by Daiichi of the safe port undertaking [41 45].
Assuming there had been a breach of the safe port warranty, Gard claims to be able to recover the insured value of the vessel from the time charterers as the demise charterers assignee on the basis that the demise charterer is liable to the owners for breach of its safe port undertaking, and is therefore entitled to recover the same sum from the time charterer [93, 138].
Lord Toulson, Lord Mance and Lord Hodge conclude that the provisions of clause 12 of the demise charter, which provide for joint insurance and a distribution of insurance proceeds, preclude such a claim.
It is well established that co insureds cannot claim against each other in respect of an insured loss.
Clause 12 provides a comprehensive scheme for an insurance funded result in the event of loss of the vessel by marine risks.
The safe port undertaking does not alter this scheme. [139 146, 114 122].
Lord Sumption agrees that co insureds cannot claim against each other in respect of an insured loss.
Whether this is because liability to pay damages is excluded by the terms of the contract, or because as between the co insureds the insurers payment makes good any loss and satisfies any liability to pay damages will depend on the terms of the contract [99 100].
In this case clause 12 of the demise charter envisages the latter [101 105].
Lord Clarke agrees with Lord Sumption on this issue [48 57].
Had there been a breach of the safe port warranty, Daiichi would not have been entitled to limit its liability under the Convention.
Article 2(1)(a) of the Convention allows owners or charterers to limit liability for loss or damage to property occurring on board the ship or in direct connexion with the operation of the ship [61].
The court agrees with the Court of Appeal in The CMA Djakarta that giving the words their ordinary meaning, this category of claim does not include loss or damage to the ship itself [79 81].
This interpretation is supported by Articles 9 to 11 of the Convention [82 84] and there is nothing in the travaux prparatoires which supports another conclusion [86].
|
The issue before the Supreme Court lies within a very narrow compass.
The appellant is applying to the European Court of Human Rights to challenge the fairness of his trial because it was held partially in camera.
The United Kingdom has in its observations to the court resisted this application.
The appellant wishes to be permitted in his response to disclose and refer to contents of the evidence given in camera.
The limited issue now before the Supreme Court is whether the English courts have any discretionary power in any circumstances to refuse to permit the appellant to do this at this stage of the proceedings before the European Court of Human Rights.
If the English courts have any discretion at all in this regard, the question whether circumstances exist justifying its exercise in this case is not before the Supreme Court.
In a purely domestic context, it is now common ground that the English courts have a discretionary power to refuse to permit disclosure of material deployed in camera.
The issue on this appeal is whether this power ceases or ceases to be exercisable, whatever the circumstances, once an applicant to the European Court of Human Rights decides that he wishes to disclose the material to that court in the context (here) of a complaint that the in camera proceedings made his trial unfair.
The appellant invokes in this connection obligations which he alleges are imposed on the United Kingdom at the international level under article 34 of the European Convention on Human Rights, an article not incorporated into United Kingdom law by the Human Rights Act 1998.
The appellants conviction
In circumstances which attracted much public attention at the time, Mr Allen Chappelow, an 86 year old reclusive writer, was on 14 June 2006 found to have been murdered, plainly some weeks beforehand, in his house in Downshire Hill, Hampstead, London.
The appellant, who lived two or three streets away, was subsequently charged with his murder and with associated offences of fraudulent misuse of his identity and bank accounts.
The appellant denied the murder charge and alleged that he had been given the deceaseds cheques, credit cards and banking information by gangsters who he named as Gaz, Zhao Dong and Ah Ming.
He gave descriptions of them and places they frequented or where, in the case of Ah Ming, he said he worked.
The appellant alleged that they were responsible for the theft of the deceaseds identity and that he was playing along with them as a means of assembling evidence against them and reporting them.
The Crown applied for an order that part of the trial relating to this defence take place in camera in the interests of national security and to protect the identity of a witness or other person.
The judge, Ouseley J, considered this exceptional application in the light of the relevant case law of the European Court of Human Rights.
By judgment and order dated 15 January 2008 he held that the risks to national security and to witnesses or others, together with the risk that no trial at all might otherwise be possible, justified the making of the order sought and that the defendant would have a fair trial were it to be made.
The Court of Appeal (Criminal Division) (Lord Phillips of Worth Matravers CJ, Silber and Underhill JJ) upheld this decision by judgment dated 28 January 2008, after considering the in camera material.
On a first trial, the jury could not agree on the murder charge, but convicted the appellant on charges of fraudulent misuse of the deceaseds identity and bank accounts. (That was a conviction which the jury should not have been allowed to deliver while the murder charge and a retrial were outstanding, and it was subsequently set aside by the Court of Appeal.) On a retrial, a second jury on 16 January 2009 convicted the appellant of both murder and burglary, and he was sentenced to life imprisonment with a minimum term of 20 years.
During the trial, because of the appellants difficulty in keeping distinct the sensitive and non sensitive aspects of his evidence, the entire defence case was heard in camera in the presence of the appellant and those representing him, who were Mr Robertson QC leading Ms Brimelow instructed by Janes Solicitors.
At the end of the retrial, Ouseley J made a further order that nothing be published revealing any evidence or other matter heard or dealt with in camera, other than that which had been said in public during the proceedings.
The appeal against conviction
The appellant appealed against his conviction, on the grounds that, in the light of the hearing of part of the trial in camera, the conviction was unsafe.
The fairness of this procedure was again considered by the Court of Appeal (Criminal Division) (Hughes V P, Saunders and Thirlwall JJ), this time in the light of the way the trial had actually proceeded and again after considering the in camera material.
The court dismissed the appeal in a full judgment dated 5 October 2010.
Inter alia, it addressed submissions advanced on behalf of the appellant by Mr Robertson QC in a passage which also indicates how substantially the essence of the appellants case was in fact publicly disclosed: 21.
He [Mr Robertson] contends that if the evidence which was taken in private, which consisted of four witnesses plus that of the defendant, had been heard in public, there would have been likely to be significantly greater media coverage of the trial, and that there is a real possibility that additional witnesses supporting the defendant in his case would have come forward on seeing it.
In particular, he suggests that there is a real possibility that witnesses would have come forward to confirm the existence and gangster characteristics of those whom the defendant blamed for the supply to him of the deceaseds cheques, credit card and banking information.
Secondly, he says, there may well have been further evidence of the essentially good and non violent past character of the defendant. 22.
This possibility was considered carefully at the time of the decision to conduct part of the case in camera.
We are unable to see that it can be more than the merest speculation.
Most of the trial was conducted in public.
The defendant was able to name the three persons who he said were responsible for the supply of the cheques and to give a good deal of circumstantial identifying material.
The order for the taking of evidence in private had excluded that part of his evidence, expressly so that it could be heard by anyone who chose to be in court, but the defendant when he came to give evidence was unable to confine himself even for a brief period to this kind of material and so it was in the end necessary for all his evidence to be taken in private.
Nevertheless, the information about the alleged gangsters was available to be put to several Crown witnesses who gave evidence in open court, including the officer in the case who was cross examined about them and about what efforts had been made to trace them.
Moreover, at the first trial counsel for the defendant had made an opening statement after the Crown opening in public and had had the opportunity, taken as we understand it, to identify the persons on whom, on the defendants case, the defence turned.
At the second trial a similar statement could no doubt have been made, but as a matter of trial strategy no request to do so was made.
The existence of Aming [Ah Ming] was confirmed by at least one witness and other information about him was elicited.
The defendant was also able to advance, in open court, a number of allegations against a prosecution witness, He Jia Jin, and to put before the jury material which suggested, perhaps without much in the way of proof but advantageously so to the defendant, that that man similarly participated in nefarious activities.
This all happened twice, in two trials a year or so apart.
We are unable to accept that there is a real possibility that other evidence would have emerged given further publicity and that such would have been exculpatory.
In reaching that conclusion we have taken into account the enormously strong evidence, summarised below, that the defendant's account of being involved only in very limited use of the deceased's identity and bank accounts at the behest of others, was simply not true.
Insofar as Mr Robertson suggested that further material 23. might also have emerged on which to cross examine the few witnesses who gave evidence in private this was not made out.
The kind of material to which he referred was available at the time and no attempt was made to deploy it. 24.
The suggestion that additional good character evidence might also have emerged is similarly unarguable.
There was a great deal of evidence of the defendant's character, both praiseworthy and non violent on the one hand and less good, involving a history of forgery and dishonesty, on the other.
The judge summed it up very favourably to the defendant.
The appellants application to the European Court of Human Rights
By Application No 31295/11 lodged on 28 April 2011 the appellant, again represented by Mr Robertson and Ms Brimelow instructed by Janes Solicitors, has initiated proceedings against the United Kingdom before the European Court of Human Rights, complaining inter alia that his trial and conviction were unfair and violated article 6.1 of the Convention because of the in camera hearing of that part of the trial that went to his defence.
The evidential prejudice alleged (in the applicants application dated 28 April 2011) to have arisen from material being deployed in camera, rather than in public, is the same as that previously alleged and considered by the English trial and appellate courts, namely: 42.
If the trial had been conducted in the normal way in public it could have encouraged additional witnesses, who would have supported the defence, to come forward.
It would have placed witnesses called by the Crown under public scrutiny. 43.
In particular, there is a real possibility that witnesses who were able to substantiate the applicants defence that he was being supplied with material stolen from the deceased by gangsters, would have made themselves known.
Not only could these witnesses have given evidence for the defence, but they also could have provided material with which defence counsel could have cross examined prosecution witnesses.
To that end, the defence was impaired by being unable to properly challenge the case against Mr Yam and present an alternative explanation.
A public reporting of this case, undoubtedly, would have raised awareness within the close knit Chinese community in London and the confidence raised by open criminal due process would have encouraged witnesses to come forward.
The United Kingdom in observations dated 9 April 2013 has submitted that the application should be declared manifestly ill founded and inadmissible or alternatively dismissed on the merits.
The issue has thus subsequently arisen, whether the appellant can or should be permitted to refer to the contents of in camera material in his response to the United Kingdoms observations.
The European Court of Human Rights on 30 August 2013 extended the time for any response to allow the appellant to apply to the English courts for leave to refer to the contents of in camera material in his response.
The court when doing this confirmed that it has procedures in place to ensure the safe storage of secret documents, should the need arise.
The further application to Ouseley J and the present judicial review proceedings in
respect of his ruling
The appellant duly made an application to Ouseley J.
The Attorney General intervened as an interested party.
A certificate dated 11 December 2013 was made by the Rt Hon William Hague MP, Secretary of State for Foreign and Commonwealth Affairs, stating that he had considered in camera material set out in a schedule (not itself disclosed to those acting for the appellant) together with the appellants draft of the response which he wishes to put before the European Court of Human Rights, and that:
I have concluded that there would be a real risk of serious harm to an important public interest were either the Order to be discharged in its entirety, or in part, permitting disclosure of the in camera information, or were disclosure to be made to the Strasbourg court of the information in the draft response document.
It is not possible for me to be specific in this certificate about the precise harm that disclosure of the information in question would cause, since my doing so would be liable to cause the very damage that the certificate seeks to avoid.
Full details are, however, given for the benefit of the court in the Schedule to this certificate. 10.
On 27 February 2014 Ouseley J ruled that the appellant was not and should not be able to disclose the in camera material in his response and, for the avoidance of doubt, expanded the wording of his order of 15 January 2008 to make this express.
The appellant brought proceedings challenging the ruling by way of judicial review.
On 31 October 2014, the Divisional Court (Elias LJ and Hickinbottom J) granted permission for judicial review, but dismissed the application on its merits. 11.
Before Ouseley J and the Divisional Court, Ms Brimelow QC representing the appellant referred to the Supreme Courts decision in Bank Mellat v HM Treasury (No 2) [2013] UKSC 38; [2014] AC 700.
The Supreme Court there held by a majority that it must in the interests of justice be able on an appeal to consider closed material deployed before a first instance judge.
She submitted that the Supreme Court should adopt similar reasoning as regards in camera material, in the context of the appellants current application to the European Court of Human Rights.
Ouseley J was referred to articles 34 and 38 of the Convention and to case law of the European Court of Human Rights dealing with their effect.
Articles 34 and 38 bind the United Kingdom at the international level.
They are not incorporated into English law by the Human Rights Act 1998.
They read: 34.
Individual applications The court may receive applications from any person, nongovernmental organisation or group of individuals claiming to be the victim of a violation by one of the High Contracting Parties of the rights set forth in the Convention or the Protocols thereto.
The High Contracting Parties undertake not to hinder in any way the effective exercise of this right. 38.
Examination of the case The court shall examine the case together with the representatives of the parties and, if need be, undertake an investigation, for the effective conduct of which the High Contracting Parties concerned shall furnish all necessary facilities.
Ms Brimelow submitted that, although articles 34 and 38 are not part of domestic law, domestic courts should, so far as free to, act consistently with the obligations which she submitted that they involve under international law, and should leave it to the European Court of Human Rights to make such use as it may decide of its own procedural powers to hear the case in camera and to protect the in camera material.
In the light of the parties submissions and after considering the open certificate as well as its closed schedule, Ouseley J reconsidered whether disclosure as sought by the appellant should be permitted.
He concluded that it should not be.
On the material before him, he held that The purpose of the in camera order would be put at risk by disclosure of the in camera material to the Strasbourg Court.
He said that, although a court should not stand in the way of what an applicant wishes to place before Strasbourg, unless there is very good reason to do so, he had no doubt that there are very good reasons to do so in this case (para 50).
Any obligations arising under articles 34 and 38 of the European Convention on Human Rights operated on the United Kingdom at the international level only (para 51).
He was not satisfied that the European Court of Human Rights would insist on disclosure to it by the United Kingdom of the in camera material (para 52).
Undertaking, as a domestic court, the balancing exercise referred to by the European Court of Human Rights in Janowiec v Russia (2013) 58 EHRR 792, he had no doubt but that the balance lies in favour of non disclosure to the Strasbourg court, even assuming the use by it of its protective procedural powers, bearing in mind the nature of the evidence as to the interests to be protected, the decisions made thus far on that by the trial and appellate courts, the degree of risk and the possible consequences of disclosure (para 58).
Ouseley J further amplified his reasons for these conclusions, noting, as had done the Court of Appeal (Criminal Division) (para 6 above), the speculative nature of the appellants case that a trial in the open would have led to either the named gangsters or any third party coming forward (para 62).
He went on: 63.
There is nothing in this point, and nothing to go in the balance favouring disclosure beyond allowing the ECtHR to reach that same, and to my mind inevitable, conclusion itself.
That is not nearly enough.
I say that, having seen the partial draft of the response which Ms Brimelow wishes to submit to the ECtHR.
The United Kingdom government had also suggested that, with various amendments, the appellants response could avoid any breach of the prohibition on disclosure.
As to this Ouseley J said: 64.
Those amendments would permit the response document to be submitted and it would then convey something of the flavour of the envisaged submissions.
However, if the application on that basis were declared admissible, I doubt that they could all be effectively pursued let alone answered, without the in camera material.
But, with the amended response document, the Strasbourg court would be in a better position to judge relevance and what requirement, if any, it should place on the UK Government in relation to the in camera material. 65.
At present, therefore, I see no reason to vary the order to enable the material to be deployed before Strasbourg.
The Government will have to see how far it can persuade the Strasbourg court not to ask for the material, whether or not in camera, and then decide whether or not to comply with any obligations which Strasbourg may impose.
It is not for this court to make that decision for it, let alone at this stage. 66.
If the Government wished to disclose material covered by the order, the court would again consider an application for its variation or discharge.
The Government is just as much covered by the order as Wang Yam and his lawyers.
To the extent that the order covers the use of the in camera material in applications to Strasbourg, whether under its own in camera rules or not, it would be a breach of the order by either party or others to refer to that material without variation of the order or its discharge.
Before the Divisional Court Ms Brimelow advanced essentially the same submissions as had been advanced before Ouseley J.
The Divisional Court gave essentially the same reasons for rejecting them.
It noted that the right of access to the European Court of Human Rights operates at the international level, and is not analogous to a domestic right of appeal.
It said that it was far from clear that the European Court of Human Rights would consider that the order made would infringe Convention principles; and that, in any event, there was no absolute obligation on a domestic court to exercise a domestic discretion in a way which would ensure that the United Kingdom acted compatibly with its international obligations (paras 16 to 22, 28 and 35).
The Divisional Court was asked not to look at and did not look at the in camera material.
It was told that there was in this regard a further matter which [the appellant] may wish to pursue at a later occasion.
The Divisional Court addressed this further matter as follows: 59.
He [the appellant] wishes to contend that even if in principle it was open to the judge to make an order interfering with the way in which he wished to present his case, in the particular circumstances of this case the order ought not to have been made.
The judge gave disproportionate weight to the national security considerations.
The claimant said that he was unable to run this argument because in order to do so his lawyers needed to be able to see the material which had only been disclosed in the closed session, but they were unable to do.
The reason is that the Secretary of State has required certain undertakings to be complied with before permitting access to the material.
The claimants lawyers say that these are unjustified conditions and they have refused to comply; hence there has been a stand off.
We were not asked to resolve this matter and in any event we were not in a position to do so.
Moreover, we were asked in the circumstances not to look at the confidential material, and have not done so. 60.
I confess that it is not clear to me from the grounds that this point had been raised.
Counsel has undertaken to give careful consideration as to whether in all the circumstances it is still proper to pursue that ground.
If it is pursued, there should be a short hearing before the same court if possible.
The Divisional Court certified the following point of law as being of general public importance, but refused permission to appeal on it to the Supreme Court: Is there a power under the common law or under section 12 of the Administration of Justice Act 1960 to prevent an individual from placing material before the European Court of Human Rights? If so, can the power be exercised where the domestic court is satisfied that it is not in the interests of state for the material to be made public even to the Strasbourg court? The Supreme Court granted permission to appeal.
The parties appearing are the appellant, represented by Lord Pannick QC leading Ms Brimelow QC and Nikolaus Grubeck instructed by Janes Solicitors, and the Attorney General as an interested party.
The parties cases before the Supreme Court
Before the Supreme Court, Lord Pannick QC accepted, indeed emphasised, that the appellants case depends on the proposition that the courts below had no relevant power or discretion to exercise at all.
This proposition in turn depends upon the submission that the existence or exercise of any such power or discretion would inevitably involve the United Kingdom in a breach of international obligations owed under article 34, at least once an appellant determines to refer to the contents of in camera material in submissions to the European Court of Human Rights.
The further matter referred to by the Divisional Court (para 18 above) does not and cannot arise on this appeal, since it would involve a challenge to the reasonableness or proportionality of the exercise of any power or discretion which exists.
This matter was not argued before the Divisional Court, was linked with the closed schedule which the appellants advisers have not seen and was left over for further pursuit, if the appellants advisers thought proper (as they do not appear, at least as yet, to have done), before the Divisional Court.
In relation to the first stated question, both parties have on this appeal proceeded on the basis that any relevant power is to be found in the common law.
It is thus unnecessary in this judgment to consider section 12(1)(c) of the Administration of Justice Act 1960, on which the Divisional Court also relied and to which the first certified question set out in para 19 above refers, or section 11 of the Contempt of Court Act 1981, the application of which the Divisional Court considered but did not find it necessary to decide.
Lord Pannick accepts that in a purely domestic context the common law power extends to enable the protection of the national interest and/or the interests of witnesses or others by an order regarding in camera material such as Ouseley J made on 15 January 2008.
But in his submission no such power can exist or continue to be exercisable in any circumstances where its use would put the United Kingdom in breach of an international obligation.
The only basis upon which the power could be exercised inconsistently with such an obligation would be, he submitted, if Parliament expressly authorised this.
The international obligation on which he relies before the Supreme Court is article 34, rather than article 38, of the Convention.
Analysis
The appellant can (as I have emphasised) only succeed on this appeal by making good a proposition that there are no circumstances in which refusal to permit disclosure of the in camera material to the European Court of Human Rights in the appellants response could be justified.
For reasons which appear in paras 24 to 34 below, that proposition is not in my opinion made good at the international level by reference to the Convention and case law of the European Court of Human Rights.
Moreover, even if it were made good at the international level, it would not, in my opinion and for reasons which appear in paras 35 to 38, follow that the English courts would as a matter of domestic law be obliged to give effect to it.
The right of access to the European Court of Human Rights in Strasbourg is a right conferred by the Convention at the international level.
The European Court of Human Rights is an independent international court, not another tier in the domestic appellate structure.
The domestic principles according to which a domestic appellate court may have access to all the materials available to a first instance court have no direct application.
Further, any obligations which the United Kingdom may have under articles 34 and 38 operate at the international level, not at a domestic level.
However, as stated already, Lord Pannick submits that the United Kingdom is currently under international obligations under article 34, which must under domestic law be seen as controlling the domestic power to restrict disclosure of in camera material.
I will address this submission, starting with the question whether it is made good at the international level.
The international legal position under article 34
The submission is that the United Kingdom would, contrary to article 34, be hindering the effective exercise of the appellants right of application to the European Court of Human Rights, whereby he claims to be the victim of a violation of article 6 of the Convention because of the in camera procedure adopted at his trial.
The application itself has been made without hindrance, but Lord Pannicks submission is, clearly, that its effective exercise includes its pursuit and that the English courts can and should conclude that this is being hindered by the appellants inability at this stage to refer to the in camera material in his response.
The appellant asks the English courts to accept this, in circumstances where English courts have repeatedly examined the question whether it was both necessary and fair to hold part of the trial in camera and have repeatedly concluded that it was.
The appellant and those representing him knew of and were able to address the in camera material at trial and on appeal.
It arose, as Lord Pannick noted, from the appellants own defence.
The appellants assertion that publication of its content would in any way have advanced his defence has repeatedly been rejected as implausible.
The appellants current appeal can only succeed if one accepts that the inability to deploy the in camera material in the appellants response will inevitably constitute a breach by the United Kingdom of an obligation owed by it in international law under article 34.
In my opinion, that is not shown to be the case, and in any event, if any court is to reach such a conclusion, it must be the European Court of Human Rights, not the English courts.
Case law of the European Court of Human Rights on article 34 is limited.
Sisojeva v Latvia (2007) 45 EHRR 753 to which the Supreme Court was referred concerned the very different subject matter of pressure to dissuade or discourage pursuit of a Convention remedy.
The European Court of Human Rights reiterated, uncontroversially, that: 115. it is of the utmost importance for the effective operation of the system of individual petition instituted by article 34 of the Convention that applicants or potential applicants are able to communicate freely with the court without being subjected to any form of pressure from the authorities to withdraw or modify their complaints. 116.
The word pressure must be taken to cover not only direct coercion and flagrant acts of intimidation of applicants or their families or legal representatives but also other improper indirect acts or contacts designed to dissuade or discourage them from pursuing a Convention remedy.
Whether or not contacts between the authorities and an applicant or potential applicant amount to unacceptable practices from the standpoint of article 34 must be determined in the light of the particular circumstances in issue.
The actual decision was that there was insufficient evidence that the questioning by security police in the circumstances of that case should be regarded as a form of pressure, intimidation or harassment which might have induced the applicants to withdraw or modify their application or hindered them in any other way in the exercise of their right of individual petition. (para 124)
Contrary to the appellants case, it is in my opinion relevant to look in the present context not just at article 34, but also at article 38.
On the appellants case under article 34 he would be the sole judge of what is necessary at this stage for the effective presentation of his case in Strasbourg.
This would be so, even though the English courts have, as I have mentioned, repeatedly concluded both that it would be prejudicial to the national interest, to witnesses or to others, if the disclosure were made, and that it was not unfair to him that the disclosure he wishes should not be made.
In contrast, the order under appeal leaves it at the international level to the European Court of Human Rights to consider and decide under article 38 whether any and if so what further material should be requested from the United Kingdom to enable it to consider the appellants case both at the admissibility stage and, if the matter were to go further, on the merits.
Further, the case law of the European Court of Human Rights indicates that that Court will not in this context act as if it were a fourth instance appeal court re determining issues of national security, but will review the domestic adjudication on the issues involved and, if satisfied of its fairness and thoroughness, may accept the outcome without insisting on automatic disclosure to itself of secret material.
The most relevant case law consists of Janowiec v Russia (2013) 58 EHRR 792 and Al Nashiri v Poland (2014) 60 EHRR 393.
As the reference (above) to secret material indicates, these two cases concerned closed material held and used by the relevant state which the applicants to Strasbourg had never seen.
In contrast, the present appeal concerns material which the appellant and his representatives have been able to see and address in camera both at trial and on appeal.
The complaint is simply that its publication to the world at large might have been beneficial to his defence.
That is a difference which in my opinion may well weigh with the European Court of Human Rights, as a factor inclining that court to accept the judgment of domestic courts which have adjudicated fairly and thoroughly on the question whether material should, in the interests of national security, witnesses and others, remain in camera at and after trial.
In Janowiec the applicants were relatives of the alleged victims of a massacre of Polish prisoners of war held at Ostashkoy in 1940, for which massacre Russia in 1990 accepted responsibility.
They had been refused access to Russian prosecutorial investigation files as well as to a decision on 21 September 2004 to discontinue the criminal case on the ground that the persons responsible were already dead.
The European Court of Human Rights in holding that there had been a breach of article 38 said this (italics added): 208.
The court reiterates that article 38 of the Convention requires the Contracting States to furnish all necessary facilities to the court, whether it is conducting a fact finding investigation or performing its general duties as regards the examination of applications.
Being master of its own procedure and of its own rules, the court has complete freedom in assessing not only the admissibility and the relevance but also the probative value of each item of evidence before it.
Only the court may decide whether and to what extent the participation of a particular witness would be relevant for its assessment of the facts and what kind of evidence the parties are required to produce for due examination of the case.
The parties are obliged to comply with its evidential requests and instructions, provide timely information on any obstacles in complying with them and provide any reasonable or convincing explanations for failure to comply.
It is therefore sufficient that the court regards the evidence contained in the requested decision as necessary for the establishment of the facts in the present case. 209.
As regards the allegedly derivative nature of the obligation to furnish all necessary facilities for its investigation, flowing from article 38 of the Convention, the court reiterates that this obligation is a corollary of the undertaking not to hinder the effective exercise of the right of individual application under article 34 of the Convention.
Indeed, the effective exercise of this right may be thwarted by a Contracting Partys failure to assist the court in conducting an examination of all circumstances relating to the case, including in particular by not producing evidence which the court considers crucial for its task.
Both provisions work together to guarantee the efficient conduct of the judicial proceedings and they relate to matters of procedure rather than to the merits of the applicants' grievances under the substantive provisions of the Convention or its Protocols.
Although the structure of the courts judgments traditionally reflects the numbering of the articles of the Convention, it has also been customary for the court to examine the Governments compliance with their procedural obligation under article 38 of the Convention at the outset, especially if negative inferences are to be drawn from the Governments failure to submit the requested evidence.
Furthermore, it is not required that the Governments alleged interference should have actually restricted, or had any appreciable impact on, the exercise of the right of individual petition.
The court reaffirms that the Contracting Partys procedural obligations under articles 34 and 38 of the Convention must be enforced irrespective of the eventual outcome of the proceedings and in such a manner as to avoid any actual or potential chilling effect on the applicants or their representatives.
As to national security considerations, the court said: 213.
The court reiterates that the judgment by the national authorities in any particular case that national security considerations are involved is one which it is not well equipped to challenge.
However, even where national security is at stake, the concepts of lawfulness and the rule of law in a democratic society require that measures affecting fundamental human rights must be subject to some form of adversarial proceedings before an independent body competent to review the reasons for the decision and the relevant evidence.
If there was no possibility to challenge effectively the executives assertion that national security was at stake, the state authorities would be able to encroach arbitrarily on rights protected by the Convention.
In Janowiec itself, there had been no substantive analysis by the Russian courts of the reasons for maintaining the classified (secret) status, no meaningful scrutiny of the executive assertions and no independent review of whether the conclusion that declassification constituted a danger to national security had a reasonable basis in fact (para 214).
In Al Nashiri the two applicants had been detained for six and nine months respectively in a secret CIA detention facility operated in a Polish training base in Poland, where they alleged that they were not only unlawfully detained, but also tortured and ill treated.
The Polish authorities refused access to findings of inquiries by a Polish Parliamentary Committee and Regional Prosecutor.
The European Court of Human Rights had twice issued procedural orders for production of the non confidential part of the investigative file (para 358), and further found that the Polish Government had provided no reasonable and solid grounds to justify the treatment of most of the relevant documents in the investigation as secret (para 354).
The European Court of Human Rights concluded that there had been a breach of article 38, and in para 363 repeated what it had said in para 208 in Janowiec.
Dealing specifically with cases where national security or confidentiality are involved, the court in Al Nashiri returned to the theme of para 213 of its judgment in Janowiec in these terms (italics added): 365.
The judgment by the national authorities in any particular case that national security considerations are involved is one which the court is not well equipped to challenge.
Nevertheless, in cases where the Government have advanced confidentiality or security considerations as the reason for their failure to produce the material requested, the court has had to satisfy itself that there were reasonable and solid grounds for treating the documents in question as secret or confidential.
Where such legitimate concerns exist, the court may consider it necessary to require that the respondent Government edit out the sensitive passages or supply a summary of the relevant factual grounds.
Furthermore, such concerns may, depending on the document, be accommodated in the courts proceedings by means of appropriate procedural arrangements, including by restricting access to the document in question under rule 33 of the Rules of Court, by classifying all or some of the documents in the case file as confidential vis vis the public and, in extremis, by holding a hearing behind closed doors.
The reasoning in this case law makes clear the inter play between articles 34 and 38.
The European Court of Human Rights has a central role in deciding what material should be disclosed to it: see especially the passages italicised in the quotations from the judgments in Janowiec and Al Nashiri set out in paras 29 and 32 above.
A suggestion of breach of article 34 is a matter for the European Court of Human Rights to consider under article 38.
It by no means follows that the court will always order disclosure, even of secret material which the alleged victim has never seen, and still less of in camera material which the alleged victim has seen and addressed.
On the contrary, the European Court of Human Rights recognises the sensitivity of national security considerations, and the particular competence one might add responsibility of national authorities in handling material affecting national security or the safety of witnesses or others.
Thus, in deciding whether to order that material withheld by governmental authorities from an alleged victim should be disclosed to it, the European Court of Human Rights will consider the independence and thoroughness of the domestic procedure for reviewing the authorities decision.
It will consider in that light whether any and if so what further disclosure should be made.
It will by no means necessarily conclude that any further disclosure was required.
Here, Ouseley J was satisfied at trial that the in camera procedure was necessary and fair and on 27 February 2014 that it continued to be necessary and fair that there should be no disclosure of the in camera material.
He was satisfied that there were reasonable and solid grounds for continuing non disclosure.
The reasonableness and proportionality of his conclusion have not been (at least as yet) challenged before the Divisional Court or therefore before the Supreme Court: para 20 above.
But, even apart from that, I see no basis for concluding that the European Court of Human Rights would either inevitably or probably conclude that any further disclosure should be made to it.
More importantly, it will as Ouseley J said in paras 64 to 66 of his judgment (para 16 above) be for the European Court of Human Rights to decide at an appropriate time under article 38 whether any and if so what further disclosure should be made, rather than for the appellant to prejudge its view by insisting on such disclosure as of right under article 34; and it will then be for the United Kingdom to consider its position further.
For this reason alone, I would therefore dismiss this appeal.
The domestic legal position
In the light of the above, the question whether the English courts domestic power to restrain disclosure of in camera material is limited by reference to any international obligation incumbent on the United Kingdom under article 34 does not necessarily arise.
But I can consider it shortly.
The United Kingdom takes a dualist approach to international law.
The case does not concern the construction of a statutory right, duty or power which would otherwise be of uncertain scope in a context where it can be seen or presumed that Parliament intended the statute to comply with the United Kingdoms international obligations: see eg Garland v British Rail Engineering Ltd [1983] 2 AC 751, 771A C per Lord Diplock, R v Secretary of State for the Home Department, Ex p Brind [1991] 1 AC 696, 747H 748A per Lord Bridge and Assange v Swedish Prosecution Authority [2012] UKSC 22; [2012] 2 AC 471.
It concerns a general discretionary common law power, to be exercised in the light of all circumstances which the common law identifies as relevant.
The starting point in this connection is that domestic and international law considerations are separate.
In accordance with R v Secretary of State for the Home Department, Ex p Brind [1991] 1 AC 696, R v Lyons [2002] UKHL 44; [2003] 1 AC 976, para 13 and R (Hurst) v London Northern District Coroner [2007] UKHL 13; [2007] 2 AC 189, para 56, per Lord Brown of Eaton under Heywood with whose reasons Lord Bingham of Cornhill and Lord Rodger of Earlsferry agreed at paras 1, 9 and 15, a domestic decision maker exercising a general discretion (i) is neither bound to have regard to this countrys purely international obligations nor bound to give effect to them, but (ii) may have regard to the United Kingdoms international obligations, if he or she decides this to be appropriate.
In relation to point (i), even the minority who have suggested that a domestic decision maker should at least give consideration to international rights which can properly be regarded as fundamental go no further: see per Lady Hale and Lord Mance in Hurst at paras 18 and 78 to 79.
Neither by reference to the principle of legality, which refers to rights and obligations recognised at a domestic level, nor on any other basis is it possible to limit the domestic courts general discretion by reference to unincorporated international obligations or to require Parliamentary authorisation before a court can consider whether it should in particular circumstances exercise such a discretion in a way which will or may prove inconsistent with such obligations.
For completeness, I add that, in the light of the powers of the European Court of Human Rights under article 38, I would not regard any obligation (if any) which is regarded as existing at this stage under article 34 as fundamental in the sense under discussion in Hurst.
In the present case Ouseley J did have regard to the United Kingdoms international legal position under articles 34 and 38, but made clear (inter alia) that, whatever the United Kingdoms obligations might prove to be at the international level, he did not consider the suggested relaxation of his order to allow disclosure in the appellants response to be appropriate.
That was in my opinion an orthodox approach to the exercise of his general discretion.
He also made clear his willingness to reconsider the position further, in the circumstances indicated in paras 64 to 66 of his judgment (para 16 above).
In these circumstances, and bearing in mind that the only issue now before the Supreme Court is whether Ouseley J had a common law power to maintain and expand his order for non disclosure, so as to cover the appellants application to the European Court of Human Rights, as he did on 27 February 2014, this appeal must also fail on the second ground.
Conclusions
In the light of the above, the appellant has not made good the proposition which he needs to establish, namely that there are no circumstances in which refusal to permit disclosure of the in camera material to the European Court of Human Rights in the appellants response could be justified.
First, he has not established at the international level that the non disclosure at this stage involves any breach by the United Kingdom of any obligation under article 34 of the Convention: see paras 24 to 34.
Second, even if a contrary conclusion had been reached on the first point, it would not follow that the order maintained and made by Ouseley J on 27 February 2014 involved any breach of English law: see paras 35 to 38.
It follows that, for each of these separate reasons, this appeal must be dismissed.
| UK-Abs | Wang Yam was charged with the murder of Allen Chappellow and associated offences in 2007.
He denied the murder charge and alleged that he had been given the deceaseds cheques, credit cards and banking information by various gangsters.
The Crown applied for an order that part of the trial relating to evidence which Wang Yam wished to submit in his defence take place in camera (i.e. in a closed court) in the interests of national security and to protect the identity of a witness or other person.
This order was granted in January 2008 by Ouseley J.
At trial, because of the Wang Yams difficulty in keeping distinct the sensitive and non sensitive aspects of his evidence, the entire defence case was heard in camera in the presence of Wang Yam and his representatives.
In January 2009 Wang Yam was convicted of murder and burglary and sentenced to life imprisonment.
In April 2011 Wang Yam lodged an application with the European Court of Human Rights (ECtHR) against the UK, complaining that his trial and conviction were unfair and therefore violated article 6.1 of the European Convention on Human Rights (ECHR).
The UK submitted that the application should be declared manifestly ill founded and inadmissible, or alternatively dismissed on the merits.
Wang Yam argued that he should be permitted to refer to the in camera material in his response to the UKs observations before the ECtHR.
In February 2014 Ouseley J ruled that Wang Yam should not be able to disclose the in camera material to the ECtHR.
Wang Yam applied for and was granted judicial review of that decision, but the application was dismissed on its merits.
The Divisional Court allowed a leapfrog appeal direct to the Supreme Court on the following questions: Is there a power to prevent an individual from placing material before the European Court of Human Rights? If so, can the power be exercised where the domestic court is satisfied that it is not in the interests of state for the material to be made public even to the Strasbourg court?
The Supreme Court unanimously dismisses Wang Yams appeal.
Lord Mance gives the judgment of the Court.
In a purely domestic context the English courts have a discretion to refuse to permit disclosure of material deployed in camera.
The issue before the Supreme Court is whether this power ceases to be
exercisable once an applicant to the ECtHR decides that he wishes to disclose the material to that court in the context of a complaint that the in camera proceedings made his trial unfair [1 2].
Wang Yams case depends on the proposition that the courts below have discretion to prevent the disclosure of in camera material to the ECtHR [20].
This proposition depends in turn on the submission that such discretion would involve the UK in a breach of the international obligations under article 34 ECHR, which provides that: The Court may receive applications from any person claiming to be the victim of a violation by one of the High Contracting Parties of the rights set forth in the Convention or the Protocols thereto.
The High Contracting Parties undertake not to hinder in any way the effective exercise of this right.
Refusal to permit disclosure to the ECtHR does not constitute a breach of international law [22, 24 34].
The English courts have repeatedly found that it was both necessary and fair to hold part of the trial in camera.
The in camera material formed part of Wang Yams own defence and has been seen by both him and his legal representatives.
The suggestion that its publication would have advanced this defence has been rejected as implausible.
If any court is to reach the conclusion that the UK is in breach of article 34 it must be the ECtHR and not the English courts [25].
On Wang Yams case he would be the sole judge of what is necessary at this stage for the effective presentation of his case to the ECtHR.
Wang Yam relied on article 34, rather than article 38 ECHR, which provides that: The Court shall examine the case together with the representatives of the parties and, if need be, undertake an investigation, for the effective conduct of which the High Contracting Parties concerned shall furnish all necessary facilities.
The ECtHR is able to decide under article 38 whether any further material should be requested from the UK to enable it to consider Wang Yams case [27].
The case law of the ECtHR indicates that it will not act as a fourth instance appeal court re determining issues of national security, but rather it will review the domestic adjudication on the issues involved and, if satisfied of its fairness and thoroughness, may accept the outcome without insisting on automatic disclosure to itself of secret material [28 33].
This reason alone is sufficient to dismiss the appeal [34].
Even if refusal to permit disclosure to the ECtHR breached an international obligation, English courts would not be obliged automatically to give effect to such obligation.
The UK takes a dualist approach to international law.
The starting point when considering a general discretionary common law power is that domestic and international law considerations are separate.
The decision maker may take international law obligations into account but is not bound to do so [35].
In R (Hurst) v London Northern District Coroner [2007] 2 AC 189 even the minority who suggested that a domestic decision maker should at least give consideration to international rights which can properly be regarded as fundamental went no further.
In any event, given that an appeal lies to the ECtHR under article 38 ECHR, any obligation on the UK at this stage under article 34 could not be regarded as fundamental [36].
In this context, Ouseley J took an orthodox approach to his general discretion and therefore the appeal must also fail on the second ground [37 38].
|
Each of these three appeals involves a challenge to an order for costs made by a High Court judge against a newspaper publisher after a trial.
In two of the appeals, Flood v Times Newspapers Ltd and Miller v Associated Newspapers Ltd, the trial involved an allegation that the newspaper had libelled the claimant; in the third appeal, Frost and others v MGN Ltd, the trial involved allegations that the newspaper had unlawfully gathered private information about the claimants by hacking into their phone messages.
In each case, the newspaper publisher lost and was ordered to pay the claimants costs, and in each case the newspaper publisher contends that the costs order infringes its rights under article 10 of the European Convention on Human Rights.
In Flood v TNL, the newspaper publisher also argues that the order for costs made against it was outside the ambit of what a reasonable judge could have decided.
In all three cases, the proceedings against the newspaper publisher had been brought by claimants who were able to take advantage of the costs regime introduced by the Access to Justice Act 1999 and reflected in the provisions of the relevant Civil Procedure Rules then in force, in particular CPR 44.
It is the provisions of this regime (the 1999 Act regime) which found the basis of the contention that article 10 is infringed.
The 1999 Act regime has now been largely replaced by a new regime, and, although the new regime has no bearing on the awards of costs in the present cases, it is of some relevance to the issues which have to be considered.
Accordingly, I shall start by briefly describing the 1999 Act regime and its aftermath.
I will then summarise the facts of each case before turning to the issues.
I will deal first with the article 10 issues which apply in all three cases, and I will finally discuss the issue specific to Flood v TNL, which turns on its own facts.
The 1999 Act regime and its aftermath
The 1999 Act regime, Callery v Gray and Campbell v MGN
Around 20 years ago, the government decided to curtail the availability of civil legal aid very substantially, and it appreciated that in order to do so a new system had to be introduced if people who were not particularly well off financially were to be able to enjoy access to legal advice and representation.
After some, if limited, consultation, the government introduced a Bill into Parliament which became the 1999 Act.
That statute severely cut down the availability of legal aid in the field of civil law and introduced the 1999 Act regime instead.
The 1999 Act regime was described in a little detail in the leading judgment of this Court in Lawrence v Fen Tigers Ltd (No 3) [2015] 1 WLR 3485, paras 12 25, and its background is more fully explained in paras 65 69 of that judgment.
In essence, under the 1999 Act and the rules made thereunder, a claimant could bring proceedings on terms which involved (i) the claimants lawyers agreeing under a conditional fee agreement (a CFA) to be paid nothing if the claim failed, but to be entitled to receive up to twice their normal rates if the claim succeeded, and/or (ii) the claimant taking out so called after the event (ATE) insurance against the risk of his having to pay the defendants costs (and on terms that the insurer was only paid if the claim succeeded), and (iii) the claimant being able to recover from the defendant the success fee, payable under the CFA, and the premium payable in respect of the ATE insurance, as part of his costs if his claim succeeded.
The 1999 Act regime was considered by the House of Lords in two cases, Callery v Gray (Nos 1 and 2) [2002] 1 WLR 2000, and Campbell v MGN Ltd (No 2) [2005] 1 WLR 3394.
In the former case, which involved a successful personal injury claim, the defendant challenged the level of success fee and the ATE premium which had been held to be recoverable by the claimant, in circumstances where the level of success fee had been reduced by the Court of Appeal.
It was said that the success fee was too high and that the ATE insurance had been taken out prematurely.
Both arguments failed.
However, while accepting that the system introduced by the 1999 Act improved access to justice for claimants, all members of the panel were plainly concerned about the possibility of abuse of the 1999 Act regime.
In Campbell (No 2), the newspaper publisher, MGN, which had lost a privacy infringement claim and had been ordered to pay Ms Campbells costs, contended that they should not be liable to pay any part of the success fee on the ground that, in the circumstances of this case, such a liability is so disproportionate as to infringe their right to freedom of expression under article 10 of the Convention para 6, per Lord Hoffmann.
In para 22, he explained that this argument was based in part on the disproportionality of the level of costs bearing in mind what was at stake in the litigation, and in part on the fact that the particular claimant did not need to fund the litigation with the benefit of a CFA and ATE insurance.
Lord Hoffmann then proceeded to reject both contentions in paras 23 28, and made the point that the 1999 Act regime had to be considered as a whole, because concentration on the individual case does not exclude recognising the desirability, in appropriate cases, of having a general rule in order to enable the scheme to work in a practical and effective way (para 26).
However, he went on to express considerable reservations about the level of recoverable costs engendered by the 1999 Act regime in relation to claims against the press.
The Jackson Review, the Leveson Inquiry, and subsequent legislation
The concern about the 1999 Act regime expressed in those two cases had started to become widespread by the time Campbell (No 2) was decided.
In 2008, the then Master of the Rolls, Sir Anthony Clarke, asked Sir Rupert Jackson to investigate the costs of civil litigation, and this resulted in the Review of Civil Litigation Costs: Final Report (December 2009), which was published in 2010.
In the Review, Sir Rupert was very critical of the 1999 Act regime, and proposed substantial changes, most of which have now been implemented by and pursuant to the Legal Aid, Sentencing and Punishment of Offenders Act 2012 (LASPO), and which (as a broad generalisation) apply to proceedings begun after 1 April 2013.
However, some of his proposals have not been adopted, although it is clear that the implementation of a new regime to replace the 1999 Act regime is still work in progress.
Some of the principal changes to the 1999 Act regime effected by LASPO did not apply to defamation and privacy claims see article 4 of the LASPO (Commencement No 5 and Saving Provision) Order 2013 (SI 2013/77).
Thus, such claims are now an exception to the general rule which excludes the recoverability of success fees and ATE premiums by successful claimants. (The only other current exception is mesothelioma claims).
This was justified by the fact that such claims would be covered by other legislation.
Another recommendation made by Sir Rupert, namely qualified one way costs shifting, has also been introduced, but only to a limited extent, in that it only extends to personal injury claims, and therefore does not apply to defamation or privacy claims.
However, certain changes introduced following Sir Rupert Jacksons Review do apply to defamation and privacy cases.
They include more muscular case management by the courts to deal with cases proportionately, costs budgeting and costs management, which involve the parties and the court controlling the level of recoverable costs at the start of the proceedings (see CPR 3.12(1)), costs capping (by virtue of PD 3F para 1), and new provisions which limit the level of overall recoverable costs to what is proportionate (pursuant to CPR 44.3(2)(a)).
There are two other statutes which should be mentioned in the present context.
The Defamation Act 2013 contained provisions which afforded a degree of substantive protection to potential defendants in defamation actions; however, that statute did not deal with costs.
The Crime and Courts Act 2013 (the CCA 2013) on the other hand did concern itself with costs (among many other issues).
The CCA 2013 was enacted in part to give effect to the recommendations of Sir Brian Leveson in his An Inquiry into the Culture, Practices and Ethics of the Press (November 2012) (HC 780).
Section 40 of the CCA 2013 (which is not in force) provided that if a newspaper publisher became a member of an approved press regulator, it would have a measure of protection against an adverse costs order in any court proceedings brought against it which could have been brought under the regulators arbitration scheme, but any publisher which was not a member of such a regulator would be at greater risk of adverse costs orders than before.
The Government has launched a public consultation as to whether section 40 of the CCA 2013 should be implemented, and this has led to a sharp difference of views.
MGN v UK and Lawrence v Fen Tigers
Meanwhile, MGN was dissatisfied with the House of Lords decision in Campbell (No 2), and applied to the Strasbourg court, who, on 18 January 2011, decided that MGNs article 10 rights were infringed by having to reimburse the claimant the success fee and the ATE premium which Ms Campbell had incurred MGN v United Kingdom (2011) 53 EHRR 5 (MGN v UK).
The Strasbourg court acknowledged that the 1999 Act regime sought to achieve the legitimate aim of the widest public access to legal services for civil litigation funded by the private sector (para 197).
However, at paras 207 to 210 of its judgment, the Strasbourg court discussed a number of flaws in the system that Sir Rupert Jackson had identified in his Review; to quote from Lawrence (No 3), para 43: The flaws were (i) the lack of focus of the regime and the lack of any qualifying requirements for appellants who would be allowed to enter into a CFA; (ii) the absence of any incentive for appellants to control the incurring of legal costs and the fact that judges assessed costs only at the end of the case when it was too late to control costs that had been spent; (iii) the blackmail or chilling effect of the regime which drove parties to settle early despite good prospects of a defence; and (iv) the fact that the regime gave the opportunity to cherry pick winning cases to conduct on CFAs.
At para 217, the court concluded that: the depth and nature of the flaws in the system are such that the court can conclude that the impugned scheme exceeded even the broad margin of appreciation to be accorded to the state in respect of general measures pursuing social and economic interests.
Accordingly the Strasbourg court held that the order for costs upheld by the House of Lords in Campbell (No 2) infringed the article 10 rights of MGN.
In a subsequent judgment, the Strasbourg court awarded MGN compensation in a figure the precise basis for whose quantification is impossible to assess (2012) 55 EHRR SE9.
In Lawrence (No 3), this Court had to consider the contention that a substantial order based on the 1999 Act regime against unsuccessful defendants in a nuisance claim was incompatible with their rights under article 6 of the Convention (access to court) and/or article 1 of the First Protocol to the Convention (right to property A1P1).
The Supreme Court rejected the argument that this contention was supported by the reasoning of the Strasbourg court in MGN v UK.
In the leading judgment, Lord Dyson MR and I said that the criticisms of the 1999 Act regime in MGN v UK were made in the context of the Strasbourg courts concern about the effect of the scheme in defamation and privacy cases, and that the balancing of the article 6 rights of [claimants] against those of [defendants] is an exercise of a wholly different character, and the same applied to A1P1 para 52.
The leading judgment then went on to address the defendants further contention that, even if MGN v UK was not of assistance to their case, the 1999 Act regime, at least in so far as it applied in the case of Lawrence v Fen Tigers was incompatible with their article 6 and/or A1P1 rights.
After considering the question in some detail, Lord Dyson and I rejected that contention also, concluding in para 83: We accept that, in a number of individual cases, the scheme might be said to have interfered with a defendants right of access to justice.
But it is necessary to concentrate on the scheme as a whole.
The scheme as a whole was a rational and coherent scheme for providing access to justice to those to whom it would probably otherwise have been denied.
It was subject to certain safeguards.
The government was entitled to a considerable area of discretionary judgment in choosing the scheme that it considered would strike the right balance between the interests of appellants and respondents whilst at the same time securing access to justice to those who would previously have qualified for legal aid.
A summary of the facts of each case
Flood v
Mr Flood was a detective sergeant with the Metropolitan Police, although he retired during the currency of these proceedings.
Following an allegation of corruption against him, a police investigation was begun in April 2006, and he was suspended from his duties.
On 2 June 2006, an article was published in the Times newspaper, both in hard copy and on the Times website, suggesting that there were strong grounds to believe that Mr Flood had been guilty of corruption.
The investigation resulted in a report which was made available internally only in December 2006, which found no evidence against Mr Flood, and he returned to his duties that month.
In July 2006, Mr Flood instructed solicitors in connection with the publication of the article, and in January 2007 they instructed junior counsel, who entered into a conditional fee agreement (a CFA).
In May 2007, Mr Flood issued proceedings claiming damages for libel against the publisher of the Times, TNL.
In July 2007 TNL served its Defence advancing, inter alia, a defence based on (i) justification and (ii) the principle in Reynolds v Times Newspapers Ltd [2001] 2 AC 127 ie that, even if Mr Flood was innocent of any wrong doing, the article had been properly researched and was in the public interest (the Reynolds defence).
A Reply was served on behalf of Mr Flood in August 2007.
On 5 September 2007, TNL received a letter from the Metropolitan Police informing them that Mr Flood had been exonerated by the investigation.
Despite this, TNL did not take down the story from the Times website.
Between mid September and mid November 2007, the parties tried to settle the claim in negotiations which were expressed to be without prejudice save as to costs.
When those negotiations came to nothing, Mr Flood took out ATE insurance in connection with his claim.
In January 2007, he entered into a CFA with his solicitors and a second CFA with junior counsel.
He also entered into a CFA with leading counsel in early 2010.
Meanwhile, after procedural hearings and further attempts at settlement, there was a four day hearing before Tugendhat J of TNLs Reynolds defence.
In a judgment given on 16 October 2009, he held that the defence succeeded albeit only up to 5 September 2007 [2010] EMLR 169.
The Court of Appeal allowed Mr Floods appeal, but the Supreme Court restored the judgment of Tugendhat J [2011] 1 WLR 153 and [2012] 2 AC 273.
The parties have reached agreement as to the costs of these two appeals.
The consequence of Tugendhat Js judgment was that the only publications of the article in respect of which Mr Floods case could succeed were those that remained on TNLs website after 5 September 2007.
On 25 July 2013, Tugendhat J gave judgment in favour of Mr Flood as to the meaning of the words used in the article, and ordered TNL to pay Mr Floods costs of that issue [2013] EWHC 2182 (QB).
On 1 October 2013, TNL withdrew its defence of justification.
Accordingly, the way was clear for Mr Flood to succeed in his claim for damages in respect of the continuing publication of the article on TNLs website.
Following a two day hearing, Nicola Davies J handed down judgment awarding Mr Flood 60,000 damages [2013] EWHC 4075 (QB).
In arriving at that figure, she took into account the attitude of TNL in open correspondence with Mr Flood, which she described as aggressive and unpleasant, and she said that it had increased the distress and anxiety of [Mr Flood] paras 27, 76.
She also characterised TNLs attitude as oppressive and high handed and concluded that it serve[d] to aggravate the award of damages para 78.
It is also worth mentioning that the Judge considered that TNLs conduct meant that [Mr Flood] had no choice but to pursue these proceedings in order to clear his name para 79.
There followed a hearing on costs, and Nicola Davies J ordered TNL to pay all Mr Floods costs of the proceedings (other than those which had been the subject of a prior order or agreement) [2013] EWHC 4336 (QB).
TNLs appeal to the Court of Appeal was dismissed [2014] EWCA Civ 1574.
TNL now appeals against that decision.
In this Court, TNL runs two arguments.
The first is that, despite the Court of Appeal holding otherwise, the Judges order that TNL pay all Mr Floods costs was, in all the circumstances illogical, factually unsustainable and unjust, to quote from its printed case.
Secondly, TNL argues that, relying on MGN v UK, the order for costs, insofar as it requires TNL to reimburse Mr Flood any success fee or ATE premium, constitutes an infringement of its article 10 rights, and should be set aside.
As already mentioned, I propose to deal with the first point at the end of this judgment.
Miller v ANL
On 2 October 2008, the Daily Mail published an article suggesting that Mr Millers management consultancy had received contracts worth millions of pounds of public money as a result of improper conduct and cronyism.
In September 2009, Mr Miller instructed solicitors and counsel, all of whom entered into CFAs, and he took out ATE insurance.
In the same month, Mr Millers solicitors issued proceedings for libel against the publishers of the Daily Mail, ANL.
After various discussions and a hearing as to the meaning of the article in question and the issue of an amended particulars of claim, the claim was met by ANL with a formal defence of justification, served in July 2010.
Thereafter, there were further discussions, during which Mr Miller warned ANL that he would have to increase his ATE cover unless ANL agreed to limit their recoverable costs if they were to win, a proposal to which they did not agree.
Accordingly, Mr Miller increased his ATE cover in June 2011 (and negotiated a further increase in June 2012).
In December 2011, Mr Miller offered to settle the case for 18,000 pursuant to CPR Part 36, and this was met by an offer from ANL in March 2012 in the sum of 5,000 with no apology.
Following further discussions, the case did not settle and there was a full trial before Sharp J.
In her judgment given on 21 December 2012, she rejected the defence of justification and awarded Mr Miller 65,000 [2012] EWHC 3721 (QB).
As this exceeded the sum he had offered to accept, he was awarded his costs on a standard basis until January 2012 and on an indemnity basis thereafter.
Mr Millers base costs (ie his costs ignoring any success fees or the ATE premium) have been agreed at 633,006.08.
However, he claimed in addition 587,000 in respect of success fees and 248,000 in respect of his ATE premium.
While not challenging the reasonableness of these figures as such, ANL contended that, following the reasoning in MGN v UK, it would infringe their article 10 rights if they had to reimburse these sums.
That issue was referred to Mitting J, who held that he was bound by the reasoning in Campbell (No 2) to reject ANLs arguments, although he also said that reimbursement of the ATE premium was justified under article 10(2) [2016] EWHC 397 (QB).
He granted a leapfrog certificate.
The issue on this appeal is whether this Court should reverse Mitting Js order that ANL should reimburse Mr Miller the success fees and the ATE premium.
Frost v MGN
A number of individuals had their phones hacked by MGN, the publisher of the Daily Mirror, Sunday Mirror and the People.
More particularly, this involved MGN or its agents hacking, ie unlawfully listening to voicemails on mobile phones, and blagging, ie masquerading as the individuals concerned or as other people legitimately entitled to obtain telephone call data, and then MGN publishing articles in its newspapers based on the information so obtained.
Many of these individuals began proceedings against MGN; they included eight wave one claimants, whose claims were ordered to be heard together.
Those claimants proceeded to the trial of their claims, which succeeded, in sums varying between 72,500 and 260,250, for reasons given by Mann J in a comprehensive judgment in May 2015 against whose decision the Court of Appeal dismissed MGNs appeal see sub nom Gulati v MGN Ltd [2016] FSR 12 and [2017] QB 149 respectively.
The other 15 claimants settled their claims prior to the hearing before Mann J. Each of the 23 claimants is entitled to recover his or her costs from MGN.
On various dates between August 2011 and October 2014, each of the 23 claimants entered into CFAs with their lawyers, and 18 of them took out ATE insurance.
The parties were able to agree (subject to an issue on proportionality) as to the reasonable base costs in each of the 23 cases, varying between 22,000 and 210,000.
The Costs Judge determined a reasonable success fee in each case, varying between 25% and 100%, and the ATE premiums incurred by the claimants varied between 13,515 and 87,450.
MGN contended that, following the reasoning of the Strasbourg court in MGN v UK, it would be an infringement of their article 10 rights to require them to reimburse the claimants the success fees or the ATE premiums.
Mann J rejected that argument [2016] EWHC 855 (Ch).
MGN was granted a leapfrog certificate to appeal to this Court against that conclusion.
Similar arguments arise in relation to the costs in the Court of Appeal, where the claimants are seeking from MGN 739,456.87 by way of base costs, 645,799.88 by way of success fees and 318,000 for their ATE premium.
Overview of issues and conclusions
As explained in para 19 above, the appeal in Flood v TNL raises a discrete and case specific issue, namely whether the first instance judges decision to award Mr Flood all his costs of the proceedings (other than those which had already been awarded or agreed) was a permissible exercise of her discretion, and I propose to deal with that point at the end of this judgment.
The main focus of this judgment is on the issues raised in all three appeals arising from the engagement of article 10 by the costs orders made by each first instance judge.
In that connection, there are four issues to be considered.
The first is whether, as ANL contends (with the support of TNL and MGN), the domestic law should reflect the Strasbourg courts decision in MGN v UK to the extent of laying down a general rule (the Rule).
That rule is that, where a claim involves restricting the defendants freedom of expression, then at least where the defendant is a newspaper or broadcaster, it would, as a matter of domestic law, normally infringe the defendants article 10 rights to require it to reimburse the success fee and ATE premium for which the claimant is liable under the 1999 Act regime.
If we reject the existence of the Rule, then the remaining article 10 issues fall away, whereas if we accept its existence, those remaining issues are as follows.
The second issue is whether the effect of the Rule should be that the costs orders made by Mitting J and Nicola Davies J in Miller v ANL and in Flood v TNL respectively must be amended to exclude the defendant in each case paying the success fee and the ATE premium for which the claimant is liable.
The third issue is whether the Rule could be relied on by MGN in Frost v MGN, so that the orders for costs against MGN made by Mann J and by the Court of Appeal should be amended to exclude any liability for the claimants success fees and ATE premiums.
The fourth issue is whether this Court should make a declaration of incompatibility under section 4 of the Human Rights Act 1998 in relation to the 1999 Act regime, or indeed the costs regime which applies following LASPO and the 2013 Act.
For reasons which are set out in paras 42 to 63 below, I consider that, even if the answer to the first of those issues is that the Rule applies, so that it would normally infringe a newspaper publishers article 10 rights to require it to reimburse the claimants success fee and ATE premium under the 1999 Act regime in a case involving freedom of expression, the orders for costs made in the three cases should not be varied to remove the defendants liability for the claimants success fee and ATE premium.
In those circumstances, I believe that it would not be appropriate to express a concluded view on the first issue, because the party who would be, at least potentially, most detrimentally affected by the decision is not before us.
That party is of course the United Kingdom government.
If we were to conclude that the Rule is part of domestic law, it would not technically bind the government, but it would make it difficult for the government to re open the question in this country, and it could make it more difficult for the government to challenge the conclusion and reasoning in MGN v UK in Strasbourg.
Although we are not being asked to make a declaration of incompatibility, a decision that the Rule applies but cannot assist the appellants in the three appeals could have very similar consequences, and section 5 of the Human Rights Act 1998 requires the government to be notified if a declaration of incompatibility is sought in any proceedings.
The article 10 arguments Should MGN v UK be applied domestically?
I turn now to the issue of whether ANLs (and TNLs) article 10 rights are infringed by the order for costs made by Mitting J (and Nicola Davies J).
In this section and the next section (starting with para 42 below) of the judgment, I shall concentrate on Miller v ANL, as the article 10 argument was advanced in relation to that appeal, but my comments apply equally to Flood v TNL.
It is, of course, open to a domestic court to refuse to follow the Strasbourg courts analysis and conclusion in MGN v UK, especially as it is a single decision of one section of the Strasbourg court.
It is not as if there is a number of section decisions to the same effect or a decision of the Grand Chamber; it is also of some possible relevance that there was no oral argument in MGN v UK.
However, there is undoubtedly a very powerful argument for concluding that we should effectively follow the Strasbourg courts approach in that case.
The judgment was full and careful, and the ultimate decision was based on a report which was prepared by a senior United Kingdom judge and was largely acted on by the UK government.
The 1999 Act regime gave rise to some concern in the House of Lords in Campbell (No 2) and was criticised in this court in Lawrence (No 2) [2015] AC 106, para 37.
The UK government did not try to have the decision in MGN v UK reconsidered by the Grand Chamber.
Indeed, the UK government relied on the decision in MGN v UK to justify its initial decision to forbid recovery of success fees and ATE premiums in defamation and privacy actions (see the Joint Committee on Human Rights Legislative Scrutiny: Defamation Bill Seventh report of Session 2012 2013 (HLP84: HC 810), para 64).
It also appears to have been assumed (albeit without expressly deciding the point) by the five Justices in the majority in Lawrence (No 3) that MGN v UK represented the domestic law, and the conclusion reached by the two dissenting Justices was based on the proposition that it did represent domestic law.
Nonetheless, in a spirited and impressive argument on behalf of Mr Miller, Mr McCormick QC contended that there were good reasons for this court to refuse to follow the Strasbourg courts decision.
I would reject his first argument, namely that the Strasbourg court merely decided that the imposition of reimbursement of the success fee and the ATE premium represented an infringement of MGNs article 10 rights on the facts of the particular case.
It seems to me clear that the decision of the Strasbourg court was based on the 1999 Act regime in principle.
In paras 217 and 218, the court said that it was the depth and nature of the flaws in the system, highlighted in convincing detail by the public consultation process, and accepted in important respects by the Ministry of Justice which led the court to conclude that the impugned scheme exceeded even the broad margin of appreciation to be accorded to the state in respect of general measures pursuing social and economic interests and that this conclusion is indeed borne out by the facts of the present case.
This does not mean that article 10 is automatically infringed in every case involving freedom of expression where an unsuccessful defendant has to reimburse the claimant the success fee and ATE premium, but it does mean that it will normally be the case.
There is perhaps a little more force in the contention that the Strasbourg court did not have regard to the wide range of civil cases to which the 1999 Act regime applied.
The Strasbourg court concentrated on civil claims where article 10 was engaged, rather than looking at civil claims across the board, which were subject to the 1999 Act regime.
However, in my view, they were entitled, and arguably bound, to do that.
The principle that claims involving article 10 were in a special category for present purposes was accepted by Lord Hoffmann in Campbell (No 2), para 19, where he emphasised the importance of freedom of expression and the special position of the media as defendants to actions for defamation and wrongful publication of personal information.
There is more force in the contention that the Strasbourg court does not appear to have taken into account that the 1999 regime could actually assist defendants who wished to defend claims involving article 10, as they could enter into CFAs and take out ATE insurance, as pointed out in Lawrence (No 3), para 68.
It is also a fair criticism of the judgment in MGN v UK that the Strasbourg court accepted at para 208 the argument that under the 1999 Act regime, there was no incentive on the part of a claimant to control the incurring of legal costs on his or her behalf.
In fact, in many cases claimants could often find themselves liable for at least some costs which were held to be irrecoverable from the defendants, and in other cases the defendants might not be financially able to meet a costs order, which would leave a claimant out of pocket.
Another criticism of the judgment in MGN v UK which has some, if limited, force is in relation to its reliance on the blackmail effect of the 1999 Act regime (in para 209).
In most cases, a claimant under that scheme will have ATE insurance which would reduce this factor significantly by allowing a successful defendant to recover its costs (and the cases cited in footnote 73 to para 209 were cases where the claimant had not taken out ATE insurance).
Although the points discussed in the immediately preceding paragraph have some force, it seems to me that they are not particularly powerful.
They represent qualifications to some of the factors relied on by the Strasbourg court, but it seems to me unlikely that they would have caused the Strasbourg court to reach a different conclusion if they had been raised.
However, there are other points relied on by Mr Miller.
In particular, it is argued that events after the decision in MGN v UK justify this Court not applying the reasoning in that decision.
There is nothing in this point in so far as it relies on changes in the law ie the changes which have been made by and pursuant to LASPO and which have been mooted in the CCA 2013.
Those changes do not apply to any of the instant three cases, and there is therefore no basis for relying on them to justify the regime which does apply.
However, there is somewhat more force so far as other matters which occurred after the decision in MGN v UK are concerned: they provide some support for the notion that the 1999 Act regime could reasonably have been thought to be the least bad option to enable access to justice in relation to defamation and privacy claims.
Thus, the UK government failed to persuade the House of Commons to include in the Defamation Act 2013 a provision which reduced the potential exposure of defendants to costs in defamation and privacy actions.
And the Joint Committee in its report referred to in para 32 above expressed concern about any change to CFAs and ATE as it may prevent claimants and defendants of modest means from accessing the courts, a particularly pertinent concern when the action is one of defamation para 68.
Sir Brian Levesons Inquiry expressed similar concerns at Part J, Chapter 3, paras 3.7 and 3.13, suggesting that simply removing recoverability of success fees and ATE premium would risk turning the clock back to the time when, in reality, only the very wealthy could pursue claims [for defamation or breach of privacy].
These points demonstrate the difficulty in which the government found itself after deciding to reduce drastically the availability of legal aid, while wishing to ensure access to justice.
The exclusion of defamation and privacy cases from some of the major changes effected by LASPO and the politically controversial nature of section 40 of CCA 2013, and indeed the decisions in Campbell (No 2) and MGN v UK, demonstrate the even greater difficulties involved in balancing access to justice for claimants and the article 10 rights of defendants in such actions.
I rather doubt, however, that these points, even taken together with the points made in para 36 above, would justify a domestic court refusing to follow the reasoning and conclusion of the Strasbourg court.
The Strasbourg court accepted that the government enjoyed a broad or wide margin of appreciation in this connection.
However for reasons which were largely sound and reflected Sir Rupert Jacksons criticisms, and which have led to significant changes and projected changes as explained above, the court decided that the article 10 rights of MGN had been infringed.
However, as explained in para 29 above, I consider that we should leave the point open, and proceed to the remaining article 10 issues on the assumption that we should follow MGN v UK, and so the Rule as defined in para 27 above does apply.
Would the Rule prevent Mr Miller and Mr Flood recovering the success fee and ATE premium?
As just explained, in this and the next section of this judgment (starting at para 57), I am assuming that the effect of MGN v UK is that, where a claim involves restricting a defendants freedom of expression, it would normally be a breach of its article 10 rights to require it to reimburse the claimant any success fee or ATE premium which he would be liable to pay.
Even if that contention is correct, it is argued on behalf of Mr Miller (and Mr Flood) that it would be wrong to invoke it to deprive him of the ability to recover from ANL (and TNL) the success fee and ATE premium for which he is liable to his legal advisers and ATE insurers respectively.
If the Rule applies, it was effectively conceded on behalf of Mr Miller that, in the absence of any good reason to the contrary, it would mean that this Court should ensure that any order for costs should not impose such a liability on ANL.
That is because section 6(1) of the Human Rights Act 1998 provides that it is unlawful for a public authority to act in a way which is incompatible with a Convention right, and subsection (3) provides that public authority includes a court or tribunal.
I am prepared to proceed on the basis that this concession is correct, although it may be that Mr Miller could have invoked section 6(2) of the Human Rights Act, which provides: (2) Subsection (1) does not apply to an act if (a) as the result of one or more provisions of primary legislation, the authority could not have acted differently; or in the case of one or more provisions of, or made (b) under, primary legislation which cannot be read or given effect in a way which is compatible with the Convention rights, the authority was acting so as to give effect to or enforce those provisions.
On the face of it, this does not assist Mr Miller, as the primary legislation merely provides that an order for costs may, subject in the case of court proceedings to rules of court, include any success fee or ATE premium payable by the party in whose favour a costs order is made see section 58A(6) of the Courts and Legal Services Act 1990, as inserted by section 27 of the 1999 Act, and section 29 of the 1999 Act, set out in Lawrence (No 3), paras 16 and 17.
Accordingly, there is obvious force in the point that the provisions which would have the effect of infringing the article 10 rights of ANL in the instant case are in the CPR and Practice Directions (whose relevant provisions are set out in Lawrence (No 3), paras 19 to 25), and they can, indeed, at least normally, should, be disapplied by a court to the extent that they infringe the Convention.
However, all these provisions are part of a single statutory scheme, as Lord Dyson MR and I explained in Lawrence (No 3), paras 76 78, and it may be arguable that section 6(2) of the Human Rights Act could be invoked on the basis that disapplying provisions which enable Mr Miller to recover the success fee and ATE premium from ANL would imperi[l] the whole scheme which had been put in place by the 1999 Act to quote from Lawrence (No 3), para 78.
It is right to add that Lord Clarkes view as expressed in para 136 of his dissenting judgment in that case (with which Lady Hale agreed) is to the contrary.
Whatever the right analysis, I am prepared to proceed on the basis that, if the Rule applies as a matter of domestic law, ANL would in the absence of a good reason to the contrary, be entitled to require the costs order made by Mitting J to be amended so as to remove the success fee and ATE premium from the scope of that order.
On behalf of Mr Miller it is argued that there is a good reason to the contrary, in that, if we were to order that ANL should not have to pay the success fee or the ATE premium for which Mr Miller is liable, we would be wreaking a plain injustice on him.
He embarked on his claim against ANL, and in particular he incurred liabilities to his lawyers for any success fee and to his insurer for the ATE premium, in the expectation that, if the claim succeeded and he obtained an order for costs, ANL would be liable to reimburse not only the base costs but also the success fee and ATE premium.
And he did so in 2009, to the knowledge of ANL and at a time when that expectation not only reflected the law according to the relevant legislation (ie the 1999 Act and the consequential provisions of the CPR), but also when that law had been held by the House of Lords in Campbell (No 2) to be consistent with the Convention, and in particular with article 10.
In this connection, I consider that it would not simply be a plain injustice on Mr Miller to deprive him of the ability to recover the success fee and the ATE premium; it would in my view infringe his rights under A1P1, and that is a factor which can, indeed which must, be taken into account when considering how to dispose of ANLs appeal.
That view derives direct support from the concurring judgment of Lord Mance (with whom Lord Carnwath agreed) in Lawrence (No 3), para 106, where he said that claimants who had entered into a CFA and taken out ATE insurance under the 1999 Act regime must have had a legitimate expectation that the system would apply and be upheld, especially as appellate courts have repeatedly endorsed the system.
Accordingly, he said: [The claimants] legitimate expectation that the system would be enforced is one which falls to be taken into account at the present stage [ie when deciding whether to extend the costs order to payment of the success fee and ATE premium] and is not merely a matter that might (being itself a protected possession within A1P1) be raised as against the United Kingdom in Strasbourg.
Support for the notion that Mr Miller can rely on A1P1 in the instant circumstances appears to me to be found in the discussion on A1P1 in Simor and Emmerson on Human Rights Practice para 15.010, which includes the proposition that where in reliance on a legal act, an individual incurs financial obligations, he may have a legitimate expectation that that legal act will not be retrospectively invalidated to his detriment.
Strasbourg jurisprudence also supports this proposition.
Pine Valley Developments v Ireland (1991) 14 EHRR 319, Pressos Cia Naviera SA v Belgium (1995) 21 EHRR 301, and Stretch v United Kingdom (2003) 38 EHRR 12 are all cases where the applicants disappointed legitimate expectation of a legal right was held to justify his A1P1 claim.
In Pine Valley (assumed validity of a planning permission) and Stretch (assumed validity of a contractual option), the basis of the claim was not as strong as here, where it is based on primary legislation whose validity was approved by the Law Lords; on the other hand, both cases related to loss of land related rights rather than a money claim.
Pressos provides a closer analogy for present purposes, as it involved retrospective amendment of legislation which deprived the applicant of an accrued statutorily based claim for damages.
Having said that, not all retrospective deprivations of accrued rights will offend A1P1.
As the Strasbourg court pointed out in Pressos, para 38, the question of proportionality will normally arise, and this typically involves balancing the demands of the general interest of the community and the requirements of the protection of the individual's fundamental rights.
Even bearing that factor in mind, I find it very difficult to see how Mr Millers A1P1 claim could be defeated.
Parliament did not see fit to render the LASPO regime retrospective: on the contrary, as explained above, the 1999 Act regime applies to all proceedings begun before 1 April 2013.
Parliament thereby correctly recognised that, while the 1999 Act regime was unsatisfactory, it would be wrong to disapply it to proceedings which had been issued in the expectation that that regime would continue to apply to those proceedings.
In addition to A1P1, although this was not raised in argument, it seems to me that, especially given that the purpose of the 1999 Act regime (as the Strasbourg court accepted in MGN v UK at para 197) was to enable people to get access to the courts, to hold that Mr Miller could not recover the success fee and the ATE premium could infringe his rights under article 6 of the Convention.
As Lord Dyson MR and I said in Lawrence (No 3), para 77, recovery of success fee and ATE premium was integral to the means of providing access to justice in civil disputes in what may be called the post legal aid world, and necessary in order to secure access to justice, so that [i]f it were otherwise, there would have been a real danger that litigants who previously qualified for legal aid would have been unrepresented and the fundamental and legitimate aim of the 1999 Act scheme would have been frustrated.
In MGN v UK at paras 142 and 199, the Strasbourg court unsurprisingly accepted that a claimants article 6 rights were engaged in a case such as Miller v ANL.
In those circumstances, given that the 1999 Act regime was intended to enable potential claimants to obtain access to the courts, and that the recoverability of the success fee and ATE premium was an essential ingredient of the regime, it appears to me that a decision which deprives a successful claimant of the right to recover such sums retrospectively would probably serve to infringe his article 6 rights.
I note that in Stankov v Bulgaria 49 EHRR 7, paras 53 and 54, the Strasbourg court accepted that the imposition on a successful claimant of a considerable financial burden due after the conclusion of the proceedings infringed his article 6(1) rights even though he had access to all stages of the proceedings.
Further, it may be that such a decision would infringe Mr Millers article 8 rights as well, given that the purpose of his bringing the proceedings was for the purpose of restoring or maintaining his personal dignity.
However, no argument based on article 6 or article 8 was raised at all on behalf of Mr Miller (or Mr Flood).
In those circumstances, I prefer to base my conclusion on Mr Millers A1P1 right not to be deprived of his accrued rights and his legitimate expectations.
It follows from all this that upholding Mitting Js costs order would infringe ANLs article 10 rights for the reasons given by the Strasbourg court in MGN v UK and would therefore involve an injustice, but amending that costs order in the way sought by ANL would not only involve an infringement of Mr Millers A1P1 rights: it would undermine the rule of law.
It is a fundamental principle of any civilised system of government that citizens are entitled to act on the assumption that the law is as set out in legislation (especially when its lawfulness has been confirmed by the highest court in the land), secure in the further assumption that the law will not be changed retroactively ie in such a way as to undo retrospectively the law upon which they committed themselves.
To refuse the costs order which Mr Miller seeks would directly infringe that fundamental principle.
While freedom of expression is, of course, another fundamental principle, it is not so centrally engaged by the issue in this case: the decision in MGN v UK is essentially based on the indirect, chilling, effect on freedom of expression of a very substantial costs order.
In these circumstances, whether we allow or dismiss this appeal, a Convention right would be infringed.
When deciding what to do in such circumstances, section 6 of the Human Rights Act does not assist ANL any more than it assists Mr Miller.
However, section 8(1) of that Act seems to me to be in point.
It provides: In relation to any act (or proposed act) of a public authority which the court finds is (or would be) unlawful, it may grant such relief or remedy, or make such order, within its powers as it considers just and appropriate.
It appears clearly to follow from this that the just and appropriate order is to dismiss ANLs appeal because to allow the appeal would involve a graver infringement of Mr Millers rights than the infringement of rights which ANL will suffer if we dismiss the appeal.
It is right to record that we were pressed with the argument that Mr Miller would not in fact suffer if the costs order did not entitle him to recover the success fee or ATE premium, because his lawyers and insurance company would not in practice press for payment of, respectively, the success fee or ATE premium, if they knew that he could not recover them from ANL.
That was an argument which was also raised in Lawrence (No 3), and it was rejected see the first point discussed in each of paras 91 and 92.
In any event, it must be at least arguable that lawyers who conducted their professional practices on the basis that the 1999 Act regime was lawful, could claim that their A1P1 rights were infringed if they were, in practice, deprived of their success fees by a determination that the CFAs into which they had entered into with their clients were not fully enforceable.
In summary, then, in the present case either ANL or Mr Miller has to suffer an injustice (including infringement of Convention rights), and it is clear to me that it should be ANL that suffers, as the injustice on Mr Miller would be significantly more substantial.
Accordingly, I would dismiss the appeal in Miller v ANL, and, at least on the article 10 ground, the appeal in Flood v TNL.
If MGN v UK applies, can Ms Frost recover the success fee and ATE premium?
The claimants argument in Frost v MGN to the same effect as that just discussed in Miller v ANL is weaker in that they all entered into CFAs and took out ATE insurance after publication of the judgment of the Strasbourg court in MGN v UK.
Despite that, I would reach the same conclusion as in Miller v ANL.
Notwithstanding the judgment in MGN v UK, until LASPO came into force, the 1999 Act regime, as approved by the House of Lords in Campbell (No 2), was lawful in domestic terms, and, with all its flaws, it represented the domestic policy whereby citizens could get access to the courts to vindicate their civil legal rights.
Parliament could have enacted that decisions of the Strasbourg court had direct effect on UK law, but, for good reasons, it did not do so: such decisions are, of course, simply to be take[n] into account by a UK judge when they are relevant to the proceedings before him or her see section 2(1) of the Human Rights Act.
However, in my view, there is another, more fundamental, reason why it is not open to MGN to rely on the Rule when it comes to the costs orders in Frost v MGN.
In order to rely on the Rule, MGN would have to establish that the principle laid down in MGN v UK applies in cases where information is obtained illegally by or on behalf of a media organisation.
Although I accept that article 10 is engaged in such a case, I cannot accept that the Rule can have any application, at least on facts such as those in Frost v MGN.
When it comes to a costs order in a successful claim against a media organisation in proceedings where the 1999 Act regime applies, there are two applicable principles at play.
The first is that, where article 10 is not engaged, there is normally no Convention basis for refusing to order an unsuccessful defendant to reimburse the claimants success fee and ATE premium see Lawrence (No 3).
The second principle is that in such proceedings where article 10 is engaged, the Rule applies and so it is normally a breach of such a defendants Convention rights if he is required to pay the success fee and ATE premium.
In Frost v MGN, the court was not merely concerned with the complaint that MGN had published, or threatened to publish, information which infringed the claimants privacy rights.
It was also concerned with the complaint that the information in question had been obtained unlawfully by or on behalf of MGN.
Thus, as Mann J said in his judgment at [2016] FSR 12, paras 1, 13 and 702, In all [eight] cases the infringements of privacy rights were founded in what has become known as phone hacking, though there are also claims that confidential or private information was also obtained in other ways (principally from private investigators).
In all cases except [one], there is also a claim that infringements of privacy rights led to the publication of articles in the various newspapers just described, which articles were themselves said to be an invasion of privacy rights and which would not have been published but for the earlier invasions which provided material for them. [T]he claimants make claims which are said to fall into three main categories wrongfully listening to private or confidential information left for or by the claimant, wrongfully obtaining private information via private investigators, and the publication of stories based on that information.
MGN admits all those activities None of the articles in respect of which I have awarded compensation would (on the admitted case) have been published had it not been for the underlying prolonged phone hacking that went on, which was known to be wrongful.
That hacking existed in all cases whether or not an article resulted.
The length, degree and frequency of all this conduct explains why the sums I have awarded are so much greater than historical awards.
People whose private voicemail messages were hacked so often and for so long, and had very significant parts of their private lives exposed, and then reported on, are entitled to significant compensation.
When the Judge assessed damages, he awarded seven of the eight claimants separate sums for (i) hacking, (ii) blagging, and (iii) (save in one case) publications, (iv) general distress, and (v) (in one case) aggravated damages.
The remaining claimant, who was subjected to hacking and blagging, but not publication, was awarded a single figure which included a modest sum for aggravated damages.
The awards of these sums were upheld by the Court of Appeal, in a judgment which includes a schedule which sets out the details of the damages awarded to each of the eight claimants.
I accept that this is a case where MGNs article 10 rights are engaged, in the sense that an aspect of the complaints of most of the claimants is that their private information was published in MGN newspapers.
However, to treat this case as one where the newspaper publishers article 10 rights are not merely engaged, but should be given anything like the sort of weight which they were given in MGN v UK seems to me quite unrealistic.
The fundamental complaint of all the claimants is that their phone records were unlawfully hacked or blagged by agents of MGN on a persistent and systematic basis.
It is true that this hacking and blagging was done with a view to obtaining information which might be published in MGNs newspapers.
However, this was not a case where there can be any suggestion of MGN or its agents even hoping, let alone intending or expecting, that the end would justify the means, as might be the case where unlawful means are used in the expectation, or even the reasonable hope, that it may yield information which it would be in the public interest to reveal.
The claimants were generally celebrities, footballers, television personalities and the like; people whose private lives may be of interest to the public, but the revelation of whose private lives is not normally in the public interest.
I accept that the courts must be careful before deciding that a particular case of this sort involves newsgathering whose nature is so extreme as to lie outside the territory which should be subject to the Rule.
However, bearing in mind the persistence, pervasiveness and flagrancy of the hacking and blagging, and the lack of any public significance of the information which it would be expected to and did reveal, it appears to me that this is not a case where the Rule can properly be invoked by MGN.
As the Strasbourg court explained at para 201, its decision that the liability for costs in MGN v UK offended article 10 was based on the proposition that the most careful scrutiny on the part of the Court is called for when measures taken by a national authority are capable of discouraging the participation of the press in debates over matters of legitimate public concern.
I cannot accept that such a proposition applies in relation to claims based on a defendants unlawful hacking and blagging of the phone records of individuals such as the 23 claimants in Frost v MGN.
A declaration of incompatibility?
For the reasons given in para 29 above, it would be inappropriate to grant a declaration of incompatibility.
In addition, it would not be right to grant such a declaration in relation to legislation which contains the 1999 Act regime, because that regime has been superseded by other legislation, including LASPO, the Defamation Act 2013 and CCA 2013.
And it would plainly be inappropriate even to consider making a declaration of incompatibility in relation to those statutes, as their effect does not need to be, and was not, considered in any detail in order to dispose of the instant appeals.
The exercise of the Judges discretion in Flood v TNL
The final issue is whether TNL is right in its contention that, in ordering it to pay Mr Floods costs of the proceedings (other than those costs which had already been the subject of an order of the court or agreement between the parties), Nicola Davies J acted outside the ambit of her discretionary powers.
This is not a point which would normally come before this court: it is a one off issue relating to the exercise of a discretionary power where the first instance judges decision has been upheld by the Court of Appeal.
It is only before this Court because the article 10 issues in relation to the costs order are before us, and it seemed sensible not to shut out TNL from pursuing its contention that Nicola Davies J had erred in principle when making that order.
The Judge formed the view that, as Mr Flood had established that he had been defamed and had obtained an order for substantial damages, the starting point was that he should have his costs, and there was no reason to depart from that position.
She thought that this conclusion was supported by the fact that Mr Flood had vindicated his reputation, and she also considered that TNLs attitude in open and without prejudice save as to costs correspondence made it substantially harder for the case to settle.
TNL complains that the Judge wrongly concluded that she was not persuaded that there were good grounds to depart from the starting point, notwithstanding (i) the importance of freedom of expression, (ii) the without prejudice save as to costs correspondence (the correspondence), (iii) the fact that Mr Flood had fought the Reynolds defence and lost, and (iv) the fact that TNL had successfully defeated the claim in respect of all publications apart from those posted on TNLs website after 5 September 2007.
In my judgment, the Court of Appeal was correct in holding that Nicola Davies J made no error in her decision.
She was clearly right to start with the proposition that the prima facie position was that, as Mr Flood was the winner, he therefore ought to get his costs.
He had had to go to trial to vindicate his reputation, when TNL had accused him of corruption and had maintained a plea of justification for a substantial time, and to recover substantial damages, indeed substantially more than he had offered to accept.
As Sharp LJ put it in the Court of Appeal, [t]he outcome of the litigation could properly be described as a victory for Mr Flood (para 27).
In those circumstances, as the successful party, the general rule set out in CPR 44.2(2)(a) was that he should have his costs.
However, as Nicola Davies J rightly acknowledged, that is only the starting point.
It is thus necessary to consider whether any of the points raised on behalf of TNL justify its contention that the Judge could not reasonably have refused to depart from that starting point.
First, the importance of freedom of expression.
In my view, important though freedom of expression undoubtedly is, it cannot assist TNL in its challenge to the unqualified order for costs made in favour of Mr Flood (save, of course, in so far as MGN v UK assists its contention in relation to the success fee and the ATE premium as discussed above).
There are many cases in domestic courts and in the Strasbourg court which emphasise the fact that potential and actual defamation actions have an inhibiting effect on freedom of speech, and the consequent need for the court to scrutinise orders which it makes in that connection (see eg Derbyshire County Council v Times Newspapers Ltd [1993] AC 534, 547F and 548D and Bladet Troms and Stenaas v Norway (1999) 29 EHRR 125, para 64).
However, save in exceptional circumstances, it would be quite inappropriate to invoke that principle so that it renders it more difficult for claimants in defamation actions to obtain access to justice than claimants in other types of civil claim.
As pointed out on his behalf, Mr Flood also had rights: just as TNLs rights are covered by the Convention (through article 10) so were his (through article 8).
While such exceptional circumstances were found to exist in MGN v UK, it is worth noting that no complaint was ever made about the level of base costs in Campbell v MGN.
And it is worth pointing out that, while, as already mentioned, Lord Hoffmann emphasised the importance of freedom of expression and the special position of the media in Campbell (No 2), para 19, he nonetheless refused to accept that even requiring MGN to reimburse the success fee and ATE premium payable by Miss Campbell offended freedom of expression.
Secondly, the correspondence.
Although we were taken to the correspondence in a little detail by counsel on behalf of each party, it is unnecessary to consider it in any detail.
As is not uncommon in such correspondence, there were passages emanating from each side, which, at any rate with the benefit of hindsight, would have been better omitted.
More importantly, I can see nothing in that correspondence which assists TNLs challenge to the Judges award of costs.
I accept that some people might characterise the attitude revealed by Mr Flood in that correspondence as intransigent, but I consider that description would be unkind.
TNL were adopting a very tough attitude in the correspondence; some people might use a more critical adjective.
Thus, as in the open negotiations alluded to in paras 16 and 17 above, TNL was making it very clear in the correspondence that it was maintaining its plea of justification and would be taking steps to find witnesses to support that case.
TNLs plea of justification would have involved showing that there were grounds to justify a police investigation, and it was a plea which was of course eventually abandoned after TNL lost on meaning.
In addition, TNL suggested that Mr Flood would be likely to be financially ruined by the costs if he proceeded with his claim and lost, whereas TNL could easily take such a risk if it lost; the Judge not unfairly described TNLs approach as involving unsubtle threats (para 20).
It is fair to emphasise that nothing said on behalf of TNL in the correspondence was improper, but, if the correspondence is to be relied on in relation to the issue of costs, in my view, and in agreement with the Judge (who described TNLs approach as involving a die hard attitude: para 20), it was undoubtedly TNLs negotiating stance far more than that of Mr Flood which prevented the claim from being settled.
On any view, it is impossible to suggest that it assists TNLs case on costs.
Indeed, in my view the Judge was entitled to regard TNLs attitude in the open discussions and in the correspondence as a reason which militated against departing from the prima facie position, namely an unqualified costs order in favour of Mr Flood.
Thirdly, the Reynolds defence.
It is true that Mr Flood contested TNLs Reynolds defence case very strongly.
In so far as the costs attributable to that issue going to appeal are concerned, they have been disposed of by agreement or by court orders.
As to the success of the Reynolds defence it was, as Nicola Davies J pointed out, no clear cut win for [TNL], as the defence failed in relation to the continuing website publication after 5 September 2007.
In any event, Tugendhat J, whose experience in this field was unrivalled, refused to make a costs order in favour of TNL following his judgment on the preliminary issue as to the availability of the Reynolds defence, on 25 July 2009 after a four day trial.
He said that having regard to the way the matter has been contested, I see no reason to doubt that the defendant would have conducted the trial of the preliminary issue very substantially, if not identically, to the way in which they did, even if the claimant had conceded that qualified privilege was a defence in respect of the print publication, and even if they had conceded it was a defence in respect of some of the website publications.
To much the same effect, Nicola Davies J said that the defences of Reynolds privilege and of justification could not easily be separated (para 21).
In other words the costs of arguing the Reynolds defence would have been incurred anyway.
Finally, there is the fact that Mr Flood was only partially successful.
There are, of course, cases where a claimant (or indeed a defendant) is successful, but the success is partial or limited to an extent which would make it unreasonable to award him all his costs.
In the instant case, there is an initial attraction in the notion that the fact that Mr Flood succeeded on the material posted on TNLs website after 5 September 2007 but failed on the hard copy and website material published before that date, means that there should be some amendment in TNLs favour to the costs order made by Nicola Davies J.
However, as Sharp LJ said in the Court of Appeal (para 41), the fact that TNL had won on a significant part of the case, comprising numerically the greater proportion of the publications was a factor to be taken into account when deciding what costs order to make, but the effect of that factor on the eventual decision was a matter for the first instance judge.
As she also said, on the facts of this case, the first instance judge was entitled to resolve to award costs on the basis that Mr Flood was the overall winner rather than making an issues based order.
Conclusion
It follows from this that all three appeals must be dismissed.
| UK-Abs | These three appeals each involve a challenge to an order for costs made by a High Court judge against a newspaper publisher following trial.
Flood v Times Newspapers Limited (Flood) and Miller v Associated Newspapers Ltd (Miller) each involved an allegation that the newspaper had libelled the claimant, and Frost and others v MGN Ltd (Frost) involved allegations that the newspaper had unlawfully gathered private information about the claimants by hacking in to their phone messages.
In each case, the newspaper publisher lost at trial and was ordered to pay the claimants costs.
The claimants had each taken advantage of the costs regime introduced by the Access to Justice Act 1999 and reflected in the Civil Procedure Rules then in force, in particular Rule 44, (the 1999 Act regime).
This regime enabled: (i) the claimants lawyers to agree under a conditional fee agreement (a CFA) to be paid nothing if the claim failed but to receive up to twice their normal fee if it succeeded; and/or (ii) the claimant to take out after the event (ATE) insurance against the risk of having to pay the defendants costs (with the insurer only being paid if the claim succeeded); and (iii) the claimant being able to recover from the defendant the success fee payable under the CFA, and the ATE insurance premium, if his claim succeeded.
Following widespread criticism, the regime has now largely been replaced for claims commenced after 1st April 2013 by the Legal Aid, Sentencing and Punishment of Offenders Act 2012, but not for defamation or privacy claims.
A public consultation as to whether s.40 of the Crime and Courts Act 2013, which would introduce a new scheme for costs recovery for privacy and defamation claims against newspapers, has been launched.
In Flood, Times Newspapers Limited (TNL) had defeated Mr Floods defamation claim in relation to hard copies of the publication, but had failed in relation to the electronic version, which they had failed to take down when they should have done.
Nicola Davies J awarded Mr Flood damages of 60,000 and ordered TNL to pay all Mr Floods costs of the proceedings (including success fees and ATE premium), and this was upheld by the Court of Appeal.
In Miller, Associated Newspapers Limited (ANL)s defence was rejected by Sharp J, and Mitting J subsequently concluded that he was bound by the decision of the House of Lords in Campbell v MGN Ltd (No 2) to hold that recovery of the success fee and ATE premium did not infringe ANLs Article 10 rights and ordered that ANL should reimburse Mr Miller his costs.
In Frost, having found for the claimants, Mann J ordered MGN to pay their costs, including reasonable success fees and ATE premiums which they had incurred, as determined by the Costs Judge, and this was upheld by the Court of Appeal.
The newspaper publishers appealed to the Supreme Court.
In each appeal, the newspaper publisher relies upon the decision of the European Court of Human Rights in MGN Ltd v United Kingdom (MGN
v UK), where the Court held, contrary to the decision of the House of Lords in Campbell v MGN Ltd (No2), that MGNs right to freedom of expression under Article 10 of the European Convention on Human Rights was infringed by the order to reimburse the success fee and ATE premium incurred by the claimant.
The newspaper publishers now contend that the costs orders in the present appeals similarly infringe their rights under Article 10.
In Flood, TNL also contend that, given their partial success, the costs order was so unreasonable as to be outside the ambit of the trial judges discretionary powers.
The Supreme Court unanimously dismisses the newspaper publishers appeals.
Lord Neuberger gives the lead judgment, with which the other Justices agree.
The reasoning of the Strasbourg court in MGN v UK was full, careful and largely soundly based, and reflected widespread criticism of the 1999 Act regime which has led to significant changes [32 and 41].
However, as the UK Government is not a party to these appeals, it would be inappropriate to express a concluded view as to whether there is a general rule of domestic law that it would normally infringe a newspaper publishers rights under Article 10 to require it to reimburse the claimants success fee and ATE premium in a defamation or privacy case, unless it was necessary so to decide, and it is not [29].
It would be similarly inappropriate to grant a declaration of incompatibility of legislation containing the 1999 Act regime or the statutes which supersede it [64].
Assuming that there is such a general rule, to deny the claimants in Miller and Flood the ability to recover the success fee and ATE premium which they had incurred would infringe their rights under Article 1 of the First Protocol to the Convention.
They had incurred financial obligations in reliance on a statute and had a legitimate expectation that the statute would not be retrospectively repealed or otherwise invalidated to their detriment [46 48].
It may be that the claimants Article 6 and 8 rights would also thereby be infringed as the regime aimed to enable access to the courts, and the present proceedings were brought to restore personal dignity [49 52].
Even if upholding the costs order in Miller and Flood would infringe the newspaper publishers article 10 rights for the reasons given in MGN v UK, the fundamental principle that citizens are entitled to assume that the law will not change retroactively would be directly infringed by the order sought.
Freedom of expression is also a fundamental principle, but one which is less centrally engaged by the issue in this case: the infringement of the newspaper publishers rights is based on an indirect chilling effect [53].
The just and appropriate order under section 8(1) of the Human Rights Act is therefore to dismiss the appeals, as to allow them would be a graver infringement of the claimants rights than the infringement which the newspaper publishers will suffer if the appeals are dismissed [53 54].
In the appeal in Frost, such a rule could in any event have no proper application to facts.
The information was obtained illegally and there could have been no real expectation that its publication would be in the public interest.
The Article 10 rights of the newspaper publishers have greatly reduced weight in this context as compared with those of MGN in MGN v UK [58 63].
The trial judge in Flood was correct to start with the proposition that, prima facie, Mr Flood was the winner and ought to receive his costs [67].
In considering whether to alter this, the judge was entitled to regard TNLs aggressive and unconstructive attitude in correspondence as militating against departure [70 71], and to find that the costs of TNLs defence would have been incurred even if Mr Flood had conceded the part of his claim that was eventually unsuccessful [73].
The weight to be given to the fact that Mr Flood was only partially successful was a matter for the first instance judge, as was the decision to award costs on the basis that he was the overall winner rather than making an issues based order [74].
|
The issue in this case is whether the court should order the return to France of two little girls who have been living with their mother in Scotland since July 2013.
The issue arises under article 3 of the 1980 Hague Convention on the Civil Aspects of International Child Abduction, as incorporated into the law of the United Kingdom by the Child Abduction and Custody Act 1985.
The facts
The children were born in France in August 2010 and June 2013.
Their father is a French citizen who has lived in France all his life.
He has a small business in France.
Their mother is a British and Canadian citizen, who was born in Canada of a Scottish mother.
She works from home for a Canadian employer.
She and the father have never been married.
Until July 2013 the family lived together in France, visiting the mothers parents in Scotland from time to time.
During July 2013 the mother and the two children came to live in Scotland.
They did so with the agreement of the childrens father.
According to the fathers affidavit, it had been agreed that the mother and the children should live in Scotland during her 12 months maternity leave, returning afterwards to France.
According to the mothers affidavit, it had been agreed that the family would move permanently away from France, although not necessarily remaining in Scotland beyond the duration of her maternity leave.
The father was to join the rest of the family after the family home in France had been sold, and arrangements had been made in relation to the management of his business, and they would then decide where to settle in the longer term.
What is uncontroversial is that the mother and children were to live in Scotland for the period of about a year from July 2013 during which she was on maternity leave.
Following their arrival in Scotland, the mother and children lived initially with the maternal grandparents.
In August 2013 the family home in France was sold, the sale being completed two months later.
The elder child also started to attend the local nursery in Scotland in August 2013, and has continued to do so since then.
The father visited the rest of the family in Scotland for several days every month.
The mother and children joined the father for a holiday in France in September 2013, and also spent 12 days with him in October 2013 at their former home in France, shortly before it changed hands.
On their return to Scotland they moved into a rented house, adjacent to the maternal grandparents, which the mother and father had inspected together.
The mother and children have lived there ever since.
On 9 November 2013 the mother discovered infidelity on the part of the father and told him that their relationship was over.
On 20 November 2013 he was served with notice of proceedings in Scotland in which the mother sought a residence order in respect of the children, and interdict against the father removing them from Scotland.
In the present proceedings, brought under the 1985 Act and seeking an order for the return of the children to France, the father maintains that the initiation of the mothers proceedings was a wrongful retention within the meaning of the Hague Convention.
That proposition is predicated upon the childrens being habitually resident in France immediately before 20 November 2013.
That is the question on which issue was joined in the courts below.
The proceedings below
In the Outer House of the Court of Session, the Lord Ordinary, Lord Uist, identified the first question which he had to determine as being whether the children were habitually resident in France immediately before 20 November 2013.
It was common ground that that question was to be determined in accordance with the guidance given by this court in A v A and another (Children: Habitual Residence) (Reunite International Child Abduction Centre and others intervening) [2013] UKSC 60; [2014] AC 1 and In re L (A Child) (Custody: Habitual Residence) (Reunite International Child Abduction Centre intervening) [2013] UKSC 75; [2014] AC 1017.
After summarising the evidence and the parties contentions, the Lord Ordinary stated (para 7): After considering all the relevant evidence I am satisfied that the children had not immediately before 20 November 2013 lost their habitual residence in France.
They had both been born there and lived there in family with their parents until 26 July.
This was a French family living in France.
There is nothing which happened thereafter which persuades me that they had ceased to be habitually resident in France.
I conclude from the evidence and productions presented that the stay of the respondent and the two children in Scotland was to be of limited duration, consisting of the period of her maternity leave.
I do not regard the sale of the family home in Narbonne as evidencing a joint intention to leave France for good.
I am not persuaded that there was a joint decision to uproot themselves from France and relocate permanently to Scotland.
The petitioner has his own expanding business in Narbonne, for which he relies on his livelihood (sic) and in order to maintain the respondent and children.
He speaks little or no English.
I reject as fanciful any suggestion that he intended to set up a business in Scotland.
That would have involved abandoning his established business in France and attempting to set up a business in a country where he did not speak the language and had no obvious prospect of succeeding.
He continued to live and work in France after the respondent and children came to live in Scotland, although he visited them regularly.
The respondent and children returned to France on two occasions after their move to Scotland.
Certain of the children's belongings were in storage in France.
The lease of the property in which the respondent and children were living in Scotland was in her name alone.
Nothing in the communications between the parties indicates a joint intention to uproot themselves from France and relocate permanently to Scotland.
The Lord Ordinary therefore granted the fathers application.
That decision was reversed by an Extra Division of the Inner House of the Court of Session: [2014] CSIH 95; 2014 SLT 1080; [2014] Fam LR 131.
The court considered that the Lord Ordinary had erred in law, in the passage which I have just quoted, in treating a shared parental intention to move permanently to Scotland as an essential element in any alteration of the childrens habitual residence from France to Scotland.
This error had deflected him from a proper consideration of the factors relied upon by the mother.
Considering the matter afresh, in the light of the guidance provided by this court, the Extra Division concluded that the children were habitually resident in Scotland at the material time: If the salient facts of the present case are approached in accordance with the guidance summarised earlier, the key finding of the Lord Ordinary is that the children came to live in Scotland.
The real issue is whether there was a need for a longer period in Scotland before it could be held that there had been a change in their habitual residence.
For our part, in the whole circumstances we would view four months as sufficient. (para 14)
The law
Article 1 of the Hague Convention provides that its objects include to secure the prompt return of children wrongfully removed to or retained in any contracting state.
In terms of article 3, the removal or the retention of a child is to be considered wrongful where, in the first place, it is in breach of rights of custody attributed to a person, an institution or any other body, either jointly or alone, under the law of the state in which the child was habitually resident immediately before the removal or retention.
Article 12 provides that, where a child has been wrongfully removed or retained in terms of article 3, and proceedings are commenced within one year before the judicial or administrative authority of the contracting state where the child is, the authority shall order the return of the child forthwith.
Under article 13, the return of the child need not be ordered if it is established, inter alia, that the applicant for the order consented to the removal or retention.
In relations between the member states of the EU other than Denmark, the Hague Convention is supplemented by the Brussels II Revised Regulation (EC) No 2201/2003 (the Regulation), which is in similar but not identical terms.
The Regulation takes precedence over the Convention: see article 60.
It is common ground that habitual residence, for the purposes of applying the Hague Convention and the Regulation, is to be determined in accordance with the guidance given by this court in the cases of A v A, In re L and In re LC (Children) (Reunite International Child Abduction Centre intervening) [2014] UKSC 1; [2014] AC 1038.
It is also common ground that that guidance is consistent with the guidance given by the Court of Justice of the European Union as to the application of the Regulation in Proceedings brought by A (Case C 523/07) [2010] Fam 42, Mercredi v Chaffe (Case C 497/10PPU) [2012] Fam 22, and C v M (Case C 376/14PPU) [2015] Fam 116.
judgment of the Court of Justice in Proceedings brought by A: In A v A, Lady Hale drew attention at para 48 to the operative part of the 2.
The concept of 'habitual residence' under article 8(1) of Council Regulation (EC) No 2201/2003 must be interpreted as meaning that it corresponds to the place which reflects some degree of integration by the child in a social and family environment.
To that end, in particular the duration, regularity, conditions and reasons for the stay on the territory of a member state and the family's move to that state, the child's nationality, the place and conditions of attendance at school, linguistic knowledge and the family and social relationships of the child in that state must be taken into consideration.
It is for the national court to establish the habitual residence of the child, taking account of all the circumstances specific to each individual case. (p 69)
Lady Hale also noted at para 50 the need to focus upon the primary carer, rather than the child, in cases where the child is an infant.
As the Court of Justice explained in Mercredi v Chaffe: An infant necessarily shares the social and family environment of the circle of people on whom he or she is dependent.
Consequently, where . the infant is in fact looked after by her mother, it is necessary to assess the mother's integration in her social and family environment.
In that regard, the tests stated in the court's case law, such as the reasons for the move by the child's mother to another member state, the languages known to the mother or again her geographic and family origins may become relevant. (para 55)
In the circumstances of the present case, it is also important to note what was said by Lady Hale in relation to passages in Mercredi v Chaffe which appeared to import a requirement of permanence for residence to be habitual.
In particular, in para 51 of Mercredi v Chaffe the Court of Justice stated: In that regard, it must be stated that, in order to distinguish habitual residence from mere temporary presence, the former must as a general rule have a certain duration which reflects an adequate degree of permanence.
However, the Regulation does not lay down any minimum duration.
Before habitual residence can be transferred to the host state, it is of paramount importance that the person concerned has it in mind to establish there the permanent or habitual centre of his interests, with the intention that it should be of a lasting character.
Accordingly, the duration of a stay can serve only as an indicator in the assessment of the permanence of the residence, and that assessment must be carried out in the light of all the circumstances of fact specific to the individual case.
In A v A, Lady Hale commented at para 51: At first instance in DL v EL [2013] FLR 163, Sir Peter Singer compared the French and English texts of the judgment, which showed that the French text had almost throughout used stabilit rather than permanence and in the one place where it did use permanence it was as an alternative to habituelle: paras 71 et seq.
It is therefore the stability of the residence that is important, not whether it is of a permanent character.
There is no requirement that the child should have been resident in the country in question for a particular period of time, let alone that there should be an intention on the part of one or both parents to reside there permanently or indefinitely.
As Lady Hale observed at para 54 of A v A, habitual residence is therefore a question of fact.
It requires an evaluation of all relevant circumstances.
It focuses upon the situation of the child, with the purposes and intentions of the parents being merely among the relevant factors.
It is necessary to assess the degree of integration of the child into a social and family environment in the country in question.
The social and family environment of an infant or young child is shared with those (whether parents or others) on whom she is dependent.
Hence it is necessary, in such a case, to assess the integration of that person or persons in the social and family environment of the country concerned.
The essentially factual and individual nature of the inquiry should not be glossed with legal concepts which would produce a different result from that which the factual inquiry would produce.
In particular, it follows from the principles adopted in A v A and the other cases that the Court of Appeal of England and Wales was right to conclude in In re H (Children) (Reunite International Child Abduction Centre intervening) [2014] EWCA Civ 1101; [2015] 1 WLR 863 that there is no rule that one parent cannot unilaterally change the habitual residence of a child.
Finally, it is relevant to note the limited function of an appellate court in relation to a lower courts finding as to habitual residence.
Where the lower court has applied the correct legal principles to the relevant facts, its evaluation is not generally open to challenge unless the conclusion which it reached was not one which was reasonably open to it.
The present case
Counsel for the father sought to persuade this court that there had been no error of approach by the Lord Ordinary, and that the Inner House had therefore not been entitled to interfere with his assessment.
I am unable to accept that submission.
In the salient passage in his judgment, quoted earlier, the Lord Ordinarys focus was entirely upon whether there had been a joint decision to move permanently to Scotland.
He began by expressing his conclusion, at para 7: I conclude from the evidence and productions presented that the stay of the respondent and the two children in Scotland was to be of limited duration, consisting of the period of her maternity leave.
He then referred to aspects of the evidence which bore upon that issue, stating that he did not regard the sale of the family home in France as evidencing a joint intention to leave France for good, and that he was not persuaded that there was a joint decision to uproot themselves from France and relocate permanently to Scotland.
In that regard, he referred to the fathers business interests in France, his limited command of English, the fact that he continued to live and work in France, the fact that the mother and children had visited him there, the fact that certain of the children's belongings were in storage in France after the [mother] and children came to live in Scotland, and the fact that the lease of the house in Scotland was in the mothers name alone.
He then concluded his discussion of the issue of habitual residence: Nothing in the communications between the parties indicates a joint intention to uproot themselves from France and relocate permanently to Scotland.
In determining the case on this basis, the Lord Ordinary failed to apply the guidance given in the authorities.
As I have explained, parental intentions in relation to residence in the country in question are a relevant factor, but they are not the only relevant factor.
The absence of a joint parental intention to live permanently in the country in question is by no means decisive.
Nor, contrary to counsels submission, is an intention to live in a country for a limited period inconsistent with becoming habitually resident there.
As was explained in A v A, the important question is whether the residence has the necessary quality of stability, not whether it is necessarily intended to be permanent.
The Lord Ordinarys exclusive focus on the latter question led to his failing to consider in his judgment the abundant evidence relating to the stability of the mothers and the childrens lives in Scotland, and their integration into their social and family environment there.
Counsel for the father further argued that the Extra Division had themselves fallen into error, in treating the critical issue as being whether it was necessary for the mother and children to have spent a longer period in Scotland before the children could be said to have become habitually resident there.
The Extra Division had, it was argued, answered that question without themselves addressing the truly critical issue, namely whether the children retained habitual residence in France immediately before 20 November 2013.
They had erroneously focused only on the childrens circumstances in Scotland, and had left out of account the agreement between their parents as to the limited duration of the stay in Scotland, and their parents intentions.
I do not find that submission persuasive.
The Extra Division proceeded on the basis that the stay in Scotland was originally intended to be for the 12 months maternity leave, that much being uncontroversial.
They therefore assumed, in the fathers favour, that the stay in Scotland was originally intended to be of limited duration.
Their remark that the real issue was whether there was a need for a longer period than four months in Scotland, before it could be held that the childrens habitual residence had changed, followed immediately upon their statement: If the salient facts of the present case are approached in accordance with the guidance summarised earlier, the key finding of the Lord Ordinary is that the children came to live in Scotland.
In other words, following the childrens move with their mother to Scotland, that was where they lived, albeit for what was intended to be a period of 12 months.
Their life there had the necessary quality of stability.
For the time being, their home was in Scotland.
Their social life was there.
Their family life was predominantly there.
The longer time went on, the more deeply integrated they had become into their environment in Scotland.
In that context, the question the Extra Division asked themselves did not indicate any error of approach.
Nor did their answer: For our part, in the whole circumstances we would view four months as sufficient.
The Extra Division therefore considered the evidence on a proper understanding of the nature of habitual residence.
In the light of the evidence before them, their conclusion that the children were habitually resident in Scotland at the material time is one which they were entitled to reach.
Other issues
Counsel for the mother took the opportunity of this appeal to raise the question whether there had been any wrongful retention of the children in Scotland.
It was argued that the bringing of the residence proceedings did not amount, implicitly or otherwise, to a wrongful retention within the meaning of the Hague Convention.
That issue was not raised in the courts below, and it does not arise for decision by this court: given the conclusion that the children were habitually resident in Scotland at the material time, they cannot have been wrongfully retained there.
There was also discussion in the courts below of the question, under article 13 of the Hague Convention, whether the father had consented to the childrens retention in Scotland.
Given my conclusion on the issue of habitual residence, that question also does not arise, and need not be considered.
Conclusion
For these reasons, I would dismiss the appeal.
| UK-Abs | This appeal concerns the application of Article 3 of the Hague Convention on the Civil Aspects of International Child Abduction (the Convention).
Under Article 3 it is unlawful to remove or retain a child in breach of rights of custody attributed to a person under the law of the state in which the child was habitually resident immediately before removal or retention.
This case concerns two small children, born and raised in France, who were brought to Scotland by their mother in July 2013 with the consent of their father, who remained in France.
The mother and children were to live in Scotland for the period of about a year.
In November 2013 the relationship between the parents ended.
On 20 November 2013 the mother commenced proceedings in which she sought a residence order in respect of the children and an interdict against the father removing them from Scotland.
The father argued that the initiation of those proceedings was a wrongful retention within the meaning of the Convention on the basis that the children were habitually resident in France immediately before proceedings commenced.
The Outer House of the Court of Session concluded that the children were still habitually resident in France on 20 November 2013.
This judgment was based on the fact that the move to Scotland had not been intended by both parents to be permanent.
The Inner House of the Court of Session reversed the Outer Houses decision on the basis that shared parental intention to move permanently to Scotland was not an essential element in any alteration of the childrens habitual residence.
The Inner House concluded that the children were habitually resident in Scotland at the material time.
The father appealed to the Supreme Court on the basis that the Outer House had been correct, and that the Inner House had in any event erred in its approach.
The mother argued that there had in any event been no wrongful retention.
The Supreme Court unanimously dismisses the appeal.
The Court considers that, for the purposes of habitual residence, the stability of residence, rather than its degree of permanence, is important.
There is no requirement that the child should have been resident in the country in question for a particular period of time or that one or both parents intend to reside there permanently or indefinitely.
As the Court has previously held in a series of cases, habitual residence is a question of fact which requires an evaluation of all relevant circumstances [16].
In determining habitual residence, the focus is upon the situation of the child, with the intentions of the parents being merely one of the relevant factors.
It is necessary to assess the degree of the integration of the child (or, in the case of an infant or young child, the degree of integration of those on whom the child is dependent) into a social and family environment in the country in question.
There is no rule that one parent cannot unilaterally change the habitual residence of a child [17].
In the present case, the children were habitually resident in Scotland within the meaning of the Convention.
The absence of a joint parental intention to live permanently in Scotland was not decisive, nor was an intention to live in a country for a limited period inconsistent with becoming habitually resident there.
The important question is whether the residence has the necessary quality of stability, not whether it is necessarily intended to be permanent [21].
Following the childrens move with their mother to Scotland, their life there had the necessary quality of stability.
Their home was Scotland for the time being, their social life and much of their family life was there.
The longer time went on, the more integrated they became into their environment in Scotland [23].
Given this conclusion, the question of wrongful retention did not arise [25].
|
This appeal is concerned with the interpretation of a solicitors professional indemnity insurance policy (the Policy) written by AIG Europe Ltd (AIG).
It raises a legal question of general public importance both because it concerns a term of an insurance policy, which is, or is similar to, terms in all professional indemnity insurance policies for solicitors in England and Wales, and also because it is important to the business model by which many solicitors have funded litigation since state funded legal aid for civil cases was significantly reduced.
As described more fully below, the respondent, Impact Funding Solutions Ltd (Impact) entered into an arrangement with solicitors, Barrington Support Services Ltd (Barrington), by which Impact, by entering into loan agreements with Barringtons clients, provided funds to Barrington to hold on behalf of its clients and to use to make disbursements in the conduct of its clients litigation in pursuit of damages for industrial deafness.
Barrington failed to perform its professional duties towards its clients in the conduct of litigation, both through its failure adequately and timeously to investigate the merits of their claims and also through the misapplication of funds provided by Impact, and so breached its duty of care to them.
Barrington thereby put itself in breach of a warranty in its contract with Impact that it would perform its professional duties towards its clients.
Barringtons clients were not able to repay their loans.
Impact sought to recover from Barrington the losses which it suffered on those loans by seeking damages for the breach of the warranty.
In an admirable judgment dated 30 May 2013, His Honour Judge Waksman QC awarded Impact damages of 581,353.80, which represented the principal elements of the loans which would not have been made if Barrington had not breached its contract with Impact.
On Barringtons insolvency, Impact seeks in this action to recover those losses from Barringtons professional indemnity insurers, AIG, under the Third Parties (Rights against Insurers) Act 1930.
In another impressive judgment dated 13 December 2013 His Honour Judge Waksman QC analysed the nature of the arrangements between Impact and Barrington and, construing the words of the Policy, held that Impacts claim against AIG for an indemnity failed.
Impact appealed to the Court of Appeal.
In a judgment dated 3 February 2015 the Court of Appeal, [2015] 4 All ER 319; [2016] Bus LR 91 allowed the appeal.
The Court of Appeal, by standing back from the detail and asking itself what was the essential purpose of the exclusion clause in question, concluded that the loans which Impact gave to cover disbursements in intended litigation were inherently part of the solicitors professional practice and that the liabilities which Barrington incurred under its warranties to Impact were liabilities professionally incurred which came within the cover of the Policy.
AIG appeals to this court.
Impact supports the conclusion which the Court of Appeal reached.
It refers to the wide terms of the cover (para 8 below) and submits that the subsequent exclusions (para 10 below) should be construed strictly.
In particular, the fact that Barrington obtained a commercial benefit from its agreement with Impact did not mean that Impact was providing services to Barrington within the terms of the exclusion.
I do not accept that this is the correct way to read the exclusion clause in this insurance contract and set out my reasons below.
Questions of construction
In determining the appeal, the court has, first, to construe the relevant terms of the Policy against its factual matrix and, secondly, to construe the relevant terms of the disbursements funding master agreement (DFMA) between Impact and Barrington once again against its factual matrix.
This approach to construction is well established.
The court looks to the meaning of the relevant words in their documentary, factual and commercial context: Rainy Sky SA v Kookmin Bank [2011] 1 WLR 2900, para 21 per Lord Clarke of Stone cum Ebony; Arnold v Britton [2015] AC 1619, para 15 per Lord Neuberger of Abbotsbury.
As I see no ambiguity in the way that the Policy defined its cover and as the exclusion clause reflected what The Law Society of England and Wales as the regulator of the solicitors profession had authorised as a limitation of professional indemnity cover, I see no role in this case for the doctrine of interpretation contra proferentem.
As Lindley LJ stated in Cornish v Accident Insurance Co Ltd (1889) 23 QBD 453, 456: in a case of real doubt, the policy ought to be construed most strongly against the insurers; they frame the policy and insert the exceptions.
But this principle ought only to be applied for the purpose of removing a doubt, not for the purpose of creating a doubt, or magnifying an ambiguity, when the circumstances of the case raise no real difficulty.
The extent of AIGs liability is a matter of contract and is ascertained by reading together the statement of cover and the exclusions in the Policy.
An exclusion clause must be read in the context of the contract of insurance as a whole.
It must be construed in a manner which is consistent with and not repugnant to the purpose of the insurance contract.
There may be circumstances in which in order to achieve that end, the court may construe the exclusions in an insurance contract narrowly.
The judgment of Carnwath LJ in Tektrol Ltd (formerly Atto Power Controls Ltd) v International Insurance Co of Hanover Ltd [2006] 1 All ER (Comm) 780, to which counsel for Impact referred, is an example of that approach.
But the general doctrine, to which counsel also referred, that exemption clauses should be construed narrowly, has no application to the relevant exclusion in this Policy.
An exemption clause, to which that doctrine applies, excludes or limits a legal liability which arises by operation of law, such as liability for negligence or liability in contract arising by implication of law: Photo Production Ltd v Securicor Transport Ltd [1980] AC 827, 850 per Lord Diplock.
The relevant exclusion clause in this Policy is not of that nature.
The extent of the cover in the Policy is therefore ascertained by construction of all its relevant terms without recourse to a doctrine relating to exemption clauses.
The insurance policy
AIG wrote the Policy for Barrington for the period from 1 October 2009 to 30 September 2010.
The cover was stated in broad terms.
It provided: The Insurer will pay on behalf of any Insured all Loss resulting from any Claim for any civil liability of the Insured which arises from the performance of or failure to perform Legal Services.
Legal Services were defined broadly to include the provision of services
in private practice as a solicitor or Registered European Lawyer .
On p 6 of the Policy there is a clause which sets out what is excluded from cover.
It provides so far as relevant: This policy shall not cover Loss in connection with any Claim or any loss: arising out of, based upon, or attributable to any: (i) trading or personal debt incurred by an Insured, (ii) breach by any Insured of terms of any contract or arrangement for the supply to, or use by, any Insured of goods or services in the course of providing Legal Services; and (iii) guarantee, indemnity or undertaking by any Insured in connection with the provision of finance, property, assistance or other benefit or advantage directly or indirectly to that Insured. (emphasis added)
Solicitors in England and Wales were required to take out and maintain professional indemnity insurance in accordance with the Solicitors Indemnity Insurance Rules 2009 (the 2009 Rules), which were made by The Law Society in exercise of a statutory power under section 37 of the Solicitors Act 1974.
There was thus a scheme of compulsory professional indemnity insurance which Parliament had authorised.
The Law Society in Appendix 1 of the 2009 Rules laid down the minimum terms and conditions of professional indemnity insurance for solicitors and registered European Lawyers in England and Wales (the Minimum Terms).
The Minimum Terms defined the scope of cover, so far as relevant, in these terms: The insurance must indemnify each Insured against civil liability to the extent that it arises from Private Legal Practice
in connection with the Insured Firms Practice
Clause 6 provided: trading or personal debt of any Insured; or The insurance must not exclude or limit the liability of the Insurer except to the extent that any Claim or related Defence Costs arise from the matters set out in this clause 6. 6.6 Any: (a) (b) breach by any Insured of the terms of any contract or arrangement for the supply to, or use by, any Insured of goods or services in the course of the Insured Firms Practice; or (c) guarantee, indemnity or undertaking by any particular Insured in connection with the provision of finance, property, assistance or other benefit or advantage directly or indirectly to that insured.
The Policy provides that: In any dispute in connection with the terms, conditions, exclusion or limitations it is agreed and understood that the Minimum Terms and Conditions will take precedence over any terms, conditions, exclusions or limitations contained herein.
But, as can be seen by comparing the texts in paras 8 and 10 above, the exclusion is substantially the same in the Policy and in the Minimum Terms and the minor differences in drafting are of no significance.
Lord Brightman in Swain v The Law Society [1983] 1 AC 598, 618 described the context of the statutory scheme of compulsory insurance: In exercising its power under section 37 The Law Society is performing a public duty, a duty which is designed to benefit, not only solicitor principals and their staff, but also solicitors clients.
The scheme is not only for the protection of the premium paying solicitor against the financial consequences of his own mistakes, the mistakes of his partners and the mistakes of his staff, but also, and far more importantly, to secure that the solicitor is financially able to compensate his client.
Indeed, I think it is clear that the principal purpose of section 37 was to confer on The Law Society the power to safeguard the lay public and not professional practitioners, since the latter can look after themselves.
Thomas J took the same view in Kumar v AGF Insurance Ltd [1999] 1 WLR 1747, 1752A C, where he said that one must approach the construction of this sort of professional indemnity policy against the regulatory background which aimed to make sure that protection was provided to the clients of solicitors.
As a general rule, solicitors, when performing work on behalf of their clients, owe no duty of care to third parties whose interests are affected by that work: White v Jones [1995] 2 AC 207, 256C D per Lord Goff of Chieveley.
It is, nonetheless, well known and not disputed in this case that the professional indemnity policy protected not only clients of the solicitors but also those third parties to whom solicitors have been held to owe duties of care in their performance of legal services and to whom they have incurred liability in negligence, such as those who have acted in reliance on negligent misstatements or beneficiaries disappointed as a result of negligence in the preparation or execution of a will.
In addition, as Lord Toulson points out (para 42), solicitors professional liability may include undertakings given to third parties in the course of acting for their clients.
A reader of the Policy ascertains the boundaries of AIGs liability by construing the broad statement of cover (para 8 above) and also the broad exclusions (para 10 above) in the context of the regulatory background.
The exclusion in para 10 above requires the reader to look to the category of the claim and, in this case, ask whether the claim or loss arises out of, is based upon, or is attributable to a breach by Barrington of a term or terms of a contract or arrangement for the supply of services to it in the course of its provision of legal services.
Prima facie, if Impacts cause of action was a breach of a term of a contract or arrangement by which Impact supplied such services to Barrington, the clause would exclude cover, notwithstanding that Impacts loss could be said to have arisen from Barringtons failure to perform legal services for its clients.
Two questions therefore arise: the first is whether the contract between Impact and Barrington was of such a nature; the second is whether it is necessary to imply a restriction into the relevant exclusion clause limiting its effect in order to make it consistent with the purpose of the Policy.
The Disbursements Funding Master Agreement
Barrington entered into two successive DFMAs with Impact, dated 8 June 2007 and 10 March 2008.
The relevant terms of the two agreements were in substance the same.
Like Judge Waksman and the Court of Appeal, I refer in my discussion below to the 2008 DFMA.
In order to understand the provisions of the DFMA it is necessary to present that contract in its commercial context.
It formed part of a scheme by which clients who did not qualify for legal aid and who could not otherwise afford to litigate were provided with access to legal services to pursue claims without exposing them to financial risk.
Normally a client who has not got legal aid has to pay (a) fees to the instructed solicitor for legal services, (b) that solicitors disbursements, and (c) in the event that the claim fails, the other sides recoverable legal costs.
A significant proportion of (a) and (b) may be recovered from the other side if the claim succeeds.
But the failure of the claim is a serious financial risk.
Under the scheme, the instructed solicitors fees were covered by a conditional fee agreement (CFA), which was authorised initially by section 58 of the Courts and Legal Services Act 1990, by which the client paid for the lawyers work only if the case was won and the client received compensation.
The client, by taking out a legal expenses insurance policy, obtained indemnity against the other sides legal costs, his or her own solicitors disbursements and the premium paid on the policy in the event that the claim failed.
While the claim was being pursued, the solicitor would have to disburse funds, for example to obtain GP records and medical reports.
Unless otherwise funded, the solicitor had either to obtain funds in advance from the client or spend his or her own funds and later obtain reimbursement from the client.
Impact provided funding for such disbursements through the DFMA.
Judge Waksman described how the funding scheme operated in paras 5 to 18 of his judgment dated 13 December 2013.
I can therefore summarise the arrangements briefly.
Claims management companies identified potential claimants.
A company, which was associated with Impact, operated a data management and administration system called Veracity.
Claims management companies put details of potential claims onto Veracity and solicitors, including Barrington, would access Veracity to assess particular claims and either accept or reject a claim.
Before accepting a claim, solicitors ought to have verified the information provided through Veracity and investigated the merits of the claim so as to enable them to enter into a CFA and to enable legal expenses insurance to be obtained.
If the solicitors provisionally accepted a claim, Veracity required them to indicate whether they required Impact to provide a loan to the client to cover disbursements and the premium on the legal expenses insurance.
The solicitors provided the relevant details so that Veracity could calculate the amount of the loan.
Veracity then automatically generated a draft loan agreement and sent an email to the relevant claims management company instructing them to progress the matter.
The claims management company, as the solicitors agent, took a package of documents for the lay client to sign.
The pack included an engagement letter, the CFA release forms, data protection documentation, the loan agreement with Impact and the proposal for the legal expenses insurance.
Once executed, the documents would be sent to the solicitors who would forward the executed loan agreement to Impact.
Once the solicitors confirmed that they accepted the claim, the legal expenses insurers were notified that the claim should be put on cover.
On obtaining the insurers confirmation, the solicitors would draw down Impacts loan to pay disbursements and to pay the balance into the solicitors client account to fund future disbursements.
The legal expenses insurance policies required (a) that the claim had to be assessed as having a reasonable prospect of success, which in one policy was stated as 55%, and (b) that there remained in force a valid CFA.
This arrangement was reflected in the first recital of the DFMA which stated: [Impact] facilitates the presentation of PI claims to A. solicitors through its online claims introduction and tracking service, Veracity and provides funding for disbursements under Credit Agreements in respect of those PI Claims.
In clause 2.1 Impact offered credit facilities to clients selected by Barrington in its discretion, up to a specified aggregate sum, but, being a framework agreement, did not commit Impact to advance any sums.
If Impact advanced sums to a client, Barrington was obliged by clause 2.2 to pay an administration fee to Impact on Impacts execution of each credit agreement and also a quarterly monitoring fee.
The Administration Fee was defined in the DFMA (clause 1) as: a fee in respect of each Credit Agreement in the sum as notified by [Impact] to the Firm from time to time and payable by the Firm, together with Value Added Tax (if applicable) by way of remuneration for the services of [Impact].
The DFMA contained undertakings by each party about how each would behave during the currency of the agreement.
Impact founds its claim against Barrington on clauses 6.1 and 13.1 of the DFMA.
In clause 6.1 each party undertook that: it shall comply with all applicable laws, regulations and codes of practice from time to time in force and each party indemnifies the other against all loss, damages, claims, costs and expenses which the other party may suffer or incur as a result of any breach by it of this undertaking.
In clause 13.1 Barrington represented and warranted to Impact that: the services provided or to be provided by the Firm to the Customer shall be provided to the Customer in accordance with their agreement with the Customer as set out in the relevant Conditional Fee Agreement.
Judge Waksman held that Barrington, by failing to give advice and properly to assess the merits of the compensation claims, breached those provisions of the DFMA.
That finding has not been challenged.
Barrington also undertook personal liability to repay the loans which Impact made to its clients.
In clause 7.1 Barrington undertook to pay to Impact the sums due by the client under the credit agreement out of the clients damages under the claim or (in the event of the claim failing) out of the legal expenses insurance.
More onerously, in clause 7.2 Barrington undertook to pay to Impact all sums due by the customer under the credit agreement (ie the client) if the customer breached the credit agreement, if circumstances arose that entitled Impact to terminate the credit agreement or if the credit agreement was unenforceable as a result of an act or omission by Barrington.
The provision of loans to Barringtons clients as envisaged by the DFMA was undoubtedly the provision of financial services to the clients.
But were the DFMA and the resulting loans to clients also a service which Impact provided to Barrington? In my view they were, for the following four reasons.
First, Barrington contracted as a principal with Impact and not as agent for its clients.
A contract between two principals might have provided for a service to be given to a third party alone.
But that is not what happened in this contract.
This is because, secondly, Barrington clearly obtained a benefit from the funding of its disbursements.
Solicitors are personally responsible for paying the persons whom they instruct to do work or provide services in relation to a particular case, whether or not they receive funds from their clients.
But for that funding from Impact, Barrington would have had to obtain funds from its clients, who might not have been able to afford to pay, thus making pursuit of the claim impossible, unless Barrington itself funded the disbursements in the hope of recovering its outlays through success in the claim.
Impacts loans were available to fund not only the disbursements but also the premiums on the legal expenses insurance, thereby enabling the litigation to be fully funded.
Thirdly, this was not an incidental or collateral benefit to Barrington derived from a service provided to its clients but was part of a wider arrangement which I have described in paras 20 22 above, by which solicitors were able to take up claims, which their clients could not otherwise fund, and earn fees and success fees if the claim succeeded.
Fourthly, it was a service for which Barrington paid the administration fee under clause 2 of the DFMA, undertook the onerous obligation to repay Impact if a client breached the credit agreement (clause 7.2), and entered into the obligation under clause 6.1 and gave the warranty in clause 13.1, on which Impact won its claim for damages against Barrington.
I therefore conclude that the DFMA was a contract for the supply of services to Barrington.
Impact contracted to supply those services to Barrington in the course of Barringtons provision of legal services.
Impacts claim against Barrington arose out of the latters breach of that contract.
Prima facie, therefore, the exclusion which I have set out in para 10 above applies to defeat Impacts claim against AIG, unless there is a basis for implying a restriction into that exclusion.
I turn then to that question.
Can one imply a restriction on the exclusion?
I see no basis for implying additional words into the exclusion in order to limit its scope.
In Marks and Spencer plc v BNP Paribas Securities Services Trust Co (Jersey) Ltd [2016] AC 742 this court confirmed that a term would be implied into a detailed contract only if, on an objective assessment of the terms of the contract, the term to be implied was necessary to give the contract business efficacy or was so obvious that it went without saying (paras 15 31 per Lord Neuberger).
This court also held that the express terms of the contract must be interpreted before one can consider any question of implication (para 28).
In my view, it cannot be said that the Policy would lack commercial or practical coherence if a term restricting the scope of the exclusion were not implied.
I would allow the appeal.
In the present case it is fairly said that the breach of duty in the warranty on which Impact relies is a breach of duty by Barrington to its clients.
But Impacts claim is not a claim which is derived from the clients claims.
Defences which Barrington might be able to plead against its clients cannot be advanced against Impact.
For example, if a client were careless in informing Barrington of the circumstances of the injury on which his or her claim was based, and Barrington also was negligent in failing properly to investigate and prosecute the claim, which then failed, the clients claim might be met with a defence of contributory negligence.
No such defence would arise out of those circumstances in relation to a claim by Impact against Barrington.
Thus Impacts entitlement under the warranty would not be the same as the clients claim in all cases and might be larger in some cases.
In short, Impacts cause of action under the DFMA is an independent cause of action.
Excluding such a claim creates no incoherence in the Policy, as it is the combination of the opening clause and the exclusions that delimits AIGs contractual liability.
Indeed, it would be consistent with the purpose of the Policy suggested by the context, which I discussed in paras 16 and 17 above, if such a claim were excluded from that liability.
Conclusion
LORD TOULSON: (with whom Lord Mance, Lord Sumption and Lord Hodge agree)
Under the Third Parties (Rights against Insurers) Act 1930, Impact is entitled to enforce any right of indemnity which Barrington had against AIG in respect of the judgment which Impact obtained against Barrington.
Impacts argument that Barrington was entitled to such indemnity under its professional liability policy, which AIG underwrote, is founded on two propositions.
First, it is argued that the clause relied on by AIG to deny liability is an exclusion clause, which must be narrowly construed in accordance with ordinary principles of contract law.
Secondly, it is argued that the exclusion is well capable of being interpreted in a way which does not exclude cover under the policy.
Both points are important.
The first raises a point of general importance about the proper approach to the interpretation of a professional liability policy which is of a familiar kind.
The second is important because the particular clause is a standard form of wording in solicitors professional liability policies.
I take the points in turn.
The fact that a provision in a contract is expressed as an exception does not necessarily mean that it should be approached with a pre disposition to construe it narrowly.
Like any other provision in a contract, words of exception or exemption must be read in the context of the contract as a whole and with due regard for its purpose.
As a matter of general principle, it is well established that that if one party, otherwise liable, wishes to exclude or limit his liability to the other party, he must do so in clear words; and that the contract should be given the meaning it would convey to a reasonable person having all the background knowledge which is reasonably available to the person or class of persons to whom the document is addressed. (See, among many authorities, Dairy Containers Ltd v Tasman Orient Line CV [2005] 1 WLR 215, para 12, per Lord Bingham.) This applies not only where the words of exception remove a remedy for breach, but where they seek to prevent a liability from arising by removing, through a subsidiary provision, part of the benefit which it appears to have been the purpose of the contract to provide.
The vice of a clause of that kind is that it can have a propensity to mislead, unless its language is sufficiently plain.
All that said, words of exception may be simply a way of delineating the scope of the primary obligation.
The Law Commission and the Scottish Law Commission gave a homely illustration in their joint report on Exemption Clauses, 1975, Law Com No 69, para 143: If a decorator agrees to paint the outside woodwork of a house except the garage doors, no one can seriously regard the words of exception as anything but a convenient way of defining the obligation; it would surely make no difference if the promise were to paint the outside woodwork with a clear proviso that the contractor was not obliged to paint the garage doors, or if there were a definition clause brought to the promisees attention saying that outside woodwork did not include the garage doors.
Such provisions do not deprive the promisee of a right of a kind which social policy requires that he should enjoy, nor do they give the promisor the advantage of appearing to promise more than he is in fact promising.
This approach was reflected in the Law Commissions Bill which passed into law as the Unfair Contract Terms Act 1977.
Section 3 brought under statutory control, in cases where one party deals with the other as a consumer or on the others standard terms of business, a term which excludes or restricts the others liability for breach, or a term which entitles the other to render a contractual performance substantially different from that which was reasonably expected of him.
The Act does not apply to insurance contracts (Schedule 1, paragraph 1), but it is nonetheless instructive to note the types of exemption clause which the Law Commissions saw as potentially suspect in consumer contracts.
In the case a non consumer contract (with which we are concerned, albeit that consumer protection was an important end purpose), Photo Production Ltd v Securicor Transport Ltd is authority that business people capable of looking after their own affairs should be free between themselves to apportion risks as they choose: [1980] AC 827, 843 (Lord Wilberforce) and 851 (Lord Diplock).
That brings me to the contract in the present case.
The policy schedule and the policy wording are both headed in large letters Solicitors Professional Liability.
Lord Hodge has set out its material terms, but it is convenient to repeat the key parts.
Under the heading Cover appear the words: The Insurer will pay on behalf of any Insured all Loss resulting from any Claim for any civil liability of the Insured which arises from the performance or failure to perform Legal Services (which are themselves broadly defined).
Under the heading Exclusions a number of heads of claims or loss are excluded: bodily/psychological injury; directors and officers liability; employment breaches and discrimination; fines and penalties; fraud or dishonesty; partnership disputes; prior claims; property damage; trade debts; and war/terrorism.
We are concerned with the clause 6.6, which in the minimum terms is headed Debts and Trading Liabilities.
These are defined to include any claim or loss arising out of: breach by any Insured of the terms of any contract or arrangement for the supply to, or use by, any Insured of goods or services in the course of providing Legal Services.
There are two points to highlight about the nature and purpose of the policy.
One is that the relevant terms replicate the minimum terms of the cover which Barrington was required to maintain under the Solicitors Indemnity Insurance Rules 2009.
As the House of Lords recognised in Swain v The Law Society [1983] 1 AC 598, 610, the paramount purpose of The Law Society being given statutory power to require solicitors to maintain insurance cover against professional liability was the protection of that section of the public that makes use of the services of solicitors (Lord Diplock).
The second, and related point, is that the policy describes itself as a professional liability policy.
These matters are important when considering its scope.
What sort of liabilities are commonly understood as professional liabilities of solicitors or, in Lord Diplocks language, what is the sector of the public that makes use of their services? First, and most obviously, there are the liabilities which solicitors may incur to their clients as a result of their professional retainer.
Secondly, in connection with acting for their clients, they may give undertakings to third parties.
As officers of the court solicitors are expected to abide by undertakings given by them professionally, and if they do not do so they may be called upon summarily to make good their defaults (John Fox v Bannister, King & Rigbeys (Note) [1988] 1 QB 925, 928, per Nicholls LJ).
That is plainly a form of professional liability.
Exceptionally, there are also other cases where a solicitor has been held liable to a quasi client, as in White v Jones (the disappointed beneficiary under a will) [1995] 2 AC 207.
There is a detailed treatment of the scope of solicitors professional liability to third parties in Jackson & Powell on Professional Liability, 2011, 7th ed, paras 11 043 & ff.
It is a developing topic and the boundaries are not entirely clear.
In laying down the minimum terms of professional liability cover required to be maintained by solicitors, it would have been possible for the drafting committee to have attempted to structure them by defining in positive terms the scope of a solicitors professional liability for which indemnity cover was required, but it opted to delineate the liability against which solicitors should be required to maintain cover for public protection by a process of elimination, which involved combining an insuring clause far broader than any ordinary understanding of a solicitors professional liability with a list of exclusions.
It is important to recognise that list for what it is, namely an attempt to identify the types of liability against which solicitors are not required by law to be covered by way of professional liability insurance.
I would reject the first stage of Impacts argument about the way in which this policy and the list of exceptions are to be approached.
It treats the minimum terms set by the Law Society as requiring, through the opening clause, a far broader scope of cover than would have been necessary for the protection of clients and third parties to whom they may undertake professional responsibilities, subject only to exceptions which (it is argued) are to be construed as narrowly as possible.
That involves a misapprehension of the true nature and purpose of the minimum terms.
This brings me to the second point, which is the meaning of the language of clause 6.6.
The Court of Appeal approached the clause by saying that it was necessary to stand back from it and consider its essential purpose.
I do not disagree, but I would make two further comments.
First, the essential purpose of the clause has to be seen in the context of the essential purpose of the policy, as to which I have expressed my view.
Secondly, there is substance in AIGs complaint that the court omitted to grapple with the language of the clause.
I agree with Lord Hodge that the DFMA was a contract for the provision of services to Barrington, for the reasons given by him and by Judge Waksman QC in his impressive judgment.
I would add that this conclusion to my mind accords well with the essential purpose of clause 6.6.
Barrington and Impact made a commercial agreement as principals for their mutual benefit, as well as for the benefit of Barringtons clients.
Impact was not a client or quasi client of Barrington, and the promise by Barrington which led to the judgment obtained by Impact was part of the commercial bargain struck by them.
It did not resemble a solicitors professional undertaking as ordinarily understood, and it falls aptly within the description of a trading liability which the minimum terms were not intended to cover.
For those reasons, as well as the reasons given by Lord Hodge with which I fully agree, I too would allow the appeal and restore the judgment of Judge Waksman QC.
LORD CARNWATH: (dissenting)
The issue in this appeal is a narrow issue of construction of an exclusion clause in a solicitors professional indemnity policy.
The facts have been set out by Lord Hodge.
As he explains, the arrangements between the funder (Impact) and the solicitors (Barrington) were governed by two Disbursement Funding Master Agreements (DFMAs).
The DFMAs were in effect framework agreements providing the machinery for the making of loans to clients of Barrington to meet disbursements in litigation to be funded by CFAs.
In breach of its duties to its clients, and consequently also to Impact under the DFMAs, Barrington failed to exercise proper care in selecting cases, with the result that the disbursements were irrecoverable, either from the defendants or the ATE or LEI insurers.
Barrington is now in liquidation.
Having obtained judgment against it for 581,353.80, Impact has brought proceedings against Barringtons insurers, AIG Europe Ltd (AIG) under the Third Parties (Rights Against Insurers) Act 1930.
The short question is whether the DFMAs fell within the expression any contract or arrangement for the supply to, or use by, any insured of goods or services in the course of (Barringtons) Practice under the exclusion clauses in the AIG policy.
It is common ground that Barringtons liability to repay the loans made by Impact by way of disbursements fell in principle within the general cover provided by clause 1 of that policy.
The question is whether that liability is excluded by sub clause 6 of clause 6 of the Minimum Terms applicable to the policy: 6.
The insurance must not exclude or limit the liability of the insurer except to the extent that any claim or related Defence Costs arise from the matters set out in this clause 6 6.6 Debts and Trading Liabilities Any trading or personal debt of any insured, or (a) (b) breach by any insured of the terms of any contract or arrangement for the supply to, or use by, any insured of goods or services in the course of the Insured Firms Practice (c) guarantee, indemnity or undertaking by any particular Insured in connection with the provision of finance, property, assistance or other benefit or advantage directly or indirectly to that Insured.
There is a similar exclusion clause in the policy itself under the heading Trade Debts.
Nothing turns on any difference between the two clauses.
In the High Court, His Honour Judge Waksman QC, held that the exclusion applied.
He accepted that Impact did not provide financial services to Barrington: A loan might properly be described as a kind of financial service.
But it cannot be said that by the Funding Agreement Impact made, or agreed to make, loans to Barrington, for the borrowers were the lay clients even if Barrington agreed to guarantee repayment by them.
Nor can it be said that the loan moneys were for the use of Barrington in any real sense.
The fact that Barrington was the conduit for the moneys and distributed them for the purpose of paying disbursements and insurance premiums on behalf of the clients does not mean that the moneys were for its use in any beneficial sense. (para 49) However, he thought that the overall facility provided to the firm could properly be described as a service within the meaning of the clause: Impact was making available to Barrington a valuable facility at Barringtons option, namely claims whose disbursement element (including the all important ATE insurance) was fully funded leaving the solicitors to provide their services under the CFA.
The fact that the funding is made by way of loans to the clients does not affect the fact that the overall facility is provided to Barrington and it is properly described as a service and one which, if used, enables it to trade by bringing in more cases. (para 54)
Longmore LJ (with the agreement of the other members of the Court of Appeal) took a different view.
He held that the purpose of the exclusion was more limited: To my mind the essential purpose of the exclusion is to prevent insurers from being liable for what one might call liabilities of a solicitor in respect of those aspects of his practice which affect him or her personally as opposed to liabilities arising from his professional obligations to his or her clients.
Thus if a solicitor incurs liability to the supplier of, for example, a photocopier, insurers do not cover that liability nor would they cover obligations to a company providing cleaning services for the solicitors offices.
If the office premises are leased by the partnership or held subject to a mortgage to a bank, the obligations under such lease or mortgage (or any guarantee of such lease or mortgage) would not be covered either.
It is these sort of personal obligations (which may nevertheless be part of a solicitors practice as a solicitor) which are not intended to be covered.
These obligations are to be distinguished from the obligations which are incurred in connection with the solicitors duty to his clients which are intended to be covered. (para 19) The obligations arising out of the loans made to cover disbursements in intended litigation were essentially part and parcel of the obligations assumed by a solicitor in respect of his professional duties to his client rather than obligations personal to the solicitor (para 21), and not therefore within the scope of the exclusion.
Mr Cannon QC for AIG submits that Longmore LJ was wrong to depart from the reasoning of the trial judge.
He asked himself the wrong question.
The key question was whether Barrington received services under the DFMAs, not the nature of their obligations to Impact or to their clients.
He adopted an intuitive approach to what he thought to be the purpose of the agreement, rather than interpreting and applying the words of the agreement itself.
Mr Cannon points to the following valuable benefits, or services, received by Barrington each time a loan was made to a client: (i) payment of such part of the loan as it directed Impact to pay to third party suppliers (ie to persons who were owed money in respect of disbursements which had already been incurred) (clause 3.1); (ii) payment of the balance into Barringtons client account where it was to be used to fund disbursements (clauses 3.2 and 4.l(a)); and (iii) the ability to take on the clients case and so to earn fees.
He emphasises that a solicitor is liable to pay disbursements whether or not he is put in funds by his client.
Part of the service provided to Barrington was the ability to take on the case without having to fund the disbursements or take the financial risk that they would not be recovered.
For Impact, Mr Dutton QC submits that an exclusion clause is to be construed strictly (citing Lewison Interpretation of Contracts 6th ed (2015), para 12.04, and, in relation to insurance exclusion clauses, Tektrol Ltd (formerly Atto Power Controls Ltd) v International Insurance Co of Hanover Ltd [2005] EWCA Civ 845; [2006] 1 All ER (Comm) 780).
Longmore LJ was right to treat the exclusion as directed to liabilities arising out of contracts in respect of goods or services utilised by Barrington in the course of its practice, that is for the purpose of carrying out legal work for its client.
Typical examples would be contracts for supply of photocopiers or office cleaning services.
The mere fact that Barrington derived a commercial benefit from the DFMA was not enough to bring it within the exclusion.
Of the three categories identified by Mr Cannon, the first two were funds provided to the clients not beneficially to Barrington.
As Judge Waksman rightly held, this was not affected by the fact that Barrington was the conduit for the money (para 49).
The third, Barringtons ability to take on the cases, was an incidental benefit of the DFMAs but not their purpose, and too general to come within the words of the exclusion.
Discussion
Interpretation of a contract turns on the meaning of the relevant words in their documentary, factual and commercial context (per Lord Neuberger, Arnold v Britton [2015] AC 1619, para 15).
It is a fair criticism of Longmore LJs judgment, with respect, that having stood back from the detail of the contract (para 19) he never returned to the actual words of the exclusion clause.
On the other hand, those words seen in context do in my view support a narrower approach than that taken by the judge.
The clause directs attention to the purpose of the contract or arrangement: what was it for, not what were its by products or its consequences.
Furthermore the word services does not stand alone.
The composite phrase goods or services implies that the services will be supplied to or used in the practice in a way comparable to that in which goods are supplied or used.
It is not enough that they are of benefit to the firm.
That view is reinforced by the contrast with the much wider words in the following sub clause: other benefit or advantage directly or indirectly to that Insured.
As to the three services identified by Mr Cannon, I agree with Mr Duttons response.
The essential service provided by the DFMA, as the judge found, was the provision of loans to Barringtons clients, not to Barrington.
No doubt, as Mr Cannon submits, it had the incidental benefits to Barrington of enabling it to take on cases and so earn fees, and of protecting it against potential default by its clients.
To that extent perhaps it can be seen, in the judges words, as a facility for Barrington, which can loosely be described as a service.
But that was not the essential purpose of the contract, nor was it a service comparable in any way to the supply of goods or services for use in the practice.
There is a helpful parallel with Tektrol, relied on by Mr Dutton, in which the Court of Appeal had to interpret an exclusion clause referring to erasure loss distortion or corruption of information on computer systems caused deliberately by malicious persons.
It was held that the words did not cover loss of a software code as a result of the theft of the only computer on which it was stored.
Although the word loss taken on its own might have been wide enough to cover that event, the context, and the other words with which it was associated, showed that it was limited to loss due to interference by electronic means (noscitur a sociis: see paras 28 29, per Sir Martin Nourse).
In the same way in this clause the juxtaposition of goods and services, taken with the references to supply and use in the practice, suggests something more specific than a general facility or benefit such as that identified by the judge.
For completeness, I should mention to dismiss three points which were raised in oral argument: i) Whether the liabilities incurred by Barrington to Impact were different in kind from those incurred to the clients.
While the two are inevitably related, they are in principle separate causes of action.
In any event this issue throw no light on the issue in the appeal which is concerned with the purpose of the contract, rather than the characterisation of the liabilities which may arise under it. ii) The administration fee.
Under clause 2.2, on the signing of a credit agreement with a client, Barrington was required to pay an administration fee to Impact.
This was defined as a fee by way of remuneration for the services of (Impact) (clause 1.1).
It was faintly suggested that this might throw some light on whether the contract was for supply of a service under the exclusion.
This point was not raised in argument below, and the judge made no findings on it.
We were told by Mr Dutton that the administration fee was, as appears from the context, no more than a fee connected with the particular service of drawing up of the credit agreements.
In any event, it throws no light on the purpose of the contract as a whole, or whether the benefits enjoyed under it fell within the words of the exclusion. iii) Comparisons with the treatment of goods and services under VAT law.
The Court of Appeal invited submissions on whether any useful guidance could be drawn from cases concerning services to third parties under VAT law, (see now in Airtours Holidays Transport Ltd v Commissioners for Her Majestys Revenue and Customs [2016] 4 WLR 87).
That seems to me to introduce a further complication without any countervailing illumination.
Longmore LJ was right to conclude that, given the very different legal context, no assistance could be gained from that source.
In conclusion, in respectful disagreement with my colleagues, I would uphold
the decision of the Court of Appeal and dismiss the appeal.
| UK-Abs | Impact Funding Solutions (Impact) entered into a disbursements funding master agreement (DFMA) with solicitors, Barrington Support Services Ltd (Barrington), by which Impact, by entering into loan agreements with Barringtons clients, provided funds to Barrington to hold on behalf of its clients and to use to make disbursements in the conduct of its clients litigation in pursuit of damages for industrial deafness.
Barrington failed to perform its professional duties towards its clients in the conduct of the litigation, by not investigating the merits of their claims adequately and through the misapplication of funds provided by Impact, breaching their duty of care to them.
Barrington thereby put itself in breach of a warranty in its contract with Impact.
Barringtons clients were not able to repay their loans.
Impact sought to recover from Barrington the losses which it suffered on those loans by seeking damages for the breach of the warranty.
On 30 March 2013, the High Court awarded Impact damages of 581,353.80, which represented the principal elements of the loans that would not have been made if Barrington had not breached its contract with Impact.
On Barringtons insolvency, Impact seeks in this action to recover those losses from Barringtons professional indemnity insurers AIG Europe Ltd (AIG), under the Third Parties (Rights against Insurers) Act 1930.
The issue in the appeal concerns the construction of an exclusion clause in Barringtons professional indemnity policy (the Policy).
The relevant part of the exclusion clause provided that This policy shall not cover Loss in connection with any Claim or any loss: arising out of, based upon, or attributable to any breach by any Insured of terms of any contract or arrangement for the supply to, or use by, any Insured of goods or services in the course of providing Legal Services.
The question is whether the DFMA falls within the scope of this exclusion clause, and as a result, the Policy excludes cover in relation to Impacts cause of action.
On 13 December 2013, the High Court held that Impacts claim against AIG for an indemnity failed.
In a judgment dated 3 February 2015 the Court of Appeal allowed Impacts appeal.
AIG now appeals to the Supreme Court.
The Supreme Court allows AIGs appeal by a majority of 4 to 1.
Lord Hodge gives the lead judgment (with which Lord Mance, Lord Sumption and Lord Toulson agree).
Lord Toulson gives a concurring judgment (with which Lord Mance, Lord Sumption and Lord Hodge agree).
Lord Carnwath gives a dissenting judgment.
Questions of Construction The general doctrine that exemption clauses should be construed narrowly, has no application to the relevant exclusion in this Policy.
The extent of the cover in the Policy is therefore ascertained by construction of all its relevant terms without recourse to a doctrine relating to exemption clauses [7].
The insurance policy The boundaries of AIGs liability are ascertained by construing the broad statement of cover and also the broad exclusions in the context of the regulatory background [18].
Two questions arise: (i) whether the contract between Impact and Barrington was a contract by which Impact supplied services to Barrington in the course of Barringtons provision of legal services; and (ii) whether it is necessary to imply a restriction into the relevant Policy exclusion clause limiting its effect in order to make it consistent with the purpose of the Policy [18].
The DFMA and the resulting loans to Barringtons clients were a service which Impact provided to Barrington for four reasons.
Firstly, Barrington contracted as a principal with Impact and not as agent for its clients.
Secondly, Barrington clearly obtained a benefit from the funding of its disbursements.
Thirdly, this was not an incidental or collateral benefit to Barrington derived from a service provided to its clients, but was part of a wider arrangement.
Fourthly, it was a service for which Barrington paid the administration fee, undertook the onerous obligation to repay Impact if a client breached the credit agreement, entered into the obligation to indemnify Impact and gave the warranty to Impact on which Impact won its claim for damages against Barrington [29].
Therefore, the DFMA was a contract for the supply of services to Barrington [30, 46].
That conclusion accords well with the essential purpose of the Solicitors Indemnity Insurance Rules 2009 to protect the section of the public that makes use of the services of solicitors, the relevant clause in the 2009 Rules being substantially the same as the exclusion clause [46].
There is no basis for implying additional words into the exclusion in order to limit its scope.
Marks & Spencer plc v BNP Paribas Securities Services [2015] 3 WLR 1843 confirmed that a term would be implied into a detailed contract only if, on an objective assessment of the terms of the contract, the term to be implied was necessary to give the contract business efficacy or was so obvious it went without saying [31].
Impacts cause of action under the DFMA is an independent cause of action.
Excluding such a claim creates no incoherence in the Policy.
Indeed, it would be consistent with the purpose of the Policy of ensuring that protection was provided to the clients of solicitors if such a claim were excluded [32].
In a dissenting judgment, Lord Carnwath would have dismissed the appeal, finding that the essential service provided by the DFMA was the provision of loans to Barringtons clients, not to Barrington.
It may have had incidental benefits to Barrington, but that was not the essential purpose of the contract, nor was it a service comparable in any way to the supply of good or services for use in the practice [56].
|
The appellant Mark Golds was convicted by a jury of the murder of his partner.
He had admitted in court that he had killed her, and the sole issue at his trial had been whether he had made out the partial defence of diminished responsibility, and so fell to be convicted of manslaughter rather than of murder.
The law to be applied was section 2 of the Homicide Act 1957 after its recent revision by the Coroners and Justice Act 2009.
The issue is the correct approach to the statutory test of whether his abilities were in specified respects substantially impaired: see section 2(1)(b).
The appellant had attacked his partner with a knife at their home in front of her young children after a running argument which had taken place on and off throughout much of the day.
He had inflicted some 22 knife wounds together with blunt impact internal injuries.
He had a history of mental disorder leading to outpatient treatment and medication.
Two consultant forensic psychiatrists gave evidence that there was an abnormality of mental functioning arising from a recognised medical condition, although they disagreed what that condition was.
There was no contradictory psychiatric evidence.
The judge correctly identified the questions which the jury needed to address (see para 8 below) and helpfully provided a written summary of the ingredients of diminished responsibility.
He also provided a crystal clear written route to verdict document.
On the issue of substantial impairment of ability he told the jury: Mr Rose [counsel for the defence] did suggest to you in his closing address that you would get some further help from me when giving you directions in law as to what the word substantially means, where it says substantially impaired his ability to exercise those qualities.
I am not going to give you any help on the meaning of the word substantially, because unless it creates real difficulty and you require further elucidation, the general principle of English law is that where an everyday word is used, dont tell juries what it means.
They are bright enough and sensible enough to work it out for themselves, so I am not going to paraphrase substantially.
Substantially is the word that is in the Act of Parliament and thats the word that you have to work with.
If it becomes a stumbling block in some way, well at the end of the day, you can send me a note and in those circumstances, I am permitted to offer you a little more help, but not at this stage of proceedings.
The jury did not ask for further help.
In the Court of Appeal (Criminal Division), amongst other grounds of appeal which have not survived, the appellant contended (a) that the judge had been wrong not to direct the jury as to what substantially impaired meant and (b) that the jury might in the absence of such direction have applied a more stringent test than it ought to have done.
It was contended on his behalf that so long as the impairment was more than merely trivial, the test of substantially impaired was met.
The Court of Appeal dismissed the appellants appeal ([2015] 1 WLR 1030) but certified in relation to this ground that the following two questions of law of general public importance were involved: 1.
Where a defendant, being tried for murder, seeks to establish that he is not guilty of murder by reason of diminished responsibility, is the Court required to direct the jury as to the definition of the word substantial as in the phrase substantially impaired found in section 2(1)(b) of the Homicide Act 1957 as amended by section 52 of the Coroners and Justice Act 2009? 2.
If the answer to the first question is in the affirmative, or if for some other reason the judge chooses to direct the jury on the meaning of the word substantial, is it to be defined as something more than merely trivial, or alternatively in a way that connotes more than this, such as something whilst short of total impairment that is nevertheless significant and appreciable? The Court of Appeals answers to these questions were (1) that the judge was not, on authority, required to give greater definition than he did and (2) that if he had done so the appropriate formulation would have been that it was not enough that there was some impairment; the jury had to ask if it was substantial.
It would, the court held, be wrong to direct the jury that it sufficed that the impairment was more than merely trivial.
The statute
As now amended, section 2 Homicide Act 1957 provides a complete definition of diminished responsibility.
The material parts of it are as follows: Persons suffering from diminished responsibility 2(1) A person (D) who kills or is a party to the killing of another is not to be convicted of murder if D was suffering from an abnormality of mental functioning which (a) arose from a recognised medical condition, (b) substantially impaired Ds ability to do one or more of the things mentioned in subsection (1A), and (c) provides an explanation for Ds acts and omissions in doing or being a party to the killing. (1A) Those things are (a) (b) (c) to understand the nature of Ds conduct; to form a rational judgment; to exercise self control. (1B) For the purposes of subsection (1)(c), an abnormality of mental functioning provides an explanation for Ds conduct if it causes, or is a significant contributory factor in causing, D to carry out that conduct. (2) On a charge of murder, it shall be for the defence to prove that the person charged is by virtue of this section not liable to be convicted of murder. (3) A person who but for this section would be liable, whether as principal or as accessory, to be convicted of murder shall be liable instead to be convicted of manslaughter.
This differs from the previous formulation of the partial defence.
As originally enacted, section 2(1) provided: (1) Where a person kills or is a party to the killing of another, he shall not be convicted of murder if he was suffering from such abnormality of mind (whether arising from a condition of arrested or retarded development of mind or any inherent causes or induced by disease or injury) as substantially impaired his mental responsibility for his acts and omissions in doing or being a party to the killing.
It follows that the expression substantially impaired has been carried forward from the old Act into its new form.
But whereas previously it governed a single question of mental responsibility, now it governs the ability to do one or more of three specific things, to understand the nature of ones acts, to form a rational judgment and to exercise self control.
Those abilities were frequently the focus of trials before the re formulation of the law.
But previously, the question for the jury as to mental responsibility was a global one, partly a matter of capacity and partly a matter of moral culpability, both including, additionally, consideration of the extent of any causal link between the condition and the killing.
Now, although there is a single verdict, the process is more explicitly structured.
The jury needs to address successive specific questions about (1) impairment of particular abilities and (2) cause of behaviour in killing.
Both are of course relevant to moral culpability, but the jury is not left the same general mental responsibility question that previously it was.
The word used to describe the level of impairment is, however, the same.
The effect of the new statutory formulation is that the following four questions will normally arise in a case where diminished responsibility is advanced. (1) Did the accused suffer from an abnormality of mental functioning? (2) (3) abilities listed in section 1A? (4) killing the deceased? If so, did it arise from a recognised medical condition? If yes to (1) and (2), did it substantially impair one or more of the If yes to (1), (2) and (3), did it cause or significantly contribute to his Of course, in some cases one or more of these may be common ground.
The function of the judge is to focus the jurys attention on what is at issue and to explain why the issue(s) are relevant, as the judge did in the present case.
It is not to read the jury a general statement of the law.
Authority: substantially impaired
The concept of diminished responsibility was developed (with, at first, varying terminology) by the common law in Scotland in the late 19th and early 20th centuries as a means of mitigating, in an appropriate case, the mandatory sentence of death attendant on murder: see Lord Justice General Rodgers helpful historical survey in Galbraith v HM Advocate 2002 JC 1 (paras 23 to 27), together with the report of the Scottish Law Commission SLC 195 (2004) at para 3.1.
It operates by reducing the offence of murder to that of culpable homicide.
It was adopted by English law via the Homicide Act 1957 for the same reason, and using the same mechanism of partial defence, at a time when the abolition of capital punishment was under debate but there was no Parliamentary majority for that greater step.
Soon after its introduction, the new partial defence was considered by the Court of Criminal Appeal in R v Matheson [1958] 1 WLR 474, R v Spriggs [1958] 1 QB 270 and R v Byrne [1960] 2 QB 396.
In the first case there was no occasion for discussion of the meaning of substantially impaired; the defendant was agreed to be certifiable.
In Spriggs, however, the court considered the then conventional formulations employed in Scotland in relation to the level of impairment, which included (but were not confined to) references to the borderline of insanity (see HM Advocate v Savage 1923 JC 49).
The court (Lord Goddard CJ, Hilbery and Salmon JJ) concluded that the correct course for the trial judge was not to attempt synonyms or re definition but simply to direct the jury in the terms of section 2.
In Byrne the defendant was a sexual psychopath who had strangled and mutilated a young woman resident of the YWCA.
The case on his behalf was that he was unable to resist his impulse to gross and sadistic sexual violence.
The judges directions had amounted to excluding from abnormality of mind an inability to control his urges, and this was held to have been wrong.
The court further took the view that on the medical evidence the defendant was so disturbed that there was no room for doubt that diminished responsibility was made out.
Giving the judgment of the court, however, Lord Parker CJ addressed the question of substantial impairment.
He said this at 403 404: Assuming that the jury are satisfied on the balance of probabilities that the accused was suffering from abnormality of mind from one of the causes specified in the parenthesis of the subsection, the crucial question nevertheless arises: was the abnormality such as substantially impaired his mental responsibility for his acts in doing or being a party to the killing? This is a question of degree and essentially one for the jury.
Medical evidence is, of course, relevant, but the question involves a decision not merely as to whether there was some impairment of the mental responsibility of the accused for his acts but whether such impairment can properly be called substantial, a matter upon which juries may quite legitimately differ from doctors.
This court has repeatedly approved directions to the jury which have followed directions given in Scots cases where the doctrine of diminished responsibility forms part of the common law.
We need not repeat them.
They are quoted in Reg v Spriggs.
They indicate that such abnormality as substantially impairs his mental responsibility involves a mental state which in popular language (not that of the MNaughten Rules) a jury would regard as amounting to partial insanity or being on the border line of insanity.
Both in England and in Scotland it has subsequently been held that it is not usually helpful to direct juries in terms of the borderline of insanity.
That is demonstrated by considering the case where the mental impairment is depression, to which (however severe) such a description is inapt.
Such a formulation was later disapproved in R v Seers (1984) 79 Cr App R 261 (a depression case) and is now more often and wisely avoided even in a case of florid psychosis.
Despite its use in Byrne, it cannot have been the intention of the court in that case to require any such direction, given the approval of Spriggs which had commended abstention from elaboration of the words of the section.
Giving the judgment in Seers Griffiths LJ reached the same conclusion.
At 264 he said this: It is to be remembered that in Byrne all the doctors agreed that Byrne could be described as partially insane; he was a sexual psychopath who had hideously mutilated a young woman he had killed.
In such a case the evidence justifies inviting a jury to determine the degree of impairment of mental responsibility by a test of partial insanity.
But it is not a legitimate method of construing an Act of Parliament to substitute for the words of the Act an entirely different phrase and to say that it is to apply in all circumstances.
We are sure that this was not the intention of the court in Byrne , and the phrase was used as one way of assisting the jury to determine the degree of impairment of mental responsibility in an appropriate case, and no doubt to point out that Parliament by the use of the word substantial was indicating a serious degree of impairment of mental responsibility.
But what is clear is that whilst the question whether the impairment was or was not substantial was to be left to the jury in the unimproved words of the statute, the underlying assumption was that substantially in this context meant impairment which was of some importance or, as it was put in Seers, a serious degree of impairment.
The court cannot have contemplated in any of these cases that it was sufficient that the impairment merely passed triviality.
R v Simcox The Times 25 February 1964; [1964] Crim LR 402 concerned a man who had previously murdered his second wife and had now sought out his third wife, with whom he was in dispute, taking with him a rifle with which he shot her sister when it was her whom he encountered.
Some four psychiatrists agreed that he had an abnormality of mind, namely a paranoid personality.
Each said that it impaired his self control, but none was prepared to say that the impairment was substantial; they spoke of moderate impairment, or of his finding it harder than others to control himself.
The judge left the question to the jury in the terms of the section, adding only that they should ask: do we think, looking at it broadly as commonsense people, there was a substantial impairment of his mental responsibility in what he did? If the answer to that is yes then you find him not guilty of murder but guilty of manslaughter.
If the answer to that is no, there may be some impairment but we do not think it was substantial.
We do not think it was something which really made any great difference although it may have made it harder to control himself to refrain from crime, then you would find him guilty as charged.
The Court of Appeal, whilst observing that the final sentence needed the previous focus on the word substantial in order that it should not be thought that the absence of self control had to be total, approved this direction.
It is to be seen that it was essentially in accordance with Spriggs, since it repeated and emphasised, but did not attempt to re define, the statutory expression substantially impaired.
Three years later the Court of Criminal Appeal considered the case of R v Lloyd [1967] 1 QB 175, which would appear to be the indirect origin of the submission made in the present case that substantially impaired means any impairment greater than the merely trivial.
The defendant had killed his wife.
There was evidence that from time to time he had suffered recurrent episodes of reactive depression.
Two psychiatrists gave evidence that this was a mental abnormality which to some extent impaired his mental responsibility.
Neither was prepared to say that the impairment was substantial.
The first said that the depression impaired his responsibility to some extent.
The second said that there was some effect; he could not say to what degree, but although it was not as low as minimal it was not substantial.
The medical evidence was thus to similar effect as in Simcox.
At trial, Ashworth J had directed the jury in the terms of the statute, but he had then added: Fourthly, this word substantial, members of the jury.
I am not going to try to find a parallel for the word substantial.
You are the judges, but your own common sense will tell you what it means.
This far I will go.
Substantial does not mean total, that is to say, the mental responsibility need not be totally impaired, so to speak destroyed altogether.
At the other end of the scale substantial does not mean trivial or minimal.
It is something in between and Parliament has left it to you and other juries to say on the evidence, was the mental responsibility impaired, and, if so, was it substantially impaired? (p 178)
Counsel for the defendant, on appeal, contended that the judge had erred in not directing the jury that substantially meant really present or not trivial.
That was a submission that it meant no more than that there was some operating impairment, and thus that any such sufficed, so long as it was not trivial, and was exactly the same submission which is now made in the present case.
Since the doctors had agreed that the depression was not trivial in its effect, the defendant was, it was submitted, entitled to be acquitted of murder.
That contention was firmly rejected by the court.
Edmund Davies J, giving the judgment of the court, said this at 180B This court is wholly unable to accept that submission.
The word substantially obviously is inserted in the Act with a view to carrying some meaning.
It does carry a meaning.
This court is quite unable to see that the direction given to the jury on the meaning of this word, can validly be criticised, and finds itself in a difficulty of saying that any distinction can be validly drawn between the direction given in the instant case and that approved of by this court in Reg v Simcox.
It is the decision of the Court of Appeal which is the authority.
But it is equally clear that Ashworth J, in saying what he did, had no intention of telling the jury that any impairment beyond the trivial sufficed.
Firstly, if that had been his intention, it would have followed that the evidence in the case satisfied the test and a verdict of diminished responsibility ought to have followed unless the jury disagreed; this the judge would surely have told the jury.
Secondly, such an intention is inconsistent with the judge telling the jury that he was not going to find a synonym for the word substantially.
Thirdly, the judges summing up makes clear that he had before him Bryne, with its references to the borderline of insanity, although (anticipating Seers) he sensibly did not adopt that expression in a case concerning depression.
In referring to the spectrum of impairment as he did, he may have had in mind the warning in Simcox (see para 13 above) that it should be made clear that the impairment did not need to be total.
What he was clearly saying was that before an impairment could be substantial it must of course be greater than the merely trivial, but that, beyond that, what amounted to substantial impairment was a matter of degree for the jury.
Over the years since, a reference of this kind to the extremities of possible impairment has sometimes been thought not simply to be helpful to juries but also to provide a possible definition of the meaning of substantially.
R v Egan [1992] 4 All ER 470 concerned the case where there is both abnormality of mind and voluntary intoxication.
Its principal decision largely anticipated the test for such a case which was later adumbrated by the House of Lords in R v Dietschmann [2003] UKHL 10; [2003] 1 AC 1209, but the court was held by the House to have erred in its treatment of other prior decisions.
No real issue arose in relation to the meaning of substantially impaired except as to how drink was to be accommodated within it.
But one of those prior decisions on drink, R v Gittens [1984] QB 698, 703, had contained the conclusion of Lord Lane CJ that the jury should ignore the effect of drink, as later held to be the law in Dietschmann.
Lord Lane had pointed out that voluntary intoxication could not constitute a mental abnormality arising from disease or inherent cause, so the jury should ignore it and then go on to consider whether the combined effect of the other matters which do fall within the section amounted to such abnormality of mind as substantially impaired the defendants mental responsibility within the meaning of substantial set out in R v Lloyd.
In Egan, having cited that passage, Watkins LJ added in passing: In R v Lloyd directions as to the word substantial, to the effect that (1) the jury should approach the word in a broad commonsense way or (2) the word meant more than some trivial degree of impairment which does not make any appreciable difference to a persons ability to control himself, but it means less than total impairment were both approved.
There was no occasion for analysis of Lloyd in Egan.
But although it was correct that Ashworth Js direction had been approved, it would be quite inaccurate to imply that the effect of the case was that substantially meant the same as more than some trivial degree of impairment.
It may well be that Watkins LJ meant to say no such thing, rather than simply to refer to Ashworth Js formulation as convenient, but if he did, it was a misreading of Lloyd.
The decision in Lloyd, to which no doubt Lord Lane CJ was referring in Gittens, was precisely the opposite, viz: that substantially was not the same as more than trivial see para 13 above.
The difficulty for later readers was compounded by the closing words of the judgment in Egan at 480h: Finally, for the avoidance of doubt, we advise judges that guidance as to the meaning of substantial should be explicitly provided for the jury by using one or other of the two meanings in R v Lloyd.
This proposition that Lloyd authorised two meanings of substantially may have achieved some currency since.
If it has, it too is based on a misunderstanding.
The most that Lloyd ever said was that two methods of summing up were unexceptional: the first to tell the jury simply to use its common sense without further elaboration and the second to allude to the spectrum between just beyond trivial impairment and total impairment.
The decision of the court was explicitly that impairment beyond more than merely trivial is required; it follows that if the second approach, referring to the spectrum, is adopted in summing up, this must be made clear.
But the court in Lloyd was not attempting in its (extempore) judgment to ordain a template for future summings up.
It was dealing with the submission that the defendant in that case was entitled to have his conviction for murder set aside because any impairment beyond the merely trivial sufficed, and this submission it rejected.
All that mattered in that case, as in most cases before an appellate criminal court, was whether the judge had misdirected the jury to the disadvantage of the defendant.
With or without any implication of two meanings, Ashworth Js additional spectrum illustration has gained currency.
It has figured in successive Crown Court Benchbooks.
For example, the first (2010) edition, published before the new statutory formula came into operation, carefully avoided dictating the terms of summing up to judges.
However, it cited at p 340 what Ashworth J had said, and added that the direction was approved by the Court of Criminal Appeal.
A little later it gave one illustration of the kind of summing up which might be employed.
It did so in the context of the more difficult case where diminished responsibility is complicated by drink and/or by alcohol dependence, but the example was equally relevant also to non alcohol cases.
One suggested form of words (at p 347) was: This requires you to consider to what extent the defendants state of mind differed from that of the ordinary person.
Was it so abnormal that the defendants mental responsibility was substantially reduced? Substantially is an ordinary English word to which you will bring your own experience.
It means less than total and more than trivial.
Where you draw the line is for your own good judgment.
Subsequent editions, before and after the 2009 Act amendments, contained similar passages until the decision of the Court of Appeal in the present case.
It will be seen that this formulation does not tell the jury that any impairment beyond the merely trivial suffices, but with hindsight it is possible that if one does not go back to the decision in Lloyd, it might be taken by some to carry that implication.
In R v Ramchurn [2010] EWCA Crim 194; [2010] 2 Cr App R 18 (an unamended 1957 Act case) the trial judge had understandably adopted these suggestions.
His written direction to the jury was: Substantially impaired means just that.
You must conclude that his abnormality of mind was a real cause of the defendants conduct.
The defendant need not prove that his condition was the sole cause of it, but he must show that it was more than a merely trivial one which did not make any real or appreciable difference to his ability to control himself.
In retirement, the jury asked a specific question: what was the difference between trivial and substantial? The judge responded with the Ashworth formula.
He told them: The following direction has been approved at a senior level and it is this; the direction on the words substantially impaired.
Your own common sense will tell you what it means.
Substantial does not mean total.
That is to say the mental responsibility need not be totally impaired, so to speak, destroyed altogether.
The other end of the scale, substantial does not mean trivial or minimal.
It is something in between and Parliament has left it to you to say on the evidence was the mental responsibility impaired and if so, was it substantially impaired?
The defendant in Ramchurn had planned and executed the killing of his wifes lover, a cousin to whom he had originally given a home.
He had threatened previously that he would kill him, and had made a number of preparations to do so, such as trying to get keys to gain access to the victims home, and when that failed arranging a meeting to carry out his plan, equipping himself with a rope ligature for the purpose.
He disposed of the body some distance away and set up a false alibi.
The evidence was that he was depressed.
One doctor described his state as an emotional turmoil and a tortured frame of mind, and expressed the opinion that in the tumultuous final moments which resulted in the death the impairment of mental responsibility would have been substantial.
The other agreed that there was an element of depression, and accepted that it had played some part in the killing.
Carefully cross examined, he agreed that the impact of the depression on the defendants mental responsibility was more than trivial, but he disagreed that it was substantial.
The jury convicted of murder.
The argument for the defendant on appeal in Ramchurn was that there were two inconsistent meanings of substantially to be derived from Lloyd, that the judge had in consequence failed to give the jury a clear direction and moreover that the law was in too uncertain a state to satisfy the requirements of article 7 of the ECHR.
Accordingly, it was contended, the conviction for murder was unsafe.
The Court of Appeal rejected those arguments.
At para 23, Lord Judge CJ addressed specifically the two meanings argument, founded then as now on a combination of Lloyd with Egan.
The argument was rejected: It is, however, clear on analysis that in Lloyd the court rejected the submission that there were two meanings for the word substantially.
In the judgment in Lloyd the word substantially carried some meaning or a meaning.
It was accepted in Lloyd that there were different ways of illustrating the same concept and, if necessary, explaining its relevance to the jury.
If the court in Egan had intended to convey that the words substantially impaired embraced two different concepts or levels of impairment, it would have said so not by citing Lloyd as authority in support, but by distinguishing Lloyd.
In the result, just as the court in Lloyd could see no effective difference between the directions in Simcox and Lloyd, the Court of Appeal in Egan could see no difficulty in the deployment of either of the two methods of explanation found in Lloyd.
The court recorded that section 2 had been in force for 50 years and applied in countless murder trials, and observed that in its experience the test of substantial impairment was probably, in practice, the least difficult aspect of what can be a difficult defence to convey to a jury.
It went on specifically to endorse the general starting point that the test was in ordinary English and should be left to the judgment of the jury.
In so doing, it said this at para 15: Substantially is an ordinary English word which appears in the context of a statutory provision creating a special defence which, to reflect reduced mental responsibility for what otherwise would be murderous actions, reduces the crime from murder to manslaughter.
Its presence in the statute is deliberate.
It is designed to ensure that the murderous activity of a defendant should not result in a conviction for manslaughter rather than murder on account of any impairment of mental responsibility, however trivial and insignificant; but equally that the defence should be available without the defendant having to show that his mental responsibility for his actions was so grossly impaired as to be extinguished.
That is the purpose of this defence and this language.
The Concise Oxford Dictionary offers of real importance and having substance as suggested meanings for substantially.
But, in reality, even the Concise Oxford Dictionary tells us very little more about the ordinary meaning and understanding to be attached to the word substantially.
The jury must decide for itself whether the defendants mental responsibility for his actions was impaired and, assuming that they find that it was, whether the impairment was substantial.
Thus the appeal failed in Ramchurn.
The court was plainly not adopting the submission that substantially means any impairment beyond the merely trivial, for if it had done so, the evidence of both psychiatrists would have met the test.
It is right to remember that the focus on the meaning of that word in the half dozen cases here reviewed, and in the present case, does not mean that it is often the occasion of difficulty.
But the fact that the present submission is now made for the third time, despite its failure in both Lloyd and Ramchurn, does demonstrate that the use of the Ashworth spectrum formula may encourage semantic debate, at least in some cases.
Moreover it is known that in at least one case which reached the Court of Appeal on sentence, the trial judge had directed the jury that the test of substantially impaired was met by an impairment which was more than minimal: R v Brown (Robert) [2011] EWCA Crim 2796; [2012] 2 Cr App R(S) 156.
Since the appeal was limited to sentence in that case, the correctness of that direction did not call for adjudication.
But that case is a further illustration of difficulty.
When the defendant was, on that direction, convicted of manslaughter, the judge concluded when it came to sentence that in fact his responsibility had nevertheless been substantial, and the Court of Appeal decided that he was indeed entitled so to do, and to impose a very long determinate sentence (24 years) in consequence.
Scotland
The rejection in the foregoing cases of the contention that any impairment beyond the merely trivial will suffice is consistent with the way in which the law of diminished responsibility has evolved in Scotland, where it originated.
The law was reviewed in some depth by a specially convened court of five in Galbraith v HM Advocate 2002 JC 1.
The court held that the partial defence was not confined to mental illness, strictly so called, and that other mental abnormalities might also be capable of diminishing the responsibility of the accused, including in that case a combination of learned helplessness and post traumatic stress disorder following alleged persistent abuse.
The decision anticipated the new English section 2(1)(a) by requiring that there be some recognised mental abnormality (paras 53 and 54).
As to the level of impairment, the court held, for reasons essentially the same as had been given by the English court in Seers, that previous references to the borderline of insanity were simply examples of what would plainly qualify rather than a test for inclusion.
Lord Justice General Rodger summarised the rule in this way at para 54: In every case, in colloquial terms, there must, unfortunately, have been something far wrong with the accused, which affected the way he acted While the plea of diminished responsibility will be available only where the accuseds abnormality of mind had substantial effects in relation to his act, there is no requirement that his state of mind should have bordered on insanity.
In essence, the jury should be told that they must be satisfied that, by reason of the abnormality of mind in question, the ability of the accused, as compared with a normal person, to determine or control his actings was substantially impaired.
Thus substantially impaired was adopted as the test, and used in the sense of something far wrong with the accused.
There was, then, one difference between Scottish and English law, because in Scotland Galbraith held that psychopathic personality disorder was not capable of being a basis for diminished responsibility in the same way as in both jurisdictions voluntary intoxication cannot by itself found the plea: see Galbraith at para 54 and, in England, R v Dowds [2012] EWCA (Crim) 281; [2012] 1 WLR 2576.
Now, however, that distinction has gone.
Following scrutiny by the Scottish Law Commission the law has been put into statutory form by section 51B of the Criminal Procedure (Scotland) Act 1995, inserted by section 168 of the Criminal Justice and Licensing (Scotland) Act 2010, (asp 13).
Provision is made by subsection (3) to exclude voluntary intoxication but, on the Commissions recommendation, not for a similar exclusion for psychopathic personality disorder.
The new Scottish definition of diminished responsibility in subsection (1) provides: A person who would otherwise be convicted of murder is instead to be convicted of culpable homicide on grounds of diminished responsibility if the persons ability to determine or control conduct for which the person would otherwise be convicted of murder was, at the time of the conduct, substantially impaired by reason of abnormality of mind.
Thus, the Scottish law now expresses, like the English, the essential feature of abnormality of mind such as impairs the ability to determine or control conduct, and, like English law, adopts as the test for the level of impairment the same expression, namely substantially.
Plainly in Scotland this expression was used in the knowledge of the meaning authoritatively given to it by Galbraith, which the Scottish Law Commission had endorsed: SLC 195, July 2004, paras 3.15 3.17.
Usage of language
The admirably concise submissions of Mr Etherington QC for the appellant correctly point out that as a matter simply of dictionary definition, substantial is capable of meaning either (1) present rather than illusory or fanciful, thus having some substance or (2) important or weighty, as in a substantial meal or a substantial salary.
The first meaning could fairly be paraphrased as having any effect more than the merely trivial, whereas the second meaning cannot.
It is also clear that either sense may be used in law making.
In the context of disability discrimination, the Equality Act 2010 defines disability in section 6 as an impairment which has a substantial and long term effect on day to day activities, and by the interpretation section, section 212, provides that Substantial means more than minor or trivial.
It thus uses the word in the first sense.
Conversely, the expression significant and substantial when used to identify which breaches by the police of the Codes of Practice under the Police and Criminal Evidence Act 1984 will lead to the exclusion of evidence (see for example R v Absolam (1988) 88 Cr App R 332 and R v Keenan [1990] 2 QB 54) is undoubtedly used in the second sense.
It is to be accepted that the word may take its meaning from its context.
It is not surprising that in the context of triggering a duty to make reasonable adjustments to assist the disabled, the first sense should be used by the Equality Act; the extent of adjustments required varies with the level of disability and a wide spectrum of both is to be expected.
Mr Etherington additionally submits that this usage shows that the first sense does not entirely strip the word substantially of meaning.
Conclusions: substantially
The foregoing review of the authorities clearly shows that in the context of diminished responsibility the expression substantially has always been held, when the issue has been confronted, to be used in the second of the senses identified above.
True it is that in Lloyd Edmund Davies J observed that that word had been put into the 1957 Homicide Act with a view to it carrying some meaning.
If by that he meant that it could have no purpose at all unless it was used in the second sense above, the Equality Act usage may suggest otherwise, although even without the word substantially it is perhaps open to doubt that a merely trivial effect would be taken to be included either in impairment or in disability.
But this does not alter the central thrust of the decision in Lloyd, which was that in the context of diminished responsibility an impairment of consequence or weight is what is required to reduce murder to manslaughter, and not any impairment which is greater than merely trivial.
There is no basis for thinking that when the same expression was carried forward into the new formulation of diminished responsibility any change of sense was intended.
The adverb substantially is applied now, as before, to the verb impaired.
In the absence of any indication to the contrary, Parliament is to be taken to have adopted the established sense in which this word has been used for 50 years.
The reformulation of the law followed the recommendation of the Law Commission, except to the irrelevant extent that it did not incorporate developmental immaturity as an extension beyond recognised medical conditions.
The Commission had addressed diminished responsibility in two reports, each preceded by a detailed consultation paper: Partial Defences to Murder Law Com 290 (2004) and Murder, Manslaughter and Infanticide Law Com 304 (2006).
Prior to the earlier report, it had consulted upon a number of possible formulations of the test for diminished responsibility see Partial Defences at 5.52 et seq.
Most employed the adverb substantially.
The Commission was concerned to ensure that a requirement for causation was explicitly incorporated into the proposed statutory test, as it now has been, and had consulted on the question whether this test would suffice without any threshold of substantial impairment see possible version (6) at 5.52.
It is no doubt true that in many cases the question whether the impairment is sufficient to establish the partial defence will march alongside the question whether it was a significant contributory factor in causing the killing.
But this will not always be so.
Where, for example, the recognised medical condition is an emotionally unstable personality disorder leading to histrionic and impulsive behaviour, or where it is depression leading to distorted thinking, the medical evidence may make it clear that it has had some impact on behaviour and thus was a significant cause.
The jury may be satisfied that if the defendants personality had been different, or if there had not been some depression, he would not have killed as he did.
The real question thus may very well be whether the condition passes the threshold of substantial impairment, or does not.
An illustration is afforded by the facts of R v Brown.
The defendants marriage had broken down.
He was living elsewhere with his girlfriend.
There were acrimonious negotiations over the division of property between himself and his wife.
He felt that she was dishonestly concealing her assets and cheating him, and that she had unfairly manipulated him into signing what he saw as a disadvantageous pre nuptial agreement.
He planned to kill her.
He prepared a grave in Windsor Great Park and, when returning the children to her after a weekend, took with him a hammer hidden in his daughters bag and beat her to death, before dismantling the CCTV equipment which would have recorded his movements, and disposing of the body in the grave.
There was psychiatric evidence that he had developed an adjustment disorder, a recognised medical condition, arising from the severe stress of life events.
The jury must have accepted the diagnosis, and that the adjustment disorder was a significant cause of his killing his wife.
On the judges direction, that impairment beyond the merely trivial sufficed, the conviction for manslaughter followed.
Whether or not the jury would have concluded, but for that direction, that the impairment was substantial, can never be known.
But it is clear that such a conclusion would not follow necessarily from the finding of significant causation.
After consultation, the Commissions final conclusion, in the second report at 1.17, was that although there were some infelicities in the wording it was not persuaded that any of the alternative formulations canvassed would sufficiently improve the law to justify interfering with a workable form of words.
It had pointed out in the earlier report at 7.91 that the approach to the concept was essentially pragmatic, that the leading authority remained Byrne and that this partial defence had, unlike provocation, troubled the House of Lords only once in 50 years.
The formula now incorporated into the statute was recommended.
The specific requirement for causation was added, but the threshold of substantial impairment was maintained.
It follows that there is nothing in the change of the formulation of the test for diminished responsibility to cause a different view to be taken now of the sense in which the word substantially is used in conjunction with impairment.
This use of the expression accords with principle.
Diminished responsibility effects a radical alteration in the offence of which a defendant is convicted.
The context is a homicide.
By definition, before any question of diminished responsibility can arise, the homicide must have been done with murderous intent, to kill or to do grievous bodily harm, and without either provocation or self defence.
Whilst it is true that at one end of the scale of responsibility the sentence in a case of diminished responsibility may be severe, or indeed an indefinite life sentence owing to the risk which the defendant presents to the public, the difference between a conviction for murder and a conviction for manslaughter is of considerable importance both for the public and for those connected with the deceased.
It is just that where a substantial impairment is demonstrated, the defendant is convicted of the lesser offence and not of murder.
But it is appropriate, as it always has been, for the reduction to the lesser offence to be occasioned where there is a weighty reason for it and not merely a reason which just passes the trivial.
Directing juries: good practice
As Mr Perry QC for the Crown rightly submitted, there are many examples of ordinary English words incorporating questions of degree, which are left to juries to apply without attempts at further definition.
No one attempts to define reasonable in the many contexts in which it appears.
Nor should there be any further sophistication applied to the standard of proof required, that the jury be sure, at least beyond the comparable expression leaving no reasonable doubt.
The same principle of leaving an ordinary word alone was applied by the House of Lords in Brutus v Cozens [1973] AC 854 to the expression insulting, and would apply equally, no doubt, to its sister expressions abusive and threatening.
In all these cases the understandable itch of the lawyer to re define needs to be resisted.
Any attempt to find synonyms for such ordinary English expressions, although they involve questions of degree, simply complicates the jurys exercise, and leads to further semantic debate about the boundaries of meaning of the synonym.
Where, however, as here, there are two identifiable and different senses in which the expression in question may be used, the potential for inconsistent usage may need to be reduced.
The existence of the two senses of the word substantially identified above means that the law should, in relation to diminished responsibility, be clear which sense is being employed.
If it is not, there is, first, a risk of trials being distracted into semantic arguments between the two.
Secondly, there is a risk that different juries may apply different senses.
Thirdly, medical evidence (nearly always forensic psychiatric evidence) has always been a practical necessity where the issue is diminished responsibility.
If anything, the 2009 changes to the law have emphasised this necessity by tying the partial defence more clearly to a recognised medical condition, although in practice this was always required.
Although it is for the jury, and not for the doctors, to determine whether the partial defence is made out, and this important difference of function is well recognised by responsible forensic psychiatrists, it is inevitable that they may express an opinion as to whether the impairment was or was not substantial, and if they do not do so in their reports, as commonly many do, they may be asked about it in oral evidence.
It is therefore important that if they use the expression, they do so in the sense in which it is used by the courts.
If there is doubt about the sense in which they have used it, their reports may be misunderstood and decisions made upon them falsified, and much time at trials is likely to be taken up unnecessarily by cross examination on the semantic question.
The experience of R v Brown (supra at paras 24 and 33) underlines the need for clarification.
The sense in which substantially impaired is used in relation to diminished responsibility is, for the reasons set out above, the second of the two senses.
It is not synonymous with anything more than merely trivial impairment.
It does not follow that it is either necessary or wise to attempt a re definition of substantially for the jury.
First, in many cases the debate here addressed will simply not arise.
There will be many cases where the suggested condition is such that, if the defendant was affected by it at the time, the impairment could only be substantial, and the issue is whether he was or was not so affected.
Second, if the occasion for elucidation does arise, the judges first task is to convey to the jury, by whatever form of words suits the case before it, that the statute uses an ordinary English word and that they must avoid substituting a different one for it.
Third, however, various phrases have been used in the cases to convey the sense in which substantially is understood in this context.
The words used by the Court of Appeal in the second certified question in the present case (significant and appreciable) are one way of putting it, providing that the word appreciable is treated not as being synonymous with merely recognisable but rather with the connotation of being considerable.
Other phrases used have been a serious degree of impairment (Seers), not total impairment but substantial (Ramchurn) or something far wrong (Galbraith).
These are acceptable ways of elucidating the sense of the statutory requirement but it is neither necessary nor appropriate for this court to mandate a particular form of words in substitution for the language used by Parliament.
The jury must understand that substantially involves a matter of degree, and that it is for it to use the collective good sense of its members to say whether the condition in the case it is trying reaches that level or not.
It seems likely that the Ashworth spectrum illustration will have been of assistance to juries in some cases, for it helps to explain (a) that the impairment need not be total to suffice and (b) that substantially is a question of degree.
But, as the experience of Lloyd, Ramchurn and the present case teaches, if it is to be used it needs to be combined with making it clear that it is not the law that any impairment beyond the merely trivial will suffice.
The impairment must of course pass the merely trivial to be considered, just as it need not reach the total, but whether, when it has passed the trivial, it can properly be regarded as substantial, is a matter for the jury in the individual case, aided as it will be by the experts exposition of the kind of impairment which the condition under consideration may have generated in the accused.
Unless the spectrum illustration has been used by someone in the case, it is preferable for the judge not to introduce it.
If it has been used, or if, on mature consideration the judge considers that it may help the jury in the particular case on trial, it needs to be coupled with a clear statement that it is not enough that the impairment be merely more than trivial; it must be such as is judged by the jury to be substantial.
For the same reason, if an expert witness, or indeed counsel, should introduce into the case the expression more than merely trivial, the same clear statement should be made to assist the jury.
Once this usage is understood by all concerned with the trial, there ought to be no occasion for the jury to be distracted by debate about the meaning of the word.
What matters is what kind of effect the medical condition was likely to have had on the three relevant capacities of the accused.
So long as the experts understand the sense in which substantially is used in the statute (which should henceforth be clear), and that the decision whether the threshold is met is for the jury rather than for them, it is a matter for individual judgment whether they offer their own opinion on whether the impairment will have been substantial or confine themselves to the kind of practical effect it would have had.
If they do the former, they will be understood to be using the word in the second sense set out in para 27 above.
It follows that the questions certified by the Court of Appeal should be answered as follows: (1) Ordinarily in a murder trial where diminished responsibility is in issue the judge need not direct the jury beyond the terms of the statute and should not attempt to define the meaning of substantially.
Experience has shown that the issue of its correct interpretation is unlikely to arise in many cases.
The jury should normally be given to understand that the expression is an ordinary English word, that it imports a question of degree, and that whether in the case before it the impairment can properly be described as substantial is for it to resolve. (2) If, however, the jury has been introduced to the question of whether any impairment beyond the merely trivial will suffice, or if it has been introduced to the concept of a spectrum between the greater than trivial and the total, the judge should explain that whilst the impairment must indeed pass the merely trivial before it need be considered, it is not the law that any impairment beyond the trivial will suffice.
The judge should likewise make this clear if a risk arises that the jury might misunderstand the import of the expression; whether this risk arises or not is a judgment to be arrived at by the trial judge who is charged with overseeing the dynamics of the trial.
Diminished responsibility involves an impairment of one or more of the abilities listed in the statute to an extent which the jury judges to be substantial, and which it is satisfied significantly contributed to his committing the offence.
Illustrative expressions of the sense of the word may be employed so long as the jury is given clearly to understand that no single synonym is to be substituted for the statutory word: see para 40 above.
R v Brennan
Counsel drew attention to the Court of Appeal decision in R v Brennan [2014] EWCA Crim 2387; [2015] 1 WLR 2060, decided after both trial and appeal in the present case.
The defendant in that case (aged 22 at the time of the offence) had a nine year history of disturbed childhood, sexual abuse and outpatient mental health treatment together with one instance when he was sectioned following a suicide attempt.
On the undisputed psychiatric evidence he suffered from a schizotypal disorder as well as an emotionally unstable personality disorder.
He was obsessed with witchcraft and Satanist killings.
He was also depressed.
He had planned and executed the ritualistic killing of a client whom he had served as a male prostitute.
He left notes of what he planned to do, and after killing the man with one or more knives, had scored his back and painted or written on the walls symbols such as a pentagram and references to Satan and to Krishna, before cleaning himself up and going to the police station to report what he had done.
He was treated by the police as needing an appropriate adult to attend his interviews, and told that person that he had been having thoughts of killing somebody (apparently anybody) for several weeks.
At trial the only issue was diminished responsibility.
The Court of Appeal held that in that case there was only one possible outcome.
There was simply no basis for a verdict of murder and moreover this was so clear that the judge ought not to have left it open to the jury.
The court regarded that decision as a straightforward application of R v Galbraith [1981] 1 WLR 1039; 73 Cr App R 124.
It went on to offer some general observations about the circumstances in which a judge ought to withdraw murder from the jury where the issue is diminished responsibility and uncontradicted psychiatric evidence supports the defence case on that topic.
The report suggests that Brennan was a case in which the Crown expressly did not challenge the diagnosis of the single consultant psychiatrist called and barely challenged her opinion that the defendants condition substantially impaired his ability to form rational judgments. (There was perhaps greater challenge to the opinion that his ability to control himself was also substantially impaired).
That was a reasoned decision.
The Crown had a second psychiatric report, disclosed in ordinary course to the defence, which agreed those conclusions.
Counsel for the Crown had then, legitimately, tested the evidence of the psychiatrist, in particular by drawing attention to the defendants consumption of drink and drugs, and to the clear evidence of pre planning.
As to the first, the psychiatrists answer had, however, been that the underlying mental condition effected sufficient impairment independently of any additional disinhibition attributable to intoxication.
As to the second, she had said that a disordered and impaired mind may well be no less capable of premeditation and detailed planning than a rational one, and that that was what had happened.
Those answers had not been challenged, presumably because they were not, on the facts, capable of dispute.
It is an important part of the Crowns function, where the charge is murder and a case of diminished responsibility is advanced, to assess the expert evidence almost invariably obtained on both sides and its relationship to any dispute of fact.
If it is clear that the defendant was indeed suffering from a recognised medical condition which substantially impaired him in one of the material respects, and that this condition was a significant cause of the killing, the Crown is entitled to, and conventionally frequently does, accept that the correct verdict is guilty of manslaughter on the grounds of diminished responsibility and no trial need ensue.
In practice quite a large proportion of verdicts of manslaughter on this ground arise from the Crown taking this responsible course: see the research undertaken for the Law Commission by Professor Mackay cited in Partial Defences to Murder Law Com 290 (2004) at Appendix B, especially paras 6, 20 and 21.
Acceptance of a plea to manslaughter may properly be given either before trial, thus making it unnecessary, or after testing the evidence if that is required.
Given the answers of the psychiatrist in Brennan and the state of the evidence, it is clear that the Crown could not properly ask the jury to convict of murder unless it was to reject one or more parts of the expert evidence.
Certainly a jury is not bound by the expert.
In some cases, pre planning, especially involving meticulous preparations, may indicate self control which gives grounds for rejecting an opinion that self control was substantially impaired.
In others, there may be legitimate grounds for asking the jury to disagree about the level of impairment.
In yet further cases, it may be perfectly proper to ask the jury to conclude that it was the drink or drugs which led to the killing, whilst the underlying mental condition was in the background.
That is not by any means an exhaustive catalogue of questions which a jury may properly be invited to decide.
However, as the Court of Appeal rightly held, if the jury is to be invited to reject the expert opinion, some rational basis for doing so must at least be suggested, and none had been at trial nor was on appeal.
It is not open to the Crown in this kind of situation simply to invite the jury to convict of murder without suggesting why the expert evidence ought not to be accepted.
In particular, it would not have been a proper basis for rejecting diminished responsibility that the circumstances of the killing had been particularly violent or sadistic.
It is a well known factor in such cases that such brutality may (understandably) be taken by a jury to point away from the partial defence; sometimes it may truly do so, but not infrequently it is the product of the mental disorder.
It may be agreed that the ordinary principles of R v Galbraith are capable of being applied in a trial where the sole issue is diminished responsibility.
A court ought, however, to be cautious about doing so, and for several reasons.
First, a murder trial is a particularly sensitive event.
If the issue is diminished responsibility, a killing with murderous intent must, ex hypothesi, have been carried out.
If a trial is contested, it is of considerable importance that the verdict be that of the jury.
Second, the onus of proof in relation to diminished responsibility lies on the defendant, albeit on the balance of probabilities rather than to the ordinary criminal standard.
The Galbraith process is generally a conclusion that no jury, properly directed, could be satisfied that the Crown has proved the relevant offence so that it is sure.
In the context of diminished responsibility, murder can only be withdrawn from the jury if the judge is satisfied that no jury could fail to find that the defendant has proved it.
Thirdly, a finding of diminished responsibility is not a single issue matter; it requires the defendant to prove that the answer to each of the four questions set out in para 8 above is yes.
Whilst the effect of the changes in the law has certainly been to emphasise the importance of medical evidence, causation (question 4) is essentially a jury question.
So, for the reasons explained above, is question 3: whether the impairment of relevant ability(ies) was substantial.
That the judge may entertain little doubt about what he thinks the right verdict ought to be is not sufficient reason in this context, any more than in any other, for withdrawing from the jury issues which are properly theirs to decide.
Where, however, in a diminished responsibility trial the medical evidence supports the plea and is uncontradicted, the judge needs to ensure that the Crown explains the basis on which it is inviting the jury to reject that evidence.
He needs to ensure that the basis advanced is one which the jury can properly adopt.
If the facts of the case give rise to it, he needs to warn the jury that brutal killings may be the product of disordered minds and that planning, whilst it may be relevant to self control, may well be consistent with disordered thinking.
While he needs to make it clear to the jury that, if there is a proper basis for rejecting the expert evidence, the decision is theirs that trial is by jury and not by expert it will also ordinarily be wise to advise the jury against attempting to make themselves amateur psychiatrists, and that if there is undisputed expert evidence the jury will probably wish to accept it, unless there is some identified reason for not doing so.
To this extent, the approach of the court in Brennan is to be endorsed.
The present case
In the present case the appellant and the deceased had lived together for around three years before she was killed on a Sunday in July 2012.
On that day she and he, and her two sons aged 13 and eight, had been to a family barbecue.
The couple had rowed at the party, in part because she said that he had hit her in the past, in part because he demanded that she give him a bank card which she refused to do, and in part because he wanted to go home and she did not.
After they had returned home, separately, and after her mother had visited the house, the argument was renewed later in the evening.
Outside the house, the appellant seized the deceased by her face, held her by her hair and slapped her across the cheek.
She insisted that he leave the home.
He packed a bag but refused to leave.
Some time later that evening he attacked her.
By then the deceased had a large lump on her face.
The several stages of this attack were witnessed by one or both of her two sons.
The older son intervened in the argument.
He stood between them and said that he would not leave them alone.
The appellant then fetched a knife from the kitchen, but the older son took it from his pocket.
The boy told his mother about the knife and the appellant said Its self defence.
She went and sat on the bed but the appellant went after her and punched her in the head, whereupon she hit him back.
He had a small cut on his eyebrow which the boys said he squeezed to increase the blood flow.
Then he attacked the deceased with a second knife which he produced, kneeling on her arms as he did so and shouting that he was going to kill her.
She was afterwards found to have some 22 knife wounds, plus internal bleeding injuries to her abdomen and liver, apparently from a kick or similar blow(s) or contact with a hard object, which latter injuries were the fatal ones.
When the police arrived the appellant became extremely violent.
He was described as snarling like an animal and appearing as if deranged.
At some stage he said to the police that She is evil .
The demons gone She had Satan in her eyes.
The appellant was 46 years old.
Since he was about 23 he had been referred by his GP for out patient psychiatric consultations from time to time.
He had never been admitted to hospital but had complained of depression, paranoid fears and, at times, of hearing voices in his head.
He had been prescribed anti depressant and anti psychotic drugs and was still under such prescription at the time of the offence, although he had told the doctors that he was not taking his medicine.
One consultant psychiatrist diagnosed his condition as a mixed personality disorder with paranoid, emotionally unstable, anxious and dependent traits.
On the basis largely of what he had said to the police, the doctor concluded that at the time of the killing he was additionally in the grip of an acute psychotic episode and was driven by persecutory beliefs.
The second psychiatrist disagreed that there was a personality disorder, but concluded that the appellant was at the time of the offence suffering from a paranoid psychotic illness, most likely schizophrenia.
Both expressed the opinion that the different conditions they identified substantially impaired the relevant statutory abilities, although they were not at one as to which.
The first psychiatrist thought that the ability to form a rational judgment and to exercise self control were impaired, but that the defendant knew what he was doing; the second agreed on the first two counts but additionally thought that the ability to understand the nature of his conduct was impaired.
The Crown case was that he was simply very angry with his partner, and had been on and off all day, for unremarkable domestic reasons.
There was some evidence of an ability to control himself on previous occasions when there had been assaults on her which had not been uncontrolled.
The truthfulness of his assertion that he had seen Satan was in issue, and may or may not have been consistent with asserting self defence at the time.
The renewal of the attack despite the warning presence of the children and the removal of the first knife might perhaps be some indicator of self control and give some support to the contention that the cause was simple anger rather than distorted thinking.
That being the state of the evidence, the debate between the two possible meanings of the expression substantially barely arose.
If the appellant was indeed in the grip of a psychotic episode involving persecutory delusions when he killed his partner, that would, by any ordinary standard, involve substantial impairment of one or more of the statutory abilities.
The real question appears to have been whether, on the balance of probabilities, he had been.
The judge left the issues squarely to the jury, correctly reminding them more than once that the doctors were agreed that there was a medical condition substantially impairing his abilities.
Conclusion
It follows that for the several reasons set out above, this appeal must be dismissed.
| UK-Abs | The appellant Mark Golds was convicted by a jury of the murder of his partner.
The medical evidence was that he had an abnormality of mental functioning arising from a medical condition.
He admitted in court that he had killed his partner.
The sole issue in the case was whether he had been in the grip of a psychotic condition when he did so, so as to satisfy the requirements for the partial defence of diminished responsibility and reduce the charge of murder to manslaughter.
The law to be applied was section 2 of the Homicide Act 1957 after its revision by the Coroners and Justice Act 2009, with the relevant test being whether the appellants ability to understand what he was doing, to form a rational judgment or to exercise self control was substantially impaired [5].
The trial judge correctly identified the questions which the jury needed to address, and provided a written summary of the ingredients of diminished responsibility.
On the issue of substantial impairment, the judge told the jury that he was not going to give them specific guidance on the meaning of the everyday word substantially, unless it created difficulty and they requested assistance.
The jury did not ask for further clarification or assistance.
The appellant appealed against his conviction, including on two issues relating to the correct approach to the statutory test.
Firstly, where a defendant, being tried for murder, seeks to establish that he is not guilty of murder by reason of diminished responsibility, whether the Court was required to direct the jury as to the definition of the word substantial in the phrase substantially impaired in s.2(1)(b) Homicide Act 1957, as amended by s.52 Coroners and Justice Act 2009? Secondly, if the judge is required to, or if the judge of his own accord chooses to, direct the jury on the meaning of the word substantial, is it to be defined as something more than merely trivial, or alternatively in a way that connotes more than this, such as something whilst short of total impairment that is nevertheless significant and appreciable? The Court of Appeal dismissed his appeal.
There was no authority requiring the judge to give direction on the meaning of substantial, and if he had done so it would have been wrong to direct that it would suffice if the impairment was more than merely trivial.
Mr Golds appealed to the Supreme Court.
The Supreme Court unanimously dismisses Mr Golds appeal.
Lord Hughes gives judgment, with which the rest of the Court agrees.
In a murder trial where diminished responsibility is an issue, the judge is not ordinarily required to direct the jury beyond the terms of the statute, and should not attempt to define the meaning of substantially.
However, if there is a risk that the jury will misunderstand the meaning of substantial, then a direction is required.
Whether this risk arises is a matter for the judge.
This may be the case where the jury has been introduced to the question of whether any impairment beyond the trivial will suffice, or has been introduced to the concept of a spectrum between greater than trivial and total.
The judge must direct that while an impairment must be more than merely trivial to be substantial, it is not the case that any impairment that is more than trivial will suffice [43].
Lord Hughes carries out a comprehensive review of the treatment of the expression substantial impairment in the context of the diminished responsibility defence in cases from both England and Scotland (from whose common law the English defence was derived).
This included the old formulation of the defence in the Homicide Act 1957 before it had been amended by the Coroners and Justice Act 2009.
In the earlier formulation the phrase substantially impaired applied to the global concept of mental responsibility, rather than to the ability to do one or more specified things, as it now does [6].
There is no indication that Parliament wished the same expression to carry a different meaning in the new the formulation of diminished responsibility, or therefore that the authorities on the old formulation should not apply to the new law [30 35].
In ordinary usage, substantial is capable of meaning either (1) present rather than illusory or fanciful, thus having some substance, or (2) important or weighty.
Either sense can be used in law making, and the word may take its meaning from its context.
The review of the authorities clearly shows that in the context of diminished responsibility the expression substantially has always been held to be used in the second of the two possible meanings [27].
This meaning of the expression also accords with principle there must be a weighty reason for a reduction from murder to the lesser offence of manslaughter, and not merely a reason which just passes the trivial [36].
In the authorities reviewed, the expression substantially impaired has been consistently treated as a question of degree, and one that should be left to the jury.
The cases repeated and re emphasised, but did not attempt to re define the statutory expression.
However, they did proceed on the assumption that substantially in this context meant impairment which was of some importance, or a serious degree of impairment.
It was not contemplated in any of the cases considered that it was sufficient that the impairment merely passed triviality [9 26].
Where triviality was mentioned, as in R v Lloyd [1967] 1 QB 175, it was in the context of a direction to the jury that substantial impairment fell between two extremities: more than merely trivial, but less than total.
It is clear from the decision in that and other appeals that there was no intention to direct that any impairment beyond the trivial sufficed, or that the reference to the extremities of possible impairment should provide a definition of substantial impairment.
Beyond the merely trivial, what amounted to a substantial impairment was a matter of degree for the jury.
There is usually no need for the jury to be directed on the meaning of ordinary words: any attempt to find synonyms or re define such words complicates the jurys task and leads to further debate.
There will be many cases where the need for elucidation does not arise, for example where the suggested impairment, if it existed, is clearly substantial.
If the need does arise, the judge may offer help on what the expression means, but must avoid substituting a single synonym, and it is usually better to avoid the spectrum referred to in R v Lloyd [37 42].
|
The appellant, Mr Campbell, was employed by the company (the first respondent) as an apprentice joiner.
The second respondent, Mr Gordon, was the sole director of the company and responsible for its day to day operation.
On 28 June 2006 the appellant suffered an injury whilst working with an electric circular saw.
Although the company had employers liability insurance policy, the policy (surprisingly for a business of this kind) excluded claims arising from the use of woodworking machinery powered by electricity.
It therefore excluded any claim arising out of Mr Campbells accident.
The companys failure to have in place appropriate insurance was a breach of its obligations under section 1(1) of the Employers Liability (Compulsory Insurance) Act 1969.
The company itself went into liquidation in 2009.
Mr Campbell now seeks to hold Mr Gordon, as director, liable in damages for the companys failure to provide adequate insurance cover.
Mr Gordon himself is recently bankrupt.
We were told by Mr Smith QC, appearing for Mr Campbell, that there are discussions with him with a view to obtaining an assignation of any rights he may have against the broker who arranged the inadequate insurance.
However, the sole issue for us is whether civil liability attaches to Mr Gordon for that failure.
The claim was upheld by the Lord Ordinary, but dismissed by the Inner House by a majority (Lord Brodie and Lord Malcolm, Lord Drummond Young dissenting).
In this respect they arrived at the same conclusion, albeit not by identical reasoning, as the English Court of Appeal in Richardson v Pitt Stanley [1995] QB 123 (Russell and Stuart Smith LJJ, Sir John Megaw dissenting).
The foundation of the claim has to be found in the 1969 Act.
The primary duty to insure is placed on the employer by section 1, which provides: 1.
Insurance against liability for employees.
Except as otherwise provided by this Act, every employer carrying on any business in Great Britain shall insure, and maintain insurance, under one or more approved policies with an authorised insurer or insurers against liability for bodily injury or disease sustained by his employees, and arising out of and in the course of their employment in Great Britain in that business Section 4 provides for regulations governing the issue of certificates of insurance and their display for the information of employees and production on demand to inspectors duly authorised by the Secretary of State.
These also are obligations placed on the employer.
Section 5 which is at the heart of the appeal provides, as amended: 5.
Penalty for failure to insure.
An employer who on any day is not insured in accordance with this Act when required to be so shall be guilty of an offence and shall be liable on summary conviction to a fine not exceeding level 4 on the standard scale; and where an offence under this section committed by a corporation has been committed with the consent or connivance of, or facilitated by any neglect on the part of, any director, manager, secretary or other officer of the corporation, he, as well as the corporation shall be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly. (emphasis added)
On its face that is an unpromising basis for Mr Campbells present claim.
This provision does not in terms impose any duty to insure on a director or other officer as such, let alone any civil liability for failure to do so.
The duty rests on the corporate employer.
The veil of incorporation is pierced for a limited purpose.
It arises only where an offence is committed by the company, and then in defined circumstances imposes equivalent criminal liability on the director or other officer on the basis, not that he is directly responsible, but that he is deemed to be guilty of the offence committed by the company.
For the appellant Mr Smith relies on well established principles governing civil liability in respect of statutory obligations.
He accepts that as a general rule, where a statute imposes an obligation and imposes a criminal penalty for failure to comply, there is no civil liability; but that is subject to exceptions, including where upon the true construction of the Act it is apparent that the obligation or prohibition was imposed for the benefit or protection of a particular class of individuals, as in the case of the Factories Acts and similar legislation (per Lord Diplock, Lonrho Ltd v Shell Petroleum Co Ltd (No 2) [1982] AC 173, at 185)
There are many examples of this exception in practice, dating back more than 100 years, for example (in England) to Groves v Lord Wimborne [1898] 2 QB 402, relating to the Factory and Workshop Act 1878, and in Scotland in Black v Fife Coal Co Ltd, 1912 SC (HL) 33; [1912] AC 149, concerning the Coal Mines Regulation Act 1887.
In the latter case, Lord Kinnear said (pp 45 and 165 166): We are to consider the scope and purpose of the statute, and in particular for whose benefit it is intended.
Now the object of the present statute is plain.
It was intended to compel mine owners to make due provision for the safety of the men working in their mines, and the persons for whose benefit all these rules are to be enforced are the persons exposed to danger.
But when a duty of this kind is imposed for the benefit of particular persons, there arises at common law a correlative right in those persons who may be injured by its contravention.
Therefore I think it is quite impossible to hold that the penalty clause detracts in any way from the prima facie right of the persons for whose benefit the statutory enactment has been passed to enforce the civil liability.
The same principle was applied to a failure to insure, in the context of motor insurance, in Monk v Warbey [1935] 1KB 75.
Section 35 of the Road Traffic Act 1930 made it illegal to use or to cause or permit any other person to use a motor vehicle on a road unless there was in force in relation to the user of the vehicle a policy of insurance against third party risks that complied with the requirements of the Act.
It was held by the Court of Appeal that, where the owner of a car permitted its use by a person uninsured against third party risks and injury to a third party was caused by the negligent driving of that person, the owner was liable in damages to that third party for breach of his statutory duty to insure.
That was followed in Scotland in Houston v Buchanan, 1940 SC (HL) 17, [1940] 2 All ER 17.
Mr Smith submits that Lord Diplocks words are directly applicable to this case.
The duty in question was imposed for the protection of employees such as Mr Campbell, and the context is identical to that of the Factories Acts.
In its application to the duty to insure, he submits, the case is indistinguishable from Monk v Warbey.
As a cross check of the appropriateness of such liability, he relies on the tri partite test set out by Lord Bridge in Caparo Industries plc v Dickman [1990] AC 605, 617 618 for a duty of care in negligence, including foreseeability, proximity and fairness.
He relies also on the statement of Lord Bingham in Fairchild v Glenhaven Funeral Services Ltd [2003] 1 AC 32, 67, referring to the strong policy argument in favour of compensating those who have suffered grave harm, at the expense of their employers who owed them a duty to protect them against that very harm and failed to do so.
Mr Smith submits that the contrary conclusion arrived at by the English Court of Appeal in Richardson was based on a flawed analysis, not least the view of Stuart Smith LJ (p 131E H) that the duty to insure was for the benefit of the employer rather than the employee.
He relies on the detailed criticism of that decision by Lord Drummond Young in the Inner House.
In the court below, and in argument before this court, there was some discussion whether Lord Diplocks statement of the exception represented the modern law.
Lord Brodie thought that it needed to be seen in the light of more recent judicial statements of high authority, which he read as placing less emphasis on definitive presumptions, and more on the need to ascertain the intention of Parliament in enacting the particular provision (paras 10, 20).
He referred in particular to statements by Lord Rodger in Morrison Sports Ltd v Scottish Power UK Plc 2011 SC (UKSC) 1 (at paras 28 29, 41), citing in turn the judgment of Lord Browne Wilkinson in X (Minors) v Bedfordshire County Council [1995] 2 AC 633, 731 732; and by Lord Jauncey in R v Deputy Governor of Parkhurst, Ex p Hague [1992] 1 AC 58, 170H 171A.
This view finds some academic support in Professor Stantons work on Statutory Torts (2003), paras 2 019 2 020.
For my part I find it unnecessary in this appeal to engage in discussion of the extent to which Lord Diplocks formulation has been modified by later authorities.
I would only observe that the statements of Lord Browne Wilkinson and Lord Jauncey referred to by Lord Brodie were made in the context of cases concerning liability of public authorities, which may raise rather different issues.
I am content to assume (without deciding) that Lord Diplocks words remain a reliable guide at least in relation to statutory duties imposed for the benefit of employees.
I would also proceed on the basis (agreeing in this respect with Sir John Megaw in the Richardson case: p 135C D) that the duty of the employer under section 1 of the 1969 Act was imposed for the benefit of the employees, in the sense indicated by Lord Diplock.
This however is not enough for the appellant.
The essential starting point for Lord Diplocks formulation is an obligation created by statute, binding in law on the person sought to be made liable.
There is no suggestion in that or any other authority that a person can be made indirectly liable for breach of an obligation imposed by statute on someone else.
It is no different where the obligation is imposed on a company.
There is no basis in the case law for looking through the corporate veil to the directors or other individuals through whom the company acts.
That can only be done if expressly or impliedly justified by the statute.
Comparison with Monk v Warbey is instructive.
The statute in that case (Road Traffic Act 1930, section 35) provided by subsection (1) that it was not lawful for any person to use, or to cause or permit any other person to use a motor vehicle on the road unless insured; and by subsection (2) imposed a criminal penalty on any person acting in contravention of the section.
It was held that civil liability was not excluded by the separate provision creating a criminal offence.
Far from supporting Mr Smiths arguments, this analogy points in the opposite direction.
In that case Parliament dealt specifically with both the user, and any person causing or permitting the use, and determined to impose direct responsibility on each.
The 1969 Act imposes direct responsibility only on the employer.
The equivalent issue would be whether that is to be treated as giving rise to civil liability on the employer for failure to insure, notwithstanding the criminal liability imposed on him by section 5.
That issue (on which there were differences in the courts below) does not arise in this appeal.
However, there is no analogy with the position of a director or officer.
Parliament has recognised that a director or officer may bear some responsibility for the failure to insure, but has dealt with it, not by imposing direct responsibility equivalent to that of the company, but by a specific and closely defined criminal penalty, itself linked to the criminal liability of the company.
I would accept that the adoption of a particular statutory model is not necessarily critical.
Lord Brodie (para 12) referred to the decision of the Court of Appeal in Rickless v United Artists Corpn [1988] QB 40, in which it was held that a provision which on its face did no more than classify a specified act as a criminal offence did indeed create civil liability.
The relevant provision was section 2 of the Dramatic and Musical Performers Protection Act 1958, by which if a person knowingly makes a cinematograph film from a dramatic or musical work without the consent in writing of the performers he shall be guilty of an offence Giving the leading judgment Sir Nicholas Browne Wilkinson V C accepted that the form of the provision pointed against civil liability: although this point is far from decisive, it is easier to spell out a civil right if Parliament has expressly stated the act is generally unlawful rather than merely classified it as a criminal offence. (p 51G H) However, he held that other factors showed an intention to create civil liability, including the clear purpose of providing protection for performers, and the need to comply with this countrys obligations under the relevant international conventions (p 53A).
This accordingly was a somewhat special case.
But there was no suggestion that civil liability could be imposed other than on those made directly responsible by statute for compliance with the primary obligation.
Lord Drummond Young gave a number of reasons for extending civil liability to the directors.
A corporate employer could only act through its officers who accordingly had a duty to ensure so far as possible that the company fulfils its statutory duties.
In that way he thought it is apparent that section 1, by itself, has the effect of imposing a duty on the directors (para 43).
He relied also on the common law rules governing liability of directors for acts of the company, citing for example the relevant principle as stated by Atkin LJ in Performing Right Society Ltd v Ciryl Theatrical Syndicate [1924] 1 KB 1, pp 14 15: Prima facie a managing director is not liable for tortious acts done by servants of the company unless he himself is privy to the acts, that is to say unless he ordered or procured the acts to be done.
I conceive that express direction is not necessary.
If the directors themselves directed or procured the commission of the [wrongful] act they would be liable in whatever sense they did so, whether expressly or impliedly. (Emphasis added) Consent, connivance and facilitation through neglect were the criteria for the imposition of criminal liability under section 5 of the Act; on general common law principles they are also sufficient to render the director civilly liable for the companys breach of section 1 (paras 44 45).
He saw nothing unfair in imposing such liability, given that the director may have ignored or deliberately disregarded the existence of the statutory duty and so incurred personal liability, and that, if he has relied on professional advice from an insurance broker, he will have a right of recourse against the broker (para 46).
He criticised the majority for an approach which frustrated the policy of the Act through an over literal construction and an excessively conceptual approach.
In his opinion, the objectives of the Act demanded that a director who has consented to or who has been complicit in a breach of the duty to obtain insurance, or who has facilitated such a breach through neglect, should incur civil liability.
This substantive point should prevail over structural niceties. (para 47)
With respect to him, I do not find these observations helpful in resolving the issue before us, which depends not on general questions of fairness, but on the interpretation of a particular statutory scheme in its context.
The fact that the company can only act through its officers tells one nothing about their potential liability to third parties for its acts or failures.
The judgment of Atkin LJ to which he refers affirms the rule (supported by reference to a statement of Lord Buckmaster in Rainham Chemical Works v Belvedere Guano Co [1921] 2 AC 465, 476) that directors are not in general liable for the tortious actions of the company.
The scope of a potential common law claim against a director for ordering or procuring such a tortious act is not in issue in this case, which turns entirely on alleged liability under the statute.
This requires the court to pay due respect to the language and structure used by Parliament, rather than to preconceptions of what its objectives could or should have been.
My view of the provisions is reinforced by a factor which was not addressed in the courts below or the written cases, but was drawn to our attention by Mr Dunlop QC for the respondent in the course of oral submissions.
This concerned the statutory background of the wording of section 5.
It seems that provisions in similar form, imposing criminal liability on directors and other officers for offences by their companies, have a long history.
We were told that a Westlaw search (looking for statutory provisions using all three of the words consent, connivance and neglect) had disclosed more than 900 examples of this type of formula, all apparently in the context of corporate offences (although, as Mr Smith pointed out, examples of precisely the same wording are much rarer).
This general picture has been confirmed by a similar exercise carried out by legal assistants for the court.
We have received nothing from the appellant since the hearing to suggest otherwise.
A typical example is found in the Companies Act 2006 itself.
Section 1255 (repeating a provision first introduced in this form in 1981) provides: (1) Where an offence under this Part committed by a body corporate is proved to have been committed with the consent or connivance of, or to be attributable to any neglect on the part of, an officer of the body, or a person purporting to act in any such capacity, he as well as the body corporate is guilty of the offence and liable to be proceeded against and punished accordingly.
A much earlier example to which Mr Dunlop referred us (dating from before the 1969 Act) comes from the Interpretation Act (Northern Ireland) 1954.
This is of general application to all corporate offences created by subsequent statutes in Northern Ireland.
Section 20(2) provides: Where an offence under any enactment passed after the commencement of this Act has been committed by a body corporate the liability of whose members is limited, then notwithstanding and without prejudice to the liability of that body, any person who at the time of such commission was a director, general manager, secretary or other similar officer of that body or was purporting to act in any such capacity shall, subject to sub section (3), be liable to be prosecuted as if he had personally committed that offence and shall, if on such prosecution it is proved to the satisfaction of the court that he consented to, or connived at, or did not exercise all such reasonable diligence as he ought in the circumstances to have exercised to prevent the offence, having regard to the nature of his functions in that capacity and to all the circumstances, be liable to the like conviction and punishment as if he had personally been guilty of that offence. (emphasis added)
There are differences of wording between the three statutes.
The 1954 statute talks not of neglect, as in the 1969 Act and the Companies Act, but of failure to exercise reasonable diligence.
On the other hand the reference to liability as if he had personally been guilty seems to anticipate the language of deemed criminal liability in the 1969 Act, but is not replicated in the Companies Act.
However, the general pattern is the same in these and in the other examples to which we have been referred.
In spite of the apparent frequency of the use of this formula, the researches of counsel and our own legal assistants have not disclosed any reported authority in which its significance or meaning has been considered, nor any previous suggestion that it might be treated as giving rise to civil liability.
I would be reluctant to attach too much weight to a point which has emerged so late in the day.
Without more substantial research it is impossible to know to what extent this formula has been used in comparable contexts involving protection of employees.
However, to my mind it tends to confirm the view that the language of section 5 was deliberately chosen and is intended to mean what it says.
The formula is specifically directed at criminal liability, and as far as we know has always been used in that context.
Where Parliament has used such a well established formula, it is particularly difficult to infer an intention to impose by implication a more general liability of which there is no hint in its actual language.
For all these reasons, I would agree with the conclusion reached by the majority of the Inner House and dismiss the appeal.
LORD TOULSON: (dissenting) (with whom Lady Hale agrees)
The issue before the court is a) whether Mr Gordon breached a statutory provision intended for the protection of a particular class including Mr Campbell and b) if so, whether Mr Gordon should be held liable for Mr Campbells resulting loss.
Lord Carnwath has set out sections 1 and 5 of the 1969 Act.
The object of the Act is that a companys employees should have the protection, in the event of suffering an illness or injury arising out of their employment for which the company is liable, of the liability being covered by insurance up to a specified sum.
Failure by the company to arrange and maintain such insurance carries a penal sanction.
But the pool of those bearing legal responsibility for seeing that such protection is in place is not confined to the company itself.
It extends to the companys relevant officer or officers.
In order to bring such persons within the pool, the drafter has used the device of a deeming provision.
The form of the drafting device is that a director, manager, secretary or other officer of the company who consents to, connives at or by neglect facilitates, a failure to maintain the requisite insurance is deemed to be guilty of the same offence as the company.
The effect in substance is to place on such an officer a legal obligation not to cause or permit the company to be without the required insurance by consent, connivance or neglect, on pain of a criminal penalty.
To say that the imposition of criminal responsibility for a specified act (or omission) carries with it a legal obligation not to act (or omit to act) in such a way is to state the obvious.
The two are opposite sides of the same coin.
The language of deeming involves artificiality.
In addressing sub issue a), the court has a choice whether to adopt a formalistic approach or to look through the artificiality and consider the function, substance and effect of the provision in real terms.
The answer to the question What does it really do? is that the provision is a concise means of extending statutory responsibility for seeing that the company is properly insured to the companys appropriate officer(s), backed by a penal sanction.
As an alternative, the drafter might have used words such as It shall be illegal for any director, manager, secretary or other officer of a corporation which is an employer carrying on business in the United Kingdom to consent to, connive at or by neglect facilitate a failure by the corporation to insure (etc), and any such person shall be liable on summary conviction (etc).
This would have been longer but the practical result would have been the same: the director or officer would have been liable to a criminal penalty for his wrongful act or omission, imposed for the protection of employees.
Sir John Megaw made a similar point.
He said: In his dissenting judgment in Richardson v Pitt Stanley [1995] QB 123, 135, With great respect, I find it difficult to believe that the parliamentary draftsman would have intended to make provision that there should be no civil right or remedy by using the formula of section 1 of the Employers Liability (Compulsory Insurance) Act 1969, shall insure, followed by section 5 shall be guilty of an offence; as contrasted with the formula of declaring an act or omission to be unlawful and then separately providing a criminal penalty for the breach.
I agree.
The approach which commends itself to the majority concentrates on the form of the language.
It is argued that the structure of the Act is such that the only duty created by it is explicitly placed on the company by section 1(1), and that the mechanism by which a director or other officer of the company is deemed to be guilty of a breach of that duty is consistent with and supports that proposition.
I have set out the alternative approach, which looks at the function and substantive effect of the deeming provision in real terms.
The choice between a formal approach and a functional approach in the interpretation and application of statutory language is an aspect of the choice between formalism and realism which has been a fruitful subject since as long ago as the publication of Holmess The Common Law in 1881.
In deciding which approach is preferable, the context matters.
The present context is legislation for the protection of a vulnerable group, a companys employees.
In that context I regard the functional approach as more appropriate.
I cannot improve on Lord Drummond Youngs pithy statement, in his dissenting opinion in this case, that in the context of legislation aimed at employee protection the formalist approach is excessively conceptual; it focuses on differences of structure that do not reflect the basic objectives of the statute (para 47).
If, however, a formalist approach is preferred, there should be no half measure about it.
On the formalist approach, the director in the eyes of the law is himself guilty of committing an offence under sections 1 and 5.
The language of the Act does not impose an accessory liability on the director.
It would be unnecessary for that purpose.
Rather, it explicitly deems him to be himself guilty of the offence of failing to insure and maintain insurance, etc.
As a matter of insurance law, it is of course the insurer who insures and someone else (usually the insured) who procures the insurance, but the meaning of shall insure, and maintain insurance in section 1 is clear enough.
The effect of the deeming provision is that in the eye of the law the director is guilty as a principal of failing to insure and maintain the necessary insurance.
Logic and justice would not permit the director to say that his criminal liability is in substance and reality a form of accessory liability, if one is living in formality land, for, as I have stressed, on the formalists approach the director is in law guilty as a principal of failing to insure.
On either approach Mr Gordon breached a statutory provision intended for the protection of a particular class, employees, of which Mr Campbell was a member, but I prefer the former approach for the reasons which I have given.
As to sub issue b), legislation for the protection of employees began in the Victorian age.
From the outset the courts have consistently held that breaches of provisions in that class of legislation are actionable at the suit of an employee who suffers from the breach.
This was established in Groves v Lord Wimborne [1898] 2 QB 402, a case under the Factory and Workshop Act 1878.
Rigby LJ said at pp 414 415: The provisions of section 5 are intended for the protection from injury of a particular class of persons, who come within the mischief of the Act.
The plaintiff is one of those persons, the possibility of injury to whom through neglect to fence machinery the section contemplates.
That being so, the only question seems to be whether the provisions of the Act with regard to the imposition of fines for neglect of the duty created by the section reasonably lead to the conclusion that the Legislature intended that such fines should be the only remedy for breach of that duty.
I think that, when those provisions are examined, it is impossible to arrive at that conclusion.
The maximum fine that can be imposed in any case, however serious the injury may be, is one of 100.
It seems monstrous to suppose that it was intended that in the case of death or severe mutilation arising through a breach of the statutory duty, the compensation to the workman or his family should never exceed 100.
Again, section 82 does not provide that the fine imposed under it shall necessarily go to the workman if he be injured, or to his family if he be killed; but only that the Secretary of State may, if he thinks fit, order that the fine or part of it shall do so.
Looking at the purview of the whole Act, I cannot think it reasonable to suppose that the Legislature intended the penalty imposed by section 82 to be the only remedy for injury occasioned by breach of the absolute statutory duty created by the Act.
The reference to the purview of the whole Act came from the speech of Lord Cairns LC in Atkinson v Newcastle and Gateshead Waterworks Co (1877) 2 Ex D 441, 448.
The maximum fine for an offence under the 1969 Act was originally 200.
An offence is committed on any day that a company is not insured in accordance with the Act.
Groves v Lord Wimborne was approved by the House of Lords in Butler (or Black) v Fife Coal Co Ltd [1912] AC 149.
Lord Kinnear said at 165 166: We are to consider the scope and purpose of the statute and in particular for whose benefit it is intended.
Now the object of the present statute is plain.
It was intended to compel mine owners to make due provision for the safety of the men working in their mines, and the persons for whose benefit all these rules are to be enforced are the persons exposed to danger.
But when a duty of this kind is imposed for the benefit of particular persons, there arises at common law a correlative right in those persons who may be injured by its contravention.
Therefore I think it is quite impossible to hold that the penalty clause detracts in any way from the prima facie right of the persons for whose benefit the statutory enactment has been passed to enforce the civil liability.
This passage was cited as a statement of general principle by Lord Simonds and Lord Normand in Cutler v Wandsworth Stadium Ltd [1949] AC 398, 407 408, 413 414, and by Lord Diplock in Lonrho Ltd v Shell Petroleum Co Ltd (No 2) [1982] AC 173, 185.
As Lord Kinnears statement indicates, the cause of action is at common law (except in cases where a statute expressly creates a civil right of action).
The cause of action which was held to exist in Groves v Lord Wimborne was created by the court.
It was founded on a statute but it was the court that determined that breach of the provisions of the Act should be actionable at the suit of the injured party for whose protection the provisions were intended.
The conventional jurisprudence is that the courts function is to ascertain as a matter of interpretation whether Parliament intended that there should be civil liability, but that understates the role of the courts in cases where the legislation is silent on the point.
In such cases the judges face hieroglyphs without a Rosetta Stone, to borrow a metaphor of Judge Richard Posner writing extra judicially (Divergent Paths The Academy and the Judiciary, Harvard University Press, 2016, p 172).
Judge Posner candidly and correctly states that the judges role in such cases is the active role of filling gaps left by the legislature.
The courts use a combination of methods for this purpose.
They examine the whole purview of the legislation and they employ default rules, with which parliamentary drafters may be taken to be familiar.
Lord Du Parcq spelt this out in Cutler v Wandsworth Stadium Ltd [1949] AC 410 411.
After a plea that Parliament should reveal its intention in plain words, he said: Parliament must be taken to have known that if it preferred to avoid the crudity of a blunt statement and to leave its intention in that regard to be inferred by the courts, the general rule would prevail unless the scope and language of the Act established the exception.
It cannot be supposed that the draftsman is blind to the principles which the courts have laid down for their own guidance when it becomes necessary for them to fill in such gaps as Parliament may choose to leave in its enactments.
The default rules were summarised by Lord Diplock in Lonrho Ltd v Shell Petroleum Co Ltd (No 2) [1982] AC 173, 185: The sanctions Order thus creates a statutory prohibition upon the doing of certain classes of acts and provides the means of enforcing the prohibition by prosecution for a criminal offence which is subject to heavy penalties including imprisonment.
So one starts with the presumption laid down originally by Lord Tenterden CJ in Doe d Murray v Bridges (1831) 1 B & Ad 847, 859, where he spoke of the general rule that where an Act creates an obligation, and enforces the performance in a specified manner that performance cannot be enforced in any other manner a statement that has frequently been cited with approval ever since, including on several occasions in speeches in this House.
Where the only manner of enforcing performance for which the Act provides is prosecution for the criminal offence of failure to perform the statutory obligation or for contravening the statutory prohibition which the Act creates, there are two classes of exception to this general rule.
The first is where upon the true construction of the Act it is apparent that the obligation or prohibition was imposed for the benefit or protection of a particular class of individuals, as in the case of the Factories Acts and similar legislation.
As Lord Kinnear put it in Butler (or Black) v Fife Coal Co Ltd (I have cited the passage which followed.)
In his opinion in the present case Lord Brodie said (at para 10) that statements of Lord Kinnear and Lord Diplock are not the modern law.
For this (to my mind startling) proposition, Lord Brodie relied on the speech of Lord Jauncey in R v Deputy Governor of Parkhurst, Ex p Hague [1992 1 AC 58, 170 171, and a passage in the speech of Lord Browne Wilkinson in X (Minors) v Bedfordshire County Council [1995] 2 AC 633, 731, cited by Lord Rodger in Morrison Sports Ltd v Scottish Power UK plc 2011 SC (UKSC) 1, para 28, in a judgment with which the other members of the court (including Lady Hale) agreed.
Those three cases were far removed from the area of legislation for the protection of employees.
In the passage from X (Minors) v Bedfordshire County Council, cited in Morrison Sports Ltd v Scottish Power UK plc, by Lord Rodger, Lord Browne Wilkinson began by describing the principles for determining whether a statutory breach gives rise to a cause of action as well established.
He went on to refer to the trilogy of Groves v Lord Wimborne, Cutler v Wandsworth Stadium Ltd and Lonrho Ltd v Shell Petroleum Co Ltd (No 2).
He did not suggest that he considered those cases to be not the modern law; quite the opposite.
Had he intended to depart from long standing authority, including decisions of the House of Lords, there can be no doubt that he would have said so.
Lord Brown Wilkinson referred to R v Deputy Governor of Parkhurst Prison, Ex p Hague, but only to give it as an example of legislation which was treated not as being passed for the benefit of a particular class of persons (those serving prison sentences), but for the benefit of society in general.
It provides an illustration of the need for a purview of the whole legislation in question in order to determine whether it is to be regarded as passed for the intended benefit of a particular class.
Lord Brodie and Lord Malcolm each cited Lord Jaunceys statement in the Parkhurst case, at pp 170 171, that The fact that a particular provision was intended to protect certain individuals is not of itself sufficient to confer private law rights of action upon them, something more is required to show that the legislature intended such conferment.
But that sentence should not be taken in isolation.
It needs to be understood in its context.
The claim in that case was brought by a prisoner who had been deprived for a time of rights of association, by an order of the deputy governor which was held to be in breach of rules under the Prison Act 1952.
In addressing the question whether the breach entitled the claimant to damages, the House of Lords held that it was necessary to consider not only the benefit of the rule to the claimant, but the wider purpose of the legislative scheme.
In the paragraph immediately following the words quoted above, Lord Jauncey described the objects of the legislation as far removed from those of legislation such as the factories and coal mines Acts whose prime concern is to protect the health and safety of those who work therein (emphasis added).
In the present case the Act has no purpose other than the protection of employees.
The principles summarised by Lord Diplock in Lonrho Ltd v Shell Petroleum Co Ltd (No 2) are no more than general principles or default rules, but they have stood the test of time and I would hold that they continue to be the law unless and until the Supreme Court makes a conscious decision otherwise.
In particular, where legislation is passed for the protection of employees, in accordance with Lord Diplocks first exception, a breach will ordinarily give rise to a potential cause of action, unless the language of the legislation points clearly in the opposite direction.
In this case the legislation was plainly intended for the protection of employees and I do not consider that the form of the language employed by the drafter takes the case in relation to Mr Gordon outside Lord Diplocks first exception.
I would allow the appeal.
LADY HALE:
The question for this court is whether in 1969, when Parliament passed the sections 1 and 5 of the Employers Liability (Compulsory Insurance) Act, it was intended that breach of those sections should give rise, not only to criminal liability, but also to civil liability towards an employee who had been injured by the employers breach of duty towards him and who, because of the failure to insure, would otherwise not receive the compensation for his injuries to which he was entitled.
In my view, it is absolutely plain that Parliament did intend there to be such civil liability.
Parliament is presumed to legislate in the knowledge of the current state of the law when it is doing so.
In 1969, the law had been clearly laid down in Groves v Lord Wimborne [1898] 2 QB 402, approved by the House of Lords in Butler (or Black) v Fife Coal Co Ltd [1912] AC 149, and again in Cutler v Wandsworth Stadium Ltd [1949] AC 398.
Statutory duties imposed upon employers for the benefit of employees who suffer injury as a result of their breach give rise to civil as well as criminal liability, absent a clear statutory intent to the contrary.
That is still the law.
Parliament understood this when it passed the Health and Safety at Work etc Act 1974, section 47 of which made clear which breaches did not give rise to civil liability, and amended it in 2013, further to restrict the extent of civil liability.
Quite apart from the fact that we are concerned with the Parliamentary intention in 1969, it is quite wrong to suggest (as the majority in the lower House did) that a trilogy of more recent cases have changed the law as it has long been understood to be.
The traditional understanding was reaffirmed in the House of Lords by Lord Diplock in Lonrho Ltd v Shell Petroleum Co Ltd (No 2) [1982] AC 173, 185.
It was reaffirmed yet again in the House of Lords by Lord Browne Wilkinson in X (Minors) v Bedfordshire County Council [1995] 2 AC 633, 732 one of the trilogy.
The other two are R v Deputy Governor of Parkhurst Prison, Ex p Hague [1992] 1 AC 58 and Morrison Sports Ltd v Scottish Power UK plc [2011] SC 1.
In none of the three is there any suggestion that the approach of the courts to deciding whether the breach of a statutory duty gives rise to civil liability in damages has changed.
In X v Bedfordshire, the principles applicable were said to be well established, albeit difficult to apply (p 731).
Those difficulties arise in novel situations rather than in well established situations like this.
In X v Bedfordshire, Lord Browne Wilkinson stressed that in no previous case had [it] been held that statutory provisions establishing a regulatory system or a scheme of social welfare for the benefit of the public at large gave rise to a right of action for damages (p 731).
Although individuals might in fact be protected, the legislation was for the benefit of society in general and not just a particular class.
The cases where civil liability had been imposed were very limited and specific as opposed to general administrative functions imposed on public bodies and involving the exercise of administrative discretions (p 732).
Cutler, being concerned with the regulation of betting at dog races, was an example of such a scheme, which did not give rise to civil liability.
Hague, being concerned with the management of prisons, was another.
Something more should be said about Morrisons Sports, as it is a recent decision of this court, to which I was a party.
It was concerned with whether there was civil liability for breach of the Electricity Supply Regulations, made in 1988 but to be treated as if made under the power in section 29 of the Electricity Act 1989.
Section 29(3) provided that the Regulations might impose criminal penalties for their contravention; but it also provided that nothing in this 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.
Much of the judgment is devoted to explaining why the view of the Inner House that this wording was apt to impose civil liability, as opposed to acknowledging it if it existed, was untenable.
When Lord Rodger (with whom the other members of the court agreed) turned to whether the regulations did indeed impose civil liability for breach, he cited the above passage from the speech of Lord Browne Wilkinson in X v Bedfordshire, which referred to, and cast no doubt upon, the law on employers liability as decided in Groves v Lord Wimborne.
There is no suggestion in Morrisons Sports that that is no longer the law.
The judgment goes on to look at the overall legislative scheme for regulating the supply of electricity.
While this clearly contemplated that there might be civil liability, it did not expressly provide for it.
Looked at as a whole 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 (para 37).
It was also difficult to identify any limited class of the public for whose protection the Regulations were intended (para 38).
In short, this was a general regulatory scheme intended for the benefit of the whole population.
The difference between that case and this could hardly be greater.
This is a very specific statutory duty imposed upon employers, and also imposed upon specified officers where the employer is a limited company.
There can be no difference in substance between imposing criminal liability for failing to do something and imposing a duty to do it.
The purpose was to protect a very specific class of people, namely employees who might be injured by the employers breach of duty (whether arising by statute or at common law).
The protection intended was that they should be compensated for their injuries even if, for whatever reason, the employer was unable to do so.
Failure to insure means that the employee is denied the very thing that the legislation is intended to provide for him.
For these reasons, as well as for the fuller reasons given by Lord Toulson, I would allow this appeal and let the case go to proof.
| UK-Abs | The Appellant, Mr Campbell, was employed as an apprentice joiner by a company whose sole director was Mr Gordon, the Respondent.
The Respondent was responsible for the day to day operation of the company.
The Appellant suffered an injury whilst working with an electric saw on 28 June 2006.
The companys employers liability policy excluded claims arriving from the use of woodworking machinery powered by electricity, and thus excluded any claim arising out of the Appellants accident.
The companys failure to have in place appropriate assurance was a breach of its obligations under section 1(1) of the Employers Liability (Compulsory Insurance) Act 1969 (the 1969 Act).
The company went into liquidation in 2009.
The issue for the court is whether the Respondents failure, as director of the company, to provide adequate insurance, makes him liable personally in damages to the Appellant.
The Appellants claim was upheld by the Lord Ordinary but dismissed by a majority of the Inner House.
The Supreme Court dismisses Mr Campbells appeal by a majority of three to two.
Lord Carnwath gives the majority judgment, with which Lord Mance and Lord Reed agree.
Lord Toulson gives a dissenting judgment, with which Lady Hale agrees in a separate dissent.
Lord Carnwath holds that there is no authority for the proposition that a person can be made indirectly liable for breach of an obligation imposed by statute on someone else, and that it is only possible to pierce the corporate veil to impose liability on a director or other individual through whom the company acts, if it is expressly or impliedly justified by the statute [13].
In section 5 of the 1969 Act, Parliament has imposed a specific and closely defined criminal penalty on a director bearing responsibility for a failure to insure, which is linked to the criminal liability of the company [14].
Lord Carnwath finds that in determining statutory liability, the court must pay due respect to the language and structure of the statute, rather than to preconceptions as to what its objectives could or should have been [18].
He rejects the argument that the imposition of criminal liability is sufficient to render the director civilly liable, finding that other statutory provisions imposing criminal liability on directors for offences by their companies have not been treated as giving rise to civil liability [21 2].
He finds that the language in section 5 of the 1969 Act was deliberately chosen and is specifically directed at criminal liability, and accordingly it is difficult to infer an intention to impose a more general liability [23].
Lord Toulson would have allowed the appeal, finding that the effect in substance of section 5 of the 1969 Act is to place a legal obligation on a director or other officer of a company not to cause or permit the company to be without the required insurance, on pain of a criminal penalty.
He considers that the imposition of criminal responsibility for a specified act (or omission) carries with it a legal obligation not to act (or omit to act) in such a way [26].
Lord Toulson prefers a functional approach to interpreting the legislation which looks to the objective of the statute, which is employee protection [30].
However, even on a formalist approach, the director is in law guilty as a principal of failing to insure [31].
Since the Victorian age, the courts have held that breaches of legislation for the protection of employees are actionable at common law by the employee suffering the breach [32].
If the legislation is silent on whether there should be civil liability, the judges role is to fill the gaps [34].
Where legislation is passed to protect employees, a breach will ordinarily give rise to a cause of action, absent a clear statutory intention to the contrary [41].
Lady Hale agrees with Lord Toulson and would have allowed the appeal.
Lady Hale considers it absolutely clear that in enacting the 1969 Act, Parliament did intend that failure to insure should give rise not only to criminal liability but also to civil liability towards an employee who had been injured by his employers breach of duty and who, because of the failure to insure, would not otherwise receive the compensation for his injuries to which he was entitled [43].
She stresses that, contrary to the view expressed by the Inner House, the law has not been changed by recent House of Lords and Supreme Court decisions.
|
Does a commercial building which is in the course of redevelopment have to be valued for the purposes of rating as if it were still a useable office? That is the question raised in this appeal.
An analogous question would arise if the building were a former hospital which was in the process of conversion into flats.
Should it be valued as if it were still available for occupation as a hospital? The question is of general public importance to the law of rating and valuation.
The appellants (SJJM) own the freehold of the first floor (the premises) of a three storey office building built in the 1990s, known as Avalon House, at St Catherines Court, Sunderland Enterprise Park, Sunderland.
In the past the premises were occupied by tenants as a single office suite of 795.73 square metres.
In 2006 the tenants vacated the premises and in December 2009 SJJM accepted the surrender of the lease of the premises.
On 9 March 2010 SJJM entered into a contract with Jomast Developments Ltd for the renovation and improvement of the premises with a view to making them more adaptable for use as either three separate suites of offices or as a single suite, in order to attract replacement tenants.
The contracted building works involved the removal of all internal elements, except for the enclosure for the lift and staircase by which people gained access to other floors.
This entailed stripping out the cooling system including all internal and external plant, the lighting and power installations, the fire alarm system, the suspended ceiling, all sanitary fittings and drainage connections, the timber joisted and modular raised flooring, and existing masonry walls and metal stud partitions.
The contract also provided for the construction of new common parts to the premises and new communal sanitary facilities, which involved new solid partitioning, a raised floor, new sanitary fittings, new drainage and plumbing systems, and new electric lighting, alarm and heating systems.
Finally, the contract envisaged the construction of three new letting areas within the premises with three self contained electrical distribution circuits and air conditioning and heating systems.
After entering into the building contract and until at least 6 January 2012 SJJM had the premises marketed as available for rental either as three separate office suites or as a whole.
On 6 January 2012, which is the relevant date for assessing the facts and applying the statutory assumptions discussed below when determining the rateable value of the premises on an application to alter the rating list (the material day), the premises were vacant.
Contractors had removed the majority of the ceiling tiles and the suspended ceiling grid and light fittings and also 50% of the raised floor.
They had also removed the cooling system and the sanitary fittings, demolished the block walls of the lavatories and stripped out the electrical wiring.
The contractors had erected and plastered plasterboard partitions to form the outline of the proposed communal lavatories and had erected and plastered a partition across the floor at the east side of the premises.
They had completed first fix electrical installations to the lavatory area and had altered the drainage to accommodate the new location of the lavatories.
SJJM wished to reduce its liability to local authority rates on the premises while they were being reconstructed.
Local authority rates are a tax on property and the unit of assessment is the hereditament.
A hereditament is defined as property which is or may become liable to a rate, being a unit of such property which is, or would fall to be, shown as a separate item in the valuation list: section 64(1) of the Local Government Finance Act 1988 (the 1988 Act) which refers to this definition in section 115(1) of the General Rate Act 1967 (the 1967 Act).
Each hereditament is separately identified on the rating list (which formerly was called the valuation list).
The premises were so listed on the 2010 rating list as offices and premises with a rateable value of 102,000.
On 6 January 2012 SJJMs agents proposed to the respondent, who is the valuation officer for Sunderland (the VO), that the description of the premises on the rating list should be altered with effect from 1 April 2010 to building undergoing reconstruction and that the rateable value should be reduced to 1.
The agents justified their proposal on the basis that the premises were undergoing building works which rendered them incapable of beneficial occupation on the material day.
They explained that the scheme of building work was remodelling and refurbishing the floor plate to allow subdivision into up to three separate offices served by communal W/Cs.
The VO did not accept the proposal and referred it to the Valuation Tribunal for England (the Valuation Tribunal) as an appeal against his refusal to alter the rating list.
The relevant legislation
The central issue in this appeal is whether the premises should be rated by having regard to the physical condition they were in on 6 January 2012 or whether para 2(1)(b) of Schedule 6 to the 1988 Act as amended by the Rating (Valuation) Act 1999 (the 1999 Act), which I set out below, requires a valuation officer to assume that they were in reasonable repair as offices and premises on that date.
Schedule 6 to the 1988 Act, which is headed Non domestic rating: valuation, provides so far as relevant: 1.
This Schedule has effect to determine the rateable value of non domestic hereditaments for the purposes of this Part. 2.(1) The rateable value of a non domestic hereditament none of which consists of domestic property and none of which is exempt from local non domestic rating shall be taken to be an amount equal to the rent at which it is estimated the hereditament might reasonably be expected to let from year to year on these three assumptions (a) the first assumption is that the tenancy begins on the day by reference to which the determination is to be made; (b) the second assumption is that immediately before the tenancy begins the hereditament is in a state of reasonable repair, but excluding from this assumption any repairs which a reasonable landlord would consider uneconomic; (c) the third assumption is that the tenant undertakes to pay all usual tenants rates and taxes and to bear the cost of the repairs and insurance and the other expenses (if any) necessary to maintain the hereditament in a state to command the rent mentioned above. (6) Where the rateable value is determined with a view to making an alteration to a list which has been compiled (whether or not it is still in force) the matters mentioned in sub paragraph (7) below shall be taken to be as they are assumed to be on the material day. (7) The matters are the quantity of minerals or other substances in or the mode or category of occupation of the (a) matters affecting the physical state or physical enjoyment of the hereditament. (b) hereditament. (c) extracted from the hereditament. (cc) the quantity of refuse or waste material which is brought onto and permanently deposited on the hereditament. (d) matters affecting the physical state of the locality in which the hereditament is situated or which, though not affecting the physical state of the locality, are nonetheless physically manifest there, and (e) in the locality of the hereditament. the use or occupation of other premises situated (8A) For the purposes of this paragraph the state of repair of a hereditament at any time relevant for the purposes of a list shall be assumed to be the state of repair in which, under sub paragraph (1) above, it is assumed to be immediately before the assumed tenancy begins.
The prior proceedings
On 19 October 2012 the Valuation Tribunal dismissed SJJMs appeal.
It identified the material day as 6 January 2012 and concluded that on that day there was nothing to prevent the economic repair of the premises.
It held that the premises were an office suite in disrepair and were to be rated as if they were in reasonable repair.
SJJM appealed to the Upper Tribunal (Lands Chamber) (UT), which heard evidence, as the appeal proceeded as a re hearing.
The UT confirmed the Valuation Tribunals finding that the material day was 6 January 2012, and that decision has not been appealed.
Otherwise, the UT allowed SJJMs appeal, holding that the premises had been stripped out to such an extent that to replace its major building elements would go beyond the meaning of repair.
The assumption in para 2(1)(b) of Schedule 6 to the 1988 Act that a hereditament was in a state of reasonable repair did not extend to the replacement of systems that had been completely removed.
The alterations had rendered the premises incapable of beneficial occupation as an office and accordingly the premises were to be rated as a building undergoing reconstruction.
As a result, the rateable value of the premises should be reduced to the nominal amount of 1.
The VO appealed to the Court of Appeal, which allowed his appeal and therefore dismissed SJJMs underlying appeal.
The Court of Appeal reasoned as follows.
It recognised that the principle of reality, which I discuss in para 12 below, could be displaced by contrary statutory instructions.
The question was the extent to which para 2(1)(b) applied to create a counterfactual assumption.
The Court concluded as a matter of statutory construction that the para did create such an assumption and so displaced the reality principle.
The premises were described in the rating list as offices and premises.
On the facts found by the UT, the hereditament so described was not in a reasonable state of repair.
It was not correct to look to the future to see what the premises might become when works were completed.
In applying the statutory assumption in para 2(1)(b), the court had to compare the hereditament in its actual state with its previous state as listed, namely as offices and premises.
In order to decide whether the replacement of the stripped out elements could fairly be described as repairs as distinct from improvements or alterations, the court should look to the tests applied in the common law of landlord and tenant: Camden London Borough Council v Langford [1980] R A 369.
Applying those tests, the court concluded that the replacement of the stripped out elements would amount to repairs.
On the facts found by the UT, those repairs would economically return the premises to their former state.
Therefore the statutory assumption applied and the premises should be valued as if they were in a state of reasonable repair.
Discussion
For many years and long before Parliament enacted Schedule 6 to the 1988 Act, it had been an established principle of rating law that a hereditament is to be valued as it in fact existed at the material day.
This principle, which in the past was described by the Latin phrase, rebus sic stantibus (ie as things stand), and is often referred to as the principle of reality or the reality principle, was stated by Lord Buckmaster in Poplar Assessment Committee v Roberts [1922] 2 AC 93, 103, thus: [A]though the tenant is imaginary, the conditions in which his rent is to be determined cannot be imaginary.
They are the actual conditions affecting the hereditament at the time when the valuation is made.
Similarly, in Townley Mill Co (1919) Ltd v Oldham Assessment Committee [1937] AC 419, 437, Lord Maugham, when explaining the legal context in which the Rating and Valuation Act 1925 was enacted, said: The hypothetical tenant was assumed to be a tenant from year to year with a reasonable prospect of continuing in occupation; but the hypothetical rent which the tenant could give was estimated with reference to the hereditament in its actual physical condition (rebus sic stantibus), and a continuance of the existing state of things was prima facie to be presumed.
In Dawkins (VO) v Ash Brothers and Heaton Ltd [1969] 2 AC 366, in which the House of Lords held that the Lands Tribunal had been correct to take account of an existing demolition order in assessing the hypothetical rent, Lord Pearce stated (382): one must assume a hypothetical letting (which in many cases would never in fact occur) in order to do the best one can to form some estimate of what value should be attributed to a hereditament on the universal standard, namely a letting from year to year.
But one only excludes the human realities to a limited and necessary extent, since it is only the human realities that give any value at all to hereditaments.
They are excluded in so far as they are accidental to the letting of a hereditament.
They are acknowledged in so far as they are essential to the hereditament itself.
In the same case, Lord Wilberforce described the reality principle thus (385 386): The principle that the property must be valued as it exists at the relevant date is an old one The principle was mainly devised to meet, and it does deal with, an obvious type of case where the character or condition of the property either has undergone a change or is about to do so: thus a house in course of construction cannot be rated: nor can a building be rated by reference to changes which might be made in it either as to its structure or its use.
In this passage Lord Wilberforce referred to each of what is generally regarded as the two limbs of the reality principle, namely the physical state of the property and its use.
The reality principle continues to be a fundamental principle of rating and is manifested in Schedule 6 to the 1988 Act, in particular in para 2(6) and (7).
In Scottish & Newcastle Retail Ltd v Williams (VO) [2001] 1 EGLR 157 the Court of Appeal upheld the decision of the Lands Tribunal that the reality principle meant that it was assumed that a hereditament was in the same physical state as upon the material day, save for minor alterations, and could be occupied only for a purpose within the same mode or category of purpose as that for which it was occupied on the material day.
Thus in that case two public houses in a shopping centre had to be valued as public houses and not as retail units.
The decision appealed against interprets Schedule 6 to the 1988 Act as entailing a major departure from the reality principle by requiring that the hereditament be assumed to be in a reasonable state of repair for the mode of occupation listed in the rating list, namely as offices and premises.
I do not agree with that approach.
In my view, the legislative history shows that the repairing assumption which para 2(1) of Schedule 6 introduced did not supplant the reality principle to that degree.
Before the enactment of the 1988 Act the statutory hypothetical tenancy of non industrial property required that the landlord bear the cost of repairs.
For example, section 2 of the Valuation for Rating Act 1953 provided that the hypothetical tenancy of a dwelling house was one in which the landlord had undertaken to bear the cost of the repairs and insurance, and the other expenses, if any, necessary to maintain the hereditament in a state to command that rent.
In Wexler v Playle (VO) [1960] 1 QB 217 the Court of Appeal held that the statutory hypothesis was that the reasonable landlord, when contracting with the tenant for the let of a dwelling house, undertook to put the property in repair and would do so by removing readily remediable defects (Wilmer LJ 239) or reparable and temporary defects (Harman LJ 240).
Thus the existence of such defects in the property did not affect its value for rating purposes.
This reflected what might reasonably be expected in reality (Morris LJ 235).
See also, on the equivalent provisions in section 19(6) of the 1967 Act, the similar view in relation to commercial offices expressed by Eveleigh LJ in Camden London Borough Council v Langford (VO) in which he distinguished between repairs needed to make good decay, which fell within the hypothetical landlords repair obligation, and structural work on reinforced concrete columns and beams to preserve the stability and duration of the building, which went beyond repair and rendered the building unlettable.
Further, in Saunders v Maltby (VO) (1976) 19 RRC 33 the Court of Appeal held that the landlords repair obligation in the statutory provision did not extend to uneconomic repairs which were disproportionate to the value of the property; instead the landlord would let the property at a lower rent.
Case law distinguished between a mere lack of repair, which did not affect rateable value because of the hypothetical landlords obligation to repair, and redevelopment works which made a building uninhabitable.
Thus, for example, in Paynter (VO) v Buxton [1986] RVR 132, the Lands Tribunal upheld a nil valuation of two flats on the first and second floors of a terraced house in London which, along with the third floor flat, were undergoing a programme of refurbishment works, which were progressing from the top down.
At the relevant time, there were extensive alterations to the third floor flat, which had been valued at nil and was not the subject of appeal, but lesser activity in the other flats in which there had been some re plastering, some sanitary ware had been removed, some floorboards lifted and skirting boards and a door had been removed.
The Lands Tribunal accepted evidence that a programme of alterations on the three floors was being carried out on all three flats and concluded that the works amounted to alteration and modernisation and not repair.
Thus the tribunal upheld the nil valuation.
See also De Silva and Another v Davis (VO) [1983] 1 EGLR 211 and Hounslow London Borough Council v Rent Audio Visual Ltd & Bryant (VO) [1970] RA 535 for other applications of the distinction.
The 1988 Act ended domestic rating, replacing it with the Community Charge.
It also removed from the hypothetical tenancy the assumption that the landlord carried the repairing obligation by providing in Schedule 6 that all non domestic hereditaments be rated by reference to a hypothetical tenancy in which the tenant bore the repairing obligation.
As originally enacted para 2(1) of Schedule 6 to the 1988 Act provided: The rateable value of a non domestic hereditament shall be taken to be an amount equal to the rent at which it is estimated the hereditament might reasonably be expected to let from year to year if the tenant undertook to pay all usual tenants rates and taxes and to bear the cost of the repairs and insurance and the other expenses (if any) necessary to maintain the hereditament in a state to command that rent.
Following the decision of the Lands Tribunal in Benjamin v Anston Properties Ltd [1998] 2 EGLR 147 that, because, under the 1988 Act, the hypothetical tenant bore the obligation to repair, the rental value of the hereditament would be adversely affected by a state of disrepair, Parliament, by section 1 of the Rating (Valuation) Act 1999, amended the 1998 Act to reinstate the prior law as to the assumption that the building was in a state of repair.
It did so (a) by deleting the words in para 2(1) of Schedule 6 (para 18 above) from if the tenant to the end and replacing them with the three assumptions in the current para 2(1) and (b) by introducing para 2(8A).
For both the current para 2(1) and para 2(8A) see para 8 above.
As a general rule those amendments took effect retrospectively on 1 April 1990 (the date on which Part III of the 1988 Act first required the compilation of rating lists) in relation to rating lists compiled before the 1999 Act was passed.
Paragraph 3 of the 1999 Acts explanatory notes stated that the Act was designed to put on a statutory footing the law as it was widely believed to apply before the Benjamin decision.
The 1999 Act can thus be seen as applying principles analogous to those in Wexler, Camden London Borough Council and Saunders (para 16 above) to a hypothetical lease in which the tenant bore the obligation to put the hereditament in repair.
In my view the Court of Appeal goes too far in interpreting the 1999 Act as completely displacing the reality principle in relation to both the physical state and the mode of occupation of a hereditament which is undergoing redevelopment.
The 1999 Act, by introducing the assumption of reasonable repair at the outset of the hypothetical tenancy (the repair assumption), is not addressing the question of whether the premises were capable of beneficial occupation, which, in the context of a building undergoing redevelopment, is a logically prior question.
Thus the repair assumption (para 2(1)(b)) applies to matters affecting the physical state of the hereditament (para 2(7)(a)) but not to the mode or category of occupation of the hereditament (para 2(7)(b)).
I derive support for this view from the speech of Baroness Farrington, who identified the mischief which the 1999 Act addresses when she promoted it as a Bill in the Grand Committee in the House of Lords (Hansard 5 May 1999, CWH2 3).
After referring, with apparent approval, to Wexler v Playle and Saunders v Maltby she stated: the 1988 Act does not contain any express reference to the hereditaments state of repair.
I am aware that the noble Earl, Lord Lytton, regards this as a lacuna.
I agree with him that this lacuna lies at the heart of the Lands Tribunal decision in Benjamin v Anston Properties which determined that valuers should take account of disrepair in rating valuations.
It is this lacuna, and this alone, that the Bill seeks to address.
She went on to state (CWH6): The Bill deals with a single issue of principle in the field of valuation for rating by way of correcting a lacuna.
The Government are anxious that what is in effect an old principle governing rating valuation should merely be restated and incorporated with the minimum of disturbance to the corpus of law and valuation practice, which has grown up and developed over the passage of time.
This statement, in my view, negatives a suggestion that the 1999 Act was addressing any mischief caused by the established distinction between works to correct a lack of repair on the one hand and what she called renewal, refurbishment or improvement on the other.
In a helpful intervention, the Rating Surveyors Association and the British Property Federation submitted that, where works were being carried out on an existing building, the correct approach was to proceed in this order: (i) to determine whether a property is capable of rateable occupation at all and thus whether it is a hereditament, (ii) if the property is a hereditament, to determine the mode or category of occupation and then (iii) to consider whether the property is in a state of reasonable repair for use consistent with that mode or category.
The first two stages of that process involve the application of the reality principle.
At the third stage the valuation officer applies the statutory assumption in para 2(1)(b) if the reality is otherwise.
In my view, this is a helpful approach where a building is undergoing redevelopment.
But it is subject to the useful practice, which I discuss in para 31 below, of reducing the rateable value of a building, which is incapable of rateable occupation because of such temporary works, to a nominal figure rather than removing it from the rating list altogether.
How does a valuation officer ascertain that premises are undergoing reconstruction rather than simply being in a state of disrepair? The subjective intentions of the freehold owner of a property are not relevant to the reality principle.
The matter must be assessed objectively.
But, in carrying out that objective assessment of the physical state of the property on the material day, the valuation officer can have regard to the programme of works which is in fact being undertaken on the property.
It is clear on the UTs findings of fact, which I have summarised in para 4 above, that on 6 January 2012 the premises had been largely stripped out in the course of a redevelopment and an outline of the future development (the communal lavatory facilities) had been created.
The premises were incapable of beneficial occupation, because, as an objective fact, they were in the process of redevelopment and no part of them was capable of beneficial use.
If the works are objectively assessed as involving such redevelopment, there is no basis for applying the assumption in para 2(1)(b) to override the reality principle and to create a hypothetical tenancy of the previously existing premises in a reasonable state of repair.
This is both because a building under redevelopment, like a building under construction, is incapable of beneficial occupation and, in any event, the hypothetical landlord of a building undergoing redevelopment would normally not consider it economic to restore it to its prior use.
When in the course of a redevelopment some part of the developed property becomes capable of beneficial occupation, and thus becomes a separate hereditament, the assumption in para 2(1)(b) might apply to that part.
Thus, if, in the course of the conversion of a hospital into offices, a part of the development became capable of beneficial occupation as flatted accommodation, para 2(1)(b) might apply to deem a hole in the roof of that part to have been repaired immediately before the beginning of the hypothetical tenancy of that part.
But para 2(1)(b) neither deems the development to be complete nor assumes that the building in whole or in part is in a state of repair to be let as a hospital.
It is necessary to examine other statutory provisions and the cases to which counsel for the VO referred to see whether they contradict this approach.
He referred, first, to the statutory provisions relating to the completion of a building under structural alteration.
Section 46A(5) of the 1988 Act provides that, where a completion day has been notified, the hereditament which comprised the existing building is deemed to have ceased to exist on the day of completion of the new building which results from the structural alteration.
The VO argued that this meant that a building undergoing structural reconstruction continued to be liable to rates until the new building was completed.
There was thus, he submitted, no scope for an entry in the list as a transitory building undergoing reconstruction either when the reconstruction involved structural alteration or, by analogy, when it did not.
He submitted that this was supported also by para 2(7)(b) of Schedule 6 to the 1988 Act which required the identification of the mode and category of occupation, which under para 2(6) was to be taken as they are assumed to be on the material day.
On SJJMs approach, there was and could be no such mode or category of occupation.
In the alternative, the VO argued that, if there were such a thing in the world of rating as a transitory building under reconstruction, a hereditament could achieve that status only once it had become uneconomic to repair the building to its former status.
Again, light is shed on the effect of the statutory provisions by referring to historical developments on the rating regime.
Before 1966 liability for occupiers rates depended upon a building being occupied.
A building undergoing redevelopment was not occupied in the relevant sense by the carrying out of alterations or by the presence of the workmen who were doing so: Arbuckle Smith & Co Ltd v Greenock Corpn [1960] AC 813.
The Local Government Act 1966 introduced liability for rates on premises which were not occupied, if a rating authority so resolved, and its provisions were repeated in the consolidating General Rate Act 1967 in section 17 and Schedule 1.
Paragraph 1 of Schedule 1 to the 1967 Act created the liability of an owner to be rated in respect of an unoccupied hereditament at one half of the amount payable if the hereditament were occupied.
Paragraph 8 of that Schedule empowered a rating authority to serve a completion notice on the owner of a newly erected or altered building.
The notice had the effect that the building was to be treated for the purpose of the schedule as completed on the date specified in the notice and the owner thereafter became liable to be rated in respect of the property.
Paragraph 10 of the Schedule contained a precursor of section 46A(5) of the 1988 Act, deeming a relevant hereditament to have ceased to exist on the completion of the structural alteration.
The paragraph stated in its concluding words that it was not to be construed as affecting any liability for rates under para 1 in respect of the hereditament for any period before that date.
Section 46A of the 1988 Act was thus not a novelty.
It was introduced retrospectively into the 1988 Act by the Local Government and Housing Act 1989 (section 139 and Schedule 5 paras 25 and 79(3)).
While section 46A(5) does not contain the concluding words of para 10 of Schedule 1 to the 1967 Act, I see no reason to give the section a different interpretation from its precursor in this respect.
Counsel for the VO sought to support his position by referring to the judgment of the Divisional Court in Easiwork Homes Ltd v Redbridge London Borough Council [1970] 2 QB 406.
In that case, the owners chose to modernise a block of flats.
During the modernisation works, the flats were uninhabitable, as the plumbing had been removed and all the essential services were being renewed.
The Council assessed each flat for rates while unoccupied.
The owners did not pay and the Council applied for a distress warrant to enforce the liability.
The Justices decided that the owners were liable to pay rates and issued a distress warrant.
The Divisional Court dismissed the owners appeal on the question whether section 17 of the 1967 Act could apply to premises which were unoccupiable.
The Court held that the statute contemplated that liability to rates might arise when an owner was carrying out alterations and improvements which temporarily rendered a property incapable of occupation because para 10 of Schedule 1 to the 1967 Act provided for the payment of rates when more radical structural alterations were being carried out.
But, in my view, the case does not assist the VO because the owners had not applied to have the valuation list altered during the period of the works; they had challenged their liability only at the stage of enforcement.
Indeed, the Council had contended before the Justices that the owners could have applied for a reduction of the rateable values for the period when the premises were unoccupiable.
It is clear that para 10 of Schedule 1 to the 1967 Act and its successor, section 46A(5) of the 1988 Act, did not and do not bar an application to alter the rating list to reflect the actual state of a hereditament undergoing redevelopment.
In Ravenseft Properties Ltd v Newham London Borough Council [1976] QB 464 the Court of Appeal considered an appeal by the owners of offices, which were in the course of erection, against completion notices under para 8 of Schedule 1 to the 1967 Act.
The court held that the test for completion of a new building or an existing hereditament undergoing structural alteration was whether it was ready for occupation.
Lord Denning MR in the course of his judgment said that Easiwork had been correctly decided because the old valuation list, unless it was altered, continued to apply (p 474) (emphasis added).
Bridge LJ, who had sat in the Easiwork appeal, was of the same view.
He stated (p 479) It is clear that in a situation where an old existing hereditament has a valuation based on its occupiable value and is undergoing radical structural alterations, it can be the subject of a proposal for an alteration in the valuation list for, at all events, any substantial period when by reason of the alteration it is incapable of occupation.
That seems to me to provide the answer to the problem of hardship to an owner which in the Divisional Court we felt could arise in the Easiwork case.
Bridge LJ expressed that view in the context of section 68(4)(b) of the 1967 Act which defined the expression material change of circumstances as a change in value of the hereditament caused by the making of structural alterations or the total or partial destruction of the building.
Now, the Non domestic Rating (Alteration of Lists and Appeals) (England) Regulations 2009 list as a ground for making a proposal to alter a rating list that the rateable value shown in the list is inaccurate by reason of a material change of circumstances (regulation 4(1)(b)) and define material change of circumstances as a change in any of the matters mentioned in para 2(7) of Schedule 6 to the [1988] Act (regulation 3).
I consider, therefore, that radical alterations, whether or not they are structural, which render the hereditament unoccupiable, may justify a proposal to alter the rating list.
I also do not accept the point made by counsel for the VO (para 25 above) about paras 2(6) and 2(7)(b) of Schedule 6 to the 1988 Act.
The location of the reality principle in para 2(7) of Schedule 6 does not require a valuation officer to disregard the fact that a building is incapable of occupation because it is undergoing reconstruction.
In my view the assumption in para 2(1)(b), which para 2(6) brings into the assessment of the reality in para 2(7), can operate in the manner set out in para 24 above.
But it does not negate the reality principle to the extent that counsel for the VO contended.
Further, while a building which is undergoing reconstruction may be incapable of occupation for a time, it has been the practice of the Valuation Office to treat the property as a hereditament with only a nominal value rather than to remove the property from the rating list temporarily: see, for example, Hounslow London Borough Council v Rank Audio Visual Ltd and Paynter v Buxton.
There is no bar to implementing a proposal to alter the description of the hereditament on the rating list from offices and premises to building undergoing reconstruction and consequently to reduce the listed rateable value to a nominal amount if the facts, objectively assessed, support that alteration.
There is also, for the reasons given above, no basis for the alternative argument that a building can be listed as being under reconstruction only once the works have proceeded so far that it is no longer economic to restore the hereditament to its former state by means of repair.
Does the interpretation advanced by SJJM create a danger of ratepayers abusing the system, for example, by removing sanitary facilities or windows and then claiming that the hereditament was incapable of beneficial occupation? The Court of Appeal saw their approach as preventing such abuse: Lewison LJ para 30.
But the Court of Appeals interpretation was novel.
Prior practice, which had been reflected in the non statutory guidance in the Rating Manual produced by the Valuation Office, had been consistent with the approach which SJJM advocates.
It was not suggested to this Court that the administration of rates had not been effective in the past.
Further, when Parliament in the Rating (Empty Properties) Act 2007 increased the unoccupied business rate to make owners of unoccupied property liable for the same rate as those payable on occupied properties, it also introduced into the 1988 Act, in section 66A, an anti avoidance power which enables the Secretary of State and the Welsh Ministers to make regulations to disregard changes in the state of an unoccupied hereditament.
This power can be used to undermine attempts by owners to avoid unoccupied rates through causing or allowing the state of their property to change.
To date neither government have used the power: I infer that the practice before the Court of Appeals decision had not caused a serious problem.
In any event, the power can be exercised, if it is needed, for example to prevent avoidance by the partial implementation of a scheme of works and its deliberate non completion.
On the facts found by the UT, which I summarised in paras 2 4 above, I conclude that the premises were undergoing reconstruction on the material day and that the UT was entitled to alter the rating list as it did to reflect that reality.
Conclusion
For these reasons, which differ in some respects from those of the Upper Tribunal, I would allow the appeal and restore the determination of the Upper Tribunal set out in paras 88 and 90 of its decision.
| UK-Abs | S J & J Monk (SJJM) own the freehold of the first floor of a three storey office building.
Previously the premises were occupied by tenants as a single office suite.
In March 2010 SJJM entered into a building contract for the renovation of the property to make it more adaptable for use as either three suites of offices, or as a single suite, in order to attract replacement tenants.
After entering into the building contract and until at least 6 January 2012, SJJM had the property marketed as available for rental either as three separate office suites or as a whole.
On 6 January 2012, which is the relevant date for determining the rateable value of the property on an application to alter the rating list, the property was vacant and substantial construction work had been undertaken, with the premises stripped to a shell.
SJJM wished to reduce the propertys liability to local authority rates during reconstruction.
These rates are a tax on property on the rating list.
The 2010 rating list listed the property as offices and premises with a 102,000 rateable value.
On 6 January 2012 SJJM proposed to the valuation officer (the VO) that the property description should be altered to building undergoing reconstruction and the rateable value reduced to 1 as the property could not be occupied due to the building works.
The issue in the appeal is whether the property should be rated having regard to its physical condition on 6 January 2012 or whether paragraph 2(1)(b) of Schedule 6 to the Local Government Finance Act 1988, as amended by the Rating (Valuation) Act 1999, requires a valuation officer to assume the property was in reasonable repair in its previous state as offices and premises on that date.
Para 2(1) of Schedule 6 provides that the rateable value of the property is an amount equal to the rent at which it is estimated it might be expected to be let from year to year, subject to the assumption in para 2(1)(b) that immediately before the tenancy begins, the property is in a state of reasonable repair, but excluding from that assumption any repairs which a reasonable landlord would consider uneconomic.
The VO rejected SJJMs proposal to alter the description of the property on the rating list.
The Valuation Tribunal upheld his decision.
The Upper Tribunal allowed SJJMs appeal, holding that the property had been stripped out beyond reasonable repair.
It held that the para 2(1)(b) assumption did not extend to the replacement of systems which had been completely removed.
The property should be rated as a building undergoing reconstruction and the rateable value of the premises reduced to 1.
The Court of Appeal allowed the VOs appeal and held that para 2(1)(b) created an assumption that the repairs would return the premises to their former state, provided that they were economic.
This displaced the reality principle that the property should be valued as it existed on 6 January 2012.
The property should be valued as if it were in a state of reasonable repair.
The Supreme Court unanimously allows S J & J Monks appeal and restores the determination of the Upper Tribunal.
Lord Hodge gives the judgment, with which the other Justices agree.
Before Parliament enacted Schedule 6 to the 1988 Act it had long been an established principle of rating law that property should be valued as it in fact existed on the material day.
That principle is referred to as the reality principle [12].
The reality principle continues to be a fundamental principle of rating and is manifested in Schedule 6, in particular para 2(6) and (7), which provide that certain matters relating to the property, including matters affecting its physical state and the mode or category of its occupation, shall be taken to be as they are assumed on the material day [14].
The legislative history shows that the repairing assumption introduced by para 2(1)(b) of Schedule 6 did not supplant the reality principle by requiring that the premises are to be assumed to be in a reasonable state of repair for the mode of occupation listed on the rating list, namely as offices and premises [15].
The Court of Appeal went too far in interpreting that assumption as displacing the reality principle in relation to both the physical state of the property undergoing redevelopment and to its mode of occupation.
The para 2(1)(b) assumption of reasonable repair at the outset of a hypothetical tenancy is not addressing the question of whether the premises were capable of beneficial occupation.
In the context of a building undergoing redevelopment that is a question that requires to be asked first.
Therefore, the repair assumption applies to matters affecting the physical state of the property (para 2(7)(a)) but not to its mode or category of occupation (para 2(7)(b)) [20].
A valuation officer must assess objectively whether a property is undergoing reconstruction, and therefore incapable of beneficial occupation, rather than simply being in a state of disrepair.
In carrying out that objective assessment of the physical state of the property on the material day, the valuation officer can have regard to the programme of works being undertaken on the property.
If the works are assessed as involving redevelopment, there is no basis for applying the para 2(1)(b) assumption to override the reality principle and to create a hypothetical tenancy of the previously existing property in a reasonable state of repair.
This is both because a building under redevelopment, like a building under construction, is incapable of beneficial occupation and because the hypothetical landlord of a building undergoing redevelopment would not normally consider it economic to restore it to its prior use [23].
If, during redevelopment, some part of the property becomes capable of occupation, the para 2(1)(b) assumption might apply to that part, but para 2(1)(b) does not deem the development complete [24].
There is no statutory bar preventing an application to alter the rating list to reflect the actual state of the property undergoing redevelopment [29].
There is also no bar to implementing a proposal to alter the description of a property on the rating list from offices and premises to building undergoing reconstruction and consequently to reduce the listed rateable value to a nominal amount if the facts, objectively assessed, support that alteration.
Furthermore, there is no basis for the argument that a property can be listed as being under reconstruction only once the works have proceeded so far that it is no longer economic to undertake repairs to restore the property to its former state [31].
On the facts found by the Upper Tribunal, the building was undergoing reconstruction on 6 January 2012 and the Upper Tribunal was entitled to alter the rating list to reflect that reality [33].
|
These appeals raise issues about the validity of European arrest warrants (EAWs) issued by two Polish courts with a view to the extradition and surrender by the United Kingdom of the appellants, Maciej Goluchowski and Marek Sas.
They are wanted for the purpose of serving sentences of imprisonment in Poland which were, in the case of Goluchowski, (a) conditionally suspended and later activated and, in the case of Sas, either (b) due to be served only after an unsuccessful appeal (case II K 52/06, and EAW 1) or (c) the subject of a conditional early release which was revoked for breaches of the relevant conditions (case II K 498/03, and EAW 3). (Mr Sas was the subject of a further, accusation EAW, EAW 2, which can be ignored for the purposes of these proceedings.) Various domestic summonses or warrants were issued in unsuccessful attempts to find and arrest the appellants in Poland, before the relevant EAWs were issued.
In each appeal, the High Court has certified a question asking whether an EAW is defective for the purposes of section 2(6)(c) of the Extradition Act 2003 if it does not also give particulars of domestic warrants issued in the category 1 territory to enforce that judgment or order within the issuing state.
In the case of Goluchowski, the further question is certified: Does the term any other warrant issued in the category 1 territory for the persons arrest in respect of the offence in section 2(6)(c) of the Extradition Act 2003 only require the European arrest warrant to include the conviction of the requested person, or does it, following Poland v Wojciechowski [2014] EWHC 4162 (Admin), require the particularisation of the decision that required the requested person to serve an immediate sentence of imprisonment and was the decision following which it could be said that the requested person was unlawfully at large?
What section 2(6)(c) in fact requires is that an EAW issued to ensure that a person wanted to serve a sentence of imprisonment contain particulars of any other warrant issued in the category 1 territory for the persons arrest in respect of the offence.
Sections 2(6)(b) and (e) require that it also contain particulars of the conviction and particulars of the sentence which has been imposed .
The submissions before the court have in the circumstances ranged more widely than the second question certified in the case of Goluchowski.
In brief outline: i) Both appellants submit that an EAW must contain particulars of any, or if not all then at least the most recent, domestic warrant issued to arrest a person wanted to serve a sentence of imprisonment. ii) Miss Clare Montgomery QC for Goluchowski submits that an EAW must also contain particulars evidencing a judicial decision activating a suspended sentence.
Mr Mark Summers QC for Sas submits that a similar objection in fact applies to the EAW issued in respect of his client in case II K 498/03. iii) Both counsel submit that their submissions follow from the terms of the 2003 Act, whatever the position may be under European law under the terms of Council Framework Decision of 13 June 2002 (2002/584/JHA). iv) On point (ii), Miss Montgomery submits that her submissions also follow from the terms of the Framework Decision.
Mr Summers was not inclined to go so far, but noted that there may be respects in which the United Kingdom Parliament introduced conditions for surrender more specific or protective than those contained in the Framework Decision. v) That last possibility was identified by Lord Hope in Office of the Kings Prosecutor, Brussels v Cando Armas [2005] UKHL 67; [2006] 2 AC 1, para 24, when he observed that unfortunately the wording of Part I of the 2003 Act does not in every respect match that of the Framework Decision, but that the task of interpreting and applying the 2003 Act has to be approached on the assumption that, where there are differences, these were regarded by Parliament as a necessary protection against an unlawful infringement of the right to liberty. vi) However, United Kingdom courts will, if reasonably available, always prefer an interpretation of a domestic Act which accords with the United Kingdoms international obligations: Assange v Swedish Prosecution Authority (Nos 1 and 2) [2012] UKSC 22; [2012] 2 AC 471, and, since 1 December 2014 (after the United Kingdoms opt back into the Framework Decision under Protocol No 36 to the Treaty of Lisbon), it has also been the United Kingdom courts duty if possible to interpret the 2003 Act consistently with the Framework Decision (Criminal Proceedings against Pupino (Case C 105/03) [2006] QB 83) and the Supreme Courts duty to refer to the Court of Justice any issue of European law which it is necessary to resolve for the purpose of resolving an appeal and which is not acte clair.
The relevant legislation
Under the 2003 Act, an EAW is a Part 1 warrant, and the language of section 2 makes clear that a Part 1 warrant to be valid must satisfy various requirements.
In particular: (2) A Part 1 warrant is an arrest warrant which is issued by a judicial authority of a category 1 territory and which contains the statement referred to in subsection (3) and the (a) information referred to in subsection (4), or (b) information referred to in subsection (6). the statement referred to in subsection (5) and the This introduces an important distinction between EAWs issued in respect of (a) persons accused and wanted for prosecution (accusation cases) and (b) persons wanted after conviction either for sentencing or to serve a sentence of imprisonment or another form of detention imposed in respect of the offence (conviction cases).
In respect of a conviction warrant, subsection (5) specifies that: The statement is one that (a) the person in respect of whom the Part 1 warrant is issued has been convicted of an offence specified in the warrant by a court in the category 1 territory, and (b) the Part 1 warrant is issued with a view to his arrest and extradition to the category 1 territory for the purpose of being sentenced for the offence or of serving a sentence of imprisonment or another form of detention imposed in respect of the offence.
Although the term is not used in section 2, a person wanted under subsection (5) is a person unlawfully at large within a definition contained in section 68A (as inserted by section 42 of and paragraph 2 of Schedule 13 to the Police and Justice Act 2006 the 2006 Act): 68A. (1) A person is alleged to be unlawfully at large after conviction of an offence if
Subsections (4) and (6) specify the information required in respectively
accusation and conviction warrants.
For an accusation warrant: (4) The information is (a) he is alleged to have been convicted of it, and (b) his extradition is sought for the purpose of his being sentenced for the offence or of his serving a sentence of imprisonment or another form of detention imposed in respect of the offence. (2) This section applies for the purposes of this Part, other than sections 14 and 63. (a) particulars of the persons identity; (b) particulars of any other warrant issued in the category 1 territory for the persons arrest in respect of the offence; (c) particulars of the circumstances in which the person is alleged to have committed the offence, including the conduct alleged to constitute the offence, the time and place at which he is alleged to have committed the offence and any provision of the law of the category 1 territory under which the conduct is alleged to constitute an offence; (d) particulars of the sentence which may be imposed under the law of the category 1 territory in respect of the offence if the person is convicted of it.
For a conviction warrant: (6) The information is (a) particulars of the persons identity; (b) particulars of the conviction; (c) particulars of any other warrant issued in the category 1 territory for the persons arrest in respect of the offence; (d) particulars of the sentence which may be imposed under the law of the category 1 territory in respect of the offence, if the person has not been sentenced for the offence; (e) particulars of the sentence which has been imposed under the law of the category 1 territory in respect of the offence, if the person has been sentenced for the offence.
The scheme of the Framework Decision to which these provisions give effect is different.
It deals with accusation and conviction cases together.
Article 1.1 provides: 1.1.
The European arrest warrant is a judicial decision issued by a member state with a view to the arrest and surrender by another member state of a requested person, for the purposes of conducting a criminal prosecution or executing a custodial sentence or detention order.
Article 8.1 sets out the required content and form of an EAW: the identity and nationality of the requested 8.1.
The European arrest warrant shall contain the following information set out in accordance with the form contained in the Annex: (a) person; (b) the name, address, telephone and fax numbers and e mail address of the issuing judicial authority; (c) evidence of an enforceable judgment, an arrest warrant or any other enforceable judicial decision having the same effect, coming within the scope of articles 1 and 2; (d) particularly in respect of article 2; a description of the circumstances in which the (e) offence was committed, including the time, place and degree of participation in the offence by the requested person; (f) the penalty imposed, if there is a final judgment, or the prescribed scale of penalties for the offence under the law of the issuing member state; (g) the nature and legal classification of the offence, if possible, other consequences of the offence.
The form contained in the Annex to the Framework Decision contains a box (box (b)) for completion with the information referred to in article 8.1(c), providing as follows: (b) Decision on which the warrant is based: 1.
Arrest warrant or judicial decision having the same effect: .
Type: . 2.
Enforceable judgment: .
Reference: .
Article 15 addresses the surrender decision and sufficiency of information: 15.1.
The executing judicial authority shall decide, within the time limits and under the conditions defined in this Framework Decision, whether the person is to be surrendered. 2.
If the executing judicial authority finds the information communicated by the issuing member state to be insufficient to allow it to decide on surrender, it shall request that the necessary supplementary information, in particular with respect to articles 3 to 5 and article 8, be furnished as a matter of urgency and may fix a time limit for the receipt thereof, taking into account the need to observe the time limits set in article 17. 3.
The issuing judicial authority may at any time forward any additional useful information to the executing judicial authority.
In the 2003 Act, the admissibility in evidence of such further information is secured by section 202 (as amended by section 42 of and paragraph 26 of Schedule 13 to the 2006 Act), which provides: (1) A Part 1 warrant may be received in evidence in proceedings under this Act. (2) Any other document issued in a category 1 territory may be received in evidence in proceedings under this Act if it is duly authenticated. (3) A document issued in a category 2 territory may be received in evidence in proceedings under this Act if it is duly authenticated. (4) A document issued in a category 1 or category 2 territory is duly authenticated if (and only if) one of these applies (a) officer of the territory; it purports to be signed by a judge, magistrate or (aa) it purports to be certified, whether by seal or otherwise, by the Ministry or Department of the territory responsible for justice or for foreign affairs; it purports to be authenticated by the oath or (b) affirmation of a witness. (5) Subsections (2) and (3) do not prevent a document that is not duly authenticated from being received in evidence in proceedings under this Act.
The facts in more detail
(a) Goluchowski
The EAW in respect of Goluchowski was dated 13 August 2010 in relation to two offences, relating to what I can call cases I and II.
The translation from the Polish shows that box (b) was completed as follows: 1.
Type: Decision of provisional detention: x Judicial decision concerning application of other measures, which is deprivation of freedom, if yes, what: x Enforceable judgment: x 1) Regional Court in Elblag, dated October 22, 2007 2) Regional Court in Elblag, dated April 8, 2008 2.
File signature, for which decision was given [a better translation might be: reference of decision given]: 1) X K 986/07 2) II K 105/08.
Under Indications on the length of sentence, there then appeared in relation to case I ten months and in relation to case II two years, with the further information that both sentences remained to be served in full.
Mr Goluchowski was arrested under the EAW on 1 August 2014, and further information was supplied, presumably at request, by the Regional Court of Elblag through Interpol on 29 August 2014.
It showed that the sentence imposed in case I on 22 October 2007 had been suspended for a probation period of four years, that on 13 June 2008 he was ordered to serve the sentence as a result of having committed a similar intentional offence during that probation period, that he was summonsed to attend the correction facility on 28 July 2008, but that on 17 June 2008 he filed a motion to defer the sentence, leading to a six month deferral until 19 February 2009, when he was required to attend the facility without further summons, that on 20 February 2009 he failed to do this, that on 10 March 2009 the police were ordered to bring him to the facility and on 30 June 2009 a search with a domestic arrest warrant was started.
As to case II, the EAW showed that the sentence of two years imprisonment imposed on him on 8 April 2008 was conditionally suspended for five years and was subject to probationary supervision, that on 10 March 2009 he was ordered to serve the sentence because he had evaded the supervision of his probation officer, that on 23 April 2009 he was summonsed to attend the correction facility, that he did not do this and that on 8 January 2010 a domestic arrest warrant was issued for this offence.
Based on police information that he might be in England, the EAW was issued by the District Court in Elblag in respect of both cases on 13 August 2010.
There are two outstanding EAWs in respect of Mr Sas.
The first, EAW 1, was issued by the Zielona Gora Circuit Court on 23 January 2008.
Box (b) is completed (in translation): 1.
Type of decision: Enforceable arrest warrant: n/a Other enforceable judicial decision involving personal liberty deprivation: n/a Enforceable judgment: Judgment of April 24, 2006, by the District Court in Zagan, changed by the judgment of November 2, 2006, by the Circuit Court in Zielona Gora (ref no VII Ka 783/06). 2.
Decision reference: II K 52/06, District Court in Zagan The length of sentence was given as eight months, all remaining to be served.
Mr Sas was arrested under EAW 1 on 30 July 2014 and on 14 October 2014 the Zielona Gora Circuit Court passed on further information provided by the Zagan District Court.
The Zielona Gora Circuit Court had on 2 November 2006 varied the basis of the original conviction, so that it was now found in article 297 para 1 in conjunction with article 11 para 3 of the Penal Code.
Both Mr Sas and his wife who was convicted with him: were free when they testified before the first and second instance courts.
Only after the appeal proceedings were finished and the judgment became final were they summonsed to report to their penitentiaries.
Marek Sas was to report to
the detention facility on January 25, 2007
He did not do this.
So, on 12 March 2007, the District Court in Zagan issued an order for the police to bring him in, but this could not be executed as he was not residing at his usual address.
The court therefore issued a wanted notice for him on 27 July 2007, and suspended the enforcement proceedings against him.
Since that produced no arrest, at the Zagan District Courts request, the Public Prosecutor of Zielona Gora applied on 31 December 2007 for an EAW, which the Zielona Gora Circuit Court issued on 23 January 2008.
The other, EAW 3, was issued by the District Court in Jelenia Gora on 21 August 2008.
Box (b) was again completed with the first entries being said to be not applicable.
Under them, the entry Enforceable judgment was completed with the information Cumulative judgment issued by the District Court in Boleslawiec on 11 February 2004 and the case reference given of II K 498/03.
Two sentences were specified one of two years and two months, the other of one year, and the remaining sentence to be served was given as one year, six months and 23 days imprisonment, off setting from the term of penalty, the periods of provisional custody served between 13.11.2003 and 05.04.2004 and between 20.04.2004 and 01.07.2005.
It thus appeared on the face of EAW 3 that Sas had served part of the sentences imposed on 11 February 2004 and was wanted to serve the balance.
Information provided by the District Court in Jelenia Gora at the request of the Crown Prosecution Service on 1 October 2014 showed that the cumulative judgment of 11 February 2004 resulted from four separate frauds committed by Sas between 2000 and 2002, that the District Court had on 30 June 2005 granted Sas early conditional release from the sentence then imposed, but that on 29 September 2007 the same Court had revoked the conditional release for breach of the condition that he undergo supervision and because of other pending charges against him, that when he failed to surrender, the District Court in Boleslawiec issued a warrant for his compulsory appearance at prison, and that thereafter on 21 August 2008 EAW 3 was issued.
Analysis
Underlying the provisions of section 2(4) and 2(6) of the 2003 Act are the requirements of article 8.1 of the Framework Decision.
Article 8.1(c) draws no explicit distinction between accusation and conviction cases, but embraces both.
The declared purpose of article 8.1(c) is to ensure that the EAW demonstrates that the case falls within articles 1 and 2, that is to say that it shows that the case is either an accusation or a conviction case (article 1.1) and that the offence qualifies under article 2.
In Parchetul de pe lng Curtea de Apel Cluj v Bob Dogi (Case C 241/15) (Bob Dogi) the opinion of Advocate General Yves Bot EU:C:2016:131, (unreported) 2 March 2016, recently stressed the importance of the requirement that every EAW rest on a basis specified in article 8.1(c).
In practice, however, a significant difference exists in the bases on which EAWs will rest in accusation and conviction cases.
In an accusation case, the requirement in section 2(4)(b) of the 2003 Act for information consisting of particulars of any other warrant issued in the category 1 territory for the persons arrest in respect of the offence refers to any domestic warrant on which the European arrest warrant is based, and not to any other European arrest warrant which may have been issued on the basis of any such domestic warrant: Louca v Public Prosecutor, Bielefeld, Germany [2009] UKSC 4; [2009] 1 WLR 2550, para 15.
As was also observed at paras 9 10 in Louca, the language of article 8.1 draws a distinction between a European arrest warrant and in sub paragraph (c) an arrest warrant, which indicates that the latter words refer to any domestic warrant.
In an accusation case, any EAW will normally be based on a domestic arrest warrant.
The language of article 8.1(c) also covers any other enforceable judicial decision having the same effect.
The concept of a warrant in section 2(4)(b) can no doubt be read widely enough to cover any other enforceable judicial decision having the same effect on which an EAW may be based in other European countries party to the Framework Decision.
In a conviction case, it is equally necessary to satisfy article 8.1(c), but the natural basis of an EAW is an enforceable judgment or, again perhaps, any other enforceable judicial decision having the same effect.
Where there exists such an enforceable judgment or equivalent decision, there is no reason why there should necessarily be any domestic warrant or equivalent, and, if there is, there is no obvious reason why it should also be required to be evidenced in the EAW.
In the judgment in Bob Dogi EU:C:2016:385 (unreported) 1 June 2016, para 51 the Court of Justice was careful to say that an EAW: must, in all cases, be based on one of the national judicial decisions referred to in the provision [viz article 8.1(c)], which may be, where relevant, the decision issuing a national arrest warrant.
The phrase where relevant might here have been better expressed as the case may be the phrase used earlier in a parallel context in para 49.
In the French, German and Spanish, the same words are used in each context (le cas cheant, gegebenfalls and en su caso).
In other words, article 8.1(c) offers alternative possibilities, according to the context.
Miss Montgomerys suggestion in further written submissions on Bob Dogi that the drafting history somehow supports a view that there must always, or at least in a case where the original judgment is not immediately executable, be a prior national arrest warrant has in fact no support in paras 50 51 of the courts judgment or para 49 of Advocate General Yves Bots opinion to which she refers.
All the drafting history shows is, as the Court of Justice said in para 51, that (whereas originally it was contemplated that there might or might not be a relevant decision) ultimately it became, in accordance with article 8.1(c), mandatory that there should be at least one of the national judicial decisions mentioned in that clause of that article.
A situation in which a domestic warrant may be required, in a conviction case, is where a person is at large when convicted, has absconded and is wanted for sentencing.
A warrant issued for his arrest might in this situation be regarded as constituting the basis of any EAW then issued to secure his surrender for sentencing.
That situation could explain the reference in section 2(6)(c) of the 2003 Act to particulars of any other warrant issued in the category 1 territory for the persons arrest.
Otherwise, I consider that section 2(6)(c) is unlikely to have any bite.
It is submitted that this interpretation of section 2(6)(c), with its necessary restriction to cases where a person has been convicted but not yet sentenced, cannot stand with the careful delineation and differentiation of the scope of section 2(6)(d) and (e) between such cases and cases where the person wanted has been both convicted and sentenced.
I accept the point forensically, but I think that it gives too much weight to a distinction which had necessarily to be expressed when drafting subsections (d) and (e), too little weight to the use of the word any in subsection (c) and too much weight to the supposed precision of the drafters of the 2003 Act generally.
As an indication of the last point, I have already observed that the word warrant in section 2(4)(b) must probably be interpreted as embracing any other enforceable judicial decision having the same effect.
Further, in contrast with the position in section 2(6)(c), the word any in section 2(4)(b) must be seen as over cautious, since it is clear that any EAW must be based on a domestic warrant or equivalent in accusation cases a point which Advocate General Bot went to great pains to stress.
In a conviction case, where the person has been sentenced to an immediate sentence of imprisonment, is due to be in prison but has absconded, perhaps even from the dock or from prison, there is no obvious reason why there should be any domestic warrant at all, or why, if any has been issued, it should be required under article 8.1(c) of the Framework Decision to be evidenced in any EAW which is issued to secure the offenders return to serve his sentence.
This is confirmed by the alternative formulation of the various possibilities in article 8.1(c), as well as in box (b) of the annexed form.
The same logic can and, in order to ensure consistency, should in my opinion be carried through to section 2(6)(c) of the 2003 Act.
The present appeals are however concerned with sentences of imprisonment following conviction which did not take immediate effect.
It is a notable feature of the Framework Decision and the 2003 Act that neither appears to show any consciousness of the possibility of such sentences, which are by no means uncommon.
That cannot mean that they are not covered.
The Framework Decision and the 2003 Act must be understood and made to work in a manner which will cater for such sentences.
Sas (EAW 1)
I will start with EAW 1 issued in respect of Sas.
In accordance with a common continental practice (in contrast with normal British practice), Sas was and remained free both when originally sentenced to imprisonment and when his appeal was heard.
His sentence became final and enforceable when his appeal failed.
His summonsing to report to the detention or correction facility on 25 January 2007 was evidently a formal step necessary to implement that outcome.
He should then have attended at the facility.
The court order later issued to secure this was irrelevant to the enforceability of his sentence.
Neither the summons, which followed from the court order, nor the court order required mention in the EAW under article 8.1(c), and neither could constitute a warrant within section 2(6)(c) of the 2003 Act.
The EAW mentioned both the original District Court judgment of 24 April 2006 and the judgment of the Circuit Court on appeal of 2 November 2006.
So there can be no question of non compliance with the terms of article 8.1(c) or of failure to particularise either the conviction or the sentence under section 2(6)(b) or (e) of the 2003 Act.
EAW 1 was therefore valid.
Goluchowski and Sas (EAW 3)
Both the sentences of imprisonment passed on Goluchowski were conditionally suspended, in each case he breached the conditions and was ordered by the court to serve the relevant sentence, in one case only after a further court order deferring the time when he should start to do so.
In each case, when he failed to attend the correction facility on the date ordered, domestic court orders, summonses or arrest warrants were issued in order to try to secure this.
In the case of Sas, a somewhat different course of events preceded EAW 3.
He was given an immediate sentence of imprisonment, but was later granted a conditional release.
He breached the conditions, whereupon the court revoked his conditional release, but he failed to surrender to serve the outstanding balance of his sentence.
A domestic warrant was issued for his arrest, and then EAW 3.
The position is therefore that Goluchowski, in respect of both sentences of imprisonment passed on him, and Sas, in respect of the sentence the subject of EAW 3, were due to attend in prison without more as a result of court judgments, but defaulted.
The EAWs in respect of these sentences could be based on these court judgments.
Any domestic summonses or warrants seeking to secure their compliance with these judgments were irrelevant, and did not require mention in the EAWs under article 8.1(c).
By the same token, they could not constitute warrants requiring mention under section 2(6)(c) of the 2003 Act.
That leads however to the further points covered by the parties submissions before the Supreme Court, in particular whether the language of the Framework Decision and/or of section 2(6) of the 2003 Act required these EAWs to evidence or particularise (i) in the case of Goluchowski, the suspension of the original sentences and the court decisions by which the suspended sentences were activated so as to fall due to be served and/or (ii) in the case of EAW 3 relating to Sas, his conditional release and the court decision by which this was revoked.
That depends on what is meant by the requirement in article 8.1(c) that an EAW shall contain information set out in accordance with the form contained in the Annex consisting of evidence of an enforceable judgment or any other enforceable judicial decision having the same effect.
In the case of all the EAWs, it can be said that, read literally, they do contain such information.
After the printed form words enforceable judgment in box (b), there is in each a reference to a judgment and, under that, its case file number is also entered.
Details of the length of sentence imposed and outstanding are also given in the completed form.
On the face of the EAW relating to Goluchowski, the two judgments recorded could have imposed sentences due for immediate service, with the lapse of time explicable by for example absconding when the sentence was passed or at some later date.
On the face of EAW 3 relating to Sas, the judgment did impose a sentence for immediate service, and the fact that a balance remained unserved could again be explicable by for example absconding.
Lord Sumption has recently stated, in a judgment with which Lord Neuberger, Lord Kerr, Lord Clarke and Lord Wilson all agreed, that It follows that the scheme of the Framework Decision and of Part 1 of the 2003 Act is that as a general rule the court of the executing state is bound to take the statements and information in the warrant at face value.
The validity of the warrant depends on whether the prescribed particulars are to be found in it, and not on whether they are correct.
It cannot be open to a defendant to challenge the validity of a warrant which contains the prescribed particulars by reference to extraneous evidence tending to show that those statements and information are wrong.
See Zakrzewski v District Court in Torun, Poland [2013] UKSC 2; [2013] 1 WLR 324, para 8.
On that basis, it might be said to be irrelevant that information subsequently made available by the relevant Polish courts, it seems at the request of the United Kingdom prosecuting authorities, shows a more complex position than appears on the face of the EAWs themselves.
I consider that it is clear in the light of the very recent decision in Bob Dogi that the Court of Justice would not take so austere a view.
In that case, box (b) of the EAW was completed in terms indicating on their face that the EAW was relied on as being itself also the national arrest warrant referred to in article 8.1(c).
The Court of Justice, having held that an EAW must, in that case (an accusation case) be based on a prior separate national arrest warrant, said: 64.
Given that article 8.1(c) of the Framework Decision lays down a requirement as to lawfulness which must be observed if the European arrest warrant is to be valid, failure to comply with that requirement must, in principle, result in the executing judicial authority refusing to give effect to that warrant.
The better interpretation of para 64 appears to be that article 8.1(c) requires an EAW to evidence on its face a prior separate national arrest warrant in order to comply with article 8.1(c), and that it is not sufficient that such a prior separate arrest warrant actually exists.
However, despite the words shall contain used by article 8.1 and the language of requirement used by the Court of Justice, it is also clear that the Court was not treating the identification on the face of the EAW of a prior separate national arrest warrant as an absolute condition of an EAWs validity.
On the contrary, the executing court was obliged to investigate the underlying factual position further, by requesting further information under article 15.
Whether the EAW was to be treated as valid and enforceable would depend not on how it was expressed, but on the underlying factual question whether or not it proved actually to be based on a prior separate national arrest warrant.
As the court put it: 65 before adopting such a decision [ie one refusing to give effect to the European arrest warrant], which, by its very nature, must remain the exception in the application of the surrender system established by the Framework Decision, as that system is based on the principles of mutual recognition and confidence, the executing judicial authority must, pursuant to article 15.2 of the Framework Decision, request the judicial authority of the issuing member state to furnish all necessary supplementary information as a matter of urgency to enable it to examine whether the fact that the European arrest warrant does not state whether there is a national arrest warrant may be explained either by the fact that no separate national warrant was issued prior to the issue of the European arrest warrant or that such a warrant exists but was not mentioned. 67.
In the light of the foregoing considerations, the answer to Question 2 is that article 8.1(c) of the Framework Decision is to be interpreted as meaning that, where a European arrest warrant based on the existence of an arrest warrant within the meaning of that provision does not contain any reference to the existence of a national arrest warrant, the executing judicial authority must refuse to give effect to it if, in the light of the information provided pursuant to article 15.2 of the Framework Decision and any other information available to it, that authority concludes that the European arrest warrant is not valid because it was in fact issued in the absence of any national warrant separate from the European arrest warrant.
In the light of Bob Dogi, it is therefore clear under European Union law that, if information obtained under article 15 subsequently to the EAW shows that a European arrest warrant was in fact based on an enforceable judgment or equivalent judicial decision, even though this was not fully or accurately evidenced on its face, the EAW will be valid and enforceable.
On the other hand, if subsequently obtained information undermines in a fundamental respect a statement in an EAW which on its face evidences an enforceable judgment or equivalent judicial decision, it could not be right to give effect to the EAW willy nilly.
It is, nonetheless, of potential relevance to consider what is meant by evidence of an enforceable judgment or of an equivalent enforceable judicial decision, since such evidence must appear either in the EAW or, if not, then in separate and subsequently obtained information.
Mr Summers was, as I have said, inclined to accept that as a matter of European law, the present EAWs contained all the evidence that could be required in any form under article 8.1.
It was sufficient to enter against the words enforceable judgment, details of the original sentences, while the fact that they had become enforceable by being activated, in the case of the two sentences passed on Goluchowski, or had become enforceable for its full length as a result of revocation of Sass conditional release, in the case of the sentence the subject of EAW 3 in his case was sufficiently evidenced by completion and certification by signature by the relevant courts at the end of the relevant EAWs.
If that be the correct analysis, then I would have no difficulty in treating the position under section 2 of the 2003 Act as paralleling that under European law.
It would be sufficient under subsections (5)(b) and (6)(b) and (e) for the EAW to identify the original convictions (which these EAWs did) and the length of the sentences passed (which these EAWs again did), bearing in mind that subsection (5)(b) clearly implies and that box (b) of the EAW must confirm that the sentence will in one way or another be or have become due to be served immediately.
Miss Montgomery submits however that evidence of an enforceable judgment or other enforceable judicial decision having the same effect encompasses all judicial judgments or decisions by virtue of which the sentence has become enforceable.
I am not attracted by this view, not least because (i) it could mean that the EAW should set out a quite complex history of court judgments and decisions, whereas article 8.1(c) and box (b) contemplate a single reference, (ii) mutual confidence would seem better served by accepting at face value, at least at an initial stage, an accurate statement that a sentence was (even though it was originally suspended or had been the subject of a conditional release) now enforceable and (iii) it would always be open to an executing state to request further information under article 15, as the United Kingdom prosecuting authorities appear to have done in the present cases.
However, it is in my opinion unnecessary to resolve this point in order to decide these appeals.
Here, the bases on which and the processes by which the judgments became enforceable are made clear by the subsequently obtained information.
Bob Dogi establishes that an EAW could not be treated as invalid or ineffective merely because that full history did not appear in the EAW itself and only became apparent from information subsequently requested.
Bob Dogi concerned an EAW which was on its face problematic.
It is inconceivable that an EAW which was in terms valid could fall to be treated as invalid in the light of subsequent information which confirmed that it did indeed rest on a valid foundation in terms of enforceable court judgment(s) and/or decision(s).
That would be perverse.
Accordingly, even if a reference to the activating decisions should strictly have been made in the EAWs alongside the reference to the judgment as enforceable, this cannot as a matter of European law mean that the EAWs should be treated as invalid or incapable of being executed.
That being so, I consider that the same position must once again carry through into section 2(6) of the 2003 Act.
Section 202 must be understood as enabling the same sort of cooperation and regularisation of formal, rather than substantive, defects appearing in an EAW that article 15 of the Framework Decision contemplates.
In Dabas v High Court of Justice in Madrid, Spain [2007] UKHL 6; [2007] 2 AC 31, para 50, Lord Hope expressed the view, which with other members of the House including myself concurred, that an EAW which does not contain the statements referred to in [section 2(2)] cannot be eked out by extraneous information, that the requirements of section 2(2) are mandatory and that, if they are not met, the warrant is not a Part 1 warrant.
That was said taking account of the principle of conforming interpretation, which was at that date treated (albeit wrongly) as applicable, but which is now on any view applicable: see Assange v Swedish Public Prosecutor [2012] UKSC 22; [2012] 2 AC 471, paras 198 217, Mugurel Cretu v Local Court of Suceava, Romania [2016] EWHC 353 (Admin), paras 14 18.
The issue in Dabas was whether the reference in section 2(7) to a certificate from the designated authority involved a certificate separate from the EAW itself.
Applying the principle in Pupino, the House nevertheless held by a majority that it did not.
On the present appeals, we have a clear decision of the Court of Justice that a requirement for information in an EAW should not be read as a condition, non compliance with which is by itself fatal to the validity of the EAW, and that the EAW may be enforced if and when separately supplied information establishes a sound factual basis for surrender.
In the context of a request for surrender under an EAW and in the light of section 202, I consider that the requirements of section 2(2)(b) read with section 2(6)(b) and (e) can and should be read in a like sense.
Lord Hopes words must be qualified to enable the process of investigation, involving where deemed appropriate a request for and examination of further information, to be undertaken and taken into account, in determining whether an EAW should be given effect under the 2003 Act, in a manner paralleling that indicated by the Court of Justice to be appropriate under the Framework Decision.
Furthermore, and in any event, the present EAWs appear on their face to meet all the requirements of section 2(6).
They particularise in each case an enforceable judgment and the sentence passed and due to be served in respect of it.
They cannot be challenged on their face: Zakrzewski, cited above.
It is only the subsequently obtained information which enables any suggestion that the particulars in the EAWs were incomplete, by providing at the same time full information: see para 35 above.
Where, as here, that information shows that the EAWs were in all substantial respects entirely justified, it would be absurd to create the exception to the rule in Zakrzewski which would be involved in setting them aside.
Conclusions
I would therefore dismiss the appeal in respect of EAW 1 relating to Mr Sas for the reasons given in para 31 above, and dismiss the appeals in relation to the EAW relating to Mr Goluchowski and in relation to EAW 3 relating to Mr Sas for the reasons given in paras 32 48 above.
I would therefore affirm the judgments given in the High Court and dismiss the appeals in the cases of both Mr Goluchowski and Mr Sas.
LORD NEUBERGER:
I agree with Lord Mance that these appeals should be dismissed for the reasons which he gives.
I give this very short judgment simply because, as Lord Mance records in para 37 above, I agreed with what Lord Sumption said in Zakrzewski v District Court in Torun, Poland [2013] 1 WLR 324, para 8.
In that case, an EAW had been issued against Mr Zakrzewski based on four convictions by Polish courts for which he had received aggregated sentences of 45 months, as recorded in the EAW.
After Mr Zakrzewski had been brought before the District Judge (and the hearing of his case had been adjourned), an order had been made by the Polish court, on his application, replacing the aggregated sentences of 45 months with a cumulative sentence of 22 months.
Accordingly, his case on the adjourned hearing before the District Judge and on appeal (which unsurprisingly was described by Lord Sumption, at para 4, as hardly overburdened with merit) was that the EAW had been invalidated by the cumulative sentence replacing the aggregated sentences.
Read in the light of those facts, it appears to me that the remarks of Lord Sumption quoted in para 37 above were justified.
However, Lord Mance is right to suggest that Lord Sumptions remarks should not be taken as representing some sort of absolute rule that the facts in an EAW must be assumed to be correct by the courts of the executing state in every case, irrespective of the evidence.
Nor were they intended to be so read: the first sentence of the quoted passage includes the words as a general rule, and the two safeguards identified by Lord Sumption in paras 9ff of his judgment make that clear.
| UK-Abs | European Arrest Warrants (EAWs) have been issued for the Appellants extradition to Poland, where they are wanted for the purposes of serving sentences of imprisonment.
The Appellants extradition to Poland was ordered pursuant to the EAWs, and they have appealed against the orders on the grounds that the EAWs are defective under section 2(6)(c) of the Extradition Act 2003.
This requires that an EAW in a conviction case contains particulars of any other warrant issued in the Category 1 territory for the persons arrest in respect of the conviction.
Various domestic summonses or warrants were issued in Poland unsuccessful attempts to find and arrest the Appellants there, before the EAWs were issued.
The Appellants case is that such domestic summonses or warrants required to be particularised in the EAWs.
The High Court dismissed their appeals and certified two questions: (1) Is an EAW defective for the purposes of section 2(6)(c) of the Extradition Act 2003 if it does not also give particulars of domestic warrants issued in the category 1 territory to enforce that judgment or order within the issuing state? (2) Does the term any other warrant issued in the category 1 territory for the persons arrest in respect of the offence in section 2(6)(c) of the Extradition Act 2003 only require the European arrest warrant to include the conviction of the requested person, or does it, following Poland v Wojciechowski [2014] EWHC 412 (Admin), require the particularisation of the decision that required the requested person to serve an immediate sentence of imprisonment and was the decision following which it could be said that the requested person was unlawfully at large?
The Supreme Court unanimously dismisses the appeal.
Lord Mance gives the leading judgment, with which the other members of the Court agree.
Lord Neuberger gives a short concurring judgment.
Although the EU Framework Decision, on which the provisions of section 2 of the Extradition Act 2003 are based, does not explicitly distinguish between accusation and conviction cases, in practice there are significant differences in the bases on which EAWs in each category of case will rest [23 24].
In an accusation case, an EAW will normally be based on a domestic arrest warrant whereas in a conviction case, the natural basis of an EAW will be an enforceable judgment [25 26].
Where there exists an enforceable judgment, there is no reason why there should necessarily be any domestic warrant and, if there is, there is no obvious reason why it should be required to be evidenced in the EAW [26].
A domestic warrant may be required in a conviction case where a person is at large when convicted, has absconded, and is wanted for sentencing, and might in such circumstances be regarded as constituting the basis of any EAW issued to secure his surrender for sentencing [27].
But, where a person has been sentenced to an immediate sentence of imprisonment and is due to be in prison but has absconded, there is no obvious reason why there should be any domestic warrant at all or why, if there is one, it should be required to be evidenced in any EAW issued to secure the offenders return to serve his sentence [29].
The circumstances of the present appeals involve sentences of imprisonment which did not take immediate effect.
Only the first and third EAWs issued in relation to Mr Sas are presently relevant.
As regards the conviction the subject of the first EAW, Mr Sas was free until he lost his appeal, whereupon he was summonsed to report to detention, which he failed to do.
A court order later issued to secure his attendance was irrelevant to the enforceability of the sentence, and could not constitute a warrant for the purposes of section 2(6)(c), and did not therefore need to be particularised in the EAW [31].
As regards the conviction the subject of the third EAW relating to Mr Sas, Mr Sas was given an immediate sentence of imprisonment but granted conditional release which was revoked when he breached the conditions of his release.
When he failed to surrender, a domestic warrant was issued for his arrest [33].
As regards the conviction the subject of the EAW relating to Mr Goluchowski, the sentences of imprisonment passed were suspended, but ordered by the court to be served when he broke certain conditions.
In these circumstances, both Appellants were due to attend prison without more as a result of court orders, and only when they failed to obey those orders were any domestic court orders, summonses or warrants issued to secure attendance at the relevant correction facility [32].
Those summonses or warrants are therefore irrelevant to the EAWs, did not need mentioning in them and did not constitute warrants under section 2(6)(c) of the 2003 Act [34].
It was not necessary for the EAWs to contain evidence of the decisions resulting in suspension of Mr Goluchowskis original sentence and subsequent activation of it, nor of Mr Sass conditional release and the subsequent revocation of that [35, 42 44].
On the face of the EAWs, details are given of judgments which by themselves required the Appellants to begin immediate service of a sentence [36].
Though they do not contain details of every judicial decision by virtue of which the sentence has become enforceable, to require such details would (i) mean that an EAW should set out a quite complex history of proceedings whereas box (b) of the prescribed form of EAW contemplates a single reference, (ii) run counter to principles of mutual confidence on which the EAW regime is based, and (iii) overlook the fact that it is always open to an executing state to request more information from the requesting state, as the UK seems to have done in these cases [43].
But a final decision on the extent of the details required is unnecessary since the processes by which the judgments became enforceable is clear from the subsequently obtained information, and EU caselaw establishes that an otherwise valid EAW is not to be treated as invalid or ineffective merely because the full history is not contained in the EAW itself [44].
Even if a reference to the activating decisions should, strictly speaking, have been made in the EAWs alongside the reference to the judgment as enforceable, this cannot mean, under European law or the Extradition Act 2003, that the EAWs should be treated as incapable of being executed [45].
|
These three conjoined appeals concern section 242 of the Insolvency Act 1986, as amended.
Where section 242(1) applies, and a company enters administration, an alienation by the company is challengeable by the administrator.
In terms of section 242(2), section 242(1) applies where by the alienation, any part of the companys property is transferred or any claim or right of the company is discharged or renounced, and the alienation takes place on a relevant day as defined by section 242(3) (that is to say, within a specified time before the date when the company enters into administration).
In terms of section 242(4), on a challenge being brought under subsection (1), the court shall grant decree of reduction or for such restoration of property to the companys assets or other redress as may be appropriate, but the court shall not grant such a decree if the person seeking to uphold the alienation establishes that it was made for adequate consideration.
These proceedings were brought under section 242(1) by the joint administrators of Oceancrown Ltd, Loanwell Ltd and Questway Ltd, in respect of alienations made by each of those companies of four properties in Glasgow during November 2010, nine months before the companies went into administration.
The alienations took place on relevant days as defined.
The administrators are the respondents to the present appeals.
The facts
The facts, as found by the Lord Ordinary, are as follows.
Oceancrown and the other companies in administration were part of a group of companies controlled by Ralph Norman Pelosi (Mr Pelosi senior).
He was the beneficial owner of their shares, the sole director of Oceancrown and Loanwell, and a shadow director of Questway.
He was also the 99% owner (subsequently 100%) of another company, Strathcroft Ltd. The nominal director of that company was John Anderson.
Norman Ralph Pelosi (Mr Pelosi junior) was the sole shareholder and director of a further company, Stonegale Ltd. He is the appellant in one of the appeals, and Stonegale is the appellant in the others.
A secured facility in the region of 17.3m had been made available to Oceancrown by Anglo Irish Bank.
The other companies in the group had cross guaranteed the debt.
Oceancrown owned a commercial property at 278 Glasgow Road, Rutherglen.
It also owned properties at 110 and 260 Glasgow Road.
Loanwell owned a property at 210 Glasgow Road.
Questway owned a property at 64 Roslea Drive, Glasgow.
The bank held standard securities over each of these five properties.
Mr Pelosi senior had concluded an agreement with Clyde Gateway Development Ltd for the sale of 278 Glasgow Road for 2,467,500 inclusive of VAT: a sum far in excess of an earlier valuation of the property at the sum of 762,000.
Subsequent events were, in the Lord Ordinarys words, machinations designed to protect the profit on the sale of number 278 (para 44), by keeping it out of the hands of the bank.
On 19 August 2010 Robert Frame, a solicitor of Miller Becket and Jackson (MBJ), a Glasgow firm of solicitors, wrote to the banks solicitor, Mr Gillespie of McClure Naismith, in relation to the release of the properties from the banks securities, giving details of the properties and the relevant sale price.
According to the details stated, the sale price of 278 Glasgow Road was 762,000; the sale price of 110 Glasgow Road was 200,000; the sale price of 210 Glasgow Road was 934,000; and the sale price of 260 Glasgow Road was 450,000.
Mr Gillespie was subsequently informed that 64 Roslea Drive was also to be sold, at a price of 68,000.
The total sale price of the five properties, as stated, was 2,414,000.
Mr Gillespie passed this information on to the bank, and prepared discharges of the standard securities.
These were duly executed by the bank, and Mr Gillespie was authorised to deliver them to MBJ in exchange for the free proceeds of sale.
In reality, as explained earlier, the actual sale price of 278 Glasgow Road was 2,467,500, and no sales had been agreed in respect of the other properties.
On 10 November 2010 Oceancrown disponed 278 Glasgow Road to Strathcroft.
The consideration was recorded in the deed as being 762,000.
On the same day, Strathcroft disponed the same property to Clyde Gateway for 2,467,500.
Mr Frame witnessed the execution of both dispositions.
The Lord Ordinary found that Strathcroft was involved in the whole matter only in order to provide a short lived intermediary between Oceancrown and Clyde Gateway.
It was a cog in Mr Pelosis machine (para 47).
On 16 November 2010 Mr Frame received a letter signed by Mr Anderson on behalf of Strathcroft, authorising MBJ to send the bank the sum of 2,414,000 in respect of purchases of [the five properties].
Mr Frame transmitted the money as instructed.
Once the bank received the funds, the executed discharges were delivered.
The Lord Ordinary found that the money was paid to MBJ then to the bank on the instructions of Mr Pelosi senior.
Strathcroft had no real involvement in that (para 47).
He also found that the bank was misled in relation to the funds it received (para 39).
The bank, acting on the information from MBJ, treated the funds as the sale price of all the subjects, but that was not an accurate understanding (para 41).
Everyone, apart from the bank and the banks solicitor, knew that the funds were the sale price of only 278 Glasgow Road.
Had the bank known the true facts, namely that 278 was sold for almost 2.5m, the same overall reduction in bank indebtedness would have occurred, but only the standard security over 278 would have been discharged (paras 39 40).
Everything depended upon the bank and the banks solicitor being unaware of the truth.
No doubt they assumed that they could trust the information provided by MBJ (para 42).
As a consequence of the fact that the bank was misled into using part of the sale price of 278 Glasgow Road to discharge all the standard securities (para 40), the four remaining properties, with an agreed value of 1.525m, were now free of the banks standard securities.
It only remained to place them entirely beyond the banks reach.
On 24 November 2010, 110, 210 and 260 Glasgow Road were disponed to Stonegale, and 64 Roslea Drive was disponed to Mr Pelosi junior.
It is those dispositions which are challenged in the present proceedings.
The dispositions, witnessed by Mr Frame, contained a date of entry of 16 November 2010, and recorded the consideration given as being in accordance with the figures given to Mr Gillespie.
In reality, nothing was paid.
The following year, Mr Pelosi junior disponed 64 Roslea Drive to a third party for 125,000.
In the proceedings before the Lord Ordinary, a document was produced which purported to be a loan agreement in the sum of 1,584,000, signed by Mr Pelosi junior and dated 16 November 2010.
It narrated that it had been entered into between Strathcroft and Stonegale to enable the latter to finance the purchase of the properties at 110, 210 and 260 Glasgow Road.
In evidence, Mr Pelosi junior confirmed that he had signed the loan agreement on 16 November 2010.
The Lord Ordinary found that the document was a sham (para 44), concocted purely for the purpose of the defence of these proceedings (para 46).
The proceedings below
Before the Lord Ordinary, it was argued that the four dispositions under challenge were made by the companies for adequate consideration, namely the reduction in their contingent liabilities (under their cross guarantees of Oceancrowns obligations) which resulted from the payment made by Strathcroft to the bank.
That reduction in indebtedness, of 2,414,000, was in excess of the open market values of all five properties, and therefore constituted adequate consideration.
That argument assumes that the open market value of 278 Glasgow Road was the 762,000 at which it had been valued by a surveyor: an assumption which is contradicted by the fact that Clyde Gateway paid almost 2.5m for it in an arms length transaction whose bona fides is not disputed.
More fundamentally, the argument disregards the fact that the four other properties were all disponed gratuitously in subsequent transactions.
In rejecting the argument, the Lord Ordinary focused on the latter point: No one paid anything for 110, 210, 260 Glasgow Road and 64 Roslea Drive.
The sellers, namely Oceancrown, Loanwell and Questway, did not receive anything in return for the dispositions under challenge.
They gifted the properties to the dispones.
That the bank was prepared to discharge the standard securities over all five properties in return for the monies forwarded to it does not create a consideration given in return for the subsequent dispositions to Stonegale.
No party gave the sellers anything in return for the conveyances under challenge.
Any value received was the value paid in respect of number 278.
That is what was transferred to McClure Naismith.
In my view nothing else alters that basic fact.
All that happened was that Strathcroft, on the direction of Mr Pelosi senior, paid the bank monies which were designed to, and did persuade the bank to discharge the standard securities over the five properties, all in order to facilitate the subsequent gratuitous sales.
Neither that payment, nor any consequential reduction in indebtedness, was in consideration for the subsequent transactions.
It was a mechanism for allowing the inter company transfers which it was hoped would achieve the retention of the profit on 278 within the group (and regarding Roslea Drive, Mr Pelosi junior) and free of the banks securities. (paras 40 and 42) The Lord Ordinary added: The dispositions under challenge were gratuitous alienations.
Were it otherwise the bank would have received in excess of 4m, and the overall indebtedness would have been reduced by that amount.
The price obtained for 278 was used to allow the other Glasgow Road properties to be transferred without consideration to another company which, nominally at least, was owned and controlled by Mr Pelosi junior, and, in the case of 64 Roslea Drive, to him personally. (para 43)
Accordingly, the Lord Ordinary decided that he should reduce (ie set aside) the three dispositions to Stonegale, order the defenders to execute dispositions of those subjects to the administrators, and order Mr Pelosi junior to repay the 125,000 which he had received for the sale of the fourth property.
Before granting decree, he decided to have the proceedings put out By Order for appropriate disposal.
That decision was upheld by an Extra Division of the Inner House (Lord Menzies, Lord Brodie and Lord McGhie).
No issue was taken with the facts found by the Lord Ordinary.
The same argument was repeated, and again rejected, for the same reasons.
The present appeal
In the absence, at the relevant time, of any requirement to obtain permission to appeal to this court, the appellants took the opportunity to challenge the approach adopted by the courts below.
They submitted that the administrators could have pursued a number of alternative remedies.
They could have challenged the alienation of 278 Glasgow Road by Oceancrown to Strathcroft.
They could have proceeded against Mr Pelosi senior as director of Oceancrown for breach of his fiduciary duty, and recovered the proceeds of his breach from the ultimate beneficiaries.
If the bank was the victim of a fraudulent misrepresentation, it could have recovered damages in respect of its loss.
The wrong remedy, it was argued, had been selected.
The failure to challenge the transfer by Oceancrown to Strathcroft meant that the transfer by Strathcroft to Clyde Gateway could not be impeached.
In any event, the 762,000 paid by Strathcroft reflected a professional valuation of the property, and therefore constituted the propertys market value.
There are no doubt a variety of remedies which the administrators might have pursued, but the issue for this court is whether they are entitled to the remedy which they have sought.
That remedy does not involve a challenge to the disposal of 278 Glasgow Road (or depend on whether the disposal of that property by Oceancrown was at an undervalue, although it plainly was), but a challenge to the other four dispositions as gratuitous alienations.
The gratuitous nature of the alienations was clearly explained by the Lord Ordinary in the passages cited at para 13 above.
Before the various conveyances, the companies owned five properties.
A bargain was in place for the sale of one of those properties, 278 Glasgow Road, for the sum of 2.4m.
After the sale was completed, 2.4m was transferred to the bank in reduction of borrowings, and the companies retained the other four properties, valued at 1.525m.
Those properties were then conveyed to the appellants.
The companies received nothing whatsoever in return.
There was no reciprocity between those disposals and the earlier payment made to the bank.
The purpose and effect of those transactions was to divert assets away from the companies creditors: exactly what section 242 is intended to prevent.
That they were gratuitous alienations is plain and obvious.
The appeal is therefore dismissed.
| UK-Abs | Oceancrown Ltd, Loanwell Ltd and Questway Ltd were part of a group of companies controlled by Ralph Norman Pelosi (Mr Pelosi senior).
Norman Ralph Pelosi (Mr Pelosi junior) was the sole shareholder and director of Stonegale Ltd. The three companies controlled by Mr Pelosi senior went into administration in 2011.
In November 2010, nine months prior to the companies entering administration, three properties were transferred to Stonegale Ltd and one property was transferred to Mr Pelosi junior directly.
Conjoined proceedings were brought by the joint administrators of the three companies in respect of these alienations under section 242 of the Insolvency Act 1986, on the basis that these were gratuitous alienations (in lay terms, a gift by the insolvent party challengeable by liquidators or administrators).
Stonegale Ltd and Mr Pelosi junior argued that the four dispositions under challenge were made by the companies for adequate consideration (a reasonable price).
The Lord Ordinary held that the dispositions were gratuitous alienations, setting aside three of the dispositions and ordering Mr Pelosi junior to repay the 125,000 he had received for the sale of the fourth property.
This decision was upheld by the Extra Division of the Inner House.
Stonegale Ltd and Mr Pelosi junior appeal the decision to the Supreme Court.
The Supreme Court unanimously dismisses Stonegale and Mr Pelosi juniors appeal.
Lord Reed gives the judgment, with which the other Justices agree.
Lord Reed finds that the Appellants submission that the administrators could have pursued a number of alternative remedies is not relevant to the issue which this court must determine, which is whether the Respondents are entitled to the remedy they have sought on the basis that the four dispositions are gratuitous alienations [17].
Lord Reed holds that the gratuitous nature of the alienations was clearly explained by the Lord Ordinary and is plain and obvious.
Prior to the conveyances, the companies owned five properties: 110, 210, 260 and 278 Glasgow Road, and 64 Roslea Drive.
The Anglo Irish Bank (the bank) held standard securities over each of these five properties, having made available to Oceancrown a secured facility in the region of 17.3 million, which was cross guaranteed by the other two companies [4].
In August 2010 the banks solicitors were informed by Mr Robert Frame, a solicitor of Miller Becket and Jackson (MBJ), of the details of the properties and the relevant sale price in relation to the release of the five properties from the banks securities.
The banks solicitors were informed that the sale prices were as follows: 762,000 for 278 Glasgow Road; 200,000 for 110 Glasgow Road; 934,000 for 210 Glasgow Road; 450,000 for 260 Glasgow Road.
They were also informed that 64 Roslea Drive was to be sold for 68,000, bringing the total sale price of the five properties to 2,414,000.
This information was passed to the bank [6].
On 10 November 2010 the property at 278 Glasgow Road was disponed by Oceancrown for 762,000 to a company called Strathcroft Ltd, which was also owned by Mr Pelosi senior.
On the same day, Strathcroft disponed the same property to Clyde Gateway for 2,467,500, a sum far in excess of an earlier valuation of 762,000.
The Lord Ordinary found that Strathcrofts involvement was to provide a short lived intermediary between Oceancrown and Clyde Gateway, describing it as a cog in Mr Pelosis machine [7].
No sales had been agreed in respect of the other four properties [6].
Strathcroft, on the instructions of Mr Pelosi senior, authorised MBJ to send the bank the sum of 2,414,000 in respect of purchases of [the five properties] on 16 November 2010, and Mr Frame transmitted the money to the bank.
The bank then executed discharges of the standard securities over all five properties.
The Lord Ordinary found that the bank was misled in relation to the funds it received and that had it known that only 278 Glasgow Road was sold, whilst the overall reduction in bank indebtedness would have occurred, the bank would only have discharged the standard security over that property [8].
As a consequence of misleading the bank, Mr Pelosi seniors companies retained the other four properties valued at 1.525 million, free of the banks standard securities [9].
On 24 November 2010, 110, 210 and 260 Glasgow Road were disponed to Stonegale Ltd and 64 Roslea Drive was disponed to Mr Pelosi junior.
Nothing was paid for these properties [10].
A loan agreement between Strathcroft Ltd and Stonegale Ltd signed by Mr Pelosi junior and dated 16 November 2010 which purported to enable the latter to finance the purchase of the properties at 110, 210 and 260 Glasgow Road was found by the Lord Ordinary to be a sham, concocted purely for the purpose of the defence of these proceedings [11].
Lord Reed finds that there was no reciprocity between the disposal of the four properties, which were gifted to Stonegale Ltd and Mr Pelosi junior, and the earlier payment to the bank.
The transactions had the purpose and effect of diverting assets from the companies creditors, which was exactly what section 242 of the Insolvency Act 1986 is intended to prevent [17].
|
This is a challenge to the decision of 29 July 2014 by HM Treasury (HMT) to use National Savings and Investments (NS&I) to deliver the Government policy of Tax free Childcare (TFC), which I describe below (para 16).
TFC is designed to replace the policy of employer supported childcare (ESC) under which the Government gives relief from tax and national insurance contributions to employers which support their employees with the cost of childcare.
The challengers are (i) Edenred (UK Group) Ltd (Edenred) which provides services to employers who operate the ESC scheme on behalf of their employees and (ii) the Childcare Voucher Providers Association (CVPA) which is a trade association for providers of childcare vouchers.
NS&I is a non ministerial Government department and executive agency of the Chancellor of the Exchequer.
It is a retail savings and investments organisation which offers its products to United Kingdom customers.
Its products are designed to enable the Government to borrow at a reasonable cost and in 2011 it had invested assets of about 105 billion from about 26m customers.
Since 2011 it has obtained contributions towards its running costs by using its substantial infrastructure to process payments, manage accounts and provide associated support functions to other public bodies.
Section 113 of the Financial Services Act 2012 gave NS&I a general power to enter into arrangements with public bodies to provide such services.
NS&I outsourced its operational services and transferred its operational staff to a private sector provider in 1999.
Its current outsourcing contract, which it entered into in 2013 and which has operated since April 2014, is with Atos IT Services Ltd (Atos).
The Director of Savings, who is NS&Is chief executive, and its other civil servants are policy makers for the organisation but its operations, both dealing with customers and back office functions, including customer service, transaction management, printing, accounting, IT development and management, are provided by employees of Atos.
Those services involve the use of Atos equipment and of premises leased or owned by Atos but those premises and equipment will be transferred to NS&I on termination of the arrangement.
To allow NS&I to administer TFC it is necessary to amend the contract between NS&I and Atos.
The Atos contract is not subject to this challenge but its proposed modification is.
The challenge in summary is (i) that the proposed amendment to the Atos contract would be contrary to European Union procurement law, and (ii) that as a result the decision to use NS&I to deliver TFC is unlawful.
The applicants seek relief in the form of declarations that the respondents decisions regarding the delivery of TFC are unlawful and an order restraining the respondents from giving effect to the modification of the Atos contract if their challenge is successful.
In the meantime, the respondents are prevented by interim order from implementing the provision of services under TFC until further order.
The challenge came before this court as an application for permission to appeal.
As the matter required a prompt determination, the court heard both the application for permission to appeal and also the substantive appeal at the same time.
At the heart of the challenge is the assertion that the proposed amendment of the contract between NS&I and Atos would involve the direct award of a valuable public contract without conducting a tender procedure contrary to the requirements of the EU procurement regime that was implemented by the Public Contracts Regulations 2006 (SI 2006/5) (the 2006 Regulations) and their successor regulations, the Public Contracts Regulations 2015 (SI 2015/102) (the 2015 Regulations), which implemented Directive 2014/24/EU (the 2014 Directive).
The latter regulations came into force on 26 February 2015 (regulation 1(2)) after the challenged decision had been made and do not affect the validity of the Atos contract itself (regulation 118(5)), but regulation 72 of the 2015 Regulations, which deals with modification of contracts during their term, will govern the amendment of the Atos contract if the respondents proceed with that amendment.
The applicants also assert more widely that the use by public bodies of contracts, such as that between NS&I and Atos, which provide both for outsourcing and for the extension of the outsourced services to other public bodies in future, would place the United Kingdom in breach of its obligations under article 56 of the Treaty on the Functioning of the European Union (the TFEU).
The facts in more detail
(i) The procurement of the contract between NS&I and Atos
In July 2011 NS&I commenced procurement of a further contract for the outsourcing of its operational services.
On 11 July 2011 HMT and NS&I held an industry day at the Royal Geographical Society at which, among others, Lord Sassoon, commercial secretary at HMT and Jane Platt, NS&Is CEO, presented to interested parties their proposals for the future of NS&I, including the business to business services which I discuss below, and the re tender of the outsourcing contract.
On 22 November 2011 NS&I as contracting authority published a notice in the Official Journal of the European Union (2011) (S 224 363697).
The notice advertised UK London: banking services and the contracting authority gave outsource services as the title to the contract.
It explained that the contracting authority was purchasing on behalf of other contracting authorities and that the nature of the services was computer and related services.
In its short description of the contract the notice described the role of NS&I and explained that it was now seeking to retender its operational services, which it described as: including all processing of customer interactions and servicing (eg sales, after sales management and payments including via telephone, internet and mail); service management; IT development and implementation; and other services (eg complaint handling, channel management, customer management, print and document management, customer market research and analysis, campaign management, compliance, management information etc), and other related ancillary services that support the business operation of NS&I. The text went on in a passage which is of significance in this appeal to describe NS&Is business to business services (which it called B2B services): In addition NS&I now delivers similar operational services (so called B2B services) to other public sector organisations.
We intend to expand this B2B service during the lifetime of the contract to deliver to other organisations, potentially resulting in significant growth of the outsourced operational services.
NS&I intends to structure the contract so that it may be used by other central government departments (including their executive agencies and non departmental public bodies) and by local authorities.
NS&I also intends to permit the contractor to make the services provided under the contract available to private sector entities provided that this does not affect the provision of service to NS&I. The notice listed 50 entries from the common procurement vocabulary.
In section II.2.1 the notice described the quantity or scope of the contract, which was to run for 96 months from the award of the contract and would be extendable for a further 36 months.
It described the average estimated annual volumes for its 26m customers (excluding B2B services) as 14 15 billion of receipts and 12 billion of payments, involving 55m transactions and 4m telephone calls.
It described the estimated contract range and value in these terms: Contract range up to approximately 2,000,000.000 GBP, with a likely contract range of approximately 1,250,000,000 and 150,000,000 GBP, depending upon the uptake of B2B services.
Estimated value excluding VAT: Range: between 1,250,000,000 and 2,000,000,000 GBP.
As the notice stated, NS&I adopted the competitive dialogue procedure under regulation 18 of the 2006 Regulations and the award criterion was the most economically advantageous tender in terms of the criteria stated in the invitation to tender and other relevant descriptive documents.
NS&I issued a prospectus in November 2011 to provide potential bidders with the information they needed to submit a comprehensive electronic pre qualification questionnaire (PQQ).
In that document NS&I explained that it had only 140 employed staff and that the workforce of 1,750 who implemented its plans worked for its outsource partner.
It flagged up the importance of B2B services as a contributor to its running costs.
It stated that its future strategy included implementing product change and developing and delivering new B2B opportunities.
It also set out the three stages of the procurement process: (i) the PQQ to identify a maximum of five bidders which had the needed experience, financial strength and capability to deliver the required services, (ii) the invitation to submit an outline proposal to select a maximum of three bidders who would receive a full set of requirements, draft contract and other supporting material, and (iii) the invitation to tender (ITT) from which it would select the provider that offered the best solution for the lowest price.
It envisaged extensive dialogue with bidders at the second and third stages.
Ten organisations responded to the PQQ, which, among other things, required an organisation to have an annual turnover in excess of 1 billion, and, after evaluation, three organisations were shortlisted.
On 2 April 2012 NS&I issued an invitation to participate in dialogue and from 1 May 2012 conducted a competitive dialogue with the remaining three bidders, who were given a full draft contract and due diligence material.
Proposals to expand B2B services to other public sector bodies were discussed in three rounds of dialogue in May, June and October 2012.
The ITT, which was finalised after dialogue with the three bidders and issued on 10 December 2012, contained the final contract and scoring guidance for the bidders.
NS&I set out in Schedule 2.11 of the contract its requirements in relation to B2B services and in Schedule 9.4 it laid down the procedures for managing change which it envisaged would occur during the term of the contract.
Schedule 2.11 required the parties to seek new B2B opportunities subject to the limitations set out in the OJEU notice (para 2.1).
Paragraph 3.3 of that schedule set out the principles which were to govern the incorporation of a new B2B service into the agreement.
Those principles included (i) that the agreement profit margin must not increase unless otherwise agreed by the parties, (ii) that, subject to (i), there must be no alteration of the allocation of risk, (iii) that where a new service was similar to existing services, the associated marginal cost and charges for delivery were to be used as the basis of the costs and charges for the new services, and (iv) that the term of any B2B services should not exceed the term of the agreement.
Schedule 9.4 gave NS&I a wide discretion to reject any change and the provider a very limited right to reject such change (para 4).
Paragraph 9 of that Schedule set out the procedure for amending the agreement, which provided for the approval or rejection of requests and a dispute resolution procedure.
There were further controls over charges and costs within schedule 9.4 (para 7) and in Schedule 7.1.
These provisions became part of the Atos contract.
On 20 May 2013 NS&I awarded the contract to Atos.
The contract provided that services would commence on 1 April 2014.
In fulfilment of its obligation to seek new B2B opportunities (Schedule 2.11 para 2.1), Atos undertook to spend more than 21m on developing a B2B sales unit during the period of the contract (Schedule 4.1.11, para B3.4).
On 26 June 2013 a notice of the award of the contract was published in the OJEU (2013) (S 124 213489) in which the total final value of the contract was stated as 660,000,000 but it was also stated that NS&I intended to expand the B2B service during the lifetime of the contract to other organisations, resulting in significant growth to the outsourced operational services.
(ii) The TFC initiative
TFC is a scheme to support working families with the costs of childcare.
It gives the opportunity for parents to open a bank account, called a childcare account, for each of their children into which they, and other members of the family or employers, can pay money to be used for childcare costs.
Those funds will make up 80% of the relevant childcare costs.
The other 20%, which is the equivalent of basic rate tax relief, will be paid by the Government up to a maximum of 2,000 per child per year.
The parents will use the funds in the childcare account to pay the registered childcare provider or providers of their choice.
TFC, unlike ESC, will not necessarily involve employers in defraying childcare costs and it is envisaged that many more parents will be eligible for support than under ESC, including the self employed and those on the national minimum wage.
NS&I estimates that around 1.9m families are potentially eligible for TFC and forecasts that about 1.2m families will have registered, giving rise to 1.6m accounts, by the fifth year of the operation of TFC.
On 19 March 2013 HMT and HM Revenue and Customs (HMRC) announced the introduction of TFC.
HMRC, like NS&I, is a non ministerial government department and, like both HMT and NS&I, is under the control of the Chancellor of the Exchequer.
HMT has allocated money to HMRC to administer TFC, which it initially intended would be introduced in the autumn of 2015.
HMT and HMRC consulted on the design and operation of TFC between August and October 2013.
The applicants participated in that consultation, which proposed that TFC would be delivered through a competitive market in which the accounts were administered by private sector providers and that HMRC would have an active role in registering the parents, processing the 20% top up to childcare account providers, and checking compliance.
In October 2013 NS&I approached HMT and HMRC offering to provide all TFC accounts and also other services, including the registration of parents, using its existing banking infrastructure, including online accounts and services, and its customer support network which Atos now operates.
The Government was attracted by the NS&I option in part because it had the potential to enable a speedy implementation of TFC in accordance with the Governments proposed timetable and also because it offered a better defence against organised criminal activity to defraud TFC through the setting up of bogus account providers and childcare providers.
On 17 March 2014 the Government announced that HMT and HMRC would use NS&I to provide and administer childcare accounts and supporting services.
After a challenge by judicial review on the ground that the Government had not consulted on that delivery option, there was a further consultation.
HMRC issued a further consultation paper on 23 May 2014 and published a prior information notice in the OJEU on 14 June 2014 to alert interested parties to the further consultation.
In the consultation paper the Government invited comments on options to deliver TFC accounts in the public sector, either through NS&I or HMRC.
It compared those options against three private sector options, namely (i) a single private sector account provider, (ii) a small fixed number of contracts for entities to become account providers, and (iii) an open market for account providers.
On 14 July 2014 HMT and HMRC officials submitted their advice to ministers.
In that submission they identified the five options for TFC.
The officials identified seven criteria: (i) simple, (ii) efficient, (iii) competitive, (iv) secure, (v) responsive, (vi) speed of delivery, and (vii) ease of build.
They stated that there was no unambiguously superior option and that ministers decision would depend upon how much importance they placed on each criterion.
In their recommendations officials noted that NS&I performed well against the simple, efficient, speed of delivery and ease to build criteria and that the private sector options performed well on many of the criteria but less favourably on speed of delivery and ease to build criteria.
On 29 July 2014 the Government announced that NS&I would provide and administer childcare accounts and supporting services in order to deliver TFC for HMRC.
In their published response to consultation HMT and HMRC stated that: the government considered that the NS&I option had real and particular advantages in terms of simplicity for parents and childcare providers, offering security for parents through a trusted brand with all funds guaranteed by the government, and speed of delivery.
The response concluded that while some of the other factors might arguably be said to tend in favour of other options, they did not outweigh the advantages of the NS&I option.
Section 16(1) of the Childcare Payments Act 2014 (para 46 below) provides statutory authority for NS&I to provide childcare accounts.
It is envisaged that most parents will manage their childcare accounts online using a modified version of NS&Is pre existing Direct Saver product, in accordance with the Governments digital by default policy.
The mechanism by which the Government proposes to introduce TFC involves (i) a memorandum of understanding between HMRC and NS&I which sets out HMRCs requirements and (ii) a variation of the Atos contract by the inclusion of a new Schedule 2.16 which sets out in some detail what Atos must do to provide services to NS&I in order to meet those requirements.
NS&I will be responsible for developing the web portal through which parents will obtain access to TFC, providing childcare accounts to parents, working out how much money is due to parents from HMRC and supporting parents, for example through call centres.
The proposed contract variation has an initial term of five years and it is estimated that Atos will earn approximately 132.8m from the provision of its services in implementing TFC over that term.
The applicants found on the estimated value of the contractual variation and the extensive amendments to the Atos contract in support of their submission that the Government was required by EU competition law to open the provision of TFC accounts to competition by an advertised procurement process.
The legal proceedings
On 27 August 2014 Edenred issued a claim under Part 7 of the Civil Procedure Rules and it and the CPVA also raised judicial review proceedings seeking declarations that the proposed arrangements were unlawful.
Edenred claimed a remedy under the 2006 Regulations as an economic operator.
The CVPA sought a remedy only in the judicial review.
The two claims were consolidated by consent.
On 30 September 2014, on Edenreds initiative, Leggatt J ordered (i) an expedited trial of the Part 7 action limited to specified grounds of claim and (ii) that the judicial review and the remaining grounds of the Part 7 action be stayed.
As a result, although the applicants grounds of appeal sought to challenge the refusal to lift the stay on the judicial review, only the grounds which were the subject of the expedited trial are available as the basis of the remedies which the applicants seek.
On 27 October 2014 Leggatt J pronounced an interim order that prevented the respondents from implementing the provision of services under the TFC scheme until further order.
Subsequent orders have kept that interim relief in force.
After an expedited trial which took place between 24 and 28 November 2014, Andrews J issued a judgment dismissing the grounds of claim.
She held (i) that the amendment of the Atos contract was not contrary to EU procurement law, (ii) that the proposed arrangements between HMRC and NS&I did not constitute a public services contract under the 2006 Regulations or an arrangement which was subject to article 56 of TFEU, and (iii) that in any event Edenred had not established that it had suffered loss as a result of any breach of the 2006 Regulations or article 56 of TFEU.
The applicants appealed.
On 31 March 2015 the Court of Appeal (Sir Terence Etherton C, Underhill and King LJJ) dismissed the appeal, holding that the amendment of the Atos contract and the memorandum of understanding between HMRC and NS&I would not be unlawful.
The Court of Appeal did not rule on the question of remedy if there were an illegality or on whether the stay should be lifted in the judicial review action.
Discussion
The principal purpose of EU procurement law, to which this challenge relates, is to develop effective competition in the field of public contracts: Sintesi SpA v Autorit per la Vigilanza sui Lavori Pubblici (C 247/02) [2004] ECR I 9215, para 35.
Thus if a public body decides to obtain services by a public contract, and the contract exceeds the prescribed threshold (currently 134,000 for public service contracts awarded by central government authorities), the public body must advertise the opportunity and follow fair and transparent procedures ensuring equality of treatment, to enable potential service providers to compete for the work.
The recitals in the latest EU legislation, the 2014 Directive, refer to the goals of improving efficiency in public spending, facilitating the participation of small and medium enterprises, and promoting smart, sustainable and inclusive growth, including innovation.
Having regard to the importance of this competition policy, the case law of the Court of Justice of the European Union (CJEU) has consistently stated that provisions that authorise derogations from the rules intended to ensure the effectiveness of Treaty rights in relation to public contracts must be interpreted narrowly.
See, for example, Commission of the European Communities v Italian Republic (C 385/02) [2004] ECR I 8121, para 19; Commission of the European Communities v Spain (C 84/03) [2005] ECR I 139, para 58.
Amendments to an existing public contract will fall within the procurement regime and be treated in substance as the award of a new contract if they involve a material variation of the contract.
Thus the central question in Edenreds challenge is whether the proposed amendments of the Atos contract amount to a material variation.
Although Edenred raised its challenge under the 2006 Regulations, both parties referred the court to the 2014 Directive and the 2015 Regulations as the updated statements of EU procurement law.
Recital 2 of the 2014 Directive spoke of the incorporation of certain aspects of related well established case law of the CJEU.
I agree that it is appropriate to test the validity of the proposed amendment of the Atos contract by reference to the 2015 Regulations.
See para 6 above.
In this judgment I therefore refer principally to the 2015 Regulations but use the case law and the 2014 Directive as aids to their interpretation.
Regulation 72 of the 2015 Regulations sets out six circumstances (or cases) in which a contracting authority may modify a public contract without a new procurement.
Two of those cases are relevant.
I will examine, first, the case in which the modifications, irrespective of their value, are not substantial (regulation 72(1)(e) and (4)) before turning, secondly, to the case which found favour with the Court of Appeal, namely that the modifications, irrespective of their monetary value, had been provided for in the initial procurement documents in clear, precise and unequivocal review clauses (regulation 72(1)(a)).
Whether the modifications are substantial extending the scope of the contract
Regulation 72(1) provides: Contracts and framework agreements may be modified without a new procurement procedure in accordance with this Part in any of the following cases: (e) where the modifications, irrespective of their value, are not substantial within the meaning of para (8).
Regulation 72(8) provides: A modification of a contract or a framework agreement during its term shall be considered substantial for the purposes of paragraph (1)(e) where one or more of the following conditions is met: the modification renders the contract or framework (a) agreement materially different in character from the one initially concluded; (b) the modification introduces conditions which, had they been part of the initial procurement procedure, would have allowed for the admission of other candidates (i) than those initially selected, (ii) allowed for the acceptance of a tender other than that originally accepted, or (iii) attracted additional participants procurement procedure; (c) the modification changes the economic balance of the contract or the framework agreement in favour of the contractor in a manner which was not provided for in the initial contract or framework agreement; (d) framework agreement considerably; the modification extends the scope of the contract or the in Those conditions derive from and codify the jurisprudence of the CJEU in Pressetext Nachrichtenagentur GmbH v Austria (C 454/06) [2008] ECR I 4401, paras 34 37.
At an earlier stage in the proceedings the applicants had argued that the modifications, if part of the initial procurement procedure, would have allowed other candidates to be admitted (condition (b) above) and that the modifications had changed the economic balance of the contract (condition (c) above).
The applicants no longer advance those submissions, correctly in my view in the light of the findings of fact of Andrews J, particularly at paras 119 123 and 132 on condition (b) and 133 139 on condition (c).
Now, the applicants confine their challenge under this heading to condition (d) above, submitting that the amendments to the Atos agreement amount to a considerable extension of the scope of the contract, in the words of the CJEU in Pressetext (para 36), to encompass services not initially covered.
I am not persuaded that this is so.
The contract which NS&I entered into with Atos under the procurement which commenced in 2011 was to provide NS&I with the operational services that would enable it both to perform its established retail banking and investment functions and also to expand its B2B services up to the 2 billion maximum envisaged in the OJEU notice (paras 8 and 9 above).
That is the contract which the economic operators competed with each other to win.
The respondents required bidders to have the financial strength and other capabilities to achieve that role.
While the initial value of the contract which was stated in the award of contract notice was 660,000,000 (para 15 above), the procurement process and the contract envisaged the expansion of NS&Is business and required the outsource partner to provide the operational services to achieve that expansion.
That was the object of the contract; it was clearly stated in the OJEU notice.
Economic operators can have been in no doubt as to the extent of the services they might have to provide to NS&I, albeit that they would not know the public bodies to whom NS&I would provide B2B services or the public policies which the future B2B services would support.
Mr Coppel QC for the applicants relied on the judgment of the CJEU in Commission of the European Communities v Federal Republic of Germany (C 160/08) [2010] ECR I 3713 to support his submission that the modification to accommodate TFC extended the scope of the Atos contract because it encompassed services not initially covered.
But in my view that case does not assist him because, in contrast with the present case, the initial contracts for the provision of public ambulance services, which the public authorities of the Lnder entered into, covered defined territories and did not envisage extension of those services into other territories or require at the outset that the bidders had resources to cover such extensions.
Similarly, I consider that Commission of the European Communities v French Republic (C 340/02) [2004] ECR I 9845 does not assist him as it involved a three stage scheme of works in which only the first stage had been the subject matter of the contract.
The court held (paras 34 36) that the contract could not be extended by an option to carry out a separate phase of works because procurement law required both the subject matter of each contract and the criteria governing its award to be clearly defined.
Commission of the European Communities v Kingdom of Spain (C 423/07) [2010] ECR I 3429, which concerned the award of additional motorway works that had not been included in the object of the contract described in the OJEU notice, also falls to be distinguished again because in the present case the OJEU notice defined the subject matter of what became the Atos contract so as to include the expansion of banking and accounts services to meet NS&Is aspirations for its B2B business.
I do not accept that one should read the prohibition from modifying a contract to encompass services not initially covered as banning the modification of a public contract which extends the contracted services beyond the level of services provided at the time of the initial contract if the advertised initial contract and related procurement documents envisaged such expansion of services, committed the economic operator to undertake them and required it to have the resources to do so.
The court must look to the OJEU notice and the other procurement documents, including the contract contained in the ITT, to ascertain the nature, scale and scope of the operational services that the Atos contract was set up to provide.
In short, the question is whether the services were covered by the contract resulting from the procurement between 2011 and 2013, including its provisions for amendment of the contract.
Were it otherwise, it is difficult to see how a Government department or other public body could outsource services that were essential to support its own operations and accommodate the occurrence of events and the changes of policy that are part of public life.
There may be circumstances in which a court could conclude that a public authority had designed a contract as a means of avoiding its obligations under EU law.
In such cases the contract might be open to challenge under EU law as an abuse of right.
But here there is no challenge to the validity of the Atos contract itself.
Edenred goes no further than to suggest that public authorities could use contracts framed in this way as a device for avoiding their public procurement obligations by allowing for the future provision of unspecified services of a much greater value.
Whether or not that is so, the focus must be on the particular contract.
The scale and nature of NS&Is stated aspirations for the use of its infrastructure and other resources in providing B2B services to public sector bodies as well as its own retail financial services, which the Atos contract was designed to support, appear to be within a reasonable compass.
As I have said, this is an outsourcing contract by which NS&I obtains operational services to enable it to provide its retail banking and investment services.
NS&I has sought to expand its business and obtain contributions towards its running costs by making variants of such banking services available to public sector bodies.
In particular it has offered its banking infrastructure, including its banking software or banking engine, to provide account management, payment processing, and ancillary services.
It advertised the outsourcing contract with the specified contract range of 1.25 billion to 2 billion.
The Atos contract limits the scope of its modification to the terms of the OJEU notice, including the upper limit of that financial range.
The essential nature of the operational services that Atos provides is not altered by the proposed modification.
Andrews J found as fact (para 112): The nature of the operational services that Atos will be providing to support the delivery of childcare accounts is essentially the same as the nature of the services which are supplied by it to NS&I for existing banking, accounting and payment products and which would have to be supplied for any new product delivered by NS&I, whether or not it was a new type of savings account to raise money for HMT or a bank account to be utilised by another government department or a payment service offered to another government department akin to the ELPS [which is the Equitable Life Payment Scheme that NS&I operates for HMT].
As I discussed in para 13 above, NS&I also included provisions in the Atos contract that restrict the scope of amendment to ensure that such modification does not alter the economic balance of the contract or increase the profit margin available to Atos.
In these circumstances I am satisfied that the proposed amendment of the Atos contract to enable NS&I to provide the TFC services will not considerably extend the scope of that contract in terms of regulation 72(8) of the 2015 Regulations and that it therefore does not involve substantial modifications under regulation 72(1)(e).
The applicants challenge therefore fails.
Clear, precise and unequivocal review clauses
That is sufficient to determine the appeal.
But it is appropriate that I also comment on the applicants challenge to the conclusion of the Court of Appeal which was based on regulation 72(1)(a).
This regulation, which follows the wording of article 72(1)(a) of the 2014 Directive, provides: Contracts and framework agreements may be modified without a new procurement procedure in accordance with this Part in any of the following cases: (a) where the modifications, irrespective of their monetary value, have been provided for in the initial procurement documents in clear, precise and unequivocal review clauses, which may include price revision clauses or options, provided that such clauses (i) state the scope and nature of possible modifications or options as well as the conditions under which they may be used, and (ii) do not provide for modifications or options that would alter the overall nature of the contract or the framework agreement; The regulation appears to draw on CAS Succhi di Frutta v Commission of the European Communities (C 496/99) [2004] ECR I 3801, in particular at paras 111 and 118.
But it is not simply a codification of prior CJEU case law.
There are four matters in this regulation which merit comment.
First, as in regulation 72(1)(e), the monetary value of the modifications is irrelevant.
Secondly, the modifications must have been provided for in the initial procurement documents.
Thirdly, the review clauses which authorise the modifications must achieve a required degree of specificity.
Fourthly, the review clauses cannot authorise modifications that would alter the overall nature of the contract.
No more need be said about the first matter.
In relation to the third matter, it seems to me that where, as in this case, the contracting authority has adopted the competitive dialogue procedure under regulation 18 of the 2006 Regulations (or now regulation 30 of the 2015 Regulations), the initial procurement documents include the documents which were issued to the selected bidders.
The definition of procurement document in regulation 2 of the 2015 Regulations includes the proposed conditions of contract and the epithet initial in regulation 72(1)(a) is in my view simply a reference to the procurement documents which were available in the initial procurement of the contract which is the subject of the modifications.
The fourth matter, the requirement that the overall nature of the contract is not altered, which is a formula used also in regulation 72(1)(c) and 72(5), appears as a matter of language to be a more liberal test than the test in regulation 72(8)(d) of extending considerably the scope of the contract.
But the two tests could overlap if the extension of scope was of such an extent that it altered the overall nature of the contract.
In my view the most significant restriction in this regulation is the degree of specification that it requires in the review clause.
The formula, clear precise and unequivocal reflects the jurisprudence of the CJEU on what the principle of transparency requires: CAS Succhi di Frutta at para 111.
The Court of Appeal held that the contract amendment provisions in the draft contract which NS&I gave the three bidders and which ultimately appeared in the Atos contract were sufficiently clear, precise and unequivocal when construed in their context.
The contract envisaged the extension of the operational services which Atos provides to NS&I to enable it to expand its B2B services to other public bodies.
The restrictions in Schedule 2.11 of the Atos contract (a) confined the B2B opportunities to those within the scope of the OJEU notice and (b) set out the principles that governed the incorporation of a new B2B service into the agreement, inter alia restricting any increase in Atos profit margin and prohibiting the alteration of the allocation of risk.
See para 13 above.
I incline to the view that these restrictions, in their contractual context were sufficiently defined to meet this regulation 72(1)(a) criterion.
But the nature of the review clauses which the regulation covers is open to debate.
Recital 111 of the 2014 Directive states: Contracting authorities should, in the individual contracts themselves, have the possibility to provide for modifications to a contract by way of review or option clauses, but such clauses should not give them unlimited discretion.
This Directive should therefore set out to what extent modifications may be provided for in the initial contract.
It should consequently be clarified that sufficiently clearly drafted review or option clauses may for instance provide for price indexations or ensure that, for example, communications equipment to be delivered over a given period continues to be suitable, also in the case of changing communications protocols or other technological changes.
It should be possible under sufficiently clear clauses to provide for adaptations of the contract which are rendered necessary by technical difficulties which have appeared during operation or maintenance.
It should also be recalled that contracts could, for instance, include both ordinary maintenance as well as provide for extraordinary maintenance interventions that might become necessary in order to ensure continuation of a public service.
The recital gives as examples of the envisaged review clauses provisions allowing for price indexation, or adjustments for technological change and for maintenance.
Those examples are not exclusive but they may indicate the general nature of the modifications that regulation 72(1)(a) envisages.
It seems clear from the CJEUs judgment in CAS Succhi di Frutta at para 126 that the regulation would extend to a provision or clause such as for the substitution of fruit which was in issue in that case.
The regulation also requires specification of the scope and nature of possible modifications and the conditions under which they may be used.
I am not persuaded that the nature of the review clauses is acte clair.
But, for the reasons already set out, it is not necessary to decide these matters in order to determine the appeal.
The appellants alternative argument
I can deal briefly with the applicants alternative argument that there was in substance a public service contract between HMRC and Atos.
The applicants did not challenge the respondents assertion that the proposed memorandum of understanding between HMRC and NS&I is not a contract in domestic law but a means by which public funds passing between two connected public bodies and their use can be accounted for in a transparent way.
But they founded on section 16 of the Childcare Payments Act 2014 (CPA) which provides: (1) Childcare accounts may be provided by any of the following the Commissioners for Her Majestys Revenue and (a) Customs, (b) a person or body with whom the Commissioners have entered into arrangements for the provision of childcare accounts, and (c) (the Director). [ie NS&I] if the Treasury so determine, the Director of Savings (2) If the Director provides childcare accounts, the Director must in doing so act in accordance with any arrangements between the Director and the Commissioners with respect to the provision of childcare accounts.
The applicants submitted that what was proposed was in substance a public service contract between HMRC and Atos because (a) most of the provisions of the proposed memorandum of understanding between HMRC and NS&I were repeated in the proposed Atos contract variation, (b) Atos would provide the TFC services through its staff using equipment that it would purchase or develop, (c) HMRC would be the service recipient of the B2B services and had discussed them directly with Atos and (d) section 16 of the CPA imposed a legal obligation on NS&I to comply with its memorandum of understanding with HMRC.
I am satisfied that there is nothing in this alternative argument.
First and foremost, it ignores the background that NS&I is an existing public body with an extensive and established remit, which is quite separate from the TFC scheme, and that it is seeking to use its outsourced resources to provide B2B services to other public bodies.
That context is part of the substance of the proposed arrangement and there is no legal basis for airbrushing NS&I out of the picture.
I agree with the Court of Appeal (para 58) that the memorandum of agreement between HMRC and NS&I and the contract between NS&I and Atos are legally distinct.
It is NS&I and not HMRC that can enforce the Atos contract.
Secondly, it misinterprets section 16(2) of the CPA, which prevents NS&I from providing childcare accounts except by arrangement with HMRC.
That subsection is simply a limitation on NS&Is power so that it cannot provide the accounts independently from HMRC and is not intended to give legal effect to the memorandum of understanding.
The purpose of such memoranda of understanding between public bodies, as Andrews J explained in para 80 of her judgment, is to set out the services that those responsible to Parliament for the expenditure of public money can expect to receive in return for the charges levied on them by the public sector provider of the services and what those charges are.
As she stated, a memorandum of understanding has to be capable of being torn up and replaced at a moments notice with no legal repercussions, in order to respond to changes in policy.
Section 16 of the CPA does not change its nature.
Thirdly, under any B2B scheme a public body will be the service recipient but it will receive the services from NS&I; the fact that the service recipient discussed those services with Atos as the outsourced provider of operational services to NS&I does not alter the substance of the transaction.
Other matters
As I conclude that the respondents are not in breach of EU procurement law, no question of the breach of article 56 of the TFEU arises.
Further, having reached the view that the applicants challenge fails, there is no need to address their arguments about their entitlement to remedies.
Conclusion
I would grant the applicants permission to appeal but would dismiss their appeal.
I would also make an order setting aside the interim order which prevents the respondents from implementing the TFC scheme.
| UK-Abs | National Savings and Investments (NS&I) is a non ministerial Government department offering retail savings and investments to UK customers.
It also provides support functions to other public bodies, referred to as business to business services or B2B services [2].
NS&I has outsourced its own operational services.
In 2013 it entered into a contract with Atos IT Services Limited (Atos) to purchase support services including transaction management, printing, accounting, IT and customer services [3].
The award of the Atos contract followed a competitive tender process which complied with EU law on public procurement, as implemented in domestic law by the Public Contract Regulations 2006 (the 2006 Regulations).
It was envisaged in the tender documents and in the Atos contract that it could be extended to support new B2B services provided by NS&I [13].
The Government announced it would replace tax relief for employers who contribute to their employees child care costs with a new scheme of tax free childcare (TFC).
The TFC scheme involves parents setting up childcare accounts into which HMRC contributes a 20% top up, capped at 2,000 per year [16].
On 29 July 2014 HM Treasury decided that NS&I would deliver the new TFC policy for HMRC by providing and administering the childcare accounts and supporting services [21].
The arrangements between HMRC and NS&I were to be set out in a memorandum of understanding.
NS&I proposed to modify its contract with Atos to include services related to TFC [23], without any government body undertaking a public procurement process in relation to this work.
The appellants are Edenred (UK Group) Limited, a company which provided services to employers under the old tax relief scheme, and the Childcare Voucher Providers Association [1].
They considered that EU procurement law required a new tender process [6].
They commenced proceedings seeking declarations that the proposed TFC arrangements were unlawful under the 2006 Regulations and an order restraining the modification of the Atos contract.
On 27 October 2014 they were granted an interim order preventing the implementation of TFC [25].
An expedited trial took place before Andrews J in November 2014.
She dismissed the claim, holding that the proposed variation of the Atos contract would not breach EU procurement law [26].
The appellants appealed to the Court of Appeal, but their appeal was dismissed on 31 March 2015 [26].
The Supreme Court heard the appellants application for permission to appeal at the same time as their substantive appeal, in order to provide a prompt determination [5].
The Supreme Court grants the appellants permission to appeal but unanimously dismisses their appeal.
The interim order preventing the implementation of TFC is set aside [50].
Lord Hodge, with whom Lord Neuberger, Lord Mance, Lord Sumption, Lord Carnwath agree, gives the judgment.
The principal purpose of EU procurement law is to develop effective competition in the field of public contracts.
Public contracts over a threshold value must be advertised and awarded according to fair and transparent procedures to ensure equality of treatment between potential service providers [28].
Amendments to an existing public contract will fall within the procurement regime and be treated in substance as the award of a new contract if they involve a material variation of the contract [29].
The 2006 Regulations were replaced by the Public Contracts Regulations 2015 (implementing Directive 2014/24/EU) which came into force on 26 February 2015.
The 2015 Regulations will govern the amendment of the Atos contract if the respondents proceed with that amendment [6], and represent an updated statement of EU procurement law [30].
Therefore, the judgment refers to reg.72 of the 2015 Regulations which sets out the circumstances in which a contracting authority may modify a public contract without a new procurement process [31].
A fresh procurement is not required where the modifications to the contract are not substantial (reg.72(1)(e)).
The appellants argued that the proposed amendments to the Atos contract were substantial because they extended the scope of the contract considerably (reg.72(8)(d)), encompassing services not initially covered [33].
This argument did not succeed.
The original contract covered operational services to support both NS&Is existing functions and (as an object of the contract) the expansion of B2B services [34].
The prohibition on modification to encompass services not initially covered does not preclude expansion that is envisaged and advertised in the initial procurement process.
The question is whether the services were covered by the original contract, including its provisions for contractual variation.
Otherwise, outsourced services would not be able to accommodate the events and policy changes that are part of public life [36].
Although contracts may not be designed to avoid EU law obligations, the expansion provided for in this case was within a reasonable compass.
It did not alter the essential nature of the operational services provided and included restrictions to maintain the economic balance of the contract and Atos profit margin [37].
A new tendering process may also be dispensed with if the proposed contractual variation has been provided for in the initial procurement documents in clear, precise and unequivocal review clauses (reg.72(1)(a)).
Lord Hodge inclines to the view that this criterion is also satisfied [43] but comments that the nature of the review clauses covered by the regulation is open to debate [44]; such debate was not necessary to resolve in order to determine the appeal [45].
The appellants argued alternatively that there was in substance a public service contract between HMRC and Atos [46], on the basis that provisions in the memorandum of understanding between HMRC and NS&I were legally binding and were repeated in the proposed modification to the Atos contract, and that HMRC was the service recipient of B2B services provided by, and discussed with, Atos [47].
However, NS&I is an existing public body with an established remit apart from the TFC scheme, using outsourced resources to provide B2B services to other public bodies.
There is no legal basis for airbrushing it out of the picture.
The memorandum of understanding and the Atos contract are legally distinct.
It is NS&I, not HMRC, that can enforce the Atos contract.
The appellants contention that NS&I would be under a statutory legal obligation to comply with the memorandum of understanding (which is not in itself an enforceable contract) by virtue of s.16 of the Childcare Payments Act 2014 misinterpreted the effect of that section.
Any public body receiving B2B services from NS&I may discuss those services with the outsourced provider, but that does not alter the substance of the transaction [48].
|
This appeal concerns the interpretation of Council Regulation (EC) No 44/2001 of 22 December 2000 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (the Judgments Regulation).
The question is whether the English courts have jurisdiction to hear the claim by the appellant (AMTF) against the respondent (MMGR) for damages for the tort of inducing breach of contract.
Factual background
AMTF is incorporated in the United Kingdom and is based in London.
It provides services as a non advisory, execution only, derivatives broker for clients who wish to trade in derivatives and who are referred to it by introducing brokers.
Among AMTFs clients were people who were domiciled in Germany, Austria, Switzerland or Belgium (the former clients) and who were introduced to AMTF by independent brokers based in Germany (the introducing brokers).
AMTF charged its clients commission for its service and paid commission to the introducing brokers.
About 70 former clients, who were dissatisfied with the financial results of their transactions, commenced legal proceedings in Germany against both the introducing brokers and AMTF seeking damages under the German law of delict.
The claim against the introducing brokers was that they had given bad investment advice or had failed to warn of the risks of the investments.
The claim against AMTF was based on a liability which was accessory to that of the brokers: it was alleged that AMTF had encouraged the brokers to behave as they did by paying them commission from the transaction accounts which it operated for its clients and that it owed and had breached a duty in delict (tort) to the clients to prevent any transactions being undertaken contrary to their interests.
AMTF challenged the jurisdiction of the German court.
But many of the former clients have recovered damages from AMTF by way of settlement.
AMTF estimates that by August 2013 it had spent 2,191,881.68 on investigating the German claims, legal costs in Germany and England and settlement costs.
The agreements between AMTF and the former clients varied over time.
But each contained clauses which provided (a) that English law would govern the rights and obligations of the contracting parties and the construction of their contract and (b) that the English courts would have exclusive jurisdiction in legal proceedings relating to the contract.
AMTF asserts that the former clients have breached their contracts with it by raising legal proceedings against it in Germany and asserting rights under the German law of delict.
AMTF has raised legal proceedings against many of the former clients seeking damages for breach of contract in the High Court in London.
MMGR is a company incorporated under the laws of Germany and carries on business as a firm of lawyers in Germany.
AMTF alleges that MMGR induced the former clients to issue proceedings against it in Germany and to advance causes of action under German law, in breach of the exclusive jurisdiction and applicable law clauses in their contracts with AMTF.
It has commenced proceedings in the High Court in London against MMGR, based on the English law tort of inducing breach of contract, in which it seeks both damages and injunctive relief to restrain MMGR from inducing clients to bring further claims in Germany asserting causes of action under German law.
AMTF argues that the English courts have jurisdiction over its claim under article 5.3 of the Judgments Regulation, which gives jurisdiction in tort claims to the courts for the place in which the harmful event occurred or may occur.
MMGR challenges the jurisdiction of the English courts to entertain this action.
To that end MMGR applied for a declaration that the English courts did not have jurisdiction over it in respect of the subject matter of AMTFs claim.
The prior legal proceedings
Popplewell J in a judgment dated 11 April 2014 ([2014] EWHC 1085 (Comm)); [2015] QB 699 refused MMGRs application and held that the English courts had jurisdiction.
He decided that the relevant harm which gives rise to jurisdiction under article 5.3 occurred in England as AMTF had in each case been deprived of the benefit of the exclusive jurisdiction clause, which, he held, created a positive obligation on a former client to bring proceedings in England.
The Court of Appeal in a judgment dated 26 February 2015 ([2015] EWCA Civ 143; [2015] QB 699), in which Christopher Clarke LJ wrote the leading judgment, concluded that the English courts did not have jurisdiction as the relevant harm had occurred in Germany.
The Court of Appeal were not enthusiastic about the conclusion which they felt compelled to reach as it meant the ancillary claim in tort against MMGR for inducing the breach of the contracts could not be made in the court which the contract breaker had agreed would have exclusive jurisdiction over the contract.
Thus AMTFs claims against its former clients for breach of contract, which could proceed in England under the exclusive jurisdiction clauses of their contracts, would be separated from the ancillary claim against MMGR.
AMTF appeals to this court against that judgment.
It submits that the English courts have jurisdiction.
In order to address AMTFs challenge it is appropriate, first, to examine the relevant provisions of the Judgments Regulation and the authoritative case law on those provisions and, secondly, to consider how that case law applies to the facts of this case.
Both AMTF and MMGR submit that the law is clear and is in their favour.
In the event that this court disagrees with its interpretation, each of AMTF and MMGR seeks a reference to the Court of Justice of the European Union (CJEU).
I therefore, thirdly, address the question whether in the light of developments of its jurisprudence it is necessary to refer a question of interpretation to the CJEU.
In discussing the prior case law in this judgment I refer to both that court and its predecessor, the Court of Justice of the European Communities, by the acronym CJEU.
The Judgments Regulation
The basic rule in the Judgments Regulation is that a person may be sued in the member state of his domicile.
Article 2 provides: 1.
Subject to this Regulation, persons domiciled in a member state shall, whatever their nationality, be sued in the courts of that member state.
As the opening words of article 2.1 suggest, the basic rule of domicile is not an exclusive ground of jurisdiction.
Other articles within the Regulation provide alternative grounds.
Thus in article 5 there are rules concerning matters relating to contract and delict among others.
Article 5 provides, so far as relevant: A person domiciled in a member state may, in another member state, be sued: 1.(a) in matters relating to a contract, in the courts for the place of performance of the obligation in question; 3. in matters relating to tort, delict or quasi delict, in the courts for the place where the harmful event occurred or may occur; Article 6 provides so far as relevant: A person domiciled in a member state may also be sued: 1. where he is one of a number of defendants, in the courts for the place where any one of them is domiciled, provided the claims are so closely connected that it is expedient to hear and determine them together to avoid the risk of irreconcilable judgments resulting from separate proceedings; In relation to contracts conferring exclusive jurisdiction, article 23 provides: If the parties, one or more of whom is domiciled in a member state, have agreed that a court or the courts of a member state are to have jurisdiction to settle any disputes which have arisen or which may arise in connection with a particular legal relationship, that court or those courts shall have jurisdiction.
Such jurisdiction shall be exclusive unless the parties have agreed otherwise.
The CJEU has provided authoritative rulings on the Judgments Regulation and its predecessor, the Brussels Convention.
Rulings on the interpretation of provisions of that Convention remain valid for the equivalent provisions in the Judgments Regulation: Zuid Chemie BV v Philippos Mineralenfabriek NV/SA (Case C 189/08) [2010] 2 All ER (Comm) 265, para 18.
I discuss the earlier case law as if it addressed the latter provisions.
The Judgments Regulation contains rules of jurisdiction which are designed to promote legal certainty by allowing prospective litigants, whether claimants or defendants, to foresee with sufficient certainty which court will have jurisdiction.
The aim of the Judgments Regulation is to prevent parallel proceedings between courts of different member states and thereby avoid or limit irreconcilable judgments and non recognition of judgments.
The compulsory system of jurisdiction which the Judgments Regulation creates is underpinned by the principle of mutual trust between the courts of the member states.
For those propositions see, for example, Overseas Union Insurance Ltd v New Hampshire Insurance Co (Case C 351/89) [1992] QB 434, para 17; Erich Gasser GmbH v MISAT Srl (Case C 116/02) [2005] QB 1, paras 41 and 72; and Turner v Grovit (Case C 159/02) [2005] 1 AC 101, paras 24 and 28.
The general principle is that civil actions are to be brought against individuals and companies in the courts of the place where they are domiciled.
It would be contrary to the objectives of the Judgments Regulation to interpret it as requiring the recognition of the jurisdiction of the courts of the claimants domicile, except where it expressly so provides, as that would enable the claimant to determine the competent court by choosing his own domicile: Dumez France SA and Tracoba Sarl v Hessische Landesbank (Helaba) (Case C 220/88) [1990] ECR I 49, paras 16 19; Kronhofer v Maier (Case C 168/02) [2004] 2 All ER (Comm) 759, para 20.
The derogations from the general rule which confers jurisdiction on the courts of the defendants domicile, including article 5.3, must be restrictively interpreted in order to achieve the aims of the Judgments Regulation: Kronhofer v Maier (above), paras 12 14; Coty Germany GmbH v First Note Perfumes NV (Case C 360/12) [2014] Bus LR 1294, paras 43 45.
The derogating grounds of jurisdiction are justified because they reflect a close connection between the dispute and the courts of a member state other than that in which the defendant is domiciled.
That close connection promotes the efficient administration of justice and proper organisation of the action: Dumez France SA and Tracoba Sarl v Hessische Landesbank (above), para 17; Kronhofer v Maier (above), para 15.
It is necessary, in my view, to distinguish between the terms of a derogating ground of jurisdiction on the one hand and the rationale or justification for the ground on the other as it is the former which confers jurisdiction, not the latter.
I discuss this point further in para 29 below.
The CJEU has ruled on the correct approach to article 5.3.
It has interpreted the phrase the place where the harmful event occurred (a) to give the claimant the option of commencing proceedings in the courts of the place where the event occurred which gave rise to the damage or in the courts of the place where the damage occurred (if the event and damage were in different member states): Handelskwekerj GJ Bier BV v Mines de Potasse d Alsace SA (Case C 21/76) [1978] QB 708, para 24; (b) as the place where the event giving rise to the damage, and entailing tortious liability, directly produced its harmful effect upon the person who is the immediate victim of the event and thus not the place where an indirect victim, such as the parent company of the immediate victim, suffered financial loss as a result: Dumez France and Tracoba Sarl v Hessische Landesbank (Helaba) (above), para 20; and (c) consistently with (b) above, where a victim suffered harm in one member state and consequential financial loss in another, as referring to the place where the initial damage occurred: Marinari v Lloyds Bank Plc (Case C 364/93) [1996] QB 217, paras 14 and 15.
The focus in (b) and (c) is thus on where the direct and immediate damage occurred.
Similarly, in Kronhofer v Maier (above) an investor domiciled in Austria raised an action in his country against investment consultants based in Germany who had given him investment advice by telephone which led him to send funds to Germany to be placed in an investment account and used in an unsuccessful speculative investment.
He argued that, because the financial loss caused by that investment diminished the totality of his assets which were concentrated in Austria, he could sue in the courts of the country of his domicile.
The CJEU did not agree.
It held that article 5.3 did not allow a claimant who had suffered financial damage resulting from the loss of part of his assets in another contracting state to sue in the place of his domicile or where his assets were concentrated.
The CJEU, in the interests of the sound administration of justice, has had to identify the place where a harmful event has occurred in the course of an international transaction, where that place was not evident from a straightforward application of the article.
In Runion Europenne SA v Spliethoffs Bevrachtingskantoor BV (Case C 51/97) [2000] QB 690, which concerned a claim in damages arising out of the poor quality of a consignment of peaches which had been carried by sea from Australia to Rotterdam for delivery to a town in France, the harmful event was a breakdown of the cooling system during the sea voyage.
The CJEU held (para 35) that the place where the harmful event occurred was to be regarded as the place where the maritime carrier was to deliver the goods, ie Rotterdam.
The Court justified the choice by reference to the requirements of foreseeability and legal certainty and the existence of a particularly close connecting factor with the dispute (para 36).
The CJEU has also had to interpret article 5.3 so that it can apply in circumstances in which it is not possible to identify one place where the relevant harm has occurred.
For example, it has interpreted the phrase place where the harmful event occurred in contexts where a claimant suffers harm to his personality rights by the publication of libellous material in several member states.
It has held that the claimant may bring an action for damages against the publisher either (a) before the courts of the member state where the publisher of the defamatory material is established, which have jurisdiction to award damages for all the harm caused by the defamation, or (b) before the courts of each member state in which the publication was distributed and where he claims that his reputation has been injured, which have jurisdiction only in respect of the harm caused in the state of the court seised: Shevill v Presse Alliance SA (Case C 68/93) [1995] 2 AC 18, paras 31 33.
The publication of material on the internet can make information which is damaging to a claimants personality right available on a worldwide basis, making it impossible to locate the relevant harm for the purpose of article 5.3 without developing a special rule.
The CJEU has recognised that the solution which it adopted in Shevill based on ascertaining damage caused by distribution within a particular member state did not address the harm caused by the availability of such information on the internet.
It has therefore created an additional option for the alleged victim in such circumstances, attributing jurisdiction to the court of the place where the alleged victim had its centre of interests: eDate Advertising GmbH v X (Cases C 509/09 and C 161/10) [2012] QB 654, paras 40 48, 52.
The CJEU has also developed special rules for the application of article 5.3 to the infringement of intellectual property rights in the context of the accessibility of the internet.
Wintersteiger AG v Products 4U Sonder maschinenbau GmbH (Case C 523/10) [2013] Bus LR 150 is a case concerning a national trademark which in principle protects only in the territory of the member state in which it is registered.
The claimant, which was the proprietor of an Austrian trademark Wintersteiger, asserted that its trademark had been infringed by the defendants registration of the word Wingersteiger in the Google search engine although the registration was limited to searches carried out via the top level domain for Germany (ie google.de).
The obvious mischief for the claimant was that Austrian customers could readily use google.de when searching for products causing Wintersteiger to lose orders in Austria.
The CJEU held that the objectives of foreseeability and the sound administration of justice pointed to treating the courts of the member state in which the property right in issue was protected (ie Austria) as the place where the damage occurred (paras 29 and 39) and identifying the place of establishment of the advertiser (Germany) as the place where the event giving rise to the damage occurred (paras 37 and 39).
The CJEU has also considered the application of article 5.3 where reproductions of a work protected by copyright throughout the EU were available for sale by marketing on the internet in many member states.
In circumstances of infringement of such a right via the internet to which courts does article 5.3 give jurisdiction? In Pinckney v KDG Mediatech AG (Case C 170/12) [2013] Bus LR 1313, paras 43 45, the CJEU answered the question by holding that the court of a member state which protected the copyright would have jurisdiction because the harmful event alleged might occur within its jurisdiction.
But the courts jurisdiction was limited to determining the damage caused within the member state in which it was situated.
Claims for damages against international cartels for breaches of EU competition law have also required the development of special rules in the interpretation of article 5.3.
In Cartel Damage Claims (CDC) Hydrogen Peroxide SA v Akzo Nobel NV (Case C 352/13) [2015] QB 906, it was not possible to identify a single place where the cartel had come into being as it resulted from collusive agreements made during several meetings which had taken place in various places in Europe.
It was also difficult to identify in a conventional way the place where the damage occurred as the claimants loss consisted in a restriction of the buyers freedom to contract as a result of the cartel supplying goods at artificially high prices.
The CJEU categorised the relevant loss as the additional costs incurred because of the artificially high prices.
It held that the place where the damage occurred was identifiable only for each alleged victim taken individually and was located, in general, at each victims registered office (paras 52 and 56).
Once again, the CJEU adapted the interpretation of article 5.3 to circumstances in which the place of the relevant harm could not otherwise be identified.
The CJEU relied on the justifications of the rule the efficacious conduct of potential proceedings in a court best suited to assess the claim for damages in devising that interpretation (para 53).
Applying the CJEUs jurisprudence in this appeal
There is no dispute in this case that the event occasioning damage, the alleged inducement of the former clients by MMGR to commence the German legal proceedings, occurred in Germany.
AMTF therefore relies on the alternative basis under article 5.3, the place where the relevant damage occurred, in support of its assertion that the English courts have jurisdiction.
First, adopting the reasoning of Popplewell J, it asserts that the relevant harm is the deprivation of the contractual benefit of dispute resolution in England under English law so that the English courts could protect and enforce its substantive rights.
Secondly, it submits that Popplewell Js judgment is supported by (a) the principles underlying article 5.3, conferring jurisdiction on a foreseeable court which has a close connection with the underlying dispute, (b) the nature of the contractual benefit conferred by an exclusive jurisdiction clause and (c) considerations of the sound administration of justice in relation to a tort which is a form of accessory liability for breach of contract.
It points out that the CJEU has innovated on its interpretation of article 5.3 in cases such as eDate Advertising, Wintersteiger and Cartel Damage Claims by locating the relevant harm at the claimants centre of interests.
Such a rule, which would locate the harm in the jurisdiction of the contractually adopted court, has, it submits, the virtue of foreseeability, as the CJEU pointed out in Wintersteiger at para 23, and should be applied when the tort of inducing breach of contract occurs in the context of an exclusive jurisdiction clause.
I am not persuaded by those submissions.
The task for the court is to identify where the relevant harm occurred.
That is relatively straightforward in most circumstances, where there is no need for any special rule such as those which the CJEU has developed when it has not been possible readily to identify one place where that harm occurred.
It is straightforward in this case.
I deal with AMTFs first submission.
The contractual obligation of the former clients was, if they chose to sue AMTF, to sue only in England.
The breach of contract which MMGR is said to have induced was the raising of legal proceedings in Germany.
AMTF accepts that the raising of those proceedings in Germany was the event which gave rise to the damage for the purposes of article 5.3.
But AMTF also incurred damage in Germany by having to engage in the German proceedings and settle claims there.
It is clear that AMTF did not get the benefit of having any dispute with the former clients determined under English law by English courts.
But the former clients were under no positive obligation to sue AMTF, which could have no objection if it was not sued.
They were under an obligation not to sue in Germany or elsewhere than England.
The former clients could have performed their contractual obligations to AMTF either by not raising proceedings in Germany or, having raised those proceedings, by discontinuing them.
Thus the circumstances of this case can be distinguished from those in Dolphin Maritime & Aviation Services Ltd v Sveriges Angfartygs Assurans Forening [2010] 1 All ER (Comm) 473, in which the contractual obligation, of which the defendants had induced the breach, was the positive obligation to pay money into the claimants bank account in England.
In that case, the harm suffered by the victim of the tort occurred in England where the money should have been paid.
It may also be, as was suggested during the legal debate in court, that the raising of the German proceedings has damaged AMTFs business model as it sought, through the exclusive jurisdiction clause, to preserve the focus of its business in London if it traded with overseas clients.
But that loss of focus is consequential upon the direct harm caused by the raising of the German proceedings.
On the clear jurisprudence of the CJEU in cases such as Dumez France SA and Tracoba Sarl v Hessische Landesbank (above) and Marinari v Lloyds Bank plc (above), article 5.3 is not concerned with such consequential loss.
In my view, which is essentially the same as that of the Court of Appeal, the direct harm which AMTF suffered from the alleged tort was the expenditure occasioned by the German proceedings.
Thus for the purposes of article 5.3 the place where the harmful event occurred was Germany.
That is sufficient to determine the appeal.
It is, nonetheless, appropriate to address AMTFs second submission, which in substance seeks this court to craft a special rule for the tort of inducing breach of contract where the contractual term which has been breached is an exclusive jurisdiction clause.
In my view the rule which AMTF advocates would be contrary to the clear jurisprudence of the CJEU.
AMTF asserts that the outcome which it favours accords with the principles underlying or justifying article 5.3.
But there is a clear distinction between a rule of special jurisdiction in the Judgments Regulation, such as article 5.3, and the justification for such a rule.
The rule of special jurisdiction in a tort case is that harm has occurred or may occur within the jurisdiction of the court seised.
When, as in this case, the court is not concerned with the event giving rise to the harm, it is the occurrence of the direct and immediate harm and nothing else that is the connecting factor in article 5.3.
It is that connecting factor which creates the benefits of foreseeability and promotes the sound administration of justice.
Those benefits, which justify the ground of jurisdiction, are not themselves connecting factors.
To invoke a special ground of jurisdiction a claimant must bring itself within that ground: Folien Fischer AG v Ritrama SpA (Case C 133/11) [2013] QB 523, paras 39 and 40.
A claimant cannot establish jurisdiction under the Judgments Regulation by merely invoking the justification or rationale of the ground.
Similarly, a focus on the nature of the contractual benefit of which AMTF has been deprived and the accessory nature of the tort of inducing breach of contract does not assist.
I have discussed the former in para 26 above and comment on the nature of the tort below.
Nor does the inconvenience, which the separation of the resolution of the contractual claims against the former clients from the pursuit of the claims against MMGR entails, carry much weight when one considers the aims of the Judgments Regulation.
The fact that a claim in tort is connected with a contractual claim has not led the CJEU to elide the grounds of jurisdiction in matters relating to a contract with those in matters relating to tort.
In Kalfelis v Bankhaus Schrder, Mnchmeyer, Hengst and Co (Case C 189/87) [1988] ECR 5565 (paras 21 23) the CJEU held that where a claimant pursued a claim based on tort and contract and for unjust enrichment, the court which had jurisdiction under article 5.3 to deal with the claim in tort did not have jurisdiction to deal with the other elements of the same claim.
More recently, in Runion Europenne SA v Spliethoffs Bevrachtingskantoor BV (above) (paras 49 51) the CJEU confirmed the principle in Kalfelis.
In both Kalfelis and Runion Europenne the CJEU has recognised that the scheme of the Judgments Regulation creates the difficulty that one jurisdiction may not be able to deal with all the related points in a dispute.
This inconvenience is the price which the scheme in the Judgments Regulation imposes by setting out well defined rules in order to achieve its primary purpose of ensuring that there shall be no clash between the jurisdictions of member states of the EU, as Lord Goff of Chieveley observed in Airbus Industrie GIE v Patel [1999] 1 AC 119, pp 131 132.
This difficulty is evident in the wording of the Judgments Regulation.
Article 6 of the Judgments Regulation does not confer jurisdiction on the courts of a member state over a co defendant as a result of the close connection of the claims unless one of the defendants is domiciled in that member state.
Jurisdiction on an article 5 ground does not suffice.
Similarly, article 23 can confer exclusive jurisdiction on a court as a result of the agreement of the parties but that jurisdiction cannot be pleaded against people who are not parties to the agreement.
Under the Judgments Regulation there is no scope outside the rules for identifying a forum conveniens.
The German courts, if seised of the matter, can apply English law if it is the governing law.
The fact that parties to a contract have selected a jurisdiction to resolve their dispute does not entitle the courts of the selected member state to review or seek to restrain the jurisdiction of the court on which a rule of the Judgment Regulation has conferred jurisdiction: West Tankers Inc v Allianz SpA (formerly RAS Riunuine Adriatica di Sicurit SpA) (Case C 185/07) [2009] AC 1138, paras 29 32.
The application of the Judgments Regulation, as I construe it, will separate the determination of AMTFs contractual claims against its former clients from the determination of its tort claim against MMGR.
But such inconvenience is the price of achieving the legal certainty and foreseeability which are among the principal aims of the Judgments Regulation, as the CJEU has recognised and endorsed.
Further, I do not see any jurisdictional difficulty for AMTF if it were to seek to protect itself against any future attempts by MMGR to induce AMTFs other clients to breach their contractual obligations: AMTF can raise proceedings in Germany, in the courts of MMGRs domicile.
Whether a reference to the CJEU is mandated?
Mr De la Mare for AMTF submits as a fall back that if it is not clear that article 5.3 should be applied as he submits where the contractual provision which has been breached as a result of the defendants inducement is an exclusive jurisdiction clause, this court should refer the issue to the CJEU.
Guidance would be needed as to whether article 5.3 would establish the jurisdiction of the English courts where MMGRs alleged tortious behaviour has undermined the contractual creation of a sole jurisdiction in England, a connecting factor which has the advantage of foreseeability, would promote the sound administration of justice and avoid the fragmentation of disputes.
I do not agree.
The circumstances which have caused the CJEU to develop special rules to interpret article 5.3 in order to identify the place where the harmful event occurred, such as to locate harm at a claimants registered office (Cartel Damage Claims) or at its centre of interests (eDate Advertising) do not arise in this case, in which there is no difficulty in locating where the relevant harm has occurred.
The event giving rise to harm and the relevant harm which that event directly caused both occurred in Germany.
AMTF also submits that EU legislation has recently shown more favour towards exclusive jurisdiction clauses.
Article 31(2) of the recast Judgments Regulation (Regulation EU No 1215/2012 of the European Parliament and of the Council of 12 December 2012) provides that where a court, on which the parties have conferred exclusive jurisdiction by an agreement which complies with article 25, is seised, any court of another member state must stay its proceedings until the former court declares that it has no jurisdiction.
AMTF submits that this may mean that the CJEU would take a more accommodating approach to exclusive jurisdiction clauses.
Be that as it may, it does not assist AMTF to establish for the purpose of jurisdiction under article 5.3 that the place where the harmful event occurred was England.
Recent case law of the CJEU does not suggest that the court has moved from the principles and approach which I have set out in paras 11 to 13, 15 and 16 above.
The CJEU has repeatedly stated in recent times that the provisions of the Regulation must be interpreted independently by reference to its scheme and purpose, and derogations from the general rule that jurisdiction is given to the court of the defendants domicile have to be interpreted restrictively: Melzer v MF Global UK Ltd (Case C 228/11) [2013] QB 1112, paras 22 and 24; Coty Germany (above), paras 43 45; and Kolassa v Barclays Bank Plc (Case C 375/13) [2015] ILPr 14, para 43.
The focus in article 5.3, which is relevant to AMTFs claim, remains on the place where the event resulted in the initial damage: Zuid Chemie BV v Philippos Mineralenfabriek NV/SA (above), paras 26 32; Universal Music International Holding BV v Schilling, Schwarz, Bro (Case C 12/15) (EU:C:2016:449), paras 30 34.
There is no complexity in the present case in identifying that place which might cause the CJEU to develop a special rule as to the location of the harmful event.
In support of an innovative interpretation of article 5.3, AMTF relies on the characteristics of the English law tort of inducing breach of contract and the application of the tort to an exclusive jurisdiction clause.
Creating a special rule in this way to accommodate the domestic law of tort of a particular member state would, in my view, undermine the certainty and foreseeability of that ground of jurisdiction, which is available to people and organisations in all of the member states of the EU.
These considerations, which depend on EU law and not domestic law and are thus equally obvious to the courts of other member states, persuade me that the matter is acte clair and that no reference is mandated, having regard to the criteria laid down in CILFIT v Ministero della Sanit (Case C 283/81) [1982] ECR 3415.
Whether consideration of AMTFs claim by the English court would infringe EU
As I have concluded that the Judgments Regulation does not give jurisdiction to the English courts over AMTFs claim, it is not necessary to address the issue, which MMGR raised, as to whether the English court which purports to hear AMTFs claim thereby breaches EU law by impermissibly interfering with the judgments of the German courts.
MMGRs cross appeal on costs
MMGR appeals against the decision of the Court of Appeal to award it only part of its costs at first instance and on appeal (the part relating to the issue whether the place of the harmful event was in England) and to require it to pay AMTFs costs at first instance and on appeal on the question of whether AMTFs claim had real prospects of success.
At first instance, MMGR had challenged the prospects of success of AMTFs claim on the basis that the exclusive jurisdiction clause was unenforceable because the former clients were consumers who were protected by the Unfair Terms in Consumer Contracts Regulations 1999 and articles 16, 17 and 23(5) of the Judgments Regulation.
Popplewell J rejected this submission.
In the Court of Appeal the argument took the form that the English courts could not grant an injunction or award damages against MMGR without impermissibly attacking the assumption of jurisdiction by the German courts.
The Court of Appeal did not require to determine this question but observed that it did not appear to be well founded (a) because an injunction against MMGR from inducing a breach of contract did not preclude anyone from commencing proceedings in Germany and (b) because a claim for damages against MMGR for the loss occasioned by the breach of contract which MMGR had induced was not a collateral attack on the jurisdiction of the German courts.
I deal with this challenge to the award of costs briefly.
The court has a broad discretion in relation to costs under CPR rule 44.2.
While there is a starting point that the unsuccessful party will pay the costs of the successful party (CPR rule 44.2(2)(a)), the court is entitled in CPR rule 44.2(4) to have regard to the parties relative success on the issues raised.
The court has a discretion on the question of relative success and an appellate court will overturn its decision on such a matter only if it has gone beyond the limits of its discretion or otherwise erred in law.
MMGR did not renew in the Court of Appeal its challenge based on the alleged status of the former clients as consumers.
The Court of Appeal expressed a clear although not conclusive view on the challenge on the merits which MMGR advanced before them.
I see no basis for impugning the discretionary decision of the Court of Appeal.
Insofar as the challenged element of the award covered MMGRs submission on the merits before Popplewell J, an argument with which MMGR has not persisted, the Court of Appeals award should stand.
Insofar as MMGR, in raising the second issue in this court, has renewed the arguments it advanced on the merits before the Court of Appeal, it can raise the question of costs in relation to those arguments in any submissions on costs which it chooses to make to this court after the courts judgment is handed down.
Conclusion
I would dismiss the appeal.
| UK-Abs | AMT Futures Limited (AMTF) is incorporated in the United Kingdom and is based in London.
It provides services as a derivatives broker for clients who wish to trade in derivatives and who are referred by introducing brokers.
Among AMTFs former clients were people domiciled in Germany, Austria, Switzerland or Belgium and who were introduced to AMTF by independent brokers based in Germany.
AMTF charged its clients commission for its service and paid commission to the introducing brokers.
Some of AMTFs former clients, who were dissatisfied with the financial results of their transactions, commenced legal proceedings in Germany against both the introducing brokers and AMTF seeking damages under the German law of delict.
The claim against the introducing brokers was that they had given bad investment advice or had failed to warn of the investment risks.
The claim against AMTF was that it had encouraged the brokers to behave as they did by paying them commission and had therefore breached a duty in tort which it had owed to the former clients to prevent any transactions being undertaken contrary to their interests.
AMTF challenged the jurisdiction of the German court.
AMTF estimates that by August 2013 it had spent over 2 million on investigating the claims, legal costs and settlement costs.
The contracts between AMTF and its former clients contained clauses which provided that English law would govern the rights and obligations of the contracting parties and the construction of their contract and that the English courts would have exclusive jurisdiction in legal proceedings relating to the contract.
AMTF asserts that the former clients have breached their contracts by raising legal proceedings against it in Germany and asserting rights under the German law of delict.
AMTF has raised legal proceedings against the former clients, seeking damages for breach of contract in the High Court in London.
AMTF alleges that MMGR, a German company which carries on business as a firm of lawyers in Germany, induced the former clients to issue proceedings against AMTF in Germany in breach of the exclusive jurisdiction and applicable law clauses in their contracts with AMTF.
AMTF commenced proceedings in the High Court in London against MMGR, based on the English law tort of inducing breach of contract and seeking both damages and injunctive relief to restrain MMGR from inducing clients to bring further claims in Germany.
The question in the appeal is whether the English courts have jurisdiction under Council Regulation (EC) No 44/2001 of 22 December 2000 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (the Judgments Regulation) to hear AMTFs claim against MMGR.
AMTF argued that the English courts had jurisdiction under article 5.3 of the Judgments Regulation.
Article 5.3 provides that jurisdiction will be established in matters relating to tort, delict or quasi delict, in the courts for the place where the harmful event occurred or may occur.
It argued that the harm it suffered was the deprivation of the contractual benefit of dispute resolution in England under English law and therefore the harmful event occurred in England.
AMTF also argued
that a special rule should apply for the purposes of article 5.3 when the tort of inducing breach of contract occurred in the context of an exclusive jurisdiction clause.
Foreseeability would be achieved by locating the harm in the jurisdiction of the contractually adopted court.
AMTF requested a reference be made to the Court of Justice of the European Union (CJEU) seeking guidance on whether article 5.3 establishes the jurisdiction of the English courts in such circumstances.
The Supreme Court unanimously dismisses AMTFs appeal.
Lord Hodge gives the judgment, with which the other Justices agree.
The aim of the Judgments Regulation is to prevent parallel proceedings between courts of different member states and thereby avoid or limit irreconcilable judgments and non recognition of judgments [11].
Derogations, including article 5.3, from the general rule under article 2 which confers jurisdiction on the courts of the defendants domicile must be restrictively interpreted to achieve this aim [13].
Article 5.3 requires the court to identify where the relevant harm occurred.
That is straightforward in this case as, unlike the cases which required the CJEU to develop special rules, it is possible readily to identify one place where the harm occurred [24].
The raising of the German proceedings was the event which gave rise to the damage for the purposes of article 5.3 [25].
The direct harm which AMTF suffered from the alleged tort was the expenditure occasioned by the German proceedings.
Thus the place where the harmful event occurred was Germany.
Article 5.3 is not concerned with consequential loss such as the loss of focus on the appellants business in London [27].
It would be contrary to CJEU jurisprudence for the court to craft a special rule for the tort of inducing breach of contract where the contractual clause which has been breached is an exclusive jurisdiction clause [28].
It is the occurrence of the direct and immediate harm which is the connecting factor in article 5.3 and which creates the benefits of foreseeability and the sound administration of justice.
Those benefits are not themselves connecting factors and a claimant cannot merely invoke those benefits to justify the establishment of a ground of jurisdiction under the Judgments Regulation [29].
A focus on the accessory nature of the tort of inducing breach of contract does not assist [30].
The fact that a claim in tort is connected with a contractual claim has not led the CJEU to elide the grounds of jurisdiction in matters relating to a contract with those in matters relating to tort [31].
Nor does the inconvenience of separating the resolution of the contractual claims against the former clients from the pursuit of the claims against MMGR assist [30].
That inconvenience is the price of achieving the legal certainty and foreseeability which are among the principal aims of the Judgments Regulation [35].
CJEU Reference The circumstances which have caused the CJEU to develop special rules to interpret article 5.3 in order to identify the place where the harmful event occurred do not arise in this case, in which there is no difficulty in locating where the relevant harm has occurred [38].
Recent CJEU case law does not suggest that the court has moved away from the principles and approach underpinning the Judgments Regulation [40].
The matter is acte clair and no reference is mandated [43].
|
Ben Belacum Makhlouf was born in Tunisia on 18 July 1971.
On 4 June 1996 he married Ruth Henderson.
She came from Northern Ireland and was a citizen of the United Kingdom.
The marriage took place in Tunisia.
On 13 November 1997, Mrs Makhlouf gave birth to their only child, a daughter called Sarah Jayne.
She was born in Northern Ireland, to where Mrs Makhlouf had returned.
Her husband joined her there on 19 November 1997, six days after the birth of their daughter.
He has lived in Northern Ireland since then.
He had come to the United Kingdom and to Northern Ireland in particular with leave to enter as the spouse of a person settled in the UK.
The leave to enter was initially valid for one year but on 19 August 1999 he was given indefinite leave to remain.
On 14 September 1999, Mrs Makhlouf informed the United Kingdom Border Agency (UKBA) that she and her husband had separated.
She claimed that he had been violent to her.
He disputes that claim.
It has never been alleged that he was violent to his daughter.
Indeed, Mr Makhlouf has said that, following the separation from his wife, he enjoyed regular weekly contact with Sarah Jayne.
Differences arose between him and his wife concerning their daughters upbringing, he claims and as a result, Mrs Makhlouf refused to allow him to see Sarah Jayne since the beginning of 2003.
Notwithstanding that they have not lived together since 1999, Mr and Mrs Makhlouf have never divorced.
On 24 April 2003, while drunk, Mr Makhlouf attacked two men after an argument about a game of pitch and toss.
He used an offensive weapon (in the form of a key ring which contained a blade).
He claimed that he was provoked by the men, who, he said, were loyalist paramilitaries.
He also alleged that they had victimised him because of his ethnic origin and skin colour.
These claims are not accepted by the respondent and there is nothing in the trial judges sentencing remarks which specifically supports them.
The judge did, however, describe the victims behaviour as shameful and the appellant as having taken the law into his own hands but it is not at all clear from the sentencing remarks that it was accepted that the appellant had been provoked because of his ethnic background.
The appellant had been remanded in custody from the date of the offences until December 2004 when he was released on bail.
He pleaded guilty to two offences of assault occasioning grievous bodily harm contrary to section 20 of the Offences against the Person Act 1861, having pleaded not guilty to the more serious offences under section 18 of the same statute, with which he had originally been charged.
The pleas of guilty to the section 20 charges were made, it is claimed, at the earliest opportunity and the trial judge appears to have taken this into account when, on 18 April 2005, he imposed concurrent sentences of 39 and nine months imprisonment.
That disposal meant that the appellant was not required to return to prison.
In his evidence to the First tier Tribunal, during an appeal against a decision that he should be deported, the appellant said that he had formed a relationship with Charlene McManus after his release from prison and that she had given birth to their son on 12 May 2006.
Mr Makhlouf has not been named on the childs birth certificate as his father but Ms McManus has not disputed that he is indeed the boys father.
Unfortunately, his relationship with Ms McManus broke down shortly after the birth but Mr Makhlouf claimed that he had regular contact with his son until 2010.
These arrangements ended, he claimed, when Ms McManus began to demand that he visit the boy at her flat and, at that time, he was unable to leave his own home because he was suffering from depression.
In his evidence to the First tier Tribunal he said that he had been unable to work since 2006 or 2007 because of his depressive illness and had been in receipt of state benefit for this condition.
In 2007 the appellant issued proceedings seeking contact with his daughter, Sarah Jayne.
He was permitted indirect contact but his application for direct contact was refused.
He appealed that decision but this appeal was dismissed by the Fermanagh Family Care Centre on 21 October 2008.
He claimed that he had not attended the hearing of the appeal because he had gone to the wrong court.
The First tier Tribunal was sceptical of this claim.
It observed, If this was truly the reason why the order was made, we find it surprising that he has been unable to secure redress for the consequences of what he claims was a simple mistake.
We are not persuaded that the order does not reflect other issues on the suitability of him having contact with Sarah Jayne at that time.
On Mrs Makhloufs application, the court made an order under article 179(14) of the Children (Northern Ireland) Order 1995 (SI 1995/755 (NI 2)) which imposed a requirement that the appellant obtain the leave of the court before making any further applications in respect of Sarah Jayne.
Between November 2008 and February 2010, the appellant was convicted of and sentenced for a series of offences as follows: On 3 November 2008 he was sentenced to six months imprisonment, suspended for two years, for breach of a non molestation order; On 2 March 2009 he was fined 350 for disorderly behaviour; On 22 February 2010 he was convicted of two sets of offences the first was for breach of a non molestation order on 12 October 2009 for which he was sentenced to three months imprisonment; the second set of offences related to breach of a non molestation order on 11 January 2009 for which he was sentenced to six months imprisonment, suspended for two years, assaulting a police officer and resisting a police officer on the same date for which he received equivalent concurrent sentences.
On 14 October 2010 the respondent wrote to the appellant, informing him that she was considering his liability to deportation.
She asked him to provide reasons that he should not be deported.
She also asked for information about his relationships and about his children.
The letter contained what is known as a one stop warning under section 120 of the Nationality, Immigration and Asylum Act 2002 and a questionnaire in which various inquiries were made about his circumstances, those of his children and how he came to the United Kingdom.
The letter had been prompted by the respondents having obtained a certificate of the applicants conviction of the offences for which he had been sentenced on 18 April 2005.
In a letter of 1 November 2010 the appellants solicitor stated that the offences arose out of an incident in which he had been provoked by loyalist paramilitaries who had targeted him because of his origins and skin colour.
The solicitor objected to the delay in seeking his deportation on foot of these convictions.
It was claimed that he had a settled life in Northern Ireland and wished to play a parenting role for his children and to support them in the future.
Any decision to deport him would breach his rights under article 8 of the European Convention on Human Rights and Fundamental Freedoms (ECHR), the letter suggested.
On 4 February 2011 the respondent wrote to the appellant again.
She asked for further information about his two children and sought certain material from his solicitor, including passport details and evidence of his residence in the UK; documentary evidence relating to custody arrangements for the children; when he had stopped living with them; and how often he had contact with them.
The solicitor was also asked to provide letters from the mothers of the appellants children detailing any support that he provided for the children.
Information was also sought relating to medical treatment that he was receiving.
No reply to these requests was forthcoming and a reminder was sent on 21 March 2011, asking for a reply by 1 April 2011.
No such reply was received and on 28 June 2011 UKBA wrote, asking for evidence of the appellants relationship with any current partner and with his children.
On 7 July 2011 the appellants solicitor wrote to ask for more time in which to reply and this was granted in a letter from UKBA of 16 August 2011 but a response within ten days was asked for.
In due course the appellants solicitor did indeed reply on 26 August 2011, stating that the appellant was not in contact with his children and was not in a financial position to contribute to their maintenance.
The letter claimed that he was being denied contact with his children by their mothers and that he had given instructions to issue legal proceedings so that he could re establish contact with them.
In the meantime, Mr Makhlouf was convicted on 15 August 2011 of offences that arose from an incident on 2 April 2011 at the public inquiry office at Enniskillen Police Office.
These included disorderly behaviour (for which he was sentenced to five months in prison); attempted criminal damage (for which he received a concurrent sentence of five months imprisonment); and resisting a police officer for which he received an equivalent concurrent sentence.
On 12 April 2012 UKBA asked for an update in relation to the contact proceedings that had been mooted in the letter of 26 August 2011.
The following day his solicitor replied saying that legal aid applications had been made in order to launch these proceedings but that these had not yet been dealt with by the Legal Aid Commission.
No applications for contact had been lodged, therefore.
On 30 May 2012 UKBA issued a liability to deportation notice on foot of Mr Makhloufs convictions in April 2005.
In an accompanying letter they sought evidence of what were described as applicable circumstances.
These included details of marriages or civil partnerships; relationships that could be said to be akin to these; evidence in relation to children or other dependents; and evidence of any medical condition from which he or any dependents suffered.
The appellant was also asked for a formal statement setting out the reasons that he should be allowed to stay in the UK, why he wished to stay here and the grounds on which he relied in support of his claim that he should be permitted to do so.
No response to this request was received.
The appellant gave instructions to his present solicitors to make a further application for contact with Sarah Jayne.
The Legal Services Commission refused to grant legal aid for this and it was not pursued.
On 5 October 2012 the respondent decided to make a deportation order.
Notice of that decision was given to the appellant.
It stated: On 18 April 2005 at Belfast Crown Court, you were convicted of grievous bodily harm.
In view of this conviction, the Secretary of State deems it to be conducive to the public good to make a deportation order against you.
The Secretary of State has therefore decided to make an order by virtue of section 3(5)(a) of the Immigration Act 1971.
You have claimed that your deportation from the United Kingdom would be a breach of your human rights under article 8 of the Human Rights Act 1998 on the grounds that you have established a family and/or private life in the United Kingdom.
This claim does not meet the criteria as laid out in paragraph(s) 399/399A of the immigration rules and for the reasons given in the attached reasons for decision letter your claim is hereby refused.
The letter which accompanied the notice of decision reviewed the various circumstances which were relevant to the appellants case.
His several convictions, not merely those in 2005, were rehearsed.
The fact that he was no longer in contact with either of his children and had not had any connection with them for some years was alluded to.
The sentencing remarks of the judge in April 2005 were quoted.
It was stated that specific regard had been had to para 396 of the Immigration Rules which provides that there is a presumption that the public interest requires the deportation of a person who is liable to deportation.
It was acknowledged, however, that there was an obligation to consider whether that presumption would be outweighed by other factors, particularly whether the decision to take deportation action would place the United Kingdom in breach of any of its obligations under [ECHR].
The reasons for decision letter accepted that the appellants removal to Tunisia would interfere with his rights under article 8 and that it might not be in the best interests of his children.
But it was stated that this interference was in accordance with the permissible aim of the prevention of disorder and crime and the protection of the rights and freedoms of others.
The letter continued: In considering whether removal to Tunisia would result in a breach of your rights under article 8, the starting point for considering such a claim is the Immigration Rules.
Paragraph 396 establishes that where a person is liable to deportation, the public interest requires it.
Where the Secretary of State must make a deportation order in accordance with section 32 of the UK Borders Act 2007, it is also in the public interest to deport.
The letter then dealt with the length of sentence imposed and the effect of this in applying the relevant immigration rules, in particular paras 398, 399 and 399A. Reference was made to the criteria in para 399A which must be satisfied in order for a parental relationship with a child to outweigh the public interest in deportation in line with article 8.
These criteria were stated to reflect the duty in section 55 of the Borders, Citizenship and Immigration Act 2009 to have regard to the need to safeguard and promote the welfare of children who are in the United Kingdom as interpreted in recent case law, in particular ZH (Tanzania) v Secretary of State for the Home Department [2011] 2 AC 166.
There then followed a review of the para 399A criteria as they applied to the appellants children.
It was noted that he was not in a genuine and subsisting relationship with his son, indeed that the appellant had provided no evidence of contact with the boy and that he was cared for by his mother.
Likewise, the letter claimed, the appellant was not in a subsisting relationship with Sarah Jayne, had no current contact with her and that she was capable of being cared for by her mother.
The appellants personal circumstances were then considered.
It was noted that he was not in a relationship with a partner at the time; that discounting the time that he had spent in prison, he had been resident in the United Kingdom for a period of 15 years; and that he had ties to Tunisia to which he was to be deported.
His parents lived there and that he had lived all his life in Tunisia until he came to the UK in 1997.
It was concluded therefore that there were no exceptional circumstances which outweighed the public interest in having the appellant deported.
The proceedings
The appellant appealed the decision to deport him to the First tier Tribunal.
On 5 December 2012 he made a statement setting out the circumstances on which he relied to advance his appeal.
He explained that he had wished to make another application for contact with Sarah Jayne but had been unable to pursue this because legal aid for his application had been refused.
He claimed that he had obtained legal aid to pursue an application for contact with his son and exhibited an application to the Family Proceedings Court.
The appellants appeal was heard on 6 December and the decision was given on 8 January 2013.
The tribunal concluded that the Secretary of State had properly applied the Immigration Rules.
Indeed, no issue was taken on the application of the rules.
The tribunal expressed some doubt as to the existence of the appellants son but concluded, in any event, that the appellant had not produced credible evidence of contact proceedings for either child or that he had any input into their lives.
The appeal was dismissed.
The appellant appealed to the Upper Tribunal on 1 July 2013.
In the course of this appeal it was conceded on the appellants behalf that there were no ongoing contact proceedings in relation to either child.
It was submitted that it was irrational for the Secretary of State to have taken into account the sentencing remarks of the trial judge because of the length of time that had elapsed between the trial and the decision to deport.
By way of fairly radical alternative to that argument, it was also argued that the Secretary of State had referred to only some of the remarks and had not alluded to the observation of the sentencing judge that nothing would be achieved by sending the appellant back to prison.
It was also argued that the Secretary of State had only considered the Immigration Rules and not article 8 proper (sic).
It was accepted by the respondent before the Upper Tribunal that the First tier Tribunal had wrongly considered the appellants case as one of automatic deportation under section 32(5) of the UK Borders Act 2007 and that therefore the burden of proving that his deportation was not conducive to the public good fell on the appellant.
But it was submitted that this should not affect the outcome of the appeal.
The Upper Tribunal agreed.
It also agreed with a submission that the panel had overstated the effect of the sentencing of the appellant for breach of a non molestation order.
But it concluded that the outcome of the appeal would not have been different even if these errors had not been made.
The decision of the Upper Tribunal was appealed to the Court of Appeal in Northern Ireland.
On 26 November 2014 that court (Sir Declan Morgan LCJ, Coghlin LJ and Gillen LJ) dismissed the appeal.
Morgan LCJ, delivering the judgment of the court, set out the issues raised in the appeal in para 1 of his judgment as follows: (1) Did the Secretary of State err in deciding to deport the appellant under the mandatory power conferred by section 32 of the UK Borders Act 2007 (the 2007 Act)? (2) Did the Upper Tribunal err in law in failing to find that the Secretary of State and First tier Tribunal had erred in law and in refusing to set aside the decision of the First tier Tribunal? (3) Did the Upper Tribunal err contrary to section 6 of the Human Rights Act in failing to set aside the decision to deport in the absence of any tangible evidence for any article 8(2) justification of the encroachment of the article 8 rights of the appellant's children in circumstances where the Tribunal had not been specifically asked to address this point by the parties?
Leave to appeal on the first of these two issues had been granted by a different panel of the Court of Appeal at an earlier hearing on 31 March 2014.
That court had decided to make no order in relation to the third issue, pending the decision on the first two.
The appellant therefore renewed his application for leave to appeal on that point when the matter came on for hearing on the first two issues.
On the first issue the Court of Appeal concluded that section 32 played no part in the Secretary of States decision.
Had it done so, it would have been unnecessary to consider para 396 of the Immigration Rules and the decision letter had made it abundantly clear that this had been taken into account para 35 of the courts judgment.
The first ground of appeal was therefore dismissed.
On the second issue the appellant presented two arguments to the Court of Appeal.
Firstly, it was submitted that the Secretary of State was wrong to conclude that it was conducive to the public good that the appellant should be deported because of his conviction in 2005.
Secondly, it was argued that no proper investigation of the article 8 issues had been undertaken in particular, there had been no proper investigation of the interests of the children.
Both arguments were rejected by the Court of Appeal.
It considered that the factors outlined in the reasons for decision letter amply supported the conclusion of the Secretary of State that the appellants deportation was conducive to the public good.
On the question of the delay in making the decision, the court accepted that this could be an important consideration but that two features of this case made this factor inconsequential.
The first was that following the 2005 convictions, the appellant was engaged in a series of further criminal offences and the second was that, during the same period, contact with his son was lost and the complete lack of contact with his daughter which had predated his convictions in 2005 continued.
On the issue of whether sufficient attention had been paid by the respondent to the interests of the appellants children, the Court of Appeal adverted to the Secretary of States reference to section 55 of the Border, Citizenship and Immigration Act 2009 and ZH (Tanzania).
Although the reasons for decision letter had concentrated on the question whether the conditions contained in para 399A of the Immigration Rules had been fulfilled, there had been a sufficient inquiry into the welfare of the children by the Family Court.
The court rejected the suggestion that there should have been further investigation of the impact that the deportation of the appellant might have on the lives of his children, observing that these children did not require the disruption of further investigation in circumstances where a court with appropriate jurisdiction had made important decisions in relation to their welfare.
The Court of Appeal therefore rejected the appellants case on the second issue and refused leave to appeal on the third issue.
The appeal before this court
For the appellant, Ms Higgins QC submitted that the Secretary of State had not contended that the appellant posed any risk to the public.
All the evidence suggested that he did not, she claimed.
Relying on Keegan v Ireland (1994) 18 EHRR 342, para 48 and Pawandeep Singh v Entry Clearance Office, New Delhi [2005] QB 608, para 72, she submitted that, where the circumstances warrant it, article 8 protects a relationship that could potentially develop between parent and child.
Exclusive concentration on the rights of the appellant was inappropriate.
His childrens article 8 rights required to be recognised and independently investigated.
Too often, Ms Higgins suggested, children were invisible as rights holders.
Dealing with the circumstance that there had not been recent contact between the appellant and his children, Ms Higgins drew attention to Strasbourg jurisprudence to the effect that divorce and separation do not bring family life between the child and the absent parent to an end, even if the divorce leads to a significant period of loss of contact: Berrehab v Netherlands (1988) 11 EHRR 322.
Where a parents contact has been denied or severely curtailed by the actions of the other, that other parent cannot rely upon reasons related to the effluxion of time to deny the parents ongoing article 8 rights: Ferrari v Romania [2015] 2 FLR 303, para 53.
Effective respect for family life required that future family relations between parent and child are not determined by the passage of time alone: Sylvester v Austria (2003) 37 EHRR 17, para 69.
In the domestic judicial sphere, courts, Ms Higgins argued, have been taking an increasingly firm line with parties responsible for parental alienation.
There were two reasons for this.
First, the growing awareness of the fundamental importance of a child having contact with both his or her parents.
The second reason was that firmer case management was required lest the family care system itself should contribute to the failure to develop a relationship with both parents, thereby violating the childs article 8 rights: In re A (A Child) (intractable contact dispute) [2013] 3 FCR 257 and In re H B (Children) (Contact: Prohibition on Further Applications) [2015] 2 FCR 581.
All of this contributed to the requirement to focus closely on the needs of the children, Ms Higgins said.
These should not be assimilated with those of the parent seeking to advance his or her article 8 rights.
Children, especially those who had dual or multi ethnic parentage, were entitled to have that ethnicity considered in any evaluation of the scope of their article 8 rights.
In General Comment no 14 (2013) on the right of the child to have his or her best interests taken as a primary consideration (article 3 para 1) the United Nations Committee on the Rights of the Children (CRC) emphasises that the concept of the childs best interests is aimed at ensuring both the full and effective enjoyment of the rights recognised in the Convention and the holistic development of the child para 4; that the full application of the childs best interests required the development of a rights based approach para 5; and that whenever a decision was to be made that would affect a specific child, the decision making process must include an evaluation of the possible impact on the child concerned para 6.
Paragraph 32 imposed an obligation on the legislator, the judge and the social or educational authority to make specific inquiry as to what the particular circumstances of an individual child demanded.
Ms Higgins also drew attention to para 36 of CRC which explained how the best interests of the child were to be treated as a primary consideration.
It provides that the words the best interests of a child shall be a primary consideration place a strong legal obligation on states.
These words meant that states could not exercise discretion as to whether the best interests of the child were to be given a primary consideration.
This was a positive requirement and it should be recognised, therefore, that the childs best interests could not be measured on the same level as all other considerations para 37.
They had to be assessed and ascribed the proper weight as a primary consideration in any consideration in any action undertaken.
The effect of all this, Ms Higgins said, was that there was a duty to investigate thoroughly the impact on the appellants children that would be occasioned by his deportation.
The loss of a possible future relationship with their father with the consequence that this might have on their sense of cultural identity was not to be lightly dismissed.
It required to be scrupulously assessed by obtaining social welfare reports.
This was particularly necessary since the mother of the appellants son, on learning of his impending deportation, had intimated a change of heart about facilitating contact with him.
Counsel contended that a sufficient article 8 inquiry had not been conducted.
Article 8 issues had been viewed through the prism of the Immigration Rules which purported to be (but were plainly not) comprehensive of all the issues that arose on the question of the right to respect for family and private life.
It was contended that the reality was that the best interests of the child, insofar as they were considered at all under the rules, were taken into account under the very compelling circumstances rubric in those rules see references to this passim my judgment in the associated case of Ali.
To provide properly for the appropriate consideration of the best interests of the children, the rules would have required express provision that these interests be taken into account as a separate, stand alone factor.
The template letter sent to the appellants solicitors demonstrated, Ms Higgins argued, that this had not taken place.
Discussion
Where a decision is taken about the deportation of a foreign criminal who has children residing in this country, separate consideration of their best interests is obviously required, especially if they do not converge with those of the parent to be deported.
And I consider that Ms Higgins is right in her submission that in the case of a child with a dual ethnic background, that factor requires to be closely examined.
She is also right in submitting that the childs interests must rank as a primary consideration see, in particular, ZH (Tanzania) v Secretary of State for the Home Department [2011] 2 AC 166.
The question whether sufficient consideration of the article 8 issues which arise in a particular case can take place through the application of the immigration rules has been thoroughly discussed in the associated case of Ali.
But that is not an issue which requires to be revisited here because what is at stake is whether the Secretary of State was in fact provided with sufficient material on which to make a proper judgment on the article 8 rights of the appellant and his children.
All the evidence on this issue leads unmistakably to the conclusion that the appellant did not enjoy any relationship with either of his children and that they had led lives which were wholly untouched by the circumstance that he was their father.
While, of course, the possibility of such a relationship developing was a factor to be considered, in this instance, the material available to the Secretary of State could admit of no conclusion other than that it was unlikely in the extreme.
The lately produced information that the mother of his son might re consider contact between them partakes of a last throw of a desperate dice and was not, in any event, provided to the Secretary of State before the decision was taken.
The question of the risk of the appellants re offending was, of course, one of the factors to be considered but his criminal behaviour after the offences in 2005 did not augur well in that assessment.
True it is that these were associated with disputes about contact with his children but, at the least, they spoke to his propensity to indulge in offending behaviour if he failed to get his way.
I cannot accept, therefore, that the Secretary of State was obliged to make yet further inquiries in relation to the appellant and his children beyond those which had already taken place.
As the Court of Appeal observed, these children did not require the disruption of further investigation in circumstances where a court with appropriate jurisdiction had made important decisions in relation to their welfare.
Conclusion
The appeal must be dismissed.
LADY HALE:
I agree entirely that this appeal must be dismissed for the reasons given by Lord Kerr.
I add a few words only because the focus of the argument on behalf of the appellant was that the Secretary of State should have undertaken her own independent enquiries into the best interests of his two children before deciding to deport him.
Ms Higgins is of course right to say that where children will be affected by a deportation or removal decision, their best interests must be treated as a primary consideration, and considered separately from those of the adults involved and from the public interest.
This duty stems from two sources in domestic law.
First, section 55 of the Borders, Citizenship and Immigration Act 2009 requires the Secretary of State to make arrangements for ensuring that her own functions in relation to immigration, asylum and nationality, and those of her immigration officers, are discharged having regard to the need to safeguard and promote the welfare of children who are in the United Kingdom.
The aim was to reflect in United Kingdom law the effect of article 3.1 of the United Nations Convention on the Rights of the Child, which requires that in all actions concerning children, including those by administrative bodies, the best interests of the child shall be a primary consideration.
But even without section 55, there is a second source of the obligation, in section 6(1) of the Human Rights Act 1998, which requires public authorities to act compatibly with the rights contained in the European Convention on Human Rights, including the right to respect for family life contained in article 8; this has been interpreted by the European Court of Human Rights to include the duty in article 3(1) of the United Nations Convention: see Neulinger v Switzerland (2010) 54 EHRR 1087 and ZH (Tanzania) v Secretary of State for the Home Department [2011] UKSC 4; [2011] 2 AC 166.
So it is quite correct to say that children must be recognised as rights holders in their own right and not just as adjuncts to other peoples rights.
But that does not mean that their rights are inevitably a passport to another persons rights.
The problem in this case is that it is the appellant who is treating the children as a passport to his own rights, rather than as rights holders in their own right.
His daughter was nearly 15 when the deportation order was made (and is now nearly 19).
Her parents separated before she was two years old.
Her contact with him ended when she was five.
Legal proceedings when she was ten ended in an order for indirect contact only and a further order (which is not often made) that her father should not be able to make further applications about her upbringing without the permission of the court.
It can be assumed, therefore, that there are good reasons for not requiring the mother to allow direct contact between father and daughter.
Without a very good reason to the contrary, the Secretary of State is entitled to treat the orders of the family courts as reflecting what is indeed in the best interests of the children concerned.
After all, a family court deciding the future of a child has to make the welfare of the child, not only a primary consideration, but its paramount consideration.
Family courts are supposed to know about the best interests of children and they have appropriate investigative resources to make their own independent enquiries should they need to do so.
The idea that the Secretary of State should make her own investigation of matters which have already been investigated by the family courts is not only completely unrealistic, it is also contrary to our understanding that the uncertainty and anxiety generated by repeated investigations and disputes about their future is usually bad for children.
Of course it is good for children, especially children of mixed ethnicity, to have a relationship with both their parents.
But is also good for them to have peace and stability.
If Sarah Jayne wishes to establish a closer relationship with her father, she will be able to do this for herself, and it will make little difference to their indirect contact whether he is in the United Kingdom or in Tunisia.
Tunisia has long been a popular holiday destination for people from this country and hopefully will become so again.
The appellants son was aged six when the deportation order was made and is now ten.
The relationship between his parents broke down shortly after his birth.
The appellant claims to have had regular contact with his son until 2010, when the child was four, but it stopped because his mother wanted it to take place in their home.
We do not know whether this had anything to do with his offending behaviour around that time.
The appellant claims that he was unable to leave his own home because of depression.
We do not know whether this was of a nature or degree to excuse or explain his failure to visit thereafter.
He claimed that he had brought proceedings to try and obtain contact with his son, but in 2013 the First tier Tribunal found that he had not produced credible evidence of contact proceedings relating to either child or that he had any input into their lives, and in the Upper Tribunal it was conceded that there were no current contact proceedings.
Nothing has been produced to suggest that the appellant has been making a meaningful contribution to his sons life.
His son also requires peace and stability.
He too can establish a relationship with his father in future should he wish to do so.
In my view, the Secretary of States officials deserve credit for the patience and perseverance with which they conducted their inquiries into the appellants family circumstances, to which the response was neither as speedy or as helpful as it might have been.
There was nothing which should have prompted them to make further enquiries as to the best interests of the children.
There is nothing at all to suggest that the best interests of these children require that their father should remain in the United Kingdom.
Of course there will be cases where fuller inquiries are warranted or where the best interests of children do outweigh the public interest in deportation or removal.
This is emphatically not one of them.
| UK-Abs | This is an appeal against an order for the deportation of a foreign criminal who has children who are citizens of and resident in the United Kingdom.
The appellant was born in Tunisia.
In 1996 he married a UK citizen and they had a daughter, born in Northern Ireland, in 1997.
Shortly after the birth, the appellant joined them in Northern Ireland on a spousal visa.
A year later he was granted indefinite leave to remain.
He separated from his wife in 1999, although they have never divorced.
In 2006 he had a son with a new partner, but the relationship broke down shortly after the birth.
In 2008 the Family Court ordered that he could only have indirect contact with his daughter and that he must obtain the leave of the court before making any further applications for contact.
He has not had any contact with his son since 2010.
In 2005 the appellant was convicted of two counts of assault occasioning grievous bodily harm, for which he received concurrent sentences of 39 months and nine months imprisonment.
Between 2008 and 2010 he was convicted of and sentenced for a series of further offences, including breach of a non molestation order, disorderly behaviour and assaulting a police officer.
Following a further incident in 2011 he was convicted of disorderly behaviour, attempted criminal damage and resisting a police officer for which he received three concurrent sentences of five months imprisonment.
In 2012 the Home Secretary sought the appellants deportation on account of his convictions.
Following inquiries regarding the appellants family circumstances, a deportation order was issued.
The appellant appealed claiming that his deportation would breach his and his childrens right to respect for private and family life under article 8 of the European Convention on Human Rights and that the Secretary of State had failed to take sufficient account of the best interests of his children.
His appeals to the First tier Tribunal, Upper Tribunal and Court of Appeal were dismissed.
The Supreme Court unanimously dismisses Mr Makhloufs appeal.
Lord Kerr gives the lead judgment with which the other Justices agree.
Lady Hale gives a concurring judgment.
Where a decision is taken about the deportation of a foreign criminal who has children residing in the United Kingdom, separate consideration of their best interests is required, especially if they do not converge with those of the parent to be deported and particularly in the case of a child with dual ethnic background.
The childs interests must rank as a primary consideration [40].
The question of whether sufficient consideration of the article 8 issues which arise in a particular case can take place through the application of the immigration rules has been thoroughly discussed in the associated case of Ali v Secretary of State for the Home Department [2016] UKSC 60.
But the issue in this case is simply whether the Secretary of State was in fact provided with sufficient material on which to make a proper judgment on the article 8 rights of the appellant and his children [41].
All the evidence on this issue leads unmistakeably to the conclusion that the appellant did not enjoy any relationship with either of his children and they led lives which were wholly untouched by the circumstance that he was their father.
While the possibility of such a relationship developing was a factor to be considered, in this case the material available to the Secretary of State could admit of no conclusion other than it was unlikely in the extreme.
The lately produced information that the mother of his son might re consider contact between them partakes of a last throw of a desperate dice [42].
The Secretary of State was therefore not obliged to make yet further inquiries in relation to the appellant and his children beyond those which had already taken place [44].
Lady Hale adds that children must be recognised as rights holders on their own account and not just as adjuncts to other peoples rights [47].
But that does not mean that their rights are inevitably a passport to another persons rights.
The problem in this case is that it is the appellant who is treating the children as a passport to his own rights, rather than as rights holders in their own right.
His daughter is now 19 and has had no contact with him since she was five [48].
Without a very good reason to the contrary, the Secretary of State is entitled to treat the orders of the family courts as reflecting what is indeed in the best interests of the children concerned.
The idea that the Secretary of State should make her own investigation of matters which have already been investigated by the family courts is not only unrealistic, but would also create uncertainty and anxiety for the children.
Of course it is good for children, especially children of mixed ethnicity, to have a relationship with both of their parents.
But it also good for them to have peace and stability.
The daughter is not prevented from establishing a relationship with her father by him living in Tunisia [49].
There was no credible evidence that the appellant had sought contact with his son and nothing to suggest that the appellant has been making a meaningful contribution to his life.
He too requires peace and stability and can establish a relationship with his father in future should he wish to do so [50].
There is nothing at all to suggest that the best interests of these children require that their father should remain in the United Kingdom.
Of course there will be cases where fuller inquiries are warranted or where the best interests of children do outweigh the public interest in deportation or removal, but this is emphatically not one of them [51].
|
This appeal concerns a repairing covenant implied into a subtenancy of a residential flat by section 11 of the Landlord and Tenant Act 1985.
It raises two issues of interpretation relating to that section, and an issue of more general application as to the need for notice before a landlord can be liable under a repairing covenant.
The background facts, statutes and procedure
The contractual background
By a lease (the Headlease) dated 28 April 2006, the freeholder of a small block of flats known as Oakleigh Court, Boston Avenue, Runcorn (the Building) let Flat 10 in the Building (the Flat) for a term of 199 years from 1 January 2006 at a rent of 195 per annum, for a premium of 130,000.
The extent of the Flat demised by the Headlease was defined by the plastered coverings and plaster work of the external and internal walls and partitions and ceilings, and the floorboards and surfaces of the floors.
Congruently, the demise expressly excluded any of main timbers and joists, and the framework, of the Building, and it also excluded the walls or partitions therein, except the plastered surfaces thereof.
The demise of the Flat also included certain rights for all purposes incidental to the occupation and enjoyment of the Flat, and those rights included the right to use the entrance hall lift staircases and landings giving access to the Flat, the right to use an access road and a specific space in a parking area in the curtilage of the Building, and the right to use the communal dust bins.
As is normal under a long lease of a flat, the Headlease contained provisions whereby the freeholder covenanted to provide certain services, and provisions whereby the headlessee covenanted to pay a service charge for those services.
Those services included keeping in good and substantial repair (i) all entrances passages landings stairs fire escapes Bin Store (if any) and other parts of the Building intended to be enjoyed or used by the owners or occupiers of the Building in common with others, and (ii) other areas in the Building not capable of being let as flats.
However, [i]n the case of any item of disrepair, it was stipulated that the freeholder will not be liable for breach of this covenant until the [headlessee] has given written notice thereof to the [freeholder] and the [freeholder] has had a reasonable opportunity to remedy the same.
The Headlease is and has at all material times been vested in the appellant, Mr Kumarasamy.
By a subtenancy dated 6 April 2009 (the Subtenancy), Mr Kumarasamy granted to the respondent, Mr Edwards, a tenancy of the Flat for a term expiring on 5 October 2009 (although the tenancy was liable to be continued as a periodic tenancy, as it was an assured shorthold tenancy, but nothing hangs on that for present purposes).
The Subtenancy included a grant of the right to use, in common with others, any shared rights of access, stairways, communal parts, paths and drives of the Building.
The Subtenancy contained a covenant by the subtenant, Mr Edwards, (i) to keep the Flat in good and tenantable condition, repair and decorative order, items which the [Headlessee as] landlord is responsible to maintain excepted, and (ii) to permit Mr Kumarasamy and his agents to enter the Flat after giving 24 hours notice in order (a) to view its state of repair and to execute repairs and other works upon the [Flat] or other properties and (b) to show it to prospective new tenants or purchasers.
The statutory background
It is rightly common ground that section 11(1) of the 1985 Act, which cannot be contracted out of (see section 12(1)), applies to the Subtenancy.
It is in these terms: [T]here is implied [into a lease of a dwelling house granted for a term of less than seven years] a covenant by the lessor (a) to keep in repair the structure and exterior of the dwelling house (including drains, gutters and external pipes); (b) to keep in repair and proper working order the installations in the dwelling house for the supply of water, gas and electricity and for sanitation ; and (c) to keep in repair and proper working order the installations in the dwelling house for space heating and heating water.
Subsection (6) of section 11 implies into any tenancy to which subsection (1) applies a covenant by the lessee that the lessor, or any person authorised by him in writing, may at reasonable times of the day and on giving 24 hours notice in writing to the occupier, enter the premises comprised in the lease for the purpose of viewing their condition and state of repair.
In Campden Hill Towers Ltd v Gardner [1977] QB 823, the Court of Appeal had to consider the application of the predecessor of section 11(1)(a), namely section 32(1)(a) of the Housing Act 1961, which was in effectively identical terms to section 11(1)(a), to a tenancy of a third floor flat in a large block of flats.
Megaw LJ, giving the judgment of the court, said at p 834 that [a]nything which, in the ordinary use of words, would be regarded as a part of the structure, or of the exterior, of the particular dwelling house [sc the third floor flat], regarded as a separate part of the building, would be within the scope of paragraph (a).
However, as he went on to explain at pp 834 835, other parts of the outside walls and other parts of the structure of the block are not of the dwelling house, and the paragraph expressly and deliberately uses the limiting words, as defined in the section itself, relating the paragraph to the dwelling house.
It has not been suggested on this appeal that this analysis is wrong; and in my view it is clearly right.
When Parliament repealed section 32 of the 1961 Act and replaced it with section 11 of the 1985 Act, it did not make any amendments of practical significance.
However, section 116(1) and 116(2) of the Housing Act 1988 added some new subsections to section 11 of the 1985 Act, part of whose purpose would appear to have been to modify the effect of some of the reasoning in Campden Hill.
In particular, new subsections (1A) and (1B) were added to the following effect: (1A) If a lease to which this section applies is a lease of a dwelling house which forms part only of a building, then, subject to subsection (1B), the covenant implied by subsection (1) shall have effect as if the reference in paragraph (a) of that subsection (a) to the dwelling house included a reference to any part of the building in which the lessor has an estate or interest; and (b) any reference in paragraphs (b) and (c) of that subsection to an installation in the dwelling house included a reference to an installation which, directly or indirectly, serves the dwelling house and which either (i) forms part of any part of a building in which the lessor has an estate or interest; or (ii) is owned by the lessor or under his control. (1B) Nothing in subsection (1A) shall be construed as requiring the lessor to carry out any works or repairs unless the disrepair (or failure to maintain in working order) is such as to affect the lessees enjoyment of the dwelling house or of any common parts which the lessee, as such, is entitled to use.
The factual and procedural history
The Building has a ground and two upper floors, and it appears that there are four flats on each floor, the Flat being on the second floor.
The Building has a main entrance door which leads into a front hallway from which access can be got to the ground floor flats and to the lift and staircase which serve the two upper floors.
The flats on the upper floors are accessed from hallways, leading from the lift and staircase.
There is a car park in front of the Building, and, between the car park and the front door to the Building, there is a paved area, which is part of what is referred to in the Headlease as the access road, which is the only or principal means of access to the Building.
The paved area, which is between three and four metres in length, is covered by paving stones.
The paved area is also used by occupiers as a means of access to the communal dustbins which are sited in the car park outside the Building.
On 1 July 2010, Mr Edwards was taking rubbish from the Flat to the communal dustbins, when he tripped over an uneven paving stone on the paved area.
As a result, he suffered an injury to his right hand (which resulted in the exacerbation of pre existing neuropathic pain for some 18 months) and to his right knee (which involved soft tissue injury lasting some four months).
He issued proceedings against Mr Kumarasamy contending that his injury was caused by Mr Kumarasamys failure to keep the paved area in repair, in breach of the covenants implied into the Subtenancy by section 11(1)(a) and 11(1A)(a) of the 1985 Act.
The claim was heard by Deputy District Judge Gilman, who accepted Mr Edwardss case both on the facts and on the law, and awarded him 3,750 damages.
While he did not challenge the Deputy District Judges conclusions on fact or quantum, Mr Kumarasamy appealed against the conclusion that he was liable to Mr Edwards under the statutory repairing covenant as a matter of law.
Her Honour Judge May QC allowed his appeal on two grounds, namely (i) the paved area was not within the ambit of the section 11 covenant, and (ii) even it had been, Mr Kumarasamy could not have been liable as he had had no notice of the disrepair.
Mr Edwards was permitted to bring a second appeal, and the Court of Appeal allowed his appeal, disagreeing with Judge May on both grounds, for reasons given by Lewison LJ, with whom Sir Terence Etherton C and Christopher Clarke LJ agreed [2015] Ch 484.
Mr Kumarasamy now appeals to this court.
The issues raised on this appeal
In a case such as this, where the dwelling house in question forms part only of a building, section 11(1A)(a) requires section 11(1)(a) to be read as if it required a landlord to keep in repair the structure and exterior of any part of the building in which [he] has an estate or interest.
As Lewison LJ said in para 6 of his judgment, when discussing the argument then advanced by counsel then appearing for Mr Kumarasamy: He argues that the extended covenant only applies to a part of the building in which Mr Kumarasamy has an estate or interest.
The word building in section 11(1A)(a) is not defined, and should be given its ordinary dictionary meaning of structure with a roof and walls.
The paved area in which Mr Edwards sustained his accident does not fall within this definition.
I agree that, viewed on its own, the paved area where Mr Edwards tripped is not itself a building.
But that is not the statutory question.
The statutory question is whether the paved area is part of the structure or exterior of part of the building in which Mr Kumarasamy has an estate or interest In my judgment Mr Kumarasamys legal easement over the front hall means that the front hall is a part of a building in which he has an estate or interest.
In the light of that analysis this appeal raises three questions.
The first is whether, to quote again from Lewison LJ, the paved area which leads from the front door to the car park [can] be described as part of the exterior of the front hall within section 11(1A)(a).
The second question is whether Mr Kumarasamy had an estate or interest in the front hall within section 11(1A)(a).
The third question is whether Mr Kumarasamy could be liable to Mr Edwards for the disrepair in question notwithstanding that he had had no notice of the disrepair in the paved area before Mr Edwardss accident.
The respondent, Mr Edwards, can only succeed if all three questions are answered in the affirmative, as the Court of Appeal held that they were.
The first and second questions are of some significance in relation to the application of section 11, as they concern, in the first case, the extent of the physical property falling within section 11(1)(a), and, in the second case, the nature of the estate or interest which falls within section 11(1A)(a).
The second question is particularly relevant to the liability to a subtenant of a flat of a landlord who has a headlease of that flat.
The third question also is of importance to the application of subsections (1)(a) and (1A)(a) of section 11, but it is of much wider significance, as it relates to the extent of the need for notice of a want of repair before a landlord can be liable for disrepair under a repairing covenant, whether under section 11 or otherwise.
The first question: is the paved area part of the exterior of the front hall?
In my view, it is not possible, as a matter of ordinary language, to describe a path leading from a car park (which serves the building and can be said to be within its curtilage) to the entrance door which opens directly onto the front hall of a building, as part of the exterior of the front hall.
It is hard to see how a feature which is not in any normal sense part of a building and lies wholly outside that building, and in particular outside the floors, ceilings, walls and doors which encase the front hall of the building, can fairly be described as part of the exterior of that front hall.
The paved area may be said to abut the immediate exterior of the front hall, but it is not part of the exterior of the front hall, as a matter of normal English.
Unless the natural meaning of the words of a statutory provision produces a nonsensical result, or a result which is inconsistent with the intention of the legislation concerned, as gathered from admissible material, the words must be given their ordinary meaning. (I should perhaps add that in many cases, particularly when the words are read in their context, they can have more than one ordinary meaning, and it is then for the court to decide which of those meanings is correct.)
There is some force in the argument that a purposive approach to the words of section 11(1A)(a) suggests that they should be given a wide, rather than a narrow, effect, as one might have expected that Parliament intended those parts of a building or its curtilage which are not included in an individual residential demise, and which are in any way enjoyed by the tenant in question, would be within the ambit of the landlords statutory repairing covenant.
However, given that the section imposes obligations on a contracting party over and above those which have been contractually agreed, one should not be too ready to give an unnaturally wide meaning to any of its expressions.
Quite apart from that, the fact that one might have expected words in a statute to cover a particular situation is not enough to justify giving those words an unnatural meaning in order to ensure that they do so.
In this case, such a wide reading would be very difficult to reconcile with the wording of section 11(1A)(a), especially in the light of the limitation to the building.
Further, the fact that section 11(1)(a) is specifically extended to cover drains, gutters and external pipes tends to support the notion that when it refers to the exterior, the word is to be given a natural, rather than an artificially wide, meaning.
This conclusion seems to me to be consistent with the approach of the Court of Appeal in Campden Hill, where, as explained above, the natural meaning was adopted, and an unnatural wide meaning was rejected, when interpreting the words structure and exterior of the dwelling house in what is now section 11(1)(a).
As Mr Rainey QC said in his submissions on behalf of Mr Kumarasamy, the decision of the Court of Appeal in this case, although on a different subsection 11, is hard to reconcile with the reasoning in Campden Hill.
Instead, the Court of Appeal in this case relied on Brown v Liverpool Corpn [1969] 3 All ER 1345, where the premises consisted of a terraced house to which access was obtained from the street through a gate, down some steps and along a two metre path which led to the front door of the house.
The court held that the steps were part of the exterior of the dwelling house for the purpose of section 32(1)(a) of the 1961 Act.
Danckwerts LJ said at p 1346 that, as the steps were the means of access to the dwelling house in question, they were plainly part of the building.
Salmon LJ at p 1346 agreed, but thought the case was not by any means free from difficulty, or, indeed, from doubt and emphasised that his decision was based on the particular facts of this case and not on any general principle of law.
Sachs LJ at p 1347 said that the case had caused [him] no little difficulty, that he had considerable hesitation and that the argument was a very close run thing; while he accepted that the covenant did not apply to those parts of the demise that are not part of the building itself, he considered that the issue was one of degree and fact, and that the judge had been entitled to conclude that the steps were within the covenant.
In my view, that decision was wrong.
The fact that a piece of property is a necessary means of access to a building cannot be sufficient for it to constitute part of the exterior of that building.
Steps separated from the outside of a building by a two metre path cannot, as a matter of ordinary English, be said to be part of the exterior of that building.
And the passages I have quoted from the brief judgments of Salmon and Sachs LJJ get close to impliedly acknowledging that simple proposition.
I note a degree of understandable scepticism in the subsequent Court of Appeal decision of Hopwood v Cannock Chase District Council [1975] 1 WLR 373, which I consider was rightly decided, about the reasoning and conclusion in Brown.
Indeed, it is very difficult to reconcile the approach of the Court of Appeal in Brown with that in Campden Hill (where I note that Brown and Hopwood were both cited in argument).
In the light of this conclusion, it is strictly unnecessary to consider the other two issues raised by the appeal.
However, as they have been fully argued, and one of them is certainly of some significance (and was in my opinion wrongly resolved by the Court of Appeal) and the other is not without significance, it is right to address them.
I shall do so on the assumption (contrary to what I have just concluded) that the paved area is part of the exterior of the front hall of the Building.
The second question: was there an estate or interest in the front hall?
Under the Headlease, Mr Kumarasamy was granted a right of way over the front hall, and, as a matter of property law, a right of way over land constitutes an interest in that land, although it does not constitute an estate in that land see subsections (1), (2)(a) and (3) of section 1 of the Law of Property Act 1925.
It is true that the subsequent grant of the Subtenancy effectively deprived Mr Kumarasamy of any practical benefit from the easement so long as it continued.
However, that does not alter the fact that, just as he retained his leasehold interest in the Flat, he retained his leasehold easement over the front hall, even though he had sublet the Flat and the easement to Mr Edwards (and any doubt about this is put to rest by section 1(5) of the 1925 Act).
Therefore, there is obvious force in the argument, which Lewison LJ had little hesitation in accepting, that Mr Kumarasamy had an interest in the front hall (and indeed in the paved area), within the meaning of section 11(1A)(a).
On behalf of Mr Kumarasamy, it is argued that, at least for the purposes of section 11(1A)(a), he nonetheless did not have an interest in the front hall once he had effectively disposed of that right of way to Mr Edwards under the Subtenancy.
There is obvious practical attraction, at least at first sight, in the contention that is unlikely that Parliament can have intended that the headlessee of a single flat, whose interest in the common parts is simply as a means of access to and egress from the flat, should have an implied liability to his subtenant of the flat to repair the common parts.
After all, during the currency of the subtenancy, the headlessee will have little reason to go onto the common parts and will enjoy very limited, if any, rights of any practical value over them in his own right, because, when he visits the flat, it will normally be as an invitee of the subtenant.
However, on closer analysis, I do not consider that contention can be right.
First, there would have to be a powerful reason not to give the word interest, when it appears in a property statute, its normal meaning in law.
Secondly, if the word is to be given a limited meaning, it is hard to identify a satisfactory way to cut it down, which is consistent with the general policy of section 11.
The only possible way of excluding the common parts of the Building in the present case from the ambit of Mr Kumarasamys statutory liability to Mr Edwards, would be to limit the word interest to an interest in possession.
However, quite apart from the fact that this would involve reading words into a statute when it does not appear to be necessary, such an interpretation would scarcely be consistent with the liability of a landlord under subsections 11(1)(a) and 11(1A)(a), which impose repairing obligations for items demised to the tenant, which, ex hypothesi, are not in the possession of the landlord.
Thirdly, if the headlessee has no liability to a subtenant for disrepair in the common parts, the subtenant would be without any contractual remedy for damage suffered as a result of such disrepair.
It is true that he may have a remedy against the headlessor or freeholder of the building under section 4 of the Defective Premises Act 1972, but that would be of very limited value. (I note that a similar argument based on the Occupiers Liability Act 1957 does not seem to have impressed the House of Lords in Liverpool City Council v Irwin [1977] AC 239 see at pp 254 and 257, per Lord Wilberforce and Lord Cross of Chelsea respectively).
On the other hand, if the subtenant has a claim for disrepair against the headlessee, the headlessee can normally expect to pass on the claim to the freeholder.
Fourthly, quite apart from his rights against the headlessor, it is not as if the headlessee would be without protection in such a case.
When subsection (1A) was introduced by the 1988 Act, subsection (3A) was also introduced, and it was to the following effect: In any case where the lessors repairing covenant has effect as (a) mentioned in subsection (1A); and in order to comply with the covenant the lessor (b) needs to carry out works or repairs otherwise than in, or to an installation in, the dwelling house; and (c) the lessor does not have a sufficient right in the part of the building or the installation concerned to enable him to carry out the required works or repairs, then, in any proceedings relating to a failure to comply with the lessors repairing covenant, so far as it requires the lessor to carry out the works or repairs in question, it shall be a defence for the lessor to prove that he used all reasonable endeavours to obtain, but was unable to obtain, such rights as would be adequate to enable him to carry out the works or repairs.
At least equally importantly, for reasons to which I turn in the next section of this judgment, the headlessee would be protected by the fact that he would not be liable for any disrepair in the common parts pursuant to section 11(1A)(a) unless he had prior notice of the disrepair, in which case he could normally expect to be able to pass on such notice to the headlessor.
Mr Rainey contends that the reasoning of Jacob LJ, giving the judgment of the Court of Appeal in Niazi Services Ltd v van der Loo [2004] 1 WLR 1254, assists the argument that Mr Kumarasamy retained no interest in the common parts of the Building after he had sublet the Flat.
Niazi was another case where a subtenant of a flat sought to invoke section 11 against the headlessee whose headlease included no other property in the building.
However, that case was concerned with whether the headlessee was liable under section 11(1A)(b) for a defect in the water supply to the top floor flat in a building, owing to inadequate supply upstairs when water was being drawn downstairs.
The actual decision and reasoning are of no assistance in this case, which is of course concerned with section 11(1A)(a).
It is true that, in para 21 of his judgment, Jacob LJ referred to section 11(1A)(a) and said that the lessor's extended liability is limited to the obligation to keep in repair the structure and exterior of any part of the building in which he has an estate or interest and that in that case, the headlessee has no estate or interest in any part of the building except the top floor flat.
However, he had no reason to consider, and presumably was not considering, whether the headlessee had a right of way over the staircase leading to the top floor flat, or (if there were any) other common parts of the building.
If he was directing his mind to that point, he was wrong in what he said.
The third question: is notice of disrepair required?
The case law
Where a landlord or a tenant (or anyone else) covenants to keep premises in repair, the general principle is that the covenant effectively operates as a warranty that the premises will be in repair.
That principle has been laid down in a number of cases, which were discussed and applied by the Court of Appeal in British Telecommunications Plc v Sun Life Assurance Society Plc [1996] Ch 69.
Accordingly, as soon as any premises subject to such a covenant are out of repair, the covenantor is in breach, irrespective of whether he has had notice of the disrepair, or whether he has had time to remedy the disrepair.
However, this general principle is subject to exceptions, which are based on normal principles applicable to the interpretation of contracts.
The most obvious exception is where the covenant is qualified by an express term, like the freeholders covenant in the Headlease in this case see the end of para 3 above.
A further exception to the general principle, which is relevant in the present case is the rule (which I shall refer to as the rule) that a landlord is not liable under a covenant with his tenant to repair premises which are in the possession of the tenant and not of the landlord, unless and until the landlord has notice of the disrepair.
The rule has been slightly differently expressed in different cases, but it is based on the normal principle upon which a term is implied into a contract, namely obviousness or necessity. (Accordingly, in accordance with normal principles governing the implication of terms, it could not be invoked where the parties had expressly agreed that the landlord is to be liable for such disrepair irrespective of whether or not he had had notice of it.)
This rule was first formally expressed in Makin v Watkinson (1870) LR 6 Ex 25 (although it was voiced in an interlocutory observation in Moore v Clark (1813) 5 Taunt 90, 96 by Sir James Mansfield CJ and Gibbs J).
In Makin, a building had been demised under a lease which contained a covenant by a landlord to keep the main walls and roofs in repair.
Channell and Bramwell BB considered that commercial necessity justified implying a term that the obligation to repair only arose once the landlord had had notice of the disrepair.
Bramwell B at p 28 said that he was irresistibly driven to hold that the parties cannot have intended that a landlord should keep in repair that of which he has no means of ascertaining the condition.
He explained this at p 30 by reference to the general proposition that when a thing is in the knowledge of the plaintiff, but cannot be in the knowledge of the defendant, but the defendant can only guess or speculate about the matter, then notice is necessary.
Channell B said much the same at pp 27 28.
Sir Richard Collins MR took the same view in Tredway v Machin (1904) 91 LT 310, 311, where he said that the rule is based on the fact that the landlord is not the occupier of the premises, and has no means of knowing what is the condition of the premises unless he is told, , whereas the occupier has the best means of knowing of any want of repair.
Brett J pithily explained the rule thus in The London and South Western Railway Co v Flower (1875) LR 1 CPD 77, 85: where there is knowledge in the one party and not in the other, there notice is necessary.
In an Irish appeal, Murphy v Hurly [1922] 1 AC 369, the House of Lords had to consider the basis for the rule, which, on the facts, they held did not apply in that case.
At p 375, Lord Buckmaster said that the rule had to be considered by reference to the actual facts existing in each case, and it was based upon the consideration whether the circumstances are such that knowledge of what may be required to be done to comply with the covenant cannot reasonably be supposed to be possessed by the one party while it is by the other.
At p 385, Lord Atkinson described the presumption upon which the right to notice is stated to depend as being that the tenant being in occupation has a full opportunity of seeing and knowing the condition of the premises he occupies and their need of repair, while the landlord has no such opportunity.
Lord Sumner said at p 387 388 that the reason for the rule was (1) that the tenant is in occupation and the landlord is not; (2) that the tenant, therefore, has the means of knowledge peculiarly in his own possession ; and (3) the repairs of dwelling houses are not such as to demand of the landlord
incessant vigilance
Morgan v Liverpool Corpn [1927] 2 KB 131 was a case like the present, in that it involved a statutorily implied liability on a landlord of a dwelling (in that case a house) to keep the dwelling fit for human habitation and in good repair.
Lord Hanworth MR at pp 141 142 said that the fact that the liability originated in statute did not put it on higher authority than a contractually agreed covenant.
Atkin LJ at p149 took the same view saying that the statutory obligation was imposed as a contractual term and as such it appears to be only available to the tenant because it is a term of the tenancy.
Lawrence LJ agreed.
At p 143, Lord Hanworth expressed the rule in these terms: it is the duty of the tenant to inform the landlord, if there is to be a responsibility in respect of a breach of his covenant enforced against the landlord.
At p 150, having described the reason for the rule as obvious, Atkin LJ explained that, as [t]he landlord has given the tenant exclusive occupation of the house and therefore, is not in a position to know whether the house is in repair or out of repair, and it would be quite contrary to justice to impose an obligation to repair of this kind upon a landlord in respect of matters of which he has in fact no knowledge.
Lawrence LJ said at p 153 that the foundation of the rule is that the tenant in occupation is generally in a far better position to know of any want of repair.
At pp 150 151, Atkin LJ referred to the fact that the statute involved gave the landlord a right of access, but said that this was quite insufficient to redress the injustice that would arise from imposing this obligation [sc an obligation to remedy disrepair of which he had no notice] upon the landlord, and Lord Hanworth and Lawrence LJ took the same view.
McCarrick v Liverpool Corpn [1947] AC 219 was another case which involved a statutorily implied covenant by a landlord to keep a demised house fit for habitation.
The appeal was treated as an appeal against the decision in Morgan, and all five members of the House of Lords agreed with the reasoning of Atkin LJ, both on the applicability of the rule to a statutorily implied covenant and on its applicability even in a case where the landlord had the right to enter and inspect the premises (see at pp 223, 226, 229, 230, and 231 232, per Lord Thankerton, Lord Porter, Lord Simonds, Lord Macmillan and Lord Uthwatt respectively).
At p 226, Lord Porter cited with approval Lord Sumners explanation in Murphy for the rule.
Lord Uthwatt explained at p 232 that it was unreasonable from the point of view of the tenant, as well as that of the landlord, if performance of the landlords covenant to repair premises in the possession of the tenant was not subject to the landlord having notice of the disrepair, adding that [t]he only part the tenant is on this basis required to play in performance is, that knowing what he wants, he should say so.
In OBrien v Robinson [1973] AC 912, the House of Lords confirmed that the rule applied to a covenant to repair implied into a tenancy by section 32(1)(a) of the 1961 Act.
The arguments largely reflected those considered in McCarrick, and the outcome was the same, in that it was unanimously decided that the reasoning in Morgan was correct and applied in that case.
It was also made clear that the rule applied to defects which the tenant did not know about, and even to those which he could not reasonably be expected to discover see at pp 925, 930, per Lord Morris of Borth y Gest and Lord Diplock respectively.
At p 926, Lord Morris (with whom Lord Cross agreed) also considered that, where the rule applies, a landlord will be liable once he has notice of the defect, even if that notice does not emanate from the tenant.
However, Lord Diplock, with whom Lord Simon of Glaisdale and Lord Reid (as well as Lord Cross) agreed, preferred to keep that point open.
Landlords repairing covenants in tenancies of flats
Two preliminary questions arise in relation to the applicability of the rule to lettings of flats.
The first question is whether, where the landlord of a flat agrees to repair the structure and exterior, the applicability of the rule to the structure and exterior of the flat itself may in some cases depend on whether or not the demise is limited to the internal surfaces of the walls, ceilings and floors (as it is under the Headlease in the present case).
In my view, the rule would apply but only to the extent that the structure is included in the demise.
If a part of the structure included within a tenants letting is out of repair, then the tenant is in possession of that part of the structure and the landlord is not.
Accordingly, the rule would apply to the landlords obligation to repair that part of the structure.
However, if that part of the structure is excluded from the demise, it would not be in the possession of the tenant (indeed it would presumably be in the possession of the landlord) and so the rule would not apply.
This may seem a rather technical, or in some cases an almost capricious, distinction, but I believe that it follows from the various dicta which I have quoted from the cases concerning the rule.
If the tenant is not in possession (and, a fortiori, if the landlord is in possession) of part of the structure which is out of repair, then there is no reason for excluding the general principle set out in para 29 above.
The rule is in any event demonstrably based as much on principle as on practicality, given that, as was confirmed in OBrien, it applies to disrepair to demised property even where the disrepair is not reasonably discoverable by the tenant.
Further, the distinction between property let to the tenant and property not so let is one which leaves the law as to the applicability of the rule in a tolerably clear state, and clarity is self evidently a desirable feature of any rule or principle.
The second question is rather more difficult in my view.
It is whether a landlord, who has covenanted with one tenant to repair the structure but has let part of the structure to another tenant, can thereby automatically escape liability to the first tenant for disrepair of that part until he has had notice of that disrepair.
Subject to one point, this question could be characterised as being whether the rule applies to property which is in the possession of neither the landlord nor the tenant ie can the rule apply to property which has not been demised to the tenant? It can be said that the dicta in the cases do not speak with one voice on this question, as some appear to emphasise the unfairness of imposing an absolute liability on a landlord in circumstances where he is not in possession and therefore not in a position to know of any disrepair, whereas other dicta indicate that the rule also depends on the tenant being in possession and therefore in a position to know of the disrepair.
Given that one is concerned with an implied term, it may be dangerous to generalise (as the point discussed in paras 49 58 below demonstrates).
However, I have concluded that the rule does not normally apply to premises which are not in the possession of the tenant.
Most of the dicta describing the reason for the rule rely not only on the landlords lack of ability to know, but also on the tenants advantageous position; and some do so very strongly see eg what was said in the earlier cases cited in para 32 above and the observations of Lord Atkinson and Lord Sumner in Murphy, and Lord Porter and Lord Uthwatt in McCarrick.
Further, the dicta which do not refer to the tenants privileged position could well have been taking it for granted, as they were all in cases where the tenant was in possession.
Further, as is suggested in some of the cases (in Makin (1870) LR 6 Ex 25, 27 28 per Channell B, in Flower (1875) LR 1 CPD 77, 82, in Murphy at pp 375, 392 per Lord Buckmaster and Lord Parmoor, and in McCarrick [1975] AC 219, 231 per Lord Uthwatt), it seems to me that the rule is an aspect of a wider principle described in these terms by Lord Abinger CB in Vyse v Wakefield (1840) 6 M & W 443, 452 453: The rule to be collected from the cases seems to be this, that where a party stipulates to do a certain thing in a certain specific event which may become known to him, or with which he can make himself acquainted, he is not entitled to any notice, unless he stipulates for it; but when it is to do a thing which lies within the peculiar knowledge of the opposite party, this notice ought to be given.
This would therefore suggest that it is not normally open to a landlord who has agreed to repair the structure, to invoke the rule against a tenant of a flat in relation to disrepair of part of the structure which the landlord has let to another tenant, or indeed were not in the possession of the landlord for some other reason.
The only argument against this might be that the lettings of flats in a block on the same terms can be treated as a sort of scheme between (i) the landlord and (ii) the tenants as a group.
I do not accept that is a valid analysis.
Once it is determined that the rule only applies to property in the possession of the tenant, there is no warrant for implying it to any other property unless of course it is justified by the terms of the particular tenancy and the surrounding circumstances.
After all, it is normally open to a landlord to add a term expressly incorporating the rule (as was done in the Headlease in this case).
In the light of section 12(1) of the 1985 Act, that cannot, I think, be done in relation to the covenant implied by section 11, but it may well be that a landlord could protect himself to some extent by imposing an obligation on the tenant to give notice to him of any disrepair which has come (or, possibly, even reasonably should have come) to the attention of the tenant.
Does section 11 always require notice?
I turn now to Mr Raineys submission that, in every case where a tenant relies on a covenant implied by section 11, a landlord is entitled to invoke the rule.
Thus, even in relation to property which is undoubtedly in the possession of the landlord, he submits that section 11 cannot be relied on by a tenant in relation to any disrepair unless the landlord has had notice of the disrepair.
This submission is supported by Dowding and Reynolds in Dilapidations: The Modern Law and Practice 5th ed (2013 14), para 20 37 on two grounds, namely (i) the section 11 repairing covenant is most likely to apply to property which is either within the relevant demise or so close to the relevant demise as to be more easily observed by the tenant than the landlord, and (ii) the speeches in OBrien are more consistent with that analysis.
I agree with Lewison LJ that this submission must be rejected.
It is clear from Morgan, McCarrick and OBrien that the repairing covenant implied by section 11 is to be interpreted and applied in precisely the same way as a landlords contractual repairing covenant.
As I have sought to explain, the rule in relation to such covenants is that, until he has notice of disrepair, a landlord should not normally be liable for disrepair of property in so far as it is in the possession of the tenant.
I can see no basis as a matter of principle for departing from the rule when it comes to covenants implied by section 11, which is what Dowding and Reynolds suggest.
And, as a matter of practicality, once one departs from the clear rule, there is a real risk of uncertainty and confusion for instance, it could be difficult to resolve whether, on particular facts, it is more likely that the tenant or the landlord should have noticed the disrepair.
It is true that in many cases where section 11 applies, the tenant may be in a better position than the landlord to observe the disrepair, but that is not the basis on which the rule has been justified in the cases eg it applies to disrepair which could not be reasonably discovered.
And, quite apart from its uncertainty, given that the rule is justified by the normal principles governing an implied term, such a yardstick would not, I think, satisfy the requirement of necessity or of obviousness.
I accept that the speeches of Lord Morris and Lord Diplock in OBrien contain nothing to suggest that there might be cases where a landlord could be liable under his statutorily implied covenant without having been given notice.
However, I do not regard that as significant.
They were concerned with a case where there could be no doubt but that the item which had fallen into disrepair (a ceiling in a room of the demised premises) was included in the demise to the tenant, and therefore on any view the landlord could claim the benefit of the rule.
Should the rule be extended to the present case?
The present case is different from the cases which have so far been decided in relation to the rule, because it is concerned with the application of a landlords repairing covenant to property which is not in the possession of either the landlord or the tenant, although it is property over which they each have a right of way as discussed in paras 23 28 above.
However, in my judgment, the application of the reasoning upon which the rule is based justifies the conclusion that the landlords (assumed) obligation to repair the paved area is only triggered once he has notice of any disrepair for which the tenant would seek to make him liable.
As explained above, the landlord, Mr Kumarasamy, has a lease of a single flat which includes the right to use the front hall and paved area, and he has effectively sublet his right to use and occupy the flat and to use the hall and paved area to the tenant, Mr Edwards.
In so far as the landlord had any right over the hall and paved area, he has effectively disposed of that right to the tenant for the term of the Subtenancy just as much as he has disposed of his right to use and occupy the Flat to the tenant for the term of the Subtenancy.
During the term of the Subtenancy, it is the tenant who uses the common parts, not the landlord, just as it is the tenant who occupies the flat, not the landlord.
It is true that the tenant does not enjoy exclusive possession of the common parts, but he is present on them every time he comes to or leaves the flat.
The present issue is concerned with the relationship between a particular landlord and a particular tenant, and the landlord has effectively lost the right to use the common parts and the tenant has acquired the right to use them, for the duration of the Subtenancy.
It is true that the landlord has the right to use the common parts as against the freeholder, but that is irrelevant for present purposes, in the same way as the fact that he has the right to occupy the Flat as against the freeholder does not prevent him from invoking the rule against the tenant in relation to any part of the demised premises which he has covenanted to repair.
It is also true that the landlord has the right to use the front hall to get access to the Flat in order to inspect and repair it, but that cannot deprive him of the right to invoke the rule, any more than his right to visit the Flat itself for those purposes would deprive him of the right to invoke the rule in relation to his repairing obligations in relation to the Flat.
To use the words of Collins MR in Tredway 91 LT 310, 311, as against the landlord, the tenant has the best means of knowing of any want of repair in the common parts, or, to adapt what Lord Atkinson said in Murphy [1922] AC 369, 385, the tenant has a full opportunity of seeing and knowing the condition of the [common parts he uses] and their need of repair, while the landlord has no such opportunity.
To adapt Atkin LJs formulation in Morgan [1927] 2 KB 131, 150, the landlord is not in a position to know whether the [common parts are] in repair or out of repair, whereas the tenant is, or, per Lawrence LJ in the same case at p 153, the tenant [using the common parts] is generally in a far better position to know of any want of repair.
Mr Rainey also argues that subsection (3A) of section 11 supports Mr Kumarasamys case that the rule shall be extended to a case such as this, as the landlord cannot be required to use reasonable endeavours to have repairs carried out until he knows of the relevant disrepair.
I am unconvinced by this argument, as it seems to me to be circular.
Nonetheless, there is something in the point that subsection (3A) shows that Parliament was concerned not to impose an unrealistically demanding duty on a landlord.
And that provides a little further support for the conclusion that, in a case such as the present, the landlord is not in breach of his statutorily implied repairing obligation until he has notice of the disrepair.
The Court of Appeal reached a different conclusion.
That was partly because they took the view that the rule only applied to disrepair within the demised premises themselves.
But that is because all the cases so far have been concerned with such disrepair.
There is no reason why the rule cannot be extended to cover a state of affairs not so far considered judicially, and, as just explained, it seems to me that the reasoning on which the rule is based means that it should be so extended in the present case.
The potential harshness on a headlessee of a single flat of imposing a covenant to repair the common parts, which he has effectively transferred to the tenant his right to use, is mitigated by the need for notice of any disrepair before the covenant becomes activated (and see the end of para 27 above).
It is also suggested that it is inappropriate to extend the rule to a case where section 11(1A) applies, when Parliament had not included a need for notice when inserting that subsection into section 11, given that it had expressly limited the landlords liability under that subsection by inserting subsections (1B) and (3A) at the same time.
I do not consider that to be a good point.
There is nothing about the need for notice in section 11 as originally enacted and yet there is no doubt that the rule applied and applies to the covenant in section 11(1)(a); it seems to me that it would be positively surprising if it did not also apply to any subsequent extensions to the ambit of section 11(1)(a), unless of course it was expressly or by necessary implication excluded, which it is not.
Further, as stated in para 53 above, the concern with practicality demonstrated by subsection (3A) appears to me to provide a little support for the requirement of notice in a case such as this.
Mr Benson QC, who appears for Mr Edwards, also submits that the implication of the rule in the present case would be inconsistent with the decision of the Court of Appeal in British Telecommunications.
I do not agree.
That case was concerned with disrepair to part of the exterior of a building on the fifth floor.
It is true that the tenant in that case may have had rights in respect of that part, but it was not a right to be frequently present on, a right frequently to use physically (if not to occupy), the property out of repair, as in the present case.
In any event, the issue was very different, namely whether, in a case where it was (rightly) common ground that the rule did not apply, a landlord would be in breach the moment disrepair occurs, or whether he would be in breach only after the expiry of a reasonable time to remedy the disrepair.
The Court of Appeal also relied on the fact that the law implied a right in Mr Kumarasamy, as a headlessee and tenant of the right to use the common parts, to go on to the common parts to repair them, invoking the decision in Newcomen v Coulson (1877) 5 Ch D 133.
I do not consider that to be a good point for two reasons.
First, a right of way does not necessarily carry with it a right to carry out repairs to the way: such an ancillary right only arises as a matter of implication, and is normally justified because the servient owner has no obligation to repair the way.
As it is put in Gale on Easements 19th ed (2012), para 1 90, [t]he ancillary right arises because it is necessary for the enjoyment of the right expressly granted.
In the present case, the Headlease, under which Mr Kumarasamy was granted the right to use the common parts, contains an obligation on the freeholder to keep the common parts in repair.
Accordingly, I do not consider that it would be appropriate to imply such an ancillary right: it is not necessary for business efficacy, nor is it obvious. (It may well be that such a right could arise in extremis as Etherton J suggested in Metropolitan Properties Co Ltd v Wilson [2002] EWHC 1853; [2003] L & TR 226, paras 49 51, but that cannot possibly do for present purposes).
Secondly, even if a term such as that envisaged by the Court of Appeal could be implied, I do not see how it would help the argument that the rule should be displaced in this case.
As mentioned above, it is well established that the fact that a landlord has the right to go into the demised premises to inspect and carry out repairs does not mean that the rule is displaced so far as disrepair to the premises is concerned.
By the same token, even if the landlord had the right to repair the common parts, I fail to see why that should displace the rule if it would otherwise apply to disrepair of the common parts.
Finally, I should say that, where a flat is let under a tenancy to which section 11 applies, by a landlord who owns the building in which the flat is situated, it seems to me likely that, in so far as the statutory covenant extends to repairing the common parts, it would not normally be subject to the rule.
That is because such landlord would ordinarily be in possession of the common parts.
Indeed, it may be that the rule would not apply in any case where the landlord is headlessee of more of the building than the single flat he has sublet, as he would have exercisable rights over the common parts in his capacity of headlessee of property other than the flat in question.
However, those issues have, understandably, not been even touched on in argument, and it would be wrong to express a concluded view on them.
Conclusion
I would therefore allow this appeal, on the ground that, although he had a sufficient interest in the front hallway and paved area for the purposes of section 11(1A)(a), Mr Kumarasamy was not liable for the disrepair which caused Mr Edwardss injury, as (i) he could only be liable if the paved area was part of the exterior of the front hall and it was not, and (ii) he could only be liable if he had had notice of the disrepair before the accident and he did not.
Her Honour Judge May QC reached the correct conclusion on these two points (although, reflecting the way that the case was argued before her by counsel other than those appearing before this court, she slightly mischaracterised the first point).
Accordingly, she dismissed Mr Edwardss claim, and I would do so too.
LORD CARNWATH:
I agree that the appeal should be allowed for the reasons given by Lord Neuberger.
My only reservation concerns a part of his judgment which does not relate directly to the issues in the appeal, and on which we have heard no argument.
In paras 40 44, he considers the application of the rule to cases where (unlike the present) parts of the external structure have been included in the relevant demise, or in a demise by the same lessor to another tenant.
While I understand the logic of his observations (even if somewhat technical, as he says), I am not convinced that it is safe to lay down a general rule for all such cases.
As he rightly says (para 30) the question ultimately depends on ordinary principles for the implication of terms, such as obviousness or necessity.
I would prefer not to consider such issues in the abstract without regard to all the circumstances, including the commercial or practical reasons which might have led to the grant in a particular case.
I doubt in any event that it is a problem likely to arise often in practice.
For the moment I would prefer to reserve my position.
| UK-Abs | By a lease dated 28 April 2006, the freeholder of a block of flats in Runcorn (the Building) let Flat 10 in the building for a term of 199 years from 1 January 2006 to Mr Kumarasamy (the Headlease).
The Building is accessed by a paved pathway (the paved area) which leads to the main entrance door which opens onto a front hallway (the front hallway).
On 2 April 2009, Mr Kumarasamy granted Mr Edwards a subtenancy of the Flat for a term expiring on 5 October 2009 (the Subtenancy).
The Subtenancy included a grant of the right to use, in common with others, any shared rights of access, stairways, communal parts, paths and drives of the Building.
Under the Subtenancy, Mr Edwards was under an obligation to repair the Flat, excepting items which Mr Kumarasamy was responsible to maintain.
On 1 July 2010, Mr Edwards was taking rubbish from the Flat to the communal dustbins, when he tripped over an uneven paving stone on the paved area.
He suffered injuries as a result and issued proceedings against Mr Kumarasamy contending that his injury was caused by Mr Kumarasamys failure to keep the paved area in repair, in breach of covenants implied into the Subtenancy by section 11(1)(a) and 11(1A)(a) of the Landlord and Tenant Act 1985 (the 1985 Act).
At first instance Deputy District Judge Gilman accepted Mr Edwards case and awarded him 3,750 in damages.
Her Honour Judge May QC allowed Mr Kumarasamys appeal on two grounds: (i) the paved area was not within the ambit of the section 11 covenant; and (ii) even if it had been, Mr Kumarasamy could not have been liable as he had no notice of the disrepair.
The Court of Appeal allowed Mr Edwards appeal, disagreeing with Judge May on both grounds.
Mr Kumarasamy now appeals to the Supreme Court.
The Supreme Court unanimously allows Mr Kumarasamys appeal.
Lord Neuberger gives the leading judgment, with which the other Justices agree.
Lord Carnwath also gives a short judgment.
This appeal raises three questions, all of which must be answered in the affirmative for Mr Edwards to succeed on the appeal [14 16]: (1) Whether, in the light of the wording of sections 11(1)(a) and 11(1A)(a) of the 1985 Act, the paved area can be described as part of the exterior of the front hall; (2) Whether Mr Kumarasamy had an estate or interest in the front hall for the purposes of section 11(1A)(a);
(3) Whether Mr Kumarasamy could be liable to Mr Edwards for the disrepair in question notwithstanding that he had had no notice of the disrepair in the paved area before Mr Edwards accident.
Section 11(1) of the 1985 Act, which implies into certain leases of dwelling houses a covenant by the landlord to keep in repair the structure and exterior of the dwelling house, applies to the Subtenancy.
Where the dwelling house only forms part of a building, section 11(1A) provides that the covenant has effect in relation to any part of the building in which the lessor has an estate or interest [6].
It is not possible, as a matter of ordinary language, to describe a path leading from a car park to the entrance door of a building as part of the exterior of the front hall of that building [17].
Such a wide reading would be difficult to reconcile with the wording of section 11(1A)(a), particularly the limitation to the building, and the specific extension to cover drains, gutters and external pipes, which supports a natural reading of the term exterior [18].
As to the second question, Mr Kumarasamy was granted a right of way over the front hall and, as a matter of property law, a right of way over land constitutes an interest in that land [23].
The argument that Mr Kumarasamy cannot be said to have interest in the front hall since the Subtenancy had effectively deprived Mr Kumarasamy of any practical benefit in the easement so long as it continued is rejected [24 25].
As to the third question, there is an established rule that a landlord is not liable to repair premises which are in the possession of the tenant and not of the landlord, unless and until the landlord has notice of the disrepair (the rule) [30].
Where a landlord agrees to repair the structure and exterior of a flat, the rule would apply but only to the extent that the structure is included in the demise and the tenant is accordingly in possession of that part of the structure [39 40].
The subsequent question is whether the rule can be invoked when a landlord has covenanted with a tenant to repair the structure but is not in possession of the structure, for example because he has let it to another tenant [41].
In such a case, the landlord is not normally entitled to notice in such circumstances [42 42].
The rule only applies to property in the possession of the tenant [43].
In view of this analysis, Mr Kumarasamys submission that, in every case where a tenant relies on a covenant implied by section 11, a landlord could not be liable until they had notice of the disrepair, even where the landlord is undoubtedly in possession of the property, is rejected [44 46].
The present case is concerned with the application of a landlords repairing covenant to property which is not in the possession of either the landlord or the tenant.
The application of the reasoning upon which the rule is based justifies the conclusion that the landlords obligation to repair the paved area is only triggered once he has notice of any disrepair for which the tenant would seek to make him liable [49].
While it is true that Mr Kumarasamy has the right to use the common parts as against the freeholder, he has effectively lost that right for the duration of the Subtenancy to the tenant, Mr Edwards [50].
It is true that the tenant does not enjoy exclusive possession of the common parts, but he is present on them every time he comes to or leaves the flat [50] and has the best means of knowing of any want of repair in them [52].
|
Subsets and Splits